<PAGE> 1
OPPENHEIMER DISCOVERY FUND
Semiannual Report March 31, 1995
"To get high
growth,
we know we
[PHOTO] have to invest
aggressively
for the long
term."
[LOGO] OPPENHEIMER FUNDS
<PAGE> 2
This Fund is for people who want to take part in the investment opportunities
offered by fast-growing companies.
- --------------------------------------------------------------------------------
HOW YOUR FUND IS MANAGED
- --------------------------------------------------------------------------------
Oppenheimer Discovery Fund seeks capital appreciation by investing in small,
emerging growth companies, or "small-cap" stocks. These stocks are expected to
provide higher growth potential than stocks of larger, more established
companies because emerging growth businesses are often developers of new or
innovative products or services and innovators in leading-edge sectors of the
economy. Although small-cap stocks may be subject to more severe price
fluctuations than the stocks of larger companies, small-cap stocks have a
history of often outperforming larger-cap, common stocks over time.
- --------------------------------------------------------------------------------
PERFORMANCE
- --------------------------------------------------------------------------------
Total returns at net asset value for the 6 months ended 3/31/95 for Class A and
B shares were 3.71% and 3.35%, respectively.(1)
Your Fund's average annual total returns at maximum offering price for
Class A shares for the 1- and 5-year periods ended 3/31/95 and since inception
of the Class on 9/11/86 were -3.71%, 13.92% and 15.51%, respectively. For Class
B shares, total return since inception of the Class on 4/1/94 was -3.46%.(2)
- --------------------------------------------------------------------------------
OUTLOOK
- --------------------------------------------------------------------------------
"The kinds of small-capitalization stocks in which the Fund invests were hit
hard by rising interest rates over the past year. While that's never good news,
it does have several positives. At this point, the prices of small-cap growth
stocks are becoming more attractive. Over the past few months, we've used rising
markets to take profits and raise cash. As the stock market finds its footing,
as we expect it to do in 1995, both small-cap growth stocks in general and this
Fund in particular should benefit."
Jay Tracey, Portfolio Manager
March 31, 1995
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.
(1) Based on the change in net asset value per share from 9/30/94 to 3/31/95,
without deducting any sales charges. Such performance would have been lower if
sales charges were taken into account.
(2) Class A returns show results of hypothetical investments on 4/1/94, 4/1/90
and 9/11/86 (inception of class), after deducting the current maximum initial
sales charge of 5.75%. Class B returns show results of a hypothetical investment
on 4/1/94 and the deduction of the applicable contingent deferred sales charge
of 5% (1-year) and 4% (since inception) for Class B shares.
The Fund also offers Class Y shares, but only to certain institutional investors
and not to members of the public. For Class Yshares, total return since
inception of the Class on 6/1/94 was 8.78% (Class A shares are offered without a
sales charge). The Fund's maximum sales charge rate for Class A shares was
higher during a portion of some of the periods shown, and actual investment
results will be different as a result of the change. An explanation of the
different total returns is in the Fund's prospectus.
2 Oppenheimer Discovery Fund
<PAGE> 3
[PHOTO]
Donald W. Spiro
President
Oppenheimer
Discovery Fund
[PHOTO]
Jon S. Fossel
Chairman and CEO
Oppenheimer
Management
Corporation
Dear OppenheimerFunds Shareholder,
1994 was a difficult period for the stock market, one marked above all by one of
the most aggressive series of moves to raise interest rates by the U.S. Federal
Reserve in its history. As interest rates moved up, bond prices fell and the
stock market followed. In the six months since our last report, however, the
stock market's tone has improved significantly. Both the Dow Jones Industrial
Average and the broader Standard & Poor's 500 Index have reached record levels
and, at this writing, many signs suggest that the market could continue to
strengthen throughout much of 1995.
For investors disappointed by the stock market's stall in 1994, that's
encouraging news, and it raises an interesting question: What changed? The
answer can be summed up simply: the outlook for interest rates.
Throughout 1994, the market's positive fundamentals--and there were many,
including a solid economy, modest inflation, and strong gains in corporate
profits--were offset by the Fed's aggressive efforts to boost interest rates and
fight future inflation. While the underlying strength of the economy and
business earnings kept stock prices from slipping severely, seven increases in
short-term interest rates kept many stock prices from rising. Today, those
interest rate pressures appear to be easing. Because of the Fed's actions,
economic growth is slowing to a modest, sustainable pace. As rates stabilize, we
should see continued gradual growth in the economy and business profits, without
recession or the need for further significant increases in interest rates.
Of course, uncertainties remain, both in the U.S. and, to a greater
extent, abroad. But, as the market's relatively mild reaction to events like the
devaluation of the Mexican peso and the dollar's decline against many major
currencies demonstrate, the overall trend in stocks at this time seems to be
solidly up. In fact, uncertainties offshore have made the U.S. one of the
world's most attractive stock markets, which has already helped provide solid
support for stock prices.
Even with all these positives, stock investors are likely to hold off and
review their positions periodically, which could lead to occasional market
corrections. Absent an upturn in inflation, however, we believe these inevitable
market pullbacks should be relatively mild and short-lived.
Investors may also be somewhat more focused than in the past because of an
apparent fundamental shift in economic patterns. Consumer spending is currently
growing at the slowest rate of any economic cycle over the past 50 years, while
business spending on capital goods is expanding at one of the fastest. As a
result, the impact of the economic slowdown is likely to be felt mainly by
consumer-sensitive businesses. Other companies--in fields from basic industry to
heavy equipment to telecommunications--should show continued sales and earnings
strength, bolstered by rising demand from recovering economies across Europe.
On the following pages, your portfolio manager discusses the outlook for
your Fund. We appreciate your trust in OppenheimerFunds, and we'll continue to
do our best to help you meet your investment objectives.
/s/ Donald W. Spiro /s/ Jon S. Fossel
- ------------------- -----------------
Donald W. Spiro Jon S. Fossel
April 24, 1995
3 Oppenheimer Discovery Fund
<PAGE> 4
Q+A [PHOTO]
Q What portfolio adjustments did you make?
An interview with your Fund's manager.
THE FUND'S PERFORMANCE WAS DOWN OVER THE PAST 12 MONTHS. WHAT FACTORS AFFECTED
PERFORMANCE?
One factor stands out. This Fund focuses on "smaller" small-cap growth stocks
whose prices were particularly affected by the Federal Reserve's aggressive
moves to raise interest rates over the past year. While we're enthusiastic about
the prospects for these companies--many of which continue to report
better-than-expected earnings--the market has been slow to recognize their
potential. As a result, we've been selling when the market rose and raising
cash. That's held our recent performance back, but it also should allow us to
move aggressively and achieve above-average returns as conditions improve. While
difficult years are hard to accept, they're an inevitable part of investing.
That's why keeping a long-term perspective is crucial to getting the most from
your investment and helping you through short-term market fluctuations.
[PHOTO]
DO YOU EXPECT CONDITIONS TO IMPROVE ANY TIME SOON?
We do. As recent reports show, the Federal Reserve's actions to raise interest
rates seem to have had their desired effect. Inflation remains very low, the
economy and business earnings are growing at a solid, sustainable rate, and
interest rates, although up from year-ago levels, are still relatively low by
historical standards.
These factors should set the stage for renewed outperformance by small-cap
stocks. And with the adjustments we've made to the portfolio over the last
several months, we believe the Fund is positioned to participate fully in any
gains.
WHAT PORTFOLIO ADJUSTMENTS DID YOU MAKE?
Our buying and selling tends to be motivated by specific companies, but we did
make
4 Oppenheimer Discovery Fund
<PAGE> 5
FACING PAGE
Top left: Jay Tracey,
Portfolio Manager
Top right: The equity trading desk
Bottom left: Paul LaRocco,
Associate Portfolio Manager
THIS PAGE
Top:Jay Tracey
Bottom: Robert Doll, Executive VP,
Director of Equity Investments,
with his assistant, Pat Andrzejewski
A We
reduced
positions in
companies
whose
earnings
are sensitive
to declines
in consumer
spending.
one broad sector shift. We reduced or eliminated positions in companies whose
earnings are sensitive to declines in consumer spending, including retailing,
restaurants, and consumer durables. Consumer spending currently is running at
the lowest rate recorded in any post-war expansion; in our view, it made sense
to reduce exposure in these areas.(1)
ARE YOU MOVING OUT OF CONSUMER-RELATED STOCKS ENTIRELY?
Not at all. While our overall consumer-related position is down substantially,
we continue to hold a number of names in which we have high confidence. In fact,
we added to our holdings in a number of areas. For example, we purchased Renters
Choice, a rent-to-own chain that's capitalizing on demographic trends,
including the growth in single-person households. We also bought Hudson Foods
and JP Foodservice, both major vendors to fast-growing restaurant chains.
[PHOTO]
ARE THERE ANY OTHER AREAS IN WHICH YOU'RE ADDING TO POSITIONS?
We've modestly--and selectively--increased our positions in technology and
healthcare.
In technology, we found interesting opportunities in companies such as
Planar Systems and Advanced Technology Materials, which specialize in flat-panel
computer displays, which are a national priority. Overall, however, our
technology weighting is less than many of our peers. We're expecting a
correction in this sector, and when it comes we'll be in a position to be
aggressive buyers.
[PHOTO]
In healthcare, we've added a number of names in the physician practice
management field, including Physicians' Reliance Network, which specializes in
oncology, and MedCath, which specializes in cardiology.
WHAT'S YOUR OUTLOOK FOR THE FUND?
Our outlook is highly positive. Despite concerns that small-cap stock prices are
stretched today, these stocks are trading in essentially the same range relative
to the S&P 500 as they were a decade ago.
As the economy slows and large-company profits start to flag, investors
should take more interest in small-cap issues, which should push their stock
prices higher. We're confident that will be the case. And we're confident this
Fund is positioned to participate powerfully as small-cap stocks resume their
advance.
(1) The Fund's portfolio is subject to change.
5 Oppenheimer Discovery Fund
<PAGE> 6
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS March 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
============================================================================================================
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS AND NOTES--4.9%
- ------------------------------------------------------------------------------------------------------------
Genesis Health Ventures, Inc., 6% Cv. Sr. Sub. Debs., 11/30/03 $1,300,000 $ 1,865,500
- ------------------------------------------------------------------------------------------------------------
Intelcom Group, Inc., 7% Cv. Sub. Nts., 10/30/98(2)(3) 2,140,000 1,515,955
- ------------------------------------------------------------------------------------------------------------
Intelcom Group, Inc., 8% Cv. Sub. Debs., 9/24/98(1)(2)(3) 2,080,000 1,529,938
- ------------------------------------------------------------------------------------------------------------
Medaphis Corp., 6.50% Cv. Sub. Nts., 1/1/00(1) 4,000,000 9,115,000
- ------------------------------------------------------------------------------------------------------------
PerSeptive Biosystems, Inc., 8.25% Cv. Sub. Debs., 8/15/01(2) 1,000,000 725,000
- ------------------------------------------------------------------------------------------------------------
Physicians Clinical Laboratory, Inc., 7.50% Cv. Sub. Debs., 8/15/00(1) 4,000,000 3,815,000
- ------------------------------------------------------------------------------------------------------------
Sierra On-Line, Inc., 6.50% Cv. Sub. Nts., 4/1/01(1) 4,000,000 6,390,000
- ------------------------------------------------------------------------------------------------------------
Solectron Corp., Zero Coupon Cv. Liquid Yield Option Sub. Nts., 5/5/12 6,300,000 3,835,125
- ------------------------------------------------------------------------------------------------------------
Theratx, Inc., 8% Cv. Sub. Debs., 2/1/02(1) 4,000,000 3,800,000
- ------------------------------------------------------------------------------------------------------------
Tops Appliance City, Inc., 6.50% Cv. Sub. Debs., 11/30/03(1) 3,000,000 1,200,000
------------
Total Convertible Corporate Bonds and Notes (Cost $29,147,772) 33,791,518
</TABLE>
<TABLE>
<CAPTION>
SHARES
============================================================================================================
<S> <C> <C>
COMMON STOCKS--74.5%
- ------------------------------------------------------------------------------------------------------------
BASIC MATERIALS--0.3%
- ------------------------------------------------------------------------------------------------------------
METALS--0.3%
- ------------------------------------------------------------------------------------------------------------
Rouge Steel Co., Cl. A 72,500 1,776,250
- ------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--16.9%
- ------------------------------------------------------------------------------------------------------------
AUTOS AND HOUSING--1.3%
- ------------------------------------------------------------------------------------------------------------
Gentex Corp.(4) 36,800 772,800
- ------------------------------------------------------------------------------------------------------------
Recoton Corp.(4) 370,000 6,151,250
- ------------------------------------------------------------------------------------------------------------
Reddi Brake Supply Corp.(4) 572,000 1,894,750
------------
8,818,800
- ------------------------------------------------------------------------------------------------------------
LEISURE AND
ENTERTAINMENT--3.9%
- ------------------------------------------------------------------------------------------------------------
Apple South, Inc. 126,400 1,975,000
- ------------------------------------------------------------------------------------------------------------
Applebee's International, Inc. 150,000 3,318,750
- ------------------------------------------------------------------------------------------------------------
DF & R Restaurants, Inc.(4) 200,000 2,900,000
- ------------------------------------------------------------------------------------------------------------
Hospitality Franchise Systems, Inc.(4) 130,000 4,160,000
- ------------------------------------------------------------------------------------------------------------
IHOP Corp.(4) 185,000 5,445,938
- ------------------------------------------------------------------------------------------------------------
Outboard Marine Corp. 186,000 3,906,000
- ------------------------------------------------------------------------------------------------------------
Rock Bottom Restaurants, Inc.(4) 75,000 1,546,875
- ------------------------------------------------------------------------------------------------------------
Supertel Hospitality, Inc.(4) 235,000 3,348,750
------------
26,601,313
- ------------------------------------------------------------------------------------------------------------
RETAIL: GENERAL--5.3%
- ------------------------------------------------------------------------------------------------------------
Authentic Fitness Corp.(4) 245,000 3,920,000
- ------------------------------------------------------------------------------------------------------------
Cygne Designs, Inc.(4) 400,000 4,700,000
- ------------------------------------------------------------------------------------------------------------
Marisa Christina, Inc.(4) 300,000 3,637,500
- ------------------------------------------------------------------------------------------------------------
Nautica Enterprises, Inc.(4) 260,000 8,125,000
- ------------------------------------------------------------------------------------------------------------
Quicksilver, Inc.(4) 230,000 4,973,750
- ------------------------------------------------------------------------------------------------------------
Tommy Hilfiger Corp.(4) 504,200 11,092,400
------------
36,448,650
- ------------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY--6.4%
- ------------------------------------------------------------------------------------------------------------
CellStar Corp. 20,000 400,000
- ------------------------------------------------------------------------------------------------------------
Corporate Express, Inc.(4) 200,000 5,300,000
- ------------------------------------------------------------------------------------------------------------
CUC International, Inc.(4) 150,000 5,831,250
- ------------------------------------------------------------------------------------------------------------
General Nutrition Cos., Inc.(4) 231,400 6,421,350
- ------------------------------------------------------------------------------------------------------------
Insurance Auto Auctions, Inc.(4) 200,000 6,900,000
</TABLE>
6 Oppenheimer Discovery Fund
<PAGE> 7
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
============================================================================================================
<S> <C> <C>
RETAIL: SPECIALITY
(CONTINUED)
Movie Gallery, Inc.(4) 235,000 $ 6,315,625
- ------------------------------------------------------------------------------------------------------------
O'Reilly Automotive, Inc.(4) 100,000 2,587,500
- ------------------------------------------------------------------------------------------------------------
Petco Animal Supplies, Inc.(4) 180,000 3,780,000
- ------------------------------------------------------------------------------------------------------------
Rex Stores Corp.(4) 163,400 2,287,600
- ------------------------------------------------------------------------------------------------------------
U.S. Office Products Co.(4) 300,000 4,312,500
------------
44,135,825
- ------------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS--24.5%
- ------------------------------------------------------------------------------------------------------------
EDUCATION--0.3%
- ------------------------------------------------------------------------------------------------------------
Children's Discovery Centers of America, Inc.(4) 130,000 2,047,500
- ------------------------------------------------------------------------------------------------------------
FOOD--2.2%
- ------------------------------------------------------------------------------------------------------------
Hudson Foods, Inc., Cl. A 420,000 8,032,500
- ------------------------------------------------------------------------------------------------------------
JP Foodservice, Inc.(4) 600,000 6,900,000
------------
14,932,500
- ------------------------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS--3.3%
- ------------------------------------------------------------------------------------------------------------
Dura Pharmaceuticals, Inc.(4) 250,000 3,718,750
- ------------------------------------------------------------------------------------------------------------
Ethical Holdings, Sponsored ADR(4) 500,000 3,062,500
- ------------------------------------------------------------------------------------------------------------
Martek Biosciences Corp.(4) 160,000 1,480,000
- ------------------------------------------------------------------------------------------------------------
Matrix Pharmaceutical, Inc.(4) 129,600 1,782,000
- ------------------------------------------------------------------------------------------------------------
Roberts Pharmaceutical Corp.(4) 175,000 4,812,500
- ------------------------------------------------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(4) 265,000 7,817,500
------------
22,673,250
- ------------------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES
AND SERVICES--18.3%
- ------------------------------------------------------------------------------------------------------------
American Medical Response, Inc.(4) 200,000 5,025,000
- ------------------------------------------------------------------------------------------------------------
Community Psychiatric Centers 200,000 2,575,000
- ------------------------------------------------------------------------------------------------------------
EmCare Holdings, Inc.(4) 200,000 4,075,000
- ------------------------------------------------------------------------------------------------------------
Equity Corp. International(4) 220,000 3,520,000
- ------------------------------------------------------------------------------------------------------------
Genesis Health Ventures, Inc.(4) 144,000 4,500,000
- ------------------------------------------------------------------------------------------------------------
Gulf South Medical Supply, Inc.(4) 136,300 5,554,225
- ------------------------------------------------------------------------------------------------------------
Horizon Healthcare Corp.(4) 347,300 9,290,275
- ------------------------------------------------------------------------------------------------------------
Lincare Holdings, Inc.(4) 165,000 4,888,125
- ------------------------------------------------------------------------------------------------------------
Living Centers of America, Inc.(4) 181,000 6,810,125
- ------------------------------------------------------------------------------------------------------------
Mariner Health Group, Inc.(4) 300,000 5,812,500
- ------------------------------------------------------------------------------------------------------------
Marquette Electronics, Inc., Cl. A(4) 80,000 1,600,000
- ------------------------------------------------------------------------------------------------------------
Medaphis Corp.(4) 100,000 6,300,000
- ------------------------------------------------------------------------------------------------------------
MedCath, Inc.(4) 300,000 4,200,000
- ------------------------------------------------------------------------------------------------------------
Medisense Inc.(4) 290,000 5,727,500
- ------------------------------------------------------------------------------------------------------------
MedPartners, Inc.(4) 80,000 1,770,000
- ------------------------------------------------------------------------------------------------------------
North American Biologicals, Inc.(4) 250,000 2,187,500
- ------------------------------------------------------------------------------------------------------------
Omnicare, Inc. 185,100 9,717,750
- ------------------------------------------------------------------------------------------------------------
Ornda Healthcorp(4) 500,000 8,562,500
- ------------------------------------------------------------------------------------------------------------
PerSeptive Biosystems, Inc.(4) 66,300 447,525
- ------------------------------------------------------------------------------------------------------------
PerSeptive Biosystems, Inc.(4) 34,080 218,538
- ------------------------------------------------------------------------------------------------------------
PerSeptive Technology II Corp., Units(4) 172,500 862,500
- ------------------------------------------------------------------------------------------------------------
Physician Reliance Network, Inc.(4) 195,000 5,021,250
- ------------------------------------------------------------------------------------------------------------
Physicians Health Services, Inc., Cl. A(4) 125,800 4,088,500
- ------------------------------------------------------------------------------------------------------------
Professional Sports Care Management, Inc.(4) 132,000 1,452,000
- ------------------------------------------------------------------------------------------------------------
Pyxis Corp.(4) 200,000 4,150,000
</TABLE>
7 Oppenheimer Discovery Fund
<PAGE> 8
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (Unaudited) (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
============================================================================================================
<S> <C> <C>
HEALTHCARE/SUPPLIES
AND SERVICES
(CONTINUED)
- ------------------------------------------------------------------------------------------------------------
Rural/Metro Corp.(4) 165,000 $ 3,052,500
- ------------------------------------------------------------------------------------------------------------
Steris Corp.(4) 100,000 4,000,000
- ------------------------------------------------------------------------------------------------------------
Sun Healthcare Group, Inc.(4) 275,000 7,012,500
- ------------------------------------------------------------------------------------------------------------
Theratx, Inc.(4) 200,000 3,350,000
------------
125,770,813
- ------------------------------------------------------------------------------------------------------------
HOUSEHOLD GOODS--0.4%
- ------------------------------------------------------------------------------------------------------------
Ultralife Batteries, Inc.(4) 170,000 2,975,000
- ------------------------------------------------------------------------------------------------------------
ENERGY--2.9%
- ------------------------------------------------------------------------------------------------------------
ENERGY SERVICES
AND PRODUCERS--2.9%
- ------------------------------------------------------------------------------------------------------------
Basin Exploration, Inc.(4) 250,000 2,203,125
- ------------------------------------------------------------------------------------------------------------
Cross Timbers Oil Co. 160,000 2,240,000
- ------------------------------------------------------------------------------------------------------------
Nabors Industries, Inc.(4) 500,000 3,750,000
- ------------------------------------------------------------------------------------------------------------
Newfield Exploration Co.(4) 80,000 1,720,000
- ------------------------------------------------------------------------------------------------------------
NUMAR Corp.(4) 145,000 1,323,125
- ------------------------------------------------------------------------------------------------------------
St. Mary Land & Exploration Co. 250,000 3,218,750
- ------------------------------------------------------------------------------------------------------------
Stone Energy Corp.(4) 200,000 2,950,000
- ------------------------------------------------------------------------------------------------------------
Weatherford International, Inc.(4) 260,000 2,730,000
------------
20,135,000
- ------------------------------------------------------------------------------------------------------------
FINANCIAL--3.7%
- ------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--3.7%
- ------------------------------------------------------------------------------------------------------------
First USA, Inc. 135,000 5,670,000
- ------------------------------------------------------------------------------------------------------------
Foothill Group, Inc. (The), Cl. A 430,000 8,546,250
- ------------------------------------------------------------------------------------------------------------
Green Tree Financial Corp. 169,200 6,937,200
- ------------------------------------------------------------------------------------------------------------
Renters Choice, Inc.(4) 280,000 4,340,000
------------
25,493,450
- ------------------------------------------------------------------------------------------------------------
INDUSTRIAL--5.9%
- ------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.9%
- ------------------------------------------------------------------------------------------------------------
Oak Industries, Inc.(4) 235,000 6,051,250
- ------------------------------------------------------------------------------------------------------------
INDUSTRIAL MATERIALS--0.9%
- ------------------------------------------------------------------------------------------------------------
Giant Cement Holding, Inc.(4) 240,000 2,760,000
- ------------------------------------------------------------------------------------------------------------
U.S. Can Corp.(4) 165,000 3,506,250
------------
6,266,250
- ------------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES--3.7%
- ------------------------------------------------------------------------------------------------------------
Acxiom Corp.(4) 200,000 3,350,000
- ------------------------------------------------------------------------------------------------------------
Daisytek International Corp.(4) 140,000 3,027,500
- ------------------------------------------------------------------------------------------------------------
Fritz Cos., Inc.(4) 120,000 7,710,000
- ------------------------------------------------------------------------------------------------------------
Kent Electronics Corp.(4) 135,000 3,982,500
- ------------------------------------------------------------------------------------------------------------
United Waste Systems, Inc.(4) 270,000 7,627,500
------------
25,697,500
- ------------------------------------------------------------------------------------------------------------
MANUFACTURING--0.4%
- ------------------------------------------------------------------------------------------------------------
Cyrk International, Inc.(4) 150,000 2,568,750
- ------------------------------------------------------------------------------------------------------------
Greenbrier Companies, Inc. 24,800 368,900
------------
2,937,650
- ------------------------------------------------------------------------------------------------------------
TECHNOLOGY--20.3%
- ------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE--3.6%
- ------------------------------------------------------------------------------------------------------------
AER Energy Resources, Inc.(4) 268,000 1,239,500
- ------------------------------------------------------------------------------------------------------------
Data Translation, Inc.(4) 100,000 3,200,000
- ------------------------------------------------------------------------------------------------------------
EMC Corp.(4) 390,000 6,532,500
</TABLE>
8 Oppenheimer Discovery Fund
<PAGE> 9
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
============================================================================================================
<S> <C> <C>
COMPUTER HARDWARE
(CONTINUED)
- ------------------------------------------------------------------------------------------------------------
In Focus Systems, Inc. 42,300 $ 1,099,800
- ------------------------------------------------------------------------------------------------------------
Planar Systems, Inc.(4) 200,000 4,200,000
- ------------------------------------------------------------------------------------------------------------
Proxima Corp.(4) 95,000 2,458,125
- ------------------------------------------------------------------------------------------------------------
Symbol Technologies, Inc.(4) 197,600 6,076,200
------------
24,806,125
- ------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE--9.5%
- ------------------------------------------------------------------------------------------------------------
7th Level, Inc.(4) 235,000 1,938,750
- ------------------------------------------------------------------------------------------------------------
Aspen Technologies, Inc.(4) 135,000 2,666,250
- ------------------------------------------------------------------------------------------------------------
Cornerstone Imaging, Inc.(4) 197,000 3,570,625
- ------------------------------------------------------------------------------------------------------------
Davidson & Associates, Inc.(4) 80,000 2,680,000
- ------------------------------------------------------------------------------------------------------------
FTP Software, Inc.(4) 235,000 7,461,250
- ------------------------------------------------------------------------------------------------------------
HBO & Co. 260,000 11,310,000
- ------------------------------------------------------------------------------------------------------------
McAfee Associates, Inc.(4) 250,800 7,273,200
- ------------------------------------------------------------------------------------------------------------
Microtec Research, Inc.(4) 300,000 3,750,000
- ------------------------------------------------------------------------------------------------------------
National Instruments Corp.(4) 156,000 2,808,000
- ------------------------------------------------------------------------------------------------------------
Oracle Systems Corp.(4) 126,600 3,956,250
- ------------------------------------------------------------------------------------------------------------
Pairgain Technologies, Inc.(4) 100,000 2,387,500
- ------------------------------------------------------------------------------------------------------------
Project Software & Development, Inc.(4) 99,500 2,437,750
- ------------------------------------------------------------------------------------------------------------
Simula, Inc. 85,000 1,742,500
- ------------------------------------------------------------------------------------------------------------
Softkey International, Inc.(4) 250,000 6,812,500
- ------------------------------------------------------------------------------------------------------------
SPSS, Inc.(4)(5) 335,000 4,187,500
------------
64,982,075
- ------------------------------------------------------------------------------------------------------------
ELECTRONICS--3.2%
- ------------------------------------------------------------------------------------------------------------
Advanced Technology Materials, Inc.(4) 172,200 1,226,925
- ------------------------------------------------------------------------------------------------------------
Credence Systems Corp.(4) 75,000 2,343,750
- ------------------------------------------------------------------------------------------------------------
Fusion Systems Corp.(4) 150,000 4,387,500
- ------------------------------------------------------------------------------------------------------------
Integrated Silicon Solution, Inc.(4) 100,000 3,500,000
- ------------------------------------------------------------------------------------------------------------
Lam Research Corp.(4) 50,000 2,237,500
- ------------------------------------------------------------------------------------------------------------
Novellus Systems, Inc.(4) 30,000 1,860,000
- ------------------------------------------------------------------------------------------------------------
Sanmina Corp.(4) 200,000 6,500,000
------------
22,055,675
- ------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-
TECHNOLOGY--4.0%
- ------------------------------------------------------------------------------------------------------------
Arch Communications Group, Inc.(4) 220,000 4,290,000
- ------------------------------------------------------------------------------------------------------------
DSP Communications, Inc.(4) 76,000 1,007,000
- ------------------------------------------------------------------------------------------------------------
Glenayre Technologies, Inc.(4) 172,500 7,848,750
- ------------------------------------------------------------------------------------------------------------
Intertel Communications, Inc.(4) 150,000 1,625,625
- ------------------------------------------------------------------------------------------------------------
Intertel Communications, Inc.(2)(4) 22,500 243,844
- ------------------------------------------------------------------------------------------------------------
LCI International, Inc.(4) 284,100 7,066,988
- ------------------------------------------------------------------------------------------------------------
Periphonics Corp. 131,200 2,132,000
- ------------------------------------------------------------------------------------------------------------
PriCellular Corp., Cl. A(4) 200,000 1,425,000
- ------------------------------------------------------------------------------------------------------------
ProNet, Inc.(4) 105,000 1,903,126
------------
27,542,333
------------
Total Common Stocks (Cost $404,501,432) 512,147,209
</TABLE>
9 Oppenheimer Discovery Fund
<PAGE> 10
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (Unaudited) (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
============================================================================================================
<S> <C> <C>
PREFERRED STOCKS--0.8%
- ------------------------------------------------------------------------------------------------------------
AK Steel Holding Corp., 7% Cv. Stock Appreciation Income Linked Securities 75,000 $ 2,156,250
- ------------------------------------------------------------------------------------------------------------
Silicon Video Corp., $2.50 Cv., Series D(2) 1,200,000 3,000,000
------------
Total Preferred Stocks (Cost $5,306,250) 5,156,250
</TABLE>
<TABLE>
<CAPTION>
UNITS
============================================================================================================
<S> <C> <C>
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- ------------------------------------------------------------------------------------------------------------
China Aerospace International Holdings Wts., Exp. 12/95 2,400,000 17,070
- ------------------------------------------------------------------------------------------------------------
PerSeptive Biosystems, Inc. Wts., Exp. 12/97 40,110 0
- ------------------------------------------------------------------------------------------------------------
Windmere Corp. Wts., Exp. 1/98 238 0
- ------------------------------------------------------------------------------------------------------------
Xoma Corp. Wts., Exp. 6/95 6,914 380
------------
Total Rights, Warrants and Certificates (Cost $263,061) 17,450
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
============================================================================================================
<S> <C> <C>
REPURCHASE AGREEMENTS--21.3%
- ------------------------------------------------------------------------------------------------------------
Repurchase agreement with First Chicago Capital Markets, 6.25%, dated
3/31/95, to be repurchased at $146,676,354 on 4/3/95, collateralized by
U.S. Treasury Nts., 4.75%--8.875%, 5/15/96--10/31/99, with a value of
$127,920,028 and U.S. Treasury Bonds, 8.125%--12.50%, 8/14/14--8/15/19,
with a value of $21,771,292 (Cost $146,600,000) $146,600,000 146,600,000
- ------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $585,818,515) 101.5% 697,712,427
- ------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (1.5) (10,474,142)
------------ ------------
NET ASSETS 100.0% $687,238,285
============ ============
</TABLE>
(1) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $25,839,938 or 3.76% of the Fund's net
assets, at March 31, 1995.
(2) Identifies issues considered to be illiquid--See Note 5 of Notes to
Financial Statements.
(3) Interest or dividend is paid in kind.
(4) Non-income producing security.
(5) 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 period ended March 31, 1995.
The aggregate fair value of all securities of affiliated companies as of March
31, 1995 amounted to $4,487,500. Transactions during the period in which the
issuer was an affiliate are as follows:
<TABLE>
<CAPTION>
BALANCE SEPTEMBER 30, 1994 GROSS ADDITIONS GROSS REDUCTIONS BALANCE MARCH 31, 1995
-------------------------- -------------------- ------------------- ----------------------
SHARES COST SHARES COST SHARES COST SHARES COST
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SPSS, Inc. 300,000 $2,400,000 35,000 $566,875 -- $ -- 335,000 $2,966,875
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Discovery Fund
<PAGE> 11
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES March 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
===============================================================================================================
<S> <C>
ASSETS
Investments, at value (including repurchase agreements of $146,600,000)
(cost $585,818,515)--see accompanying statement $697,712,427
- ---------------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 6,081,861
Shares of beneficial interest sold 1,324,413
Interest and dividends 594,335
- ---------------------------------------------------------------------------------------------------------------
Other 43,150
------------
Total assets 705,756,186
===============================================================================================================
LIABILITIES
Bank overdraft 3,383,290
- ---------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 11,166,033
Shares of beneficial interest redeemed 2,568,604
Transfer and shareholder sevicing agent fees--Note 4 533,543
Distribution and service plan fees--Note 4 384,430
Trustees' fees 54,405
Dividends 317
Other 427,279
------------
Total liabilities 18,517,901
===============================================================================================================
NET ASSETS $687,238,285
===============================================================================================================
COMPOSITION OF
NET ASSETS
Paid-in capital $566,554,298
- ---------------------------------------------------------------------------------------------------------------
Accumulated net investment loss (800,281)
- ---------------------------------------------------------------------------------------------------------------
Accumulated net realized gain from investment and written options transactions 9,590,356
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Note 3 111,893,912
------------
Net assets $687,238,285
===============================================================================================================
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of $643,286,833 and
18,190,715 shares of beneficial interest outstanding) $35.36
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $37.52
- ---------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets of
$41,548,192 and 1,184,578 shares of beneficial interest outstanding) $35.07
- ---------------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net assets of
$2,403,260 and 67,817 shares of beneficial interest outstanding) $35.44
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Discovery Fund
<PAGE> 12
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the Six Months Ended March 31, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
==============================================================================================================
<S> <C>
INVESTMENT INCOME
Interest $ 3,817,986
- --------------------------------------------------------------------------------------------------------------
Dividends 387,190
-----------
Total income 4,205,176
==============================================================================================================
EXPENSES
Management fees--Note 4 2,272,080
- --------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4
Class A 717,286
Class B 158,109
- --------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 1,300,345
- --------------------------------------------------------------------------------------------------------------
Shareholder reports 246,585
- --------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 156,600
- --------------------------------------------------------------------------------------------------------------
Legal and auditing fees 24,427
- --------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 2,972
Class B 5,342
Class Y 696
- --------------------------------------------------------------------------------------------------------------
Other 5,428
-----------
Total expenses 4,889,870
==============================================================================================================
NET INVESTMENT LOSS (684,694)
==============================================================================================================
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
AND OPTIONS WRITTEN
Net realized gain from:
Investments 12,111,437
Closing of option contracts written--Note 6 807,864
-----------
Net realized gain 12,919,301
- --------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 13,052,932
-----------
Net realized and unrealized gain on investments and options written 25,972,233
==============================================================================================================
Net Increase in Net Assets Resulting From Operations $25,287,539
===========
</TABLE>
See accompanying Notes to Financial Statements.
12 Oppenheimer Discovery Fund
<PAGE> 13
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1995 SEPTEMBER 30,
(UNAUDITED) 1994
=================================================================================================================
<S> <C> <C>
OPERATIONS
Net investment loss $ (684,694) $ (2,044,185)
- -----------------------------------------------------------------------------------------------------------------
Net realized gain on investments and options written 12,919,301 28,310,742
- -----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 13,052,932 (71,924,513)
------------ ------------
Net increase (decrease) in net assets resulting from operations 25,287,539 (45,657,956)
=================================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net realized gain on investments and options written:
Class A ($1.617 and $1.00 per share, respectively) (27,415,478) (15,359,681)
Class B ($1.617 per share) (1,382,429) --
Class Y ($1.617 per share) (40,545) --
=================================================================================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from Class A beneficial
interest transactions--Note 2 33,370,395 88,455,074
- -----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class B beneficial
interest transactions--Note 2 14,870,487 25,739,503
- -----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class Y beneficial
interest transactions--Note 2 2,123,459 190,922
=================================================================================================================
NET ASSETS
Total increase 46,813,428 53,367,862
- -----------------------------------------------------------------------------------------------------------------
Beginning of period 640,424,857 587,056,995
End of period (including accumulated net investment losses ------------ ------------
of $800,281 and $115,587, respectively) $687,238,285 $640,424,857
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
13 Oppenheimer Discovery Fund
<PAGE> 14
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31,
1995 YEAR ENDED SEPTEMBER 30,
(UNAUDITED) 1994 1993 1992 1991 1990
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $35.81 $39.90 $27.62 $26.03 $17.97 $24.51
- -------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.03) .26 (.13) (.17) .06 .16
Net realized and unrealized gain (loss)
on investments and options written 1.20 (3.35) 12.41 3.05 8.87 (4.84)
------ ------ ------ ------ ------ ------
Total income (loss) from investment
operations 1.17 (3.09) 12.28 2.88 8.93 (4.68)
- -------------------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income -- -- -- -- (.19) (.30)
Distributions from net realized gain on
investments and options written (1.62) (1.00) -- (1.29) (.68) (1.56)
------ ------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (1.62) (1.00) -- (1.29) (.87) (1.86)
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $35.36 $35.81 $39.90 $27.62 $26.03 $17.97
====== ====== ====== ====== ====== ======
===================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 3.71% (7.91)% 44.46% 11.28% 51.88% (20.34)%
===================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $643,287 $613,740 $587,057 $294,010 $117,110 $50,357
- -------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $603,467 $588,642 $451,016 $218,065 $ 75,083 $54,454
- -------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 18,191 17,139 14,713 10,647 4,499 2,802
- -------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (.18)%(4) (.34)% (.54)% (.62)% .22% .83%
Expenses 1.51%(4) 1.32% 1.27% 1.52% 1.42% 1.53%
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 41.1% 83.3% 85.2% 67.9% 158.1% 234.6%
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS Y
-------------------------- ---------------------------
SIX MONTHS SIX MONTHS
ENDED PERIOD ENDED PERIOD
MARCH 31, ENDED MARCH 31, ENDED
1995 SEPT. 30, 1995 SEPT. 30,
(UNAUDITED) 1994(2) (UNAUDITED) 1994(1)
=========================================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $35.65 $35.65 $35.81 $34.89
- ---------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.13) .03 (.07) .11
Net realized and unrealized gain (loss)
on investments and options written 1.17 (.03) 1.32 .81
------ ------ ------ ------
Total income (loss) from investment
operations 1.04 -- 1.25 .92
- ---------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income -- -- -- --
Distributions from net realized gain on
investments and options written (1.62) -- (1.62) --
------ ------ ------ ------
Total dividends and distributions
to shareholders (1.62) -- (1.62) --
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $35.07 $35.65 $35.44 $35.81
====== ====== ====== ======
=========================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 3.35% (1.93)% 3.94% 3.20%
=========================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $41,548 $26,491 $2,403 $ 194
- ---------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $31,669 $12,435 $1,003 $ 39
- ---------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 1,185 743 68 5
- ---------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (.89)%(4) (1.06)%(4) .40%(4) (.13)%(4)
Expenses 2.25%(4) 2.36%(4) 1.08%(4) 1.41%(4)
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 41.1% 83.3% 41.1% 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. 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. Total returns are not annualized for
periods of less than one full year.
4. Annualized.
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 six
months ended March 31, 1995 were $224,844,248 and $220,398,301, respectively.
See accompanying Notes to Financial Statements.
14 Oppenheimer Discovery Fund
<PAGE> 15
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
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. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase. The following is a summary of significant
accounting policies consistently followed by the Fund.
- --------------------------------------------------------------------------------
INVESTMENT 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
asked price 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 the 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 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. Forward contracts are valued based on the closing
prices of the forward 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 or asked price closest to the last reported
sale price is used.
- --------------------------------------------------------------------------------
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 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 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' 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. During the six months
ended March 31, 1995, a provision of $12,680 was made for the Fund's projected
benefit obligations, and a payment of $2,280 was made to a retired trustee,
resulting in an accumulated liability of $128,141 at March 31, 1995.
15 Oppenheimer Discovery Fund
<PAGE> 16
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders 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 the reclassification of net operating losses. The character
of the distributions made during the year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the year that the income
or realized gain (loss) was recorded by the Fund. 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 determin ed in
accordance with income tax regulations.
- --------------------------------------------------------------------------------
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>
SIX MONTHS ENDED MARCH 31, 1995 YEAR ENDED SEPTEMBER 30, 1994(1)
------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 6,402,989 $ 217,189,983 10,323,810 $ 381,892,840
Distributions reinvested 821,890 26,423,762 384,457 14,724,695
Redeemed (6,172,878) (210,243,350) (8,282,662) (308,162,461)
---------- ------------- ---------- -------------
Net increase 1,052,001 $ 33,370,395 2,425,605 $ 88,455,074
========== ============= ========== =============
- ------------------------------------------------------------------------------------------------------
Class B:
Sold 778,338 $ 26,450,016 961,766 $ 33,185,516
Distributions reinvested 42,037 1,343,501 -- --
Redeemed (378,780) (12,923,030) (218,783) (7,446,013)
---------- ------------- ---------- -------------
Net increase 441,595 $ 14,870,487 742,983 $ 25,739,503
========== ============= ========== =============
- ------------------------------------------------------------------------------------------------------
Class Y:
Sold 67,827 $ 2,311,937 5,405 $ 190,967
Distributions reinvested 1,260 40,545 -- --
Redeemed (6,674) (229,023) (1) (45)
---------- ------------- ---------- -------------
Net increase 62,413 $ 2,123,459 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 INVESTMENTS
At March 31, 1995, net unrealized appreciation on investments of $111,893,912
was composed of gross appreciation of $135,546,444, and gross depreciation of
$23,652,532.
16 Oppenheimer Discovery Fund
<PAGE> 17
================================================================================
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 state regulatory limit on Fund
expenses.
For the six months ended March 31, 1995, commissions (sales charges
paid by investors) on sales of Class A shares totaled $1,424,597, of which
$459,186 was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a
subsidiary of the Manager, as general distributor, and by an affiliated
broker/dealer. Sales charges advanced to broker/dealers by OFDI on sales of the
Fund's Class B shares totaled $603,196, of which $64,677 was paid to an
affiliated broker/dealer. During the six months ended March 31, 1995, OFDI
received contingent deferred sales charges of $34,757 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 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 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 six months ended March 31, 1995, OFDI
paid $52,285 and $186, respectively, to an affiliated broker/dealer as
reimbursement for Class A and Class B personal service and maintenance expenses
and retained $153,957 as reimbursement for Class B sales commissions and service
fee advances, as well as financing costs.
================================================================================
5. ILLIQUID SECURITIES
At March 31, 1995, investments in securities included issues that are illiquid
or restricted. The 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. The Fund intends to invest no more
than 10% of its net assets (determined at the time of purchase) in illiquid or
restricted securities. The aggregate value of these securities subject to this
limitation at March 31, 1995 was $7,014,737, which represents 1.02% of the
Fund's net assets. Information concerning these securities is as follows:
<TABLE>
<CAPTION>
VALUATION
PER UNIT AS OF
SECURITY ACQUISITION DATE COST PER UNIT MARCH 31, 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IntelCom Group, Inc., 7% Cv. Sub. Nts., 10/30/98 10/26/93--10/27/93 $ 99.75 $70.84
- -------------------------------------------------------------------------------------------------------------------
IntelCom Group, Inc., 8% Cv. Sub. Debs., 9/24/98 9/24/93 $100.00 $73.55
- -------------------------------------------------------------------------------------------------------------------
Intertel Communications, Inc. 6/9/93 $ 5.50 $10.84
- -------------------------------------------------------------------------------------------------------------------
PerSeptive Biosystems, Inc., 8.25% Cv. Sub. Debs., 8/15/00 8/19/94 $100.00 $72.50
- -------------------------------------------------------------------------------------------------------------------
Silicon Video Corp., $2.50 Cv., Series D 3/31/95 $ 2.50 $ 2.50
</TABLE>
Pursuant to guidelines adopted by the Board of Trustees, certain unregistered
securities are determined to be liquid and are not included within the 10%
limitation specified above.
17 Oppenheimer Discovery Fund
<PAGE> 18
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
- --------------------------------------------------------------------------------
6. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write covered call options on
portfolio securities in order to produce incremental earnings or protect against
changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call
options to hedge against adverse movements in the value of portfolio holdings.
When an option is written, the Fund receives a premium and becomes obligated to
sell or purchase the underlying security at a fixed price, upon exercise of the
option.
Options are valued daily based upon the last sale price on the
principal exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
In this report, securities designated to cover outstanding call
options are noted in the Statement of Investments. Shares subject to call,
expiration date, exercise price, premium received and market value are detailed
in a footnote to the Statement of Investments. Options written are reported as a
liability in the Statement of Assets and Liabilities. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.
Written put option activity for the six months ended March 31, 1995 was as
follows:
<TABLE>
<CAPTION>
NUMBER OF AMOUNT OF
PUT OPTION ACTIVITY OPTIONS PREMIUMS
- ------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at September 30, 1994 13,000 $ 2,540,764
- ------------------------------------------------------------------------------
Options canceled in closing purchase transactions (13,000) (2,540,764)
------- -----------
Options outstanding at March 31, 1995 -- $ --
======= ===========
</TABLE>
18 Oppenheimer Discovery Fund
<PAGE> 19
- --------------------------------------------------------------------------------
OPPENHEIMER DISCOVERY FUND
- --------------------------------------------------------------------------------
================================================================================
OFFICERS AND TRUSTEES
Leon Levy, Chairman of the Board of Trustees
Leo Cherne, 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 SERVICING AGENT
Oppenheimer Shareholder Services
================================================================================
CUSTODIAN OF PORTFOLIO SECURITIES
The Bank of New York
================================================================================
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
================================================================================
LEGAL COUNSEL
Gordon Altman Butowsky Weitzen Shalov & Wein
The financial statements included herein have been taken from the records of the
Fund without examination by the independent auditors.
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
================================================================================
INFORMATION
GENERAL INFORMATION
Monday-Friday 8:30 a.m.-8 p.m. ET
Saturday 10 a.m.-2 p.m. ET
1-800-525-7048
TELEPHONE TRANSACTIONS
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-852-8457
PHONELINK
24 hours a day, automated
information and transactions
1-800-533-3310
TELECOMMUNICATIONS DEVICE
FOR THE DEAF (TDD)
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-843-4461
OPPENHEIMERFUNDS
INFORMATION HOTLINE
24 hours a day, timely and insightful
messages on the economy and
issues that affect your investments
1-800-835-3104
RS0500.001.0595 May 31, 1995
"How may I help you?"
As an OppenheimerFunds shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling our
toll-free Telephone Transactions number. And, by enrolling in AccountLink, a
convenient service that "links" your OppenheimerFunds accounts and your bank
checking or savings account, you can use the Telephone Transactions number to
make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
[PHOTO]
Jennifer Leonard, Customer Service Representative
Oppenheimer Shareholder Services
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the OppenheimerFunds' transfer agent,
Oppenheimer Shareholder Services, with their Award of Excellence in 1993.
So call us today--we're here to help.
- --------------------------------------------------------------------------------
[LOGO]
--------------
Oppenheimer Funds Distributor, Inc. Bulk Rate
P.O. Box 5270 U.S. Postage
Denver, CO 80217-5270 PAID
Permit No. 469
Denver,CO
--------------
