<PAGE> 1
[PHOTO]
ANNUAL REPORT SEPTEMBER 30, 2000
Oppenheimer
DISCOVERY FUND
[OPPENHEIMERFUNDS LOGO]
THE RIGHT WAY TO INVEST
<PAGE> 2
REPORT HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Contents
<S> <C>
1 President's Letter
3 An Interview
with Your Fund's
Manager
7 Fund Performance
11 FINANCIAL
STATEMENTS
34 INDEPENDENT
AUDITORS' REPORT
35 Federal
Income Tax
Information
36 Officers and Trustees
</TABLE>
Our investment strategy enabled us to discover SUPERIOR OPPORTUNITIES IN A WIDE
RANGE OF SECTORS IN ADDITION TO TECHNOLOGY.
TECHNOLOGY, THE FUND'S LARGEST INVESTMENT SECTOR, chalked up large gains during
the first half of the period, but many tech stocks gave up some of their earlier
gains after mid-March 2000. HEALTHCARE AND ENERGY STOCKS provided strong returns
throughout the period.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS*
For the 1-Year Period
Ended 9/30/00
Class A
Without With
Sales Chg. Sales Chg.
--------------------------------------------------------------------------------
<S> <C>
62.15% 52.83%
Class B
Without With
Sales Chg. Sales Chg.
--------------------------------------------------------------------------------
60.95% 55.95%
Class C
Without With
Sales Chg. Sales Chg.
--------------------------------------------------------------------------------
60.95% 59.95%
Class Y
--------------------------------------------------------------------------------
62.68%
--------------------------------------------------------------------------------
</TABLE>
*SEE NOTES ON PAGE 10 FOR FURTHER DETAILS
<PAGE> 3
PRESIDENT'S LETTER
--------------------------------------------------------------------------------
[PHOTO]
BRIDGET A. MACASKILL
PRESIDENT
OPPENHEIMER
DISCOVERY FUND
Dear Shareholder,
Over the past several decades, our investment teams have learned the
importance of avoiding complacency when it comes to navigating the financial
markets--especially when times are good. Right now, times appear particularly
good. The U.S. economy is in its tenth year of expansion. In the bond market,
U.S. Treasury issues have been performing favorably over the past year. In
addition, despite volatility in the second quarter, the stock market has been
providing attractive returns from a wide spectrum of industry sectors,
capitalization ranges and investment styles.
We have arrived at this juncture after months of monitoring the rapid
pace of global economic growth and its implications for inflation, as well as
the Federal Reserve Board's evolving monetary policy. At this point, economic
indicators suggest a dampening of short-term inflationary pressures. While
recent increases in oil prices are certainly taking their toll, we don't
believe this signals a return to 1970's-style inflation. Accordingly, if the
Fed continues in its diligence, the economy could maintain its healthy rate
of growth.
In the bond market, the achievement of a federal budget surplus has
prompted the Treasury to buy back many of its long-term securities. The
resulting supply shortage boosted these securities' returns, causing an
inversion of the yield curve-- an unusual situation in which shorter term
Treasuries yield more than their longer term counterparts. Other bond sectors
are offering many opportunities in the form of attractive valuations.
Perhaps most important is that we have begun to see encouraging signs in
the stock market. Formerly high-flying Internet stocks have generally come
down to earth, and investors have begun to refocus on companies with
strong business fundamentals and justifiable valuations. Investors have
also returned to long-neglected, value-oriented companies.
1 OPPENHEIMER DISCOVERY FUND
<PAGE> 4
PRESIDENT'S LETTER
--------------------------------------------------------------------------------
What else do these various trends tell us? They tell us that the ability
to discriminate between long-term potential and short-lived fads has become
more critical than ever. Trying to generate good long-term performance
requires tracking the best companies through intensive research, combined
with hard-earned experience.
At OppenheimerFunds, our seasoned portfolio management teams fight
complacency by remaining constantly aware of the risks that face the economy
and financial markets. Virtually anything could affect the overall markets--a
surge in inflation, a decline in productivity, deteriorating corporate
earnings, or even the new Administration's proposals regarding tax reform,
healthcare and Social Security. However, by remaining vigilant in our quest
for fundamentally sound businesses, we believe we can find good investments
that can weather market volatility.
In this environment, we encourage you to consult your financial advisor
and to stay on track with your long-term financial plan. For our part, we
will continue to monitor the opportunities and risks ever present in the
financial markets. Thank you for your confidence in OppenheimerFunds, The
Right Way to Invest.
Sincerely,
/s/BRIDGET A. MACASKILL
Bridget A. Macaskill
October 20, 2000
THESE GENERAL MARKET VIEWS REPRESENT OPINIONS OF OPPENHEIMERFUNDS, INC.
AND ARE NOT INTENDED TO PREDICT OR DEPICT PERFORMANCE OF THE SECURITIES
MARKETS OR ANY PARTICULAR FUND. SPECIFIC DISCUSSION, AS IT APPLIES TO
YOUR FUND, IS CONTAINED IN THE PAGES THAT FOLLOW. STOCKS AND BONDS HAVE
DIFFERENT TYPES OF INVESTMENT RISKS; STOCKS ARE SUBJECT TO MARKET
VOLATILITY AND BONDS ARE SUBJECT TO CREDIT AND INTEREST RATE RISKS.
2 OPPENHEIMER DISCOVERY FUND
<PAGE> 5
AN INTERVIEW WITH YOUR FUND'S MANAGER
--------------------------------------------------------------------------------
[PHOTO]
PORTFOLIO MANAGEMENT
TEAM(L TO R)
STEPHEN ROSEMAN
IAN HOROWITZ
JAYNE STEVLINGSON
(PORTFOLIO MANAGER)
TOLOMY ERPF
HOW WOULD YOU CHARACTERIZE THE FUND'S PERFORMANCE DURING THE FISCAL YEAR
THAT ENDED SEPTEMBER 30, 2000?
A. We are pleased with the Fund's strong performance. Despite an
exceptionally volatile period for equity markets, our disciplined focus on
small-cap growth stocks enabled us to deliver a strongly positive total
return to investors. The Fund's Class A shares generated a 62.15% average
annual total return, without sales charge, for the period that ended
September 30, 2000, outperforming benchmarks for the same one-year period.
The Russell 2000 Index produced a 23.39% return, and the S&P 500 Index
produced a 13.28% return.(1)
We attribute these returns to our success in investing in several of the
market's best performing stocks during the first half of the period, when
market strength was at its height. Although many of our holdings suffered
sharp declines later in the period, those declines remained smaller, on
average, than our earlier gains.
WHAT MADE THIS SUCH A VOLATILE PERIOD?
Throughout the period, investors struggled to weigh the positive impact of
encouraging economic data against the negative impact of rising interest
rates. In late 1999 and early 2000, equity markets were driven higher by
continued strength in the U.S. economy, low rates of inflation, growing
evidence of global economic recovery and diminishing fears of Y2K-related
problems.
1. The Russell 2000 Index is a capitalization-weighted index of 2,000 U.S.
issuers whose common stocks are traded on the New York and American Stock
Exchanges and Nasdaq, and is widely recognized as a measure of the
performance of "mid-capitalization" stocks. The S&P 500 Index is a
broad-based index of equity securities widely regarded as a general measure
of the performance of the U.S. equity securities market. The Fund's returns
at 9/30/00 include results for periods of exceptional market performance that
are not typical of historical results. You should not expect those growth
rates to continue.
3 OPPENHEIMER DISCOVERY FUND
<PAGE> 6
AN INTERVIEW WITH YOUR FUND'S MANAGER
--------------------------------------------------------------------------------
"Technology represented the Fund's largest investment sector and contributed
significantly to our positive performance"
On the other hand, interest rate hikes by the Federal Reserve Board ("the
Fed") threatened corporate profitability and heightened concerns about the
potential for rising inflation.
As the Fed continued to raise interest rates in 2000, many segments of
the market sagged. Yet, despite interest rate concerns, investors remained
willing to pay increasingly rising prices for the high-growth potential of
many technology-related stocks. Market strength became concentrated in
technology stocks, driving the valuations of these companies to very high
levels by March 2000.
In March 2000, interest rate concerns finally took their toll on
technology stocks, causing many of the highest flying stocks in the
sector to fall rapidly. Investors showed renewed concern about company
fundamentals and profitability, shifting the focus of market strength from
growth-to value-oriented stocks in April and May. From June through
September, however, better-than-expected corporate earnings reports--along
with preliminary signs that U.S. economic growth might be slowing in response
to the Fed's measures--bolstered investor confidence and gave new impetus to
the broad markets. A number of sectors participated in this rally, including
technology, energy and healthcare.
HOW DID YOU MANAGE THE FUND IN LIGHT OF THESE CONDITIONS?
The investment environment over the past year illustrates the tremendous
volatility that can affect the small-cap market, particularly in the
technology sector. We saw many stocks more than double in value during the
first half of the period, only to fall by 50% or more after mid-March 2000.
Our goal, as always, was to maximize the Fund's performance over the long
term while carefully managing risk through a disciplined investment strategy.
Accordingly, we thoroughly evaluated each company that met our basic
investment criteria, looking for those issuers with superior fundamentals, a
strong competitive position and the proven ability to carry out their
business plans.
4 OPPENHEIMER DISCOVERY FUND
<PAGE> 7
<TABLE>
<CAPTION>
------------------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
For the Periods Ended 9/30/00(2)
<S> <C> <C>
Class A
1-Year 5-Year 10-Year
------------------------------------------------
52.83% 13.51% 18.42%
Class B Since
1-Year 5-Year Inception
------------------------------------------------
55.95% 13.75% 14.84%
Class C Since
1-Year 5-Year Inception
------------------------------------------------
59.95% N/A 14.24%
Class Y Since
1-Year 5-Year Inception
------------------------------------------------
62.68% 15.20% 16.89%
------------------------------------------------
</TABLE>
We found such companies in many sectors of the economy during the
reporting period. Technology represented the Fund's largest investment sector
and contributed significantly to our positive performance, especially from
September 1999 through early March 2000. Within technology, we focused on
both software and hardware companies at the forefront of emerging industries.
On the software side, our best performers included several well-established
companies, such as Documentum, Inc., Sybase, Inc., and Manugistics Group,
Inc., that are successfully implementing Internet strategies. Among hardware
companies, we emphasized telecommunications and consumer-related
manufacturers, including fiber optic component suppliers and makers of
semi-conductor chips for consumer electronics.
Our investment strategy also enabled us to discover superior
opportunities in a wide range of other sectors. Healthcare, our
second-largest investment sector, provided strong returns throughout the
period. We scored successes with a wide range of healthcare-related stocks,
including managed care providers such as Trigon Healthcare, Inc., diagnostic
laboratories, and biotechnology firms in advanced stages of the drug-approval
process, such as Protein Design Labs, Inc. and CV Therapeutics, Inc. In
addition, we took advantage of rising energy prices and declining gas
reserves with investments in several drilling, pipeline and energy service
companies.
WHAT IS YOUR OUTLOOK FOR THE FUND AND THE SMALL-CAP MARKET OVER THE COMING
MONTHS?
While the U.S. economy remains strong, the rate of U.S. economic growth has
moderated in recent months. As a result, the Federal Reserve Board avoided
raising interest rates at its June 2000 meeting for the first time in several
months. Equity markets have generally responded positively to these
developments. Although small-cap growth stocks have been slower to recover
2.See notes on page 10 for further details.
5 OPPENHEIMER DISCOVERY FUND
<PAGE> 8
AN INTERVIEW WITH YOUR FUND'S MANAGER
--------------------------------------------------------------------------------
SECTOR ALLOCATION(3)
[PIECHART]
<TABLE>
<S> <C>
-Technology
Computer
Software 14.7%
Electronics 10.7
Computer
Hardware 6.2
Computer
Services 5.0
Communications
Equipment 2.9
-Healthcare 21.1
-Capital Goods 9.6
-Consumer
Cyclicals 9.1
-Energy 8.9
-Financial 4.6
-Consumer
Staples 4.4
-Communication
Services 1.7
-Utilities 1.1
</TABLE>
--------------------------------------------------------------------------------
from their 2000 lows than their large- and mid-cap counterparts, we believe
that an environment of continued, moderate economic growth bodes well for
this sector.
Fundamentally, we continue to believe that small-cap stocks offer
outstanding investment opportunities over the long term. The accelerating
pace of change in the commercial arena--evident in the growth of the
Internet, the expansion of global telecommunications services and
developments in biotechnology--is creating vast new opportunities for small
companies to grow rapidly into large ones. That's why we remain dedicated to
our strategy of disciplined small company investing, and why we believe
Oppenheimer Discovery Fund remains part of The Right Way to Invest.
<TABLE>
<CAPTION>
TOP TEN COMMON STOCK HOLDINGS(4)
..................................................
<S> <C>
Documentum, Inc. 2.1%
..................................................
Veeco Instruments, Inc. 1.4
..................................................
Protein Design Labs, Inc. 1.4
..................................................
Cirrus Logic, Inc. 1.3
..................................................
HNC Software, Inc. 1.2
..................................................
Benchmark Electronics, Inc. 1.1
..................................................
Sybase, Inc. 1.1
..................................................
CV Therapeutics, Inc. 1.1
..................................................
Manugistics Group, Inc. 1.1
..................................................
Investors Financial Services Corp. 1.0
..................................................
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE COMMON STOCK INDUSTRIES(4)
..................................................
<S> <C>
Healthcare/Drugs 17.5%
..................................................
Computer Software 13.3
..................................................
Electronics 9.7
..................................................
Manufacturing 5.7
..................................................
Computer Hardware 5.6
..................................................
</TABLE>
3. Portfolio is subject to change. Percentages are as of September 30, 2000, and
are based on total market value of common stock investments.
4. Portfolio is subject to change. Percentages are as of September 30, 2000, and
are based on net assets.
6 OPPENHEIMER DISCOVERY FUND
<PAGE> 9
FUND PERFORMANCE
--------------------------------------------------------------------------------
HOW HAS THE FUND PERFORMED? Below is a discussion by OppenheimerFunds, Inc.
of the Fund's performance during its fiscal year ended September 30, 2000,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index and a sector index.
MANAGEMENT'S DISCUSSION OF PERFORMANCE. During the fiscal year that ended
September 30, 2000, the U.S. economy enjoyed robust growth, but rising
interest rates undercut the performance of equity markets. As a result, the
Fund's stocks experienced an exceptionally volatile 12-month period. Many of
the Fund's technology stocks rose sharply from September 1999 to early March
2000. In late March and April, technology stocks were hurt by rising interest
rates, and gave up a portion of their earlier gains. However, healthcare and
energy stocks delivered strong returns throughout the period, helping to
balance losses in the technology sector. The Fund's portfolio holdings,
allocations and strategies are subject to change.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show
the performance of a hypothetical $10,000 investment in Class A, Class B,
Class C and Class Y shares of the Fund held until September 30, 2000. In the
case of Class A shares, performance is measured for a ten-year period. In the
case of Class B shares, performance is measured from the inception of the
class on April 4, 1994. In the case of Class C shares, performance is
measured from the inception of the class on October 2, 1995 and in the case
of Class Y shares, from the inception of the class on June 1, 1994. The
Fund's performance reflects the deduction of the maximum initial sales charge
on Class A shares, the applicable contingent deferred sales charge on Class B
and Class C shares, and reinvestments of all dividends and capital gains
distributions.
The Fund's performance is compared to the performance of the Standard &
Poor's (S&P) 500 Index and the Russell 2000 Index. The S&P 500 Index is a
broad-based index of equity securities widely regarded as a general measure
of the performance of the U.S. equity securities market. The Russell 2000
Index is a capitalization-weighted index of 2,000 U.S. issuers whose common
stocks are traded on the New York and American Stock Exchanges and Nasdaq,
and is widely recognized as a measure of the performance of
mid-capitalization stocks.
Index performance reflects the reinvestment of dividends but does not
consider the effect of capital gains or transaction costs, and none of the
data in the graphs that follow shows the effect of taxes. The Fund's
performance reflects the effects of Fund business and operating expenses.
While index comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited to
the securities in the indices shown.
7 OPPENHEIMER DISCOVERY FUND
<PAGE> 10
FUND PERFORMANCE
--------------------------------------------------------------------------------
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
--Oppenheimer Discovery Fund (Class A)
-- S&P 500 Index *** Russell 2000 Index
[The following table was originally a line graph in the printed materials.]
<TABLE>
<CAPTION>
Date Oppenheimer S&P 500 Index Russell 2000 Index
<S> <C> <C> <C>
09/30/90 9425 10000 10000
12/31/91 9860 10895 10506
03/31/91 12417 12475 13630
06/30/91 12159 12445 13414
09/30/91 14315 13109 14512
12/31/91 16990 14207 15311
03/31/92 17077 13849 16493
06/30/92 15133 14112 15364
09/30/92 15992 14557 15807
12/31/92 19816 15288 18169
03/31/93 19384 15955 18945
06/30/93 20277 16032 19361
09/03/93 23011 16445 21054
12/31/93 23352 16826 21599
03/31/94 21511 16189 21024
06/30/94 19387 16256 20201
09/30/94 21192 17050 21605
12/31/94 20741 17074 21205
03/31/95 21987 18705 22184
06/30/95 23519 20488 24264
09/30/95 27130 22115 26660
12/31/95 28371 23445 27238
03/31/96 30206 24703 28628
06/30/96 33835 25810 30060
09/30/96 34661 26608 30162
12/31/96 32568 28824 31731
03/31/97 28332 29599 30090
06/30/97 33578 34761 34968
09/30/97 37835 37365 40173
12/31/97 35941 38438 38827
03/31/98 39953 43795 42732
06/30/98 38138 45249 40740
09/30/98 29972 40759 32533
12/31/98 35223 49430 37838
03/31/99 31396 51892 35786
06/30/99 34349 55543 41351
09/30/99 33445 52084 38737
12/31/99 53297 59827 45881
03/31/00 61289 61197 49131
06/30/00 53370 59572 47274
09/30/00 54231 58994 47797
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS A SHARES OF THE fUNDS AT 9/30/00(1)
1-YEAR 52.83% 5-YEAR 13.51% 10-YEAR 18.42%
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
--Oppenheimer Discovery Fund (Class B)
-- S&P 500 Index *** Russell 2000 Index
[The following table was originally a line graph in the printed materials.]
<TABLE>
<CAPTION>
Date Oppenheimer S&P 500 Index Russell 2000 Index
<S> <C> <C> <C>
04/04/94 10000 10000 10000
06/30/94 9167 10042 9606
09/30/94 10000 10532 10276
12/31/94 9772 10530 10086
03/31/95 10335 11554 10552
06/30/95 11036 12656 11541
09/30/95 12704 13661 12681
12/31/95 13257 14482 12956
03/31/96 14090 15259 13617
06/30/96 15751 15943 14298
09/30/96 16105 16436 14347
12/31/96 15101 17805 15093
03/31/97 13118 18284 14313
06/30/97 15515 21473 16633
09/30/97 17446 23081 19108
12/31/97 16542 23743 18468
03/31/98 18355 27053 20326
06/30/98 17488 27951 19378
09/30/98 13719 25177 15474
12/31/98 16090 30534 17998
03/31/99 14313 32054 17022
06/30/99 15633 34310 19669
09/30/99 15190 32173 18425
12/31/99 24162 36956 21823
03/30/00 27737 37802 23369
06/30/00 24151 36798 22468
09/30/00 24541 36442 22734
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS B SHARES OF THE FUNDS AT 9/30/00(1)
1-YEAR 55.95% 5-YEAR 13.75% LIFE 14.84%
1. See page 10 for further details
8 OPPENHEIMER DISCOVERY FUND
<PAGE> 11
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
-- Oppenheimer Discovery Fund (Class C)
-- S&P 500 Index ***Russell 2000 Index
[The following table was originally a line graph in the printed materials.]
<TABLE>
<CAPTION>
Date Oppenheimer S&P 500 Index Russell 2000 Index
<S> <C> <C> <C>
10/02/95 10000 10000 10000
12/31/95 10536 10602 10217
03/31/96 11194 11170 10738
06/30/96 12516 11671 11275
09/30/96 12796 12032 11313
12/31/96 11998 13034 11902
03/31/97 10422 13384 11287
06/30/97 12328 15719 13116
09/30/97 13869 16896 15068
12/31/97 13152 17381 14564
03/31/98 14595 19804 16029
06/30/98 13904 20461 15281
09/30/98 10909 18431 12203
12/31/98 12792 22352 14193
03/31/99 11383 23465 13423
06/30/99 12431 25116 15510
09/30/99 12079 23552 14530
12/31/99 19210 27053 17210
03/31/00 22053 27673 18429
06/30/00 19170 26938 17732
09/30/00 19440 26677 17928
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS C SHARES OF THE FUNDS AT 9/30/00(1)
1-YEAR 59.95% LIFE 14.24%
CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
--Oppenheimer Discovery Fund (Class Y)
-- S&P 500 Index *** Russell 2000 Index
[The following table was originally a line graph in the printed materials.]
<TABLE>
<CAPTION>
Date Oppenheimer S&P 500 Index Russell 2000 Index
<S> <C> <C> <C>
06/01/94 10000 10000 10000
06/30/94 9438 9755 9660
12/31/94 10115 10230 10141
03/31/95 10726 11224 10609
06/30/95 11483 12294 11609
09/30/95 13238 13271 12749
12/31/95 13855 14069 13026
03/31/96 14761 14824 13690
06/30/96 16545 15489 14375
09/30/96 16957 15967 14424
12/31/96 15944 17297 15174
03/31/97 13883 17762 14390
06/30/97 16464 20860 16722
09/30/97 18568 22422 19211
12/31/97 17657 23066 18568
03/31/98 19649 26281 20435
06/30/98 18769 27154 19482
09/30/98 14767 24459 15558
12/31/98 17351 29663 18095
03/31/99 15475 31140 17113
06/30/99 16937 33331 19775
09/30/99 16513 31255 18524
12/31/99 26324 35902 21941
03/31/00 30291 36724 23495
06/30/00 26411 35748 22607
09/30/00 26861 35402 22857
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS B SHARES OF THE FUNDS AT 9/30/00(1)
1-YEAR 62.68% 5-YEAR 15.20% LIFE 16.89%
THE PERFORMANCE INFORMATION FOR BOTH INDICES IN THE GRAPHS BEGINS ON 9/30/90 FOR
CLASS A, 3/31/94 FOR CLASS B, 9/30/95 FOR CLASS C AND 5/31/94 FOR CLASS Y.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. GRAPHS ARE NOT DRAWN
TO THE SAME SCALE.
9 OPPENHEIMER DISCOVERY FUND
<PAGE> 12
NOTES
--------------------------------------------------------------------------------
IN REVIEWING PERFORMANCE AND RANKINGS, PLEASE REMEMBER THAT PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. THE FUND'S RETURNS
AT 9/30/00 INCLUDE RESULTS FOR PERIODS OF EXCEPTIONAL MARKET PERFORMANCE THAT
ARE NOT TYPICAL OF HISTORICAL RESULTS. YOU SHOULD NOT EXPECT THOSE GROWTH RATES
TO CONTINUE. BECAUSE OF ONGOING MARKET VOLATILITY, THE FUND'S PERFORMANCE HAS
BEEN SUBJECT TO SUBSTANTIAL SHORT-TERM FLUCTUATIONS AND CURRENT PERFORMANCE MAY
BE LESS THAN THE RESULTS SHOWN. FOR QUARTERLY UPDATES ON THE FUND'S
PERFORMANCE, PLEASE CONTACT YOUR FINANCIAL ADVISOR, CALL US AT 1.800.525.7048
OR VISIT OUR WEBSITE AT WWW.OPPENHEIMERFUNDS.COM.
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Fund's total returns shown
do not show the effects of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or gains paid by the Fund
or any gains you may realize if you sell your shares.
CLASS A shares were first publicly offered on 9/11/86. Unless otherwise noted,
Class A returns include the current maximum initial sales charge of 5.75%. The
Fund's maximum sales charge for Class A shares was lower prior to 4/4/91, so
actual performance may have been higher.
CLASS B shares of the Fund were first publicly offered on 4/4/94. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 2% (5-year). Because Class B shares convert to
Class A shares 72 months after purchase, the "life of class" return for Class B
uses Class A performance for the period after conversion. Class B shares are
subject to an annual 0.75% asset-based sales charge.
CLASS C shares of the Fund were first publicly offered on 10/2/95. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS Y shares of the Fund were first publicly offered on 6/1/94. Class Y shares
are offered only to certain institutional investors under special agreement with
the Distributor.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
10 OPPENHEIMER DISCOVERY FUND
<PAGE> 13
STATEMENT OF INVESTMENTS SEPTEMBER 30, 2000
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
-------------------------------------------------------------------------------------------
COMMON STOCKS--90.5%
-------------------------------------------------------------------------------------------
CAPITAL GOODS--8.7%
-------------------------------------------------------------------------------------------
<S> <C> <C>
AEROSPACE/DEFENSE--0.5%
Hexcel Corp.(1) 345,000 $ 4,614,375
-------------------------------------------------------------------------------------------
Teledyne Technologies, Inc.(1) 141,500 4,121,187
---------------
8,735,562
-------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--1.1%
Benchmark Electronics, Inc.(1) 400,000 20,800,000
-------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES--1.4%
Forrester Research, Inc.(1) 100,000 6,375,000
-------------------------------------------------------------------------------------------
Iron Mountain, Inc. 380,000 14,060,000
-------------------------------------------------------------------------------------------
Tetra Tech,Inc.(1) 200,000 5,712,500
---------------
26,147,500
-------------------------------------------------------------------------------------------
MANUFACTURING--5.7%
ATMI, Inc.(1) 235,000 5,493,125
-------------------------------------------------------------------------------------------
Coherent, Inc.(1) 240,000 16,320,000
-------------------------------------------------------------------------------------------
FSI International, Inc.(1) 445,500 6,348,375
-------------------------------------------------------------------------------------------
Photon Dynamics, Inc.(1) 95,200 3,593,800
-------------------------------------------------------------------------------------------
Plexus Corp.(1) 80,000 5,640,000
-------------------------------------------------------------------------------------------
PRI Automation, Inc.(1) 369,700 6,747,025
-------------------------------------------------------------------------------------------
RadiSys Corp.(1) 88,900 4,495,006
-------------------------------------------------------------------------------------------
Rudolph Technologies, Inc.(1) 129,600 4,333,500
-------------------------------------------------------------------------------------------
Three-Five Systems, Inc.(1) 350,000 10,237,500
-------------------------------------------------------------------------------------------
Veeco Instruments, Inc.(1) 250,000 26,566,406
-------------------------------------------------------------------------------------------
Zygo Corp.(1) 192,800 16,773,600
--------------
106,548,337
-------------------------------------------------------------------------------------------
COMMUNICATION SERVICES--1.5%
-------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-LONG DISTANCE--0.4%
Cosine Communications, Inc.(1) 20,400 1,133,475
-------------------------------------------------------------------------------------------
Lexent, Inc.(1) 105,000 3,123,750
-------------------------------------------------------------------------------------------
Powertel, Inc.(1) 35,000 2,662,187
-------------
6,919,412
-------------------------------------------------------------------------------------------
TELEPHONE UTILITIES--0.2%
Choice One Communications, Inc.(1) 340,400 4,148,625
-------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-WIRELESS--0.9%
Leap Wireless International, Inc.(1) 115,000 7,194,687
-------------------------------------------------------------------------------------------
Metricom, Inc.(1) 150,000 3,862,500
-------------------------------------------------------------------------------------------
Pinnacle Holdings, Inc.(1) 103,000 2,742,375
-------------------------------------------------------------------------------------------
Proxim, Inc.(1) 81,100 3,608,950
-------------
17,408,512
</TABLE>
11 OPPENHEIMER DISCOVERY FUND
<PAGE> 14
STATEMENT OF INVESTMENTS Continued
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
-------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--8.3%
-------------------------------------------------------------------------------------------
CONSUMER SERVICES--0.9%
-------------------------------------------------------------------------------------------
<S> <C> <C>
Getty Images, Inc.(1) 305,000 $ 9,283,437
-------------------------------------------------------------------------------------------
Heidrick & Struggles International, Inc.(1) 65,000 3,339,375
-------------------------------------------------------------------------------------------
Macrovision Corp.(1) 60,000 4,860,000
-------------
17,482,812
-------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--1.6%
Anchor Gaming(1) 201,800 16,055,712
-------------------------------------------------------------------------------------------
Orient-Express Hotel Ltd.(1) 225,000 4,331,250
-------------------------------------------------------------------------------------------
Station Casinos, Inc.(1) 710,900 10,130,325
-------------
30,517,287
-------------------------------------------------------------------------------------------
MEDIA--1.0%
ACNielsen Corp.(1) 200,100 4,764,881
-------------------------------------------------------------------------------------------
Penton Media, Inc. 235,000 6,462,500
-------------------------------------------------------------------------------------------
True North Communications, Inc. 200,000 7,150,00
-------------
18,377,381
-------------------------------------------------------------------------------------------
RETAIL: SPECIALTY--3.1%
Factory 2-U Stores, Inc.(1) 220,000 6,723,750
-------------------------------------------------------------------------------------------
Footstar, Inc.(1) 150,000 4,846,875
-------------------------------------------------------------------------------------------
Hot Topic, Inc.(1) 280,000 8,400,000
-------------------------------------------------------------------------------------------
Skechers U.S.A., Inc., Cl. A(1) 251,000 3,796,375
-------------------------------------------------------------------------------------------
Tech Data Corp.(1) 320,000 13,680,000
-------------------------------------------------------------------------------------------
Tweeter Home Entertainment Group, Inc.(1) 110,000 3,994,375
-------------------------------------------------------------------------------------------
Venator Group, Inc.(1) 600,000 7,425,000
-------------------------------------------------------------------------------------------
Yankee Candle, Inc. (The)(1) 391,000 7,868,875
-------------
56,735,250
--------------------------------------------------------------------------------------------
TEXTILE/APPAREL & HOME FURNISHINGS--1.7%
Abercrombie & Fitch Co., Cl. A(1) 614,400 11,712,000
-------------------------------------------------------------------------------------------
Kenneth Cole Productions, Inc., Cl. A(1) 138,200 4,880,187
-------------------------------------------------------------------------------------------
Liz Claiborne, Inc. 220,000 8,470,000
-------------------------------------------------------------------------------------------
Too, Inc.(1) 250,000 5,937,500
------------
30,999,687
-------------------------------------------------------------------------------------------
CONSUMER STAPLES--4.0%
-------------------------------------------------------------------------------------------
Sirius Satellite Radio, Inc.(1) 244,000 12,901,500
-------------------------------------------------------------------------------------------
XM Satellite Radio Holdings, Inc.(1) 280,700 12,087,644
---------------
24,989,144
</TABLE>
12 OPPENHEIMER DISCOVERY FUND
<PAGE> 15
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
-------------------------------------------------------------------------------------------
<S> <C> <C>
EDUCATION--0.9%
Career Education Corp.(1) 189,700 $ 8,441,650
-------------------------------------------------------------------------------------------
Corinthian Colleges, Inc.(1) 146,800 8,661,200
-------------------------------------------------------------------------------------------
17,102,850
-------------------------------------------------------------------------------------------
ENTERTAINMENT--0.5%
California Pizza Kitchen, Inc.(1) 39,100 1,094,800
-------------------------------------------------------------------------------------------
P.F. Chang's China Bistro, Inc.(1) 232,500 8,035,781
----------------
9,130,581
FOOD--0.5%
Performance Food Group Co.(1) 259,800 9,774,975
-------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--0.7%
Pathmark Stores, Inc.(1) 414,600 5,104,762
-------------------------------------------------------------------------------------------
Whole Foods Market, Inc.(1) 150,000 8,053,125
---------------
13,157,887
-------------------------------------------------------------------------------------------
ENERGY--8.1%
-------------------------------------------------------------------------------------------
ENERGY SERVICES--3.8%
Cross Timbers Oil Co. 798,900 15,328,894
-------------------------------------------------------------------------------------------
Dril-Quip, Inc.(1) 219,100 8,736,612
-------------------------------------------------------------------------------------------
Hanover Compressor Co.(1) 160,000 5,270,000
-------------------------------------------------------------------------------------------
Marine Drilling Cos., Inc.(1) 300,300 8,577,319
-------------------------------------------------------------------------------------------
Parker Drilling Co.(1) 991,900 6,943,300
-------------------------------------------------------------------------------------------
Pride International, Inc.(1) 420,000 11,130,000
-------------------------------------------------------------------------------------------
Proton Energy Systems, Inc.(1) 13,100 374,987
-------------------------------------------------------------------------------------------
Tidewater, Inc. 329,200 14,978,600
---------------
71,339,712
-------------------------------------------------------------------------------------------
OIL: DOMESTIC--3.3%
Devon Energy Corp. 200,000 12,030,000
-------------------------------------------------------------------------------------------
Forest Oil Corp.(1) 275,000 4,451,562
-------------------------------------------------------------------------------------------
Frontier Oil Corp.(1) 450,000 3,318,750
-------------------------------------------------------------------------------------------
Key Energy Services, Inc.(1) 570,000 5,593,125
-------------------------------------------------------------------------------------------
Louis Dreyfus Natural Gas Corp.(1) 391,000 15,493,375
-------------------------------------------------------------------------------------------
Noble Affiliates, Inc. 200,000 7,425,000
-------------------------------------------------------------------------------------------
Stone Energy Corp.(1) 145,000 7,975,000
-------------------------------------------------------------------------------------------
Vintage Petroleum, Inc. 200,000 4,550,000
---------------
60,836,812
------------------------------------------------------------------------------------------
OIL: INTERNATIONAL--1.0%
Precision Drilling Corp.(1) 150,000 5,343,750
-------------------------------------------------------------------------------------------
Rio Alto Exploration Ltd.(1) 275,000 5,848,731
-------------------------------------------------------------------------------------------
Talisman Energy, Inc.(1) 185,000 6,485,943
---------------
17,678,424
</TABLE>
13 OPPENHEIMER DISCOVERY FUND
<PAGE> 16
STATEMENT OF INVESTMENTS Continued
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
-------------------------------------------------------------------------------------------
FINANCIAL--4.2%
-------------------------------------------------------------------------------------------
<S> <C> <C>
BANKS--2.0%
Commerce Bancorp, Inc. 149,200 $ 8,681,575
------------------------------------------------------------------------------------------
East West Bancorp, Inc. 197,500 3,863,594
------------------------------------------------------------------------------------------
Investors Financial Services Corp. 300,000 18,937,500
------------------------------------------------------------------------------------------
Silicon Valley Bancshares(1) 100,000 5,823,437
------------
37,306,106
-------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--1.9%
AmeriCredit Corp.(1) 198,400 5,716,400
-------------------------------------------------------------------------------------------
ChoicePoint, Inc.(1) 300,000 13,762,500
-------------------------------------------------------------------------------------------
eSPEED, Inc., Cl. A(1) 247,600 7,041,125
-------------------------------------------------------------------------------------------
LaBranche & Co., Inc.(1) 265,700 8,867,737
-------------
35,387,762
-------------------------------------------------------------------------------------------
INSURANCE--0.3%
Annuity & Life RE Holdings Ltd. 120,000 2,895,000
-------------------------------------------------------------------------------------------
London Pacific Group Ltd., Sponsored ADR 150,000 2,981,250
-----------
5,876,250
-------------------------------------------------------------------------------------------
HEALTHCARE--19.0%
-------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS--17.5%
3 Dimensional Pharmaceuticals, Inc.(1) 56,800 2,044,800
-------------------------------------------------------------------------------------------
Accredo Health, Inc.(1) 217,700 10,640,087
-------------------------------------------------------------------------------------------
Alexion Pharmaceuticals, Inc.(1) 67,500 7,695,000
-------------------------------------------------------------------------------------------
Alpharma, Inc., Cl. A 140,000 8,557,500
-------------------------------------------------------------------------------------------
AmeriSource Health Corp., Cl. A(1) 263,000 12,361,000
-------------------------------------------------------------------------------------------
Arena Pharmaceuticals, Inc.(1) 82,300 3,538,900
-------------------------------------------------------------------------------------------
Aviron(1) 219,400 12,793,762
-------------------------------------------------------------------------------------------
Barr Laboratories, Inc.(1) 100,000 6,631,250
-------------------------------------------------------------------------------------------
Caremark Rx, Inc.(1) 1,680,200 18,902,250
-------------------------------------------------------------------------------------------
Cell Genesys, Inc.(1) 330,000 9,900,000
-------------------------------------------------------------------------------------------
Cell Therapeutics, Inc.(1) 23,400 1,560,487
-------------------------------------------------------------------------------------------
Charles River Laboratories International, Inc.(1) 260,200 8,846,800
-------------------------------------------------------------------------------------------
Ciphergen Biosystems, Inc.(1) 80,700 2,582,400
-------------------------------------------------------------------------------------------
Coventry Health Care, Inc.(1) 298,300 4,511,787
-------------------------------------------------------------------------------------------
Cubist Pharmaceuticals, Inc.(1) 80,000 4,165,000
-------------------------------------------------------------------------------------------
CuraGen Corp.(1) 328,500 17,502,891
-------------------------------------------------------------------------------------------
CV Therapeutics, Inc.(1) 257,500 20,028,672
-------------------------------------------------------------------------------------------
Dendrite International, Inc.(1) 189,700 5,086,331
-------------------------------------------------------------------------------------------
Dura Pharmaceuticals, Inc.(1) 150,000 5,306,250
</TABLE>
14 OPPENHEIMER DISCOVERY FUND
<PAGE> 17
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
-------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE/DRUGS Continued
Dusa Pharmaceuticals, Inc.(1) 285,000 $ 8,781,563
-------------------------------------------------------------------------------------------
Eden Bioscience Corp.(1) 69,400 2,290,200
-------------------------------------------------------------------------------------------
Enzon, Inc.(1) 250,000 16,500,000
-------------------------------------------------------------------------------------------
Illumina, Inc.(1) 20,800 943,800
-------------------------------------------------------------------------------------------
Inhale Therapeutic Systems, Inc.(1) 310,000 17,476,250
-------------------------------------------------------------------------------------------
Inspire Pharmaceuticals, Inc.(1) 113,600 3,408,000
-------------------------------------------------------------------------------------------
Laboratory Corp. of America Holdings, Inc.(1) 135,000 16,166,250
-------------------------------------------------------------------------------------------
Matrix Pharmaceutical, Inc.(1) 287,000 4,466,438
-------------------------------------------------------------------------------------------
Neose Technologies, Inc.(1) 150,000 7,256,250
-------------------------------------------------------------------------------------------
Protein Design Labs, Inc.(1) 210,000 25,305,000
-------------------------------------------------------------------------------------------
Regeneron Pharmaceuticals, Inc.(1) 150,000 4,893,750
-------------------------------------------------------------------------------------------
RehabCare Group, Inc.(1) 85,000 3,612,500
-------------------------------------------------------------------------------------------
Rosetta Inpharmatics, Inc.(1) 119,700 3,338,508
-------------------------------------------------------------------------------------------
SurModics, Inc.(1) 198,800 10,884,300
-------------------------------------------------------------------------------------------
Syncor International Corp.(1) 120,000 4,417,500
-------------------------------------------------------------------------------------------
Trigon Healthcare, Inc.(1) 355,400 18,680,713
-------------------------------------------------------------------------------------------
XOMA Ltd.(1) 1,1244,400 16,233,525
------------
327,309,714
-------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES--1.5%
PhotoMedex, Inc.(1) 200,000 2,575,000
-------------------------------------------------------------------------------------------
PolyMedica Corp.(1) 140,000 6,002,500
-------------------------------------------------------------------------------------------
Province Healthcare Co.(1) 337,500 13,478,906
-------------------------------------------------------------------------------------------
Triad Hospitals, Inc.(1) 220,000 6,462,500
-----------
28,518,906
-------------------------------------------------------------------------------------------
TECHNOLOGY--35.7%
-------------------------------------------------------------------------------------------
COMPUTER HARDWARE--5.6%
Artesyn Technologies, Inc.(1) 331,600 9,657,850
-------------------------------------------------------------------------------------------
Avid Technology, Inc.(1) 1,156,900 16,196,600
-------------------------------------------------------------------------------------------
Cobalt Networks, Inc.(1) 200,000 11,575,000
-------------------------------------------------------------------------------------------
Creo Products, Inc.(1) 100,000 3,400,000
-------------------------------------------------------------------------------------------
Handspring, Inc.(1) 226,700 15,656,469
-------------------------------------------------------------------------------------------
Mentor Graphics Corp.(1) 732,700 17,264,244
-------------------------------------------------------------------------------------------
Pixelworks, Inc.(1) 97,900 4,668,606
-------------------------------------------------------------------------------------------
Quantum Corp./DLT & Storage Systems Group(1) 1,002,100 15,094,131
-------------------------------------------------------------------------------------------
Read-Rite Corp.(1) 732,500 8,240,625
-------------------------------------------------------------------------------------------
Silicon Storage Technology, Inc.(1) 100,000 2,718,750
------------
104,472,275
</TABLE>
15 OPPENHEIMER DISCOVERY FUND
<PAGE> 18
STATEMENT OF INVESTMENTS Continued
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
-------------------------------------------------------------------------------------------
<S> <C> <C>
COMPUTER SERVICES--4.5%
Clarent Corp.(1) 120,000 $ 4,725,000
-------------------------------------------------------------------------------------------
Eclipsys Corp.(1) 199,600 3,193,600
-------------------------------------------------------------------------------------------
Elastic Networks, Inc.(1) 112,100 1,562,394
-------------------------------------------------------------------------------------------
HNC Software, Inc.(1) 274,700 22,473,894
-------------------------------------------------------------------------------------------
OmniSky Corp.(1) 313,800 6,374,063
-------------------------------------------------------------------------------------------
Packeteer, Inc.(1) 150,000 5,690,625
-------------------------------------------------------------------------------------------
Shaw Communications, Inc., Cl. B 337,950 7,749,086
-------------------------------------------------------------------------------------------
SmartForce plc, Sponsored ADR(1) 210,000 9,948,750
-------------------------------------------------------------------------------------------
SynQuest, Inc.(1) 342,300 4,492,688
-------------------------------------------------------------------------------------------
WebEx Communications, Inc.(1) 268,200 9,889,875
-------------------------------------------------------------------------------------------
WorldGate Communications, Inc.(1) 408,400 8,576,400
---------------
84,676,375
-------------------------------------------------------------------------------------------
COMPUTER SOFTWARE--13.3%
Adept Technology, Inc.(1) 77,900 4,094,619
-------------------------------------------------------------------------------------------
Advanced Digital Information Corp.(1) 648,200 9,844,538
-------------------------------------------------------------------------------------------
Advent Software, Inc.(1) 80,000 5,590,000
-------------------------------------------------------------------------------------------
Aspen Technologies, Inc.(1) 151,200 6,822,900
-------------------------------------------------------------------------------------------
Avant! Corp.(1) 300,000 5,475,000
-------------------------------------------------------------------------------------------
Caminus Corp.(1) 449,900 17,883,525
-------------------------------------------------------------------------------------------
Cognos, Inc.(1) 185,000 7,538,750
-------------------------------------------------------------------------------------------
Concurrent Computer Corp.(1) 515,800 9,800,200
-------------------------------------------------------------------------------------------
Corsair Communications, Inc.(1) 400,000 3,125,000
-------------------------------------------------------------------------------------------
Descartes Systems Group, Inc. (The)(1) 152,400 7,543,800
-------------------------------------------------------------------------------------------
Documentum, Inc.(1) 485,000 39,375,938
-------------------------------------------------------------------------------------------
Genomica Corp.(1) 144,500 2,808,719
-------------------------------------------------------------------------------------------
Informatica Corp.(1) 100,000 9,325,000
-------------------------------------------------------------------------------------------
Interactive Intelligence, Inc.(1) 100,000 3,931,250
-------------------------------------------------------------------------------------------
Interwoven, Inc.(1) 130,000 14,698,125
-------------------------------------------------------------------------------------------
Liberate Technologies, Inc.(1) 372,200 10,770,538
-------------------------------------------------------------------------------------------
Manugistics Group, Inc.(1) 200,000 19,625,000
-------------------------------------------------------------------------------------------
NetIQ Corp.(1) 205,000 13,465,938
-------------------------------------------------------------------------------------------
Peregrine Systems, Inc.(1) 316,400 5,991,825
-------------------------------------------------------------------------------------------
Precise Software Solutions Ltd.(1) 5,000 215,625
-------------------------------------------------------------------------------------------
Quest Software, Inc.(1) 120,000 7,453,125
-------------------------------------------------------------------------------------------
RSA Security, Inc.(1) 175,000 7,546,875
-------------------------------------------------------------------------------------------
SignalSoft Corp.(1) 49,200 1,998,750
-------------------------------------------------------------------------------------------
SonicWALL, Inc.(1) 278,000 7,923,000
</TABLE>
16 OPPENHEIMER DISCOVERY FUND
<PAGE> 19
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
-------------------------------------------------------------------------------------------
<S> <C> <C>
COMPUTER SOFTWARE Continued
Sybase, Inc.(1) 900,000 $ 20,700,000
-------------------------------------------------------------------------------------------
Verity, Inc.(1) 130,000 4,639,375
-------------
248,187,415
-------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--2.6%
Computer Network Technology Corp.(1) 320,200 13,069,375
-------------------------------------------------------------------------------------------
Plantronics, Inc.(1) 300,000 11,400,000
-------------------------------------------------------------------------------------------
Polycom, Inc.(1) 200,000 13,393,750
-------------------------------------------------------------------------------------------
Tut Systems, Inc.(1) 130,000 11,220,625
------------
49,083,750
-------------------------------------------------------------------------------------------
ELECTRONICS--9.7%
ACT Manufacturing, Inc.(1) 174,800 9,220,700
-------------------------------------------------------------------------------------------
Alpha Industries, Inc.(1) 300,000 10,218,750
-------------------------------------------------------------------------------------------
Cirrus Logic, Inc.(1) 597,400 24,082,688
-------------------------------------------------------------------------------------------
DDi Corp./CA(1) 50,000 2,212,500
-------------------------------------------------------------------------------------------
DSP Group(1) 200,000 7,475,000
-------------------------------------------------------------------------------------------
Elantec Semiconductor, Inc.(1) 74,400 7,412,100
-------------------------------------------------------------------------------------------
Galileo Technology Ltd.(1) 176,900 5,616,575
-------------------------------------------------------------------------------------------
Intersil Holding Corp.(1) 190,900 9,521,138
-------------------------------------------------------------------------------------------
Lattice Semiconductor Corp.(1) 310,000 16,662,500
-------------------------------------------------------------------------------------------
Merix Corp.(1) 170,000 11,018,125
-------------------------------------------------------------------------------------------
Methode Electronics, Inc., Cl. A 200,000 8,862,500
-------------------------------------------------------------------------------------------
MIPS Technologies, Inc., Cl. A(1) 125,000 5,750,000
-------------------------------------------------------------------------------------------
MMC Networks, Inc.(1) 77,500 9,803,750
-------------------------------------------------------------------------------------------
Oak Technology, Inc.(1) 510,000 13,961,250
-------------------------------------------------------------------------------------------
Park Electrochemical Corp. 98,400 5,473,500
-------------------------------------------------------------------------------------------
Semtech Corp.(1) 300,000 12,937,500
-------------------------------------------------------------------------------------------
SMTC Corp.(1) 76,100 1,636,150
-------------------------------------------------------------------------------------------
Supertex, Inc.(1) 121,200 6,105,450
-------------------------------------------------------------------------------------------
TTM Technologies, Inc.(1) 74,400 1,748,400
-------------------------------------------------------------------------------------------
Virata Corp.(1) 177,900 11,763,638
-------------
181,482,214
</TABLE>
17 OPPENHEIMER DISCOVERY FUND
<PAGE> 20
STATEMENT OF INVESTMENTS Continued
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES--1.0%
---------------------------------------------------------------------------------------------------------------
GAS UTILITIES--1.0%
Equitable Resources, Inc. 228,100 $ 14,455,838
---------------------------------------------------------------------------------------------------------------
Western Gas Resources, Inc. 175,000 4,385,938
----------------
18,841,776
----------------
Total Common Stocks (Cost $1,349,953,336) 1,689,973,293
===============================================================================================================
PREFERRED STOCKS--1.1%
Candescent Technologies Corp., $2.50 Cv., Series D(1),(2) 1,200,000 11,136,000
---------------------------------------------------------------------------------------------------------------
Candescent Technologies Corp., Sr. Exchangeable, Series E(1),(2) 800,000 7,824,000
---------------------------------------------------------------------------------------------------------------
Candescent Technologies Corp., Sr. Exchangeable, Series F(1),(2) 200,000 1,918,000
----------------
20,878,000
Total Preferred Stocks (Cost $8,900,000)
PRINCIPAL
AMOUNT
---------------------------------------------------------------------------------------------------------------
SHORT-TERM NOTES--2.7%
CIT Group, Inc., 6.49%, 10/2/00 $ 25,000,000 24,995,493
---------------------------------------------------------------------------------------------------------------
New Center Asset Trust, 6.52%, 10/19/00 25,000,000 24,918,500
----------------
Total Short-Term Notes (Cost $49,913,993) 49,913,993
---------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--6.2%
Repurchase agreement with Banc One Capital Markets, Inc., 6.45%,
dated 9/29/00, to be repurchased at $115,026,794 on 10/2/00,
collateralized by U.S. Treasury Bonds, 5.25%-15.75%, 11/15/01-5/15/30,
with a value of $49,014,759, U.S. Treasury Nts., 4.25%-8.50%,
11/15/00-11/15/08, with a value of $68,345,451 and U.S. Treasury Bills,
11/9/00, with a value of $23,552 (Cost $114,965,000) 114,965,000 114,965,000
---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $1,523,732,329) 100.5% 1,875,730,286
---------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.5) (8,472,107)
---------------------------------------
NET ASSETS 100.0% $1,867,258,179
=======================================
</TABLE>
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income-producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 OPPENHEIMER DISCOVERY FUND
<PAGE> 21
STATEMENT OF ASSETS AND LIABILITIES September 30, 2000
<TABLE>
-----------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at value (cost $1,523,732,329)--see accompanying statement $ 1,875,730,286
-----------------------------------------------------------------------------------------------
Cash 2,160,748
-----------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 49,920,567
Shares of beneficial interest sold 3,653,002
Interest and dividends 119,785
Other 458,432
--------------
Total assets 1,932,042,820
-----------------------------------------------------------------------------------------------
LIABILITIES
Payables and other liabilities:
Investments purchased 44,574,975
Shares of beneficial interest redeemed 17,945,736
Distribution and service plan fees 1,052,320
Transfer and shareholder servicing agent fees 287,063
Trustees' compensation 283,816
Other 640,731
--------------
Total liabilities 64,784,641
-----------------------------------------------------------------------------------------------
NET ASSETS $ 1,867,258,179
==============
-----------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital $ 1,156,239,386
-----------------------------------------------------------------------------------------------
Accumulated net investment loss (250,694)
-----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions 359,271,530
-----------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign currencies 351,997,957
---------------
NET ASSETS $ 1,867,258,179
===============
</TABLE>
19 OPPENHEIMER DISCOVERY FUND
<PAGE> 22
STATEMENT OF ASSETS AND LIABILITIES Continued
<TABLE>
<S> <C>
----------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$1,286,297,575 and 19,265,911 shares of beneficial interest outstanding) $66.77
Maximum offering price per share (net asset value plus sales charge of 5.75% of
offering price) $70.84
---------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $423,689,431
and 6,726,524 shares of beneficial interest outstanding) $62.99
----------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $70,140,296
and 1,095,952 shares of beneficial interest outstanding) $64.00
----------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $87,130,877 and 1,280,254 shares of beneficial interest outstanding) $68.06
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 OPPENHEIMER DISCOVERY FUND
<PAGE> 23
STATEMENT OF OPERATIONS For the Year Ended September 30, 2000
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest $ 10,494,605
------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $2,297) 930,958
------------
Total income 11,425,563
------------------------------------------------------------------------------------------------
EXPENSES
Management fees 10,861,232
------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 2,843,155
Class B 3,713,228
Class C 551,071
------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 2,191,302
Class B 683,589
Class C 97,635
Class Y 65,049
------------------------------------------------------------------------------------------------
Custodian fees and expenses 102,655
------------------------------------------------------------------------------------------------
Trustees' compensation 89,101
------------------------------------------------------------------------------------------------
Other 1,111,336
------------
Total expenses 22,309,353
Less expenses paid indirectly (65,372)
------------
Net expenses 22,243,981
------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (10,818,418)
------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 473,743,645
Foreign currency transactions (171,938)
Net realized gain 473,571,707
------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 145,851,515
Translation of assets and liabilities denominated in foreign currencies (309,252)
------------
Net change 145,542,263
------------
Net realized and unrealized gain 619,113,970
------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $608,295,552
============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21 OPPENHEIMER DISCOVERY FUND
<PAGE> 24
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 2000 1999
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment loss $(10,818,418) $(10,452,859)
----------------------------------------------------------------------------------------------------------------
Net realized gain 473,571,707 79,072,011
----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 145,542,263 69,855,627
------------------------------------
Net increase in net assets resulting from operations 608,295,552 138,474,779
----------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net realized gain:
Class A (48,950,971) (33,486,062)
Class B (15,499,580) (10,003,098)
Class C (1,945,396) (1,248,219)
Class Y (2,425,868) (1,407,650)
----------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Class A 134,098,247 (265,166,206)
Class B 87,560,981 (58,016,597)
Class C 29,719,349 (8,383,628)
Class Y 34,700,391 (3,821,532)
----------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease) 825,552,705 (243,058,213)
----------------------------------------------------------------------------------------------------------------
Beginning of period 1,041,705,474 1,284,763,687
------------------------------------
End of period (including accumulated net investment
loss of $250,694 and $234,171, respectively) $1,867,258,179 $1,041,705,474
====================================
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 OPPENHEIMER DISCOVERY FUND
<PAGE> 25
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A YEAR ENDED SEPTEMBER 30, 2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $43.26 $40.12 $51.72 $51.19 $43.65
----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.32) (.28) (.26) (.08) (.13)
Net realized and unrealized gain (loss) 26.72 4.84 (10.37) 4.12 11.26
--------------------------------------------------------------------
Total income (loss) from
investment operations 26.40 4.56 (10.63) 4.04 11.13
----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain (2.89) (1.42) (.97) (3.51) (3.59)
----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $66.77 $43.26 $40.12 $51.72 $51.19
====================================================================
TOTAL RETURN, AT NET ASSET VALUE(1) 62.15% 11.59% (20.78)% 9.16% 27.76%
----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $1,286 $750 $946 $1,330 $1,160
----------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $1,176 $875 $1,216 $1,119 $938
----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment loss (0.47)% (0.69)% (0.51)% (0.17)% (0.32)%
Expenses 1.15% 1.31% 1.18%(3) 1.22%(3) 1.22%(3)
----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 224% 73% 82% 69% 80%
</TABLE>
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 OPPENHEIMER DISCOVERY FUND
<PAGE> 26
FINANCIAL HIGHLIGHTS Continued
<TABLE>
<CAPTION>
CLASS B YEAR ENDED SEPTEMBER 30, 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $41.22 $38.58 $50.15 $50.10 $43.11
-----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.47) (.85) (.55) (.23) (.23)
Net realized and unrealized gain (loss) 25.13 4.91 (10.05) 3.79 10.81
Total income (loss) from
investment operations 24.66 4.06 (10.60) 3.56 10.58
-----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain (2.89) (1.42) (.97) (3.51) (3.59)
-----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $62.99 $41.22 $38.58 $50.15 $50.10
===========================================================
-----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 60.95% 10.73% (21.37)% 8.33% 26.77%
-----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $424 $225 $266 $323 $194
-----------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $372 $257 $319 $233 $120
-----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment loss (1.22)% (1.45)% (1.27)% (0.93)% (1.06)%
Expenses 1.90% 2.07% 1.94%(3) 1.97%(3) 1.99%(3)
-----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 224% 73% 82% 69% 80%
</TABLE>
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 OPPENHEIMER DISCOVERY FUND
<PAGE> 27
<TABLE>
<CAPTION>
CLASS C YEAR ENDED SEPTEMBER 30, 2000 1999 1998 1997 1996(1)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $41.85 $39.15 $50.86 $50.73 $43.20
----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.24) (.85) (.55) (.26) (.21)
Net realized and unrealized gain (loss) 25.28 4.97 (10.19) 3.90 11.33
---------------------------------------------------
Total income (loss) from
investment operations 25.04 4.12 (10.74) 3.64 11.12
----------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain (2.89) (1.42) (.97) (3.51) (3.59)
----------------------------------------------------------------------------------------------------------
Net asset value, end of period $64.00 $41.85 $39.15 $50.86 $50.73
====================================================
----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 60.95% 10.73% (21.34)% 8.39% 27.96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $70 $27 $33 $42 $18
----------------------------------------------------------------------------------------------------------
Average net assets (in millions) $55 $32 $41 $26 $7
Ratios to average net assets:(3)
Net investment loss (1.20)% (1.45)% (1.25)% (0.92)% (1.00)%
Expenses 1.90% 2.07% 1.92%(4) 1.94%(4) 2.03%(4)
----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 224% 73% 82% 69% 80%
</TABLE>
1. For the period from October 2, 1995 (inception of offering) to September 30,
1996.
2. 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.
3. Annualized for periods of less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 OPPENHEIMER DISCOVERY FUND
<PAGE> 28
FINANCIAL HIGHLIGHTS Continued
<TABLE>
<CAPTION>
CLASS Y YEAR ENDED SEPTEMBER 30, 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $43.92 $40.63 $52.17 $51.44 $43.74
--------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.30) (.17) (.09) .02 (.02)
Net realized and unrealized gain (loss) 27.33 4.88 (10.48) 4.22 11.31
-------------------------------------------------------
Total income (loss) from
investment operations 27.03 4.71 (10.57) 4.24 11.29
--------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain (2.89) (1.42) (.97) (3.51) (3.59)
--------------------------------------------------------------------------------------------------------------
Net asset value, end of period $68.06 $43.92 $40.63 $52.17 $51.44
========================================================
--------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(1) 62.68% 11.82% (20.47)% 9.50% 28.09%
--------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $87 $39 $40 $45 $32
--------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $77 $41 $45 $35 $19
--------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income (loss) (0.11)% (0.48)% (0.15)% 0.15% (0.04)%
Expenses 0.80% 1.11% 0.81%(3) 0.89%(3) 0.99%(3)
--------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 224% 73% 82% 69% 80%
</TABLE>
1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 OPPENHEIMER DISCOVERY FUND
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS
===============================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Discovery Fund (the Fund) is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment objective is to seek 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 at their offering price, which is normally net asset value plus a
front-end sales charge. Class B and Class C shares are sold without a front-end
sales charge but may be subject to a contingent deferred sales charge (CDSC).
Class Y shares are sold to certain institutional investors without either a
front-end sales charge or a CDSC. All classes of shares have identical rights
to earnings, assets and voting privileges, except that each class has its own
expenses directly attributable to that class and exclusive voting rights with
respect to matters affecting that class. Classes A, B and C have separate
distribution and/or service plans. No such plan has been adopted for Class Y
shares. Class B shares will automatically convert to Class A shares six years
after the date of purchase. The following is a summary of significant
accounting policies consistently followed by the Fund.
--------------------------------------------------------------------------------
SECURITIES VALUATION. Securities listed or traded on National Stock Exchanges
or other domestic or foreign exchanges are valued based on the last sale price
of the security traded on that exchange prior to the time when the Fund's
assets are valued. In the absence of a sale, the security is valued at the last
sale price on the prior trading day, if it is within the spread of the closing
bid and asked prices, and if not, at the closing bid price. Securities
(including restricted securities) for which quotations are not readily
available are valued primarily using dealer-supplied valuations, a portfolio
pricing service authorized by the Board of Trustees, or at their fair value.
Fair value is determined in good faith under consistently applied procedures
under the supervision of the Board of Trustees. Short-term "money market type"
debt securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
--------------------------------------------------------------------------------
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.
27 OPPENHEIMER DISCOVERY FUND
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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 an unfunded retirement plan for
the Fund's independent Board of Trustees. Benefits are based on years of
service and fees paid to each trustee during the years of service. During the
year ended September 30, 2000, a provision of $27,443 was made for the Fund's
projected benefit obligations and payments of $10,918 were made to retired
trustees, resulting in an accumulated liability of $252,850 as of September 30,
2000.
The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all or
a portion of annual compensation they are entitled to receive from the Fund.
Under the plan, the compensation deferred is periodically adjusted as though an
equivalent amount had been invested for the Board of Trustees in shares of one
or more Oppenheimer funds selected by the trustee. The amount paid to the Board
of Trustees 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 investment income per share.
--------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
28 OPPENHEIMER DISCOVERY FUND
<PAGE> 31
--------------------------------------------------------------------------------
CLASSIFICATION OF DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Net investment
income (loss) and net realized gain (loss) may differ for financial statement
and tax purposes. The character of dividends and distributions made during the
fiscal 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 dividends and distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or realized
gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended September 30, 2000, amounts have been reclassified to reflect an
increase in paid-in capital of $101,090,271, a decrease in accumulated net
investment loss of $10,801,895, and a decrease in accumulated net realized gain
on investments of $111,892,166. This reclassification includes $101,090,271
distributed in connection with Fund share redemptions which increased paid-in
capital and reduced accumulated net realized gain. Net assets of the Fund were
unaffected by the reclassifications.
--------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENTS. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
--------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the dividend if
such information is obtained subsequent to 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.
29 OPPENHEIMER DISCOVERY FUND
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 2000 YEAR ENDED SEPTEMBER 30, 1999
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Sold 10,572,195 $ 700,492,924 7,340,366 $ 305,832,917
Dividends and/or
distributions reinvested 835,171 47,755,057 780,123 31,868,038
Redeemed (9,489,580) (614,149,734) (14,350,871) (602,867,161)
--------------------------------------------------------------------
Net increase (decrease) 1,917,786 $134,098,247 (6,230,382) $(265,166,206)
====================================================================
------------------------------------------------------------------------------------------------------------------------------------
CLASS B
Sold 3,332,677 $ 214,014,951 1,771,225 $ 70,895,318
Dividends and/or
distributions reinvested 279,543 15,170,839 249,023 9,751,761
Redeemed (2,336,781) (141,624,809) (3,455,595) (138,663,676)
--------------------------------------------------------------------
Net increase (decrease) 1,275,439 $ 87,560,981 (1,435,347) $ (58,016,597)
====================================================================
------------------------------------------------------------------------------------------------------------------------------------
CLASS C
Sold 1,784,337 $ 112,381,786 1,894,040 $ 76,754,870
Dividends and/or
distributions reinvested 34,336 1,893,313 30,536 1,214,123
Redeemed (1,377,721) (84,555,750) (2,123,773) (86,352,621)
-------------------------------------------------------------------
Net increase (decrease) 440,952 $ 29,719,349 (199,197) $(8,383,628)
===================================================================
------------------------------------------------------------------------------------------------------------------------------------
CLASS Y
Sold 1,639,835 $ 118,744,235 453,623 $ 19,236,361
Dividends and/or
distributions reinvested 41,732 2,425,868 34,009 1,407,649
Redeemed (1,293,525) (86,469,712) (571,735) (24,465,542)
-------------------------------------------------------------------
Net increase (decrease) 388,042 $ 34,700,391 (84,103) $ (3,821,532)
===================================================================
====================================================================================================================================
</TABLE>
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended September 30, 2000, were
$3,634,297,821 and $3,327,383,050, respectively.
As of September 30, 2000, unrealized appreciation (depreciation) based on cost
of securities for federal income tax purposes of $1,528,354,760 was:
Gross unrealized appreciation $ 412,482,160
Gross unrealized depreciation (65,106,634)
--------------
Net unrealized appreciation $ 347,375,526
=============
30 OPPENHEIMER DISCOVERY FUND
<PAGE> 33
================================================================================
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with
the investment advisory agreement with the Fund which provides for a fee of
0.75% of the first $200 million of average annual net assets, 0.72% of the next
$200 million, 0.69% of the next $200 million, 0.66% of the next $200 million,
0.60% of the next $700 million and 0.58% of average annual net assets in excess
of $1.5 billion. The Fund's management fee for the year ended September 30,
2000, was an annualized rate of 0.65%, before any waiver by the Manager if
applicable.
--------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Fund on
an "at-cost" basis. OFS also acts as the transfer and shareholder servicing
agent for the other Oppenheimer funds.
--------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FEES. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the
period indicated.
<TABLE>
<CAPTION>
AGGREGATE CLASS A COMMISSIONS COMMISSIONS COMMISSIONS
FRONT-END FRONT-END ON CLASS A ON CLASS B ON CLASS C
SALES CHARGES SALES CHARGES SHARES SHARES SHARES
ON CLASS A RETAINED BY ADVANCED BY ADVANCED BY ADVANCED BY
YEAR ENDED SHARES DISTRIBUTOR DISTRIBUTOR(1) DISTRIBUTOR(1)DISTRIBUTOR(1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
September 30, 2000 $2,632,889 $794,399 $342,591 $3,080,610 $255,800
</TABLE>
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
CONTINGENT DEFERRED CONTINGENT DEFERRED CONTINGENT DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES
YEAR ENDED RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
September 30, 2000 $32,097 $630,269 $13,194
</TABLE>
The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B and Class C shares under Rule 12b-1 of the Investment
Company Act. Under those plans the Fund pays the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
--------------------------------------------------------------------------------
CLASS A SERVICE PLAN FEES. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements
to the Distributor at a rate of up to 0.25% of average annual net assets of
Class A shares purchased. The Distributor makes payments to plan recipients
quarterly at an annual rate not to exceed 0.25% of the average annual net
assets consisting of Class A shares of the Fund. For the year ended September
30, 2000, payments under the Class A plan totaled $2,843,155 prior to Manager
waiver if applicable, all of which were paid by the Distributor to recipients,
and included $215,426 paid to an affiliate of the Manager. Any unreimbursed
expenses the
31 OPPENHEIMER DISCOVERY FUND
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
Distributor incurs with respect to Class A shares in any fiscal year cannot be
recovered in subsequent years.
--------------------------------------------------------------------------------
CLASS B AND CLASS C DISTRIBUTION AND SERVICE PLAN FEES. Under each plan,
service fees and distribution fees are computed on the average of the net asset
value of shares in the respective class, determined as of the close of each
regular business day during the period. The Class B and Class C plans provide
for the Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The asset-based sales charges on Class B
and Class C shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
The Distributor's actual expenses in selling Class B and Class C shares may
be more than the payments it receives from the contingent deferred sales
charges collected on redeemed shares and asset-based sales charges from the
Fund under the plans. If any plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for distributing shares before the plan was
terminated. The plans allow for the carry-forward of distribution expenses, to
be recovered from asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the year ended September 30,
2000, were as follows:
<TABLE>
<CAPTION>
DISTRIBUTOR'S DISTRIBUTOR'S
AGGREGATE UNREIMBURSED
UNREIMBURSED EXPENSES AS %
TOTAL PAYMENTS AMOUNT RETAINED EXPENSES OF NET ASSETS
UNDER PLAN BY DISTRIBUTOR UNDER PLAN OF CLASS
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B Plan $3,713,228 $2,970,317 $7,572,564 1.79%
Class C Plan 551,071 180,403 796,157 1.14
========================================================================================================
</TABLE>
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into
foreign currency contracts for operational purposes and to seek to protect
against adverse exchange rate fluctuations. Risks to the Fund include the
potential inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates as provided
by a reliable bank, dealer or pricing service. Unrealized appreciation and
depreciation on foreign currency contracts are reported in the Statement of
Assets and Liabilities.
32 OPPENHEIMER DISCOVERY FUND
<PAGE> 35
--------------------------------------------------------------------------------
The Fund may realize a gain or loss upon the closing or settlement of the
foreign currency transactions. Realized gains and losses are reported with all
other foreign currency gains and losses in the Statement of Operations.
Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency contracts are noted in the Statement of
Investments where applicable.
================================================================================
6. ILLIQUID OR RESTRICTED SECURITIES
As of September 30, 2000, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933,
may have contractual restrictions on resale, and are valued under methods
approved by the Board of Trustees as reflecting fair value. A security may also
be considered illiquid if it lacks a readily available market or if its
valuation has not changed for a certain period of time. The Fund intends to
invest no more than 10% of its net assets (determined at the time of purchase
and reviewed periodically) in illiquid or restricted securities. Certain
restricted securities, eligible for resale to qualified institutional
investors, are not subject to that limitation. The aggregate value of illiquid
or restricted securities subject to this limitation as of September 30, 2000,
was $20,878,000, which represents 1.12% of the Fund's net assets, all of which
is considered restricted. Information concerning restricted securities is as
follows:
<TABLE>
<CAPTION>
VALUATION
PER UNIT AS OF
SECURITY ACQUISITION DATE COST PER UNIT SEPTEMBER 30, 2000
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS AND WARRANTS
Candescent Technologies Corp., 2.50% Cv.,
Series D 3/31/95 $2.50 $9.28
------------------------------------------------------------------------------------------------------------------------------------
Candescent Technologies Corp., Sr. Exchangeable,
Series E 4/24/96 5.50 9.78
------------------------------------------------------------------------------------------------------------------------------------
Candescent Technologies Corp., Sr. Exchangeable,
Series F 6/11/97 7.50 9.59
</TABLE>
7. BANK BORROWINGS
================================================================================
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.45%. 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
0.08% per annum.
The Fund had no borrowings outstanding during the year ended September 30,
2000.
33 OPPENHEIMER DISCOVERY FUND
<PAGE> 36
INDEPENDENT AUDITORS' REPORT
================================================================================
THE BOARD OF TRUSTEES AND SHAREHOLDERS
OF OPPENHEIMER DISCOVERY FUND:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Discovery Fund as of September 30,
2000, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in the
five-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of September 30, 2000, by
correspondence with the custodian and brokers; and where confirmations were not
received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Discovery Fund as of September 30, 2000, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
accounting principles generally accepted in the United States of America.
KPMG LLP
Denver, Colorado
October 20, 2000
34 OPPENHEIMER DISCOVERY FUND
<PAGE> 37
FEDERAL INCOME TAX INFORMATION Unaudited
================================================================================
In early 2001 shareholders will receive information regarding all
dividends and distributions paid to them by the Fund during calendar year 2000.
Regulations of the U.S. Treasury Department require the Fund to report this
information to the Internal Revenue Service.
Distributions of $2.8913, per share were paid to Class A, Class B, Class
C and Class Y shareholders, on December 10, 1999, of which $2.0496 was
designated as a "capital gain distribution" for federal income tax purposes.
Whether received in stock or in cash, the capital gain distribution should be
treated by shareholders as a gain from the sale of capital assets held for more
than one year (long-term capital gains).
The foregoing information is presented to assist shareholders in
reporting distributions received from the Fund to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
35 OPPENHEIMER DISCOVERY FUND
<PAGE> 38
OPPENHEIMER DISCOVERY FUND
================================================================================
OFFICERS AND TRUSTEES Leon Levy, Chairman of the Board of Trustees
Donald W. Spiro, Vice Chairman of the Board of Trustees
Bridget A. Macaskill, Trustee and President
Robert G. Galli, Trustee
Benjamin Lipstein, Trustee
Elizabeth B. Moynihan, Trustee
Kenneth A. Randall, Trustee
Edward V. Regan, Trustee
Russell S. Reynolds, Jr., Trustee
Clayton K. Yeutter, Trustee
Jayne Stevlingson, Vice President
Andrew J. Donohe, Secretary
Brian W. Wixted, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
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 Mayer, Brown & Platt
For more complete information about Oppenheimer
Discovery Fund, please refer to the Prospectus. To
obtain a copy, call your financial advisor, or call
OppenheimerFunds Distributor, Inc. at 1.800.525.7048,
or visit the OppenheimerFunds Internet website, at
WWW.OPPENHEIMERFUNDS.COM.
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.
OPPENHEIMER FUNDS ARE DISTRIBUTED BY OPPENHEIMERFUNDS
DISTRIBUTOR, INC., TWO WORLD TRADE CENTER, NEW YORK,
NY 10048-0203.
(C)Copyright 2000 OppenheimerFunds, Inc. All rights reserved.
36 OPPENHEIMER DISCOVERY FUND
<PAGE> 39
INFORMATION AND SERVICES
As an Oppenheimer fund shareholder, you can benefit from special services
designed to make investing simple. Whether it's automatic investment plans,
timely market updates, or immediate account access, you can count on us whenever
you need assistance. So call us today, or visit our website-- we're here to
help.
--------------------------------------------------------------------------------
INTERNET
24-hr access to account information and transactions(1)
WWW.OPPENHEIMERFUNDS.COM
--------------------------------------------------------------------------------
GENERAL INFORMATION
Mon-Fri 8am-9pm ET, Sat 10am-4pm ET
1.800.525.7048
--------------------------------------------------------------------------------
TELEPHONE TRANSACTIONS
Mon-Fri 8am-9pm ET, Sat 10am-4pm ET
1.800.852.8457
--------------------------------------------------------------------------------
PHONELINK
24-hr automated information and automated transactions
1.800.533.3310
--------------------------------------------------------------------------------
TELECOMMUNICATIONS DEVICE FOR THE DEAF (TDD)
Mon-Fri 9am-6:30pm ET
1.800.843.4461
--------------------------------------------------------------------------------
OPPENHEIMERFUNDS INFORMATION HOTLINE
24 hours a day, timely and insightful
messages on the economy and issues that may affect your investments
1.800.835.3104
--------------------------------------------------------------------------------
TRANSFER AND SHAREHOLDER SERVICING AGENT
OppenheimerFunds Services
P.O. BOX 5270, DENVER, CO 80217-5270
--------------------------------------------------------------------------------
TICKER SYMBOLS Class A: OPOCX Class B: ODIBX Class C: ODICX Class Y: ODIYX
--------------------------------------------------------------------------------
1. At times this website may be inaccessible or its transaction feature may be
unavailable.
RA0500.001.0900 November 29, 2000 [OPPENHEIMERFUNDS LOGO]
