<PAGE> 1
SEMIANNUAL REPORT MARCH 31, 1999
OPPENHEIMER
DISCOVERY
FUND
[PHOTO]
[OPPENHEIMERFUNDS LOGO]
THE RIGHT WAY TO INVEST
<PAGE> 2
CONTENTS
3 President's Letter
4 An Interview
with Your Fund's
Managers
8 Financial
Statements
32 Officers and
Trustees
36 Information and
Services
REPORT HIGHLIGHTS
- --------------------------------------------------------------------------------
- - TECHNOLOGY, THE FUND'S LARGEST INVESTMENT SECTOR, performed relatively well,
while healthcare declined over concerns regarding possible Medicare reform.
- - SMALL-CAP STOCKS ENDED THE PERIOD priced at unprecedented lows relative to
large stocks.
CUMULATIVE TOTAL RETURNS
For the 6-Month Period Ended 3/31/99
CLASS A
Without With
Sales Chg.(1) Sales Chg.(2)
4.75% -1.27%
CLASS B
Without With
Sales Chg.(1) Sales Chg.(2)
4.34% -0.66%
CLASS C
Without With
Sales Chg.(1) Sales Chg.(2)
4.35% 3.35%
CLASS Y
Without With
Sales Chg.(1) Sales Chg.(2)
4.79% 4.79%
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
Cumulative total returns are not annualized. 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 THE STOCK MARKET CAN BE VOLATILE, 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.
1. Includes changes in net asset value per share without deducting any sales
charges.
2. Class A return includes the current maximum initial sales charge of 5.75%.
Class B return includes the applicable contingent deferred sales charge of 5%.
Class C return includes the contingent deferred sales charge of 1%. Class Y
shares are offered only to certain institutional investors under special
agreement with the Distributor. Class B and C shares are subject to an annual
0.75% asset-based sales charge. An explanation of the different performance
calculations is in the Fund's prospectus.
2 Oppenheimer Discovery Fund
<PAGE> 3
[PHOTO]
BRIDGET A. MACASKILL
President
Oppenheimer
Discovery Fund
DEAR SHAREHOLDER,
- --------------------------------------------------------------------------------
The strength of the U.S. economy continues to surprise and concern
many analysts. At a time when the majority of the world's economies are
beleaguered by financial strain, the U.S. economy has been growing at a
remarkable rate.
With respect to the U.S. bond market, stronger than expected economic
growth has triggered concerns that the Federal Reserve may raise key interest
rates to forestall an acceleration of inflation. As a result, yields of longer
term taxable bonds have risen from their October 1998 lows, when investors had
bid up prices during the global "flight to quality." At the same time,
tax-exempt bond prices and yields have remained relatively stable.
In the U.S. stock market, it might appear at first glance that prices are
rising as rapidly as the economy is growing. However, a closer look reveals
that, with the exception of large-cap growth companies and the technology
industry, most stock prices remained relatively flat through March 31. What's
more, the disparity in valuations between large com-panies, which have led the
market's advance, and smaller ones, which have lagged, has become historically
wide.
What do these observations mean for your investments? In our view,
actively managed portfolios that are closely monitored by expert money managers
may provide better returns than passive index investing in 1999. That's because
selectivity is expected to be more critical to performance than it has been over
the past few years. In a potentially overvalued stock market and rising
interest-rate environment, the ability to identify the most promising securities
could become paramount.
Even though many equity investors may be tempted to focus their portfolio
on the technology sector, we suggest a more prudent course: broad
diversification beyond any single asset class, industry, capitalization range or
geographic region. We believe that the risks of this investment environment
require consideration of a broad range of investments and markets, including
bonds. That way, if one market experiences setbacks, one or more of the others
may help cushion the effects on your overall portfolio.
No matter what the financial markets have in store, we resolve to continue
working with your financial advisor to keep you apprised of potential risks and
opportunities. Providing you with the market information, professionally managed
investments and other resources you need to achieve your financial goals is an
important part of our enduring commitment to you as The Right Way to Invest.
Sincerely,
/s/ BRIDGET A. MACASKILL
Bridget A. Macaskill
April 22, 1999
3 Oppenheimer Discovery Fund
<PAGE> 4
AN INTERVIEW WITH YOUR FUND'S MANAGERS
- --------------------------------------------------------------------------------
HOW DID THE FUND PERFORM DURING THE SIX-MONTH PERIOD THAT ENDED MARCH 31, 1999?
The last six months were volatile for equity markets in general, and extremely
so for the small company, or small-cap, stocks in which Oppenheimer Discovery
Fund invests. The Fund's performance echoed that volatility, ending the period
with modest gains.
WHAT ACCOUNTED FOR THE MARKET'S HIGH LEVEL OF VOLATILITY?
The market's volatility was largely driven by fears of slowing global growth. At
the beginning of October, economic difficulties in several emerging markets
fueled concerns about the ability of U.S. companies to sustain earnings growth.
Most equities fell sharply, but 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.
Investor confidence rose again in mid-October when the Federal Reserve
Board (the Fed) acted decisively to make funds more available for corporate
borrowing by unexpectedly cutting government lending rates. Equities immediately
began to rise almost as quickly as they had fallen, and by early 1999, most
sectors had recovered the ground they'd lost. On average, small company stocks
outperformed large company stocks during this period, with the technology sector
showing particular strength.
Renewed concerns about the potential for a global slowdown arose in
mid-January when Brazil devalued its currency. Once again, small-cap stocks
suffered, often without regard to the quality of a company's earnings or the
health of its underlying business.
4 Oppenheimer Discovery Fund
<PAGE> 5
[PHOTO]
PORTFOLIO MANAGEMENT
TEAM (L TO R)
Bonnie Sherman
Alan Gilston
(Portfolio Manager)
Jay Tracey
(Portfolio Manager)
Susan Switzer
HOW DID YOU MANAGE THE FUND IN LIGHT OF THESE EVENTS?
We never wavered from our commitment to invest in emerging growth companies that
exhibit leadership potential within their market sector. However, we did seek to
limit the Fund's volatility by limiting the Fund's exposure to cyclical
companies and focusing investments in areas that are less economically
sensitive. For example, our overweighting in services companies reflects our
view that their growth rates will remain near their historic trendline even if
the economy slows down. We have been particularly careful to avoid those
segments of the market whose earnings depend upon favorable product pricing,
since excess capacity exists in many industries and inflation is virtually nil.
We invested in several education service providers, such as Education
Management Corporation. Education and skills training are attractive businesses
from a cash-flow perspective because students pay tuition before the school
incurs the cost of educating them. It is also a business with relatively
predictable earnings in an area of growing demand.
The Fund also benefited from our decision to allocate more assets to
technology than any other sector. Technology proved to be the market's leading
growth area for most of the last six months. Consequently, the Fund realized
some of its greatest gains from companies such as New Era of Networks, Inc., a
leader in the rapidly growing field of applications integration--helping the
various parts of a large organization share information electronically.
5 Oppenheimer Discovery Fund
<PAGE> 6
AVG ANNUAL TOTAL RETURNS
For the Periods Ended 3/31/99(1)
<TABLE>
<CAPTION>
CLASS A
1 year 5 year 10 year
- ---------------------------------
<S> <C> <C>
- -25.94% 6.58% 11.93%
- ---------------------------------
CLASS B
Since
1 year 5 year Inception
- ---------------------------------
- -25.78% N/A 7.15%
- ---------------------------------
CLASS C
Since
1 year 5 year Inception
- ---------------------------------
- -22.76% N/A 3.77%
- ---------------------------------
CLASS Y
Since
1 year 5 year Inception
- ---------------------------------
- -21.24% N/A 9.45%
- ---------------------------------
</TABLE>
An INTERVIEW with your Fund's managers
- --------------------------------------
WHICH INVESTMENT SECTORS PROVED MOST PROBLEMATIC FOR THE FUND?
The volatility of the small-cap stock environment during the last six months was
not confined to any particular sector or industry. One of our largest holdings
within technology, Visio Corporation, has gained substantially during the
period. However, the company lost a significant percentage of its value in a
single week in late January when the company's management provided a cautious
estimate of future earnings.
Despite broad market weakness, certain sectors suffered more than others
did. Healthcare stocks experienced a particularly weak February. Investors
became concerned that Medicare reform, if enacted, could result in lower
reimbursement rates, thereby constraining the profits of some healthcare
providers. Because of these concerns, stocks of many smaller healthcare
companies fell dramatically--more than any future impact would likely warrant.
For example, one of the Fund's holdings, Serologicals Corporation, which
harvests and provides specialty human antibody products to healthcare companies,
is unlikely to be negatively affected by Medicare reform. Nevertheless, the
stock of this well-managed company with record earnings fell sharply in
February.
1. Total returns include changes in share price and reinvestment of dividends
and capital gains distributions in a hypothetical investment for the periods
shown. Class A returns include the current maximum initial sales charge of
5.75%. Class A shares were first publicly offered on 9/11/86. The Fund's maximum
sales charge for Class A shares was lower prior to 4/4/91, so actual performance
may have been higher. Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 2% (since inception on 4/4/94). Class C returns
for the one-year result include the contingent deferred sales charge of 1%.
Class C shares have been available since 10/2/95. Class Y shares were first
publicly offered on 6/1/94, and are available only to certain institutional
investors under special agreement with the Distributor. Class B and C shares are
subject to an annual 0.75% asset-based sales charge. An explanation of the
different performance calculations is in the Fund's prospectus.
6 Oppenheimer Discovery Fund
<PAGE> 7
SECTOR ALLOCATION (2)
[PIE CHART]
<TABLE>
<S> <C>
- - Technology 30.7%
- - Consumer Staples 14.9
- - Consumer Cyclical 14.5
- - Healthcare 12.1
- - Capital Goods 11.3
- - Financial 4.0
- - Communication Services 3.5
- - Energy 2.2
- - Basic Materials 2.1
- - Other Sectors 4.7
</TABLE>
WHAT IS YOUR OUTLOOK FOR THE SMALL-CAP MARKET?
In our opinion, small company stocks have never been better values relative to
the overall market than they are currently. 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 bargains are available in well-managed
small companies with excellent opportunities for growth. Furthermore, since most
small companies depend little on foreign sales, their revenues are somewhat
insulated from the economic impact of today's emerging market turmoil.
We believe these factors make small-cap investing an important part of a
well-diversified portfolio. That's why we remain dedicated to our disciplined
strategy of investing in rapidly growing small companies with strong
fundamentals and healthy growth prospects. That's what makes Oppenheimer
Discovery Fund part of The Right Way to Invest.
<TABLE>
<CAPTION>
TOP TEN STOCK HOLDINGS(2)
- ---------------------------------------------------------------
<S> <C>
Education Management Corp. 2.0%
- ---------------------------------------------------------------
Pittway Corp., Cl. A 1.9
- ---------------------------------------------------------------
Covance, Inc. 1.7
- ---------------------------------------------------------------
Cinar Films, Inc., Cl. B 1.7
- ---------------------------------------------------------------
Linens 'N Things, Inc. 1.7
- ---------------------------------------------------------------
U.S. Foodservice, Inc. 1.6
- ---------------------------------------------------------------
Visio Corp. 1.5
- ---------------------------------------------------------------
ITT Educational Services, Inc. 1.4
- ---------------------------------------------------------------
Investors Financial Services Corp. 1.2
- ---------------------------------------------------------------
O'Reilly Automotive, Inc. 1.2
- ---------------------------------------------------------------
</TABLE>
2. Portfolio is subject to change. Percentages are as of March 31, 1999, and are
based on total market value of investments.
7 Oppenheimer Discovery Fund
<PAGE> 8
STATEMENT OF INVESTMENTS March 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
=================================================================================
<S> <C> <C>
COMMON STOCKS--93.0%
- ---------------------------------------------------------------------------------
BASIC MATERIALS--2.1%
- ---------------------------------------------------------------------------------
CHEMICALS--1.2%
AMCOL International Corp. 260,000 $ 2,600,000
- ---------------------------------------------------------------------------------
Calgon Carbon Corp. 300,000 1,556,250
- ---------------------------------------------------------------------------------
International Specialty Products, Inc.(1) 400,000 3,025,000
- ---------------------------------------------------------------------------------
Minerals Technologies, Inc. 150,000 7,200,000
-----------
14,381,250
- ---------------------------------------------------------------------------------
METALS--0.4%
IMCO Recycling, Inc. 340,000 4,377,500
- ---------------------------------------------------------------------------------
PAPER--0.5%
Chesapeake Corp. 200,000 5,425,000
- ---------------------------------------------------------------------------------
CAPITAL GOODS--11.1%
- ---------------------------------------------------------------------------------
AEROSPACE/DEFENSE--0.2%
Orbital Sciences Corp.(1) 65,000 1,840,312
- ---------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--1.0%
Hussmann International, Inc. 60,000 881,250
- ---------------------------------------------------------------------------------
Sanmina Corp.(1) 170,000 10,837,500
-----------
11,718,750
- ---------------------------------------------------------------------------------
INDUSTRIAL SERVICES--8.5%
Casella Waste Systems, Inc., Cl. A(1) 213,000 4,805,812
- ---------------------------------------------------------------------------------
ChoicePoint, Inc.(1) 110,000 5,486,250
- ---------------------------------------------------------------------------------
CIBER, Inc.(1) 350,000 6,715,625
- ---------------------------------------------------------------------------------
Daisytek International Corp.(1) 190,000 3,158,750
- ---------------------------------------------------------------------------------
Eagle USA Airfreight, Inc.(1) 90,000 2,925,000
- ---------------------------------------------------------------------------------
Granite Construction, Inc. 271,500 6,346,312
- ---------------------------------------------------------------------------------
Group Maintenance America Corp.(1) 250,000 2,843,750
- ---------------------------------------------------------------------------------
Maximus, Inc.(1) 329,500 9,596,687
- ---------------------------------------------------------------------------------
Metzler Group, Inc.(1) 427,650 13,417,519
- ---------------------------------------------------------------------------------
MSC Industrial Direct Co., Inc., Cl. A(1) 492,500 8,372,500
- ---------------------------------------------------------------------------------
National Equipment Services, Inc.(1) 600,000 5,550,000
- ---------------------------------------------------------------------------------
Rental Service Corp.(1) 450,000 7,875,000
- ---------------------------------------------------------------------------------
Service Experts, Inc.(1) 112,800 1,522,800
- ---------------------------------------------------------------------------------
Stericycle, Inc.(1) 174,200 2,340,812
- ---------------------------------------------------------------------------------
Tetra Tech, Inc.(1) 355,000 7,477,187
- ---------------------------------------------------------------------------------
United Rentals, Inc.(1) 192,500 5,486,250
- ---------------------------------------------------------------------------------
West TeleServices Corp.(1) 542,800 4,613,800
-----------
98,534,054
</TABLE>
8 Oppenheimer Discovery Fund
<PAGE> 9
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
================================================================================
<S> <C> <C>
MANUFACTURING--1.4%
Applied Power, Inc., Cl. A 220,000 $ 5,995,000
- --------------------------------------------------------------------------------
CompX International, Inc.(1) 250,000 3,187,500
- --------------------------------------------------------------------------------
Cuno, Inc.(1) 175,000 2,450,000
- --------------------------------------------------------------------------------
SLI, Inc.(1) 147,000 3,087,000
- --------------------------------------------------------------------------------
Werner Enterprises, Inc. 90,000 1,417,500
-----------
16,137,000
- --------------------------------------------------------------------------------
COMMUNICATION SERVICES--3.5%
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS: LONG DISTANCE--1.7%
General Cable Corp. 396,250 4,185,391
- --------------------------------------------------------------------------------
Pacific Gateway Exchange, Inc.(1) 235,000 7,799,062
- --------------------------------------------------------------------------------
RSL Communications Ltd., Cl. A(1) 203,000 7,295,312
-----------
19,279,765
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS: WIRELESS--1.8%
LodgeNet Entertainment Corp.(1) 525,000 3,445,312
- --------------------------------------------------------------------------------
Metrocall, Inc.(1) 1,025,000 3,107,031
- --------------------------------------------------------------------------------
Paging Network, Inc.(1) 400,000 1,875,000
- --------------------------------------------------------------------------------
Pinnacle Holdings, Inc.(1) 350,000 5,293,750
- --------------------------------------------------------------------------------
Proxim, Inc.(1) 80,000 2,300,000
- --------------------------------------------------------------------------------
Vanguard Cellular Systems, Inc., Cl. A(1) 170,000 4,643,125
-----------
20,664,218
- --------------------------------------------------------------------------------
CONSUMER CYCLICALS--14.3%
- --------------------------------------------------------------------------------
AUTOS & HOUSING--1.5%
Champion Enterprises, Inc.(1) 210,000 4,068,750
- --------------------------------------------------------------------------------
Fairfield Communities, Inc.(1) 500,000 4,468,750
- --------------------------------------------------------------------------------
Kroll-O'Gara Co. (The)(1) 200,000 5,425,000
- --------------------------------------------------------------------------------
Wilmar Industries, Inc.(1) 247,500 3,666,094
-----------
17,628,594
- --------------------------------------------------------------------------------
CONSUMER SERVICES--3.8%
Borg-Warner Security Corp.(1) 250,000 4,187,500
- --------------------------------------------------------------------------------
Central Garden & Pet Co.(1) 145,000 2,446,875
- --------------------------------------------------------------------------------
Core Laboratories NV(1) 200,000 3,512,500
- --------------------------------------------------------------------------------
Getty Images, Inc.(1) 240,000 5,040,000
- --------------------------------------------------------------------------------
HA-LO Industries, Inc.(1) 435,000 5,355,937
- --------------------------------------------------------------------------------
Intermedia Communications, Inc.(1) 250,000 6,656,250
- --------------------------------------------------------------------------------
ProBusiness Services, Inc.(1) 180,000 7,560,000
- --------------------------------------------------------------------------------
Rent-A-Center, Inc. (New)(1) 315,000 9,056,250
-----------
43,815,312
</TABLE>
9 Oppenheimer Discovery Fund
<PAGE> 10
STATEMENT OF INVESTMENTS (Unaudited)(Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
================================================================================
<S> <C> <C>
LEISURE & ENTERTAINMENT--2.8%
Action Performance Cos., Inc.(1) 210,000 $ 6,326,250
- --------------------------------------------------------------------------------
Anchor Gaming(1) 100,000 4,375,000
- --------------------------------------------------------------------------------
Bally Total Fitness Holding Corp.(1) 305,000 7,281,875
- --------------------------------------------------------------------------------
Coach USA, Inc.(1) 275,700 7,581,750
- --------------------------------------------------------------------------------
Scientific Games Holdings Corp.(1) 200,000 3,550,000
- --------------------------------------------------------------------------------
Sodak Gaming, Inc.(1) 370,000 3,283,750
-----------
32,398,625
- --------------------------------------------------------------------------------
MEDIA--1.4%
Hollinger International, Inc. 300,000 4,068,750
- --------------------------------------------------------------------------------
Penton Media, Inc. 525,000 11,812,500
-----------
15,881,250
- --------------------------------------------------------------------------------
RETAIL: SPECIALTY--4.5%
AmeriCredit Corp.(1) 81,600 1,071,000
- --------------------------------------------------------------------------------
Buckle, Inc. (The)(1) 41,000 922,500
- --------------------------------------------------------------------------------
CompUSA, Inc.(1) 425,000 2,975,000
- --------------------------------------------------------------------------------
Guitar Center, Inc. 300,000 6,131,250
- --------------------------------------------------------------------------------
Heilig-Meyers Co. 480,000 2,490,000
- --------------------------------------------------------------------------------
Linens 'N Things, Inc.(1) 420,000 19,057,500
- --------------------------------------------------------------------------------
O'Reilly Automotive, Inc.(1) 300,000 13,425,000
- --------------------------------------------------------------------------------
Pacific Sunware of California, Inc.(1) 25,000 868,750
- --------------------------------------------------------------------------------
PetsMart, Inc.(1) 675,000 5,421,094
-----------
52,362,094
- --------------------------------------------------------------------------------
TEXTILE/APPAREL & HOME FURNISHINGS--0.3%
Russell Corp. 158,600 3,191,825
- --------------------------------------------------------------------------------
CONSUMER STAPLES--14.5%
- --------------------------------------------------------------------------------
BROADCASTING--1.9%
Cumulus Media, Inc., Cl. A(1) 110,000 1,292,500
- --------------------------------------------------------------------------------
Emmis Communications Corp., Cl. A(1) 140,000 7,000,000
- --------------------------------------------------------------------------------
Entercom Communications Corp.(1) 200,000 7,075,000
- --------------------------------------------------------------------------------
Heftel Broadcasting Corp., A Shares(1) 150,000 6,506,250
-----------
21,873,750
- --------------------------------------------------------------------------------
EDUCATION--4.3%
Corinthian Colleges, Inc.(1) 57,000 1,254,000
- --------------------------------------------------------------------------------
Education Management Corp.(1) 725,000 22,293,750
- --------------------------------------------------------------------------------
ITT Educational Services, Inc.(1) 410,000 15,400,625
- --------------------------------------------------------------------------------
Strayer Education, Inc. 297,000 10,989,000
-----------
49,937,375
</TABLE>
10 Oppenheimer Discovery Fund
<PAGE> 11
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
================================================================================
<S> <C> <C>
ENTERTAINMENT--4.5%
Applebee's International, Inc. 150,000 $ 3,721,875
- --------------------------------------------------------------------------------
CBRL Group, Inc. 100,000 1,800,000
- --------------------------------------------------------------------------------
CEC Entertainment, Inc.(1) 175,500 6,296,062
- --------------------------------------------------------------------------------
Cinar Films, Inc., Cl. B(1) 840,000 19,320,000
- --------------------------------------------------------------------------------
CKE Restaurants, Inc. 140,000 2,765,000
- --------------------------------------------------------------------------------
Darden Restaurants, Inc. 380,000 7,837,500
- --------------------------------------------------------------------------------
Hollywood Entertainment Corp.(1) 100,000 1,862,500
- --------------------------------------------------------------------------------
Luby's, Inc. 235,000 3,965,625
- --------------------------------------------------------------------------------
Metromedia International Group, Inc.(1) 161,900 789,262
- --------------------------------------------------------------------------------
Speedway Motorsports, Inc.(1) 100,000 4,125,000
-----------
52,482,824
- --------------------------------------------------------------------------------
FOOD--1.1%
Celestial Seasonings, Inc.(1) 180,000 3,892,500
- --------------------------------------------------------------------------------
Del Monte Foods Co.(1) 489,700 6,457,919
- --------------------------------------------------------------------------------
Worthington Foods, Inc. 265,000 3,014,375
-----------
13,364,794
- --------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--2.7%
Richfood Holdings, Inc. 265,000 5,714,062
- --------------------------------------------------------------------------------
U.S. Foodservice, Inc.(1) 380,000 17,670,000
- --------------------------------------------------------------------------------
United Natural Foods, Inc.(1) 345,000 8,064,375
-----------
31,448,437
- --------------------------------------------------------------------------------
ENERGY--2.1%
- --------------------------------------------------------------------------------
ENERGY SERVICES--1.7%
Cabot Oil & Gas Corp., Cl. A 260,000 3,753,750
- --------------------------------------------------------------------------------
Cal Dive International, Inc.(1) 5,000 104,375
- --------------------------------------------------------------------------------
Cooper Cameron Corp.(1) 30,000 1,016,250
- --------------------------------------------------------------------------------
Dril-Quip, Inc.(1) 185,000 4,081,562
- --------------------------------------------------------------------------------
Input/Output, Inc.(1) 235,000 1,483,437
- --------------------------------------------------------------------------------
Stolt Comex Seaway SA(1) 726,200 6,989,675
- --------------------------------------------------------------------------------
Stolt Comex Seaway SA, ADR(1) 328,100 2,747,837
-----------
20,176,886
- --------------------------------------------------------------------------------
OIL: DOMESTIC--0.4%
Barrett Resources Corp.(1) 210,000 5,263,125
- --------------------------------------------------------------------------------
FINANCIAL--3.8%
- --------------------------------------------------------------------------------
BANKS--1.4%
CCB Financial Corp. 50,000 2,703,125
- --------------------------------------------------------------------------------
Investors Financial Services Corp. 484,000 13,915,000
-----------
16,618,125
</TABLE>
11 Oppenheimer Discovery Fund
<PAGE> 12
STATEMENT OF INVESTMENTS (Unaudited)(Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
================================================================================
<S> <C> <C>
DIVERSIFIED FINANCIAL--0.1%
Resource America, Inc., Cl. A 180,000 $ 1,552,500
- --------------------------------------------------------------------------------
INSURANCE--2.3%
Annuity & Life RE Holdings Ltd. 500,000 11,437,500
- --------------------------------------------------------------------------------
Berkley (W.R.) Corp. 45,000 1,102,500
- --------------------------------------------------------------------------------
FPIC Insurance Group, Inc.(1) 115,000 4,772,500
- --------------------------------------------------------------------------------
HCC Insurance Holdings, Inc. 200,000 3,850,000
- --------------------------------------------------------------------------------
Medical Assurance, Inc.(1) 173,600 4,860,800
- --------------------------------------------------------------------------------
Scottish Annuity & Life Holdings Ltd.(1) 120,000 1,170,000
-----------
27,193,300
- --------------------------------------------------------------------------------
HEALTHCARE--11.8%
- --------------------------------------------------------------------------------
HEALTHCARE/DRUGS--4.3%
Dentsply International, Inc. 190,000 4,417,500
- --------------------------------------------------------------------------------
Genset, Sponsored ADR(1) 89,700 1,379,138
- --------------------------------------------------------------------------------
Lynx Therapeutics, Inc. (New)(1)(2) 112,500 1,054,688
- --------------------------------------------------------------------------------
Medimmune, Inc.(1) 150,000 8,878,125
- --------------------------------------------------------------------------------
Osteotech, Inc.(1) 135,000 4,640,625
- --------------------------------------------------------------------------------
Protein Design Labs, Inc.(1) 135,000 2,033,438
- --------------------------------------------------------------------------------
Roberts Pharmaceutical Corp.(1) 160,000 3,320,000
- --------------------------------------------------------------------------------
SangStat Medical Corp.(1) 250,000 3,093,750
- --------------------------------------------------------------------------------
Serologicals Corp.(1) 865,000 11,731,563
- --------------------------------------------------------------------------------
Ventana Medical Systems, Inc.(1) 433,000 9,688,375
-----------
50,237,202
- --------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES--7.5%
Albany Molecular Research, Inc.(1) 27,800 695,000
- --------------------------------------------------------------------------------
Aurora Biosciences Corp.(1) 140,000 940,625
- --------------------------------------------------------------------------------
Covance, Inc.(1) 785,000 19,674,063
- --------------------------------------------------------------------------------
EndoSonics Corp.(1) 325,000 2,112,500
- --------------------------------------------------------------------------------
Haemonetics Corp.(1) 300,000 4,706,250
- --------------------------------------------------------------------------------
Hanger Orthopedic Group, Inc.(1) 393,000 5,305,500
- --------------------------------------------------------------------------------
Henry Schein, Inc.(1) 235,862 5,955,516
- --------------------------------------------------------------------------------
Invacare Corp. 295,000 7,172,188
- --------------------------------------------------------------------------------
OrthoLogic Corp.(1) 500,000 1,500,000
- --------------------------------------------------------------------------------
Parexel International Corp.(1) 245,000 5,068,438
- --------------------------------------------------------------------------------
Pediatrix Medical Group, Inc.(1) 160,917 4,525,791
- --------------------------------------------------------------------------------
Pharmaceutical Product Development, Inc.(1) 255,000 8,558,438
- --------------------------------------------------------------------------------
PSS World Medical, Inc.(1) 622,050 5,481,816
- --------------------------------------------------------------------------------
Renal Care Group, Inc.(1) 595,000 11,676,875
- --------------------------------------------------------------------------------
Total Renal Care Holdings, Inc.(1) 350,000 3,850,000
-----------
87,223,000
</TABLE>
12 Oppenheimer Discovery Fund
<PAGE> 13
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
================================================================================
<S> <C> <C>
TECHNOLOGY--28.3%
- --------------------------------------------------------------------------------
COMPUTER HARDWARE--1.7%
Electronics for Imaging, Inc.(1) 70,000 $ 2,730,000
- --------------------------------------------------------------------------------
Network Appliance, Inc.(1) 200,000 10,125,000
- --------------------------------------------------------------------------------
SCM Microsystems, Inc.(1) 95,000 5,771,250
- --------------------------------------------------------------------------------
VideoServer, Inc.(1) 150,000 1,162,500
-----------
19,788,750
- --------------------------------------------------------------------------------
COMPUTER SERVICES--6.4%
ABR Information Services, Inc.(1) 250,000 4,343,750
- --------------------------------------------------------------------------------
Acxiom Corp.(1) 200,000 5,300,000
- --------------------------------------------------------------------------------
Affiliated Computer Services, Inc., Cl. A(1) 270,000 12,352,500
- --------------------------------------------------------------------------------
American Management Systems, Inc.(1) 350,000 11,943,750
- --------------------------------------------------------------------------------
Billing Concepts Corp.(1) 210,000 2,493,750
- --------------------------------------------------------------------------------
Cerner Corp.(1) 205,000 3,292,813
- --------------------------------------------------------------------------------
CMG Information SVS, Inc.(1) 20,000 3,661,250
- --------------------------------------------------------------------------------
Eclipsys Corp.(1) 407,500 8,608,438
- --------------------------------------------------------------------------------
MiningCo.com, Inc.(1) 4,600 411,700
- --------------------------------------------------------------------------------
NCO Group, Inc.(1) 125,000 4,625,000
- --------------------------------------------------------------------------------
OneMain.com, Inc.(1) 205,500 7,449,375
- --------------------------------------------------------------------------------
Priceline.com, Inc.(1) 30,000 2,486,250
- --------------------------------------------------------------------------------
Transaction Systems Architects, Inc., Cl. A(1) 65,000 2,340,000
- --------------------------------------------------------------------------------
Ziff-Davis, Inc.(1) 133,000 4,788,000
-----------
74,096,576
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE--16.2%
Abacus Direct Corp.(1) 115,000 9,430,000
- --------------------------------------------------------------------------------
Aspen Technologies, Inc.(1) 287,900 4,084,581
- --------------------------------------------------------------------------------
Avid Technology, Inc.(1) 65,000 1,133,438
- --------------------------------------------------------------------------------
AXENT Technologies, Inc.(1) 150,000 3,609,375
- --------------------------------------------------------------------------------
BindView Development Corp.(1) 250,000 7,781,250
- --------------------------------------------------------------------------------
CBT Group Public Ltd. Co., Sponsored ADR(1) 70,000 800,625
- --------------------------------------------------------------------------------
Concord Communications, Inc.(1) 134,000 7,638,000
- --------------------------------------------------------------------------------
Descartes Systems Group, Inc. (The)(1) 500,000 3,843,750
- --------------------------------------------------------------------------------
Documentum, Inc.(1) 145,000 2,510,313
- --------------------------------------------------------------------------------
DoubleClick, Inc.(1) 40,000 7,282,500
- --------------------------------------------------------------------------------
Engineering Animation, Inc.(1) 130,000 5,476,250
- --------------------------------------------------------------------------------
Entrust Technologies, Inc.(1) 200,000 6,750,000
- --------------------------------------------------------------------------------
ICG Communications, Inc. 350,000 7,000,000
- --------------------------------------------------------------------------------
Inktomi Corp.(1) 70,000 6,002,500
- --------------------------------------------------------------------------------
Inso Corp.(1) 190,000 1,436,875
- --------------------------------------------------------------------------------
Integrated Systems, Inc.(1) 250,000 3,203,125
- --------------------------------------------------------------------------------
ISS Group, Inc.(1) 70,000 5,565,000
</TABLE>
13 Oppenheimer Discovery Fund
<PAGE> 14
STATEMENT OF INVESTMENTS (Unaudited) (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
================================================================================
<S> <C> <C>
COMPUTER SOFTWARE(CONTINUED)
Legato Systems, Inc.(1) 80,000 $ 4,130,000
- --------------------------------------------------------------------------------
Medical Manager Corp.(1) 200,000 4,625,000
- --------------------------------------------------------------------------------
Micromuse, Inc.(1) 160,000 7,360,000
- --------------------------------------------------------------------------------
MicroStrategy, Inc.(1) 175,000 3,368,750
- --------------------------------------------------------------------------------
Network Solutions, Inc., Cl. A(1) 60,000 6,345,000
- --------------------------------------------------------------------------------
New Era of Networks, Inc.(1) 150,000 10,162,500
- --------------------------------------------------------------------------------
PLATINUM technology International, Inc.(1) 80,000 2,040,000
- --------------------------------------------------------------------------------
Progress Software Corp.(1) 125,000 4,265,625
- --------------------------------------------------------------------------------
Sanchez Computer Associates, Inc.(1) 125,000 2,906,250
- --------------------------------------------------------------------------------
Saville Systems Ireland plc, Sponsored ADR(1) 250,000 3,062,500
- --------------------------------------------------------------------------------
Security Dynamics Technologies, Inc.(1) 35,000 651,875
- --------------------------------------------------------------------------------
Software AG Systems, Inc.(1) 540,000 4,522,500
- --------------------------------------------------------------------------------
Superior Consultant Holdings Corp.(1) 200,000 6,825,000
- --------------------------------------------------------------------------------
Sykes Enterprises, Inc.(1) 300,000 9,693,750
- --------------------------------------------------------------------------------
VeriSign, Inc.(1) 30,000 4,620,000
- --------------------------------------------------------------------------------
Veritas Software Corp.(1) 163,000 13,162,250
- --------------------------------------------------------------------------------
Visio Corp.(1) 590,000 16,593,750
-------------
187,882,332
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--2.8%
Harmonic Lightwaves, Inc.(1) 370,000 10,221,250
- --------------------------------------------------------------------------------
Pittway Corp., Cl. A 800,000 21,200,000
- --------------------------------------------------------------------------------
Tekelec(1) 240,000 1,755,000
-------------
33,176,250
- --------------------------------------------------------------------------------
ELECTRONICS--1.2%
ATMI, Inc.(1) 370,000 7,400,000
- --------------------------------------------------------------------------------
Flextronics International Ltd.(1) 120,000 6,120,000
-------------
13,520,000
- --------------------------------------------------------------------------------
TRANSPORTATION--1.3%
- --------------------------------------------------------------------------------
AIR TRANSPORTATION--0.6%
AHL Services, Inc.(1) 200,000 4,100,000
- --------------------------------------------------------------------------------
Offshore Logistics, Inc.(1) 235,000 2,731,875
-------------
6,831,875
- --------------------------------------------------------------------------------
SHIPPING--0.7%
Avondale Industries, Inc.(1) 280,000 8,260,000
- --------------------------------------------------------------------------------
UTILITIES--0.2%
- --------------------------------------------------------------------------------
GAS UTILITIES--0.2%
Western Gas Resources, Inc. 260,000 1,950,000
-------------
Total Common Stocks (Cost $951,953,202) 1,080,512,650
</TABLE>
14 Oppenheimer Discovery Fund
<PAGE> 15
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
========================================================================================================
<S> <C> <C>
PREFERRED STOCKS--1.8%
AirNet Communications Corp., Series C(2) 250,000 $ 10,945
- --------------------------------------------------------------------------------------------------------
Candescent Technologies Corp., $2.50 Cv., Series D(2) 1,200,000 11,136,000
- --------------------------------------------------------------------------------------------------------
Candescent Technologies Corp., Preferred Stock, Series E(2) 800,000 7,824,000
- --------------------------------------------------------------------------------------------------------
Candescent Technologies Corp., Preferred Stock, Series F(2) 200,000 1,918,000
--------------
Total Preferred Stocks (Cost $10,400,000) 20,888,945
UNITS
========================================================================================================
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------------------------------
Iwerks Entertainment, Inc. Wts., Exp. 7/99 (Cost $0) 16,399 ---
FACE
AMOUNT
========================================================================================================
REPURCHASE AGREEMENTS--3.2%
- --------------------------------------------------------------------------------------------------------
Repurchase agreement with First Chicago Capital Markets, 4.85%,
dated 3/31/99, to be repurchased at $36,904,971 on 4/1/99,
collateralized by U.S. Treasury Nts., 4%--7.875%, 11/30/99--2/15/07,
with a value of $34,105,941, U.S. Treasury Bonds, 8%--10.75%,
2/15/03--11/15/21, with a value of $2,197,401 and U.S. Treasury Bills,
4/8/99--4/22/99, with a value of $1,364,329 (Cost $36,900,000) $36,900,000 36,900,000
- --------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $999,253,202) 98.0% 1,138,301,595
- --------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 2.0 22,725,037
----------- --------------
NET ASSETS 100.0% $1,161,026,632
=========== ==============
</TABLE>
1. Non-income producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
See accompanying Notes to Financial Statements.
15 Oppenheimer Discovery Fund
<PAGE> 16
STATEMENT OF ASSETS AND LIABILITIES March 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
==============================================================================================
<S> <C>
ASSETS
Investments, at value (cost $999,253,202)--see accompanying statement $1,138,301,595
- ----------------------------------------------------------------------------------------------
Cash 21,688
- ----------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 40,511,146
Shares of beneficial interest sold 1,583,858
Interest and dividends 202,205
Other 25,572
-------------
Total assets 1,180,646,064
==============================================================================================
LIABILITIES
Payables and other liabilities:
Investments purchased 13,567,950
Shares of beneficial interest redeemed 3,995,598
Distribution and service plan fees 767,558
Transfer and shareholder servicing agent fees 677,445
Shareholder reports 298,362
Trustees' compensation--Note 1 248,901
Custodian fees 32,349
Other 31,269
--------------
Total liabilities 19,619,432
==============================================================================================
NET ASSETS $1,161,026,632
==============
==============================================================================================
COMPOSITION OF NET ASSETS
Paid-in capital $ 957,417,893
- ----------------------------------------------------------------------------------------------
Accumulated net investment loss (6,675,530)
- ----------------------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 71,235,876
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Note 3 139,048,393
--------------
Net assets $1,161,026,632
==============
</TABLE>
16 Oppenheimer Discovery Fund
<PAGE> 17
<TABLE>
==============================================================================================
<S> <C>
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$841,507,930 and 20,724,235 shares of beneficial interest outstanding) $40.61
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $43.09
- ----------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets
of $249,340,579 and 6,418,975 shares of beneficial interest outstanding) $38.84
- ----------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets
of $30,178,291 and 765,246 shares of beneficial interest outstanding) $39.44
- ----------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $39,999,832 and 971,706 shares of beneficial interest outstanding) $41.16
</TABLE>
See accompanying Notes to Financial Statements.
17 Oppenheimer Discovery Fund
<PAGE> 18
STATEMENT OF OPERATIONS For the Six Months Ended March 31, 1999 (Unaudited)
<TABLE>
============================================================================================
<S> <C>
INVESTMENT INCOME
Interest $ 2,695,007
- --------------------------------------------------------------------------------------------
Dividends 986,229
-----------
Total income 3,681,236
============================================================================================
EXPENSES
Management fees--Note 4 4,361,976
- --------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 1,160,264
Class B 1,384,877
Class C 175,446
- --------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4:
Class A 1,716,888
Class B 500,606
Class C 63,060
Class Y 107,026
- --------------------------------------------------------------------------------------------
Shareholder reports 405,770
- --------------------------------------------------------------------------------------------
Custodian fees and expenses 60,238
- --------------------------------------------------------------------------------------------
Trustees' compensation--Note 1 35,209
- --------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 29,958
- --------------------------------------------------------------------------------------------
Registration and filing fees 17,392
- --------------------------------------------------------------------------------------------
Insurance expenses 9,080
- --------------------------------------------------------------------------------------------
Other 109,814
-----------
Total expenses 10,137,604
Less expenses paid indirectly--Note 4 (25,936)
-----------
Net expenses 10,111,668
============================================================================================
NET INVESTMENT LOSS (6,430,432)
============================================================================================
REALIZED AND UNREALIZED GAIN
Net realized gain on:
Investments 73,412,179
Closing of futures contracts 21,017
-----------
Net realized gain 73,433,196
- --------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 2,448,326
Net realized and unrealized gain 75,881,522
============================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $69,451,090
===========
</TABLE>
See accompanying Notes to Financial Statements.
18 Oppenheimer Discovery Fund
<PAGE> 19
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30,
(UNAUDITED) 1998
================================================================================================================
<S> <C> <C>
OPERATIONS
Net investment loss $ (6,430,432) $ (10,880,476)
- ----------------------------------------------------------------------------------------------------------------
Net realized gain 73,433,196 47,704,048
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 2,448,326 (379,028,136)
-------------- --------------
Net increase (decrease) in net assets resulting from operations 69,451,090 (342,204,564)
================================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net realized gain:
Class A (33,488,065) (24,482,868)
Class B (10,003,994) (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 (123,470,245) (108,272,187)
Class B (19,384,815) 20,865,114
Class C (3,820,588) 1,524,509
Class Y (364,569) 5,570,069
================================================================================================================
NET ASSETS
Total decrease (123,737,055) (454,975,478)
- ----------------------------------------------------------------------------------------------------------------
Beginning of period 1,284,763,687 1,739,739,165
-------------- --------------
End of period (including accumulated net investment losses of
$6,675,530 and $245,098, respectively) $1,161,026,632 $1,284,763,687
============== ==============
</TABLE>
See accompanying Notes to Financial Statements.
19 Oppenheimer Discovery Fund
<PAGE> 20
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------
SIX MONTHS
MONTHS
ENDED
MARCH 31,
1999 YEAR ENDED SEPTEMBER 30,
(UNAUDITED) 1998 1997 1996
====================================================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $40.12 $51.72 $51.19 $43.65
- --------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.16) (.26) (.08) (.13)
Net realized and unrealized
gain (loss) 2.07 (10.37) 4.12 11.26
------ ------ ------ ------
Total income (loss) from
investment operations 1.91 (10.63) 4.04 11.13
- --------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from
net realized gain (1.42) (.97) (3.51) (3.59)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $40.61 $40.12 $51.72 $51.19
====== ====== ====== ======
====================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 4.75% (20.78)% 9.16% 27.76%
====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $841,508 $ 945,972 $1,330,172 $1,160,087
- --------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $962,265 $1,215,780 $1,119,302 $ 937,563
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (0.80)%(5) (0.51)% (0.17)% (0.32)%
Expenses(6) 1.37%(5) 1.18% 1.22% 1.22%
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 26% 82% 69% 80%
</TABLE>
1. For the period from June 1, 1994 (inception of offering) to September 30,
1994.
2. For the period from October 2, 1995 (inception of offering) to September 30,
1996.
3. For the period from April 4, 1994 (inception of offering) to September 30,
1994.
4. 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.
20 Oppenheimer Discovery Fund
<PAGE> 21
<TABLE>
<CAPTION>
CLASS B
- -------------------------- --------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31,
1999 YEAR ENDED SEPTEMBER 30,
1995 1994 (Unaudited) 1998 1997 1996 1995 1994(3)
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
$35.81 $39.90 $38.58 $50.15 $50.10 $43.11 $35.65 $35.65
- --------------------------------------------------------------------------------------------------------------
-- (.11) (.38) (.55) (.23) (.23) (.21) .03
9.46 (2.98) 2.06 (10.05) 3.79 10.81 9.29 (.03)
------ ------ ------ ------ ------ ------ ------ ------
9.46 (3.09) 1.68 (10.60) 3.56 10.58 9.08 --
- --------------------------------------------------------------------------------------------------------------
(1.62) (1.00) (1.42) (.97) (3.51) (3.59) (1.62) --
- --------------------------------------------------------------------------------------------------------------
$43.65 $35.81 $38.84 $38.58 $50.15 $50.10 $43.11 $35.65
====== ====== ====== ====== ====== ====== ====== ======
==============================================================================================================
28.03% (7.91)% 4.34% (21.37)% 8.33% 26.77% 27.04% 0.00%
==============================================================================================================
$798,065 $613,740 $249,341 $265,687 $322,736 $193,637 $75,062 $26,491
- --------------------------------------------------------------------------------------------------------------
$650,903 $588,642 $278,343 $319,197 $233,172 $119,895 $43,301 $12,435
- --------------------------------------------------------------------------------------------------------------
0.00% (0.34)% (1.56)%(5) (1.27)% (0.93)% (1.06)% (0.78)% (1.06)%(5)
1.33% 1.32% 2.12%(5) 1.94% 1.97% 1.99% 2.11% 2.36%(5)
- -------------------------------------------------------------------------------------------------------------------
106% 83% 26% 82% 69% 80% 106% 83%
</TABLE>
5. Annualized.
6. Beginning in fiscal 1995, the expense ratio reflects the effect of gross
expenses paid indirectly by the Fund. Prior year expense ratios have not been
adjusted.
7. 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 March 31, 1999, were $311,466,083 and $455,485,215,
respectively.
21 Oppenheimer Discovery Fund
<PAGE> 22
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
1999 (UNAUDITED) 1998 1997 1996(2)
================================================================================================================
<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) (.41) (.55) (.26) (.21)
Net realized and unrealized
gain (loss) 2.12 (10.19) 3.90 11.33
Total income (loss) from ------ ------ ------ ------
investment operations 1.71 (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 $39.44 $39.15 $50.86 $50.73
====== ====== ====== ======
================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 4.35% (21.34)% 8.39% 27.96%
================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $30,178 $33,441 $41,720 $17,512
- ----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $35,168 $40,501 $26,361 $ 7,109
- ----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (1.56)%(5) (1.25)% (0.92)% (1.00)%(5)
Expenses(6) 2.13%(5) 1.92% 1.94% 2.03%(5)
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 26% 82% 69% 80%
</TABLE>
1. For the period from June 1, 1994 (inception of offering) to September 30,
1994.
2. For the period from October 2, 1995 (inception of offering) to September 30,
1996.
3. For the period from April 4, 1994 (inception of offering) to September 30,
1994.
4. 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.
22 Oppenheimer Discovery Fund
<PAGE> 23
<TABLE>
<CAPTION>
CLASS Y
- ---------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
1999 (UNAUDITED) 1998 1997 1996 1995 1994(1)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
$ 40.63 $52.17 $51.44 $43.74 $35.81 $34.89
- ---------------------------------------------------------------------------------------------------------------
.35 (.09) .02 (.02) (.10) .11
1.60 (10.48) 4.22 11.31 9.65 .81
- --------- ----------- ----------- ----------- ---------- ---------
1.95 (10.57) 4.24 11.29 9.55 .92
- ---------------------------------------------------------------------------------------------------------------
(1.42) (.97) (3.51) (3.59) (1.62) --
- ---------------------------------------------------------------------------------------------------------------
$ 41.16 $40.63 $52.17 $51.44 $43.74 $35.81
========= =========== =========== =========== =========== ==========
===============================================================================================================
4.79% (20.47)% 9.50% 28.09% 28.28% 3.20%
===============================================================================================================
$40,000 $39,664 $45,112 $31,619 $9,394 $194
- ---------------------------------------------------------------------------------------------------------------
$41,555 $44,859 $34,811 $18,563 $3,190 $ 39
- ---------------------------------------------------------------------------------------------------------------
(0.72)%(5) (0.15)% 0.15% (0.04)% 0.03% (0.13)%(5)
1.28%(5) 0.81% 0.89% 0.99% 1.26% 1.41%(5)
- ---------------------------------------------------------------------------------------------------------------
26% 82% 69% 80% 106% 83%
</TABLE>
5. Annualized.
6. Beginning in fiscal 1995, the expense ratio reflects the effect of gross
expenses paid indirectly by the Fund. Prior year expense ratios have not been
adjusted.
7. 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 March 31, 1999, were $311,466,083 and $455,485,215, respectively.
See accompanying Notes to Financial Statements.
23 Oppenheimer Discovery Fund
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (Unaudited)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Discovery Fund (the Fund) is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company. The Fund's investment 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. Class B and Class C shares may be subject to a
contingent deferred sales charge. All classes of shares have identical rights to
earnings, assets and voting privileges, except that each class has its own
expenses directly attributable to that class and exclusive voting rights with
respect to matters affecting that class. Classes A, B and C have separate
distribution and/or service plans. No such plan has been adopted for Class Y
shares. Class B shares will automatically convert to Class A shares six years
after the date of purchase. The following is a summary of significant accounting
policies consistently followed by the Fund.
- --------------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount.
24 Oppenheimer Discovery Fund
<PAGE> 25
================================================================================
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.
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, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
- -------------------------------------------------------------------------------
TRUSTEES' 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 six months ended
March 31, 1999, a provision of $5,108 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 $235,480 as of March 31, 1999.
25 Oppenheimer Discovery Fund
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 fees 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.
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
- -------------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of the recognition of certain foreign currency gains (losses)
as ordinary income (loss) for tax purposes. The character of the distributions
made during the year from net investment income or net realized gains may differ
from its ultimate characterization for federal income tax purposes. Also, due to
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or realized gain
was recorded by the Fund.
- -------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Realized gains and losses on investments and unrealized
appreciation and depreciation are determined on an identified cost basis, which
is the same basis used for federal income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
26 Oppenheimer Discovery Fund
<PAGE> 27
================================================================================
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31, 1999 YEAR ENDED SEPTEMBER 30, 1998
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 4,129,390 $ 170,845,636 10,639,767 $ 517,992,202
Distributions reinvested 780,143 31,868,835 526,371 23,986,669
Redeemed (7,763,805) (326,184,716) (13,305,219) (650,251,058)
------------- ---------------- -------------- ----------------
Net decrease (2,854,272) $(123,470,245) (2,139,081) $(108,272,187)
============= ================ ============== ================
- ----------------------------------------------------------------------------------------------------------------
Class B:
Sold 964,036 $ 38,431,910 2,633,873 $ 124,120,591
Distributions reinvested 249,046 9,752,629 140,314 6,185,059
Redeemed (1,680,539) (67,569,354) (2,323,577) (109,440,536)
------------- ---------------- -------------- ----------------
Net increase (decrease) (467,457) $ (19,384,815) 450,610 $20,865,114
============= ================ ============== ================
- ----------------------------------------------------------------------------------------------------------------
Class C:
Sold 1,077,331 $ 43,315,341 1,067,332 $ 50,776,830
Distributions reinvested 30,536 1,214,123 17,282 773,012
Redeemed (1,196,818) (48,350,052) (1,050,793) (50,025,333)
------------- ---------------- -------------- ----------------
Net increase (decrease) (88,951) $ (3,820,588) 33,821 $ 1,524,509
============= ================ ============== ================
- ---------------------------------------------------------------------------------------------------------------
Class Y:
Sold 267,688 $ 11,256,235 520,524 $ 25,679,544
Distributions reinvested 34,009 1,407,650 18,108 833,135
Redeemed (306,306) (13,028,454) (427,078) (20,942,610)
------------- ---------------- -------------- ----------------
Net increase (decrease) (4,609) $ (364,569) 111,554 $ 5,570,069
============= ================ ============== ================
</TABLE>
===============================================================================
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
As of March 31, 1999, net unrealized appreciation on investments of $139,048,393
was composed of gross appreciation of $273,162,988, and gross depreciation of
$134,114,595.
27 Oppenheimer Discovery Fund
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.75% 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 six months ended March 31, 1999,
was 0.66% of average net assets for each class of shares.
For the six months ended March 31, 1999, commissions (sales charges
paid by investors) on sales of Class A shares totaled $1,062,386, of which
$328,763 was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary
of the Manager, as general distributor, and by an affiliated broker/dealer.
Sales charges advanced to broker/dealers by OFDI on sales of the Fund's Class A,
Class B and Class C shares totaled $123,940, $826,256 and $40,323, respectively.
Amounts paid to an affiliated broker/dealer for Class B and Class C shares were
$120,538 and $2,000, respectively. During the six months ended March 31, 1999,
OFDI received contingent deferred sales charges of $509,805 and $7,482,
respectively, upon redemption of Class B and Class C shares, as reimbursement
for sales commissions advanced by OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund and other Oppenheimer
funds. OFS's total costs of providing such services are allocated ratably to
these funds.
Expenses paid indirectly represent a reduction of custodian fees for
earnings on cash balances maintained by the Fund.
The Fund has adopted a Service Plan for Class A shares to reimburse
OFDI for a portion of its costs incurred in connection with the personal service
and maintenance of shareholder accounts that hold Class A shares. Reimbursement
is made quarterly at an annual rate that may not exceed 0.25% of the average
annual net assets of Class A shares of the Fund. OFDI uses the service fee to
reimburse brokers, dealers, banks and other financial institutions quarterly for
providing personal service and maintenance of accounts of their customers that
hold Class A shares. During the six months ended March 31, 1999, OFDI paid
$94,376 to an affiliated broker/dealer as reimbursement for Class A personal
service and maintenance expenses.
28 Oppenheimer Discovery Fund
<PAGE> 29
================================================================================
The Fund has adopted a Distribution and Service Plan for Class B shares to
reimburse OFDI for its costs in distributing Class B shares and servicing
accounts. Under the Plan, the Fund pays OFDI an annual asset-based sales charge
of 0.75% per year on Class B shares for its services rendered in distributing
Class B shares. OFDI also receives a service fee of 0.25% per year to reimburse
dealers for providing personal services for accounts that hold Class B shares.
Each fee is computed on the average annual net assets of Class B shares,
determined as of the close of each regular business day. During the six months
ended March 31, 1999, OFDI paid $27,277 to an affiliated broker/dealer as
reimbursement for Class B personal service and maintenance expenses and retained
$1,109,485 as reimbursement for Class B sales commissions and service fee
advances, as well as financing costs. If the Plan is terminated by the Fund, the
Board of Trustees may allow the Fund to continue payments of the asset-based
sales charge to OFDI for distributing shares before the Plan was terminated. As
of March 31, 1999, OFDI had incurred excess distribution and servicing costs of
$7,767,388 for Class B.
The Fund has adopted a Distribution and Service Plan for Class C
shares to compensate OFDI for its costs in distributing Class C shares and
servicing accounts. Under the Plan, the Fund pays OFDI an annual asset-based
sales charge of 0.75% per year on Class C shares for its services rendered in
distributing Class C shares. OFDI also receives a service fee of 0.25% per year
to compensate dealers for providing personal services for accounts that hold
Class C shares. Each fee is computed on the average annual net assets of Class C
shares, determined as of the close of each regular business day. During the six
months ended March 31, 1999, OFDI paid $3,655 to an affiliated broker/dealer as
compensation for Class C personal service and maintenance expenses and retained
$99,778 as compensation for Class C sales commissions and service fee advances,
as well as financing costs. If the Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales charge
to OFDI for distributing shares before the Plan was terminated. As of March 31,
1999, OFDI had incurred excess distribution and servicing costs of $456,170 for
Class C.
29 Oppenheimer Discovery Fund
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
================================================================================
5. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates. The Fund may also buy
and sell financial futures. 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 recognizes a realized gain or loss when the contract
is closed or expires.
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 AND RESTRICTED SECURITIES
As of March 31, 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 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 limit. The aggregate value of illiquid or restricted securities
subject to this limitation as of March 31, 1999, was $21,943,633, which
represents 1.89% of the Fund's net assets, of which $20,888,945 is considered
restricted. Information concerning restricted securities is as follows:
<TABLE>
<CAPTION>
VALUATION PER
COST UNIT AS OF
SECURITY ACQUISITION DATE PER UNIT MARCH 31, 1999
- -----------------------------------------------------------------------------------------------------------------
STOCKS & WARRANTS
- -----------------
<S> <C> <C> <C>
AirNet Communications Corp., Series C 7/6/95 $6.00 $ .04
- -----------------------------------------------------------------------------------------------------------------
Candescent Technologies Corp., $2.50 Cv., Series D 3/31/95 2.50 9.28
- -----------------------------------------------------------------------------------------------------------------
Candescent Technologies Corp.,
Preferred Stock, Series E 4/24/96 5.50 9.78
- -----------------------------------------------------------------------------------------------------------------
Candescent Technologies Corp.,
Preferred Stock, Series F 6/11/97 7.50 9.59
</TABLE>
30 Oppenheimer Discovery Fund
<PAGE> 31
================================================================================
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 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the six months ended
March 31, 1999.
31 Oppenheimer Discovery Fund
<PAGE> 32
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
Alan Gilston, Vice President
Jay W. Tracey, III, Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
==============================================================================================
INVESTMENT ADVISOR OppenheimerFunds, Inc.
==============================================================================================
DISTRIBUTOR OppenheimerFunds Distributor, Inc.
==============================================================================================
TRANSFER AND SHAREHOLDER OppenheimerFunds Services
SERVICING AGENT
==============================================================================================
CUSTODIAN OF The Bank of New York
PORTFOLIO SECURITIES
==============================================================================================
INDEPENDENT AUDITORS KPMG LLP
==============================================================================================
LEGAL COUNSEL Gordon Altman Butowsky Weitzen Shalov & Wein
The financial statements included herein have
been taken from the records of the Fund
without examination of the independent
auditors. This is a copy of a report to
shareholders of Oppenheimer Discovery Fund.
This report must be preceded or accompanied by
a Prospectus of Oppenheimer Discovery Fund.
For material information concerning the Fund,
see the Prospectus.
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>
32 Oppenheimer Discovery Fund
<PAGE> 33
OPPENHEIMERFUNDS FAMILY
<TABLE>
===============================================================================================================
<S> <C> <C>
REAL ASSET FUNDS
- ---------------------------------------------------------------------------------------------------------------
Real Asset Fund Gold & Special Minerals Fund
===============================================================================================================
GLOBAL STOCK FUNDS
- ---------------------------------------------------------------------------------------------------------------
Developing Markets Fund International Growth Fund Global Growth & Income Fund
International Small Global Fund Europe Fund
Company Fund Quest Global Value Fund
===============================================================================================================
STOCK FUNDS
- ---------------------------------------------------------------------------------------------------------------
Enterprise Fund MidCap Fund Growth Fund
Discovery Fund Capital Appreciation Fund Large Cap Growth Fund
Quest Small Cap Value Fund Quest Capital Value Fund Disciplined Value Fund
Quest Value Fund
===============================================================================================================
STOCK & BOND FUNDS
- ---------------------------------------------------------------------------------------------------------------
Main Street Growth & Total Return Fund Multiple Strategies Fund
Income Fund(1) Quest Balanced Disciplined Allocation Fund
Quest Opportunity Value Fund Convertible Securities Fund
Value Fund Capital Income Fund(2)
===============================================================================================================
TAXABLE BOND FUNDS
- ---------------------------------------------------------------------------------------------------------------
International Bond Fund Champion Income Fund U.S. Government Trust
World Bond Fund Strategic Income Fund Limited-Term Government Fund
High Yield Fund Bond Fund
===============================================================================================================
MUNICIPAL BOND FUNDS
- ---------------------------------------------------------------------------------------------------------------
California Municipal Fund(3) Pennsylvania Municipal Fund(3) Rochester Division:
Florida Municipal Fund(3) Municipal Bond Fund Rochester Fund Municipals
New Jersey Municipal Fund(3) Insured Municipal Fund Limited Term New York
New York Municipal Fund(3) Intermediate Municipal Fund Municipal Fund
===============================================================================================================
MONEY MARKET FUNDS(4)
- ---------------------------------------------------------------------------------------------------------------
Money Market Fund Cash Reserves
</TABLE>
1. The Fund's name was changed from "Oppenheimer Main Street Income & Growth
Fund" on 12/22/98.
2. The Fund's name was changed from "Oppenheimer Equity Income Fund" on 4/1/99.
3. Available only to investors 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, NY 10048-0203.
(C) Copyright 1999 OppenheimerFunds, Inc. All rights reserved.
33 Oppenheimer Discovery Fund
<PAGE> 34
[This page intentionally left blank.]
<PAGE> 35
INTERNET
24-hr access to account
information. Online
transactions now available
WWW.OPPENHEIMERFUNDS.COM
GENERAL INFORMATION
Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
1-800-525-7048
ACCOUNT TRANSACTIONS
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1-800-852-8457
PHONELINK
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1-800-533-3310
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INFORMATION HOTLINE
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1-800-835-3104
INFORMATION AND SERVICES
- ------------------------------------------------------------------------------
As an Oppenheimer fund shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing
simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling
our toll-free Telephone Transactions number or by visiting our website. And, by
enrolling in AccountLink, a convenient service that "links" your Oppenheimer
funds accounts and your bank checking or savings account, you can use the
Telephone Transactions number or website to make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the Oppenheimer funds' transfer agent,
OppenheimerFunds Services, with their Award of Excellence in 1993.
So call us today, or visit us at our website at
www.oppenheimerfunds.com--we're here to help.
[OPPENHEIMERFUNDS LOGO]
RS0500.001.0399 May 28, 1999
