<PAGE> 1
OPPENHEIMER DISCOVERY FUND
ANNUAL REPORT SEPTEMBER 30, 1994
(OPPENHEIMERFUNDS(R) LOGO)
[PHOTO OF MAN AND BOY PLAYING]
"COLLEGE AND RETIREMENT ARE FAR IN THE
FUTURE FOR US. BUT I KNOW I NEED TO START
PLANNING TODAY.
"I CHOSE THIS FUND BECAUSE IT INVESTS
IN THE KINDS OF STOCKS THAT OFFER STRONG
POTENTIAL FOR LONG-TERM GROWTH."
<PAGE> 2
FUND FACTS
IN THIS REPORT:
ANSWERS TO TIMELY
QUESTIONS YOU SHOULD
ASK YOUR FUND'S
MANAGERS.
* HOW HAVE HIGHER INTEREST RATES AFFECTED SMALL-COMPANY GROWTH STOCKS?
* HAVE YOU ADJUSTED YOUR PORTFOLIO STRATEGY OVER THE PAST SEVERAL MONTHS?
* WHAT'S THE LONGER-TERM GROWTH STOCK OUTLOOK?
FACTS EVERY SHAREHOLDER SHOULD KNOW ABOUT
OPPENHEIMER DISCOVERY FUND
- -------------------------------------------------------------------------------
1 The Fund seeks aggressive capital appreciation.
- -------------------------------------------------------------------------------
2 The Fund is designed for the long-term investor who can accept some
volatility in the Fund's net asset value in return for the potential
for above-average, future gains.
- -------------------------------------------------------------------------------
3 Total return at net asset value for Class A shares for the 12 months
ended September 30, 1994 was -7.91%. For Class B shares, total return
at net asset value since inception of the Class on April 1, 1994 was
-1.93%. Total return at net asset value for Class Y shares since
inception of the Class on June 1, 1994 was 3.20%.(1)
- -------------------------------------------------------------------------------
4 Average annual total returns for Class A shares for the 1- and 5-year
periods ended September 30, 1994 and since inception of the Fund on
September 11, 1986 were -13.20%, 11.04% and 16.03%, respectively.
Total return for Class B shares since inception on 4/1/94 was
-6.83%.(2)
- -------------------------------------------------------------------------------
5 "While small-company growth stocks have at times been among the
market's best performers over the long term, in the short term they
can be subject to sharp corrections, lasting six months to a year in
most cases. The Fund experienced one of those corrections as interest
rates rose in 1994, but in our view the bull market in growth stocks
is far from over. In fact, from both fundamental and technical
perspectives, we believe these stocks and your Fund are poised for
solid gains."
Portfolio Manager Jay Tracey, September 30, 1994
(1) Based on the change in net asset value per share from 9/30/93 to 9/30/94,
without deducting any sales charges. Such performance would have been lower for
Class A and Class B shares if sales charges were taken into account.
(2) Average annual total returns are based on a hypothetical investment held
until 9/30/94, after deducting the maximum initial sales charge of 5.75% for
Class A shares and the contingent deferred sales charge of 5% for Class B
shares. The Fund's portfolio is subject to change. All figures assume
reinvestment of dividends and capital gains distributions. Past performance is
not indicative of future results. Investment and principal value on 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.
2 Oppenheimer Discovery Fund
<PAGE> 3
REPORT TO SHAREHOLDERS
The year ended September 30, 1994 was a challenging one for growth stocks, a
fact reflected in Oppenheimer Discovery Fund's performance, shown on the facing
page.
This performance isn't surprising at this point in the economic
cycle. Historically, growth stock prices have fluctuated sharply as the economy
and investment markets adjust to higher interest rates. In the long term,
however, growth stocks have been among the stock market's best performers.
Higher interest rates are, after all, a side effect of economic growth, and a
growing economy is the key to gains in small-company profits and higher stock
prices. That's why your managers believe that the long-term prospects for
Oppenheimer Discovery Fund are positive.
While the strong late-summer stock market rally suggests that growth
stocks are ready to resume their upward trend, at this writing, the market
remains somewhat unsettled, and your managers continue to maintain a
conservative portfolio posture. At September 30, the Fund's cash reserves stood
at 20.7% of net assets, a position that both helps reduce the portfolio's
exposure to volatility and gives your managers the flexibility to invest
aggressively as market directions become clearer.
Over the past six months, your managers continued to focus on
well-managed, innovative companies in sectors with high potential, including
technology, consumer cyclicals such as restaurants and specialty retailing, and
financial services.
Looking ahead, your management team is confident that small-company
growth stocks offer strong prospects for long-term capital appreciation. The
economy has been growing at a gradual, sustainable pace. Inflation remains
under control and interest rates, while up from year-ago levels, remain at low
levels from a historical perspective. And positive earnings surprises are
starting to appear. These are the conditions under which growth stocks thrive.
The confidence you have placed in the management of Oppenheimer
Discovery Fund is appreciated, and we look forward to continuing to help you
meet your investment goals.
/s/ DONALD W. SPIRO
- -------------------
Donald W. Spiro
President
Oppenheimer Discovery Fund
October 21, 1994
3 Oppenheimer Discovery Fund
<PAGE> 4
STATEMENT OF INVESTMENTS September 30, 1994
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
==================================================================================================================================
<S> <C> <C>
REPURCHASE AGREEMENTS--20.6%
- ----------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with The First Boston Corp., 4.70%, dated
9/30/94, to be repurchased at $15,005,875 on 10/3/94, collateralized
by U.S. Treasury Bills., 0%, 6/29/95, with a value of $15,318,945
(Cost $15,000,000) $ 15,000,000 $ 15,000,000
---------------------------------------------------------------------------------------------------------
Repurchase agreement with First Chicago Capital Markets,
4.95%, dated 9/30/94, to be repurchased at $117,148,304
on 10/3/94, collateralized by U.S. Treasury Nts., 4.25%-8.50%,
4/15/95-7/15/98, with a value of $66,216,113 and U.S.
Treasury Bills, 0%, 3/16/95-3/23/95, with a value of $53,334,535
(Cost $117,100,000) 117,100,000 117,100,000
------------
Total Repurchase Agreements (Cost $132,100,000) 132,100,000
==================================================================================================================================
CORPORATE BONDS AND NOTES--4.2%
- ----------------------------------------------------------------------------------------------------------------------------------
Genesis Health Ventures, Inc., 6% Cv. Sr. Sub. Debs., 11/30/03 1,300,000 1,745,250
---------------------------------------------------------------------------------------------------------
IntelCom Group, Inc., 8% Cv. Sub. Debs., 9/24/98(2) 2,080,000 1,649,934
---------------------------------------------------------------------------------------------------------
IntelCom Group, Inc., 7% Cv. Sub. Nts., 10/30/98(2) 2,070,000 1,265,101
---------------------------------------------------------------------------------------------------------
Medaphis Corp., 6.50% Cv. Sub. Debs., 1/1/00(2) 4,000,000 5,465,000
---------------------------------------------------------------------------------------------------------
PerSeptive Biosystems, Inc., 8.25% Cv. Sub. Debs., 8/15/01(2) 1,000,000 1,140,000
---------------------------------------------------------------------------------------------------------
Physicians Clinical Laboratory, Inc., 7.50% Cv. Sub. Debs., 8/15/00(2) 4,000,000 4,160,000
---------------------------------------------------------------------------------------------------------
Sierra On-Line, Inc., 6.50% Sub. Nts., 4/1/01(2) 2,000,000 1,800,000
---------------------------------------------------------------------------------------------------------
Solectron Corp., 0% Liq. Yld. Opt. Sub. Nts., 5/5/12 12,000,000 6,765,000
---------------------------------------------------------------------------------------------------------
Tops Appliance City, Inc., 6.50% Cv. Sub. Debs., 11/30/03(2) 3,000,000 1,935,000
---------------------------------------------------------------------------------------------------------
United Gaming, Inc., 7.50% Cv. Sub. Debs., 9/15/03 920,000 769,350
------------
Total Corporate Bonds and Notes (Cost $25,979,497) 26,694,635
<CAPTION>
UNITS
==================================================================================================================================
<S> <C> <C>
RIGHTS AND WARRANTS--0.1%
- ----------------------------------------------------------------------------------------------------------------------------------
China Aerospace International Holdings Ltd., Wts., Exp. 12/95 2,400,000 143,494
---------------------------------------------------------------------------------------------------------
PerSeptive Biosystems, Inc. Wts., Exp. 12/97 40,110 145,599
---------------------------------------------------------------------------------------------------------
Xoma Corp. Wts., Exp. 6/95 6,914 1,037
------------
Total Rights and Warrants (Cost $263,061) 290,130
<CAPTION>
SHARES
SUBJECT
DATE/PRICE TO PUT
==================================================================================================================================
<S> <C> <C> <C>
PUT OPTIONS PURCHASED--1.2%
- ----------------------------------------------------------------------------------------------------------------------------------
S&P 100 Index, 11/21/94(1) Nov./$420.00 13,000 7,150,000
---------------------------------------------------------------------------------------------------------
NASDAQ 100 Stock Index, 11/21/94(1) Nov./$375.00 1,320 610,500
------------
Total Put Options Purchased (Cost $5,666,210) 7,760,500
<CAPTION>
SHARES
==================================================================================================================================
<S> <C> <C>
COMMON STOCKS--76.5%
- ----------------------------------------------------------------------------------------------------------------------------------
BASIC MATERIALS--3.3%
- ----------------------------------------------------------------------------------------------------------------------------------
CHEMICALS: SPECIALTY--0.7%
BAREFOOT, INC.(1) 280,000 4,550,000
- ----------------------------------------------------------------------------------------------------------------------------------
COPPER--0.7% Greenbrier Companies, Inc.(1) 240,000 4,410,000
- ----------------------------------------------------------------------------------------------------------------------------------
METALS: MISCELLANEOUS--0.1%
Addington Resources, Inc.(1) 50,000 662,500
</TABLE>
4 Oppenheimer Discovery Fund
<PAGE> 5
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
STEEL--1.8% AK Steel Holding Corp.(1) 160,000 $ 5,200,000
---------------------------------------------------------------------------------------------------------
Reliance Steel & Aluminum Co.(1) 105,000 1,653,750
---------------------------------------------------------------------------------------------------------
Rouge Steel Co., Cl. A(1) 155,000 4,553,125
------------
11,406,875
- ----------------------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--21.0%
- ----------------------------------------------------------------------------------------------------------------------------------
AUTO PARTS: AFTER MARKET--0.4%
O'Reilly Automotive, Inc.(1) 100,000 2,500,000
- ----------------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT--1.7% Autotote Corp., Cl. A(1) 150,000 2,812,500
---------------------------------------------------------------------------------------------------------
Harveys Casinos Resorts 70,000 918,750
---------------------------------------------------------------------------------------------------------
Imax Corp.(1) 87,000 804,750
---------------------------------------------------------------------------------------------------------
Iwerks Entertainment, Inc.(1) 174,500 850,688
---------------------------------------------------------------------------------------------------------
Monarch Casino & Resort, Inc.(1) 150,000 1,106,250
---------------------------------------------------------------------------------------------------------
Players International, Inc.(1) 170,000 4,122,500
------------
10,615,438
- ----------------------------------------------------------------------------------------------------------------------------------
HOTELS/MOTELS--1.4% Hospitality Franchise Systems, Inc.(1) 295,000 9,255,625
- ----------------------------------------------------------------------------------------------------------------------------------
LEISURE TIME--1.5% Arctco, Inc. 192,500 3,657,500
---------------------------------------------------------------------------------------------------------
Mikohn Gaming Corp.(1) 50,000 525,000
---------------------------------------------------------------------------------------------------------
Outboard Marine Corp. 245,000 5,573,750
------------
9,756,250
- ----------------------------------------------------------------------------------------------------------------------------------
PUBLISHING--0.6% Marvel Entertainment Group, Inc.(1) 140,000 2,432,500
---------------------------------------------------------------------------------------------------------
Scientific Games Holdings Corp.(1) 35,000 1,461,250
------------
3,893,750
- ----------------------------------------------------------------------------------------------------------------------------------
RESTAURANTS--5.4% Apple South, Inc. 525,000 9,318,750
---------------------------------------------------------------------------------------------------------
Applebee's International, Inc. 300,000 5,700,000
---------------------------------------------------------------------------------------------------------
DF & R Restaurants, Inc.(1) 145,000 4,096,250
---------------------------------------------------------------------------------------------------------
IHOP Corp.(1) 215,000 5,966,250
---------------------------------------------------------------------------------------------------------
Marcus Corp. (The) 110,000 3,011,250
---------------------------------------------------------------------------------------------------------
Outback Steakhouse, Inc.(1) 220,000 6,242,500
------------
34,335,000
- ----------------------------------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY--5.6% Carson Pirie Scott & Co.(1) 100,000 2,112,500
---------------------------------------------------------------------------------------------------------
General Nutrition Cos., Inc.(1) 281,400 6,261,150
---------------------------------------------------------------------------------------------------------
GYMBOREE CORP(1) 200,000 5,950,000
---------------------------------------------------------------------------------------------------------
Hollywood Entertainment Corp.(1) 125,000 3,500,000
---------------------------------------------------------------------------------------------------------
Insurance Auto Auctions, Inc.(1) 200,000 6,850,000
---------------------------------------------------------------------------------------------------------
Jos. A. Banks Clothiers, Inc.(1) 90,000 607,500
---------------------------------------------------------------------------------------------------------
Men's Wearhouse, Inc.(1) 172,500 3,450,000
---------------------------------------------------------------------------------------------------------
Petco Animal Supplies, Inc.(1) 140,000 2,100,000
---------------------------------------------------------------------------------------------------------
Rex Stores Corp.(1) 190,000 3,823,750
---------------------------------------------------------------------------------------------------------
Ultimate Electronics, Inc.(1) 130,000 1,397,500
------------
36,052,400
</TABLE>
5 Oppenheimer Discovery Fund
<PAGE> 6
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TEXTILES: APPAREL Authentic Fitness Corp.(1) 195,000 $ 3,022,500
MANUFACTURERS--4.4% ---------------------------------------------------------------------------------------------------------
CYGNE DESIGNS, INC.(1) 150,000 3,375,000
---------------------------------------------------------------------------------------------------------
Marisa Christina, Inc.(1) 200,000 2,725,000
---------------------------------------------------------------------------------------------------------
Mohawk Industries, Inc.(1) 145,000 2,211,250
---------------------------------------------------------------------------------------------------------
Nautica Enterprises, Inc.(1) 260,000 8,043,750
---------------------------------------------------------------------------------------------------------
Tommy Hilfiger Corp.(1) 232,600 9,042,325
------------
28,419,825
- ----------------------------------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS--14.9%
- ----------------------------------------------------------------------------------------------------------------------------------
DRUGS--1.2% Roberts Pharmaceutical Corp.(1) 130,000 3,575,000
---------------------------------------------------------------------------------------------------------
Watson Pharmaceutical, Inc.(1) 167,600 4,231,900
------------
7,806,900
- ----------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE: DIVERSIFIED--1.6%
TheraTx, Inc.(1) 220,000 3,836,250
---------------------------------------------------------------------------------------------------------
Value Health, Inc.(1) 135,000 6,480,000
------------
10,316,250
- ----------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE: Cephalon, Inc.(1) 62,000 662,625
MISCELLANEOUS--5.3% ---------------------------------------------------------------------------------------------------------
COR Therapeutics, Inc.(1) 107,500 1,639,375
---------------------------------------------------------------------------------------------------------
Dentsply International, Inc. 160,000 5,480,000
---------------------------------------------------------------------------------------------------------
Ethical Holdings Ltd., Sponsored ADR(1) 320,000 2,640,000
---------------------------------------------------------------------------------------------------------
Genesis Health Ventures, Inc.(1) 144,000 4,086,000
---------------------------------------------------------------------------------------------------------
Genetic Therapy, Inc.(1) 116,300 901,325
---------------------------------------------------------------------------------------------------------
Horizon Healthcare Corp.(1) 267,300 7,317,338
---------------------------------------------------------------------------------------------------------
Martek Biosciences Corp.(1) 200,000 1,950,000
---------------------------------------------------------------------------------------------------------
Matrix Pharmaceutical, Inc.(1) 100,000 1,425,000
---------------------------------------------------------------------------------------------------------
PerSeptive Biosystems, Inc.(1) 130,380 1,849,766
---------------------------------------------------------------------------------------------------------
PerSeptive Technology II Corp., Units(1) 197,500 2,567,500
---------------------------------------------------------------------------------------------------------
Rural/Metro Corp.(1) 165,000 3,073,125
------------
33,592,054
- ----------------------------------------------------------------------------------------------------------------------------------
HOSPITAL MANAGEMENT--5.5%
American Medical Response, Inc.(1) 160,000 4,020,000
---------------------------------------------------------------------------------------------------------
Community Psychiatric Centers 400,000 5,450,000
---------------------------------------------------------------------------------------------------------
Lincare Holdings, Inc.(1) 125,000 2,906,250
---------------------------------------------------------------------------------------------------------
Mariner Health Group, Inc.(1) 258,500 5,412,344
---------------------------------------------------------------------------------------------------------
Medaphis Corp.(1) 130,000 4,712,500
---------------------------------------------------------------------------------------------------------
Ornda Healthcorp(1) 500,000 8,062,500
---------------------------------------------------------------------------------------------------------
Sun Healthcare Group, Inc.(1) 225,000 4,921,875
------------
35,485,469
- ----------------------------------------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS--1.3% MARQUETTE ELECTRONICS, INC., Cl. A(1) 80,000 1,520,000
---------------------------------------------------------------------------------------------------------
Medisense, Inc.(1) 250,000 4,406,250
---------------------------------------------------------------------------------------------------------
Steris Corp.(1) 100,000 2,650,000
------------
8,576,250
</TABLE>
6 Oppenheimer Discovery Fund
<PAGE> 7
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY--3.8%
- ----------------------------------------------------------------------------------------------------------------------------------
OIL AND GAS DRILLING--3.0%
Basin Exploration, Inc.(1) 300,000 $ 3,375,000
---------------------------------------------------------------------------------------------------------
Cross Timbers Oil Co. 160,000 2,340,000
---------------------------------------------------------------------------------------------------------
Nabors Industries, Inc.(1) 500,000 3,062,500
---------------------------------------------------------------------------------------------------------
Newfield Exploration Co.(1) 80,000 1,970,000
---------------------------------------------------------------------------------------------------------
Noble Drilling Corp.(1) 300,000 2,250,000
---------------------------------------------------------------------------------------------------------
St. Mary Land & Exploration Co. 250,000 3,062,500
---------------------------------------------------------------------------------------------------------
Stone Energy Corp.(1) 200,000 3,475,000
------------
19,535,000
- ----------------------------------------------------------------------------------------------------------------------------------
OIL WELL SERVICES NUMAR Corp.(1) 120,000 1,642,500
AND EQUIPMENT--0.8% ---------------------------------------------------------------------------------------------------------
Weatherford International, Inc.(1) 260,000 3,217,500
------------
4,860,000
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL--6.2%
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES: Credit Depot Corp.(1) 38,500 269,500
MISCELLANEOUS--3.9% ---------------------------------------------------------------------------------------------------------
First USA, Inc. 135,000 4,741,875
---------------------------------------------------------------------------------------------------------
Foothill Group, Inc. (The), Cl. A 350,000 5,206,250
---------------------------------------------------------------------------------------------------------
Green Tree Financial Corp. 355,300 9,548,688
---------------------------------------------------------------------------------------------------------
Olympic Financial Ltd.(1) 260,000 1,365,000
---------------------------------------------------------------------------------------------------------
Servicios Financieros Quadrun SA,Sponsored ADR(1) 120,000 1,950,000
---------------------------------------------------------------------------------------------------------
TFC Enterprises, Inc.(1) 170,000 2,210,000
------------
25,291,313
- ----------------------------------------------------------------------------------------------------------------------------------
INSURANCE: LIFE--0.6% Physicians Health Services, Inc., Cl. A(1) 165,800 3,771,950
- ----------------------------------------------------------------------------------------------------------------------------------
INSURANCE: MULTI-LINE--0.6%
CCP Insurance, Inc. 170,000 3,888,750
- ----------------------------------------------------------------------------------------------------------------------------------
INSURANCE: PROPERTY Mid Ocean Ltd.(1) 59,300 1,501,031
AND CASUALTY--0.8% ---------------------------------------------------------------------------------------------------------
Vesta Insurance Group, Inc. 125,000 3,312,500
------------
4,813,531
- ----------------------------------------------------------------------------------------------------------------------------------
SAVINGS AND LOANS/ Metropolitan Bancorp. 165,000 1,856,250
HOLDINGS COS.--0.3%
- ----------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--8.6%
- ----------------------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS GROUP--1.8%
BMC West Corp.(1) 310,000 4,940,625
---------------------------------------------------------------------------------------------------------
Centex Construction Products, Inc.(1) 257,000 3,212,500
---------------------------------------------------------------------------------------------------------
Giant Cement Holding, Inc.(1) 240,000 3,360,000
------------
11,513,125
- ----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES--1.1%
Dimac Corp.(1) 170,000 2,082,500
---------------------------------------------------------------------------------------------------------
Fusion Systems Corp.(1) 150,000 4,865,625
------------
6,948,125
- ----------------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--1.7%
AER Energy Resources, Inc.(1) 268,000 2,010,000
---------------------------------------------------------------------------------------------------------
Kent Electronics Corp.(1) 90,000 3,195,000
---------------------------------------------------------------------------------------------------------
Oak Industries, Inc.(1) 235,000 5,786,875
------------
10,991,875
</TABLE>
7 Oppenheimer Discovery Fund
<PAGE> 8
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MACHINERY: DIVERSIFIED--1.3%
Duracraft Corp.(1) 90,000 $ 3,060,000
---------------------------------------------------------------------------------------------------------
Novellus Systems, Inc.(1) 110,000 5,197,500
------------
8,257,500
- ----------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING: Johnstown America Industries, Inc.(1) 215,000 5,751,250
DIVERSIFIED INDUSTRIALS--0.9%
- ----------------------------------------------------------------------------------------------------------------------------------
POLLUTION CONTROL--1.0% United Waste Systems, Inc.(1) 270,000 6,682,500
- ----------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION: Fritz Cos., Inc.(1) 138,000 4,899,000
MISCELLANEOUS--0.8%
- ----------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--18.7%
- ----------------------------------------------------------------------------------------------------------------------------------
COMMUNICATION--1.6% Aspect Telecommunications Corp.(1) 95,000 3,610,000
---------------------------------------------------------------------------------------------------------
Glenayre Technologies, Inc.(1) 115,000 6,641,250
------------
10,251,250
- ----------------------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE Acxiom Corp.(1) 125,000 3,562,500
AND SERVICES--9.5% ---------------------------------------------------------------------------------------------------------
CUC International, Inc.(1) 150,000 4,950,000
---------------------------------------------------------------------------------------------------------
Cornerstone Imaging, Inc.(1) 197,000 4,087,750
---------------------------------------------------------------------------------------------------------
Davidson & Associates, Inc.(1) 100,000 2,000,000
---------------------------------------------------------------------------------------------------------
EMC Corp.(1) 520,000 10,465,000
---------------------------------------------------------------------------------------------------------
FTP Software, Inc.(1) 168,700 4,038,256
---------------------------------------------------------------------------------------------------------
HBO & Co. 260,000 8,840,000
---------------------------------------------------------------------------------------------------------
Medicus Systems Corp. 120,000 1,770,000
---------------------------------------------------------------------------------------------------------
Oracle Systems Corp.(1) 84,400 3,629,200
---------------------------------------------------------------------------------------------------------
Project Software & Development, Inc.(1) 150,000 2,025,000
---------------------------------------------------------------------------------------------------------
Proxima Corp.(1) 95,000 2,470,000
---------------------------------------------------------------------------------------------------------
Pyxis Corp.(1) 300,000 7,350,000
---------------------------------------------------------------------------------------------------------
SPSS, Inc.(1)(3) 300,000 2,887,500
---------------------------------------------------------------------------------------------------------
Sierra On-Line, Inc.(1) 98,800 2,025,400
---------------------------------------------------------------------------------------------------------
Softkey International, Inc.(1) 45,000 669,375
------------
60,769,981
- ----------------------------------------------------------------------------------------------------------------------------------
COMPUTER SYSTEMS--1.2% BancTec, Inc.(1) 180,000 4,455,000
---------------------------------------------------------------------------------------------------------
Planar Systems, Inc.(1) 212,500 3,028,125
------------
7,483,125
- ----------------------------------------------------------------------------------------------------------------------------------
ELECTRONICS: Gentex Corp.(1) 180,000 4,275,000
INSTRUMENTATION--3.5% ---------------------------------------------------------------------------------------------------------
Recoton Corp.(1) 370,000 6,012,500
---------------------------------------------------------------------------------------------------------
Sanmina Corp.(1) 158,800 3,850,900
---------------------------------------------------------------------------------------------------------
Symbol Technologies, Inc.(1) 265,000 8,082,500
------------
22,220,900
- ----------------------------------------------------------------------------------------------------------------------------------
ELECTRONICS: Advanced Technology Materials, Inc.(1) 172,200 1,248,450
SEMICONDUCTORS--1.5% ---------------------------------------------------------------------------------------------------------
Dallas Semiconductor Corp.(1) 85,000 1,317,500
---------------------------------------------------------------------------------------------------------
Lam Research Corp.(1) 150,000 6,037,500
---------------------------------------------------------------------------------------------------------
MRS Technology, Inc.(1) 162,900 1,343,925
------------
9,947,375
</TABLE>
8 Oppenheimer Discovery Fund
<PAGE> 9
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS--1.4% Intertel Communications, Inc.(1) 150,000 $ 1,959,375
---------------------------------------------------------------------------------------------------------
Intertel Communications, Inc.(1)(2) 22,500 256,781
---------------------------------------------------------------------------------------------------------
LCI International, Inc.(1) 346,600 6,737,037
------------
8,953,193
------------
Total Common Stocks (Cost $393,850,609) 490,320,579
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $557,859,377) 102.6% 657,165,844
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (2.6) (16,740,987)
------- ------------
NET ASSETS 100.0% $640,424,857
------- ------------
</TABLE>
1. Non-income-producing security.
2. Restricted security--See Note 5 of Notes to
Financial Statements.
3. Affiliated company. Represents ownership of at
least 5% of the voting securities of the issuer and is
or was an affiliate, as defined in the Investment
Company Act of 1940, at or during the year ended
September 30, 1994. The aggregate fair value of all
securities of affiliated companies as of September 30,
1994 amounted to $2,887,500. Transactions during the
period in which the issuer was an affiliate are as
follows:
<TABLE>
<CAPTION>
BALANCE BALANCE
SEPTEMBER 30, 1993 GROSS ADDITIONS GROSS REDUCTIONS SEPTEMBER 30, 1994
------------------ --------------- ------------------- ------------------
SHARES COST SHARES COST SHARES COST SHARES COST
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LifeQuest Medical, Inc. 200,000 $2,011,250 -- $-- 200,000 $2,011,250 -- $ --
----------------------------------------------------------------------------------------------------------
OCTUS, Inc., Units 270,000 1,665,312 -- -- 270,000 1,665,313 -- --
----------------------------------------------------------------------------------------------------------
SPSS, Inc. 300,000 2,400,000 -- -- -- -- 300,000 2,400,000
---------- ---------- ----------
$6,076,562 $3,676,563 $2,400,000
========== ========== ==========
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Discovery Fund
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES September 30, 1994
<TABLE>
<S> <C> <C>
===================================================================================================================================
ASSETS Investments, at value (including repurchase agreements of $132,100,000)
(cost $557,859,377)--see accompanying statement $657,165,844
----------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 19,463,678
Shares of beneficial interest sold 5,010,887
Dividends and interest 457,381
----------------------------------------------------------------------------------------------------------
Other 21,919
------------
Total assets 682,119,709
===================================================================================================================================
LIABILITIES Bank overdraft 900,946
----------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 34,939,205
Options written, at value (premiums received $2,540,763)--Note 6 3,006,250
Shares of beneficial interest redeemed 1,940,411
Distribution and service plan fees--Note 4 366,268
Other 541,772
------------
Total liabilities 41,694,852
===================================================================================================================================
NET ASSETS $640,424,857
============
===================================================================================================================================
COMPOSITION OF Paid-in capital $516,189,957
NET ASSETS ----------------------------------------------------------------------------------------------------------
Accumulated net investment loss (115,587)
----------------------------------------------------------------------------------------------------------
Accumulated net realized gain from investment and written option transactions 25,509,507
----------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Note 3 98,840,980
------------
Net assets $640,424,857
============
===================================================================================================================================
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets
of $613,740,255 and 17,138,714 shares of beneficial interest outstanding) $35.81
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $37.99
----------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $26,491,076 and 742,983 shares of beneficial interest outstanding) $35.65
----------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $193,526 and 5,404 shares of beneficial interest outstanding) $35.81
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Discovery Fund
<PAGE> 11
STATEMENT OF OPERATIONS For the Year Ended September 30, 1994
<TABLE>
<S> <C>
===================================================================================================================================
INVESTMENT INCOME Interest $ 4,730,334
----------------------------------------------------------------------------------------------------------
Dividends 1,115,071
------------
Total income 5,845,405
===================================================================================================================================
EXPENSES Management fees--Note 4 4,280,597
----------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 4 1,429,769
Class B--Note 4 61,551
Class Y--Note 4 1
----------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 1,083,640
----------------------------------------------------------------------------------------------------------
Shareholder reports 354,806
----------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 241,347
----------------------------------------------------------------------------------------------------------
Custodian fees 149,355
----------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 26,857
Class B 7,978
Class Y 63
----------------------------------------------------------------------------------------------------------
Legal and auditing fees 65,346
----------------------------------------------------------------------------------------------------------
Other 188,280
------------
Total expenses 7,889,590
===================================================================================================================================
NET INVESTMENT LOSS (2,044,185)
===================================================================================================================================
REALIZED AND UNREALIZED Net realized gain on investments 28,310,742
GAIN (LOSS) ON INVESTMENTS
----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (71,924,513)
------------
Net realized and unrealized loss on investments (43,613,771)
===================================================================================================================================
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(45,657,956)
============
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Discovery Fund
<PAGE> 12
STATEMENTS OF CHANGES IN NET ASSET
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1994 1993
===================================================================================================================================
<S> <C> <C> <C>
OPERATIONS Net investment loss $ (2,044,185) $ (2,412,387)
----------------------------------------------------------------------------------------------------------
Net realized gain on investments 28,310,742 19,651,352
----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (71,924,513) 140,464,453
------------ ------------
Net increase (decrease) in net assets resulting from operations (45,657,956) 157,703,418
===================================================================================================================================
DISTRIBUTIONS Distributions from net realized gain on investments:
TO SHAREHOLDERS Class A ($1.00 per share) (15,359,681) --
===================================================================================================================================
BENEFICIAL INTEREST Net increase in net assets resulting from Class A
TRANSACTIONS beneficial interest transactions--Note 2 88,455,074 135,344,010
----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class B
beneficial interest transactions--Note 2 25,739,503 --
----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class Y
beneficial interest transactions--Note 2 190,922 --
===================================================================================================================================
NET ASSETS Total increase 53,367,862 293,047,428
----------------------------------------------------------------------------------------------------------
Beginning of year 587,056,995 294,009,567
------------ ------------
End of year [including accumulated net investment
losses of ($115,587) and ($3,803,286), respectively] $640,424,857 $587,056,995
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
12 Oppenheimer Discovery Fund
<PAGE> 13
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------------
YEAR ENDED
SEPTEMBER 30,
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 39.90 $ 27.62 $ 26.03 $ 17.97 $ 24.51 $ 17.62
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .26 (.13) (.17) .06 .16 .29
Net realized and unrealized gain (loss)
on investments and options written (3.35) 12.41 3.05 8.87 (4.84) 6.74
-------- -------- -------- -------- ------- --------
Total income (loss) from
investment operations (3.09) 12.28 2.88 8.93 (4.68) 7.03
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net
investment income -- -- -- (.19) (.30) (.14)
Distributions from net realized gain
on investments and options written (1.00) -- (1.29) (.68) (1.56) --
-------- -------- -------- -------- ------- --------
Total dividends and
distributions to shareholders (1.00) -- (1.29) (.87) (1.86) (.14)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 35.81 $ 39.90 $ 27.62 $ 26.03 $ 17.97 $ 24.51
======== ======== ======== ======== ======= ========
===============================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) (7.91)% 44.46% 11.28% 51.88% (20.34)% 40.23%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $613,740 $587,057 $294,010 $117,110 $50,357 $ 53,793
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $588,642 $451,016 $218,065 $ 75,083 $54,454 $ 40,641
- -------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 17,139 14,713 10,647 4,499 2,802 2,195
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (.34)% (.54)% (.62)% .22% .83% 1.52%
Expenses 1.32% 1.27% 1.52% 1.42% 1.53% 1.46%
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 83.3% 85.2% 67.9% 158.1% 234.6% 132.0%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS Y
---------------------------------------- ---------------------------------
YEAR ENDED PERIOD ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1988 1987 1986(3) 1994(2) 1994(1)
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.49 $ 14.21 $14.29 $ 35.65 $34.89
Income (loss) from investment operations:
Net investment income (loss) .14 .02 .02 .03 .11
Net realized and unrealized gain (loss)
on investments and options written (1.98) 7.28 (.10) (.03) .81
------- ------- ------ ------- ------
Total income (loss) from
investment operations (1.84) 7.30 (.08) -- .92
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net
investment income (.05) (.02) -- -- --
Distributions from net realized gain
on investments and options written (1.98) -- -- -- --
------- ------- ------ ------- ------
Total dividends and
distributions to shareholders (2.03) (.02) -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.62 $ 21.49 $14.21 $ 35.65 $35.81
======= ======= ====== ======= ======
===============================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) (7.11)% 51.08% (.56)% (1.93)% 3.20%
===============================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $33,361 $35,834 $1,353 $26,491 $ 194
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $32,089 $21,439 $1,173 $12,435 $ 39
- -------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 1,894 1,667 95 743 5
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) .80% .19% 3.55%(5) (1.06)%(5) (.13)%(5)
Expenses 1.52% 1.74% 1.50%(5) 2.36%(5) 1.41%(5)
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 169.0% 145.4% 0.0% 83.3% 83.3%
</TABLE>
(1) For the period from June 1, 1994 (inception of offering) to September 30,
1994.
(2) For the period from April 1, 1994 (inception of offering) to September 30,
1994.
(3) For the period from September 11, 1986 (commencement of operations) to
September 30, 1986.
(4) Assumes a hypothetical initial 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.
(5) Annualized.
(6) 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 year ended September 30, 1994 were $428,361,291 and $431,915,878,
respectively.
See accompanying Notes to Financial Statements.
13 Oppenheimer Discovery Fund
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
===============================================================================
1. SIGNIFICANT
ACCOUNTING POLICIES Oppenheimer Discovery 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 advisor is Oppenheimer
Management Corporation (the Manager). The fund offers
Class A, Class B and Class Y shares. Class A shares
are sold with a front-end sales charge. Class B shares
may be subject to a contingent deferred sales charge.
All three classes of shares have identical rights to
earnings, assets and voting privileges, except that
each class has its own expenses directly attributable
to a particular class and exclusive voting rights with
respect to matters affecting a single class. Classes A
and B 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.
------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued
at 4:00 p.m. (New York time) 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 asked
price or the last sale price on the prior trading day.
Long-term debt securities are valued by a portfolio
pricing service approved by the Board of Trustees.
Long-term debt securities which cannot be valued by
the approved portfolio pricing service are valued by
averaging the mean between the bid and asked prices
obtained from two active market makers in such
securities. Short-term 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.
Securities for which market quotes are not readily
available are valued under procedures established by
the Board of Trustees to determine fair value in good
faith. An option is valued based upon the last sales
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 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 or asked
price closest to the last reported sale price 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
securities and investment income are translated at the
rates of exchange prevailing on the respective dates
of such transactions.
The Fund generally enters into forward
currency exchange contracts as a hedge, upon the
purchase or sale of a security denominated in a
foreign currency. Risks may arise from the potential
inability of the counterparty to meet the terms of the
contract and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar.
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
results 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. 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 AND GAINS AND LOSSES.
Income, expenses (other than those attributable to a
specific class) and 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 INCOME 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 tax provision is required. At September 30,
1994, the Fund had available for federal income tax
purposes an unused capital loss carryover of
approximately $1,875,000 expiring in 1995, the usage
of which is subject to certain limitations.
14 Oppenheimer Discovery Fund
<PAGE> 15
===============================================================================
1. SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED) TRUSTEES' FEES AND EXPENSES. 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.
The accumulated liability for the Fund's projected
benefit obligations was $117,741 at September 30,
1994. No payments have been made under the plan.
------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and
distributions to shareholders are recorded on the
ex-dividend date.
------------------------------------------------------
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO
SHAREHOLDERS. Effective October 1, 1993, the Fund
adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of
Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. As a result,
the Fund changed the classification of distributions
to shareholders to better disclose the differences
between financial statement amounts and distributions
determined in accordance with income tax regulations.
Accordingly, subsequent to September 30, 1993, amounts
have been reclassified to reflect a decrease in
paid-in capital of $2,004,732, a decrease in
undistributed net investment loss of $3,682,108, and a
decrease in undistributed capital gain on investments
of $1,677,376. During the year ended September 30,
1994, in accordance with Statement of Position 93-2,
undistributed net investment loss was decreased by
$2,049,776, undistributed capital gain was decreased
by $68,230 and paid-in capital was decreased by
$1,981,546.
------------------------------------------------------
OTHER. Investment transactions are accounted for on
the date the investments are purchased or sold (trade
date) and dividend income is recorded on the
ex-dividend date. Discount on securities purchased is
amortized over the life of the respective securities,
in accordance with federal income tax requirements.
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.
===============================================================================
2. SHARES OF
BENEFICIAL INTEREST The Fund has authorized an unlimited number of no par
value shares of beneficial interest of each class.
Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1994(1) YEAR ENDED SEPTEMBER 30, 1993
-------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 10,323,810 $381,892,840 10,406,503 $349,688,611
Distributions reinvested 384,457 14,724,695 -- --
Redeemed (8,282,662) (308,162,461) (6,339,986) (214,344,601)
---------- ------------ ---------- ------------
Net increase 2,425,605 $ 88,455,074 4,066,517 $135,344,010
========== ============ ========== ============
----------------------------------------------------------------------------------------------------------
Class B:
Sold 961,766 $ 33,185,516 -- $ --
Redeemed (218,783) (7,446,013) -- --
---------- ------------ ---------- ------------
Net increase 742,983 $ 25,739,503 -- $ --
========== ============ ========== ============
----------------------------------------------------------------------------------------------------------
Class Y:
Sold 5,405 $ 190,967 -- $ --
Redeemed (1) (45) -- --
---------- ------------ ---------- ------------
Net increase 5,404 $ 190,922 -- $ --
========== ============ ========== ============
</TABLE>
1. For the year ended September 30, 1994 for Class A
shares, for the period from April 1, 1994 (inception
of offering) to September 30, 1994 for Class B shares,
and for the period from June 1, 1994 (inception of
offering) to September 30, 1994 for Class Y shares.
===============================================================================
3. UNREALIZED GAINS AND
LOSSES ON At September 30, 1994, net unrealized appreciation on
INVESTMENTS investments and options written of $98,840,980 was
composed of gross appreciation of $121,752,992, and
gross depreciation of $22,912,012.
15 Oppenheimer Discovery Fund
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (Continued)
===============================================================================
4. MANAGEMENT FEES
AND OTHER TRANSACTIONS
WITH AFFILIATES Management fees paid to the Manager were in accordance
with the investment advisory agreement with the Fund
which provides for an annual fee of .75% on the first
$200 million of net assets with a reduction of .03% on
each $200 million thereafter to $800 million, and .60%
on net assets in excess of $800 million. The Manager
has agreed to reimburse the Fund if aggregate expenses
(with specified exceptions) exceed the most stringent
applicable regulatory limit on Fund expenses.
For the year ended September 30, 1994,
commissions (sales charges paid by investors) on sales
of Fund shares totaled $5,199,808, of which $1,699,406
was retained by Oppenheimer Funds Distributor, Inc.
(OFDI), a subsidiary of the Manager, as general
distributor, and by an affiliated broker/dealer.
During the year ended September 30, 1994, OFDI
received contingent deferred sales charges of $6,595
upon redemption of Class B shares, as reimbursement
for sales commissions advanced by OFDI at the time of
sale of such shares.
Oppenheimer Shareholder Services (OSS), a
division of the Manager, is the transfer and
shareholder servicing agent for the Fund, and for
other registered investment companies. OSS's total
costs of providing such services are allocated ratably
to these companies.
Under separate approved plans, Class A and
Class B may expend up to .25% of its net assets
annually to reimburse OFDI for costs incurred in
connection with the personal service and maintenance
of accounts that hold shares of the Fund, including
amounts paid to brokers, dealers, banks and other
financial institutions. In addition, Class B shares
are subject to an asset-based sales charge of .75% of
net assets annually, to reimburse OFDI for sales
commissions paid from its own resources at the time of
sale and associated financing costs. In the event of
termination or discontinuance of the Class B plan, the
Board of Trustees may allow the Fund to continue
payment of the asset-based sales charge to OFDI for
distribution expenses incurred on Class B shares sold
prior to termination or discontinuance of the plan.
During the year ended September 30, 1994, OFDI paid
$92,564 to an affiliated broker/dealer as
reimbursement for Class A personal service and
maintenance expenses and retained $61,551 as
reimbursement for Class B sales commissions and
service fee advances, as well as financing costs.
===============================================================================
5. RESTRICTED SECURITIES The Fund owns securities purchased in private
placement transactions, without registration under the
Securities Act of 1933 (the Act). The securities are
valued under methods approved by the Board of Trustees
as reflecting fair value. The Fund intends to invest
no more than 10% of its net assets (determined at the
time of purchase) in restricted and illiquid
securities, excluding securities eligible for resale
pursuant to Rule 144A of the Act that are determined
to be liquid by the Board of Trustees or by the
Manager under Board-approved guidelines. Restricted
and illiquid securities, excluding securities eligible
for resale pursuant to Rule 144A of the Act amount to
$17,671,816, or 2.8% of the Fund's net assets, at
September 30, 1994. Illiquid and/or restricted
securities, including those restricted securities that
are transferable under Rule 144A of the Act are listed
below.
<TABLE>
<CAPTION>
VALUATION
PER UNIT AS OF
SECURITY ACQUISITION DATE COST PER UNIT SEPTEMBER 30, 1994
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IntelCom Group, Inc., 7% Cv. Sub. Nts., 10/30/98 10/26/93-10/27/93 $ 99.75 $ 61.12
---------------------------------------------------------------------------------------------------------
IntelCom Group, Inc., 8% Cv. Sub. Debs., 9/24/98 9/24/93 $100.00 $ 79.32
---------------------------------------------------------------------------------------------------------
Intertel Communications, Inc. 1/10/94 $ 13.89 $ 11.41
---------------------------------------------------------------------------------------------------------
Medaphis Corp., 6.50% Cv. Sub. Nts., 1/1/00 9/28/94 $117.25 $136.63
---------------------------------------------------------------------------------------------------------
PerSeptive Biosystems, Inc., 8.25% Cv. Sub. Debs.,
8/15/01 8/19/94 $100.00 $114.00
---------------------------------------------------------------------------------------------------------
Physicians Clinical Laboratory, Inc., 7.50% Cv. Sub.
Debs., 8/15/00 1/13/94 $101.00 $104.00
---------------------------------------------------------------------------------------------------------
Sierra On-Line, Inc., 6.50% Sub. Nts., 4/1/01 4/13/94 $100.00 $ 90.00
---------------------------------------------------------------------------------------------------------
Tops Appliance City, Inc., 6.50% Cv. Sub. Debs.,
11/30/03 11/26/93 $100.00 $ 64.50
</TABLE>
===============================================================================
6. PUT OPTION ACTIVITY Put option activity for the year ended September 30,
1994 was as follows:
<TABLE>
<CAPTION>
NUMBER AMOUNT OF
PUT OPTION ACTIVITY OF OPTIONS PREMIUMS
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at September 30, 1993 -- $ --
Options written 13,000 2,540,763
Options expired prior to exercise -- --
Options exercised -- --
------ ----------
Options outstanding at September 30, 1994 13,000 $2,540,763
====== ==========
</TABLE>
At September 30, 1994, the Fund had outstanding put
options written with an expiration date of 11/21/94
and an exercise price of 405. The market value was
$3,006,250.
16 Oppenheimer Discovery Fund
<PAGE> 17
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer Discovery Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Discovery Fund as of September 30, 1994, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period then ended
and the financial highlights for each of the years in the eight-year period
then ended and the period from September 11, 1986 (commencement of operations)
to September 30, 1986. 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 and financial highlights. Our procedures included
confirmation of securities owned as of September 30, 1994, 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 Discovery Fund as of September 30, 1994, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights
for each of the years in the eight-year period then ended and the period from
September 11, 1986 (commencement of operations) to September 30, 1986, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
October 21, 1994
17 Oppenheimer Discovery Fund
<PAGE> 18
FEDERAL INCOME TAX INFORMATION (Unaudited)
In early 1995, shareholders will receive information regarding all dividends
and distributions paid to them by the Fund during calendar year 1994.
Regulations of the U.S. Treasury Department require the Fund to report this
information to the Internal Revenue Service.
A distribution of $1.00 was paid on December 29, 1993 which was
designated as a "capital gain distribution" for federal income tax purposes.
Whether received in stock or in cash, the capital gain distribution should be
treated by shareholders as a gain from the sale of capital assets held for more
than one year (long-term capital gains).
None of the dividends paid by the Fund during the fiscal year ended
September 30, 1994 are eligible for the corporate dividend-received deduction.
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.
18 Oppenheimer Discovery Fund
<PAGE> 19
OPPENHEIMER DISCOVERY FUND
===============================================================================
OFFICERS AND TRUSTEES Leon Levy, Chairman of the Board of Trustees
Leo Cherne, Trustee
Edmund T. Delaney, 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
Sidney M. Robbins, Trustee
Donald W. Spiro, Trustee and President
Pauline Trigere, Trustee
Clayton K. Yeutter, Trustee
Jay W. Tracey, Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
===============================================================================
INVESTMENT ADVISOR Oppenheimer Management Corporation
===============================================================================
DISTRIBUTOR Oppenheimer Funds Distributor, Inc.
===============================================================================
TRANSFER AND SHAREHOLDER Oppenheimer Shareholder Services
SERVICING AGENT
===============================================================================
CUSTODIAN OF The Bank of New York
PORTFOLIO SECURITIES
===============================================================================
INDEPENDENT AUDITORS KPMG Peat Marwick LLP
===============================================================================
LEGAL COUNSEL Gordon Altman Butowsky Weitzen Shalov & Wein
This is a copy of a report to shareholders of
Oppenheimer Discovery Fund. This report must be
preceded or accompanied by a Prospectus of
Oppenheimer Discovery Fund. For material
information concerning the Fund, see the
Prospectus.
19 Oppenheimer Discovery Fund
<PAGE> 20
'Talk to a Customer Service
Representative.
Monday through Friday from
8:30 a.m. to 8:00 p.m., and
Saturday from 10:00 a.m.
to 2:00 p.m. ET.
Make account transactions with a
Customer Service Representative.
Monday through Friday from
8:30 a.m. to 8:00 p.m. ET.
Get automated information or
make automated transcactions.
24 hours a day, 7 days a week.
Service for the hearing impaired.
Monday through Friday from
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Hear timely and insightful
messages on the economy and
issues that affect your finances.
24 hours a day, 7 days a week.
"Just as OppenheimerFunds offers over 35 different mutual funds designed to
help meet virtually every investment need, Oppenheimer Shareholder Services
offers a variety of services to satisfy your individual needs. Whenever you
require help, we're only a toll-free phone call away.
"For personalized assistance
and account information, call our General
Information number to speak with our
knowledgeable Customer Service
Representatives and get the help you need. [Photograph of
"When you want to make account Barbara Hennigar
transactions, it's easy for you to redeem Chief Executive Officer
shares, exchange shares, or conduct Oppenheimer Shareholder
AccountLink transactions, simply by calling Services.]
our Telephone Transactions number.
"And for added convenience,
OppenheimerFunds' Phone Link, an automated
voice response system is available 24 hours
a day, 7 days a week. PhoneLink gives you access to a variety of fund,
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- ------------ exchanges and redemptions using your touch-tone phone. Of
1 9 9 3 course, PhoneLink will always give you the option to
AWARD of speak with a Customer Service Representative during the hours
EXCELLENCE shown to the left.
[LOGO] icsa "When you invest in OppenheimerFunds, you know
- ------------ you'll receive a high level of customer service. The
International International Customer Service Association knows it, too, as
Customer it awarded Oppenheimer Shareholder Services a 1993 Award of
Service Excellence for consistenly demonstrating superior customer
Association service.
"Whatever your needs, we're ready to assist you."
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--------------------
