<PAGE>
Oppenheimer Discovery Fund
Annual Report September 30, 1996
[Photo]
[Logo]
"TO GET HIGH GROWTH, WE KNOW WE HAVE TO INVEST AGGRESSIVELY FOR THE LONG
TERM."
<PAGE>
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-
and medium-sized emerging growth companies, including "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 products or services and innovators in leading-edge
sectors of the economy.
- --------------------------------------------------------------------------------
PERFORMANCE
- --------------------------------------------------------------------------------
Total returns at net asset value for the 12 months ended 9/30/96 were 27.76% for
Class A shares and 26.77% for Class B shares. Cumulative return at net asset
value for Class C shares since inception on 10/2/95 was 27.96%.(1)
Your Fund's average annual total returns at maximum offering price for
Class A shares for the 1-, 5- and 10-year periods ended 9/30/96 were 20.41%,
17.94% and 18.47%, respectively. For Class B shares, average annual total
returns for the 1-year period and since inception on 4/1/94 were 21.77% and
19.17%, respectively. For Class C shares, cumulative total return since
inception on 10/2/95 was 26.96%. For Class Y shares, average annual total
returns for the 1-year period and since inception on 6/1/94 were 28.09% and
25.43%, respectively.(2)
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OUTLOOK
- --------------------------------------------------------------------------------
"We remain optimistic. Our strategy of selecting stocks based on their
individual strengths and potential will not change, whether or not predictions
of a market correction come true, because the stocks of companies whose
underlying fundamentals remain strong usually have won out in the end."
Jay Tracey, Portfolio Manager
September 30, 1996
NEWS
----------------------------------
BEAT THE AVERAGE
----------------------------------
Total Return for the 5-Year Period
Ended 9/30/96:
Oppenheimer Discovery Fund
Class A (at net asset value)(1)
----------------------------------
142.14%
----------------------------------
Lipper Small Company Growth
Fund Average for 94 Funds for
the 5-Year Period Ended 9/30/96(3)
----------------------------------
119.97%
----------------------------------
THE FUND'S CLASS A SHARES
WERE RANKED **** AMONG
1,684 (3-YEAR),
1,014 (5-YEAR) AND 560
(10-YEAR) EQUITY FUNDS FOR
THE COMBINED 3-, 5- AND
10-YEAR PERIODS ENDED
9/30/96 BY MORNINGSTAR
MUTUAL FUNDS.(4)
Total returns include change in share price and reinvestment of dividends and
capital gains distributions. In reviewing the notes that follow on performance
and rankings, please be aware that past performance does not guarantee future
results. Investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than the original cost.
1. Based on the change in net asset value per share for the period shown,
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 9/30/95, 9/30/91
and 9/30/86, after deducting the current maximum initial sales charge of 5.75%.
Class B returns show results of hypothetical investments on 9/30/95 and 4/1/94
(inception of class), after the deduction of the applicable contingent deferred
sales charge of 5% (1-year) and 3% (since inception). Class C returns show
results of a hypothetical investment on 10/2/95 (inception of class), after the
deduction of the 1% contingent deferred sales charge. The Fund also offers Class
Y shares, but only to certain institutional investors and not to members of the
public. An explanation of the different total returns is in the Fund's
prospectus.
3. Source: Lipper Analytical Services, 9/30/96, an independent mutual fund
monitoring service. The average is shown for comparative purposes only.
Oppenheimer Discovery Fund is characterized by Lipper as a small company growth
fund. Lipper performance does not take sales charges into consideration.
4. Source: MORNINGSTAR MUTUAL FUNDS, 9/30/96. Morningstar rankings are based on
risk-adjusted investment return, after considering sales charges and expenses.
Investment return measures a fund's (or class's) 3-, 5- and 10-year (depending
on the inception of the class or fund) average annual total returns in excess of
90-day U.S. Treasury bill returns. Risk measures a fund's (or class's)
performance below 90-day U.S. Treasury bill returns. Risk and returns are
combined to produce star rankings, reflecting performance relative to the
average fund in the fund's category. Five stars is the "highest" ranking (top
10%), 4 stars is "above average" (next 22.5%), and 1 star is the lowest (bottom
10%). The 4-star current ranking is a weighted average of the 3-, 5- and 10-year
rankings for the class, which were 2, 3 and 5 stars, weighted 20%/30%/50%,
respectively. The 1-year star ranking is 3 stars, but is not included in the
overall ranking calculations. There were 1,684 funds in the 1-year period.
Rankings are subject to change. The Fund's Class A, B and C shares have the same
portfolio but different expenses.
2 Oppenheimer Discovery Fund
<PAGE>
DEAR SHAREHOLDER,
Over the past six months, the stock market has shown investors just how
unpredictable it can be. During this time, the Dow declined nearly 10%, only to
rebound and soar to record highs. As a result, overall stock valuations appear
high, indicating that this bull market could be nearing the top of the mountain.
However, we remain optimistic that this stock market still has enough strength
left to extend into 1997. Here's why.
We entered this period agreeing with many experts that the stock market was
probably due for some kind of a downturn. After all, we had not experienced any
real market correction in six years, making this the longest bull market of the
post-World War II era. Although the market did decline significantly in June and
July, as we moved through the summer, it proceeded to rebound significantly. Our
outlook for the stock market in the coming months is positive, based on three
reasons: solid corporate profits; low inflation; and stabilized interest rates.
First, against all odds, corporate America continued to perform well
through September. While some analysts predicted a disappointment in corporate
earnings, strong profits emerged due to the fact that many companies reduced
their operating expenses and frequently applied their profits to their
businesses.
Second, we believe that in today's world, economic growth may not
necessarily mean higher inflation. In fact, the latest reports show that while
the economy continues to grow, it is not accelerating as quickly as preliminary
data had indicated, keeping fears of inflation at bay. Our view is that
inflation will remain under control primarily because of the Federal Reserve's
conservative monetary policy over the last few years, as well as the declining
federal government deficit.
Third, the yield on the benchmark 30-year U.S. Treasury bond rose from
under 6% in January to about 7% today. And while it's impossible to predict the
direction of interest rates, the Federal Reserve voted not to increase interest
rates in July and September. Therefore, we believe interest rates will remain
stable for the next few months. Rest assured that we will continue to monitor
this situation very closely and would become very cautious in anticipating the
stock market's performance if inflation were to flare up.
Throughout this period, our managers have worked hard to strive to meet
your Fund's objective--being careful not to abandon their investment styles in
response to short-term volatility. They understand that, historically, a
diversified portfolio of stocks has provided superior growth over the long term.
With that in mind, it is critical for investors to remain focused on long-term
goals and put near-term fluctuations in their proper perspective.
Your portfolio managers discuss the outlook for your Fund in light of these
broad issues on the following pages. Thank you for your confidence in
OppenheimerFunds. We look forward to helping you reach your investment goals in
the future.
Bridget A. Macaskill
President
Oppenheimer
Discovery Fund
/s/ Bridget A. Macaskill
Bridget A. Macaskill
October 21, 1996
3 Oppenheimer Discovery Fund
<PAGE>
Q + A
AN INTERVIEW WITH YOUR FUND'S MANAGERS.
Q HOW DID
THE FUND
PERFORM?
HOW HAS THE FUND PERFORMED OVER THE PAST YEAR?
We're pleased with the Fund's outperformance over the past year. Oppenheimer
Discovery Fund finished 55th out of 350 funds in its category ranked by
Lipper Analytical Services for the 1-year period ended 9/30/96. This put the
Fund in the top quartile.(1) This outperformance occurred despite the
mid-summer decline in both large- and small-cap stocks. And, with the S&P 500
setting new records, as well as small-caps showing signs of recovery, we
expect room for more growth in these areas.
WHAT INVESTMENTS MADE POSITIVE CONTRIBUTIONS TO PERFORMANCE?
In general, our technology holdings contributed nicely to the Fund's
performance. This broad category makes up a substantial portion of the
portfolio, roughly one-quarter. Within this sector, we've focused on companies
and industries we feel are relatively predictable in terms of earnings growth.
For example, we shifted away from hardware suppliers, which are very sensitive
to component price volatility, and have been emphasizing service providers and
client-server software. Thus, we avoided most of the weakness in semiconductors
and participated in some of the highest tech achievers.
One of our largest technology positions that did well this period was a
leading anti-virus software company. The company not only develops innovative
programs, but has also begun to utilize the Internet to market and distribute
its products. This strategy substantially lowers distribution costs, which has
helped both sales and profits.(2)
WERE THERE ANY INVESTMENTS THAT DIDN'T PERFORM AS WELL AS EXPECTED?
Most of our companies have
1. Source: Lipper Analytical Services, 9/30/96. Oppenheimer Discovery Fund is
characterized by Lipper as a small company growth fund. Lipper does not take
sales charges into consideration.
2. The Fund's portfolio is subject to change.
4 Oppenheimer Discovery Fund
<PAGE>
FACING PAGE
Top left: Jay Tracey,Portfolio
Manager
Top right: Robert Doll, Executive VP,
Director of Equity Investments
Bottom: Michael Levine, Member
of Equity Investments Team
THIS PAGE
Top: Richard Rubinstein, Member
of Equity Investments Team
Bottom: Paul LaRocco, Member
of Equity Investments Team
A THE FUND
FINISHED IN
THE TOP
QUARTILE
OF ITS PEERS.
grown their sales and earnings very well. Indeed, as each quarter has gone by
over the last year, about 65% of our portfolio companies have reported earnings
better than the market expected, 25% have reported in line, and only about 10%
have come in below forecasts. In general, good corporate results have produced
good investment performance, but stock prices have had both good and bad periods
over the past year. In the long run, we believe strong growth in corporate sales
and earnings leads to superior investment results. For this reason, we
concentrate most of our efforts on finding companies that are demonstrating
superior growth which we believe can be sustained into the future.
WHAT TYPES OF COMPANIES ARE YOU CURRENTLY TARGETING?
Our strategy always places primary emphasis on careful stock selection, rather
than trying to pick stocks in "hot" industry sectors. However, we are currently
focusing on the consistency and predictability of earnings growth more than on
the absolute rate of growth, because at this stage of the economic cycle, it is
becoming tougher for many companies to keep up very high rates of growth.
This recent focus has led us to increase our holdings in service companies,
particularly those that are less sensitive to the economy and have recurring
revenue streams. Also, in technology, we have decreased our exposure to hardware
and increased software companies, because software companies are more
predictable and less subject to price competition.
WHAT IS YOUR OUTLOOK FOR THE FUND?
We remain optimistic. Neither a recession nor a significant rise in inflation or
interest rates seems likely over the intermediate term, which means that the
kind of environment we have had--one that has been conducive to the Fund's
success over the past year--should continue for a while. Our strategy of
selecting stocks based on their individual strengths and potential will not
change, whether or not predictions of a market correction come true, because the
stocks of companies whose underlying fundamentals remain strong usually have won
out in the end.
5 Oppenheimer Discovery Fund
<PAGE>
FINANCIALS
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CONTENTS
- --------------------------------------------------------------------
Statement of Investments 7
Statement of Assets and Liabilities 15
Statement of Operations 16
Statements of Changes in Net Assets 17
Financial Highlights 18
Notes to Financial Statements 20
Independent Auditors' Report 24
Federal Income Tax Information 25
6 Oppenheimer Discovery Fund
<PAGE>
<TABLE>
<CAPTION>
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STATEMENT OF INVESTMENTS SEPTEMBER 30, 1996
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FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM NOTES--17.3%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Countrywide Home Loans, 5.33%, 10/1/96 $43,000,000 $ 43,000,000
-------------------------------------------------------------------------------------------
Ford Motor Credit Co., 5.35%, 10/10/96 40,000,000 39,946,500
-------------------------------------------------------------------------------------------
General Electric Capital Corp., 5.32%, 10/16/96 40,000,000 39,911,333
-------------------------------------------------------------------------------------------
Goldman Sachs Group, L.P., 5.36%, 10/7/96 40,000,000 39,964,200
-------------------------------------------------------------------------------------------
Household Finance Corp., 5.35%, 10/8/96 40,000,000 39,958,389
-------------------------------------------------------------------------------------------
New Center Asset Trust, 5.30%, 10/21/96 18,000,000 17,947,000
-------------------------------------------------------------------------------------------
New Center Asset Trust, 5.35%, 10/21/96 22,000,000 21,934,611
--------------
Total Short-Term Notes (Cost $242,662,033) 242,662,033
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS AND NOTES--0.0%
- ------------------------------------------------------------------------------------------------------------------------------
Physicians Clinical Laboratory, Inc., 7.50% Cv. Sub. Debs.,
8/15/00 (Cost $4,098,554)(1)(2) 4,000,000 400,000
<CAPTION>
SHARES
- ------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--78.9%
- ------------------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--17.8%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AUTOS & HOUSING--5.0% Alrenco, Inc.(3)(4) 440,000 9,240,000
-------------------------------------------------------------------------------------------
APS Holding Corp., Cl. A(3) 200,000 5,825,000
-------------------------------------------------------------------------------------------
Belmont Homes, Inc.(3)(4) 600,000 15,150,000
-------------------------------------------------------------------------------------------
Diamond Home Services, Inc.(3) 200,000 5,800,000
-------------------------------------------------------------------------------------------
ITI Technologies, Inc.(3) 300,000 10,575,000
-------------------------------------------------------------------------------------------
NHP, Inc.(3) 350,000 6,650,000
-------------------------------------------------------------------------------------------
OEA, Inc. 200,000 7,950,000
-------------------------------------------------------------------------------------------
Team Rental Group, Inc.(3) 300,000 5,700,000
-------------------------------------------------------------------------------------------
Wilmar Industries, Inc.(3) 135,000 3,071,250
--------------
69,961,250
- ------------------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--4.2% Applebee's International, Inc. 130,000 3,445,000
-------------------------------------------------------------------------------------------
Cinar Films, Inc., Cl. B(3) 400,000 10,425,000
-------------------------------------------------------------------------------------------
CKE Restaurants, Inc. 300,000 9,225,000
-------------------------------------------------------------------------------------------
Coach USA, Inc.(3) 160,000 4,280,000
-------------------------------------------------------------------------------------------
Einstein/Noah Bagel Corp.(3) 140,000 4,305,000
-------------------------------------------------------------------------------------------
Galoob (Lewis) Toys, Inc.(3) 250,000 7,312,500
-------------------------------------------------------------------------------------------
K2, Inc. 100,000 2,612,500
-------------------------------------------------------------------------------------------
Longhorn Steaks, Inc.(3) 150,000 2,287,500
-------------------------------------------------------------------------------------------
Quality Dining, Inc.(3) 300,000 8,550,000
-------------------------------------------------------------------------------------------
Silver Diner, Inc.(1)(3)(4) 700,000 3,574,375
-------------------------------------------------------------------------------------------
Studio Plus Hotels, Inc.(3) 181,100 2,988,150
-------------
59,005,025
</TABLE>
7 Oppenheimer Discovery Fund
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<TABLE>
<CAPTION>
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STATEMENT OF INVESTMENTS (CONTINUED)
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MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MEDIA--3.1% Chancellor Broadcasting Co., Cl. A(3) 100,000 $ 4,150,000
-------------------------------------------------------------------------------------------
Heartland Wireless Communications, Inc.(3) 220,000 5,555,000
-------------------------------------------------------------------------------------------
Outdoor Systems, Inc.(3) 140,000 6,580,000
-------------------------------------------------------------------------------------------
SFX Broadcasting, Inc., Cl. A(3) 211,500 9,623,250
-------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., Cl. A(3) 135,000 5,383,125
-------------------------------------------------------------------------------------------
Universal Outdoor Holdings, Inc.(3) 160,000 5,760,000
-------------------------------------------------------------------------------------------
Wireless One, Inc.(3) 260,000 3,835,000
-------------------------------------------------------------------------------------------
Young Broadcasting, Inc., Cl. A(3) 100,000 3,300,000
------------
44,186,375
- ------------------------------------------------------------------------------------------------------------------------------
RETAIL: GENERAL--1.7% Fila Holding SpA, Sponsored ADR 110,000 10,573,750
-------------------------------------------------------------------------------------------
Nautica Enterprises, Inc.(3) 150,000 4,837,500
-------------------------------------------------------------------------------------------
Wolverine World Wide, Inc. 322,000 8,935,500
-------------
24,346,750
- ------------------------------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY--3.8% American Pad & Paper Co.(3) 405,800 8,623,250
-------------------------------------------------------------------------------------------
Copart, Inc.(3) 225,000 4,443,750
-------------------------------------------------------------------------------------------
Corporate Express, Inc.(3) 250,000 9,718,750
-------------------------------------------------------------------------------------------
Garden Ridge Corp.(3) 220,000 3,767,500
-------------------------------------------------------------------------------------------
Moovies, Inc.(3) 380,000 2,090,000
-------------------------------------------------------------------------------------------
Movie Gallery, Inc.(3) 175,000 2,275,000
-------------------------------------------------------------------------------------------
MSC Industrial Direct Co., Inc., Cl. A(3) 300,000 10,687,500
-------------------------------------------------------------------------------------------
Petco Animal Supplies, Inc.(3) 330,000 8,992,500
-------------------------------------------------------------------------------------------
West Coast Entertainment Corp.(3) 340,000 3,442,500
----------
54,040,750
- ------------------------------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS--18.8%
- ------------------------------------------------------------------------------------------------------------------------------
EDUCATION--0.7% National Education Corp.(3) 500,000 9,562,500
- ------------------------------------------------------------------------------------------------------------------------------
FOOD--1.6% JP Foodservice, Inc.(3) 400,000 9,500,000
-------------------------------------------------------------------------------------------
Performance Food Group Co.(3) 300,000 4,950,000
-------------------------------------------------------------------------------------------
Richfood Holdings, Inc. 200,000 7,450,000
------------
21,900,000
</TABLE>
8 Oppenheimer Discovery Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTHCARE/DRUGS--5.3% Agouron Pharmaceuticals, Inc.(3) 130,000 $ 5,671,250
-------------------------------------------------------------------------------------------
Alpha-Beta Technology, Inc.(3) 250,000 2,687,500
-------------------------------------------------------------------------------------------
Applied Analytical Industries, Inc.(3) 100,000 2,275,000
-------------------------------------------------------------------------------------------
Biocompatibles International PLC(3) 394,800 3,228,274
-------------------------------------------------------------------------------------------
Dura Pharmaceuticals, Inc.(3) 430,000 15,856,250
-------------------------------------------------------------------------------------------
Ethical Holdings PLC, Sponsored ADR(3) 500,000 3,500,000
-------------------------------------------------------------------------------------------
Global Pharmaceutical Corp.(3) 200,000 1,850,000
-------------------------------------------------------------------------------------------
Guilford Pharmaceuticals, Inc.(3) 44,800 1,232,000
-------------------------------------------------------------------------------------------
Incyte Pharmaceuticals, Inc.(3) 180,000 8,910,000
-------------------------------------------------------------------------------------------
Martek Biosciences Corp.(3) 100,000 2,500,000
-------------------------------------------------------------------------------------------
Millennium Pharmaceuticals, Inc.(3) 200,000 3,650,000
-------------------------------------------------------------------------------------------
Norland Medical Systems, Inc.(3)(4) 480,000 10,200,000
-------------------------------------------------------------------------------------------
PAREXEL International Corp.(3) 110,000 6,930,000
-------------------------------------------------------------------------------------------
SangStat Medical Corp.(3) 220,000 5,610,000
-------------
74,100,274
- ------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & American HomePatient, Inc.(3) 300,000 6,675,000
SERVICES--11.2% -------------------------------------------------------------------------------------------
AmeriSource Health Corp., Cl. A(3) 240,000 10,680,000
-------------------------------------------------------------------------------------------
Calypte Biomedical Corp.(3) 320,000 2,800,000
-------------------------------------------------------------------------------------------
Capstone Pharmacy Services, Inc.(3) 600,000 7,425,000
-------------------------------------------------------------------------------------------
Compdent Corp.(3) 100,000 3,775,000
-------------------------------------------------------------------------------------------
Digene Corp.(3) 185,000 1,225,625
-------------------------------------------------------------------------------------------
EP MedSystems, Inc.(3)(4) 400,000 2,200,000
-------------------------------------------------------------------------------------------
ESC Medical Systems Ltd.(3) 250,000 8,000,000
-------------------------------------------------------------------------------------------
Gulf South Medical Supply, Inc.(3) 300,000 7,725,000
-------------------------------------------------------------------------------------------
HealthPlan Services Corp.(3) 200,000 4,375,000
-------------------------------------------------------------------------------------------
Henry Schein, Inc.(3) 220,000 8,470,000
-------------------------------------------------------------------------------------------
HumaScan, Inc.(3)(4) 600,000 3,600,000
-------------------------------------------------------------------------------------------
OccuSystems, Inc.(3) 200,000 6,000,000
-------------------------------------------------------------------------------------------
Omnicare, Inc. 400,000 12,200,000
-------------------------------------------------------------------------------------------
Pediatrix Medical Group, Inc.(3) 204,000 10,225,500
-------------------------------------------------------------------------------------------
PhyCor, Inc.(3) 290,000 11,038,125
-------------------------------------------------------------------------------------------
Physician Reliance Network, Inc.(3) 140,000 2,135,000
-------------------------------------------------------------------------------------------
Physicians Resource Group, Inc.(3) 330,000 7,796,250
-------------------------------------------------------------------------------------------
Rural/Metro Corp.(3) 230,000 8,395,000
-------------------------------------------------------------------------------------------
Serologicals Corp.(3) 300,000 10,425,000
-------------------------------------------------------------------------------------------
Spine-Tech, Inc.(3) 120,000 3,360,000
-------------------------------------------------------------------------------------------
Total Renal Care Holdings, Inc.(3) 200,000 7,950,000
-------------------------------------------------------------------------------------------
United Dental Care, Inc.(3) 100,000 3,612,500
-------------------------------------------------------------------------------------------
Ventana Medical Systems, Inc.(3) 350,000 6,475,000
-------------
156,563,000
</TABLE>
9 Oppenheimer Discovery Fund
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
-------------------------------------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------
ENERGY--5.2%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ENERGY SERVICES &
PRODUCERS--4.6% 3-D Geophysical, Inc.(3)(4) 380,000 $ 3,135,000
-------------------------------------------------------------------------------------------
Brown (Tom), Inc.(3) 255,000 4,813,125
-------------------------------------------------------------------------------------------
Core Laboratories NV(3) 250,000 3,937,500
-------------------------------------------------------------------------------------------
Cross Timbers Oil Co. 180,000 4,320,000
-------------------------------------------------------------------------------------------
Diamond Offshore Drilling, Inc.(3) 153,100 8,420,500
-------------------------------------------------------------------------------------------
Energy Ventures, Inc.(3) 250,000 10,125,000
-------------------------------------------------------------------------------------------
Falcon Drilling Co., Inc.(3) 140,000 3,640,000
-------------------------------------------------------------------------------------------
FX Energy, Inc.(3) 500,000 4,875,000
-------------------------------------------------------------------------------------------
HarCor Energy, Inc.(3) 350,000 1,925,000
-------------------------------------------------------------------------------------------
Nabors Industries, Inc.(3) 500,000 6,812,500
-------------------------------------------------------------------------------------------
Newfield Exploration Co.(3) 120,000 5,400,000
-------------------------------------------------------------------------------------------
NUMAR Corp.(3) 306,700 4,945,538
-------------------------------------------------------------------------------------------
Stone Energy Corp.(3) 150,000 2,775,000
-------------------------------------------------------------------------------------------
65,124,163
- ------------------------------------------------------------------------------------------------------------------------------
OIL-INTEGRATED--0.6% Dailey Petroleum Services Corp.(3)(4) 300,000 2,625,000
-------------------------------------------------------------------------------------------
Rutherford-Moran Oil Corp.(3) 200,000 6,000,000
-------------------------------------------------------------------------------------------
8,625,000
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL--3.8%
- ------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--2.4% Green Tree Financial Corp. 120,000 4,710,000
-------------------------------------------------------------------------------------------
RAC Financial Group, Inc.(3) 140,000 6,387,500
-------------------------------------------------------------------------------------------
Renters Choice, Inc.(3) 250,000 4,687,500
-------------------------------------------------------------------------------------------
Resource Bancshares Mortgage Group, Inc. 374,500 4,868,500
-------------------------------------------------------------------------------------------
Rockford Industries, Inc.(3)(4) 350,000 6,037,500
-------------------------------------------------------------------------------------------
Winthrop Resources Corp. 250,000 6,750,000
-------------------------------------------------------------------------------------------
33,441,000
- ------------------------------------------------------------------------------------------------------------------------------
INSURANCE--1.4% CapMAC Holdings, Inc. 320,000 10,640,000
-------------------------------------------------------------------------------------------
Executive Risk, Inc. 200,000 7,700,000
-------------------------------------------------------------------------------------------
Meadowbrook Insurance Group, Inc. 26,000 728,000
------------
19,068,000
</TABLE>
10 Oppenheimer Discovery Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INDUSTRIAL--14.3%
- ------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL MATERIALS--0.5% American Buildings Co.(3) 250,000 $ 6,625,000
- ------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES--12.5% Abacus Direct Corp.(3) 200,000 4,200,000
-------------------------------------------------------------------------------------------
ABR Information Services, Inc.(3) 100,000 7,200,000
-------------------------------------------------------------------------------------------
Acxiom Corp.(3) 260,000 10,692,500
-------------------------------------------------------------------------------------------
Affiliated Computer Services, Inc., Cl. A(3) 130,000 7,637,500
-------------------------------------------------------------------------------------------
Alternative Resources Corp.(3) 170,000 4,781,250
-------------------------------------------------------------------------------------------
Barnett, Inc.(3) 150,000 3,543,750
-------------------------------------------------------------------------------------------
Correctional Services Corp.(3) 235,000 3,319,375
-------------------------------------------------------------------------------------------
CORT Business Services Corp.(3) 400,000 8,150,000
-------------------------------------------------------------------------------------------
Daisytek International Corp.(3) 300,000 12,975,000
-------------------------------------------------------------------------------------------
DecisionOne Holdings Corp.(3) 350,000 4,900,000
-------------------------------------------------------------------------------------------
Dynamex, Inc.(3)(4) 400,000 3,700,000
-------------------------------------------------------------------------------------------
Eagle USA Airfreight, Inc.(3) 300,000 7,800,000
-------------------------------------------------------------------------------------------
First USA Paymentech, Inc.(3) 180,000 7,312,500
-------------------------------------------------------------------------------------------
International Network Services(3) 100,000 3,512,500
-------------------------------------------------------------------------------------------
Lamar Advertising Co.(3) 100,000 4,150,000
-------------------------------------------------------------------------------------------
Leap Group, Inc. (The)(3) 300,000 3,037,500
-------------------------------------------------------------------------------------------
May & Speh, Inc.(3) 260,000 5,200,000
-------------------------------------------------------------------------------------------
National Processing, Inc.(3) 200,000 3,900,000
-------------------------------------------------------------------------------------------
NuCo2, Inc.(3) 200,000 4,150,000
-------------------------------------------------------------------------------------------
PMT Services, Inc.(3) 200,000 4,050,000
-------------------------------------------------------------------------------------------
Precision Response Corp.(3) 200,000 7,700,000
-------------------------------------------------------------------------------------------
SITEL Corp.(3) 250,000 11,125,000
-------------------------------------------------------------------------------------------
Stericycle, Inc.(3) 300,000 2,737,500
-------------------------------------------------------------------------------------------
Telespectrum Worldwide, Inc.(3) 200,000 3,900,000
-------------------------------------------------------------------------------------------
Transaction Network Services, Inc.(3) 200,000 2,875,000
-------------------------------------------------------------------------------------------
Transaction Systems Architects, Inc., Cl. A(3) 200,000 8,450,000
-------------------------------------------------------------------------------------------
United Waste Systems, Inc.(3) 400,000 13,900,000
-------------------------------------------------------------------------------------------
USA Waste Services, Inc.(3) 350,000 11,025,000
--------------
175,924,375
-------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--1.0% U.S. Filter Corp.(3) 400,000 13,650,000
- ------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--0.3% Genesee & Wyoming, Inc., Cl. A(3) 156,000 4,251,000
- ------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--17.6%
- ------------------------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE--0.7% Citrix Systems, Inc.(3) 150,000 7,687,500
-------------------------------------------------------------------------------------------
Data Translation, Inc.(3) 220,000 2,475,000
-------------
10,162,500
</TABLE>
11 Oppenheimer Discovery Fund
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
-------------------------------------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMPUTER SOFTWARE--10.0% Arbor Software Corp.(3) 100,000 $ 4,275,000
-------------------------------------------------------------------------------------------
Aspen Technologies, Inc.(3) 180,000 12,195,000
-------------------------------------------------------------------------------------------
Business Objects SA, Sponsored ADR(3) 250,000 4,812,500
-------------------------------------------------------------------------------------------
CSG Systems International, Inc.(3) 75,000 1,518,750
------------------------------------------------------------------------------------------
Enterprise Systems, Inc.(3) 100,000 2,575,000
-------------------------------------------------------------------------------------------
Forte Software, Inc.(3) 100,000 3,925,000
-------------------------------------------------------------------------------------------
Global DirectMail Corp.(3) 270,000 12,892,500
-------------------------------------------------------------------------------------------
HBO & Co. 140,000 9,345,000
-------------------------------------------------------------------------------------------
IDX Systems Corp.(3) 100,000 3,500,000
-------------------------------------------------------------------------------------------
Indus Group, Inc. (The)(3) 200,000 4,000,000
-------------------------------------------------------------------------------------------
Inference Corp., Cl. A(3)(4) 360,000 6,390,000
-------------------------------------------------------------------------------------------
Integrated Measurement Systems, Inc.(3) 260,000 4,290,000
-------------------------------------------------------------------------------------------
McAfee Associates, Inc.(3) 225,000 15,525,000
-------------------------------------------------------------------------------------------
National Instruments Corp.(3) 230,000 6,095,000
-------------------------------------------------------------------------------------------
PLATINUM Technology, Inc.(3) 350,000 4,418,750
-------------------------------------------------------------------------------------------
Pure Atria Corp.(3) 100,000 3,775,000
-------------------------------------------------------------------------------------------
Rational Software Corp.(3) 160,000 5,460,000
-------------------------------------------------------------------------------------------
Siebel Systems, Inc.(3) 120,000 4,995,000
-------------------------------------------------------------------------------------------
Software 2000, Inc.(3) 350,000 3,412,500
-------------------------------------------------------------------------------------------
SPSS, Inc.(3) 330,000 9,157,500
-------------------------------------------------------------------------------------------
SQA, Inc.(3) 260,000 7,020,000
-------------------------------------------------------------------------------------------
Systemsoft Corp.(3) 300,000 10,275,000
---------------
139,852,500
- ------------------------------------------------------------------------------------------------------------------------------
ELECTRONICS--1.5% Advanced Technology Materials, Inc.(3) 300,000 4,050,000
-------------------------------------------------------------------------------------------
Pittway Corp., Cl. A 150,000 6,693,750
-------------------------------------------------------------------------------------------
Sawtek, Inc.(3) 230,000 5,980,000
-------------------------------------------------------------------------------------------
SDL, Inc.(3) 200,000 4,100,000
--------------
20,823,750
- ------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS- Comverse Technology, Inc.(3) 220,000 8,552,500
TECHNOLOGY--5.4% -------------------------------------------------------------------------------------------
DSP Communications, Inc.(3) 100,000 5,587,500
-------------------------------------------------------------------------------------------
ICG Communications, Inc.(3) 150,000 3,150,000
-------------------------------------------------------------------------------------------
ICG Communications, Inc.(1)(3) 272,500 5,436,375
-------------------------------------------------------------------------------------------
IXC Communications, Inc.(3) 400,000 8,200,000
-------------------------------------------------------------------------------------------
LCI International, Inc.(3) 500,000 15,750,000
</TABLE>
12 Oppenheimer Discovery Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TELECOMMUNICATIONS- Lightbridge, Inc.(3) 292,000 $ 3,431,000
TECHNOLOGY -------------------------------------------------------------------------------------------
(CONTINUED) PageMart Wireless, Inc., Cl. A(3) 351,000 3,378,375
-------------------------------------------------------------------------------------------
Periphonics Corp.(3) 300,000 11,700,000
-------------------------------------------------------------------------------------------
Tel-Save Holdings, Inc.(3) 250,000 7,187,500
-------------------------------------------------------------------------------------------
Teltrend, Inc.(3) 80,000 3,400,000
-----------
75,773,250
- ------------------------------------------------------------------------------------------------------------------------------
UTILITIES--1.4%
- ------------------------------------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES--1.4% ACC CORP.(3) 135,000 6,378,750
-------------------------------------------------------------------------------------------
McLeod, Inc.(3) 270,000 8,910,000
-------------------------------------------------------------------------------------------
Telco Communications Group, Inc.(3) 200,000 3,700,000
--------------
18,988,750
--------------
Total Common Stocks (Cost $714,244,016) 1,105,975,212
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--0.8%
- ------------------------------------------------------------------------------------------------------------------------------
AirNet Communications Corp., Series C(1)(3) 250,000 1,500,000
-------------------------------------------------------------------------------------------
Silicon Video Corp., $2.50 Cv., Series D(1)(3) 1,200,000 5,628,000
-------------------------------------------------------------------------------------------
Silicon Video Corp., Series E(1)(3) 800,000 4,400,000
-------------
Total Preferred Stocks (Cost $8,900,000) 11,528,000
UNITS
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- ------------------------------------------------------------------------------------------------------------------------------
Biocompatibles International PLC Wts., Exp. 2/97 56,400 54,672
-------------------------------------------------------------------------------------------
PerSeptive Biosystems, Inc., Cl. A Wts., Exp. 12/97 40,110 --
-------------------------------------------------------------------------------------------
Windmere-Durable Holdings, Inc. Wts., Exp. 1/98 238 --
--------
Total Rights, Warrants and Certificates (Cost $291,393) 54,672
</TABLE>
13 Oppenheimer Discovery Fund
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
-------------------------------------------------------------------------------------------
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT--3.3%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Repurchase agreement with Zion First National Bank,
5.62%, dated 9/30/96, to be repurchased at $46,307,228
on 10/1/96, collateralized by U.S. Treasury Nts.,
5.75%--8.875%, 5/15/97--8/15/04, with a value
of $47,251,925 (Cost $46,300,000) $46,300,000 $46,300,000
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $1,016,495,996) 100.3% 1,406,919,917
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.3) (4,065,606)
---------- --------------
NET ASSETS 100.0% $1,402,854,311
----------- ---------------
----------- ---------------
</TABLE>
1. Identifies issues considered to be illiquid--See
Note 5 of Notes to Financial Statements.
2. Non-income producing--issuer is in default of
interest payment.
3. Non-income producing security.
4. 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 September 30, 1996. The aggregate fair
value of all securities of affiliated companies as
of September 30, 1996 amounted to $65,851,875.
Transactions during the period in which the issuer
was an affiliate are as follows:
<TABLE>
<CAPTION>
BALANCE
SEPTEMBER 30, 1995 GROSS ADDITIONS GROSS REDUCTIONS
----------------------- ----------------------- --------------------------
SHARES COST SHARES COST SHARES COST
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alrenco, Inc. -- $ -- 440,000 $7,038,513 -- $ --
- ---------------------------------------------------------------------------------------------------------------------------------
Belmont Homes, Inc. 372,500 4,018,062 250,000 4,720,839 22,500 288,281
- ---------------------------------------------------------------------------------------------------------------------------------
Business Resource Group 260,000 1,871,875 -- -- 260,000 1,871,875
- ---------------------------------------------------------------------------------------------------------------------------------
Dailey Petroleum Services Corp. -- -- 300,000 2,407,916 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Dynamex, Inc. -- -- 400,000 3,216,874 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
EP MedSystems, Inc. -- -- 400,000 2,200,000 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
HumaScan, Inc. -- -- 600,000 3,600,000 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Inference Corp., Cl. A 200,000 3,063,605 160,000 3,035,761 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Norland Medical Systems, Inc. 240,000 3,041,878 240,000 1,758,550 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Rockford Industries, Inc. 200,000 1,667,500 150,000 1,647,984 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Rocky Mountain Chocolate
Factory, Inc. 150,000 2,493,750 50,000 631,250 200,000 3,125,000
- ---------------------------------------------------------------------------------------------------------------------------------
Silver Diner, Inc. -- -- 700,000 3,850,000 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
3-D Geophysical, Inc. -- -- 380,000 2,863,675 -- --
------------- ----------- -----------
$16,156,670 $36,971,362 $5,285,156
------------ ---------- -----------
------------ ----------- -----------
<CAPTION>
BALANCE
SEPTEMBER 30, 1996
--------------------------
SHARES COST
- --------------------------------------------------------------------
<S> <C> <C>
Alrenco, Inc. 440,000 $7,038,513
- --------------------------------------------------------------------
Belmont Homes, Inc. 600,000 8,450,620
- --------------------------------------------------------------------
Business Resource Group -- --
- --------------------------------------------------------------------
Dailey Petroleum Services Corp. 300,000 2,407,916
- --------------------------------------------------------------------
Dynamex, Inc. 400,000 3,216,874
- --------------------------------------------------------------------
EP MedSystems, Inc. 400,000 2,200,000
- --------------------------------------------------------------------
HumaScan, Inc. 600,000 3,600,000
- --------------------------------------------------------------------
Inference Corp., Cl. A 360,000 6,099,366
- --------------------------------------------------------------------
Norland Medical Systems, Inc. 480,000 4,800,428
- --------------------------------------------------------------------
Rockford Industries, Inc. 350,000 3,315,484
- --------------------------------------------------------------------
Rocky Mountain Chocolate
Factory, Inc. -- --
- --------------------------------------------------------------------
Silver Diner, Inc. 700,000 3,850,000
- --------------------------------------------------------------------
3-D Geophysical, Inc. 380,000 2,863,675
--------------
$47,842,876
--------------
--------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14 Oppenheimer Discovery Fund
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES September 30, 1996
-------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS Investments, at value--see accompanying statement:
Unaffiliated companies (cost $968,653,120) $1,341,068,042
Affiliated companies (cost $47,842,876) 65,851,875
-------------------------------------------------------------------------------------------
Cash 1,722,403
-------------------------------------------------------------------------------------------
Receivables:
Investments sold 6,870,082
Shares of beneficial interest sold 5,489,975
Interest and dividends 99,785
-------------------------------------------------------------------------------------------
Other 17,360
-----------------
Total assets 1,421,119,522
-------------------------------------------------------------------------------------------
LIABILITIES Payables and other liabilities:
Investments purchased 13,143,179
Shares of beneficial interest redeemed 3,585,797
Distribution and service plan fees 763,963
Trustees' fees 228,491
Transfer and shareholder servicing agent fees 128,207
Other 415,574
------------------
Total liabilities 18,265,211
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,402,854,311
------------------
------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF Paid-in capital $923,007,741
NET ASSETS -------------------------------------------------------------------------------------------
Accumulated net investment loss (624,556)
-------------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 90,047,205
-------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Note 3 390,423,921
-------------------------------------------------------------------------------------------
Net Assets $1,402,854,311
------------------
------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE Class A Shares:
Net asset value and redemption price per share (based on net
assets of $1,160,086,668 and 22,661,207 shares of beneficial
interest outstanding) $51.19
Maximum offering price per share (net asset value plus sales
charge of 5.75% of offering price) $54.31
-------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets
of $193,636,739 and 3,865,275 shares of beneficial interest outstanding) $50.10
-------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based
on net assets of $17,512,295 and 345,203 shares of beneficial interest
outstanding) $50.73
-------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based
on net assets of $31,618,609 and 614,713 shares of beneficial interest
outstanding) $51.44
-------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
15 Oppenheimer Discovery Fund
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the Year Ended September 30, 1996
-------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME Interest $9,398,429
-------------------------------------------------------------------------------------------
Dividends 381,428
Total income 9,779,857
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
EXPENSES Management fees--Note 4 7,334,344
-------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 2,279,225
Class B 1,197,138
Class C 70,325
-------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 2,260,851
-------------------------------------------------------------------------------------------
Shareholder reports 520,617
-------------------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1 163,385
-------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 68,330
Class B 31,298
Class C 5,384
Class Y 6,090
-------------------------------------------------------------------------------------------
Custodian fees and expenses 57,877
-------------------------------------------------------------------------------------------
Legal and auditing fees 44,617
-------------------------------------------------------------------------------------------
Other 131,674
-------------
Total expenses 14,171,155
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (4,391,298)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED Net realized gain (loss) on investments:
GAIN (LOSS) Unaffiliated companies 95,246,912
Affiliated companies (2,371,409)
---------------
Net realized gain 92,875,503
-------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 178,297,200
-------------
Net realized and unrealized gain 271,172,703
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $266,781,405
-------------
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
16 Oppenheimer Discovery Fund
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
-------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS Net investment loss $(4,391,298) $(328,003)
-------------------------------------------------------------------------------------------
Net realized gain 92,875,503 74,810,356
-------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 178,297,200 113,285,741
----------- -------------
Net increase in net assets resulting from operations 266,781,405 187,768,094
- ------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND
DISTRIBUTIONS TO SHAREHOLDERS Distributions from net investment income:
Class A -- (27,414,490)
Class B -- (1,382,289)
Class Y -- (40,545)
-------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (65,845,405) --
Class B (7,032,331) --
Class C (197,246) --
Class Y (965,392) --
- ------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST
TRANSACTIONS Net increase in net assets resulting from beneficial
interest transactions--Note 2:
Class A 196,657,756 38,698,901
Class B 96,461,672 36,609,837
Class C 15,930,604 --
Class Y 18,542,687 7,856,196
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS Total increase 520,333,750 242,095,704
-------------------------------------------------------------------------------------------
Beginning of period 882,520,561 640,424,857
--------------- --------------
End of period (including accumulated net
investment loss of $624,556 and
$243,227, respectively) $1,402,854,311 $882,520,561
--------------- ---------------
--------------- ---------------
</TABLE>
See accompanying Notes to Financial Statements.
17 Oppenheimer Discovery Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------
CLASS A
----------------------------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995 1994
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $43.65 $35.81 $39.90
---------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.13) -- (.11)
Net realized and unrealized gain (loss) 11.26 9.46 (2.98)
-------- ------ ------
Total income (loss) from investment operations 11.13 9.46 (3.09)
---------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gain (3.59) (1.62) (1.00)
---------------------------------------------------------------------------------------------------
Net asset value, end of period $51.19 $43.65 $35.81
-------- ------ ------
-------- ------ ------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(4) 27.76% 28.03% (7.91)%
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $1,160,087 $798,065 $613,740
---------------------------------------------------------------------------------------------------
Average net assets (in thousands) $937,563 $650,903 $588,642
---------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (0.32)% 0.00% (0.34)%
Expenses 1.22% 1.33% 1.32%
---------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 79.7% 105.9% 83.3%
Average brokerage commission rate(7) $0.0577 -- --
</TABLE>
1. For the period from June 1, 1994 (inception of offering) to
September 30, 1994.
2. For the period from October 2, 1995 (inception of offering) to
September 30, 1996.
3. For the period from April 1, 1994 (inception of offering) to
September 30, 1994.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), 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.
18 Oppenheimer Discovery Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------
CLASS A CLASS B
---------------------- -------------------------------------------
YEAR ENDED SEPTEMBER 30,
1993 1992 1996 1995 1994(3)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $27.62 $26.03 $43.11 $35.65 $35.65
----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.13) (.17) (.23) (.21) .03
Net realized and unrealized gain (loss) 12.41 3.05 10.81 9.29 (.03)
------- ------- ------ ------ --------
Total income (loss) from investment operations 12.28 2.88 10.58 9.08 --
----------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gain -- (1.29) (3.59) (1.62) --
----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $39.90 $27.62 $50.10 $43.11 $35.65
------- ------- ------ ------ --------
------- ------- ------ ------ --------
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(4) 44.46% 11.28% 26.77% 27.04% (1.93)%
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $587,057 $294,010 $193,637 $75,062 $26,491
----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $451,016 $218,065 $119,895 $43,301 $12,435
----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (0.54)% (0.62)% (1.06)% (0.78)% (1.06)%(5)
Expenses 1.27% 1.52% 1.99% 2.11% 2.36%(5)
----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 85.2% 67.9% 79.7% 105.9% 83.3%
Average brokerage commission rate(7) -- -- $0.0577 -- --
<CAPTION>
CLASS C CLASS Y
------------- -------------------------------------------
PERIOD ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
1996(2) 1996 1995 1994(1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $43.20 $43.74 $35.81 $34.89
------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.21) (.02) (.10) .11
Net realized and unrealized gain (loss) 11.33 11.31 9.65 .81
------- ------ ------ -------
Total income (loss) from investment operations 11.12 11.29 9.55 .92
------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gain (3.59) (3.59) (1.62) --
------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $50.73 $51.44 $43.74 $35.81
------- ------ ------ -------
------- ------ ------ -------
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(4) 27.96% 28.09% 28.28% 3.20%
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $17,512 $31,619 $9,394 $194
------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $7,109 $18,563 $3,190 $ 39
------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (1.00)%(5) (0.04)% 0.03% (0.13)%(5)
Expenses 2.03%(5) 0.99% 1.26% 1.41%(5)
------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 79.7% 79.7% 105.9% 83.3%
Average brokerage commission rate(7) $0.0577 $0.0577 -- --
</TABLE>
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 period
ended September 30, 1996 were $803,223,056 and $736,912,422, respectively.
7. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period divided by the total number of related
shares purchased and sold.
See accompanying Notes to Financial Statements.
19 Oppenheimer Discovery Fund
<PAGE>
---------------------------------------------
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 objective is capital
appreciation; current income is not an
objective. In seeking its objective, the Fund
emphasizes investments in securities of
"growth-type" companies, including common
stocks, preferred stocks, convertible
securities, rights, warrants and options. The
Fund's investment adviser is
OppenheimerFunds, Inc. (the Manager). The
Fund offers Class A, Class B, Class C and
Class Y shares. Class A shares are sold with
a front-end sales charge. Class B and Class C
shares may be subject to a contingent
deferred sales charge. All 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, B and C 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 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 are valued
under consistently applied procedures
established by the Board of Trustees to
determine fair value in good faith.
Short-term "money market type" debt
securities having a remaining maturity of 60
days or less are valued at cost (or last
determined market value) adjusted for
amortization to maturity of any premium or
discount.
--------------------------------------------
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 year ended September 30, 1996, a
provision of $86,789 was made for the Fund's
projected benefit obligations and payments of
$5,460 were made to retired trustees,
resulting in an accumulated liability of
$196,947 at September 30, 1996.
--------------------------------------------
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 due to 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.
20 Oppenheimer Discovery Fund
<PAGE>
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
During the year ended September 30, 1996, the
Fund adjusted the classification of
distributions to shareholders to reflect the
differences between financial statement
amounts and distributions determined in
accordance with income tax regulations.
Accordingly, during the year ended September
30, 1996, amounts have been reclassified to
reflect a decrease in paid-in capital of
$4,009,969. Accumulated net investment loss
was decreased by the same amount.
--------------------------------------------
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. Realized
gains and losses on investments and
unrealized appreciation and depreciation are
determined on an identified cost basis, which
is the same basis used for federal income tax
purposes.
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make
estimates and assumptions that affect the
reported amounts of assets and liabilities
and disclosure of contingent assets and
liabilities at the date of the financial
statements and the reported amounts of income
and expenses during the reporting period.
Actual results could differ from those
estimates.
- --------------------------------------------------------------------------------
2. SHARES OF
BENEFICIAL INTEREST
The Fund has authorized an unlimited number
of no par value shares of beneficial interest
of each class. Transactions in shares of
beneficial interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996(1) YEAR ENDED SEPTEMBER 30, 1995
---------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 12,519,702 $569,002,600 11,835,083 $428,009,066
Distributions reinvested 1,596,700 64,139,185 821,910 26,424,457
Redeemed (9,738,312) (436,484,029) (11,512,590) (415,734,622)
----------- ------------ ----------- ------------
Net increase 4,378,090 $196,657,756 1,144,403 $ 38,698,901
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
-----------------------------------------------------------------------------------------------
Class B:
Sold 2,852,250 $129,720,421 1,606,929 $58,824,017
Distributions reinvested 172,972 6,841,003 42,043 1,343,689
Redeemed (901,310) (40,099,752) (650,592) (23,557,869)
----------- ------------ ----------- ------------
Net increase 2,123,912 $96,461,672 998,380 $36,609,837
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
-----------------------------------------------------------------------------------------------
Class C:
Sold 760,144 $35,068,889 -- $ --
Distributions reinvested 4,897 196,204 -- --
Redeemed (419,838) (19,334,489) -- --
----------- ------------ ----------- ------------
Net increase 345,203 $15,930,604 -- $ --
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
-----------------------------------------------------------------------------------------------
Class Y:
Sold 535,075 $24,859,892 247,309 $9,293,954
Distributions reinvested 23,960 965,392 1,260 40,545
Redeemed (159,096) (7,282,597) (39,199) (1,478,303)
----------- ------------ ----------- ------------
Net increase 399,939 $18,542,687 209,370 $7,856,196
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
1. For the year ended September 30, 1996 for
Class A, Class B and Class Y shares, for the
period from October 2, 1995 (inception of
offering) to September 30, 1996 for Class C
shares.
- -------------------------------------------------------------------------------
3. UNREALIZED GAINS AND
LOSSES ON INVESTMENTS At September 30, 1996, net unrealized
appreciation on investments of $390,423,921
was composed of gross appreciation of
$416,343,907, and gross depreciation of
$25,919,986.
21 Oppenheimer Discovery Fund
<PAGE>
--------------------------------------------
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 a
fee of 0.75% on the first $200 million of
average annual net assets, 0.72% of the next
$200 million, 0.69% of the next $200 million,
0.66% of the next $200 million and 0.60% of
the next $800 million. The Manager has
voluntarily undertaken to waive a portion of
its management fee, whereby the Fund shall
pay an annual management fee of 0.58% of its
net assets in excess of $1.5 billion. 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, 1996,
commissions (sales charges paid by investors)
on sales of Class A shares totaled
$4,301,367, of which $1,402,167 was retained
by OppenheimerFunds 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 and Class C shares totaled $3,211,860
and $132,708, of which $305,386 and $3,459,
respectively, was paid to an affiliated
broker/dealer. During the year ended
September 30, 1996, OFDI received contingent
deferred sales charges of $168,972 and $2,383
upon redemption of Class B and Class C
shares, as reimbursement for sales
commissions advanced by OFDI at the time of
sale of such shares.
OppenheimerFunds Services (OFS), a
division of the Manager, is the transfer and
shareholder servicing agent for the Fund, and
for other registered investment companies.
OFS's total costs of providing such services
are allocated ratably to these companies.
The Fund has adopted a Service Plan for
Class A shares to reimburse OFDI for a
portion of its costs incurred in connection
with the personal service and maintenance of
accounts that hold Class A shares.
Reimbursement is made quarterly at an annual
rate that may not exceed 0.25% of the average
annual net assets of Class A shares of the
Fund. OFDI uses the service fee to reimburse
brokers, dealers, banks and other financial
institutions quarterly for providing personal
service and maintenance of accounts of their
customers that hold Class A shares. During
the year ended September 30, 1996, OFDI paid
$164,037 to an affiliated broker/dealer as
reimbursement for Class A personal service
and maintenance expenses.
The Fund has adopted a reimbursement
type Distribution and Service Plan for Class
B shares to reimburse OFDI for its services
and costs in distributing Class B shares and
servicing accounts. Under the Plan, the Fund
pays OFDI an annual asset-based sales charge
of 0.75% per year on Class B shares. OFDI
also receives a service fee of 0.25% per year
to reimburse dealers for providing personal
services for accounts that hold Class B
shares. Both fees are computed on the average
annual net assets of Class B shares,
determined as of the close of each regular
business day. If the Plan is terminated by
the Fund, the Board of Trustees may allow the
Fund to continue payments of the asset-based
sales charge to OFDI for certain expenses it
incurred before the Plan was terminated.
During the year ended September 30, 1996,
OFDI paid $12,821 to an affiliated
broker/dealer as reimbursement for Class B
personal service and maintenance expenses and
retained $1,040,973 as reimbursement for
Class B sales commissions and service fee
advances, as well as financing costs. As of
September 30, 1996, OFDI had incurred
unreimbursed expenses of $4,689,052 for Class
B.
The Fund has adopted a compensation type
Distribution and Service Plan for Class C
shares to compensate OFDI for its services
and costs in distributing Class C shares and
servicing accounts. Under the Plan, the Fund
pays OFDI an annual asset-based sales charge
of 0.75% per year on Class C shares. OFDI
also receives a service fee of 0.25% per year
to compensate dealers for providing personal
services for accounts that hold Class C
shares. Both fees are computed on the average
annual net assets of Class C shares,
determined as of the close of each regular
business day. If the Plan is terminated by
the Fund, the Board of Trustees may allow the
Fund to continue payments of the asset-based
sales charge to OFDI for certain expenses it
incurred before the Plan was terminated.
During the year ended September 30, 1996,
OFDI retained $53,257 as compensation for
Class C sales commissions and service fee
advances, as well as financing costs. As of
September 30, 1996, OFDI had incurred
unreimbursed expenses of $184,481 for Class
C.
22 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. ILLIQUID AND
RESTRICTED SECURITIES At September 30, 1996, investments in
securities included issues that are illiquid
or restricted. Restricted securities are
often purchased in private placement
transactions, are not registered under the
Securities Act of 1933, may have contractual
restrictions on resale, and are valued under
methods approved by the Board of Trustees as
reflecting fair value. A security may be
considered illiquid if it lacks a
readily-available market or if its valuation
has not changed for a certain period of time.
The Fund intends to invest no more than 10%
of its net assets (determined at the time of
purchase and reviewed from time to time) in
illiquid or restricted securities. Certain
restricted securities, eligible for resale to
qualified institutional investors, are not
subject to that limit. The aggregate value of
illiquid or restricted securities subject to
this limitation at September 30, 1996 was
$20,938,750, which represents 1.49% of the
Fund's net assets. Information concerning
restricted securities is as follows:
<TABLE>
<CAPTION>
VALUATION
PER UNIT AS OF
SECURITY ACQUISITION DATES COST PER UNIT SEPT. 30, 1996
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AirNet Communications Corp., Series C 7/6/95 $6.00 $6.00
------------------------------------------------------------------------------------------------
ICG Communications, Inc. 6/9/93--5/10/96 6.97 19.95
------------------------------------------------------------------------------------------------
Silicon Video Corp. Series E 4/24/96 5.50 5.50
------------------------------------------------------------------------------------------------
Silver Diner, Inc. 7/10/96 5.50 5.11
</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.
23 Oppenheimer Discovery Fund
<PAGE>
--------------------------------------------
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, 1996, and the related statement of
operations for the year then ended, the
statements of changes in net assets for each
of the years in the two year period then
ended and the financial highlights for each
of the years in the five year period then
ended. These financial statements and
financial highlights are the responsibility
of the Fund's management. Our responsibility
is to express an opinion on these financial
statements and financial highlights based on
our audits.
We conducted our audits in accordance
with generally accepted auditing standards.
Those standards require that we plan and
perform the audit to obtain reasonable
assurance about whether the financial
statements and financial highlights are free
of material misstatement. An audit includes
examining, on a test basis, evidence
supporting the amounts and disclosures in the
financial statements. Our procedures included
confirmation of securities owned as of
September 30, 1996, 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, 1996, the results of
its operations for the year then ended, the
changes in its net assets for each of the
years in the two year period then ended, and
the financial highlights for each of the
years in the five year period then ended, in
conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
October 21, 1996
24 Oppenheimer Discovery Fund
<PAGE>
--------------------------------------------
Federal Income Tax Information (Unaudited)
--------------------------------------------
In early 1997, shareholders will receive
information regarding all dividends and
distributions paid to them by the Fund during
calendar year 1996. Regulations of the U.S.
Treasury Department require the Fund to
report this information to the Internal
Revenue Service.
Distributions of $3.5916, per share were
paid to Class A, Class B, Class C and Class Y
shareholders on December 22, 1995, of which
$3.1297 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,
1996 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 adviser for specific guidance.
25 Oppenheimer Discovery Fund
<PAGE>
--------------------------------------------
OPPENHEIMER DISCOVERY FUND
--------------------------------------------
- -------------------------------------------------------------------------------
OFFICERS AND TRUSTEES Leon Levy, Chairman of the Board of Trustees
Donald W. Spiro, Vice Chairman of the Board
of Trustees
Bridget A. Macaskill, Trustee and President
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
Pauline Trigere, Trustee
Clayton K. Yeutter, Truste
Jay W. Tracey, Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OppenheimerFunds, Inc.
- --------------------------------------------------------------------------------
DISTRIBUTOR OppenheimerFunds Distributor, Inc.
- --------------------------------------------------------------------------------
TRANSFER AND SHAREHOLDER OppenheimerFunds 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.
Shares of Oppenheimer funds are not deposits
or obligations of any bank, are not
guaranteed by any bank, and are not insured
by the FDIC or any other agency, and involve
investment risks, including possible loss of
the principal amount invested.
26 Oppenheimer Discovery Fund
<PAGE>
--------------------------------------------
OPPENHEIMERFUNDS FAMILY
--------------------------------------------
- --------------------------------------------------------------------------------
OppenheimerFunds offers over 50 funds
designed to fit virtually every investment
goal. Whether you're investing for
retirement, your children's education or
tax-free income, we have the funds to help
you seek your objective.
When you invest with OppenheimerFunds,
you can feel comfortable knowing that you are
investing with a respected financial
institution with over 35 years of experience
in helping people just like you reach their
financial goals. And you're investing with a
leader in global, growth stock and flexible
fixed-income investments--with over 3 million
shareholder accounts and more than $55
billion under OppenheimerFunds' management
and that of our affiliates.
At OppenheimerFunds we don't charge a
fee to exchange shares. And you can exchange
shares easily by mail or by telephone.1 For
more information on Oppenheimer funds, please
contact your financial adviser or call us at
1-800-525-7048 for a prospectus. You may also
write us at the address shown on the back
cover. As always, please read the prospectus
carefully before you invest.
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
STOCK FUNDS Global Emerging Growth Fund Growth Fund
Enterprise Fund(2) Global Fund
International Growth Fund Quest Global Value Fund
Discovery Fund Disciplined Value Fund
Quest Small Cap Value Fund Oppenheimer Fund
Gold & Special Minerals Fund Value Stock Fund
Target Fund Quest Value Fund
- -----------------------------------------------------------------------------------------------------------------------
STOCK & BOND FUNDS Main Street Income & Growth Fund Equity Income Fund
Quest Opportunity Value Fund Disciplined Allocation Fund
Total Return Fund Asset Allocation Fund
Quest Growth & Income Value Fund Strategic Income & Growth Fund
Global Growth & Income Fund Bond Fund for Growth
- ----------------------------------------------------------------------------------------------------------------------
BOND FUNDS International Bond Fund Bond Fund
High Yield Fund U.S. Government Trust
Champion Income Fund Limited-Term Government Fund
Strategic Income Fund
- ----------------------------------------------------------------------------------------------------------------------
MUNICIPAL FUNDS California Municipal Fund(3) Insured Municipal Fund
Florida Municipal Fund(3) Intermediate Municipal Fund
New Jersey Municipal Fund(3)
New York Municipal Fund(3) ROCHESTER DIVISION
Pennsylvania Municipal Fund(3) Rochester Fund Municipals
Municipal Bond Fund Limited Term New York Municipal Fund
- ----------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS(4) Money Market Fund Cash Reserves
- ----------------------------------------------------------------------------------------------------------------------
LIFESPAN Growth Fund Income Fund
Balanced Fund
</TABLE>
1. Exchange privileges are subject to change
or termination. Shares may be exchanged only
for shares of the same class of eligible
funds.
2.Effective 4/1/96, the Fund is closed to new
investors.
3. Available only to investors in certain
states.
4. An investment in money market funds is
neither insured nor guaranteed by the U.S.
government and there can be no assurance that
a money market fund will be able to maintain
a stable net asset value of $1.00 per share.
Oppenheimer funds are distributed by
OppenheimerFunds Distributor, Inc., Two World
Trade Center, New York, NY 10048-0203.
-C- Copyright 1996 OppenheimerFunds, Inc. All
rights reserved.
27 Oppenheimer Discovery Fund
<PAGE>
INFORMATION
GENERAL INFORMATION
Monday-Friday 8:30 a.m.-9 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
RA0500.001.0996 November 30, 1996
"HOW MAY I HELP YOU?"
As an Oppenheimer fund 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 Oppenheimer funds 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.
[PICTURE]
Customer Service Representative
OppenheimerFunds Services
Of course, you can always speak with a Customer Service Representative during
the General Information hours shown at the left.
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 Oppenheimer funds' transfer agent,
OppenheimerFunds Services, with their Award of Excellence in 1993.
So call us today--we're here to help.
[LOGO]
OppenheimerFunds Distributor, Inc.
P.O. Box 5270
Denver, CO 80217-5270
- --------------------
Bulk Rate
U.S. Postage
PAID
Permit No. 469
Denver, CO
- --------------------
