<PAGE> 1
[PHOTO]
- -------------------------------------------------------------------------------
ANNUAL REPORT AUGUST 31, 1999
OPPENHEIMER
INTERNATIONAL
SMALL COMPANY FUND
[OPPENHEIMERFUNDS LOGO]
THE RIGHT WAY TO INVEST
<PAGE> 2
CONTENTS
3 President's Letter
5 An Interview
with Your Fund's
Managers
9 Fund Performance
14 FINANCIAL
STATEMENTS
32 INDEPENDENT
AUDITORS' REPORT
33 Federal
Income Tax
Information
34 Officers and Trustees
35 OppenheimerFunds Family
36 Information and
Services
REPORT HIGHLIGHTS
In September and October 1998, WE TOOK ADVANTAGE OF FAVORABLE BUYING
OPPORTUNITIES in media companies, technology businesses, diversified financial
enterprises and consumer cyclicals.
Although European markets lagged due to weakness in the euro, WE IDENTIFIED MANY
ATTRACTIVE EUROPEAN INVESTMENT OPPORTUNITIES, a number of which appreciated in
value even more quickly than we expected.
WE SEE CONTINUING INVESTMENT OPPORTUNITIES in the countries of the European
Monetary Union as well as in Great Britain.
- ----------------------
AVERAGE ANNUAL
TOTAL RETURNS
For the 1-Year Period
Ended 8/31/99*
<TABLE>
<CAPTION>
Class A
Without With
Sales Chg. Sales Chg.
- ----------------------
<S> <C>
63.10% 53.72%
</TABLE>
<TABLE>
<CAPTION>
Class B
Without With
Sales Chg. Sales Chg.
- ----------------------
<S> <C>
61.77% 56.77%
</TABLE>
<TABLE>
<CAPTION>
Class C
Without With
Sales Chg. Sales Chg.
- ----------------------
<S> <C>
61.77% 60.77%
</TABLE>
- ----------------------
- ---------------------
NOT FDIC INSURED.
NO BANK GUARANTEE.
MAY LOSE VALUE.
- ---------------------
* See page 12 for further details.
2 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 3
[PHOTO]
BRIDGET A. MACASKILL
President
Oppenheimer
International
Small Company Fund
PRESIDENT'S LETTER
DEAR SHAREHOLDER,
In many ways, the 1999 investment environment has, so far, unfolded as many
expected it would, producing both attractive opportunities and formidable
challenges for investors.
On the economic front, early worries about the effects of global weakness
in the wake of last year's credit and currency crises have abated. Instead, as
many economies around the world begin to strengthen, concerns now center around
whether the U.S. economy may be growing too quickly. Throughout the year,
consumers in the United States have continued to spend and borrow heavily, more
than offsetting any temporary slowdown in the industrial and export sectors.
The economy's strength has not gone unnoticed by the nation's monetary
policymakers. In an effort to ward off emerging inflationary pressures, the
Federal Reserve Board increased short-term interest rates this past summer.
Market reaction to robust economic growth has been mixed. The U.S. bond
market has generally declined, as fixed income investors became increasingly
concerned about the effects of rising interest rates.
In the stock market, the performance of large-capitalization growth
stocks, which has driven the market's advance over the past few years, has begun
to moderate, and many previously out-of-favor, value-oriented mid-cap and
small-cap stocks have rallied. At the same time, a healthy percentage of
actively managed diversified portfolios have once again begun to outperform
unmanaged stock indices such as Standard & Poor's 500.
At OppenheimerFunds, we applaud the Fed's preemptive strike against
inflation. In our view, history has repeatedly demonstrated that most financial
assets do best in a low-inflation environment. What's more, we believe that the
move to higher interest rates should be temporary.
3 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 4
PRESIDENT'S LETTER
One recent development is quite troublesome to us however: the increasing
popularity of "day trading" among individuals seeking to make fast money in a
volatile stock market. In our opinion, day trading is not investing, it is
gambling. Experience proves that without extensive research and analysis,
attempting to time short-term price swings is a fool's errand. Instead, we
continue to encourage investors to maintain a long-term perspective that is
measured in years, not days.
Finally, while we remain alert to the potential impact of the Y2K issue,
we are encouraged by the progress made in addressing the matter. At
OppenheimerFunds, our shareholder accounting systems are already Y2K compliant,
and we have successfully participated in all required industrywide tests. We
intend to continue retesting our systems in order to help further protect
against any potential problems. After all, whether in our computer accounting
systems or the financial markets, managing risk is an important part of what
makes OppenheimerFunds The Right Way to Invest.
Sincerely,
/s/ BRIDGET A. MACASKILL
Bridget A. Macaskill
September 22, 1999
4 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 5
[PHOTO]
PORTFOLIO MANAGEMENT
TEAM(1) (L TO R)
George Evans
Shanquan Li
AN INTERVIEW WITH YOUR FUND'S MANAGERS
Q HOW DID OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND PERFORM DURING THE
ONE-YEAR PERIOD THAT ENDED AUGUST 31, 1999?
A. Oppenheimer International Small Company Fund performed very well during a
period marked by notable challenges and opportunities in the global equity
markets. We believe our focus on individual companies with above-average growth
potential, above-average yield, and below-average valuation enabled the Fund to
perform relatively well in falling as well as rising markets.
WHAT WERE THE MOST SIGNIFICANT CHALLENGES AND OPPORTUNITIES FOR INTERNATIONAL
SMALL-CAP STOCKS DURING THE PERIOD?
During the second half of 1998, difficulties in emerging markets throughout the
world sparked fears of a global economic slowdown. Most equities suffered as a
result, especially the stocks of smaller companies in the troubled regions of
Asia, Eastern Europe, and South America. However, global equities rebounded
remarkably swiftly when developed economies, led by the United States, produced
unexpectedly robust rates of growth. Although Latin American markets suffered a
setback because of monetary weakness in Brazil, the markets of Europe, Asia and
the United States rose sharply through the rest of 1998 and into the beginning
of 1999.
1. Effective August 20, 1999, George Evans and Shanquan Li became the portfolio
managers of the Fund.
5 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 6
"WHILE OUR INVESTMENTS WERE GLOBALLY DIVERSIFIED, MANY WERE LOCATED IN GREAT
BRITAIN, WHICH HAS EXPERIENCED STRONG ECONOMIC EXPANSION FOR MORE THAN A
DECADE."
AN INTERVIEW WITH YOUR FUND'S MANAGERS
Throughout the remainder of the reporting period, many of the world's economies
and markets showed continuing strength. South America joined the global recovery
in early 1999, with the Brazilian economy demonstrating surprising resilience in
the wake of its January currency devaluation. Japan exhibited early signs of
positive economic growth during the second quarter of 1999, and its stock market
rose sharply in response. Other Asian markets improved as well; however, the
region's fundamental economic problems remained unresolved. Although most
European markets lagged behind the rest of the developed world in 1999 as a
result of weakness in the new euro, several small European companies exceeded
earnings expectations, driving their stock prices higher.
HOW DID YOU MANAGE THE FUND IN LIGHT OF THESE EVENTS?
Early in 1998, we recognized the economic instabilities that would later lead to
market declines in Asia and South America. As a result, we held minimal
positions in Asia and Brazil by September 1998. These moves helped protect
investors from some of the market's sharpest losses, as did our significant
holdings of high yielding stocks paying strong dividends.
In September and October 1998, we took advantage of favorable buying
opportunities in media companies, technology businesses, diversified financial
enterprises, consumer cyclicals and other companies. While our investments were
globally diversified, many were located in Great Britain, which has experienced
strong economic expansion for more than a decade.
In the months that followed, some of our holdings rose in value so quickly
that they reached our target prices in a relatively short period of time. In
those instances, we sold them and looked for new opportunities, many of which
also reached our target prices sooner than we expected.
6 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 7
- ---------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
For the Periods Ended 9/30/99(2)
<TABLE>
<CAPTION>
Class A Since
1-Year Inception
- ---------------------------------
<S> <C>
61.31% 36.30%
</TABLE>
<TABLE>
<CAPTION>
Class B Since
1-Year Inception
- ---------------------------------
<S> <C>
64.72% 37.97%
</TABLE>
<TABLE>
<CAPTION>
Class C Since
1-Year Inception
- ---------------------------------
<S> <C>
68.87% 39.58%
</TABLE>
- ---------------------------------
During the second half of the period, we continued to find attractive
investments among European companies, such as a British home furnishings
retailer that has effectively managed a major expansion. We also maintained
several long-term holdings, such as SPIR Communication SA, a French advertising
company that has long continued to meet our investment criteria.
As always, please remember that investing in foreign securities entails
additional expenses and risks, including foreign currency fluctuations.
WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
We remain optimistic about Europe. Despite recent weakness in the euro, we
believe the European Monetary Union (EMU) marks a positive long-term development
for the region. The EMU has already removed trade barriers among its member
countries while making their economies more fiscally responsible and attractive
to investment. At the same time, the euro has increased the comparability of
company performance from country to country, forcing less competitive businesses
to restructure.
We also see opportunities in Great Britain, although it is not currently
part of the EMU. We believe Britain's prolonged expansion is likely to continue
at a rate that will meet or exceed analysts' expectations, and that the risks of
the market's Asian exposure is already factored into stock prices.
At the same time, we continue to be wary of Asia. We do not believe the
Asian markets' sharp upswing in 1999 is backed by solid fundamentals. As a
result, we have limited our Asian investments to a small number of Japanese
companies in which we have a high degree of confidence.
2. See page 12 for further details.
7 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 8
- -----------------------------
REGIONAL ALLOCATION(3)
[PIE CHART]
<TABLE>
<S> <C>
- - Europe 74.6%
- - Asia 9.9
- - Emerging Europe 5.7
- - United States/Canada 4.7
- - Japan 4.3
- - Latin America 0.8
</TABLE>
- -----------------------------
Our disciplined stock-picking strategy has provided investors with good
long-term performance since the Fund's inception in November 1997. We will
continue to seek foreign companies with a history of strong profitability and
management, in industries with good growth trends. That's what makes Oppenheimer
International Small Company Fund an important part of The Right Way to Invest.
<TABLE>
<CAPTION>
TOP TEN COUNTRY HOLDINGS(3)
- -------------------------------------------------------
<S> <C>
Great Britain 26.0%
- -------------------------------------------------------
Germany 11.9
- -------------------------------------------------------
France 10.5
- -------------------------------------------------------
Australia 6.2
- -------------------------------------------------------
Switzerland 5.0
- -------------------------------------------------------
United States 4.7
- -------------------------------------------------------
Japan 4.3
- -------------------------------------------------------
Portugal 4.1
- -------------------------------------------------------
Austria 3.8
- -------------------------------------------------------
The Netherlands 3.5
</TABLE>
<TABLE>
<CAPTION>
TOP TEN STOCK HOLDINGS(3)
- -------------------------------------------------------
<S> <C>
Novus Petroleum Ltd. 4.4%
- -------------------------------------------------------
Morgan Crucible Co. plc 4.2
- -------------------------------------------------------
House of Fraser plc 3.9
- -------------------------------------------------------
Alliance & Leicester plc 3.6
- -------------------------------------------------------
Vendex KBB NV 3.5
- -------------------------------------------------------
Kingston Communication (Hull) plc 3.4
- -------------------------------------------------------
Kvaerner AS, Series B 3.1
- -------------------------------------------------------
Gretag Imaging Group 3.0
- -------------------------------------------------------
Bank Austria AG 2.9
- -------------------------------------------------------
ProSieben Media AG, Preference 2.9
</TABLE>
3. Portfolio is subject to change. Percentages are as of August 31, 1999, and
are based on total market value of investments.
8 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 9
FUND PERFORMANCE
HOW HAS THE FUND PERFORMED? Below is a discussion, by the Manager, of the Fund's
performance during its fiscal year ended August 31, 1999, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index and to a sector index.
MANAGEMENT'S DISCUSSION OF PERFORMANCE. The fiscal year that ended August 31,
1999, opened with sharp market declines in September 1998, driven by fears of
global recession. The Fund's reduced emerging market exposure cushioned the
impact of the market downturn. As markets bottomed, we invested primarily in
European companies among a wide range of industries and sectors, including
media, technology, financials and consumer cyclicals. As global markets
recovered in late 1998 and into early 1999, many of these investments reached
our 12-month price targets in less than two months. We replaced them with other
investments, most of which were also European. Many of these investments soon
reached our price targets as well. In addition, we invested in a small number of
Japanese companies in which we had a high level of confidence. The Fund's
portfolio holdings, allocations and strategies are subject to change.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in Class A, Class B and Class C
shares of the Fund from the inception date of November 17, 1997, until August
31, 1999. The Fund's performance reflects the deduction of the maximum initial
sales charge on Class A shares and the applicable contingent deferred sales
charge for Class B and Class C shares, and reinvestment of all dividends and
capital gains distributions.
The Fund's performance is compared to the performances of the HSBC James
Capel World excluding U.S. Smaller Companies Index (WexUS) and the Morgan
Stanley Capital International (MSCI) EAFE Index. The performance of small
international companies is represented by WexUS, an index comprised of 1,200
securities with a market capitalization range of $53-$1,033 million. The index
is comprised of stocks in Europe, UK, Southeast Asia, Japan, Australia and New
Zealand. The performance of large international companies is represented by the
MSCI EAFE Index which is comprised of common stocks issued in Europe, Australia
and the Far East. Index performance reflects the reinvestment of dividends but
does not consider the effect of capital gains or transaction costs, and none of
the data in the graphs shows the effect of taxes. The Fund's performance
reflects the effects of Fund business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's performance, it
must be noted that the Fund's investments are not limited to the securities in
any one index.
9 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 10
FUND PERFORMANCE
CLASS A SHARES
COMPARISION OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer International Small Company Fund (Class A),
HSBC James Capel World excluding U.S. Smaller Companies Index (WexUS)
and Morgan Stanley Capital International (MSCI) EAFE Index
[The following table was originally a line graph in the printed materials.]
<TABLE>
<CAPTION>
OPPENHEIMER INTERNATIONAL HSBC JAMES MSCI EAFE
Date SMALL COMPANY FUND CLASS A CAPEL WEXUS INDEX INDEX
<S> <C> <C> <C>
11/17/97 9,425 10,000 10,000
8/31/98 10,585 9,432 10,370
8/31/99 17,708 12,418 13,069
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS A SHARES OF THE FUND AT 8/31/99(1)
1-YEAR 53.72% LIFE 37.64%
CLASS B SHARES
COMPARISION OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer International Small Company Fund (Class B),
HSBC James Capel World excluding U.S. Smaller Companies Index (WexUS)
and Morgan Stanley Capital International (MSCI) EAFE Index
[The following table was originally a line graph in the printed materials.]
<TABLE>
<CAPTION>
OPPENHEIMER INTERNATIONAL HSBC JAMES MSCI EAFE
Date SMALL COMPANY FUND CLASS B CAPEL WEXUS INDEX INDEX
<S> <C> <C> <C>
11/17/97 10,000 10,000 10,000
8/31/98 11,450 9,432 10,370
8/31/99 18,123 12,418 13,069
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS B SHARES OF THE FUND AT 8/31/99(1)
1-YEAR 56.77% LIFE 39.43%
10 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 11
CLASS C SHARES
COMPARISION OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer International Small Company Fund (Class C),
HSBC James Capel World excluding U.S. Smaller Companies Index (WexUS)
and Morgan Stanley Capital International (MSCI) EAFE Index
[The following table was originally a line graph in the printed materials.]
<TABLE>
<CAPTION>
OPPENHEIMER INTERNATIONAL HSBC JAMES MSCI EAFE
Date SMALL COMPANY FUND CLASS C CAPEL WEXUS INDEX INDEX
<S> <C> <C> <C>
11/17/97 10,000 10,000 10,000
8/31/98 11,450 9,432 10,370
8/31/99 18,523 12,418 13,069
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS C SHARES OF THE FUND AT 8/31/99(1)
1-YEAR 60.77% LIFE 41.14%
The returns and the ending account values in the graphs show change in
share value and include reinvestment of all dividends and capital gains
distributions. The performance information in the graphs for both indices begins
on 11/30/97.
1. See page 12 for further details.
Past performance is not predictive of future performance.
11 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 12
NOTES
IN REVIEWING PERFORMANCE AND RANKINGS, PLEASE REMEMBER THAT PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. BECAUSE OF ONGOING
MARKET VOLATILITY, THE FUND'S PERFORMANCE MAY BE SUBJECT TO SUBSTANTIAL
SHORT-TERM CHANGES. FOR UPDATES ON THE FUND'S PERFORMANCE, PLEASE CONTACT YOUR
FINANCIAL ADVISOR, CALL US AT 1.800.525.7048 OR VISIT OUR WEBSITE,
WWW.OPPENHEIMERFUNDS.COM.
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown.
CLASS A shares were first publicly offered on 11/17/97. Class A returns include
the current maximum initial sales charge of 5.75%.
CLASS B shares were first publicly offered on 11/17/97. Class B returns include
the applicable contingent deferred sales charge of 5% (1-year) and 4% (since
inception). Class B shares are subject to a 0.75% annual asset-based sales
charge. The ending account value in the graph is net of the applicable 4%
contingent deferred sales charge.
CLASS C shares were first publicly offered on 11/17/97. Class C returns include
the contingent deferred sales charge of 1% for the one-year period. Class C
shares are subject to a 0.75% annual asset-based sales charge.
An explanation of the different performance calculations is in the Fund's
prospectus.
12 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 13
FINANCIALS
13 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 14
STATEMENT OF INVESTMENTS August 31, 1999
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--91.9%
- --------------------------------------------------------------------------------------------------
BASIC MATERIALS--3.7%
- --------------------------------------------------------------------------------------------------
METALS--2.1%
Metallgesellschaft AG 37,900 $ 860,667
- --------------------------------------------------------------------------------------------------
PAPER--1.6%
Daishowa Paper Mfg. Co., Ltd.(1) 160,000 653,766
- --------------------------------------------------------------------------------------------------
CAPITAL GOODS--12.3%
- --------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--3.1%
Halma plc 315,600 674,955
- --------------------------------------------------------------------------------------------------
Kokusai Electric Co. 40,000 613,636
-------------
1,288,591
- --------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES--2.4%
BAU Holdings AF, Preference 10,085 342,996
- --------------------------------------------------------------------------------------------------
Danka Business Systems plc, Sponsored ADR(1) 65,000 637,813
-------------
980,809
- --------------------------------------------------------------------------------------------------
MANUFACTURING--6.8%
Gretag Imaging Group 11,170 1,201,750
- --------------------------------------------------------------------------------------------------
Morgan Crucible Co. plc 330,000 1,644,985
-------------
2,846,735
- --------------------------------------------------------------------------------------------------
COMMUNICATION SERVICES--6.0%
- --------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS: LONG DISTANCE--4.8%
Kingston Communication (Hull) plc(1) 230,700 1,335,477
- --------------------------------------------------------------------------------------------------
Teles AG(1) 15,800 664,198
-------------
1,999,675
- --------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES--1.2%
Portugal Telecom SA 12,000 501,792
- --------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--18.4%
- --------------------------------------------------------------------------------------------------
AUTOS & HOUSING--2.0%
Alfred McAlpine Group plc 200,000 820,081
- --------------------------------------------------------------------------------------------------
CONSUMER SERVICES--1.0%
AS Det Ostasiatiske Kompagni (The East Asiatic Co. Ltd. AS)(1) 35,000 397,791
- --------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--1.5%
Danubius Hotel & Spa Rt.(1) 30,000 624,291
</TABLE>
14 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 15
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
MEDIA--5.6%
Lusomundo SGPS SA(1) 36,579 $ 482,947
- --------------------------------------------------------------------------------------------------
SPIR Communication SA 12,850 998,937
- --------------------------------------------------------------------------------------------------
Times Publishing Ltd. 185,000 362,472
- --------------------------------------------------------------------------------------------------
United News & Media plc 48,400 477,470
-------------
2,321,826
- --------------------------------------------------------------------------------------------------
RETAIL: GENERAL--7.1%
House of Fraser plc 1,025,000 1,557,550
- --------------------------------------------------------------------------------------------------
Vendex KBB NV 52,666 1,379,556
-------------
2,937,106
- --------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY--1.2%
Karstadt AG 1,040 489,920
- --------------------------------------------------------------------------------------------------
CONSUMER STAPLES--8.3%
- --------------------------------------------------------------------------------------------------
BROADCASTING--3.4%
ProSieben Media AG, Preference 25,875 1,134,190
- --------------------------------------------------------------------------------------------------
TV 4 AB 21,520 263,177
-------------
1,397,367
- --------------------------------------------------------------------------------------------------
ENTERTAINMENT--1.2%
Leon de Bruxelles SA 11,800 490,563
- --------------------------------------------------------------------------------------------------
FOOD--3.7%
Greencore Group plc 320,000 1,092,533
- --------------------------------------------------------------------------------------------------
Royal Canin SA 6,800 427,350
-------------
1,519,883
- --------------------------------------------------------------------------------------------------
ENERGY--7.8%
- --------------------------------------------------------------------------------------------------
ENERGY SERVICES--1.0%
Cie Generale de Geophysique SA(1) 7,000 424,762
- --------------------------------------------------------------------------------------------------
OIL: DOMESTIC--5.8%
Novus Petroleum Ltd.(1) 1,725,000 1,736,579
- --------------------------------------------------------------------------------------------------
Tap Oil NL(1) 1,387,000 680,480
-------------
2,417,059
- --------------------------------------------------------------------------------------------------
OIL: INTERNATIONAL--1.0%
ISIS 5,500 418,266
</TABLE>
15 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 16
STATEMENT OF INVESTMENTS Continued
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL--14.7%
- --------------------------------------------------------------------------------------------------
BANKS--5.4%
Banco International do Funchal SA 12,252 $ 97,833
- --------------------------------------------------------------------------------------------------
Banco Pinto & Sotto Mayor SA 30,000 555,153
- --------------------------------------------------------------------------------------------------
Bank Austria AG 21,600 1,146,429
- --------------------------------------------------------------------------------------------------
IFCT Finance & Securities Public Company Ltd. plc(1,2) 140,000 --
- --------------------------------------------------------------------------------------------------
Unidanmark AS, A Shares 7,000 459,449
-------------
2,258,864
- --------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--8.6%
Alliance & Leicester plc 104,025 1,431,015
- --------------------------------------------------------------------------------------------------
Gold-Zack AG 3,000 428,406
- --------------------------------------------------------------------------------------------------
ICICI Ltd., GDR(3) 46,900 439,688
- --------------------------------------------------------------------------------------------------
Metrovacesa SA 27,644 594,186
- --------------------------------------------------------------------------------------------------
Ruam Pattana Fund II(1) 625,000 97,774
- --------------------------------------------------------------------------------------------------
Singer & Friedlander Group plc 238,000 575,970
-------------
3,567,039
- --------------------------------------------------------------------------------------------------
INSURANCE--0.7%
AXA China Regional Ltd. 431,000 302,508
- --------------------------------------------------------------------------------------------------
HEALTHCARE--1.3%
- --------------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS--1.3%
Haw Par Healthcare Ltd. 158,000 138,838
- --------------------------------------------------------------------------------------------------
Ontex(1) 4,000 417,843
-------------
556,681
- --------------------------------------------------------------------------------------------------
TECHNOLOGY--16.2%
- --------------------------------------------------------------------------------------------------
COMPUTER HARDWARE--1.1%
Imagineer Co. Ltd. 41,900 450,942
- --------------------------------------------------------------------------------------------------
COMPUTER SERVICES--1.1%
Computacenter plc 50,200 461,728
- --------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE--12.2%
Autonomy Corp. plc(1) 80,000 684,000
- --------------------------------------------------------------------------------------------------
Cegid SA 4,675 757,962
- --------------------------------------------------------------------------------------------------
Industrial & Financial Systems Ltd. IFS AB, B Shares(1) 100,000 1,004,993
- --------------------------------------------------------------------------------------------------
Infomatec Integrated Information Systems AG(1) 9,000 288,033
- --------------------------------------------------------------------------------------------------
Saga Systems, Inc.(1) 74,000 869,500
- --------------------------------------------------------------------------------------------------
SER Systeme AG 20,000 847,094
- --------------------------------------------------------------------------------------------------
Transiciel SA 5,500 626,818
-------------
5,078,400
</TABLE>
16 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 17
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
ELECTRONICS--1.8%
Micronas Semiconductor Holding AG(1) 5,400 $ 769,876
- --------------------------------------------------------------------------------------------------
TRANSPORTATION--2.9%
- --------------------------------------------------------------------------------------------------
SHIPPING--2.9%
Kvaerner AS, Series B(1) 55,000 1,219,534
- --------------------------------------------------------------------------------------------------
UTILITIES--0.3%
- --------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.3%
Contact Energy Ltd.(1) 80,000 133,181
--------------
Total Common Stocks (Cost $35,475,080) 38,189,703
==================================================================================================
PREFERRED STOCKS--0.8%
Sadia SA (Cost $298,894) 520,000 313,848
</TABLE>
<TABLE>
<CAPTION>
UNITS
==================================================================================================
<S> <C> <C>
RIGHTS, WARRANTS AND CERTIFICATES--0.1%
Biocompatibles International plc Wts., Exp. 12/99 21,844 5,971
- --------------------------------------------------------------------------------------------------
Milano Assicurazioni Wts., Exp. 6/02 9,880 --
- --------------------------------------------------------------------------------------------------
Novus Petro Rts., Exp. 9/99 431,250 27,478
- --------------------------------------------------------------------------------------------------
PT Pan Indonesia Bank Wts., Exp. 6/00 83,310 4,885
----------
Total Rights, Warrants and Certificates (Cost $1,733) 38,334
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
==========================================================================================================================
<S> <C> <C>
REPURCHASE AGREEMENTS--2.4%
Repurchase agreement with Zion First National Bank, 5.40%, dated
8/31/99, to be repurchased at $1,000,150 on 9/1/99, collateralized by U.S.
Treasury Bonds, 8%, 11/15/21, with a value of $59,929, and U.S. Treasury
Nts., 5.875%-7%, 2/15/00-2/15/07, with a value of $960,334 (Cost $1,000,000) $1,000,000 1,000,000
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $36,775,707) 95.2% 39,541,885
- --------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 4.8 2,001,122
-------------------------------------
NET ASSETS 100.0% $41,543,007
=====================================
</TABLE>
17 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 18
STATEMENT OF INVESTMENTS Continued
FOOTNOTES TO STATEMENT OF INVESTMENTS
DISTRIBUTION OF INVESTMENTS REPRESENTING GEOGRAPHIC DIVERSIFICATION, AS A
PERCENTAGE OF TOTAL INVESTMENTS AT VALUE, IS AS FOLLOWS:
<TABLE>
<CAPTION>
GEOGRAPHIC DIVERSIFICATION MARKET VALUE PERCENT
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Great Britain $10,307,017 26.0%
Germany 4,712,508 11.9
France 4,144,657 10.5
Australia 2,444,537 6.2
Switzerland 1,971,626 5.0
United States 1,869,500 4.7
Japan 1,718,344 4.3
Portugal 1,637,725 4.1
Austria 1,489,425 3.8
The Netherlands 1,379,557 3.5
Sweden 1,268,170 3.2
Norway 1,219,533 3.1
Ireland 1,092,532 2.8
Denmark 857,240 2.2
Hungary 624,291 1.6
Spain 594,186 1.5
Singapore 501,310 1.3
India 439,688 1.1
Belgium 417,843 1.1
Brazil 313,848 0.8
Hong Kong 302,508 0.8
New Zealand 133,181 0.3
Thailand 97,774 0.2
Indonesia 4,885 0.0
------------------------------
TOTAL $39,541,885 100.0%
==============================
</TABLE>
1. Non-income-producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
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 $439,688 or 1.06% of the Fund's net assets
as of August 31, 1999.
See accompanying Notes to Financial Statements.
18 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 19
STATEMENT OF ASSETS AND LIABILITIES August 31, 1999
<TABLE>
<CAPTION>
======================================================================================================
<S> <C>
ASSETS
Investments, at value (cost $36,775,707)--see accompanying statement $39,541,885
- ------------------------------------------------------------------------------------------------------
Cash 140,772
- ------------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency exchange contracts--Note 5 405
- ------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 5,917,217
Shares of beneficial interest sold 496,109
Interest and dividends 31,212
Other 6,134
-----------
Total assets 46,135,734
======================================================================================================
LIABILITIES
Unrealized depreciation on foreign currency exchange contracts--Note 5 23,742
- ------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 4,340,794
Closed foreign currency exchange contracts 95,248
Shares of beneficial interest redeemed 36,881
Trustees' compensation--Note 1 27,661
Shareholder reports 26,702
Distribution and service plan fees 12,701
Transfer and shareholder servicing agent fees 11,740
Other 17,258
-----------
Total liabilities 4,592,727
======================================================================================================
NET ASSETS $41,543,007
============
======================================================================================================
COMPOSITION OF NET ASSETS
Paid-in capital $ 31,307,556
- ------------------------------------------------------------------------------------------------------
Undistributed net investment income 342,771
- ------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 7,124,396
- ------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies 2,768,284
-----------
Net assets $41,543,007
============
</TABLE>
19 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 20
STATEMENT OF ASSETS AND LIABILITIES Continued
<TABLE>
<CAPTION>
=====================================================================================================
<S> <C>
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$26,964,735 and 1,548,292 shares of beneficial interest outstanding) $17.42
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price) $18.48
- -----------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $11,763,590
and 683,111 shares of beneficial interest outstanding) $17.22
- -----------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $2,814,682
and 163,496 shares of beneficial interest outstanding) $17.22
</TABLE>
See accompanying Notes to Financial Statements.
20 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 21
STATEMENT OF OPERATIONS For the Year Ended August 31, 1999
<TABLE>
<CAPTION>
=================================================================================================
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $55,941) $ 504,304
- -------------------------------------------------------------------------------------------------
Interest 81,878
------------
Total income 586,182
=================================================================================================
EXPENSES
Management fees--Note 4 166,013
- -------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 28,550
Class B 53,417
Class C 12,500
- -------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 79,880
- -------------------------------------------------------------------------------------------------
Shareholder reports 46,900
- -------------------------------------------------------------------------------------------------
Trustees' compensation--Note 1 33,727
- -------------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 18,032
- -------------------------------------------------------------------------------------------------
Deferred organization expenses 17,137
- -------------------------------------------------------------------------------------------------
Custodian fees and expenses 8,194
- -------------------------------------------------------------------------------------------------
Registration and filing fees 5,178
- -------------------------------------------------------------------------------------------------
Insurance expenses 1,881
- -------------------------------------------------------------------------------------------------
Other 8,560
------------
Total expenses 479,969
Less expenses paid indirectly--Note 1 (2,895)
------------
Net expenses 477,074
=================================================================================================
NET INVESTMENT INCOME 109,108
=================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 7,719,320
Foreign currency transactions (255,529)
------------
Net realized gain 7,463,791
- -------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 3,968,110
Translation of assets and liabilities denominated in foreign currencies (240,272)
------------
Net change 3,727,838
------------
Net realized and unrealized gain 11,191,629
=================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $11,300,737
============
</TABLE>
See accompanying Notes to Financial Statements.
21 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 22
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
AUGUST 31, AUGUST 31,
1999 1998(1)
====================================================================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 109,108 $ 19,038
- ----------------------------------------------------------------------------------------------------
Net realized gain 7,463,791 838,299
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 3,727,838 (959,554)
------------------------------
Net increase (decrease) in net assets resulting from operations 11,300,737 (102,217)
====================================================================================================
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A (39,378) --
- ----------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (653,225) --
Class B (222,502) --
Class C (49,271) --
====================================================================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from beneficial interest
transactions--Note 2:
Class A 10,428,211 9,607,137
Class B 6,385,658 2,782,183
Class C 1,548,125 557,549
====================================================================================================
NET ASSETS
Total increase 28,698,355 12,844,652
- ----------------------------------------------------------------------------------------------------
Beginning of period 12,844,652 --
------------------------------
End of period (including undistributed net investment
income of $342,771 and $20,345, respectively) $41,543,007 $12,844,652
==============================
</TABLE>
1. For the period from November 17, 1997 (commencement of operations) to August
31, 1998.
See accompanying Notes to Financial Statements.
22 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 23
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B
YEAR YEAR
ENDED ENDED
AUG. 31, AUG. 31,
1999 1998(1) 1999 1998(1)
==================================================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $ 11.52 $ 10.00 $ 11.45 $ 10.00
- ------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .06 .03 .02 (.01)
Net realized and unrealized gain 6.72 1.49 6.59 1.46
--------------------- ----------------------
Total income from investment operations 6.78 1.52 6.61 1.45
- ------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.04) -- -- --
Distributions from net realized gain (.84) -- (.84) --
--------------------- ----------------------
Total dividends and distributions to shareholders (.88) -- (.84) --
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.42 $11.52 $17.22 $11.45
===================== ======================
==================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 63.10% 15.20% 61.77% 14.50%
==================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $26,965 $9,605 $11,764 $2,631
- ------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $14,208 $6,482 $ 5,367 $1,187
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income (loss) 0.73% 0.44% 0.09% (0.38)%
Expenses 2.05% 1.77%(4) 2.84% 2.67%(4)
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 280% 239% 280% 239%
</TABLE>
1. For the period from November 17, 1997 (commencement of operations) to August
31, 1998.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), with all
dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year.
3. Annualized for periods of less than one full year.
4. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended August 31, 1999, were $71,178,766 and $54,961,224,
respectively.
See accompanying Notes to Financial Statements.
23 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 24
FINANCIAL HIGHLIGHTS Continued
<TABLE>
<CAPTION>
CLASS C
YEAR
ENDED
AUG. 31,
1999 1998(1)
=================================================================================================================
<S> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $ 11.45 $ 10.00
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .04 (.04)
Net realized and unrealized gain 6.57 1.49
---------------------
Total income from investment operations 6.61 1.45
- -----------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income -- --
Distributions from net realized gain (.84) --
---------------------
Total dividends and distributions to shareholders (.84) --
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.22 $11.45
=====================
=================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 61.77% 14.50%
=================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $2,815 $609
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,256 $454
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income (loss) 0.09% (0.66)%
Expenses 2.84% 2.58%(4)
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 280% 239%
</TABLE>
1. For the period from November 17, 1997 (commencement of operations) to August
31, 1998.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized for periods of less than one full year.
4. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended August 31, 1999, were $71,178,766 and $54,961,224,
respectively.
See accompanying Notes to Financial Statements.
24 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer International Small Company Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is to seek
long-term capital appreciation. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B and Class
C shares. Class A shares are sold with a front-end sales charge on investments
up to $1 million. Class B and Class C shares may be subject to a contingent
deferred sales charge (CDSC). All classes of shares have identical rights to
earnings, assets and voting privileges, except that each class has its own
expenses directly attributable to that class and exclusive voting rights with
respect to matters affecting that class. Classes A, B and C have separate
distribution and/or service plans. Class B shares will automatically convert to
Class A shares six years after the date of purchase. The following is a summary
of significant accounting policies consistently followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Foreign currency exchange contracts are valued based on the
closing prices of the foreign currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
Options are valued based upon the last sale price on the principal exchange on
which the option is traded or, in the absence of any transactions that day, the
value is based upon the last sale price on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
25 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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.
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted a nonfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each Trustee during the years of service. During the year ended August
31, 1999, a provision of $24,428 was made for the Fund's projected benefit
obligations and payments of $7 were made to retired Trustees, resulting in an
accumulated liability of $27,279 as of August 31, 1999.
The Board of Trustees has adopted a deferred compensation plan for
independent Trustees that enables Trustees to elect to defer receipt of all or a
portion of annual compensation they are entitled to receive from the Fund. Under
the plan, the compensation deferred is periodically adjusted as though an
equivalent amount had been invested for the Trustees in shares of one or more
Oppenheimer funds selected by the Trustee. The amount paid to the Trustee under
the plan will be determined based upon the performance of the selected funds.
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
income per share.
26 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 27
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of paydown gains and losses and the recognition of certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of distributions made during the year from net investment income or
net realized gains may differ from its ultimate characterization for federal
income tax purposes. Also, due to timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the fiscal year in which
the income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended August 31, 1999, amounts have been reclassified to reflect an
increase in undistributed net investment income of $252,696. Accumulated net
realized gain on investments was decreased by the same amount.
- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENTS. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Foreign dividend income is often
recorded on the payable date. Realized gains and losses on investments and
unrealized appreciation and depreciation are determined on an identified cost
basis, which is the same basis used for federal income tax purposes.
The preparation of financial statements in conformity with 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 lia-bilities 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.
27 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS Continued
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of beneficial
interest for each class. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, 1999 PERIOD ENDED AUGUST 31, 1998(1)
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Sold 1,342,812 $ 18,716,106 1,018,740 $11,907,503
Dividends and/or distributions reinvested 57,034 639,347 -- --
Redeemed (684,920) (8,927,242) (185,374) (2,300,366)
----------------------------------------------------------------------
Net increase 714,926 $10,428,211 833,366 $ 9,607,137
======================================================================
- -------------------------------------------------------------------------------------------------------------------
CLASS B
Sold 708,065 $ 10,033,460 308,085 $ 3,685,253
Dividends and/or distributions reinvested 19,492 217,331 -- --
Redeemed (274,188) (3,865,133) (78,343) (903,070)
----------------------------------------------------------------------
Net increase 453,369 $ 6,385,658 229,742 $ 2,782,183
======================================================================
- -------------------------------------------------------------------------------------------------------------------
CLASS C
Sold 142,500 $ 1,990,985 93,920 $ 1,083,570
Dividends and/or distributions reinvested 4,411 49,186 -- --
Redeemed (36,570) (492,046) (40,765) (526,021)
----------------------------------------------------------------------
Net increase 110,341 $ 1,548,125 53,155 $ 557,549
======================================================================
</TABLE>
1. For the period from November 17, 1997 (commencement of operations) to August
31, 1998.
================================================================================
3. UNREALIZED GAINS AND LOSSES ON SECURITIES
As of August 31, 1999, net unrealized appreciation on securities of $2,766,178
was composed of gross appreciation of $3,834,809, and gross depreciation of
$1,068,631.
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee of 0.80% of
the first $250 million of average annual net assets of the Fund, 0.77% of the
next $250 million, 0.75% of the next $500 million, 0.69% of the next $1 billion,
and 0.67% of average annual net assets in excess of $2 billion. The Fund's
management fee for the year ended August 31, 1999, was 0.80% of average net
assets for each class of shares.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund and for other
Oppenheimer funds. OFS's total costs of providing such services are allocated
ratably to these funds.
28 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 29
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FEES. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the period
indicated.
<TABLE>
<CAPTION>
AGGREGATE CLASS A COMMISSIONS COMMISSIONS COMMISSIONS
FRONT-END FRONT-END ON CLASS A ON CLASS B ON CLASS C
SALES CHARGES SALES CHARGES SHARES SHARES SHARES
ON CLASS A RETAINED BY ADVANCED BY ADVANCED BY ADVANCED BY
YEAR ENDED SHARES DISTRIBUTOR DISTRIBUTOR(1) DISTRIBUTOR(1) DISTRIBUTOR(1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
August 31, 1999 $107,221 $34,313 $4,633 $131,563 $10,080
</TABLE>
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
CONTINGENT DEFERRED CONTINGENT DEFERRED CONTINGENT DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES
YEAR ENDED RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
August 31, 1999 $-- $7,137 $--
</TABLE>
The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B and Class C shares under Rule 12b-1 of the Investment
Company Act. Under those plans the Fund pays the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
- --------------------------------------------------------------------------------
CLASS A SERVICE PLAN FEES. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of Class A
shares. The Distributor makes payments to plan recipients quarterly at an annual
rate not to exceed 0.25% of the average annual net assets consisting of Class A
shares of the Fund. For the fiscal year ended August 31, 1999, payments under
the Class A Plan totaled $28,550, all of which was paid by the Distributor to
recipients. That included $1,884 paid to an affiliate of the Distributor's
parent company. Any unreimbursed expenses the Distributor incurs with respect to
Class A shares in any fiscal year cannot be recovered in subsequent years.
29 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
CLASS B AND CLASS C DISTRIBUTION AND SERVICE PLAN FEES. Under each plan, service
fees and distribution fees are computed on the average of the net asset value of
shares in the respective class, determined as of the close of each regular
business day during the period. The Class B and Class C plans provide for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The asset-based sales charges on Class B
and Class C shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
The Distributor's actual expenses in selling Class B and Class C shares may
be more than the payments it receives from the contingent deferred sales charges
collected on redeemed shares and from the Fund under the plans. If either the
Class B or the Class C plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the asset-based sales charge to the
Distributor for distributing shares before the plan was terminated. The plans
allow for the carry-forward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the year ended August 31, 1999,
were as follows:
<TABLE>
<CAPTION>
DISTRIBUTOR'S DISTRIBUTOR'S
AGGREGATE UNREIMBURSED
UNREIMBURSED EXPENSES AS %
TOTAL PAYMENTS AMOUNT RETAINED EXPENSES OF NET ASSETS
UNDER PLAN BY DISTRIBUTOR UNDER PLAN OF CLASS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B Plan $53,417 $46,128 $137,458 1.17%
Class C Plan 12,500 10,203 15,381 0.55
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
5. FOREIGN CURRENCY CONTRACTS
A foreign currency exchange 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 exchange contracts for operational purposes and to seek to
protect against adverse exchange rate fluctuations. 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 foreign currency exchange rates as provided by
a reliable bank, dealer or pricing service. Unrealized appreciation and
depreciation on foreign currency contracts are reported in the Statement of
Assets and Liabilities.
30 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 31
5. FOREIGN CURRENCY CONTRACTS Continued
The Fund may realize a gain or loss upon the closing or settlement of the
foreign currency transactions. Realized gains and losses are reported with all
other foreign currency gains and losses in the Statement of Operations.
Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency contracts are noted in the Statement of Investments
where applicable.
As of August 31, 1999, outstanding foreign currency contracts were as follows:
<TABLE>
<CAPTION>
CONTRACT VALUATION AS OF UNREALIZED UNREALIZED
CONTRACT DESCRIPTION EXPIRATION DATE AMOUNT (000S) AUG. 31, 1999 APPRECIATION DEPRECIATION
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONTRACTS TO PURCHASE
British Pound Sterling (GBP) 9/2/99 GBP 115 $ 184,193 $ 2,405 $ --
---------------------------
CONTRACTS TO SELL
Australian Dollar (AUD) 9/1/99 AUD 1,878 1,196,896 -- 8,941
British Pound Sterling (GBP) 9/2/99 GBP 667 1,071,996 -- 14,801
---------------------------
-- 23,742
---------------------------
Total Unrealized Appreciation and Depreciation $2,405 $23,742
===========================
</TABLE>
================================================================================
6. ILLIQUID OR RESTRICTED SECURITIES
As of August 31, 1999, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Trustees as reflecting fair value. A security may also 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 intends to invest no more
than 10% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limitation.
================================================================================
7. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended August 31,
1999.
31 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 32
INDEPENDENT AUDITOR'S REPORT
================================================================================
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer International Small Company Fund as
of August 31, 1999, and the related statement of operations for the year then
ended and the statements of changes in net assets and financial highlights for
year then ended and the period from November 17, 1997 (commencement of
operation) to August 31, 1998. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1999, by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer International Small Company Fund as of August 31, 1999, the results
of its operations for the year then ended, and the changes in net assets and the
financial highlights for year then ended and the period from November 17, 1997
(commencement of operations) to August 31, 1998, in conformity with generally
accepted accounting principles.
KPMG LLP
Denver, Colorado
September 22, 1999
32 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 33
FEDERAL INCOME TAX INFORMATION Unaudited
================================================================================
In early 2000, shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1999. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
Distributions of $0.8808, $0.8434, and $0.8434, per share were paid to
Class A, Class B, and Class C shareholders, respectively, on December 18, 1998.
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.
33 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 34
OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
================================================================================
OFFICERS AND TRUSTEES Leon Levy, Chairman of the Board of Trustees
Donald W. Spiro, Vice Chairman of the Board of Trustees
Bridget A. Macaskill, Trustee and President
Phillip A. Griffiths, Trustee
Robert G. Galli, Trustee
Benjamin Lipstein, Trustee
Elizabeth B. Moynihan, Trustee
Kenneth A. Randall, Trustee
Edward V. Regan, Trustee
Russell S. Reynolds, Jr., Trustee
Pauline Trigere, Trustee
Clayton K. Yeutter, Trustee
Goerge Evans, Vice President
Shanquan Li, Vice President
Andrew J. Donohue, Secretary
Brian W. Wixted, Treasurer
Robert G. Zack, Assistant Secretary
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
================================================================================
INVESTMENT ADVISOR OppenheimerFunds, Inc.
================================================================================
DISTRIBUTOR OppenheimerFunds Distributor, Inc.
================================================================================
TRANSFER AND
SHAREHOLDER
SERVICING AGENT OppenheimerFunds Services
================================================================================
CUSTODIAN OF The Bank of New York
PORTFOLIO SECURITIES
================================================================================
INDEPENDENT AUDITORS KPMG LLP
================================================================================
LEGAL COUNSEL Mayer, Brown & Platt
This is a copy of a report to shareholders of
Oppenheimer International Small Company Fund. This
report must be preceded or accompanied by a Prospectus
of Oppenheimer International Small Company Fund. For
material information concerning the Fund, see the
Prospectus.
SHARES OF OPPENHEIMER FUNDS ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT GUARANTEED BY ANY
BANK, ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY,
AND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
34 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 35
OPPENHEIMERFUNDS FAMILY
<TABLE>
<CAPTION>
==============================================================================================
<S> <C> <C>
GLOBAL EQUITY
Developing Markets Fund Global Fund
International Small Company Fund Quest Global Value Fund
Europe Fund Global Growth & Income Fund
International Growth Fund
==============================================================================================
EQUITY
Stock Stock & Bond
Enterprise Fund(1) Main Street(R) Growth & Income Fund
Discovery Fund Quest Opportunity Value Fund
Main Street(R) Small Cap Fund Total Return Fund
Quest Small Cap Value Fund Quest Balanced Value Fund
MidCap Fund Capital Income Fund(2)
Capital Appreciation Fund Multiple Strategies Fund
Growth Fund Disciplined Allocation Fund
Disciplined Value Fund Convertible Securities Fund
Quest Value Fund
Specialty
Real Asset Fund
Gold & Special Minerals Fund
==============================================================================================
FIXED INCOME
Taxable Municipal
International Bond Fund California Municipal Fund(3)
World Bond Fund Florida Municipal Fund(3)
High Yield Fund New Jersey Municipal Fund(3)
Champion Income Fund New York Municipal Fund(3)
Strategic Income Fund Pennsylvania Municipal Fund(3)
Bond Fund Municipal Bond Fund
U.S. Government Trust Insured Municipal Fund
Limited-Term Government Fund Intermediate Municipal Fund
Rochester Division
Rochester Fund Municipals
Limited Term New York Municipal Fund
==============================================================================================
MONEY MARKET(4)
Money Market Fund Cash Reserves
</TABLE>
1. Effective July 1, 1999, this fund is closed to new investors. See prospectus
for details.
2. On 4/1/99, the Fund's name was changed from "Oppenheimer Equity Income
Fund."
3. Available to investors only in certain states.
4. An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
these funds may seek to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in these funds.
Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc., Two
World Trade Center, New York, NY 10048-0203.
(C) Copyright 1999 OppenheimerFunds, Inc. All rights reserved.
35 OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
<PAGE> 36
INFORMATION AND SERVICES
As an Oppenheimer fund shareholder, you can benefit from special services
designed to make investing simple. Whether it's automatic investment plans,
timely market updates, or immediate account access, you can count on us
whenever you need assistance. So call us today, or visit our website--
we're here to help.
RA0815.001.0899 October 29, 1999
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