[cover]
Annual Report September 30, 1997
O P P E N H E I M E R
Discovery
Fund
[photo of telescope]
[OppenheimerFunds logo]
THE RIGHT WAY TO INVEST
<PAGE>
Report highlights
- --------------------------------------------------------------------------------
Contents
3 President's Letter
4 Fund Performance
6 An Interview
with the Fund's
Managers
10 Statement of
Investments
18 Statement of
Assets &
Liabilities
20 Statement of
Operations
21 Statements of
Changes in
Net Assets
22 Financial Highlights
24 Notes to Financial
Statements
31 Independent
Auditors' Report
32 Federal Income
Tax Information
33 Officers & Trustees
36 Information &
Services
[bullet] During much of the period, investors have shown a preference for
larger, liquid, blue-chip multinational companies, which held back the Fund's
relative performance.
[bullet] Diversification in a variety of companies and industries has helped
lower the volatility of small and micro-cap investments.
[bullet] Energy stocks have shown positive gains at home and abroad, due to
strengthening economies in many parts of the world.
- ------------------------------
Avg Annual Total Returns
- ------------------------------
For the 1-year period ended
9/30/97 without sales charges(1)
Class A
- ------------------------------
9.16%
- ------------------------------
Class B
- ------------------------------
8.33%
- ------------------------------
Class C
- ------------------------------
8.39%
- ------------------------------
Class Y
- ------------------------------
9.50%
- ------------------------------
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
In reviewing performance and rankings, please remember that past performance
does not guarantee future results. Investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
1. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken into
account.
2 Oppenheimer Discovery Fund
<PAGE>
Dear shareholder,
- --------------------------------------------------------------------------------
[photo of Bridget A. Macaskill]
Bridget A. Macaskill
President
Oppenheimer
Discovery Fund
As you are no doubt aware, during the end of October and early November many
stock markets around the world recorded their all-time largest point declines,
followed by subsequent gains and continued volatility, leaving investors
uncertain about what would occur next.
To put those events in focus, let's look at a "snapshot" of the two-week
time period. Sharp declines in the overseas stock markets, particularly in Asia,
triggered a series of sell-offs throughout Europe, Latin America and the United
States. In response, the U.S. stock market, as measured by the Dow Jones
Industrial Average, dropped 554 points on October 27, its largest point decline
in history. However, almost as quickly, the U.S. stock market bounced back over
the succeeding few days, regaining nearly all of its losses.
While no one could have predicted the timing or extent of these
fluctuations, many analysts, including our fund managers here at
OppenheimerFunds, had warned of a correction for several months. We believed
that U.S. valuations were too high, stocks were expensive relative to bonds,
recent corporate earnings were somewhat disappointing and that Federal Reserve
Chairman Alan Greenspan could possibly seek a short-term interest rate hike.
As a result, when October 27 arrived, our equity funds held above-average
cash positions relative to many of our competitors. Not only did our higher
cash levels serve as a protection, they also enabled us to buy the stocks of
numerous excellent companies that were selling at more reasonable prices. In
addition, our international and global funds were not as impacted because they
weren't heavily invested in Southeast Asia and Japan. Finally, on the
fixed-income side, our bond funds were generally characterized by longer-than-
normal durations, which allowed us to lock in higher yields.
In conclusion, many of our funds experienced relatively strong
performance during the October-November market shake-ups. We'd like to take
this opportunity to remind shareholders that stock market volatility is a
normal and expected part of the business cycle. As Alan Greenspan suggested, in
years to come this period will likely be remembered as a positive change for a
market that was growing too quickly.
For frequent market updates, please visit our website at
www.oppenheimerfunds.com or call 1-800-835-3104 to listen to our recorded
messages. In the meantime, thank you for your confidence in OppenheimerFunds,
The Right Way to Invest. We look forward to helping you reach your investment
goals in the future.
/s/ Bridget A. Macaskill
Bridget A. Macaskill
November 7, 1997
3 Oppenheimer Discovery Fund
<PAGE>
Performance update
- --------------------------------------------------------------------------------
- -------------------------------
Avg Annual Total Returns
- -------------------------------
For the Period Ended 9/30/97(1)
Class A
1 year 5 year 10 year
- -------------------------------
2.88% 17.49% 14.66%
- -------------------------------
Class B
Since
1 year 5 year Inception
- -------------------------------
3.33% N/A 16.67%
- -------------------------------
Class C
Since
1 year 5 year Inception
- -------------------------------
7.39% N/A 17.82%
- -------------------------------
Class Y
Since
1 year 5 year Inception
- -------------------------------
9.50% N/A 20.42%
- -------------------------------
- -------------------------------
Cumulative Total Return
- -------------------------------
For the 30 Days Ended 9/30/97(1)
Class A
5 year
- -------------------------------
123.87% $22,387(3)
- -------------------------------
Oppenheimer Discovery Fund's Class A shares produced an average annual total
return, without sales charges, of 9.16% for the one-year period ended September
30, 1997.(2) This past year was a difficult time for small-cap funds in general,
primarily because investors showed a preference for larger blue-chip companies
during the first seven months of the past fiscal year. However, since late
April, small-cap stocks have experienced a significant rebound, and the Fund
benefited accordingly. Because the companies we hold in the Fund's portfolio
are exhibiting strong sales and earnings growth, we are optimistic.
[typeset representation of mountain chart]
Growth of $10,000
Over five years
(without sales charges)(3)
Oppenheimer
Discovery Fund S&P 500
Class A shares Index
9/30/92 10000 10000
12440.2 10503.5
12168.7 10962.2
12729.9 11015.6
14446 11300.2
14659.8 11582.2
13504.4 11123.7
12170.7 11170.5
13303.8 11716.8
13020.8 11714.9
13797.3 12865.5
14765 14082.8
17032 15201.9
17810.9 16117.1
18962.9 16982.2
21241.3 17744.3
21759.9 18292.8
20445.7 19817.6
17786.7 20348.9
21079.5 23901.4
9/30/97 23752.2 25692.4
[end mountain chart]
1. Total returns include changes in share price and reinvestment of dividends
and capital gains distributions in a hypothetical investment for the periods
shown. Class A returns include the current maximum initial sales charge of
5.75%. Class A shares were first publicly offered on 9/11/86. The Fund's
maximum sales charge for Class A shares was lower prior to 4/1/91, so actual
performance may have been higher. Class B returns include the applicable
contingent deferred sales charge of 5% (1-year) and 3% (since inception on
4/1/94). Class Class C returns for the 1-year result include the contingent
deferred sales charge of 1%. Class C shares have an inception date of 10/2/95.
Class Y shares were first publicly offered on 6/1/94 and are not available for
sale to individual shareholders. An explanation of the different performance
calculations is in the Fund's prospectus. Class B and C shares are subject to an
annual 0.75% asset-based sales charge and 0.25% distribution fee. Class A shares
are subject to an annual asset-based sales charge not to exceed 0.25%.
4 Oppenheimer Discovery Fund
<PAGE>
Portfolio review
- --------------------------------------------------------------------------------
Oppenheimer Discovery Fund is for investors aggressively seeking high long-term
growth from small-company stocks.
Sector Weightings(4)
[pie chart]
Technology 24.21%
Industrial 21.71
Consumer
Non-Cyclical 21.49
Consumer Cyclical 15.97
Energy 7.62
Financial 6.25
Utility 2.67
Basic Materials 0.08
[end pie chart]
What We Look For
[bullet] Sustainable earnings growth rates.
[bullet] Rapidly accelerated earnings.
[bullet] Innovative products or services.
[bullet] Self-financed expansion and/or expansion into new markets.
Top Ten Stock Holdings(4)
<TABLE>
<S> <C> <C> <C>
Visio Corp. 1.70% EVI, Inc. 1.43%
..................................................................................
CORT Business Services Corp. 1.49 Pittway Corp., Cl. A 1.32
..................................................................................
National Instruments Corp. 1.43 AmeriSource Health Corp. 1.31
..................................................................................
Comverse Technology, Inc. 1.43 Executive Risk, Inc. 1.30
..................................................................................
Saville Systems Ireland, ADR 1.43 Parexel International Corp. 1.21
..................................................................................
</TABLE>
2. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken
into account.
3. Results of a hypothetical $10,000 investment in Class A shares on September
30, 1992. The S&P 500 is a broad-based unmanaged stock index including daily
reinvestment of dividends, and cannot be purchased directly by investors.
4. Portfolio is subject to change. Percentages are as of September 30, 1997 and
are based on total market value of stock holdings.
5 Oppenheimer Discovery Fund
<PAGE>
An interview with your Fund's managers
- --------------------------------------------------------------------------------
How would you describe the Fund's performance over the year?
This past year was a difficult period for small-cap funds in general, primarily
because investors showed a preference for larger blue-chip companies during the
first seven of the past 12 months. However, since late April, small-cap stocks
have experienced a significant rebound and Oppenheimer Discovery Fund--a
small-cap growth fund--finished the fiscal period on a positive note. For the
one-year period ended September 30, 1997, the Fund's Class A shares had an
average annual total return, without sales charges, of 9.16%.(1)
Have small-cap growth stocks kept up with the rest of the market?
Not for the first seven months of the fiscal year, from October 1, 1996 through
the end of April 1997. During that period small caps underperformed large caps,
and growth stocks underperformed value stocks. However, since the first of May
and during the last five months of the period, small-cap growth stocks have
experienced a strong comeback.
For clarification, a small-cap company is generally defined as one
whose "market capitalization" is $1 billion or less. By comparison, a large-cap
company's total market capitalization is generally defined to be greater than
$5 billion. Market capitalization can be calculated by multiplying the total
number of shares outstanding by the price per share. Normally, investors prefer
the relative safety and predictability of large-cap stocks, and venture into
small-cap stocks when small companies offer faster earnings growth. When
relative earnings growth prospects of small companies began to improve early
last spring, small-cap stocks began to outperform.
- -----------------------
"Since late April,
small-cap
stocks have
experienced a
significant
rebound."
1. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken
into account.
6 Oppenheimer Discovery Fund
<PAGE>
[photo of Tracey and LaRocco]
Portfolio Management
Team (l to r)
Jay Tracey (Fund Manager)
Paul LaRocco
This past year was also characterized by another macro trend: the market's
preference for "value stocks" as opposed to "growth stocks." Oppenheimer
Discovery Fund is a growth-oriented fund, which means we seek companies for the
portfolio that are achieving strong sales and earnings gains; in contrast,
value-oriented funds emphasize stocks considered by their managers to be
underpriced. The market goes through cycles in which one style is favored over
another. Over the past 12 months, value stocks outperformed growth stocks, which
hindered our relative performance until recently. Since May, however, although
value stocks have continued to do well, growth-oriented small-cap stocks have
done better, which is an encouraging sign for the Fund going forward.
Where did you see earnings strength?
Energy was the Fund's best-performing sector over the past year. In oil
services, we hold shares of Energy Ventures, Inc., recently renamed EVI, Inc.,
a company that has benefited from the better economics of offshore drilling.
EVI manufactures and supplies oil field equipment used for exploration. Due to
rising demand for these items and increased drilling activity, the company was
able to increase profits dramatically. In general, the companies in this
industry have produced strong earnings gains, and as a result, the stocks have
posted large gains as well. The trends that produced these good results are
still with us, so we're going to stick with our position.
7 Oppenheimer Discovery Fund
<PAGE>
An interview with your Fund's managers
- --------------------------------------------------------------------------------
Technology, though mixed, was generally a good sector for the market, as
well as for the Fund. We like to break technology down into four components:
software, hardware, services and communications technology. Our heaviest
concentrations have been in software, services and communications. Our view is
that hardware can be very sensitive to the ups and downs of the economy. As a
result, our exposure to computers, circuit boards, semiconductors and
semiconductor equipment has been low, but because the secular outlook is
positive, we expect to be adding in these areas on weakness.
Within technology, one of our best performers was National Instruments
Corp., a company that makes software that enables personal computers to perform
the functions of a variety of analytical instruments. The advantage of the
technology is its cost savings to the customer, who no longer has to purchase
separate hardware for each analytical purpose. The company's sales have grown
20% over the past year and earnings have grown more than 40%.
Although energy and technology are well represented in the portfolio,
we select stocks on their individual merits, rather than attempting to maintain
specific sector weightings. Some of our holdings don't fit into neat industry
categories. For example, one of the biggest and best-performing positions in
the Fund is CORT Business Services Corp., a company that has grown its revenues
and earnings by about 30% over the past year. CORT provides rental furniture,
accessories and related services to corporations in 31 states and the District
of Columbia, and has capitalized on the corporate trend of providing employees
temporary apartment housing when they're working on extended projects, rather
than having them stay in hotels.
- ---------------------
"One of the
strongest
groups over
the past
12 months
has been
energy..."
8 Oppenheimer Discovery Fund
<PAGE>
What was a weak area of the portfolio?
The healthcare industry was battered by fears that Medicare spending by the
federal government would be cut drastically. For instance, we had a big decline
in a company that manufactures devices used in the diagnosis and monitoring of
bone disorders. Now that we know what the Medicare reimbursement rates are
going to be, the stock has recovered, but it's still down about 50% from where
it was at the beginning of the Fund's fiscal year. Even though the stock price
has been extremely volatile, the company itself remains a solid investment.
What is your outlook?
The low stock prices that we saw at the end of April established a very
attractive relative price level for the kinds of stocks that Oppenheimer
Discovery Fund owns and buys. We believe the outlook for relative earnings
performance has improved, and we have already seen a nice rebound in stock
prices. Looking ahead to 1998, we expect positive relative earnings gains to
contribute to better relative performance of small-cap stocks, and we are
therefore optimistic about the Fund's opportunities and outlook.
- --------------------
". . . particularly
exploration
and offshore
drilling."
9 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks--84.9%
- --------------------------------------------------------------------------------
Basic Materials--0.1%
- --------------------------------------------------------------------------------
Chemicals--0.1%
AMCOL International Corp. 7,500 $ 155,625
- --------------------------------------------------------------------------------
Minerals Technologies, Inc. 23,200 1,033,850
-------------
1,189,475
- --------------------------------------------------------------------------------
Consumer Cyclicals--13.6%
- --------------------------------------------------------------------------------
Autos & Housing--1.9%
Budget Group, Inc., Cl. A(1) 250,000 8,250,000
- --------------------------------------------------------------------------------
Fairfield Communities, Inc.(1) 450,000 16,903,125
- --------------------------------------------------------------------------------
Wilmar Industries, Inc.(1) 280,000 7,560,000
-------------
32,713,125
- --------------------------------------------------------------------------------
Leisure & Entertainment--4.2%
Action Performance Cos., Inc.(1) 320,000 9,320,000
- --------------------------------------------------------------------------------
Applebee's International, Inc. 250,000 6,250,000
- --------------------------------------------------------------------------------
Cinar Films, Inc., Cl. B(1) 465,000 17,728,125
- --------------------------------------------------------------------------------
CKE Restaurants, Inc. 368,300 15,468,600
- --------------------------------------------------------------------------------
Coach USA, Inc.(1) 300,000 9,018,750
- --------------------------------------------------------------------------------
Signature Resorts, Inc.(1) 220,000 10,450,000
- --------------------------------------------------------------------------------
Silver Diner, Inc.(1)(2)(3) 700,000 1,413,125
- --------------------------------------------------------------------------------
Sodak Gaming, Inc.(1) 200,000 2,825,000
-------------
72,473,600
- --------------------------------------------------------------------------------
Media--1.9%
Applied Graphics Technologies, Inc.(1) 250,000 14,062,500
- --------------------------------------------------------------------------------
Heftel Broadcasting Corp., A Shares(1) 200,000 15,150,000
- --------------------------------------------------------------------------------
Scientific Games Holdings Corp.(1) 200,000 4,350,000
-------------
33,562,500
- --------------------------------------------------------------------------------
Retail: General--1.2%
North Face, Inc. (The)(1) 300,000 8,062,500
- --------------------------------------------------------------------------------
Wolverine World Wide, Inc. 489,750 12,366,187
-------------
20,428,687
- --------------------------------------------------------------------------------
Retail: Specialty--4.4%
Central Garden & Pet Co.(1) 300,000 9,225,000
- --------------------------------------------------------------------------------
Children's Place Retail Stores, Inc.(1) 300,000 4,350,000
- --------------------------------------------------------------------------------
dELiA*s, Inc.(1) 175,000 3,915,625
- --------------------------------------------------------------------------------
Heilig-Meyers Co. 360,000 5,535,000
- --------------------------------------------------------------------------------
Linens 'N Things, Inc.(1) 342,800 11,483,800
10 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Retail: Specialty (continued)
Marks Bros. Jewelers, Inc.(1) 200,000 $ 2,800,000
- --------------------------------------------------------------------------------
MSC Industrial Direct Co., Inc., Cl. A(1) 300,000 13,800,000
- --------------------------------------------------------------------------------
Petco Animal Supplies, Inc.(1) 530,000 16,628,750
- --------------------------------------------------------------------------------
Pier 1 Imports, Inc. 500,000 8,968,750
-------------
76,706,925
- --------------------------------------------------------------------------------
Consumer Non-Cyclicals--18.2%
- --------------------------------------------------------------------------------
Beverages--0.2%
Celestial Seasonings, Inc.(1) 105,000 3,255,000
- --------------------------------------------------------------------------------
Food--1.2%
JP Foodservice, Inc.(1) 500,000 15,750,000
- --------------------------------------------------------------------------------
Richfood Holdings, Inc. 200,000 5,187,500
-------------
20,937,500
- --------------------------------------------------------------------------------
Healthcare/Drugs--3.8%
Applied Analytical Industries, Inc.(1) 180,000 3,645,000
- --------------------------------------------------------------------------------
Biocompatibles International plc(1) 498,044 5,149,064
- --------------------------------------------------------------------------------
Dura Pharmaceuticals, Inc.(1) 250,000 10,906,250
- --------------------------------------------------------------------------------
Ethical Holdings plc, Sponsored ADR(1) 500,000 2,281,250
- --------------------------------------------------------------------------------
Global Pharmaceutical Corp.(1) 195,800 1,150,325
- --------------------------------------------------------------------------------
Incyte Pharmaceuticals, Inc.(1) 125,000 10,500,000
- --------------------------------------------------------------------------------
Kos Pharmaceuticals, Inc.(1) 240,000 8,580,000
- --------------------------------------------------------------------------------
Roberts Pharmaceutical Corp.(1) 100,000 1,087,500
- --------------------------------------------------------------------------------
Transkaryotic Therapies, Inc.(1) 200,000 7,850,000
- --------------------------------------------------------------------------------
Vivus, Inc.(1) 300,000 11,250,000
- --------------------------------------------------------------------------------
Warner Chilcott Laboratories, Sponsored ADR(1) 230,000 4,082,500
-------------
66,481,889
- --------------------------------------------------------------------------------
Healthcare/Supplies & Services--13.0%
AmeriSource Health Corp., Cl. A(1) 330,000 19,284,375
- --------------------------------------------------------------------------------
Arterial Vascular Engineering, Inc.(1) 150,000 8,325,000
- --------------------------------------------------------------------------------
Capstone Pharmacy Services, Inc.(1) 300,000 3,618,750
- --------------------------------------------------------------------------------
Concentra Managed Care, Inc.(1) 350,000 12,359,375
- --------------------------------------------------------------------------------
Covance, Inc.(1) 500,000 10,812,500
- --------------------------------------------------------------------------------
EndoSonics Corp. 152,500 2,239,844
- --------------------------------------------------------------------------------
EP MedSystems, Inc.(1)(3) 400,000 1,200,000
- --------------------------------------------------------------------------------
ESC Medical Systems Ltd.(1) 250,000 9,406,250
- --------------------------------------------------------------------------------
FPA Medical Management, Inc.(1) 350,000 12,031,250
- --------------------------------------------------------------------------------
Gulf South Medical Supply, Inc.(1) 300,000 8,025,000
- --------------------------------------------------------------------------------
Healthcare Recoveries, Inc.(1) 300,000 6,750,000
- --------------------------------------------------------------------------------
Henry Schein, Inc.(1) 200,000 7,150,000
11 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares See Note 1
- --------------------------------------------------------------------------------
Healthcare/Supplies & Services (continued)
HumaScan, Inc.(1)(3) 584,500 $ 5,991,125
- --------------------------------------------------------------------------------
Invacare Corp. 168,000 3,948,000
- --------------------------------------------------------------------------------
Lincare Holdings, Inc.(1) 180,000 9,078,750
- --------------------------------------------------------------------------------
Norland Medical Systems, Inc.(1)(3) 480,000 4,260,000
- --------------------------------------------------------------------------------
Omnicare, Inc. 300,000 9,750,000
- --------------------------------------------------------------------------------
Parexel International Corp.(1) 452,800 17,885,600
- --------------------------------------------------------------------------------
Pediatrix Medical Group, Inc.(1) 300,000 13,237,500
- --------------------------------------------------------------------------------
PhyCor, Inc.(1) 50,000 1,453,125
- --------------------------------------------------------------------------------
Renal Care Group, Inc.(1) 225,000 8,100,000
- --------------------------------------------------------------------------------
Rural/Metro Corp.(1) 118,200 3,605,100
- --------------------------------------------------------------------------------
Sabratek Corp.(1) 200,000 7,275,000
- --------------------------------------------------------------------------------
Serologicals Corp.(1) 550,000 12,512,500
- --------------------------------------------------------------------------------
Superior Consultant Holdings Corp.(1) 200,000 6,700,000
- --------------------------------------------------------------------------------
Total Renal Care Holdings, Inc.(1) 300,000 15,000,000
- --------------------------------------------------------------------------------
Ventana Medical Systems, Inc.(1) 425,000 6,853,125
--------------
226,852,169
- --------------------------------------------------------------------------------
Energy--6.5%
- --------------------------------------------------------------------------------
Energy Services & Producers--6.5%
Brown (Tom), Inc.(1) 350,000 8,662,500
- --------------------------------------------------------------------------------
Core Laboratories NV(1) 200,000 7,000,000
- --------------------------------------------------------------------------------
Cross Timbers Oil Co. 350,000 8,531,250
- --------------------------------------------------------------------------------
Diamond Offshore Drilling, Inc. 200,000 11,037,500
- --------------------------------------------------------------------------------
EVI, Inc.(1) 325,000 20,800,000
- --------------------------------------------------------------------------------
Falcon Drilling Co., Inc.(1) 320,000 11,300,000
- --------------------------------------------------------------------------------
FX Energy, Inc.(1) 500,000 3,265,625
- --------------------------------------------------------------------------------
Nabors Industries, Inc.(1) 290,000 11,291,875
- --------------------------------------------------------------------------------
Newfield Exploration Co.(1) 200,000 5,612,500
- --------------------------------------------------------------------------------
St. Mary Land & Exploration Co. 267,000 12,115,125
- --------------------------------------------------------------------------------
Stolt Comex Seaway SA(1) 207,000 12,950,437
--------------
112,566,812
- --------------------------------------------------------------------------------
Financial--5.3%
- --------------------------------------------------------------------------------
Banks--1.1%
Ocwen Financial Corp.(1) 83,500 3,517,437
- --------------------------------------------------------------------------------
TCF Financial Corp. 256,278 14,976,246
--------------
18,493,683
- --------------------------------------------------------------------------------
Diversified Financial--2.1%
First Alliance Corp.(1) 200,000 6,300,000
- --------------------------------------------------------------------------------
FIRSTPLUS Financial Group, Inc.(1) 150,000 8,418,750
12 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Diversified Financial (continued)
Investors Financial Services Corp. 285,800 $ 11,789,250
- --------------------------------------------------------------------------------
Renters Choice, Inc.(1) 400,000 9,087,500
- --------------------------------------------------------------------------------
Rockford Industries, Inc.(1) 100,900 1,059,450
-------------
36,654,950
- --------------------------------------------------------------------------------
Insurance--2.1%
CapMAC Holdings, Inc. 550,000 17,771,875
- --------------------------------------------------------------------------------
Executive Risk, Inc. 280,000 19,145,000
- --------------------------------------------------------------------------------
Penn-America Group, Inc. 10,000 202,500
-------------
37,119,375
- --------------------------------------------------------------------------------
Industrial--18.3%
Electrical Equipment--0.2%
- --------------------------------------------------------------------------------
Vishay Intertechnology, Inc. 165,000 4,362,187
- --------------------------------------------------------------------------------
Industrial Services--15.0%
Abacus Direct Corp.(1) 300,000 9,637,500
- --------------------------------------------------------------------------------
ABR Information Services, Inc.(1) 170,000 4,696,250
- --------------------------------------------------------------------------------
Acxiom Corp.(1) 400,000 6,975,000
- --------------------------------------------------------------------------------
Affiliated Computer Services, Inc., Cl. A(1) 450,000 11,137,500
- --------------------------------------------------------------------------------
Alternative Resources Corp.(1) 142,000 3,354,750
- --------------------------------------------------------------------------------
American Business Information, Inc.(1) 200,000 5,425,000
- --------------------------------------------------------------------------------
Barnett, Inc.(1) 250,000 5,312,500
- --------------------------------------------------------------------------------
Calgon Carbon Corp. 100,000 1,306,250
- --------------------------------------------------------------------------------
CIBER, Inc.(1) 300,000 14,175,000
- --------------------------------------------------------------------------------
CORT Business Services Corp.(1) 550,000 21,965,625
- --------------------------------------------------------------------------------
Culligan Water Technologies, Inc.(1) 200,000 9,200,000
- --------------------------------------------------------------------------------
Cuno, Inc.(1) 25,000 434,375
- --------------------------------------------------------------------------------
Daisytek International Corp.(1) 275,000 12,031,250
- --------------------------------------------------------------------------------
Eagle USA Airfreight, Inc.(1) 350,000 11,725,000
- --------------------------------------------------------------------------------
Hub Group, Inc., Cl. A(1) 280,000 10,395,000
- --------------------------------------------------------------------------------
IntelliQuest Information Group, Inc.(1)(3) 490,000 10,290,000
- --------------------------------------------------------------------------------
Leap Group, Inc. (The)(1) 322,900 827,431
- --------------------------------------------------------------------------------
Maximus, Inc.(1) 200,000 5,787,500
- --------------------------------------------------------------------------------
May & Speh, Inc.(1) 395,000 5,480,625
- --------------------------------------------------------------------------------
Metzler Group, Inc.(1) 200,000 8,025,000
- --------------------------------------------------------------------------------
NCO Group, Inc.(1) 150,000 5,550,000
- --------------------------------------------------------------------------------
Newpark Resources, Inc.(1) 286,600 11,266,962
- --------------------------------------------------------------------------------
Pierce Leahy Corp.(1) 200,000 5,425,000
- --------------------------------------------------------------------------------
Precision Response Corp.(1) 137,200 1,063,300
- --------------------------------------------------------------------------------
Registry, Inc.(1) 250,000 11,531,250
13 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Industrial Services (continued)
Rental Service Corp.(1) 500,000 $ 11,218,750
- --------------------------------------------------------------------------------
Service Experts, Inc.(1) 310,000 8,389,375
- --------------------------------------------------------------------------------
SITEL Corp.(1) 275,000 2,887,500
- --------------------------------------------------------------------------------
StaffMark, Inc.(1) 117,500 4,479,687
- --------------------------------------------------------------------------------
Stericycle, Inc.(1) 400,000 3,800,000
- --------------------------------------------------------------------------------
Transaction Systems Architects, Inc., Cl. A(1) 230,000 9,343,750
- --------------------------------------------------------------------------------
U.S. Rentals, Inc.(1) 250,000 6,578,125
- --------------------------------------------------------------------------------
USA Waste Services, Inc.(1) 365,000 14,554,375
- --------------------------------------------------------------------------------
Wackenhut Corrections Corp.(1) 48,000 1,488,000
- --------------------------------------------------------------------------------
West TeleServices Corp.(1) 400,000 6,000,000
--------------
261,757,630
- --------------------------------------------------------------------------------
Manufacturing--2.4%
Ballantyne of Omaha, Inc.(1) 200,000 3,850,000
- --------------------------------------------------------------------------------
Chicago Miniature Lamp, Inc.(1) 300,000 9,975,000
- --------------------------------------------------------------------------------
PRI Automation, Inc.(1) 250,000 14,625,000
- --------------------------------------------------------------------------------
U.S. Filter Corp.(1) 300,000 12,918,750
--------------
41,368,750
- --------------------------------------------------------------------------------
Transportation--0.7%
Genesee & Wyoming, Inc., Cl. A(1) 217,400 6,875,275
- --------------------------------------------------------------------------------
Swift Transportation Co., Inc.(1) 200,000 6,325,000
--------------
13,200,275
- --------------------------------------------------------------------------------
Technology--19.3%
- --------------------------------------------------------------------------------
Computer Hardware--1.1%
Auspex Systems, Inc.(1) 235,000 2,908,125
- --------------------------------------------------------------------------------
MicroTouch Systems, Inc.(1) 305,000 8,501,875
- --------------------------------------------------------------------------------
Network Appliance, Inc.(1) 137,500 7,459,375
--------------
18,869,375
- --------------------------------------------------------------------------------
Computer Software--11.9%
Aspen Technologies, Inc.(1) 396,700 13,934,088
- --------------------------------------------------------------------------------
BEA Systems, Inc.(1) 192,500 3,440,938
- --------------------------------------------------------------------------------
Cambridge Technology Partners, Inc.(1) 250,000 8,953,125
- --------------------------------------------------------------------------------
Check Point Software Technologies Ltd.(1) 100,000 3,100,000
- --------------------------------------------------------------------------------
Documentum, Inc.(1) 250,000 8,312,500
- --------------------------------------------------------------------------------
Dr. Solomon's Group plc, ADR(1) 200,000 5,075,000
- --------------------------------------------------------------------------------
Engineering Animation, Inc.(1) 127,600 4,864,750
- --------------------------------------------------------------------------------
Global DirectMail Corp.(1) 320,000 7,160,000
- --------------------------------------------------------------------------------
Harbinger Corp.(1) 179,400 6,525,675
14 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Computer Software (continued)
HBO & Co. 160,000 $ 6,040,000
- --------------------------------------------------------------------------------
Infinity Financial Technology, Inc.(1) 150,000 1,912,500
- --------------------------------------------------------------------------------
Integrated Measurement Systems, Inc.(1) 350,000 6,300,000
- --------------------------------------------------------------------------------
IONA Technologies plc, ADR(1) 300,000 4,162,500
- --------------------------------------------------------------------------------
J.D. Edwards & Co.(1) 80,000 2,680,000
- --------------------------------------------------------------------------------
JDA Software Group, Inc.(1) 300,000 10,950,000
- --------------------------------------------------------------------------------
National Instruments Corp.(1) 455,000 21,100,625
- --------------------------------------------------------------------------------
Network General Corp.(1) 325,000 6,296,875
- --------------------------------------------------------------------------------
Progress Software Corp.(1) 140,000 3,132,500
- --------------------------------------------------------------------------------
Rogue Wave Software, Inc.(1) 250,000 3,437,500
- --------------------------------------------------------------------------------
Saville Systems Ireland plc, Sponsored ADR(1) 300,000 21,075,000
- --------------------------------------------------------------------------------
Siebel Systems, Inc.(1) 150,000 6,384,375
- --------------------------------------------------------------------------------
SPSS, Inc.(1)(3) 412,500 11,807,813
- --------------------------------------------------------------------------------
Viasoft, Inc.(1) 74,000 3,663,000
- --------------------------------------------------------------------------------
Visigenic Software, Inc.(1) 379,600 2,704,650
- --------------------------------------------------------------------------------
Visio Corp.(1) 600,000 25,050,000
- --------------------------------------------------------------------------------
Zebra Technologies Corp., Cl. A(1) 250,000 8,937,500
--------------
207,000,914
- --------------------------------------------------------------------------------
Electronics--2.8%
Advanced Technology Materials, Inc.(1) 400,000 14,700,000
- --------------------------------------------------------------------------------
Lernout & Hauspie Speech Products NV(1) 107,500 4,703,125
- --------------------------------------------------------------------------------
Pittway Corp., Cl. A 300,000 19,481,250
- --------------------------------------------------------------------------------
Sawtek, Inc.(1) 200,000 9,250,000
--------------
48,134,375
- --------------------------------------------------------------------------------
Telecommunications-Technology--3.5%
Comverse Technology, Inc.(1) 400,000 21,100,000
- --------------------------------------------------------------------------------
General Cable Corp.(1) 350,000 12,425,000
- --------------------------------------------------------------------------------
ICG Communications, Inc.(1)(2) 272,500 6,342,438
- --------------------------------------------------------------------------------
Lightbridge, Inc.(1) 550,000 8,937,500
- --------------------------------------------------------------------------------
MRV Communications, Inc.(1) 65,000 2,372,500
- --------------------------------------------------------------------------------
Teledata Communications Ltd.(1) 200,000 9,025,000
--------------
60,202,438
- --------------------------------------------------------------------------------
Utilities--3.6%
- --------------------------------------------------------------------------------
Gas Utilities--0.1%
Cabot Oil & Gas Corp., Cl. A 108,400 2,499,975
- --------------------------------------------------------------------------------
Telephone Utilities--3.5%
ACC Corp.(1) 200,000 6,575,000
- --------------------------------------------------------------------------------
ICG Communications, Inc.(1) 150,000 3,675,000
</TABLE>
15 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Market Value
Shares See Note 1
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Telephone Utilities (continued)
IXC Communications, Inc.(1) 130,000 $ 4,127,500
- -------------------------------------------------------------------------------------------
LCI International, Inc.(1) 200,000 5,325,000
- -------------------------------------------------------------------------------------------
McLeodUSA, Inc., Cl. A(1) 120,000 4,732,500
- -------------------------------------------------------------------------------------------
Metrocall, Inc.(1) 400,000 2,950,000
- -------------------------------------------------------------------------------------------
NEXTLINK Communications, Inc., Cl. A(1) 150,000 3,600,000
- -------------------------------------------------------------------------------------------
Qwest Communications International, Inc.(1) 200,000 9,225,000
- -------------------------------------------------------------------------------------------
Star Telecommunications, Inc.(1) 175,000 4,025,000
- -------------------------------------------------------------------------------------------
Tel-Save Holdings, Inc.(1) 500,000 12,031,250
- -------------------------------------------------------------------------------------------
Telegroup, Inc.(1) 400,000 4,200,000
----------------
60,466,250
----------------
Total Common Stocks (Cost $962,781,544) 1,477,297,859
- -------------------------------------------------------------------------------------------
Preferred Stocks--0.9%
- -------------------------------------------------------------------------------------------
AirNet Communications Corp., Series C(1)(2) 250,000 250,000
Candescent Technologies Corp., $2.50 Cv., Series D(1)(2) 1,200,000 7,380,000
- -------------------------------------------------------------------------------------------
Candescent Technologies Corp., Series E, Preferred Stock(1)(2) 800,000 5,768,000
- -------------------------------------------------------------------------------------------
Candescent Technologies Corp., Series F, Preferred Stock(1)(2) 200,000 1,500,000
----------------
Total Preferred Stocks (Cost $10,400,000) 14,898,000
</TABLE>
<TABLE>
<CAPTION>
Units
--------
<S> <C> <C>
Rights, Warrants and Certificates--0.0%
- -----------------------------------------------------------------------------------
PerSeptive Biosystems, Inc., Cl. A Wts., Exp. 12/97 (Cost $261,332) 40,110 --
</TABLE>
<TABLE>
<CAPTION>
Face
Amount
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Convertible Corporate Bonds and Notes--0.5%
- --------------------------------------------------------------------------------------------------------
American Retirement Corp., 5.75% Cv. Sub. Debs., 10/1/02 $ 2,280,000 2,294,250
- --------------------------------------------------------------------------------------------------------
Physicians Clinical Laboratory, Inc., 7.50% Cv. Sub. Debs., 8/15/00(2)(6) 4,000,000 40,000
- --------------------------------------------------------------------------------------------------------
Sunrise Assisted Living, Inc., 5.50% Cv. Nts., 6/15/02(7) 5,059,000 6,077,124
---------------
Total Convertible Corporate Bonds and Notes (Cost $11,536,154) 8,411,374
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C> <C>
- -------------------------------------------------------------------------------
Short-Term Notes--5.7%
- --------------------------------------------------------------------------------
CIESCO, LP, 5.54%, 10/16/97(8) 50,000,000 49,885,209
- --------------------------------------------------------------------------------
General Electric Capital Corp., 5.53%, 10/6/97(8) 50,000,000 49,961,736
---------------
Total Short-Term Notes (Cost $99,846,945) 99,846,945
</TABLE>
16 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements--8.3%
==================================================================================================
Repurchase agreement with Goldman, Sachs & Co., 6.125%,
dated 9/30/97, to be repurchased at $145,024,670 on 10/1/97,
collateralized by U.S. Treasury Nts., 5.125%-9.125%, 11/15/98-
9/30/99, with a value of $148,064,127 (Cost $145,000,000) $ 145,000,000 $ 145,000,000
- -------------------------------------------------------------- ------------- --------------
Total Investments, at Value (Cost $1,229,825,975) 100.3% 1,745,454,178
- -------------------------------------------------------------- ------------- --------------
Liabilities in Excess of Other Assets (0.3) (5,715,013)
------------- --------------
Net Assets 100.0% $1,739,739,165
============= ==============
</TABLE>
1. Non-income producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 5 of
Notes to Financial Statements.
3. Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer,
and is or was an affiliate, as defined in the Investment Company Act of 1940,
at or during the period ended September 30, 1997. The aggregate fair value of
securities of affiliated companies as of September 30, 1997 amounts to
$34,962,063. Transactions during the period in which the issuer was an
affiliate are as follows:
<TABLE>
<CAPTION>
Shares Gross Gross Shares
Sept. 30, 1996 Additions Reductions Sept. 30, 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alrenco, Inc. 440,000 90,000 530,000 --
- --------------------------------------------------------------------------------------------------------
Belmont Homes, Inc. 600,000 -- 600,000 --
- --------------------------------------------------------------------------------------------------------
Dailey Petroluem Services Corp. 300,000 -- 300,000 --
- --------------------------------------------------------------------------------------------------------
Dynamex, Inc. 400,000 -- 400,000 --
- --------------------------------------------------------------------------------------------------------
EP Medsystems, Inc. 400,000 -- -- 400,000
- --------------------------------------------------------------------------------------------------------
HumaScan, Inc. 600,000 -- 15,500 584,500
- --------------------------------------------------------------------------------------------------------
Inference Corp., Cl. A 360,000 -- 360,000 --
- --------------------------------------------------------------------------------------------------------
IntelliQuest Information Group, Inc. -- 490,000 -- 490,000
- --------------------------------------------------------------------------------------------------------
Norland Medical Systems, Inc. 480,000 -- -- 480,000
- --------------------------------------------------------------------------------------------------------
Rockford Industries, Inc.(4) 350,000 150,000 399,100 100,900
- --------------------------------------------------------------------------------------------------------
SPSS, Inc.(5) 330,000 110,000 27,500 412,500
- --------------------------------------------------------------------------------------------------------
Silver Diner, Inc. 700,000 -- -- 700,000
- --------------------------------------------------------------------------------------------------------
3-D Geophysical, Inc. 380,000 -- 380,000 --
</TABLE>
4. Not an affiliate as of September 30, 1997.
5. Not an affiliate as of September 30, 1996.
6. Non-income producing--issuer is in default of interest payment.
7. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities
have been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $6,077,124 or 0.35% of the Fund's net
assets, at September 30, 1997.
8. Short-term notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase.
See accompanying Notes to Financial Statements.
17 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------
Assets
Investments, at value--see accompanying statement:
Unaffiliated companies (cost $1,197,058,620) $1,709,432,665
Affiliated companies (cost $32,767,355) 36,021,513
- -------------------------------------------------------------------- --------------
Cash 396,317
- -------------------------------------------------------------------- --------------
Receivables:
Investments sold 29,420,257
Shares of beneficial interest sold 3,303,242
Interest and dividends 174,440
- -------------------------------------------------------------------- --------------
Other 50,241
--------------
Total assets 1,778,798,675
- ----------------------------------------------------------------------------------------
Liabilities
Payables and other liabilities:
Investments purchased 34,189,978
Shares of beneficial interest redeemed 2,969,889
Distribution and service plan fees 956,393
Shareholder reports 329,983
Trustees' fees--Note 1 214,081
Transfer and shareholder servicing agent fees 103,175
Other 296,011
--------------
Total liabilities 39,059,510
- ----------------------------------------------------------------------------------------
Net Assets $1,739,739,165
- ----------------------------------------------------------------------------------------
Composition of Net Assets
Paid-in capital $1,196,345,462
- -------------------------------------------------------------------- --------------
Accumulated net investment loss (939,479)
- -------------------------------------------------------------------- --------------
Accumulated net realized gain on investment transactions 28,704,979
- -------------------------------------------------------------------- --------------
Net unrealized appreciation on investments and translation of assets
and liabilities denominated in foreign currencies 515,628,203
--------------
Net assets $1,739,739,165
==============
</TABLE>
18 Oppenheimer Discovery Fund
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$1,330,171,707 and 25,717,588 shares of beneficial interest outstanding) $51.72
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price) $54.88
- ------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $322,735,637
and 6,435,822 shares of beneficial interest outstanding) $50.15
- ------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $41,720,225
and 820,376 shares of beneficial interest outstanding) $50.86
- ------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $45,111,596 and 864,761 shares of beneficial interest outstanding) $52.17
</TABLE>
See accompanying Notes to Financial Statements.
19 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------
Investment Income
Interest $ 14,086,279
- ----------------------------------------------------------------------------------------
Dividends 665,221
------------
Total income 14,751,500
- ----------------------------------------------------------------------------------------
Expenses
Management fees--Note 4 9,305,515
- ----------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 2,724,209
Class B 2,327,943
Class C 262,815
- ----------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4:
Class A 2,712,192
Class B 562,125
Class C 58,344
Class Y 42,539
- ----------------------------------------------------------------------------------------
Shareholder reports 711,765
- ----------------------------------------------------------------------------------------
Custodian fees and expenses 82,347
- ----------------------------------------------------------------------------------------
Registration and filing fees 81,772
- ----------------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1 68,371
- ----------------------------------------------------------------------------------------
Legal and auditing fees 44,030
- ----------------------------------------------------------------------------------------
Insurance expenses 19,699
- ----------------------------------------------------------------------------------------
Other 69,446
------------
Total expenses 19,073,112
- ----------------------------------------------------------------------------------------
Net Investment Loss (4,321,612)
- ----------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments:
Unaffiliated companies 28,202,538
Affiliated companies (3,793,399)
Closing of futures contracts 11,150,835
Foreign currency transactions (742)
------------
Net realized gain 35,559,232
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 125,255,268
Translation of assets and liabilities denominated in foreign currencies (50,986)
------------
Net change 125,204,282
------------
Net realized and unrealized gain 160,763,514
- ----------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $156,441,902
============
</TABLE>
See accompanying Notes to Financial Statements.
20 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended September 30,
1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment loss $ (4,321,612) $ (4,391,298)
- ---------------------------------------------------------------------------------------------------
Net realized gain 35,559,232 92,875,503
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 125,204,282 178,297,200
-------------- --------------
Net increase in net assets resulting from operations 156,441,902 266,781,405
- ---------------------------------------------------------------------------------------------------
Dividends and Distributions to Shareholders
Distributions from net realized gain:
Class A (80,609,827) (65,845,405)
Class B (15,203,908) (7,032,331)
Class C (1,451,890) (197,246)
Class Y (2,352,509) (965,392)
- ---------------------------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial interest
transactions--Note 2:
Class A 135,425,471 196,657,756
Class B 112,330,605 96,461,672
Class C 20,931,283 15,930,604
Class Y 11,373,727 18,542,687
- ---------------------------------------------------------------------------------------------------
Net Assets
Total increase 336,884,854 520,333,750
- ---------------------------------------------------------------------------------------------------
Beginning of period 1,402,854,311 882,520,561
-------------- --------------
End of period (including accumulated net investment losses
of $939,479 and $624,556, respectively) $1,739,739,165 $1,402,854,311
============== ==============
</TABLE>
See accompanying Notes to Financial Statements.
21 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------------------------
Year Ended September 30,
1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $51.19 $43.65 $35.81 $39.90 $27.62
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.08) (.13) -- (.11) (.13)
Net realized and unrealized gain (loss) 4.12 11.26 9.46 (2.98) 12.41
------------ ------------ -------- ----------- -----------
Total income (loss) from investment
operations 4.04 11.13 9.46 (3.09) 12.28
- ----------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net
realized gain (3.51) (3.59) (1.62) (1.00) --
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $51.72 $51.19 $43.65 $35.81 $39.90
============ ============ ======== =========== ===========
- ----------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value(4) 9.16% 27.76% 28.03% (7.91)% 44.46%
- ----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $1,330,172 $1,160,087 $798,065 $613,740 $587,057
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,119,302 $ 937,563 $650,903 $588,642 $451,016
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (0.17)% (0.32)% 0.00% (0.34)% (0.54)%
Expenses 1.22% 1.22% 1.33% 1.32% 1.27%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 68.7% 79.7% 105.9% 83.3% 85.2%
Average brokerage commission rate(7) $0.0600 $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.
5. Annualized.
22 Oppenheimer Discovery Fund
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
- ---------------------------------------------------------- -------------------------------
Year Ended September 30, Year Ended September 30,
1997 1996 1995 1994(3) 1997 1996(2)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$50.10 $43.11 $35.65 $35.65 $50.73 $43.20
- ------------------------------------------------------------------------------------
(.23) (.23) (.21) .03 (.26) (.21)
3.79 10.81 9.29 (.03) 3.90 11.33
---------- ------------ ------------ ------------- ----------- -------------
3.56 10.58 9.08 -- 3.64 11.12
- ------------------------------------------------------------------------------------
(3.51) (3.59) (1.62) -- (3.51) (3.59)
- ------------------------------------------------------------------------------------
$50.15 $50.10 $43.11 $35.65 $50.86 $50.73
========== ============ ============ ============= =========== =============
- ------------------------------------------------------------------------------------
8.33% 26.77% 27.04% (1.93)% 8.39% 27.96%
$322,736 $193,637 $75,062 $26,491 $41,720 $17,512
- ------------------------------------------------------------------------------------
$233,172 $119,895 $43,301 $12,435 $26,361 $ 7,109
- ------------------------------------------------------------------------------------
(0.93)% (1.06)% (0.78)% (1.06)%(5) (0.92)% (1.00)%(5)
1.97% 1.99% 2.11% 2.36%(5) 1.94% 2.03%(5)
- ------------------------------------------------------------------------------------
68.7% 79.7% 105.9% 83.3% 68.7% 79.7%
$0.0600 $0.0577 -- -- $0.0600 $0.0577
<CAPTION>
Class Y
- ---------------------------------------------------------------------
Year Ended September 30,
1997 1996 1995 1994(1)
- ---------------------------------------------------
<S> <C> <C> <C>
$51.44 $43.74 $35.81 $34.89
- ---------------------------------------------------
.02 (.02) (.10) .11
4.22 11.31 9.65 .81
------- ------------ --------- -------------
4.24 11.29 9.55 .92
- ---------------------------------------------------
(3.51) (3.59) (1.62) --
------- ------------ --------- -------------
$52.17 $51.44 $43.74 $35.81
======= ============ ========= =============
- ---------------------------------------------------
9.50% 28.09% 28.28% 3.20%
- ---------------------------------------------------
$45,112 $31,619 $9,394 $194
- ---------------------------------------------------
$34,811 $18,563 $3,190 $39
- ---------------------------------------------------
0.15% (0.04)% 0.03% (0.13)%(5)
0.89% 0.99% 1.26% 1.41%(5)
- ---------------------------------------------------
68.7% 79.7% 105.9% 83.3%
$0.0600 $0.0577 -- --
</TABLE>
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, 1997 were $1,034,041,777 and $801,420,976,
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. Generally, non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share but higher when expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
See accompanying Notes to Financial Statements.
23 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 advisor 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 that class and exclusive
voting rights with respect to matters affecting that class. Classes A, B and C
have separate distribution and/or service plans. 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 an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is
reliable and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost
(or last determined market value) adjusted for amortization to maturity of any
premium or discount.
24 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
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, 1997, a provision of $25,631 was made for the Fund's projected
benefit obligations, and payments of $10,708 were made to retired trustees,
resulting in an accumulated liability of $211,870 at September 30, 1997.
- --------------------------------------------------------------------------------
Distributions to Shareholders. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
25 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Significant Accounting Policies (continued)
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes primarily because of the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes. The character of the
distributions made during the year from net investment income or net realized
gains may differ from its ultimate characterization for federal income tax
purposes. Also, due to timing of dividend distributions, the fiscal year in
which amounts are distributed may differ from the fiscal year in which the
income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to
shareholders to reflect the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, during the year ended September 30, 1997, amounts have been
reclassified to reflect a decrease in accumulated net investment loss of
$4,006,689, an increase in accumulated net realized gain on investments of
$2,716,676, and a decrease in paid-in capital of $6,723,365.
- --------------------------------------------------------------------------------
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.
26 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
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, 1997 Year Ended September 30, 1996(1)
----------------------------- ----------------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------
Class A:
<S> <C> <C> <C> <C>
Sold 11,525,612 $ 516,255,667 12,519,702 $ 569,002,600
Distributions reinvested 1,804,573 78,737,385 1,596,700 64,139,185
Redeemed (10,273,804) (459,567,581) (9,738,312) (436,484,029)
------------ -------------- ----------- --------------
Net increase 3,056,381 $ 135,425,471 4,378,090 $ 196,657,756
============ ============== =========== ==============
- ------------------------------------------------------------------------------------------
Class B:
Sold 4,023,759 $ 175,948,220 2,852,250 $ 129,720,421
Distributions reinvested 348,742 14,842,538 172,972 6,841,003
Redeemed (1,801,954) (78,460,153) (901,310) (40,099,752)
------------ -------------- ----------- --------------
Net increase 2,570,547 $ 112,330,605 2,123,912 $ 96,461,672
============ ============== =========== ==============
- ------------------------------------------------------------------------------------------
Class C:
Sold 1,235,025 $ 54,325,325 760,144 $ 35,068,889
Distributions reinvested 33,285 1,434,706 4,897 196,204
Redeemed (793,137) (34,828,748) (419,838) (19,334,489)
------------ -------------- ----------- --------------
Net increase 475,173 $ 20,931,283 345,203 $ 15,930,604
============ ============== =========== ==============
- ------------------------------------------------------------------------------------------
Class Y:
Sold 646,438 $ 29,225,305 535,075 $ 24,859,892
Distributions reinvested 53,588 2,352,509 23,960 965,392
Redeemed (449,978) (20,204,087) (159,096) (7,282,597)
------------ -------------- ----------- --------------
Net increase 250,048 $ 11,373,727 399,939 $ 18,542,687
============ ============== =========== ==============
</TABLE>
1. For the year ended September 30, 1996 for Class A, Class B and Class Y
shares, and 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, 1997, net unrealized appreciation on investments of
$515,628,203 was composed of gross appreciation of $544,505,392, and gross
depreciation of $28,877,189.
27 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 $700 million, and 0.58% of average annual net assets in excess of $1.5
billion.
For the year ended September 30, 1997, commissions (sales charges
paid by investors) on sales of Class A shares totaled $4,882,365, of which
$1,597,976 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 $4,609,293 and $221,073,
respectively, of which $518,408 and $7,469, respectively, were paid to an
affiliated broker/dealer. During the year ended September 30, 1997, OFDI
received contingent deferred sales charges of $488,384 and $18,559,
respectively, 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 shareholder 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 their
customers' accounts that hold Class A shares. During the year ended September
30, 1997, OFDI paid $212,124 to an affiliated broker/dealer as reimbursement
for Class A personal service and maintenance expenses.
28 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
The Fund has adopted a 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. During the year ended September 30, 1997, OFDI paid $26,037 to an
affiliated broker/dealer as reimbursement for Class B personal service and
maintenance expenses and retained $2,023,085 as reimbursement for Class B sales
commissions and service fee advances, as well as financing costs. 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 distributing shares before
the Plan was terminated. As of September 30, 1997, OFDI had incurred
unreimbursed expenses of $7,906,753 for Class B.
The Fund has adopted a 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. During the year ended September 30, 1997, OFDI
retained $195,923 as compensation for Class C sales commissions and service fee
advances, as well as financing costs. 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. As of September 30, 1997, OFDI had incurred unreimbursed
expenses of $369,234 for Class C.
29 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. Illiquid and Restricted Securities
At September 30, 1997, 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, 1997 was
$22,693,563, which represents 1.30% of the Fund's net assets, of which
$15,273,563 is considered restricted. Information concerning restricted
securities is as follows:
<TABLE>
<CAPTION>
Valuation
Cost Per Unit as of
Security Acquisition Date Per Unit September 30, 1997
- ------------------------------- ------------------ ------------ -------------------
<S> <C> <C> <C>
AirNet Communications Corp.,
Series C, Preferred Stock 7/6/95 $ 6.00 $ 1.00
Candescent Technologies Corp.,
Series E, Preferred Stock 4/24/96 5.50 7.21
Candescent Technologies Corp.,
Series F, Preferred Stock 6/11/97 7.50 7.50
ICG Communications, Inc. 6/9/93-5/10/95 5.50-13.89 23.28
Silver Diner, Inc. 7/10/96 5.50 2.02
</TABLE>
- --------------------------------------------------------------------------------
6. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other OppenheimerFunds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended
September 30, 1997.
30 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, 1997, 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, 1997, 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, 1997, 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, 1997
31 Oppenheimer Discovery Fund
<PAGE>
- --------------------------------------------------------------------------------
Federal Income Tax Information (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 1998, shareholders will receive information regarding all dividends
and distributions paid to them by the Fund during calendar year 1997.
Regulations of the U.S. Treasury Department require the Fund to report this
information to the Internal Revenue Service.
Distributions of $3.5075 per share were paid to Class A, Class B,
Class C and Class Y shareholders on December 16, 1996, all of which was
designated as a "capital gain distribution" for federal income tax purposes.
Whether received in stock or in cash, the capital gain distribution should be
treated by shareholders as a gain from the sale of capital assets held for more
than one year (long-term capital gains).
None of the dividends paid by the Fund during the fiscal year ended
September 30, 1997 are eligible for the corporate dividend-received deduction.
The foregoing information is presented to assist shareholders in
reporting distributions received from the Fund to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
32 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
Pauline Trigere, Trustee
Clayton K. Yeutter, Trustee
Alan Gilston, Vice President
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 Advisor 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.
33 Oppenheimer Discovery Fund
<PAGE>
OppenheimerFunds Family
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------
Real Asset Funds
- -----------------------------------------------------------------------------------------
Real Asset Fund Gold & Special Minerals Fund
- -----------------------------------------------------------------------------------------
Stock Funds
- -----------------------------------------------------------------------------------------
Developing Markets Fund Quest Small Cap Value Fund Global Fund
Enterprise Fund Capital Appreciation Fund1 Quest Global Value Fund
International Growth Fund Quest Capital Value Fund Disciplined Value Fund
Discovery Fund Growth Fund Quest Value Fund
- -----------------------------------------------------------------------------------------
Stock & Bond Funds
- -----------------------------------------------------------------------------------------
Main Street Income & Quest Growth & Income Disciplined Allocation Fund
Growth Fund Value Fund Multiple Strategies Fund2
Quest Opportunity Value Fund Global Growth & Income Fund Bond Fund for Growth
Total Return Fund Equity Income Fund
- -----------------------------------------------------------------------------------------
Bond Funds
- -----------------------------------------------------------------------------------------
International Bond Fund Champion Income Fund U.S. Government Trust
High Yield Fund Strategic Income Fund Limited-Term Government Fund
Bond Fund
- -----------------------------------------------------------------------------------------
Municipal Funds
- -----------------------------------------------------------------------------------------
California Municipal Fund(3) Pennsylvania Municipal Fund(3) Rochester Division:
Florida Municipal Fund(3) Municipal Bond Fund Rochester Fund Municipals
New Jersey Municipal Fund(3) Insured Municipal Fund Limited Term New York
New York Municipal Fund(3) Intermediate Municipal Fund Municipal Fund
- -----------------------------------------------------------------------------------------
Money Market Funds(4)
- -----------------------------------------------------------------------------------------
Money Market Fund Cash Reserves
- -----------------------------------------------------------------------------------------
LifeSpan
- -----------------------------------------------------------------------------------------
Growth Fund Balanced Fund Income Fund
</TABLE>
1. On 12/18/96, the Fund's name was changed from "Target Fund."
2. On 3/16/97, the Fund's name was changed from "Asset Allocation Fund."
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 1997 OppenheimerFunds, Inc. All rights reserved.
34 Oppenheimer Discovery Fund
<PAGE>
<PAGE>
Internet
24-hr access to account
information
- ------------------------
www.oppenheimerfunds.com
- ------------------------
General Information
Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
- ------------------------
1-800-525-7048
- ------------------------
Account Transactions
Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
- ------------------------
1-800-852-8457
- ------------------------
PhoneLink
24-hr automated information
and automated transactions
- ------------------------
1-800-533-3310
- ------------------------
Telecommunication Device
for the Deaf (TDD)
Mon-Fri 8:30am-2pm 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
- ------------------------
RA0500.001.0997 November 28, 1997
Information and services
- --------------------------------------------------------------------------------
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 OppenheimerFunds accounts and your bank
checking or savings account, you can use the Telephone Transactions number to
make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
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, or visit us at our website at
www.oppenheimerfunds.com--we're here to help.
[Oppenheimerfunds logo]
