<PAGE> 1
ANNUAL REPORT SEPTEMBER 30, 1999
OPPENHEIMER
DISCOVERY FUND
[PHOTO]
[OPPENHEIMERFUNDS LOGO]
THE RIGHT WAY TO INVEST
<PAGE> 2
REPORT HIGHLIGHTS
CONTENTS
1 President's Letter
3 An Interview with Your Fund's Manager
7 Fund Performance
12 FINANCIAL STATEMENTS
36 INDEPENDENT AUDITORS' REPORT
37 Federal Income Tax Information
38 Officers and Trustees
39 OppenheimerFunds Family
TECHNOLOGY, THE FUND'S LARGEST INVESTMENT SECTOR, PERFORMED RELATIVELY WELL,
while healthcare declined over concerns regarding possible Medicare reform.
IN AUGUST 1999, WE REFOCUSED THE FUND TO EMPHASIZE COMPANIES GROWING FASTER THAN
EXPECTATIONS in dynamically expanding sectors, such as energy and semi-conductor
equipment companies.
UNDER THE GUIDANCE OF THE FUND'S NEW PORTFOLIO MANAGER, we reduced our total
number of holdings in order to increase the research intensity we are able to
bring to each company.
AVERAGE ANNUAL
TOTAL RETURNS
For the 1-Year Period
Ended 9/30/99*
CLASS A
Without With
Sales Chg. Sales Chg.
11.59% 5.17%
CLASS B
Without With
Sales Chg. Sales Chg.
10.73% 5.73%
CLASS C
Without With
Sales Chg. Sales Chg.
10.73% 9.73%
CLASS Y
Without With
Sales Chg. Sales Chg.
11.82% 11.82%
Not FDIC Insured. No Bank Guarantee. May Lose Value.
* See page 10 for further details
<PAGE> 3
PRESIDENT'S LETTER
[PHOTO]
Bridget A. Macaskill
President
Oppenheimer Discovery Fund
DEAR SHAREHOLDER,
In many ways, the 1999 investment environment has, so far, unfolded as many
expected it would, producing both attractive opportunities and formidable
challenges for investors.
On the economic front, early worries about the effects of global weakness
in the wake of last year's credit and currency crises have abated. Instead, as
many economies around the world begin to strengthen, concerns now center around
whether the U.S. economy may be growing too quickly. Throughout the year,
consumers in the United States have continued to spend and borrow heavily, more
than offsetting any temporary slowdown in the industrial and export sectors.
The economy's strength has not gone unnoticed by the nation's monetary
policymakers. In an effort to ward off emerging inflationary pressures, the
Federal Reserve Board increased short-term interest rates this past summer.
Market reaction to robust economic growth has been mixed. The U.S. bond
market has generally declined, as fixed income investors became increasingly
concerned about the effects of rising interest rates.
In the stock market, the performance of large-capitalization growth stocks,
which has driven the market's advance over the past few years, has begun to
moderate, and many previously out-of-favor value-oriented, mid-cap and small-cap
stocks have rallied. At the same time, a healthy percentage of actively managed,
diversified portfolios have once again begun to outperform unmanaged stock
indices such as Standard & Poor's 500.
At OppenheimerFunds, we applaud the Fed's pre-emptive strike against
inflation. In our view, history has repeatedly demonstrated that most financial
assets do best in a low-inflation environment. What's more, we believe that the
move to higher interest rates should be temporary.
1 OPPENHEIMER DISCOVERY FUND
<PAGE> 4
PRESIDENT'S LETTER
One recent development is quite troublesome to us, however: the
increasing popularity of "day trading" among individuals seeking to make
fast money in a volatile stock market. In our opinion, day trading is not
investing, it is gambling. Experience proves that without extensive
research and analysis, attempting to time short-term price swings is a
fool's errand. Instead, we continue to encourage investors to maintain a
long-term perspective that is measured in years, not days.
Finally, while we remain alert to the potential impact of the Y2K issue, we
are encouraged by the progress made in addressing the matter. At
OppenheimerFunds, our shareholder accounting systems are already Y2K compliant,
and we have successfully participated in all required industrywide tests. We
intend to continue retesting our systems in order to help further protect
against any potential problems. After all, whether in our computer accounting
systems or the financial markets, managing risk is an important part of what
makes OppenheimerFunds The Right Way to Invest.
Sincerely,
/s/ Bridget A. Macaskill
Bridget A. Macaskill
October 21, 1999
2 OPPENHEIMER DISCOVERY FUND
<PAGE> 5
AN INTERVIEW WITH YOUR FUNDS MANAGER
Q. HOW DID THE FUND PERFORM DURING THE ONE-YEAR PERIOD THAT ENDED SEPTEMBER 30,
1999?
A. The past twelve months were a volatile and challenging period for small
company stocks, and the performance of Oppenheimer Discovery Fund suffered in
that environment. Nevertheless, the Fund succeeded in ending the period with
modest gains.
[PHOTO]
Portfolio Management
Team (l to r)
Jay Tracey
Jayne Stevlingson
(Portfolio Manager)
WHAT MADE THIS SUCH A DIFFICULT ENVIRONMENT FOR THE FUND?
Throughout the period, small-cap stocks rode a rollercoaster of gains and
declines related to global economic events as well as developments within
particular industries. At the beginning of October 1998, economic difficulties
in several emerging markets fueled concerns about the ability of U.S. companies
to sustain earnings growth. Stocks of smaller companies were hit especially hard
as investors turned to the perceived safety of well-known, blue-chip corporate
names with a history of earnings predictability.
By the end of late 1998, with the U.S. economy demonstrating continued
strength and emerging markets showing signs of stability, equities began to
recover lost ground. Most small company stocks outperformed large company stocks
during the last two months of the year. However, in mid-January, economic
difficulties in Brazil renewed concerns about the potential for a global
slowdown. As a result, small-cap stocks once again suffered. In our opinion,
many businesses were punished without regard to the quality of a company's
earnings or the health of its underlying business.
3 OPPENHEIMER DISCOVERY FUND
<PAGE> 6
AN INTERVIEW WITH YOUR FUNDS MANAGER
"TRENDS SUCH AS THE GROWTH OF THE INTERNET ARE CREATING VAST NEW OPPORTUNITIES
FOR SMALL COMPANIES TO GROW RAPIDLY INTO LARGE ONES."
As the situation in Brazil stabilized, small-cap stocks again recovered. During
the second quarter of 1999, the Russell 2000 Index posted strong gains. However,
the Index's strength was based on the outstanding performance primarily of
cyclical sectors such as transportation, capital goods and energy. Because the
Fund seeks companies in growth sectors, its exposure in these areas was modest.
At the same time, the Fund had relatively larger exposure to health-care
services stocks, many of which declined sharply during 1999 in response to
concerns about the impact of Medicare reform on company revenues.
Finally, over the latter half of the period, relative small-cap stock
performance was soft because earnings growth rates and momentum for small
companies generally failed to keep pace with large companies.
GIVEN SUCH CHALLENGING CONDITIONS, HOW DID THE FUND PRODUCE ITS GAINS?
Our positive performance was largely attributable to our exposure to technology,
the Fund's largest investment sector. We held substantial positions in the
stocks of companies, such as Harmonic, Inc., and Network Appliance, Inc., that
are providing bandwidth solutions to facilitate the growth of the Internet. In
another area of technology, the Fund achieved gains from investments in
companies, such as Veritas Software Corp. and Legato Systems, Inc., that are
providing innovative software solutions to meet the expanding data storage needs
of large corporations.
4 OPPENHEIMER DISCOVERY FUND
<PAGE> 7
AVERAGE ANNUAL
TOTAL RETURNS
For the Periods Ended 9/30/99(1)
Class A
1-Year 5-Year 10-Year
5.17% 8.27% 10.30%
Class B
Since
1-Year 5-Year Inception
5.73% 8.43% 7.78%
Class C
Since
1-Year 5-Year Inception
9.73% N/A 4.84%
Class Y
Since
1-Year 5-Year Inception
11.82% 9.86% 9.87%
Performance benefited additionally from our investments in several media and
communications companies that are preeminent within their markets. These
companies include Cinar Films, Inc., a leading producer of non-violent
children's television programming, and Hispanic Broadcasting Corp., the largest
group of Spanish language radio broadcasting stations in the United States. We
also scored some individual success among sectors that performed poorly overall.
For example, despite the generally negative impact of healthcare stocks on the
Fund's portfolio, our investment in one healthcare products company, MedImmune,
Inc., rose sharply in value.
WHAT STEPS HAVE YOU TAKEN TO FURTHER IMPROVE PERFORMANCE?
In August 1999, we began to refocus the Fund for stronger growth. Under the
leadership of a new portfolio manager, we began to place greater emphasis on
sectors that were showing dynamic gains, such as telecommunications, technology
and medical technology, where results were above expectations.
At the same time, we reduced our total number of holdings in order to
increase the research intensity we are able to bring to each company in which
the Fund invests. We sold underperforming stocks in the portfolio, and
significantly increased our exposure to stocks of fast-growing companies in more
dynamic sectors, such as telecommunication equipment. For example, we increased
our exposure to semiconductor equipment companies, many of which are
experiencing rapidly rising revenues and order backlogs.
1. See page 10 for further details.
5 OPPENHEIMER DISCOVERY FUND
<PAGE> 8
<TABLE>
<CAPTION>
SECTOR ALLOCATION(2)
<S> <C>
Technology 41.0%
Capital Goods 12.8
Consumer Staples 12.7
Healthcare 9.6
Communication Services 7.1
Energy 6.3
Consumer Cyclicals 5.9
Financial 1.8
Basic Materials 1.4
Transportation 0.8
Utilities 0.6
</TABLE>
WHAT IS YOUR OUTLOOK FOR THE SMALL-CAP MARKET OVER THE COMING MONTHS?
The world today is changing more quickly than ever before. Trends such as the
growth of the Internet are creating vast new opportunities for small companies
to grow rapidly into large ones. While there is no way to predict when--or even
if--small caps will begin to outperform large caps for a sustained period of
time, we believe compelling opportunities are available in well-managed,
fast-growing small companies. That's why we remain dedicated to our strategy of
disciplined small company investing, and why we believe Oppenheimer Discovery
Fund remains part of The Right Way to Invest.
<TABLE>
<CAPTION>
TOP 10 STOCK HOLDINGS(3)
<S> <C>
Harmonic, Inc. 3.4%
Cinar Films, Inc., Cl. B 2.3
ATMI, Inc. 1.6
Network Appliance, Inc. 1.4
E-Tek Dynamics, Inc. 1.2
Credence Systems Corp. 1.1
Hispanic Broadcasting Corp. 1.1
Inktomi Corp.. 1.1
Vishay Intertechnology, Inc. 1.0
ChoicePoint, Inc. 1.0
</TABLE>
2. Portfolio is subject to change. Percentages are as of September 30,
1999, and are based on total market value of common stocks.
3. Portfolio is subject to change. Percentages are as of September 30,
1999, and are based on total market value of investments
6 OPPENHEIMER DISCOVERY FUND
<PAGE> 9
FUND PERFORMANCE
HOW HAS THE FUND PERFORMED? Below is a discussion, by the Manager, of the Fund's
performance during its fiscal year ended September 30, 1999, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index and a sector index.
MANAGEMENT'S DISCUSSION OF PERFORMANCE. The fiscal year that ended September 30,
1999, opened with sharp market declines, particularly among small company
stocks, driven by fears of global recession. Although small-cap stocks recovered
in late 1998, they declined again in early 1999 in a resurgence of recession
fears. The subsequent recovery during the second quarter of 1999 proved
strongest among the transportation, technology, capital goods, energy and
communication services sectors. While the Fund's substantial exposure to
technology stocks boosted returns, our relatively light exposure to other strong
sectors hurt performance. The Fund also suffered due to its relatively large
holdings of healthcare company stocks, many of which fell sharply in response to
the potential for Medicare reform. During the final two months of the period,
the Fund's investment approach was refocused under the guidance of a new
portfolio manager. The new portfolio manager emphasized faster-than-expected
earnings growth in rapidly growing sectors such as energy and technology. At the
same time, total holdings decreased to focus more closely on a smaller group of
companies. The Fund's portfolio holdings, allocations and strategies are subject
to change.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in Class A, Class B, Class C
and Class Y shares of the Fund held until September 30, 1999. In the case of
Class A shares, performance is measured for a 10-year period. In the case of
Class B shares, performance is measured from the inception of the class on April
4, 1994. In the case of Class C shares, performance is measured from the
inception of the class on October 2, 1995. In the case of Class Y shares,
performance is measured from the inception of the class on June 1, 1994. The
Fund's performance reflects the deduction of the maximum initial sales charge on
Class A shares, the applicable contingent deferred sales charge on Class B and
Class C shares, and reinvestments of all dividends and capital gains
distributions.
The Fund's performance is compared to the performance of the Standard &
Poor's (S&P) 500 Index and the Russell 2000 Index. The S&P 500 Index is a
broad-based index of equity securities widely regarded as a general measure of
the performance of the U.S. equity securities market. The Russell 2000 Index is
a capitalization-weighted index of 2,000 U.S. issuers whose common stocks are
traded on the New York and American Stock Exchanges and NASDAQ, and is widely
recognized as a measure of the performance of "mid-capitalization" stocks.
Index performance reflects the reinvestment of dividends but does not
consider the effect of capital gains or transaction costs, and none of the data
in the graphs that follow shows the effect of taxes. The Fund's performance
reflects the effects of Fund business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's performance, it
must be noted that the Fund's investments are not limited to the securities in
the indices shown.
7 OPPENHEIMER DISCOVERY FUND
<PAGE> 10
FUND PERFORMANCE
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Discovery Fund (Class A),
S&P 500 Index and Russell 2000 Index
<TABLE>
<CAPTION>
Oppenheimer Discovery
Fund Class A S&P 500 Index Russell 2000 Index
<S> <C> <C> <C>
09/30/89 9425 10000 10000
09/30/90 7508 9077 7287
09/30/91 11403 11899 10574
09/30/92 12689 13212 11518
09/30/93 18331 14927 15341
09/30/94 16882 15477 15742
09/30/95 21613 20073 19426
09/30/96 27612 24146 21978
09/30/97 30140 33903 29272
09/30/98 23877 36979 23705
09/30/99 26643 48580 28226
</TABLE>
Average Annual Total Return of Class A Shares of the Fund at 9/30/99(1)
1-Year 5.17% 5-Year 8.27% 10-Year 10.30%
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Discovery Fund (Class B),
S&P 500 Index and Russell 2000 Index
<TABLE>
<CAPTION>
Oppenheimer Discovery
Fund Class B S&P 500 Index Russell 2000 Index
<S> <C> <C> <C>
04/04/94 10000 10000 10000
09/30/94 10000 10531 10276
09/30/95 12705 13658 12681
09/30/96 16105 16429 14347
09/30/97 17447 23069 19108
09/30/98 13719 25161 15474
09/30/99 15090 33055 18425
</TABLE>
Average Annual Total Return of Class B Shares of the Fund at 9/30/99(1)
1-Year 5.73% 5-Year 8.43% Life 7.78%
The performance information for both indices in the graphs begins on 9/30/89 for
Class A, 3/31/94 for Class B, 9/29/95 for Class C and 5/31/94 for Class Y.
8 OPPENHEIMER DISCOVERY FUND
<PAGE> 11
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Discovery Fund (Class C),
S&P 500 Index and Russell 2000 Index
<TABLE>
<CAPTION>
Oppenheimer Discovery
Fund Class C S&P 500 Index Russell 2000 Index
<S> <C> <C> <C>
10/02/95 10000 10000 10000
09/30/96 12796 12029 11313
09/30/97 13869 16890 15068
09/30/98 10908 18422 12203
09/30/99 12078 24202 14530
</TABLE>
Average Annual Total Return of Class C Shares of the Fund at 9/30/99(1)
1-Year 9.73% Life 4.84%
CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Discovery Fund (Class Y),
S&P 500 Index and Russell 2000 Index
<TABLE>
<CAPTION>
Oppenheimer Discovery
Fund Class Y S&P 500 Index Russell 2000 Index
<S> <C> <C> <C>
06/01/94 10000 10000 10000
09/30/94 10320 10231 10332
06/30/95 13238 13269 12749
06/30/96 16956 15961 14424
06/30/97 18568 22412 19211
06/30/98 14768 24445 15558
06/30/99 16512 32114 18524
</TABLE>
Average Annual Total Return of Class Y Shares of the Fund at 9/30/99(1)
1-Year 11.82% 5-Year 9.86% Life 9.87%
1. See page 10 for further details.
Past performance is not predictive of future performance. Graphs are not
drawn to the same scale.
9 OPPENHEIMER DISCOVERY FUND
<PAGE> 12
NOTES
IN REVIEWING PERFORMANCE AND RANKINGS, PLEASE REMEMBER THAT PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. BECAUSE OF ONGOING
MARKET VOLATILITY, THE FUND'S PERFORMANCE MAY BE SUBJECT TO SUBSTANTIAL
SHORT-TERM CHANGES. FOR UPDATES ON THE FUND'S PERFORMANCE, PLEASE CONTACT YOUR
FINANCIAL ADVISOR, CALL US AT 1.800.525.7048 OR VISIT OUR WEBSITE,
WWW.OPPENHEIMERFUNDS.COM.
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown.
CLASS A. The inception date of the Fund was 9/11/86. Class A returns include the
current maximum initial sales charge of 5.75%. The Fund's maximum sales charge
for Class A shares was lower prior to 4/4/91, so actual performance may have
been higher.
CLASS B shares of the Fund were first publicly offered on 4/4/94. Class B
returns include the applicable contingent deferred sales charge of 5% (1-year)
and 1% (since inception). The ending account value shown in the graph is net of
the applicable 1% contingent deferred sales charge. Class B shares are subject
to an annual 0.75% asset-based sales charge.
CLASS C shares of the Fund were first publicly offered on 10/2/95. Class C
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class C shares are subject to an annual 0.75% asset-based sales charge.
CLASS Y shares of the Fund were first publicly offered on 6/1/94. Class Y shares
are offered only to certain institutional investors under special agreement with
the Distributor.
An explanation of the different performance calculations is in the Fund's
prospectus
10 OPPENHEIMER DISCOVERY FUND
<PAGE> 13
FINANCIALS
11 OPPENHEIMER DISCOVERY FUND
<PAGE> 14
STATEMENT OF INVESTMENTS SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
=============================================================================
<S> <C> <C>
COMMON STOCKS--73.6%
- -----------------------------------------------------------------------------
BASIC MATERIALS--1.1%
- -----------------------------------------------------------------------------
CHEMICALS--0.4%
AMCOL International Corp. 260,000 $ 3,835,000
- -----------------------------------------------------------------------------
METALS--0.7%
IMCO Recycling, Inc. 266,500 3,997,500
- -----------------------------------------------------------------------------
Shaw Group, Inc. (The)(1) 135,000 3,029,062
-------------
7,026,562
- -----------------------------------------------------------------------------
CAPITAL GOODS--9.4%
- -----------------------------------------------------------------------------
AEROSPACE/DEFENSE--0.0%
Howmet International, Inc.(1) 35,300 494,200
- -----------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--2.3%
E-Tek Dynamics, Inc.(1) 231,700 12,569,725
- -----------------------------------------------------------------------------
Vishay Intertechnology, Inc.(1) 460,000 10,925,000
-------------
23,494,725
- -----------------------------------------------------------------------------
INDUSTRIAL SERVICES--5.1%
Asyst Technologies, Inc.(1) 100,000 3,300,000
- -----------------------------------------------------------------------------
ChoicePoint, Inc.(1) 161,600 10,887,800
- -----------------------------------------------------------------------------
Cuno, Inc.(1) 100,000 1,987,500
- -----------------------------------------------------------------------------
Cyberonics, Inc.(1) 135,000 2,413,125
- -----------------------------------------------------------------------------
Eagle USA Airfreight, Inc.(1) 183,000 5,478,562
- -----------------------------------------------------------------------------
Forrester Research, Inc.(1) 20,000 780,000
- -----------------------------------------------------------------------------
Granite Construction, Inc. 195,500 5,095,219
- -----------------------------------------------------------------------------
Hussmann International, Inc. 200,000 3,400,000
- -----------------------------------------------------------------------------
Maximus, Inc.(1) 200,000 5,987,500
- -----------------------------------------------------------------------------
Navigant Consulting, Inc.(1) 100,000 4,637,500
- -----------------------------------------------------------------------------
Patterson Dental Co.(1) 65,600 3,251,300
- -----------------------------------------------------------------------------
Tetra Tech, Inc.(1) 225,000 3,754,687
- -----------------------------------------------------------------------------
West TeleServices Corp.(1) 217,800 2,259,675
-------------
53,232,868
- -----------------------------------------------------------------------------
MANUFACTURING--2.0%
Advanced Energy Industries, Inc.(1) 100,000 3,087,500
- -----------------------------------------------------------------------------
Applied Power, Inc., Cl. A 210,000 6,378,750
- -----------------------------------------------------------------------------
Optical Coating Laboratory, Inc. 72,100 6,637,706
- -----------------------------------------------------------------------------
USFreightways Corp. 103,000 4,879,625
-------------
20,983,581
</TABLE>
12 OPPENHEIMER DISCOVERY FUND
<PAGE> 15
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
=============================================================================
<S> <C> <C>
COMMUNICATION SERVICES--5.2%
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS: LONG DISTANCE--3.3%
Advanced Fibre Communications, Inc.(1) 100,000 $ 2,225,000
- -----------------------------------------------------------------------------
Aspect Telecommunications Corp.(1) 175,000 2,969,531
- -----------------------------------------------------------------------------
Convergent Communications, Inc.(1) 116,700 1,210,762
- -----------------------------------------------------------------------------
Exodus Communications, Inc.(1) 35,000 2,522,187
- -----------------------------------------------------------------------------
General Cable Corp. 5,100 61,200
- -----------------------------------------------------------------------------
Gilat Satellite Networks Ltd.(1) 70,000 3,753,750
- -----------------------------------------------------------------------------
Inter-Tel, Inc. 250,000 4,437,500
- -----------------------------------------------------------------------------
Intermedia Communications, Inc.(1) 180,000 3,915,000
- -----------------------------------------------------------------------------
Powertel, Inc.(1) 105,000 5,781,562
- -----------------------------------------------------------------------------
WinStar Communications, Inc.(1) 200,000 7,812,500
-------------
34,688,992
- -----------------------------------------------------------------------------
TELEPHONE UTILITIES--0.2%
Primus Telecommunications Group, Inc.(1) 120,000 2,520,000
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS: WIRELESS--1.7%
AirGate PCS, Inc.(1) 40,200 999,975
- -----------------------------------------------------------------------------
LodgeNet Entertainment Corp.(1) 400,000 5,200,000
- -----------------------------------------------------------------------------
Pinnacle Holdings, Inc.(1) 73,000 1,907,125
- -----------------------------------------------------------------------------
Price Communications Corp.(1) 125,000 3,132,812
- -----------------------------------------------------------------------------
Proxim, Inc.(1) 135,000 6,210,000
-------------
17,449,912
- -----------------------------------------------------------------------------
CONSUMER CYCLICALS--4.3%
- -----------------------------------------------------------------------------
AUTOS & HOUSING--0.1%
Insituform Technologies, Inc., Cl. A(1) 60,000 1,500,000
- -----------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--1.8%
Anchor Gaming(1) 31,500 1,874,250
- -----------------------------------------------------------------------------
Bally Total Fitness Holding Corp.(1) 300,300 9,177,919
- -----------------------------------------------------------------------------
Cheap Tickets, Inc.(1) 120,000 3,885,000
- -----------------------------------------------------------------------------
Midway Games, Inc.(1) 250,000 3,937,500
-------------
18,874,669
- -----------------------------------------------------------------------------
RETAIL: SPECIALTY--1.8%
Ann Taylor Stores Corp.(1) 67,000 2,738,625
- -----------------------------------------------------------------------------
Cost Plus, Inc.(1) 100,000 4,850,000
- -----------------------------------------------------------------------------
Linens 'N Things, Inc.(1) 265,000 8,943,750
- -----------------------------------------------------------------------------
Williams-Sonoma, Inc.(1) 40,000 1,942,500
-------------
18,474,875
</TABLE>
13 OPPENHEIMER DISCOVERY FUND
<PAGE> 16
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
=============================================================================
<S> <C> <C>
TEXTILE/APPAREL & HOME FURNISHINGS--0.6%
Kenneth Cole Productions, Inc., Cl. A(1) 34,200 $ 1,278,225
- -----------------------------------------------------------------------------
Too, Inc.(1) 300,000 5,381,250
-------------
6,659,475
- -----------------------------------------------------------------------------
CONSUMER STAPLES--9.4%
- -----------------------------------------------------------------------------
BROADCASTING--3.5%
Acme Communications, Inc.(1) 24,900 771,900
- -----------------------------------------------------------------------------
Cumulus Media, Inc., Cl. A(1) 88,000 2,876,500
- -----------------------------------------------------------------------------
Emmis Communications Corp., Cl. A(1) 160,000 10,570,000
- -----------------------------------------------------------------------------
Entercom Communications Corp.(1) 200,000 7,200,000
- -----------------------------------------------------------------------------
Hispanic Broadcasting Corp.(1) 150,000 11,418,750
- -----------------------------------------------------------------------------
Pegasus Communications Corp.(1) 65,000 2,933,125
- -----------------------------------------------------------------------------
TiVo, Inc.(1) 18,100 541,869
-------------
36,312,144
- -----------------------------------------------------------------------------
ENTERTAINMENT--4.1%
CEC Entertainment, Inc.(1) 166,200 5,962,425
- -----------------------------------------------------------------------------
Cinar Films, Inc., Cl. B(1) 800,000 24,200,000
- -----------------------------------------------------------------------------
Getty Images, Inc.(1) 275,000 6,634,375
- -----------------------------------------------------------------------------
Metromedia International Group, Inc.(1) 196,900 812,212
- -----------------------------------------------------------------------------
MP3.com, Inc.(1) 125,900 4,729,119
-------------
42,338,131
- -----------------------------------------------------------------------------
FOOD--1.8%
Celestial Seasonings, Inc.(1) 180,000 3,465,000
- -----------------------------------------------------------------------------
Del Monte Foods Co.(1) 500,000 7,062,500
- -----------------------------------------------------------------------------
Hain Food Group, Inc. (The)(1) 100,000 2,475,000
- -----------------------------------------------------------------------------
Wild Oats Markets, Inc.(1) 80,000 3,160,000
- -----------------------------------------------------------------------------
Worthington Foods, Inc. 165,000 2,371,875
-------------
18,534,375
- -----------------------------------------------------------------------------
ENERGY--4.6%
- -----------------------------------------------------------------------------
ENERGY SERVICES--2.6%
Cabot Oil & Gas Corp., Cl. A 260,000 4,485,000
- -----------------------------------------------------------------------------
Core Laboratories NV(1) 200,000 3,762,500
- -----------------------------------------------------------------------------
Dril-Quip, Inc.(1) 145,000 3,706,562
- -----------------------------------------------------------------------------
Nabors Industries, Inc.(1) 160,000 4,000,000
- -----------------------------------------------------------------------------
Stolt Comex Seaway SA(1) 426,200 4,821,387
- -----------------------------------------------------------------------------
Stolt Comex Seaway SA, ADR(1) 328,100 3,568,087
- -----------------------------------------------------------------------------
Veritas DGC, Inc.(1) 145,000 2,791,250
-------------
27,134,786
</TABLE>
14 OPPENHEIMER DISCOVERY FUND
<PAGE> 17
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
=============================================================================
<S> <C> <C>
OIL: DOMESTIC--1.3%
Devon Energy Corp. 195,800 $ 8,113,463
- -----------------------------------------------------------------------------
Frontier Oil Corp.(1) 450,000 3,065,625
- -----------------------------------------------------------------------------
Santa Fe Snyder Corp.(1) 291,000 2,619,000
-------------
13,798,088
- -----------------------------------------------------------------------------
OIL: INTERNATIONAL--0.7%
Berkley Petroleum Corp.(1) 54,200 542,184
- -----------------------------------------------------------------------------
Rio Alto Exploration Ltd.(1) 175,000 2,494,896
- -----------------------------------------------------------------------------
Talisman Energy, Inc.(1) 135,000 4,019,224
-------------
7,056,304
- -----------------------------------------------------------------------------
FINANCIAL--1.3%
- -----------------------------------------------------------------------------
BANKS--0.6%
Investors Financial Services Corp. 175,000 6,015,625
- -----------------------------------------------------------------------------
INSURANCE--0.7%
Annuity & Life RE Holdings Ltd. 300,000 7,462,500
- -----------------------------------------------------------------------------
HEALTHCARE--7.1%
- -----------------------------------------------------------------------------
HEALTHCARE/DRUGS--3.6%
Alpharma, Inc., Class A 110,000 3,884,375
- -----------------------------------------------------------------------------
Celgene Corp.(1) 100,000 2,706,250
- -----------------------------------------------------------------------------
Cell Genesys, Inc.(1) 250,000 1,968,750
- -----------------------------------------------------------------------------
CuraGen Corp.(1) 72,500 960,625
- -----------------------------------------------------------------------------
Enzon, Inc.(1) 109,100 3,327,550
- -----------------------------------------------------------------------------
King Pharmaceuticals, Inc.(1) 55,000 1,925,000
- -----------------------------------------------------------------------------
Lynx Therapeutics, Inc.(1) 23,600 265,500
- -----------------------------------------------------------------------------
MedImmune, Inc.(1) 105,000 10,463,906
- -----------------------------------------------------------------------------
Mentor Corp. 90,000 2,565,000
- -----------------------------------------------------------------------------
Protein Design Labs, Inc.(1) 175,000 6,321,875
- -----------------------------------------------------------------------------
Syncor International Corp.(1) 70,000 2,625,000
-------------
37,013,831
- -----------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES--3.5%
Aurora Biosciences Corp.(1) 200,000 2,725,000
- -----------------------------------------------------------------------------
Eclipse Surgical Technologies, Inc.(1) 175,000 2,887,500
- -----------------------------------------------------------------------------
EndoSonics Corp.(1) 325,000 2,762,500
- -----------------------------------------------------------------------------
Haemonetics Corp.(1) 200,000 3,937,500
- -----------------------------------------------------------------------------
Healtheon Corp.(1) 200,000 7,400,000
- -----------------------------------------------------------------------------
Medical Manager Corp.(1) 143,750 7,151,563
- -----------------------------------------------------------------------------
SonoSite, Inc.(1) 127,700 3,336,163
</TABLE>
15 OPPENHEIMER DISCOVERY FUND
<PAGE> 18
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
=============================================================================
<S> <C> <C>
HEALTHCARE/SUPPLIES & SERVICES (Continued)
VISX, Inc.(1) 40,000 $ 3,163,750
- -----------------------------------------------------------------------------
Zoll Medical Corp.(1) 102,900 3,112,725
-------------
36,476,701
- -----------------------------------------------------------------------------
TECHNOLOGY--30.1%
- -----------------------------------------------------------------------------
COMPUTER HARDWARE--3.1%
DII Group, Inc. (The)(1) 75,000 2,639,063
- -----------------------------------------------------------------------------
Extreme Networks, Inc.(1) 40,000 2,532,500
- -----------------------------------------------------------------------------
Hutchinson Technology, Inc.(1) 150,000 4,050,000
- -----------------------------------------------------------------------------
Interphase Corp.(1) 170,000 3,973,750
- -----------------------------------------------------------------------------
Netsolve, Inc.(1) 25,000 443,750
- -----------------------------------------------------------------------------
Network Appliance, Inc.(1) 200,000 14,325,000
- -----------------------------------------------------------------------------
Redback Networks, Inc.(1) 41,600 4,492,800
-------------
32,456,863
- -----------------------------------------------------------------------------
COMPUTER SERVICES--0.5%
Foundry Networks, Inc.(1) 14,200 1,789,200
- -----------------------------------------------------------------------------
NCO Group, Inc.(1) 75,000 3,525,000
-------------
5,314,200
- -----------------------------------------------------------------------------
COMPUTER SOFTWARE--13.6%
24/7 Media, Inc.(1) 62,500 2,367,188
- -----------------------------------------------------------------------------
About.com, Inc.(1) 72,500 4,096,250
- -----------------------------------------------------------------------------
Acclaim Entertainment, Inc.(1) 250,000 1,898,438
- -----------------------------------------------------------------------------
Alteon Websystems, Inc.(1) 10,600 996,400
- -----------------------------------------------------------------------------
Ardent Software, Inc.(1) 65,800 1,772,488
- -----------------------------------------------------------------------------
Aspect Development, Inc.(1) 175,000 4,429,688
- -----------------------------------------------------------------------------
Bluestone Software, Inc.(1) 36,500 844,063
- -----------------------------------------------------------------------------
Cadence Design Systems, Inc.(1) 265,000 3,511,250
- -----------------------------------------------------------------------------
Citrix Systems, Inc.(1) 81,000 5,016,938
- -----------------------------------------------------------------------------
Epiphany, Inc.(1) 18,000 877,500
- -----------------------------------------------------------------------------
Entrust Technologies, Inc.(1) 100,000 2,243,750
- -----------------------------------------------------------------------------
FreeShop.com, Inc.(1) 43,300 497,950
- -----------------------------------------------------------------------------
Inktomi Corp.(1) 95,000 11,402,969
- -----------------------------------------------------------------------------
Internap Network Services Corp.(1) 164,800 2,891,700
- -----------------------------------------------------------------------------
Interspeed, Inc.(1) 35,000 616,875
- -----------------------------------------------------------------------------
JDA Software Group, Inc.(1) 230,000 2,688,125
- -----------------------------------------------------------------------------
Kana Communications, Inc.(1) 24,000 1,197,000
- -----------------------------------------------------------------------------
Keynote Systems, Inc.(1) 24,000 600,000
</TABLE>
16 OPPENHEIMER DISCOVERY FUND
<PAGE> 19
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
=============================================================================
<S> <C> <C>
COMPUTER SOFTWARE (Continued)
Legato Systems, Inc.(1) 200,000 $ 8,718,750
- -----------------------------------------------------------------------------
Mercury Interactive Corp.(1) 70,000 4,519,375
- -----------------------------------------------------------------------------
Micromuse, Inc.(1) 100,000 6,425,000
- -----------------------------------------------------------------------------
MicroStrategy, Inc.(1) 160,000 8,970,000
- -----------------------------------------------------------------------------
NetZero, Inc.(1) 70,800 1,840,800
- -----------------------------------------------------------------------------
Project Software & Development, Inc.(1) 100,000 5,350,000
- -----------------------------------------------------------------------------
Quest Software, Inc.(1) 47,500 2,208,750
- -----------------------------------------------------------------------------
Remedy Corp.(1) 150,000 4,256,250
- -----------------------------------------------------------------------------
RSA Security, Inc.(1) 85,000 2,257,813
- -----------------------------------------------------------------------------
Safeguard Scientifics, Inc.(1) 50,000 3,400,000
- -----------------------------------------------------------------------------
Saga Systems, Inc.(1) 580,000 8,373,750
- -----------------------------------------------------------------------------
Sanchez Computer Associates, Inc.(1) 135,000 4,741,875
- -----------------------------------------------------------------------------
Siebel Systems, Inc.(1) 97,000 6,462,625
- -----------------------------------------------------------------------------
Technology Solutions Co.(1) 360,000 5,085,000
- -----------------------------------------------------------------------------
USWeb Corp.(1) 175,000 6,004,688
- -----------------------------------------------------------------------------
VeriSign, Inc.(1) 60,000 6,390,000
- -----------------------------------------------------------------------------
Veritas Software Corp.(1) 100,000 7,593,750
- -----------------------------------------------------------------------------
Vitria Technology, Inc.(1) 36,900 1,356,075
--------------
141,903,073
- -----------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--7.5%
CIENA Corp.(1) 147,900 5,398,350
- -----------------------------------------------------------------------------
Harmonic, Inc.(1) 270,000 35,319,375
- -----------------------------------------------------------------------------
Orckit Communications Ltd.(1) 230,000 8,136,250
- -----------------------------------------------------------------------------
Pairgain Technologies, Inc.(1) 250,000 3,187,500
- -----------------------------------------------------------------------------
Pittway Corp., Cl. A 281,000 8,851,500
- -----------------------------------------------------------------------------
Scientific-Atlanta, Inc. 174,900 8,668,481
- -----------------------------------------------------------------------------
Tekelec(1) 592,100 8,178,381
--------------
77,739,837
- -----------------------------------------------------------------------------
ELECTRONICS--5.4%
Amkor Technology, Inc.(1) 200,000 3,225,000
- -----------------------------------------------------------------------------
ATMI, Inc.(1) 449,000 16,753,313
- -----------------------------------------------------------------------------
Credence Systems Corp.(1) 263,000 11,802,125
- -----------------------------------------------------------------------------
DSP Group(1) 140,000 5,582,500
- -----------------------------------------------------------------------------
Flextronics International Ltd.(1) 100,000 5,818,750
- -----------------------------------------------------------------------------
Novellus Systems, Inc.(1) 100,000 6,743,750
- -----------------------------------------------------------------------------
Photronics, Inc.(1) 250,000 5,609,375
- -----------------------------------------------------------------------------
Power-One, Inc.(1) 40,000 1,020,000
--------------
56,554,813
</TABLE>
17 OPPENHEIMER DISCOVERY FUND
<PAGE> 20
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION--0.6%
- -----------------------------------------------------------------------------------------------------------------
AIR TRANSPORTATION--0.4%
AHL Services, Inc.(1) 160,000 $ 4,170,000
- -----------------------------------------------------------------------------------------------------------------
RAILROADS & TRUCKERS--0.2%
Werner Enterprises, Inc. 115,000 2,026,875
- -----------------------------------------------------------------------------------------------------------------
UTILITIES--0.5%
- -----------------------------------------------------------------------------------------------------------------
GAS UTILITIES--0.5%
Western Gas Resources, Inc. 260,000 4,858,750
----------------
Total Common Stocks (Cost $570,435,007) 766,401,755
=================================================================================================================
PREFERRED STOCKS--2.0%
- -----------------------------------------------------------------------------------------------------------------
AirNet Communications Corp., Series C(1) (2) 250,000 10,946
- -----------------------------------------------------------------------------------------------------------------
Candescent Technologies Corp., $2.50 Cv., Series D(1) (2) 1,200,000 11,136,000
- -----------------------------------------------------------------------------------------------------------------
Candescent Technologies Corp., Sr. Exchangeable, Series E(1) (2) 800,000 7,824,000
- -----------------------------------------------------------------------------------------------------------------
Candescent Technologies Corp., Sr. Exchangeable, Series F(1) (2) 200,000 1,918,000
----------------
Total Preferred Stocks (Cost $10,400,000) 20,888,946
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
=================================================================================================================
<S> <C> <C>
SHORT-TERM NOTES--19.1%(3)
- -----------------------------------------------------------------------------------------------------------------
CIESCO LP, 5.30%, 10/26/99 $25,000,000 24,907,986
- -----------------------------------------------------------------------------------------------------------------
General Electric Capital Services, 5.31%, 10/22/99 25,000,000 24,922,562
- -----------------------------------------------------------------------------------------------------------------
GTE Corp., 5.41%, 10/22/99 24,623,000 24,545,294
- -----------------------------------------------------------------------------------------------------------------
Motiva Enterprises LLC, 5.30%, 11/10/99 25,000,000 24,852,778
- -----------------------------------------------------------------------------------------------------------------
New Center Asset Trust, 5.31%, 11/8/99 25,000,000 24,859,875
- -----------------------------------------------------------------------------------------------------------------
Prudential Funding Corp., 5.30%, 10/12/99 25,000,000 24,959,514
- -----------------------------------------------------------------------------------------------------------------
Salomon Smith Barney Holdings, Inc., 5.31%, 10/21/99 25,000,000 24,926,250
- -----------------------------------------------------------------------------------------------------------------
Wells Fargo Co., 5.30%, 10/15/99 25,000,000 24,948,472
----------------
Total Short-Term Notes (Cost $198,922,731) 198,922,731
=================================================================================================================
REPURCHASE AGREEMENTS--6.6%
- -----------------------------------------------------------------------------------------------------------------
Repurchase agreement with First Chicago Capital Markets, 5.29%, dated 9/30/99,
to be repurchased at $69,110,154 on 10/1/99, collateralized by U.S. Treasury
Nts., 5.125%-8%, 10/31/99-2/15/07, with a value of $43,944,823, U.S. Treasury
Bonds, 5.25%-11.75%, 2/15/01-11/15/28, with a value of $26,580,783 (Cost
$69,100,000) 69,100,000 69,100,000
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $848,857,738) 101.3% 1,055,313,432
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (1.3) (13,607,958)
--------------------------------
NET ASSETS 100.0% $1,041,705,474
================================
</TABLE>
18 OPPENHEIMER DISCOVERY FUND
<PAGE> 21
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income-producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
3. 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.
19 OPPENHEIMER DISCOVERY FUND
<PAGE> 22
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
=================================================================================================
ASSETS
- -------------------------------------------------------------------------------------------------
<S> <C>
Investments, at value (cost $848,857,738)--see accompanying statement $1,055,313,432
- -------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 9,094,883
Shares of beneficial interest sold 2,195,810
Interest and dividends 79,171
Other 19,745
----------------
Total assets 1,066,703,041
=================================================================================================
LIABILITIES
- -------------------------------------------------------------------------------------------------
Bank overdraft 1,116,082
- -------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 20,164,287
Shares of beneficial interest redeemed 1,999,559
Distribution and service plan fees 634,711
Transfer and shareholder servicing agent fees 440,636
Trustees' compensation--Note 1 249,709
Other 392,583
----------------
Total liabilities 24,997,567
=================================================================================================
NET ASSETS $1,041,705,474
================
=================================================================================================
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------------------------------
Paid-in capital $ 769,070,147
- -------------------------------------------------------------------------------------------------
Accumulated net investment loss (234,171)
- -------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions 66,413,804
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 206,455,694
----------------
Net assets $1,041,705,474
================
</TABLE>
20 OPPENHEIMER DISCOVERY FUND
<PAGE> 23
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ----------------------------------------------------------------------------------------------------
<S> <C>
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$750,394,339 and 17,348,125 shares of beneficial interest outstanding $43.26
Maximum offering price per share (net asset value plus sales charge of 5.75% of
offering price) $45.90
- ----------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $224,709,989
and 5,451,085 shares of beneficial interest outstanding) $41.22
- ----------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $27,412,548
and 655,000 shares of beneficial interest outstanding) $41.85
- ----------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $39,188,598 and 892,212 shares of beneficial interest outstanding) $43.92
</TABLE>
See accompanying Notes to Financial Statements.
21 OPPENHEIMER DISCOVERY FUND
<PAGE> 24
STATEMENTS OF OPERATIONS For the Year Ended September 30, 1999
<TABLE>
=============================================================================================
<S> <C>
INVESTMENT INCOME
Interest $ 5,681,598
- ---------------------------------------------------------------------------------------------
Dividends 1,779,146
--------------
Total income 7,460,744
=============================================================================================
EXPENSES
- ---------------------------------------------------------------------------------------------
Management fees--Note 4 8,072,902
- ---------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 2,121,314
Class B 2,569,116
Class C 319,889
- ---------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4:
Class A 2,702,104
Class B 796,037
Class C 99,255
Class Y 144,146
- ---------------------------------------------------------------------------------------------
Shareholder reports 727,955
- ---------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 68,959
- ---------------------------------------------------------------------------------------------
Trustees' compensation--Note 1 66,092
- ---------------------------------------------------------------------------------------------
Custodian fees and expenses 73,572
- ---------------------------------------------------------------------------------------------
Other 184,369
--------------
Total expenses 17,945,710
Less expenses paid indirectly--Note 1 (32,107)
--------------
Net expenses 17,913,603
=============================================================================================
NET INVESTMENT LOSS (10,452,859)
=============================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments 79,096,318
Closing of futures contracts 21,017
Foreign currency transactions (45,324)
--------------
Net realized gain 79,072,011
- ---------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 69,855,627
--------------
Net realized and unrealized gain 148,927,638
=============================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $138,474,779
==============
</TABLE>
See accompanying Notes to Financial Statements.
22 OPPENHEIMER DISCOVERY FUND
<PAGE> 25
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999 1998
==========================================================================================================================
<S> <C> <C>
OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment loss $ (10,452,859) $ (10,880,476)
- --------------------------------------------------------------------------------------------------------------------------
Net realized gain 79,072,011 47,704,048
- --------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 69,855,627 (379,028,136)
-------------------------------------
Net increase (decrease) in net assets resulting from operations 138,474,779 (342,204,564)
==========================================================================================================================
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (33,486,062) (24,482,868)
Class B (10,003,098) (6,342,828)
Class C (1,248,219) (799,588)
Class Y (1,407,650) (833,135)
==========================================================================================================================
BENEFICIAL INTEREST TRANSACTIONS
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest
transactions--Note 2:
Class A (265,166,206) (108,272,187)
Class B (58,016,597) 20,865,114
Class C (8,383,628) 1,524,509
Class Y (3,821,532) 5,570,069
==========================================================================================================================
NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------
Total decrease (243,058,213) (454,975,478)
- --------------------------------------------------------------------------------------------------------------------------
Beginning of period 1,284,763,687 1,739,739,165
-------------------------------------
End of period (including accumulated net investment
losses of $234,171 and $245,098, respectively) $1,041,705,474 $1,284,763,687
=====================================
</TABLE>
See accompanying Notes to Financial Statements.
23 OPPENHEIMER DISCOVERY FUND
<PAGE> 26
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 40.12 $ 51.72 $ 51.19 $ 43.65 $ 35.81
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.28) (.26) (.08) (.13) --
Net realized and unrealized gain (loss) 4.84 (10.37) 4.12 11.26 9.46
------------------------------------------------------------------------------
Total income (loss) from
investment operations 4.56 (10.63) 4.04 11.13 9.46
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders
from net realized gain (1.42) (.97) (3.51) (3.59) (1.62)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 43.26 $ 40.12 $ 51.72 $ 51.19 $ 43.65
==============================================================================
==================================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(1) 11.59% (20.78)% 9.16% 27.76% 28.03%
- ----------------------------------------------------------------------------------------------------------------------------------
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $750,394 $ 945,972 $1,330,172 $1,160,087 $798,065
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $875,057 $1,215,780 $1,119,302 $ 937,563 $650,903
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income (loss) (0.69)% (0.51)% (0.17)% (0.32)% 0.00%
Expenses 1.31% 1.18%(3) 1.22%(3) 1.22%(3) 1.33%(3)
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 73% 82% 69% 80% 106%
</TABLE>
1. Assumes a $1,000 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.
2. Annualized for periods of less than one full year.
3. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
4. 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, 1999, were $803,694,753 and $1,332,605,267,
respectively.
See accompanying Notes to Financial Statements.
24 OPPENHEIMER DISCOVERY FUND
<PAGE> 27
<TABLE>
<CAPTION>
CLASS B YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 38.58 $ 50.15 $ 50.10 $ 43.11 $ 35.65
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.85) (.55) (.23) (.23) (.21)
Net realized and unrealized gain (loss) 4.91 (10.05) 3.79 10.81 9.29
-----------------------------------------------------------------------------------
Total income (loss) from
investment operations 4.06 (10.60) 3.56 10.58 9.08
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders
from net realized gain (1.42) (.97) (3.51) (3.59) (1.62)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 41.22 $ 38.58 $ 50.15 $ 50.10 $ 43.11
===================================================================================
=================================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(1) 10.73% (21.37)% 8.33% 26.77% 27.04%
- ---------------------------------------------------------------------------------------------------------------------------------
=================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $224,710 $265,687 $322,736 $193,637 $75,062
- ---------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $257,146 $319,197 $233,172 $119,895 $43,301
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income (loss) (1.45)% (1.27)% (0.93)% (1.06)% (0.78)%
EXPENSES 2.07% 1.94%(3) 1.97%(3) 1.99%(3) 2.11%(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 73% 82% 69% 80% 106%
</TABLE>
1. Assumes a $1,000 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.
2. Annualized for periods of less than one full year.
3. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
4. 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, 1999 were $803,694,753 and $1,332,605,267,
respectively.
See accompanying Notes to Financial Statements.
25 OPPENHEIMER DISCOVERY FUND
<PAGE> 28
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
CLASS C YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996
=========================================================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 39.15 $ 50.86 $ 50.73 $ 43.20
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.85) (.55) (.26) (.21)
Net realized and unrealized gain (loss) 4.97 (10.19) 3.90 11.33
-------------------------------------------------------------------------
Total income (loss) from
investment operations 4.12 (10.74) 3.64 11.12
- -------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders
from net realized gain (1.42) (.97) (3.51) (3.59)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 41.85 $ 39.15 $ 50.86 $ 50.73
=========================================================================
=========================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(1) 10.73% (21.34)% 8.39% 27.96%
- -------------------------------------------------------------------------------------------------------------------------
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $27,413 $33,441 $41,720 $17,512
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $31,971 $40,501 $26,361 $ 7,109
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income (loss) (1.45)% (1.25)% (0.92)% (1.00)%
Expenses 2.07% 1.92%(3) 1.94%(3) 2.03%(3)
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 73% 82% 69% 80%
</TABLE>
1. Assumes a $1,000 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.
2. Annualized for periods of less than one full year.
3. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
4. 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, 1999, were $803,694,753 and $1,332,605,267,
respectively.
5. For the period from October 2, 1995 (inception of offering) to September 30,
1996.
See accompanying Notes to Financial Statements.
26 OPPENHEIMER DISCOVERY FUND
<PAGE> 29
<TABLE>
<CAPTION>
CLASS Y YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995
================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $ 40.63 $ 52.17 $ 51.44 $ 43.74 $ 35.81
- ----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.17) (.09) .02 (.02) (.10)
Net realized and unrealized gain (loss) 4.88 (10.48) 4.22 11.31 9.65
-----------------------------------------------------------------
Total income (loss) from
investment operations 4.71 (10.57) 4.24 11.29 9.55
- ----------------------------------------------------------------------------------------------------------------
Distributions to shareholders
from net realized gain (1.42) (.97) (3.51) (3.59) (1.62)
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $43.92 $40.63 $52.17 $51.44 $43.74
=================================================================
================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(1) 11.82% (20.47)% 9.50% 28.09% 28.28%
================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $39,189 $39,664 $45,112 $31,619 $9,394
- ----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $40,649 $44,859 $34,811 $18,563 $3,190
- ----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income (loss) (0.48)% (0.15)% 0.15% (0.04)% 0.03%
Expenses 1.11% 0.81%(3) 0.89%(3) 0.99%(3) 1.26%(3)
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 73% 82% 69% 80% 106%
</TABLE>
1. Assumes a $1,000 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.
2. Annualized for periods of less than one full year.
3. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
4. 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, 1999, were $803,694,753 and $1,332,605,267, respectively.
See accompanying Notes to Financial Statements.
27 OPPENHEIMER DISCOVERY FUND
<PAGE> 30
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. 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 on investments up to $1 million. Class B and Class C
shares may be subject to a contingent deferred sales charge (CDSC). Class Y
shares are sold to certain institutional investors without either a front-end
sales charge or a CDSC. All classes of shares have identical rights to earnings,
assets and voting privileges, except that each class has its own expenses
directly attributable to that class and exclusive voting rights with respect to
matters affecting that class. Classes A, B and C have separate distribution
and/or service plans. 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.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Foreign currency exchange contracts are valued based on the
closing prices of the foreign currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
Options are valued based upon the last sale price on the principal exchange on
which the option is traded or, in the absence of any transactions that day, the
value is based upon the last sale price on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
28 OPPENHEIMER DISCOVERY FUND
<PAGE> 31
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no federal
income or excise tax provision is required.
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted a nonfunded retirement plan for the
Fund's independent Trustees. Benefits are based on years of service and fees
paid to each Trustee during the years of service. During the year ended
September 30, 1999, a provision of $5,953 was made for the Fund's projected
benefit obligations and payments of $16,880 were made to retired trustees,
resulting in an accumulated liability of $236,325 as of September 30, 1999.
The Board of Trustees has adopted a deferred compensation plan for
independent Trustees that enables Trustees to elect to defer receipt of all or a
portion of annual compensation they are entitled to receive from the Fund. Under
the plan, the compensation deferred is periodically adjusted as though an
equivalent amount had been invested for the Trustee in shares of one or more
Oppenheimer funds selected by the Trustee. The amount paid to the Trustee under
the plan will be determined based upon the performance of the selected funds.
Deferral of Trustees' fees under the plan will not affect the net assets of the
Fund, and will not materially affect the Fund's assets, liabilities or net
income per share.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
29 OPPENHEIMER DISCOVERY FUND
<PAGE> 32
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. The character of distributions made during the year from net
investment income or net realized gains may differ from its ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which the income or realized gain was recorded by
the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended September 30, 1999, amounts have been reclassified to reflect a
decrease in accumulated net investment loss of $10,463,786. Accumulated net
realized gain on investments was decreased by the same amount.
- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENTS. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Realized gains and losses on
investments and options written 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.
30 OPPENHEIMER DISCOVERY FUND
<PAGE> 33
===============================================================================
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, 1999 YEAR ENDED SEPTEMBER 30, 1998
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Sold 7,340,366 $ 305,832,917 10,639,767 $ 517,992,202
Dividends and/or
distributions reinvested 780,123 31,868,038 526,371 23,986,669
Redeemed (14,350,871) (602,867,161) (13,305,219) (650,251,058)
--------------------------------------------------------------------------
Net decrease (6,230,382) $(265,166,206) (2,139,081) $(108,272,187)
==========================================================================
- ------------------------------------------------------------------------------------------------------------------
CLASS B
Sold 1,771,225 $ 70,895,318 2,633,873 $ 124,120,591
Dividends and/or
distributions reinvested 249,023 9,751,761 140,314 6,185,059
Redeemed (3,455,595) (138,663,676) (2,323,577) (109,440,536)
--------------------------------------------------------------------------
Net increase (decrease) (1,435,347) $ (58,016,597) 450,610 $ 20,865,114
==========================================================================
- ------------------------------------------------------------------------------------------------------------------
CLASS C
Sold 1,894,040 $ 76,754,870 1,067,332 $ 50,776,830
Dividends and/or
distributions reinvested 30,536 1,214,123 17,282 773,012
Redeemed (2,123,773) (86,352,621) (1,050,793) (50,025,333)
--------------------------------------------------------------------------
Net increase (decrease) (199,197) $(8,383,628) 33,821 $ 1,524,509
==========================================================================
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
Sold 453,623 $ 19,236,361 520,524 $ 25,679,544
Dividends and/or
distributions reinvested 34,009 1,407,649 18,108 833,135
Redeemed (571,735) (24,465,542) (427,078) (20,942,610)
--------------------------------------------------------------------------
Net increase (decrease) (84,103) $(3,821,532) 111,554 $ 5,570,069
==========================================================================
==================================================================================================================
</TABLE>
3. UNREALIZED GAINS AND LOSSES ON SECURITIES
As of September 30, 1999, net unrealized appreciation on securities of
$206,455,694 was composed of gross appreciation of $232,394,947, and gross
depreciation of $25,939,253.
31 OPPENHEIMER DISCOVERY FUND
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee of 0.75% of
the first $200 million of average annual net assets of the Fund, 0.72% of the
next $200 million, 0.69% of the next $200 million, 0.66% of the next $200
million, 0.60% of the next $700 million and 0.58% of average annual net assets
in excess of $1.5 billion. The Fund's management fee for the year ended
September 30, 1999 was 0.67% of average net assets for each class of shares.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund and other
Oppenheimer funds. OFS's total costs of providing such services are allocated
ratably to these funds.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FEES. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the period
indicated.
<TABLE>
<CAPTION>
AGGREGATE CLASS A COMMISSIONS COMMISSIONS COMMISSIONS
FRONT-END FRONT-END ON CLASS A ON CLASS B ON CLASS C
SALES CHARGES SALES CHARGES SHARES SHARES SHARES
ON CLASS A RETAINED BY ADVANCED BY ADVANCED BY ADVANCED BY
YEAR ENDED SHARES DISTRIBUTOR DISTRIBUTOR(1) DISTRIBUTOR(1) DISTRIBUTOR(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
September 30, 1999 $1,781,549 $559,019 $200,364 $1,403,981 $73,994
</TABLE>
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
CONTINGENT DEFERRED CONTINGENT DEFERRED CONTINGENT DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES
YEAR ENDED RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
September 30, 1999 $3,844 $995,178 $14,435
</TABLE>
The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B and Class C shares under Rule 12b-1 of the Investment
Company Act. Under those plans the Fund pays the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
32 OPPENHEIMER DISCOVERY FUND
<PAGE> 35
- --------------------------------------------------------------------------------
CLASS A SERVICE PLAN FEES. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of Class A
shares. The Distributor makes payments to plan recipients quarterly at an annual
rate not to exceed 0.25% of the average annual net assets consisting of Class A
shares of the Fund. For the fiscal year ended September 30, 1999, payments under
the Class A Plan totaled $2,121,314, all of which was paid by the Distributor to
recipients. That included $172,365 paid to an affiliate of the Distributor's
parent company. Any unreimbursed expenses the Distributor incurs with respect to
Class A shares in any fiscal year cannot be recovered in subsequent years.
- --------------------------------------------------------------------------------
CLASS B AND CLASS C DISTRIBUTION AND SERVICE PLAN FEES. Under each plan, service
fees and distribution fees are computed on the average of the net asset value of
shares in the respective class, determined as of the close of each regular
business day during the period. The Class B and Class C plans provide for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The asset-based sales charges on Class B
and Class C shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
The Distributor's actual expenses in selling Class B and Class C shares may
be more than the payments it receives from the contingent deferred sales charges
collected on redeemed shares and from the Fund under the plans. If either the
Class B or the Class C plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the asset-based sales charge to the
Distributor for distributing shares before the plan was terminated. The plans
allow for the carry-forward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the year ended September 30, 1999,
were as follows:
<TABLE>
<CAPTION>
DISTRIBUTOR'S DISTRIBUTOR'S
AGGREGATE UNREIMBURSED
UNREIMBURSED EXPENSES AS %
TOTAL PAYMENTS AMOUNT RETAINED EXPENSES OF NET ASSETS
UNDER PLAN BY DISTRIBUTOR UNDER PLAN OF CLASS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B Plan $2,569,116 $2,051,837 $7,175,368 3.19%
Class C Plan 319,889 154,804 482,959 1.76
</TABLE>
33 OPPENHEIMER DISCOVERY FUND
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
5. FUTURES CONTRACTS
The Fund may buy and sell futures contracts in order to gain exposure to or to
seek to protect against changes in interest rates. The Fund may also buy or
write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against increases in
interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Fund may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund may recognize a realized gain or loss when the contract is
closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable
and/or payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
================================================================================
6. ILLIQUID OR RESTRICTED SECURITIES
As of September 30, 1999, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Trustees as reflecting fair value. A security may also be
considered illiquid if it lacks a readily available market or if its valuation
has not changed for a certain period of time. The Fund intends to invest no more
than 10% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of September 30, 1999, was $20,888,946,
which represents 2.01% of the Fund's net assets, all of which is considered
restricted.
34 OPPENHEIMER DISCOVERY FUND
<PAGE> 37
Information concerning restricted securities is as follows:
<TABLE>
<CAPTION>
VALUATION
PER UNIT AS OF
SECURITY ACQUISITION DATE COST PER UNIT SEPT. 30, 1999
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS AND WARRANTS
AirNet Communications Corp., Series C 7/6/95 $6.00 $0.04
- ----------------------------------------------------------------------------------------------------
Candescent Technologies Corp., Series D 3/31/95 2.50 9.28
- ----------------------------------------------------------------------------------------------------
Candescent Technologies Corp., Series E 4/24/96 5.50 9.78
- ----------------------------------------------------------------------------------------------------
Candescent Technologies Corp., Series F 6/11/97 7.50 9.59
</TABLE>
================================================================================
7. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 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,
1999.
35 OPPENHEIMER DISCOVERY FUND
<PAGE> 38
INDEPENDENT AUDITORS' REPORT
===============================================================================
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
OPPENHEIMER DISCOVERY FUND
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Discovery Fund as of September 30,
1999, 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, 1999, by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Discovery Fund as of September 30, 1999, 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 LLP
Denver, Colorado
October 21, 1999
36 OPPENHEIMER DISCOVERY FUND
<PAGE> 39
FEDERAL INCOME TAX INFORMATION (Unaudited)
===============================================================================
In early 2000, shareholders will receive information regarding all dividends
and distributions paid to them by the Fund during calendar year 1999.
Regulations of the U.S. Treasury Department require the Fund to report this
information to the Internal Revenue Service.
Distributions of $1.4242, per share paid to Class A, Class B and Class C
shareholders, respectively, on December 15, 1998, were 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).
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 regulations, we recommend
that you consult your tax advisor for specific guidance.
37 OPPENHEIMER DISCOVERY FUND
<PAGE> 40
OPPENHEIMER DISCOVERY FUND
<TABLE>
==========================================================================================
<S> <C>
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
Jayne Stevlingson, Vice President
Andrew J. Donohue, Secretary
Brian W. Wixted, Treasurer
Robert G. Zack, Assistant Secretary
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
==========================================================================================
INVESTMENT ADVISOR OppenheimerFunds, Inc.
==========================================================================================
DISTRIBUTOR OppenheimerFunds Distributor, Inc.
==========================================================================================
TRANSFER AND SHAREHOLDER OppenheimerFunds Services
SERVICING AGENT
==========================================================================================
CUSTODIAN OF The Bank of New York
PORTFOLIO SECURITIES
==========================================================================================
INDEPENDENT AUDITORS KPMG LLP
==========================================================================================
LEGAL COUNSEL Mayer, Brown & Platt
This is a copy of a report to shareholders of
Oppenheimer 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, ARE NOT INSURED BY THE FDIC OR
ANY OTHER AGENCY, AND INVOLVE INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
</TABLE>
38 OPPENHEIMER DISCOVERY FUND
<PAGE> 41
OPPENHEIMERFUNDS FAMILY
<TABLE>
<CAPTION>
================================================================================================
GLOBAL EQUITY
- ------------------------------------------------------------------------------------------------
<S> <C>
Developing Markets Fund Global Fund
International Small Company Fund Quest Global Value Fund
Europe Fund Global Growth & Income Fund
International Growth Fund
====================================================================================================
EQUITY
- ----------------------------------------------------------------------------------------------------
Stock Stock & Bond
Enterprise Fund(1) Main Street(R) Growth & Income Fund
Discovery Fund Quest Opportunity Value Fund
Main Street(R) Small Cap Fund Total Return Fund
Quest Small Cap Value Fund Quest Balanced Value Fund
MidCap Fund Capital Income Fund(2)
Capital Appreciation Fund Multiple Strategies Fund
Growth Fund Disciplined Allocation Fund
Disciplined Value Fund Convertible Securities Fund
Quest Value Fund
Trinity Growth Fund Specialty
Trinity Core Fund Real Asset Fund
Trinity Value Fund Gold & Special Minerals Fund
====================================================================================================
FIXED INCOME
- ----------------------------------------------------------------------------------------------------
Taxable Municipal
International Bond Fund California Municipal Fund(3)
World Bond Fund Main Street California Municipal Fund(3)
High Yield Fund Florida Municipal Fund(3)
Champion Income Fund New Jersey Municipal Fund(3)
Strategic Income Fund New York Municipal Fund(3)
Bond Fund Pennsylvania Municipal Fund(3)
Senior Floating Rate Fund Municipal Bond Fund
U.S. Government Trust Insured Municipal Fund
Limited-Term Government Fund Intermediate Municipal Fund
Rochester Division
Rochester Fund Municipals
Limited Term New York Municipal Fund
====================================================================================================
MONEY MARKET(4)
- ----------------------------------------------------------------------------------------------------
Money Market Fund Cash Reserves
</TABLE>
1. Effective July 1, 1999, this fund is closed to new investors. See prospectus
for details.
2. On 4/1/99, the Fund's name was changed from "Oppenheimer Equity Income
Fund."
3. Available to investors only in certain states.
4. An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
these funds may seek to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in these funds.
Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc., Two
World Trade Center, New York, NY10048-0203.
(C) Copyright 1999 OppenheimerFunds, Inc. All rights reserved.
Not part of the Prospectus
39 OPPENHEIMER DISCOVERY FUND
