-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GRYj4/DRO5QlVMv1pe5VeZPt59HSUA4BlA6TYKXRQd58E3Tcz0Kve0AFF86z18Hv 4P65K04p0JVCmaO01Sc/bg== 0000935069-03-001557.txt : 20031119 0000935069-03-001557.hdr.sgml : 20031119 20031119151540 ACCESSION NUMBER: 0000935069-03-001557 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031119 EFFECTIVENESS DATE: 20031119 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER DISCOVERY FUND CENTRAL INDEX KEY: 0000777547 IRS NUMBER: 222725700 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04410 FILM NUMBER: 031012718 BUSINESS ADDRESS: STREET 1: 6803 SOUTH TUCSON WAY STREET 2: N/A CITY: CENTENNIAL STATE: CO ZIP: 80112-3924 BUSINESS PHONE: 303-768-3200 MAIL ADDRESS: STREET 1: 6803 SOUTH TUCSON WAY STREET 2: N/A CITY: CENTENNIAL STATE: CO ZIP: 80112-3924 FORMER COMPANY: FORMER CONFORMED NAME: OPPENHEIMER OTC FUND DATE OF NAME CHANGE: 19891210 FORMER COMPANY: FORMER CONFORMED NAME: OPPENHEIMER EXPLORER FUND DATE OF NAME CHANGE: 19860710 N-CSR 1 ra0500_9427vef.txt RA0500_9427VEF UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-4410 Oppenheimer Discovery Fund (Exact name of registrant as specified in charter) 6803 South Tucson Way, Centennial, Colorado 80112-3924 (Address of principal executive offices) (Zip code) Robert G. Zack, Esq. OppenheimerFunds, Inc. 498 Seventh Avenue, New York, New York 10018 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (303) 768-3200 -------------- Date of fiscal year end: September 30 Date of reporting period: October 1, 2002 - September 30, 2003 ITEM 1. REPORTS TO STOCKHOLDERS. FUND PERFORMANCE DISCUSSION How has the Fund performed? Below is a discussion by OppenheimerFunds, Inc., of the Fund's performance during its fiscal year ended September 30, 2003, followed by a graphical comparison of the Fund's performance to an appropriate broad-based market index. Management's Discussion of Fund Performance. Over the 12-month period ended September 30, 2003, the Fund delivered strong, positive returns of 37.43% for Class A shares, without sales charge and 29.53% with the sales charge deducted. The Fund's performance was driven primarily by the sharp upturn in small-cap growth stock prices that began in March 2003 and continued throughout the remainder of the period. The Fund's benchmark, the Russell 2000 Index, produced returns of 36.50% for the period ending September 30, 2003. Laura Granger, a member of OppenheimerFunds' equity department's growth investment team and portfolio manager of Oppenheimer Emerging Growth Fund and Oppenheimer Emerging Technologies Fund, assumed management of the Fund in late February 2003. The Fund's new management team generally maintained prior management's growth-oriented, small-cap strategy. However, the team's stock selection approach places primary emphasis on the careful analysis of each company's underlying fundamentals and competitive position. The team looks at various growth measures as well as valuations like P/E and P/E to growth-rate, return on equity and relative strength, another measure. They conduct hands-on research, work with industry specialists and perform their own checks of each prospect's customer base and competition. The portfolio team works diligently to identify the best companies with the best growth rates, trading at the best valuations. To try to moderate the risks associated with small company stocks, the team also diversifies investments among a variety of high-potential companies in different industries, constructing a portfolio with sector weightings similar to that of the Fund's benchmark. The portfolio team gradually restructured the Fund's portfolio in March and April 2003 to reflect our stock selection approach. As markets rose during the second half of the period, their selections proved particularly successful in the areas of health care, consumer cyclicals and technology. Top performers among health care stocks included Gen-Probe, Inc., a developer of DNA-based diagnostic testing technology; Angiotech Pharmaceuticals, Inc., a producer of advanced biomedical devices; eResearch Technology, Inc., the leading provider of digitized clinical research data; and Pharmaceutical Resources, Inc., a generic drug maker. In the consumer cyclical area, the Fund's best holdings included comic book publisher and entertainment licensing company Marvel Enterprises, Inc.; retailer Urban Outfitters, Inc., which expanded its target customer base beyond young adults through its "Anthropologie" brand store chain; and Select Comfort Corp., manufacturer and aggressive marketer of customizable air mattresses. Finally, in technology, returns 5 | OPPENHEIMER DISCOVERY FUND FUND PERFORMANCE DISCUSSION benefited from investments in companies meeting the growing demand for increased security software and hardware, such as anti-virus program developer Symantec Corp. and tape storage solutions company Advanced Digital Information Corp. Of course, not all of the Fund's holdings in the three areas cited above enhanced returns. Notably weak performers included Accredo Health, Inc., PETsMART, Inc., WebEx Communications, Inc. and Cirrus Logic, Inc. However, gainers more than compensated for disappointments, enabling the Fund to outperform its benchmark in these industry areas. On the other hand, the Fund underperformed its benchmark in telecommunications and financials due to the Fund being underweight in these two sectors. In telecommunications, speculation drove prices sharply higher for many stocks that we believed exhibited weak underlying fundamentals, while in the financial area, certain stocks benefited from interest rate swings rather than the kinds of growth we look for. 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, Class N and Class Y shares of the Fund held until September 30, 2003. 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. In the case of Class N shares, performance is measured from inception of the Class on March 1, 2001. 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, Class C and Class N 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. 6 | OPPENHEIMER DISCOVERY FUND 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 [LINE CHART] Value of Investment In Fund Russell Date Reinvested Monthly S&P 500 Index 2000 Index 09/30/1993 $ 9,425 $10,000 $10,000 12/31/1993 9,564 10,232 10,259 03/31/1994 8,811 9,844 9,986 06/30/1994 7,940 9,885 9,595 09/30/1994 8,680 10,368 10,262 12/31/1994 8,495 10,366 10,072 03/31/1995 9,002 11,374 10,537 06/30/1995 9,633 12,459 11,525 09/30/1995 11,112 13,448 12,663 12/31/1995 11,620 14,257 12,937 03/31/1996 12,372 15,022 13,598 06/30/1996 13,858 15,695 14,278 09/30/1996 14,197 16,181 14,326 12/31/1996 13,339 17,528 15,071 03/31/1997 11,605 17,999 14,292 06/30/1997 13,753 21,138 16,609 09/30/1997 15,497 22,722 19,081 12/31/1997 14,721 23,374 18,442 03/31/1998 16,364 26,632 20,297 06/30/1998 15,621 27,516 19,350 09/30/1998 12,276 24,785 15,452 12/31/1998 14,427 30,059 17,972 03/31/1999 12,859 31,556 16,997 06/30/1999 14,069 33,776 19,641 09/30/1999 13,698 31,672 18,399 12/31/1999 21,830 36,381 21,793 03/31/2000 25,103 37,214 23,336 06/30/2000 21,860 36,226 22,454 09/30/2000 22,212 35,874 22,703 12/31/2000 18,935 33,069 21,134 03/31/2001 15,306 29,151 19,759 06/30/2001 18,313 30,856 22,583 09/30/2001 13,991 26,329 17,888 12/31/2001 16,740 29,142 21,660 03/31/2002 16,630 29,222 22,522 06/30/2002 14,130 25,310 20,641 09/30/2002 11,944 20,940 16,224 12/31/2002 12,705 22,704 17,223 03/31/2003 12,130 21,989 16,449 06/30/2003 14,727 25,372 20,303 09/30/2003 16,414 26,043 22,146 Average Annual Total Returns of Class A Shares of the Fund at 9/30/03* 1-Year 29.53% 5-Year 4.73% 10-Year 5.08% 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 [LINE CHART] Value of Investment In Fund Russell Date Reinvested Monthly S&P 500 Index 2000 Index 04/04/1994 $10,000 $10,000 $10,000 06/30/1994 9,167 10,042 9,609 09/30/1994 10,000 10,532 10,276 12/31/1994 9,772 10,530 10,086 03/31/1995 10,335 11,554 10,552 06/30/1995 11,036 12,656 11,541 09/30/1995 12,704 13,661 12,681 12/31/1995 13,257 14,482 12,956 03/31/1996 14,090 15,259 13,617 06/30/1996 15,751 15,943 14,298 09/30/1996 16,105 16,436 14,346 12/31/1996 15,101 17,805 15,093 03/31/1997 13,118 18,284 14,312 06/30/1997 15,515 21,473 16,633 09/30/1997 17,446 23,081 19,108 12/31/1997 16,542 23,743 18,468 03/31/1998 18,355 27,053 20,326 06/30/1998 17,488 27,951 19,378 09/30/1998 13,719 25,177 15,474 12/31/1998 16,090 30,534 17,998 03/31/1999 14,313 32,054 17,022 06/30/1999 15,633 34,310 19,669 09/30/1999 15,190 32,173 18,425 12/31/1999 24,162 36,956 21,824 03/31/2000 27,737 37,802 23,370 06/30/2000 24,151 36,798 22,486 09/30/2000 24,541 36,442 22,735 12/31/2000 20,920 33,592 21,164 03/31/2001 16,911 29,612 19,788 06/30/2001 20,233 31,344 22,615 09/30/2001 15,458 26,745 17,913 12/31/2001 18,495 29,603 21,691 03/31/2002 18,374 29,685 22,555 06/30/2002 15,612 25,710 20,671 09/30/2002 13,196 21,271 16,247 12/31/2002 14,037 23,063 17,248 03/31/2003 13,402 22,337 16,473 06/30/2003 16,271 25,773 20,332 09/30/2003 18,135 26,455 22,177 Average Annual Total Returns of Class B Shares of the Fund at 9/30/03* 1-Year 31.42% 5-Year 4.89% Since Inception 6.47% *See Notes on page 10 for further details. The performance information for the indices in the graphs begins on 9/30/93 for Class A, 3/31/94 for Class B, 9/30/95 for Class C, 2/28/01 for Class N and 5/31/94 for Class Y. Past performance cannot guarantee future results. Graphs are not drawn to same scale. 7 | OPPENHEIMER DISCOVERY FUND FUND PERFORMANCE DISCUSSION 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 [LINE CHART] Value of Investment In Fund Russell Date Reinvested Monthly S&P 500 Index 2000 Index 10/02/1995 $10,000 $10,000 $10,000 12/31/1995 10,536 10,602 10,217 03/31/1996 11,194 11,170 10,738 06/30/1996 12,516 11,671 11,275 09/30/1996 12,796 12,032 11,313 12/31/1996 11,998 13,034 11,902 03/31/1997 10,422 13,384 11,287 06/30/1997 12,328 15,719 13,116 09/30/1997 13,869 16,896 15,068 12/31/1997 13,152 17,381 14,564 03/31/1998 14,595 19,804 16,029 06/30/1998 13,904 20,461 15,281 09/30/1998 10,909 18,431 12,203 12/31/1998 12,792 22,352 14,193 03/31/1999 11,383 23,465 13,423 06/30/1999 12,431 25,116 15,511 09/30/1999 12,079 23,552 14,530 12/31/1999 19,210 27,053 17,210 03/31/2000 22,053 27,673 18,429 06/30/2000 19,170 26,938 17,732 09/30/2000 19,440 26,677 17,928 12/31/2000 16,542 24,591 16,690 03/31/2001 13,345 21,677 15,604 06/30/2001 15,940 22,945 17,834 09/30/2001 12,156 19,578 14,126 12/31/2001 14,513 21,670 17,105 03/31/2002 14,388 21,730 17,786 06/30/2002 12,203 18,821 16,301 09/30/2002 10,296 15,571 12,812 12/31/2002 10,929 16,883 13,601 03/31/2003 10,421 16,351 12,990 06/30/2003 12,625 18,867 16,033 09/30/2003 14,044 19,366 17,489 Average Annual Total Returns of Class C Shares of the Fund at 9/30/03* 1-Year 35.41% 5-Year 5.18% Since Inception 4.34% Class N Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: Oppenheimer Discovery Fund (Class N) S&P 500 Index Russell 2000 Index [LINE CHART] Value of Investment In Fund Russell Date Reinvested Monthly S&P 500 Index 2000 Index 03/01/2001 $10,000 $10,000 $10,000 03/31/2001 9,248 9,367 9,511 06/30/2001 11,059 9,915 10,870 09/30/2001 8,440 8,460 8,610 12/31/2001 10,092 9,364 10,426 03/31/2002 10,018 9,390 10,841 06/30/2002 8,507 8,132 9,935 09/30/2002 7,187 6,728 7,809 12/31/2002 7,635 7,295 8,290 03/31/2003 7,290 7,065 7,918 06/30/2003 8,842 8,153 9,772 09/30/2003 9,852 8,368 10,659 Average Annual Total Returns of Class N Shares of the Fund at 9/30/03* 1-Year 36.07% Since Inception -0.58% *See Notes on page 10 for further details. 8 | OPPENHEIMER DISCOVERY FUND 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 [LINE CHART] Value of Investment In Fund Russell Date Reinvested Monthly S&P 500 Index 2000 Index 06/01/1994 $10,000 $10,000 $10,000 06/30/1994 9,438 9,755 9,660 09/30/1994 10,320 10,231 10,332 12/31/1994 10,115 10,230 10,141 03/31/1995 10,726 11,224 10,609 06/30/1995 11,483 12,294 11,603 09/30/1995 13,238 13,271 12,749 12/31/1995 13,855 14,069 13,026 03/31/1996 14,761 14,824 13,690 06/30/1996 16,545 15,489 14,375 09/30/1996 16,957 15,967 14,424 12/31/1996 15,944 17,297 15,174 03/31/1997 13,883 17,762 14,389 06/30/1997 16,464 20,860 16,722 09/30/1997 18,568 22,422 19,211 12/31/1997 17,657 23,066 18,567 03/31/1998 19,649 26,281 20,435 06/30/1998 18,769 27,154 19,482 09/30/1998 14,767 24,459 15,558 12/31/1998 17,351 29,663 18,095 03/31/1999 15,475 31,140 17,113 06/30/1999 16,937 33,331 19,775 09/30/1999 16,513 31,255 18,524 12/31/1999 26,324 35,902 21,941 03/31/2000 30,291 36,724 23,495 06/30/2000 26,411 35,748 22,607 09/30/2000 26,861 35,402 22,857 12/31/2000 22,892 32,634 21,278 03/31/2001 18,518 28,767 19,894 06/30/2001 22,178 30,450 22,736 09/30/2001 16,955 25,982 18,010 12/31/2001 20,300 28,758 21,807 03/31/2002 20,186 28,838 22,676 06/30/2002 17,165 24,976 20,782 09/30/2002 14,519 20,664 16,335 12/31/2002 15,457 22,405 17,340 03/31/2003 14,768 21,699 16,562 06/30/2003 17,934 25,038 20,441 09/30/2003 20,006 25,700 22,297 Average Annual Total Returns of Class Y Shares of the Fund at 9/30/03* 1-Year 37.79% 5-Year 6.26% Since Inception 7.71% The performance information for the indices in the graphs begins on 9/30/93 for Class A, 3/31/94 for Class B, 9/30/95 for Class C, 2/28/01 for Class N and 5/31/94 for Class Y. Past performance cannot guarantee future results. Graphs are not drawn to same scale. 9 | OPPENHEIMER DISCOVERY FUND NOTES In reviewing performance and rankings, please remember that past performance cannot guarantee future results. Investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Because of ongoing market volatility, the Fund's performance may be subject to substantial fluctuations, and current performance may be more or less than the results shown. For updates on the Fund's performance, 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 reflect the deduction 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. For more complete information about the Fund, including charges, expenses and risks, please refer to the prospectus. To obtain a copy, call your financial advisor, call OppenheimerFunds Distributor, Inc. at 1.800.CALL OPP (1.800.225.5677) or visit the OppenheimerFunds website at www.oppenheimerfunds.com. Read the prospectus carefully before you invest or send money. Class A shares of the Fund 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 "since inception" 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 one-year period. Class C shares are subject to an annual 0.75% asset-based sales charge. Class N shares of the Fund were first publicly offered on 3/1/01. Class N shares are offered only through retirement plans. Unless otherwise noted, Class N returns include the contingent deferred sales charge of 1% for the one-year period. Class N shares are subject to an annual 0.25% 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 STATEMENT OF INVESTMENTS September 30, 2003 Market Value Shares See Note 1 - ------------------------------------------------------------------------------- Common Stocks--98.7% - ------------------------------------------------------------------------------- Consumer Discretionary--16.0% - ------------------------------------------------------------------------------- Hotels, Restaurants & Leisure--2.4% Alliance Gaming Corp. 1 258,700 $ 5,246,436 - ------------------------------------------------------------------------------- Ruby Tuesday, Inc. 235,200 5,670,672 - ------------------------------------------------------------------------------- Scientific Games Corp., Cl. A 1 588,500 6,714,785 - ------------------------------------------------------------------------------- Station Casinos, Inc. 238,900 7,310,340 -------------- 24,942,233 - ------------------------------------------------------------------------------- Household Durables--2.1% KB Home 159,900 9,539,634 - ------------------------------------------------------------------------------- Lennar Corp. 122,300 9,513,717 - ------------------------------------------------------------------------------- M/I Schottenstein Homes, Inc. 65,600 2,602,352 -------------- 21,655,703 - ------------------------------------------------------------------------------- Leisure Equipment & Products--2.1% Leapfrog Enterprises, Inc. 1 236,900 9,002,200 - ------------------------------------------------------------------------------- Marvel Enterprises, Inc. 1 568,300 12,644,675 -------------- 21,646,875 - ------------------------------------------------------------------------------- Media--1.9% Entercom Communications Corp. 1 169,300 7,588,026 - ------------------------------------------------------------------------------- Getty Images, Inc. 1 185,995 6,539,584 - ------------------------------------------------------------------------------- Pixar, Inc. 1 84,900 5,650,944 -------------- 19,778,554 - ------------------------------------------------------------------------------- Multiline Retail--0.8% Fred's, Inc. 251,500 8,289,440 - ------------------------------------------------------------------------------- Specialty Retail--5.5% bebe stores, inc. 1 163,500 4,430,850 - ------------------------------------------------------------------------------- CSK Auto Corp. 1 414,000 6,383,880 - ------------------------------------------------------------------------------- Finish Line, Inc. (The), Cl. A 1 235,200 6,185,760 - ------------------------------------------------------------------------------- Hot Topic, Inc. 1 362,700 8,175,258 - ------------------------------------------------------------------------------- Pacific Sunwear of California, Inc. 1 493,900 10,203,974 - ------------------------------------------------------------------------------- Select Comfort Corp. 1 416,200 11,029,300 - ------------------------------------------------------------------------------- Urban Outfitters, Inc. 1 447,700 11,667,062 -------------- 58,076,084 Market Value Shares See Note 1 - ------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods--1.2% K-Swiss, Inc., Cl. A 169,300 $ 6,093,107 - ------------------------------------------------------------------------------- Quicksilver, Inc. 1 426,800 6,807,460 -------------- 12,900,567 - ------------------------------------------------------------------------------- Consumer Staples--1.9% - ------------------------------------------------------------------------------- Food & Staples Retailing--1.9% Central European Distribution Corp. 1 258,700 7,075,445 - ------------------------------------------------------------------------------- Performance Food Group Co. 1 169,300 6,892,203 - ------------------------------------------------------------------------------- United Natural Foods, Inc. 1 188,200 6,246,358 -------------- 20,214,006 - ------------------------------------------------------------------------------- Financials--7.0% - ------------------------------------------------------------------------------- Capital Markets--0.8% National Financial Partners Corp. 1 311,600 8,413,200 - ------------------------------------------------------------------------------- Commercial Banks--1.6% Brookline Bancorp, Inc. 296,500 4,364,480 - ------------------------------------------------------------------------------- Independence Community Bank Corp. 94,100 3,286,913 - ------------------------------------------------------------------------------- New York Community - ------------------------------------------------------------------------------- Bancorp, Inc. 188,200 5,930,182 - ------------------------------------------------------------------------------- UCBH Holdings, Inc. 105,400 3,186,242 -------------- 16,767,817 - ------------------------------------------------------------------------------- Diversified Financial Services--3.0% Ameritrade Holding Corp. 1 423,700 4,766,625 - ------------------------------------------------------------------------------- CapitalSource, Inc. 1 303,600 5,313,000 - ------------------------------------------------------------------------------- Chicago Mercantile Exchange (The) 147,900 10,176,999 - ------------------------------------------------------------------------------- Legg Mason, Inc. 75,300 5,436,660 - ------------------------------------------------------------------------------- Raymond James Financial, Inc. 150,500 5,470,675 -------------- 31,163,959 - ------------------------------------------------------------------------------- Insurance--0.4% Direct General Corp. 1 59,500 1,491,665 - ------------------------------------------------------------------------------- Odyssey Re Holdings Corp. 103,800 2,136,204 -------------- 3,627,869 11 | OPPENHEIMER DISCOVERY FUND STATEMENT OF INVESTMENTS Continued Market Value Shares See Note 1 - ------------------------------------------------------------------------------- Real Estate--1.2% American Financial Realty Trust 343,800 $ 4,847,580 - ------------------------------------------------------------------------------- Corrections Corp. of America 1 156,200 3,853,454 - ------------------------------------------------------------------------------- Newcastle Investment Corp. 166,300 3,823,237 -------------- 12,524,271 - ------------------------------------------------------------------------------- Health Care--22.0% - ------------------------------------------------------------------------------- Biotechnology--6.4% Celgene Corp. 1 141,100 6,113,863 - ------------------------------------------------------------------------------- Digene Corp. 1 120,000 4,903,200 - ------------------------------------------------------------------------------- Gen-Probe, Inc. 1 389,300 21,088,381 - ------------------------------------------------------------------------------- Invitrogen Corp. 1 188,200 10,913,718 - ------------------------------------------------------------------------------- Martek Biosciences Corp. 1 301,800 15,895,806 - ------------------------------------------------------------------------------- Medicines Co. (The) 1 286,200 7,441,200 -------------- 66,356,168 - ------------------------------------------------------------------------------- Health Care Equipment & Supplies--3.1% Advanced Neuromodulation Systems, Inc. 1 229,500 9,157,050 - ------------------------------------------------------------------------------- Alaris Medical Systems, Inc. 1 192,000 3,187,200 - ------------------------------------------------------------------------------- Inamed Corp. 1 145,900 10,716,355 - ------------------------------------------------------------------------------- VISX, Inc. 1 200,000 3,810,000 - ------------------------------------------------------------------------------- Vital Images, Inc. 1 300,000 5,014,259 -------------- 31,884,864 - ------------------------------------------------------------------------------- Health Care Providers & Services--3.0% eResearch Technology, Inc. 1 489,200 17,038,836 - ------------------------------------------------------------------------------- Omnicare, Inc. 124,500 4,489,470 - ------------------------------------------------------------------------------- Select Medical Corp. 1 98,500 2,836,800 - ------------------------------------------------------------------------------- United Surgical Partners International, Inc. 1 252,600 7,148,580 -------------- 31,513,686 - ------------------------------------------------------------------------------- Pharmaceuticals--9.5% Able Laboratories, Inc. 1 315,300 5,899,263 - ------------------------------------------------------------------------------- Angiotech Pharmaceuticals, Inc. 1 467,000 20,384,550 Market Value Shares See Note 1 - ------------------------------------------------------------------------------- Pharmaceuticals Continued Columbia Laboratories, Inc. 1 596,400 $ 7,204,512 - ------------------------------------------------------------------------------- Discovery Laboratories, Inc. 1 619,540 3,470,415 - ------------------------------------------------------------------------------- DOV Pharmaceutical, Inc. 1,2 421,000 7,556,950 - ------------------------------------------------------------------------------- Eon Labs, Inc. 1 118,800 4,555,980 - ------------------------------------------------------------------------------- MGI Pharma, Inc. 1 282,200 11,079,172 - ------------------------------------------------------------------------------- Penwest Pharmaceuticals Co. 1 302,000 5,964,112 - ------------------------------------------------------------------------------- Pharmaceutical Resources, Inc. 1 281,100 19,176,642 - ------------------------------------------------------------------------------- Pozen, Inc. 1 188,200 3,346,196 - ------------------------------------------------------------------------------- Taro Pharmaceutical Industries Ltd. 1 189,900 10,702,764 -------------- 99,340,556 - ------------------------------------------------------------------------------- Industrials--15.5% - ------------------------------------------------------------------------------- Aerospace & Defense--0.9% Aeroflex, Inc. 1 575,800 5,095,830 - ------------------------------------------------------------------------------- Cubic Corp. 185,900 4,669,808 -------------- 9,765,638 - ------------------------------------------------------------------------------- Airlines--2.5% AirTran Holdings, Inc. 1 487,100 8,158,925 - ------------------------------------------------------------------------------- Frontier Airlines, Inc. 1 643,000 10,583,780 - ------------------------------------------------------------------------------- JetBlue Airways Corp. 1 124,550 7,593,814 -------------- 26,336,519 - ------------------------------------------------------------------------------- Commercial Services & Supplies--7.5% Career Education Corp. 1 298,600 13,526,580 - ------------------------------------------------------------------------------- Corinthian Colleges, Inc. 1 257,400 14,712,984 - ------------------------------------------------------------------------------- Corporate Executive Board Co. 1 112,900 5,300,655 - ------------------------------------------------------------------------------- Exult, Inc. 1 395,300 3,178,212 - ------------------------------------------------------------------------------- Gevity HR, Inc. 219,700 3,225,196 - ------------------------------------------------------------------------------- Monster Worldwide, Inc. 1 613,600 15,450,448 - ------------------------------------------------------------------------------- Navigant Consulting, Inc. 1 376,300 4,632,253 - ------------------------------------------------------------------------------- Stericycle, Inc. 1 235,200 11,094,384 - ------------------------------------------------------------------------------- Sylvan Learning Systems, Inc. 1 252,500 6,888,200 -------------- 78,008,912 12 | OPPENHEIMER DISCOVERY FUND Market Value Shares See Note 1 - ------------------------------------------------------------------------------- Construction & Engineering--0.9% Jacobs Engineering Group, Inc. 1 207,000 $ 9,335,700 - ------------------------------------------------------------------------------- Machinery--1.1% Ceradyne, Inc. 1 198,200 5,127,434 - ------------------------------------------------------------------------------- Pall Corp. 266,400 5,978,016 -------------- 11,105,450 - ------------------------------------------------------------------------------- Road & Rail--2.6% Hunt (J.B.) Transport Services, Inc. 1 336,400 8,753,128 - ------------------------------------------------------------------------------- Landstar System, Inc. 1 84,700 5,168,394 - ------------------------------------------------------------------------------- Pacer International, Inc. 1 332,200 6,620,746 - ------------------------------------------------------------------------------- Yellow Corp. 1 207,000 6,185,160 -------------- 26,727,428 - ------------------------------------------------------------------------------- Information Technology--35.1% - ------------------------------------------------------------------------------- Communications Equipment--5.7% ADTRAN, Inc. 150,700 9,219,826 - ------------------------------------------------------------------------------- Emulex Corp. 1 476,300 12,131,361 - ------------------------------------------------------------------------------- F5 Networks, Inc. 1 322,500 6,204,900 - ------------------------------------------------------------------------------- McDATA Corp., Cl. B 1 788,495 9,296,356 - ------------------------------------------------------------------------------- REMEC, Inc. 1 669,600 6,829,920 - ------------------------------------------------------------------------------- UTStarcom, Inc. 1 512,400 16,299,444 -------------- 59,981,807 - ------------------------------------------------------------------------------- Computers & Peripherals--5.6% Advanced Digital Information Corp. 1 627,000 8,790,540 - ------------------------------------------------------------------------------- Dot Hill Systems Corp. 1 320,100 4,404,576 - ------------------------------------------------------------------------------- Lexar Media, Inc. 1 320,800 5,466,432 - ------------------------------------------------------------------------------- Maxtor Corp. 1 571,200 6,951,504 - ------------------------------------------------------------------------------- Network Appliance, Inc. 1 360,000 7,390,800 - ------------------------------------------------------------------------------- Overland Storage, Inc. 1,2 205,000 3,023,750 - ------------------------------------------------------------------------------- SanDisk Corp. 1 267,800 17,069,572 - ------------------------------------------------------------------------------- Western Digital Corp. 1 400,000 5,156,000 -------------- 58,253,174 - ------------------------------------------------------------------------------- Electronic Equipment & Instruments--1.7% Cognex Corp. 153,700 4,040,773 - ------------------------------------------------------------------------------- Innovex, Inc. 1 336,100 3,344,195 - ------------------------------------------------------------------------------- Sigmatel, Inc. 1 30,300 624,483 Market Value Shares See Note 1 - ------------------------------------------------------------------------------- Electronic Equipment & Instruments Continued Vishay Intertechnology, Inc. 1 555,400 $ 9,730,608 -------------- 17,740,059 - ------------------------------------------------------------------------------- Internet Software & Services--5.2% Digital River, Inc. 1 258,200 7,061,770 - ------------------------------------------------------------------------------- Digitas, Inc. 1 721,600 5,238,816 - ------------------------------------------------------------------------------- eCollege.com, Inc. 1 200,000 4,028,000 - ------------------------------------------------------------------------------- MicroStrategy, Inc., Cl. A 1 263,400 12,119,034 - ------------------------------------------------------------------------------- Netease.com, Inc., Sponsored ADR 1 161,100 8,992,602 - ------------------------------------------------------------------------------- United Online, Inc. 1 230,500 8,002,960 - ------------------------------------------------------------------------------- VeriSign, Inc. 1 644,400 8,680,068 -------------- 54,123,250 - ------------------------------------------------------------------------------- IT Services--1.6% Alliance Data Systems Corp. 1 188,200 4,968,480 - ------------------------------------------------------------------------------- Cognizant Technology Solutions Corp. 1 329,300 12,009,571 -------------- 16,978,051 - ------------------------------------------------------------------------------- Office Electronics--1.1% Zebra Technologies Corp., Cl. A 1 220,400 11,366,028 - ------------------------------------------------------------------------------- Semiconductors & Semiconductor Equipment--7.4% Actel Corp. 1 244,700 5,865,459 - ------------------------------------------------------------------------------- AMIS Holdings, Inc. 1 181,200 3,344,952 - ------------------------------------------------------------------------------- Amkor Technology, Inc. 1 282,200 4,010,062 - ------------------------------------------------------------------------------- Integrated Circuit Systems, Inc. 1 335,300 10,072,412 - ------------------------------------------------------------------------------- Intersil Corp., Cl. A 1 348,800 8,301,440 - ------------------------------------------------------------------------------- Marvell Technology Group Ltd. 1 272,800 10,298,200 - ------------------------------------------------------------------------------- MEMC Electronic Materials, Inc. 1 470,300 5,130,973 - ------------------------------------------------------------------------------- Microsemi Corp. 1 337,500 5,143,500 - ------------------------------------------------------------------------------- ON Semiconductor Corp. 1 1,129,000 4,628,900 - ------------------------------------------------------------------------------- Silicon Laboratories, Inc. 1 156,100 7,016,695 - ------------------------------------------------------------------------------- Skyworks Solutions, Inc. 1 966,600 8,796,060 13 | OPPENHEIMER DISCOVERY FUND STATEMENT OF INVESTMENTS Continued Market Value Shares See Note 1 - ------------------------------------------------------------------------------- Semiconductors & Semiconductor Equipment Continued Vitesse Semiconductor Corp. 1 705,600 $ 4,515,840 -------------- 77,124,493 - ------------------------------------------------------------------------------- Software--6.8% Activision, Inc. 1 449,300 5,369,135 - ------------------------------------------------------------------------------- Amdocs Ltd. 1 244,800 4,602,240 - ------------------------------------------------------------------------------- Fair Isaac Corp. 161,000 9,492,560 - ------------------------------------------------------------------------------- FileNet Corp. 1 376,300 7,552,341 - ------------------------------------------------------------------------------- Macromedia, Inc. 1 329,300 8,146,882 - ------------------------------------------------------------------------------- Macrovision Corp. 1 402,900 7,441,563 - ------------------------------------------------------------------------------- Magma Design Automation, Inc. 1 329,300 6,460,866 - ------------------------------------------------------------------------------- Mercury Interactive Corp. 1 196,500 8,923,065 - ------------------------------------------------------------------------------- Symantec Corp. 1 79,400 5,003,788 - ------------------------------------------------------------------------------- Take-Two Interactive Software, Inc. 1 220,100 7,520,817 -------------- 70,513,257 - ------------------------------------------------------------------------------- Materials--0.6% - ------------------------------------------------------------------------------- Chemicals--0.6% Airgas, Inc. 212,400 3,780,720 - ------------------------------------------------------------------------------- MacDermid, Inc. 86,400 2,285,280 -------------- 6,066,000 - ------------------------------------------------------------------------------- Utilities--0.6% - ------------------------------------------------------------------------------- Multi-Utilities & Unregulated Power--0.6% Questar Corp. 216,700 6,676,527 -------------- Total Common Stocks (Cost $796,256,971) 1,029,198,145 - ------------------------------------------------------------------------------- Preferred Stocks--0.0% Candescent Technologies Corp.: $2.50 Cv., Series D, Vtg. 1,2 1,200,000 -- Sr. Exchangeable, Series E, Vtg. 1,2 800,000 -- Sr. Exchangeable, Series F, Vtg. 1,2 200,000 -- -------------- Total Preferred Stocks (Cost $8,900,000) -- Market Value Units See Note 1 - ------------------------------------------------------------------------------- Rights, Warrants and Certificates--0.0% Discovery Laboratories, Inc. Wts., Exp. 9/20/10 1,2 123,908 $ 370,205 - ------------------------------------------------------------------------------- Penwest Pharmaceuticals Co. Wts., Exp. 11/5/03 1 302,000 21,634 -------------- Total Rights, Warrants and Certificates (Cost $0) 391,839 Principal Amount - ------------------------------------------------------------------------------- Joint Repurchase Agreements--2.9% Undivided interest of 17.01% in joint repurchase agreement (Principal Amount/Market Value $174,199,000, with a maturity value of $174,203,500) with Banc One Capital Markets, Inc., 0.93%, dated 9/30/03, to be repurchased at $29,623,765 on 10/1/03, collateralized by U.S. Treasury Bills, 2/5/04--3/4/04, with a value of $177,781,778 (Cost $29,623,000) $29,623,000 29,623,000 - ------------------------------------------------------------------------------- Total Investments, at Value (Cost $834,779,971) 101.6% 1,059,212,984 - ------------------------------------------------------------------------------- Liabilities in Excess of Other Assets (1.6) (16,242,365) ----------------------------- Net Assets 100.0% $1,042,970,619 ============================= 14 | OPPENHEIMER DISCOVERY FUND Footnotes to Statement of Investments 1. Non-income producing security. 2. Identifies issues considered to be illiquid or restricted. See Note 8 of Notes to Financial Statements. Affiliated company. Represents ownership of at least 5% of the voting securities of the issuer, and is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended September 30, 2003. There were no affiliate securities held by the Fund as of September 30, 2003. Transactions during the period in which the issuer was an affiliate are as follows:
Shares Shares September 30, Gross Gross September 30, Dividend Realized 2002 Additions Reductions 2003 Income Gain - ------------------------------------------------------------------------------------------------------------------ Stocks and/or Warrants 1-800-FLOWERS.com, Inc. 1,858,850 13,200 1,872,050 -- $ -- $7,057,788 XM Satellite Radio Holdings, Inc., 8.25% Cum. Cv., Series B 150,000 -- 150,000 -- 527,229 2,617,243 --------------------- $527,229 $9,675,031 =====================
See accompanying Notes to Financial Statements. 15 | OPPENHEIMER DISCOVERY FUND STATEMENT OF ASSETS AND LIABILITIES September 30, 2003
- --------------------------------------------------------------------------------------------------------------- Assets Investments, at value (cost $834,779,971)--see accompanying statement $ 1,059,212,984 - --------------------------------------------------------------------------------------------------------------- Cash 514,470 - --------------------------------------------------------------------------------------------------------------- Receivables and other assets: Investments sold 23,131,654 Shares of beneficial interest sold 281,025 Interest and dividends 158,242 Other 1,445 ----------------- Total assets 1,083,299,820 - --------------------------------------------------------------------------------------------------------------- Liabilities Payables and other liabilities: Investments purchased 34,608,863 Shares of beneficial interest redeemed 4,039,383 Distribution and service plan fees 596,741 Shareholder reports 499,699 Transfer and shareholder servicing agent fees 360,693 Trustees' compensation 220,366 Other 3,456 ----------------- Total liabilities 40,329,201 - --------------------------------------------------------------------------------------------------------------- Net Assets $1,042,970,619 ================= - --------------------------------------------------------------------------------------------------------------- Composition of Net Assets Par value of shares of beneficial interest $ 27,350 - --------------------------------------------------------------------------------------------------------------- Additional paid-in capital 1,201,788,035 - --------------------------------------------------------------------------------------------------------------- Accumulated net investment loss (210,299) - --------------------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (383,067,480) - --------------------------------------------------------------------------------------------------------------- Net unrealized appreciation on investments 224,433,013 - --------------------------------------------------------------------------------------------------------------- Net Assets $1,042,970,619 =================
16 | OPPENHEIMER DISCOVERY FUND
- ------------------------------------------------------------------------------------------------------------------- Net Asset Value Per Share Class A Shares: Net asset value and redemption price per share (based on net assets of $772,419,734 and 19,900,451 shares of beneficial interest outstanding) $38.81 Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $41.18 - ------------------------------------------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $160,850,886 and 4,568,881 shares of beneficial interest outstanding) $35.21 - ------------------------------------------------------------------------------------------------------------------- Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $48,263,262 and 1,343,096 shares of beneficial interest outstanding) $35.93 - ------------------------------------------------------------------------------------------------------------------- Class N Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $4,363,009 and 113,243 shares of beneficial interest outstanding) $38.53 - ------------------------------------------------------------------------------------------------------------------- Class Y Shares: Net asset value, redemption price and offering price per share (based on net assets of $57,073,728 and 1,424,238 shares of beneficial interest outstanding) $40.07
See accompanying Notes to Financial Statements. 17 | OPPENHEIMER DISCOVERY FUND STATEMENT OF OPERATIONS For the Year Ended September 30, 2003
- ----------------------------------------------------------------------------------------------------------------- Investment Income Dividends: Unaffiliated companies (net of foreign withholding taxes of $16,545) $ 2,844,434 Affiliated companies 527,229 - ----------------------------------------------------------------------------------------------------------------- Interest 1,248,772 -------------- Total investment income 4,620,435 - ----------------------------------------------------------------------------------------------------------------- Expenses Management fees 6,068,842 - ----------------------------------------------------------------------------------------------------------------- Distribution and service plan fees: Class A 1,550,744 Class B 1,483,925 Class C 388,925 Class N 15,412 - ----------------------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Class A 2,316,911 Class B 807,116 Class C 221,328 Class N 25,092 Class Y 152,443 - ----------------------------------------------------------------------------------------------------------------- Shareholder reports 802,227 - ----------------------------------------------------------------------------------------------------------------- Custodian fees and expenses 43,551 - ----------------------------------------------------------------------------------------------------------------- Trustees' compensation 39,446 - ----------------------------------------------------------------------------------------------------------------- Other 81,370 -------------- Total expenses 13,997,332 Less reduction to custodian expenses (5,876) Less voluntary waiver of transfer and shareholder servicing agent fees--Class A (351,624) Less voluntary waiver of transfer and shareholder servicing agent fees--Class B (367,829) Less voluntary waiver of transfer and shareholder servicing agent fees--Class C (101,626) Less voluntary waiver of transfer and shareholder servicing agent fees--Class N (14,588) Less voluntary waiver of transfer and shareholder servicing agent fees--Class Y (24,855) -------------- Net expenses 13,130,934 - ----------------------------------------------------------------------------------------------------------------- Net Investment Loss (8,510,499) - ----------------------------------------------------------------------------------------------------------------- Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments: Unaffiliated companies (including premiums on options exercised) 35,425,270 Affiliated companies 9,675,031 Closing of futures contracts 542,663 Closing and expiration of option contracts written (6,010,152) Foreign currency transactions 35,973 -------------- Net realized gain 39,668,785 - ----------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation on investments 247,132,042 - ----------------------------------------------------------------------------------------------------------------- Net Increase in Net Assets Resulting from Operations $278,290,328 ==============
See accompanying Notes to Financial Statements. 18 | OPPENHEIMER DISCOVERY FUND STATEMENTS OF CHANGES IN NET ASSETS
Year Ended September 30, 2003 2002 - ----------------------------------------------------------------------------------------------------------------- Operations Net investment loss $ (8,510,499) $ (9,796,757) - ----------------------------------------------------------------------------------------------------------------- Net realized gain (loss) 39,668,785 (186,618,130) - ----------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) 247,132,042 62,195,263 --------------------------------------- Net increase (decrease) in net assets resulting from operations 278,290,328 (134,219,624) - ----------------------------------------------------------------------------------------------------------------- Beneficial Interest Transactions Net increase (decrease) in net assets resulting from beneficial interest transactions: Class A (6,160,217) (86,001,282) Class B (39,188,474) (53,404,418) Class C 1,553,417 (3,275,635) Class N 1,104,042 2,694,654 Class Y 4,517,889 (5,721,956) - ----------------------------------------------------------------------------------------------------------------- Net Assets Total increase (decrease) 240,116,985 (279,928,261) - ----------------------------------------------------------------------------------------------------------------- Beginning of period 802,853,634 1,082,781,895 --------------------------------------- End of period [including accumulated net investment loss of $210,299 and $214,527, respectively] $1,042,970,619 $802,853,634 =======================================
See accompanying Notes to Financial Statements. 19 | OPPENHEIMER DISCOVERY FUND FINANCIAL HIGHLIGHTS
Class A Year Ended September 30 2003 2002 2001 2000 1999 - ----------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $ 28.24 $ 33.08 $ 66.77 $ 43.26 $ 40.12 - ----------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (.26) (.22) (.19) (.32) (.28) Net realized and unrealized gain (loss) 10.83 (4.62) (20.66) 26.72 4.84 ---------------------------------------------------------- Total from investment operations 10.57 (4.84) (20.85) 26.40 4.56 - ----------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Distributions from net realized gain -- -- (12.84) (2.89) (1.42) - ----------------------------------------------------------------------------------------------------------------- Net asset value, end of period $38.81 $28.24 $33.08 $66.77 $43.26 ========================================================== - ----------------------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 1 37.43% (14.63)% (37.01)% 62.15% 11.59% - ----------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $772,420 $572,843 $754,082 $1,286,298 $750,394 - ----------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $639,170 $753,304 $988,717 $1,176,289 $875,057 - ----------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment loss (0.83)% (0.74)% (0.31)% (0.47)% (0.69)% Total expenses 1.41% 1.45% 1.25% 1.15% 1.31% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.35% 1.42% N/A 3 N/A 3 N/A 3 - ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 172% 143% 155% 224% 73%
1. Assumes an investment on the business day before the first day of the fiscal period, 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%. See accompanying Notes to Financial Statements. 20 | OPPENHEIMER DISCOVERY FUND
Class B Year Ended September 30 2003 2002 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $ 25.81 $ 30.46 $ 62.99 $ 41.22 $ 38.58 - -------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (1.09) (.91) (.29) (.47) (.85) Net realized and unrealized gain (loss) 10.49 (3.74) (19.40) 25.13 4.91 --------------------------------------------------------------- Total from investment operations 9.40 (4.65) (19.69) 24.66 4.06 - -------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Distributions from net realized gain -- -- (12.84) (2.89) (1.42) - -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $35.21 $25.81 $30.46 $62.99 $41.22 =============================================================== - -------------------------------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 1 36.42% (15.27)% (37.48)% 60.95% 10.73% - -------------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $160,851 $154,657 $234,023 $423,689 $224,710 - -------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $148,410 $223,215 $315,607 $371,643 $257,146 - -------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment loss (1.56)% (1.50)% (1.07)% (1.22)% (1.45)% Total expenses 2.35% 2.21% 2.01% 1.90% 2.07% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 2.10% 2.18% N/A 3 N/A 3 N/A 3 - -------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 172% 143% 155% 224% 73%
1. Assumes an investment on the business day before the first day of the fiscal period, 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%. See accompanying Notes to Financial Statements. 21 | OPPENHEIMER DISCOVERY FUND FINANCIAL HIGHLIGHTS Continued
Class C Year Ended September 30 2003 2002 2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $ 26.34 $ 31.10 $ 64.00 $ 41.85 $ 39.15 - -------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (.44) (.59) (.24) (.24) (.85) Net realized and unrealized gain (loss) 10.03 (4.17) (19.82) 25.28 4.97 --------------------------------------------------------------- Total from investment operations 9.59 (4.76) (20.06) 25.04 4.12 - -------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Distributions from net realized gain -- -- (12.84) (2.89) (1.42) - -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $35.93 $26.34 $31.10 $64.00 $41.85 =============================================================== - -------------------------------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 1 36.41% (15.31)% (37.47)% 60.95% 10.73% - -------------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $48,263 $34,673 $44,404 $70,140 $27,413 - -------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $38,930 $45,655 $56,301 $55,205 $31,971 - -------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment loss (1.58)% (1.50)% (1.07)% (1.20)% (1.45)% Total expenses 2.38% 2.21% 2.01% 1.90% 2.07% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 2.12% 2.18% N/A 3 N/A 3 N/A 3 - -------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 172% 143% 155% 224% 73%
1. Assumes an investment on the business day before the first day of the fiscal period, 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%. See accompanying Notes to Financial Statements. 22 | OPPENHEIMER DISCOVERY FUND
Class N Year Ended September 30 2003 2002 2001 1 - ------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $ 28.11 $ 33.01 $ 39.11 - ------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (.35) (.30) (.13) Net realized and unrealized gain (loss) 10.77 (4.60) (5.97) ------------------------------------- Total from investment operations 10.42 (4.90) (6.10) - ------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Distributions from net realized gain -- -- -- - ------------------------------------------------------------------------------------------------------------- Net asset value, end of period $38.53 $28.11 $33.01 ===================================== - ------------------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 37.07% (14.84)% (15.60)% - ------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $4,363 $2,236 $147 - ------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $3,088 $1,786 $105 - ------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment loss (1.13)% (0.97)% (0.93)% Total expenses 2.12% 1.68% 1.55% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.65% 1.65% N/A 4 - ------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 172% 143% 155%
1. For the period from March 1, 2001 (inception of offering) to September 30, 2001. 2. Assumes an 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. See accompanying Notes to Financial Statements. 23 | OPPENHEIMER DISCOVERY FUND FINANCIAL HIGHLIGHTS Continued
Class Y Year Ended September 30 2003 2002 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $ 29.08 $ 33.96 $ 68.06 $ 43.92 $ 40.63 - ---------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (.26) (.06) (.17) (.30) (.17) Net realized and unrealized gain (loss) 11.25 (4.82) (21.09) 27.33 4.88 ---------------------------------------------------------- Total from investment operations 10.99 (4.88) (21.26) 27.03 4.71 - ---------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Distributions from net realized gain -- -- (12.84) (2.89) (1.42) - ---------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $40.07 $29.08 $33.96 $68.06 $43.92 ========================================================== - ---------------------------------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 1 37.79% (14.37)% (36.88)% 62.68% 11.82% - ---------------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $57,074 $38,444 $50,125 $87,131 $39,189 - ---------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $43,531 $50,275 $64,264 $76,635 $40,649 - ---------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment loss (0.57)% (0.43)% (0.13)% (0.11)% (0.48)% Total expenses 1.16% 1.26% 1.14% 0.80% 1.11% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.10% 1.11% 1.06% N/A 3 N/A 3 - ---------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 172% 143% 155% 224% 73%
1. Assumes an investment on the business day before the first day of the fiscal period, 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%. See accompanying Notes to Financial Statements. 24 | OPPENHEIMER DISCOVERY FUND 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, Class N 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, Class C and Class N shares are sold without a front-end sales charge but may be subject to a contingent deferred sales charge (CDSC). Class N shares are sold only through retirement plans. Retirement plans that offer Class N shares may impose charges on those accounts. 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 and voting privileges. Earnings, net assets and net asset value per share may differ by minor amounts due to each class having its own expenses directly attributable to that class. Classes A, B, C and N 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. Securities traded on NASDAQ are valued based on the closing price provided by NASDAQ 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 using 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 Fund's accounting records 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. 25 | OPPENHEIMER DISCOVERY FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- 1. Significant Accounting Policies Continued Joint Repurchase Agreements. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. Secured by U.S. government securities, these balances are invested in one or more repurchase agreements. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. In the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings. - -------------------------------------------------------------------------------- Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis 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 comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders, therefore, no federal income or excise tax provision is required. The tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes.
Net Unrealized Appreciation Based on Cost of Securities and Undistributed Undistributed Accumulated Other Investments Net Investment Long-Term Loss for Federal Income Gain Carryforward 1,2,3 Income Tax Purposes -------------------------------------------------------------------------------------- $-- $-- $382,065,712 $223,431,247
1. As of September 30, 2003, the Fund had $379,416,335 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. As of September 30, 2003, details of the capital loss carryforwards were as follows: Expiring ------------------------------------ 2009 $ 12,201,695 2010 258,482,944 2011 108,731,696 ------------ Total $379,416,335 ============ 2. During the fiscal years ended September 30, 2003 and September 30, 2002, the Fund did not utilize any capital loss carryforwards. 3. The Fund had $2,649,377 of straddle losses which were deferred. 26 | OPPENHEIMER DISCOVERY FUND 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 their 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 net realized gain was recorded by the Fund. Accordingly, the following amounts have been reclassified for September 30, 2003. Net assets of the Fund were unaffected by the reclassifications. From To Net Ordinary Capital Tax Return Investment Loss Loss of Capital Loss ----------------------------------------------------------------- $8,514,727 $3,058 $-- $8,511,669 No distributions were paid during the years ended September 30, 2003 and September 30, 2002. The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of September 30, 2003 are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss. Federal tax cost of securities and other investments $835,781,737 ============ Gross unrealized appreciation $246,993,968 Gross unrealized depreciation (23,562,721) ----------- Net unrealized appreciation $223,431,247 ============ - -------------------------------------------------------------------------------- Trustees' Compensation. The Fund has adopted an unfunded retirement plan for the Fund's independent trustees. Benefits are based on years of service and fees paid to each trustee during the years of service. During the year ended September 30, 2003, the Fund's projected benefit obligations were increased by $10,388 and payments of $14,616 were made to retired trustees, resulting in an accumulated liability of $212,455 as of September 30, 2003. 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 the annual compensation they are entitled to receive from the Fund. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or are invested in other selected Oppenheimer 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. Amounts will be deferred until distributed in accordance to the Plan. - -------------------------------------------------------------------------------- Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded 27 | OPPENHEIMER DISCOVERY FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- 1. Significant Accounting Policies Continued on the ex-dividend date. Income and capital gain distributions, if any, are declared and paid annually. - -------------------------------------------------------------------------------- Investment Income. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes accretion of discount and amortization of premium, is accrued as earned. - -------------------------------------------------------------------------------- Expense Offset Arrangement. The reduction of custodian fees represents earnings on cash balances maintained by the Fund. - -------------------------------------------------------------------------------- Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. - -------------------------------------------------------------------------------- Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. - -------------------------------------------------------------------------------- 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2003 Year Ended September 30, 2002 Shares Amount Shares Amount - ----------------------------------------------------------------------------------------------------------- Class A Sold 10,030,343 $ 315,000,736 6,967,008 $ 237,348,768 Redeemed (10,414,246) (321,160,953) (9,476,166) (323,350,050) --------------------------------------------------------------------------- Net decrease (383,903) $ (6,160,217) (2,509,158) $ (86,001,282) =========================================================================== - ----------------------------------------------------------------------------------------------------------- Class B Sold 970,285 $ 29,163,211 1,021,721 $ 33,164,124 Redeemed (2,394,220) (68,351,685) (2,711,117) (86,568,542) --------------------------------------------------------------------------- Net decrease (1,423,935) $ (39,188,474) (1,689,396) $ (53,404,418) =========================================================================== - ----------------------------------------------------------------------------------------------------------- Class C Sold 553,181 $ 17,200,866 459,414 $ 15,342,665 Redeemed (526,300) (15,647,449) (571,171) (18,618,300) --------------------------------------------------------------------------- Net increase (decrease) 26,881 $ 1,553,417 (111,757) $ (3,275,635) =========================================================================== - ----------------------------------------------------------------------------------------------------------- Class N Sold 60,881 $ 2,008,924 97,632 $ 3,470,272 Redeemed (27,175) (904,882) (22,533) (775,618) --------------------------------------------------------------------------- Net increase 33,706 $ 1,104,042 75,099 $ 2,694,654 ===========================================================================
28 | OPPENHEIMER DISCOVERY FUND
Year Ended September 30, 2003 Year Ended September 30, 2002 Shares Amount Shares Amount - ----------------------------------------------------------------------------------------------------------- Class Y Sold 613,815 $ 21,921,802 521,664 $ 19,281,459 Redeemed (511,507) (17,403,913) (675,553) (25,003,415) --------------------------------------------------------------------------- Net increase (decrease) 102,308 $ 4,517,889 (153,889) $ (5,721,956) ===========================================================================
- -------------------------------------------------------------------------------- 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, 2003, were $1,466,619,522 and $1,402,395,964, respectively. - -------------------------------------------------------------------------------- 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 at an annual rate 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. - -------------------------------------------------------------------------------- Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a per account fee. For the year ended September 30, 2003, the Fund paid $2,915,472 to OFS for services to the Fund. Additionally, Class Y shares are subject to minimum fees of $5,000 for assets of less than $10 million and $10,000 for assets of $10 million or more. The Class Y shares are subject to the minimum fees in the event that the per account fee does not equal or exceed the applicable minimum fees. OFS may voluntarily waive the minimum fees. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees up to an annual rate of 0.35% of average annual net assets for all classes. This undertaking may be amended or withdrawn at any time. - -------------------------------------------------------------------------------- Distribution and Service Plan (12b-1) Fees. Under its General Distributor's Agreement with the Manager, OppenheimerFunds Distributor, Inc. (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.
Aggregate Class A Concessions Concessions Concessions Concessions Front-End Front-End on Class A on Class B on Class C on Class N Sales Charges Sales Charges Shares Shares Shares Shares on Class A Retained by Advanced by Advanced by Advanced by Advanced by Year Ended Shares Distributor Distributor 1 Distributor 1 Distributor 1 Distributor 1 - ------------------------------------------------------------------------------------------------------------------------- September 30, 2003 $814,991 $197,431 $116,451 $565,338 $65,421 $29,246
1. The Distributor advances concession payments to dealers for certain sales of Class A shares and for sales of Class B, Class C and Class N shares from its own resources at the time of sale. 29 | OPPENHEIMER DISCOVERY FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- 4. Fees and Other Transactions with Affiliates Continued
Class A Class B Class C Class N Contingent Contingent Contingent Contingent Deferred Deferred Deferred Deferred Sales Charges Sales Charges Sales Charges Sales Charges Retained by Retained by Retained by Retained by Year Ended Distributor Distributor Distributor Distributor - ------------------------------------------------------------------------------------------------------- September 30, 2003 $14,682 $484,569 $7,751 $7,446
- -------------------------------------------------------------------------------- Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate of up to 0.25% of the average annual net assets of Class A shares of the Fund. For the year ended September 30, 2003, expense under the Class A Plan totaled $1,550,744, all of which were paid by the Distributor to recipients, which included $13,143 retained by the Distributor and $85,227 which was paid to an affiliate of the Manager. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years. - -------------------------------------------------------------------------------- Distribution and Service Plans for Class B, Class C and Class N Shares. The Fund has adopted Distribution and Service Plans for Class B, Class C and Class N shares. Under the plans, the Fund pays the Distributor an annual asset-based sales charge of 0.75% per year on Class B shares and on Class C shares and the Fund pays the Distributor an annual asset-based sales charge of 0.25% per year on Class N shares. The Distributor also receives a service fee of 0.25% per year under each plan. Distribution fees paid to the Distributor for the year ended September 30, 2003, were as follows:
Distributor's Distributor's Aggregate Aggregate Uncompensated Uncompensated Expenses as % Total Expenses Amount Retained Expenses of Net Assets Under Plan by Distributor Under Plan of Class - ------------------------------------------------------------------------------------------------- Class B Plan $1,483,925 $958,543 $5,191,018 3.23% Class C Plan 388,925 77,679 1,075,074 2.23 Class N Plan 15,412 11,262 39,312 0.90
- -------------------------------------------------------------------------------- 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 to settle specific purchases or sales of securities denominated in a foreign currency and for protection from adverse exchange rate fluctuation. 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 prevailing foreign currency exchange rates. Unrealized appreciation and 30 | OPPENHEIMER DISCOVERY FUND depreciation on foreign currency contracts are reported in the Statement of Assets and Liabilities as a receivable or payable and in the Statement of Operations with the change in unrealized appreciation or depreciation. The Fund may realize a gain or loss upon the closing or settlement of the foreign transaction. Contracts closed or settled with the same broker are recorded as net realized gain or loss. Such realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. As of September 30, 2003, the Fund had no outstanding foreign currency contracts. - -------------------------------------------------------------------------------- 6. Futures Contracts A futures contract is a commitment to buy or sell a specific amount of a commodity or financial instrument at a negotiated price on a stipulated future date. Futures contracts are traded on a commodity exchange. The Fund may buy and sell futures contracts that relate to broadly based securities indices "financial futures" or debt securities "interest rate futures" in order to gain exposure to or protection from changes in market value of stock and bonds or interest rates. The Fund may also buy or write put or call options on these futures contracts. The Fund generally sells futures contracts as a hedge against increases in interest rates and decreases in market value of portfolio securities. The Fund may also purchase futures contracts to gain exposure to market changes as it may be more efficient or cost effective than actually buying fixed income securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or has expired. Cash held by the broker to cover initial margin requirements on open futures contracts is noted in the Statement of Assets and Liabilities. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin. Realized gains and losses are reported on the Statement of Operations as closing and expiration of futures contracts. The net change in unrealized appreciation and depreciation is reported on the Statement of Operations. Risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. As of September 30, 2003, the Fund had no outstanding futures contracts. 31 | OPPENHEIMER DISCOVERY FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- 7. Option Activity The Fund may buy and sell put and call options, or write put and covered call options on portfolio securities in order to produce incremental earnings or protect against changes in the value of portfolio securities. The Fund generally purchases put options or writes covered call options to hedge against adverse movements in the value of portfolio holdings. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. Options are valued daily based upon the last sale price on the principal exchange on which the option is traded and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss upon the expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Securities designated to cover outstanding call options are noted in the Statement of Investments where applicable. Shares subject to call, expiration date, exercise price, premium received and market value are detailed in a note to the Statement of Investments. Options written are reported as a liability in the Statement of Assets and Liabilities. Realized gains and losses are reported in the Statement of Operations. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Written option activity for the year ended September 30, 2003 was as follows: Call Options --------------------------------- Number of Amount of Contracts Premiums - -------------------------------------------------------------------- Options outstanding as of September 30, 2002 -- $ -- Options written 68,616 1,070,992 Options closed or expired (35,483) (545,939) Options exercised (33,133) (525,053) --------------------------------- Options outstanding as of September 30, 2003 -- $ -- ================================= 32 | OPPENHEIMER DISCOVERY FUND - -------------------------------------------------------------------------------- 8. Illiquid or Restricted Securities As of September 30, 2003, investments in securities included issues that are illiquid or restricted. Restricted securities are 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, 2003 was $10,950,905, which represents 1.05% of the Fund's net assets, all of which are considered restricted. Information concerning restricted securities is as follows:
Unrealized Acquisition Valuation as of Appreciation Security Dates Cost Sept. 30, 2003 (Depreciation) - --------------------------------------------------------------------------------------------------------------- Stocks and/or Warrants Candescent Technologies Corp., $2.50 Cv., Series D, Vtg. 3/31/95 $3,000,000 $ -- $(3,000,000) Candescent Technologies Corp., Sr. Exchangeable, Series E, Vtg. 4/24/96 4,400,000 -- (4,400,000) Candescent Technologies Corp., Sr. Exchangeable, Series F, Vtg. 6/11/97 1,500,000 -- (1,500,000) Discovery Laboratories, Inc. Wts., Exp. 9/20/10 6/24/03 -- 370,205 370,205 DOV Pharmaceutical, Inc. 8/30/01 2,598,765 7,556,950 4,958,185 Overland Storage, Inc. 5/12/03 3,154,950 3,023,750 (131,200)
- -------------------------------------------------------------------------------- 9. Borrowing and Lending Arrangements The Fund entered into an "interfund borrowing and lending arrangement" with other funds in the Oppenheimer funds complex, to allow funds to borrow for liquidity purposes. The arrangement was initiated pursuant to exemptive relief granted by the Securities and Exchange Commission to allow these affiliated funds to lend money to, and borrow money from, each other, in an attempt to reduce borrowing costs below those of bank loan facilities. Under the arrangement the Fund may lend money to other Oppenheimer funds and may borrow from other Oppenheimer funds at a rate set by the Fund's Board of Trustees, based upon a recommendation by the Manager. The Fund's borrowings, if any, are subject to asset coverage requirements under the Investment Company Act and the provisions of the SEC order and other applicable regulations. If the Fund borrows money, there is a risk that the loan could be called on one day's notice, in which case the Fund might have to borrow from a bank at higher rates if a loan were not available from another Oppenheimer fund. If the Fund lends money to another fund, it will be subject to the risk that the other fund might not repay the loan in a timely manner, or at all. The Fund had no interfund borrowings or loans outstanding during the year ended or at September 30, 2003. 33 | OPPENHEIMER DISCOVERY FUND INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders of Oppenheimer Discovery Fund: We have audited the accompanying statement of assets and liabilities of Oppenheimer Discovery Fund, including the statement of investments, as of September 30, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the 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, 2003, by correspondence with the custodian and broker or by other appropriate auditing procedures where replies from brokers were not received. 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, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Denver, Colorado October 21, 2003 34 | OPPENHEIMER DISCOVERY FUND FEDERAL INCOME TAX INFORMATION Unaudited - -------------------------------------------------------------------------------- In early 2004, if applicable, shareholders of record will receive information regarding all dividends and distributions paid to them by the Fund during calendar year 2003. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. A portion, if any, of the dividends paid by the Fund during the fiscal year ended September 30, 2003 which are not designated as capital gain distributions are eligible for lower individual income tax rates to the extent that the Fund has received qualified dividend income as stipulated by recent tax legislation. $3,388,208 of the Fund's fiscal year taxable income may be eligible for the lower individual income tax rates. In early 2004, shareholders of record will receive information regarding the percentage of distributions that are eligible for lower individual income tax rates. 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. PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES Unaudited - -------------------------------------------------------------------------------- The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities ("portfolio proxies") held by the Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.225.5677, (ii) on the Fund's website at www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In addition, the Fund will be required to file new Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The first such filing is due no later than August 31, 2004, for the twelve months ended June 30, 2004. Once filed, the Fund's Form N-PX filing will be available (i) without charge, upon request, by calling the Fund toll-free at 1.800.225.5677, and (ii) on the SEC's website at www.sec.gov. 35 | OPPENHEIMER DISCOVERY FUND TRUSTEES AND OFFICERS Unaudited - -------------------------------------------------------------------------------- Name, Position(s) Held Principal Occupation(s) During Past 5 Years; with Fund, Length of Other Trusteeships/Directorships Held by Service, Age Trustee; Number of Portfolios in Fund Complex Currently Overseen by Trustee INDEPENDENT TRUSTEES The address of each Trustee in the chart below is 6803 S. Tucson Way, Centennial, CO 80112-3924. Each trustee oversees 25 portfolios in the OppenheimerFunds complex except for Mr. Galli who also serves as trustee of 10 other Oppenheimer funds that are not Board I funds. Each Trustee serves for an indefinite term, until his or her resignation, retirement, death or removal. Clayton K. Yeutter, Of Counsel (since 1993), Hogan & Hartson (a law Chairman of the Board of firm). Other directorships: Weyerhaeuser Corp. Trustees (since 2003), (since 1999) and Danielson Holding Corp. (since Trustee (since 1991) 2002); formerly a director of Caterpillar, Inc. Age: 72 (1993-December 2002). Robert G. Galli, A trustee or director of other Oppenheimer Trustee (since 1996) funds. Formerly Trustee (May 2000-2002) of Age: 70 Research Foundation of AIMR (investment research, non-profit) and Vice Chairman (October 1995-December 1997) of Oppenheimer Funds Inc. Phillip A. Griffiths, A director (since 1991) of the Institute for Trustee, (since 1999) Advanced Study, Princeton, N.J., a director Age: 64 (since 2001) of GSI Lumonics, a trustee (since 1983) of Woodward Academy, a Senior Advisor (since 2001) of The Andrew W. Mellon Foundation. A member of: the National Academy of Sciences (since 1979), American Academy of Arts and Sciences (since 1995), American Philosophical Society (since 1996) and Council on Foreign Relations (since 2002). Formerly a director of Bankers Trust New York Corporation (1994-1999). Joel W. Motley, Director (since 2002) Columbia Equity Financial Trustee (since 2002) Corp. (privately-held financial adviser); Age: 51 Managing Director (since 2002) Carmona Motley, Inc. (privately-held financial adviser); Formerly he held the following positions: Managing Director (January 1998-December 2001), Carmona Motley Hoffman Inc. (privately-held financial adviser); Managing Director (January 1992-December 1997), Carmona Motley & Co. (privately-held financial adviser). Kenneth A. Randall, A director of Dominion Resources, Inc. (electric Trustee (since 1980) utility holding company) and Prime Retail, Inc. Age: 76 (real estate investment trust); formerly a director of Dominion Energy, Inc. (electric power and oil & gas producer), President and Chief Executive Officer of The Conference Board, Inc. (international economic and business research) and a director of Lumbermens Mutual Casualty Company, American Motorists Insurance Company and American Manufacturers Mutual Insurance Company. Edward V. Regan, President, Baruch College, CUNY; a director of Trustee (since 1993) RBAsset (real estate manager); a director of Age: 73 OffitBank; formerly Trustee, Financial Accounting Foundation (FASB and GASB), Senior Fellow of Jerome Levy Economics Institute, Bard College, Chairman of Municipal Assistance Corporation for the City of New York, New York State Comptroller and Trustee of New York State and Local Retirement Fund. Russell S. Reynolds, Jr., Chairman (since 1993) of The Directorship Search Trustee (since 1989) Group, Inc. (corporate governance consulting and Age: 71 executive recruiting); a life trustee of International House (non-profit educational organization), and a trustee (since 1996) of the Greenwich Historical Society. 36 | OPPENHEIMER DISCOVERY FUND Donald W. Spiro, Chairman Emeritus (since January 1991) of the Vice Chairman of the Manager. Formerly a director (January Board of Trustees, 1969-August 1999) of the Manager. Trustee (since 1985) Age: 77 - -------------------------------------------------------------------------------- INTERESTED TRUSTEE AND OFFICER The address of Mr. Murphy in the chart below is Two World Financial Center, New York, NY 10080. Mr. Murphy serves for an indefinite term, until his resignation, death or removal. John V. Murphy, Chairman, Chief Executive Officer and director President and Trustee (since June 2001) and President (since September (since 2001) 2000) of the Manager; President and a director Age: 54 or trustee of other Oppenheimer funds; President and a director (since July 2001) of Oppenheimer Acquisition Corp. (the Manager's parent holding company) and of Oppenheimer Partnership Holdings, Inc. (a holding company subsidiary of the Manager); a director (since November 2001) of OppenheimerFunds Distributor, Inc. (a subsidiary of the Manager); Chairman and a director (since July 2001) of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager); President and a director (since July 2001) of OppenheimerFunds Legacy Program (a charitable trust program established by the Manager); a director of the investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc. and Centennial Asset Management Corporation (since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001); President (since November 1, 2001) and a director (since July 2001) of Oppenheimer Real Asset Management, Inc.; a director (since November 2001) of Trinity Investment Management Corp. and Tremont Advisers, Inc. (investment advisory affiliates of the Manager); Executive Vice President (since February 1997) of Massachusetts Mutual Life Insurance Company (the Manager's parent company); a director (since June 1995) of DLB Acquisition Corporation (a holding company that owns the shares of David L. Babson & Company, Inc.); formerly, Chief Operating Officer (September 2000-June 2001) of the Manager; President and trustee (November 1999-November 2001) of MML Series Investment Fund and MassMutual Institutional Funds (open-end investment companies); a director (September 1999-August 2000) of C.M. Life Insurance Company; President, Chief Executive Officer and director (September 1999-August 2000) of MML Bay State Life Insurance Company; a director (June 1989-June 1998) of Emerald Isle Bancorp and Hibernia Savings Bank (a wholly-owned subsidiary of Emerald Isle Bancorp). Oversees 83 portfolios in the OppenheimerFunds complex. - -------------------------------------------------------------------------------- OFFICERS The address of the Officers in the chart below is as follows: for Ms. Granger and Mr. Zack Two World Financial Center, New York, NY 10080, for Mr. Wixted, 6803 S. Tucson Way, Centennial, CO 80112-3924. Each Officer oversees 83 portfolios, except for Ms. Granger, in the OppenheimerFunds complex. Each Officer serves for an annual term or until his or her earlier resignation, death or removal. Laura Granger, Vice President of the Manager (since October Vice President and 2000); an officer of 3 portfolios in the Portfolio Manager OppenheimerFunds complex; formerly a portfolio (since 2000) manager at Fortis Advisors (July 1998-October Age: 42 2000) prior to which she was portfolio manager at General Motors Investment Management (July 1993-July 1998). 37 | OPPENHEIMER DISCOVERY FUND TRUSTEES AND OFFICERS Unaudited / Continued Brian W. Wixted, Senior Vice President and Treasurer (since March Treasurer (since 1999) 1999) of the Manager; Treasurer (since March Age: 43 1999) of HarbourView Asset Management Corporation, Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, Shareholder Financial Services, Inc., Oppenheimer Partnership Holdings, Inc., OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000) and OFI Institutional Asset Management, Inc. (since November 2000) (offshore fund management subsidiaries of the Manager); Treasurer and Chief Financial Officer (since May 2000) of Oppenheimer Trust Company (a trust company subsidiary of the Manager); Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp. and OppenheimerFunds Legacy Program (since April 2000); formerly Principal and Chief Operating Officer (March 1995-March 1999), Bankers Trust Company-Mutual Fund Services Division. Robert G. Zack, Senior Vice President (since May 1985) and Secretary (since 2001) General Counsel (since February 2002) of the Age: 55 Manager; General Counsel and a director (since November 2001) of OppenheimerFunds Distributor, Inc.; Senior Vice President and General Counsel (since November 2001) of HarbourView Asset Management Corporation; Vice President and a director (since November 2000) of Oppenheimer Partnership Holdings, Inc.; Senior Vice President, General Counsel and a director (since November 2001) of Shareholder Services, Inc., Shareholder Financial Services, Inc., OFI Private Investments, Inc., Oppenheimer Trust Company and OFI Institutional Asset Management, Inc.; General Counsel (since November 2001) of Centennial Asset Management Corporation; a director (since November 2001) of Oppenheimer Real Asset Management, Inc.; Assistant Secretary and a director (since November 2001) of OppenheimerFunds International Ltd.; Vice President (since November 2001) of OppenheimerFunds Legacy Program; Secretary (since November 2001) of Oppenheimer Acquisition Corp.; formerly Acting General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November 2001); OppenheimerFunds International Ltd. and OppenheimerFunds plc (October 1997-November 2001). The Fund's Statement of Additional Information contains additional information about the Fund's Trustees and is available without charge upon request. 38 | OPPENHEIMER DISCOVERY FUND ITEM 2. CODE OF ETHICS ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT The Board of Trustees of the Fund has determined that Edward V. Regan, the Chairman of the Board's Audit Committee, possesses the technical attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as an "audit committee financial expert," and has designated Mr. Regan as the Audit Committee's financial expert. Mr. Regan is an "independent" Trustee pursuant to paragraph (a)(2) of Item 3 to Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES - NOT REQUIRED ITEM 5. NOT APPLICABLE ITEM 6. RESERVED ITEM 7. NOT APPLICABLE ITEM 8. RESERVED ITEM 9. CONTROLS AND PROCEDURES (a) Based on their evaluation of registrant's disclosure controls and procedures (as defined in rule 30a-2(c) under the Investment Company Act of 1940 (17 CFR 270.30a-2(c)) as of September 30, 2003, registrant's principal executive officer and principal financial officer found registrant's disclosure controls and procedures to be appropriately designed to ensure that information required to be disclosed by registrant in the reports that it files under the Securities Exchange Act of 1934 (a) is accumulated and communicated to registrant's management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure, and (b) is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the U.S. Securities and Exchange Commission. (b) There have been no significant changes in registrant's internal controls or in other factors that could significantly affect registrant's internal controls subsequent to the date of the most recent evaluation as indicated, including no significant deficiencies or material weaknesses that required corrective action. ITEM 10. EXHIBITS. (A) EXHIBIT ATTACHED HERETO. (ATTACH CODE OF ETHICS AS EXHIBIT) (B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS) EX-99.CODE ETH 3 ex99_code-500.txt EX99_CODE-500 EX-99.CODE ETH CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS OF THE OPPENHEIMER FUNDS AND OF OPPENHEIMERFUNDS, INC. This Code of Ethics for Principal Executive and Senior Financial Officers (referred to in this document as the "Code") has been adopted by each of the investment companies for which OppenheimerFunds, Inc. or one of its subsidiaries or affiliates (referred to collectively in this document as "OFI") acts as investment adviser (individually, a "Fund" and collectively, the "Funds"), and by OFI to effectuate compliance with Section 406 under the Sarbanes-Oxley Act of 2002 and the rules adopted to implement Section 406. This Code applies to each Fund's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions ("Covered Officers"). A listing of positions currently within the ambit of Covered Officers is attached as EXHIBIT A.(1) 1. Purpose of the Code ------------------- This Code sets forth standards and procedures that are reasonably designed to deter wrongdoing and promote: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely, and understandable disclosure in reports and documents that a Fund files with, or submits to, the U.S. Securities and Exchange Commission ("SEC") and in other public communications made by the Fund; o compliance with applicable governmental laws, rules and regulations; o the prompt internal reporting of violations of this Code to the Code Administrator identified below; and o accountability for adherence to this Code. In general, the principles that govern honest and ethical conduct, including the avoidance of conflicts of interest between personal and professional relationships, reflect, at the minimum, the following: (1) the duty at all times in performing any responsibilities as a Fund financial officer, controller, accountant or principal executive officer to place the interests of the Funds ahead of personal interests; (2) the fundamental standard that Covered Officers should not take inappropriate advantage of their positions; (3) the duty to assure that a Fund's financial statements and reports to its shareholders are prepared honestly and accurately in accordance with applicable rules, regulations and accounting standards; and (4) the duty to conduct the Funds' business and affairs in an honest and ethical manner. - --------------- 1 The obligations imposed by this Code on Covered Officers are separate from and in addition to any obligations that may be imposed on such persons as Covered Persons under the Code of Ethics adopted by the Oppenheimer Funds dated May 15, 2002, under Rule 17j-1 of the Investment Company Act of 1940, as amended and any other code of conduct applicable to Covered Officers in whatever capacity they serve. This Code does not incorporate by reference any provisions of the Rule 17j-1 Code of Ethics and accordingly, any violations or waivers granted under the Rule 17j-1 Code of Ethics will not be considered a violation or waiver under this Code. Each Covered Officer should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. It is acknowledged that, as a result of the contractual relationship between each Fund and OFI, of which the Covered Officers are also officers or employees, and subject to OFI's fiduciary duties to each Fund, the Covered Officers will, in the normal course of their duties, be involved in establishing policies and implementing decisions that will have different effects on OFI and the Funds. It is further acknowledged that the participation of the Covered Officers in such activities is inherent in the contractual relationship between each Fund and OFI and is consistent with the expectations of the Board of Trustees/Directors of the performance by the Covered Officers of their duties as officers of the Funds. 2. Prohibitions ------------ The specific provisions and reporting requirements of this Code are concerned primarily with promoting honest and ethical conduct and avoiding conflicts of interest in personal and professional relationships. No Covered Officer may use information concerning the business and affairs of a Fund, including the investment intentions of a Fund, or use his or her ability to influence such investment intentions, for personal gain to himself or herself, his or her family or friends or any other person or in a manner detrimental to the interests of a Fund or its shareholders. No Covered Officer may use his or her personal influence or personal relationships to influence the preparation and issuance of financial reports of a Fund whereby the Covered Officer would benefit personally to the detriment of the Fund and its shareholders. No Covered Officer shall intentionally for any reason take any action or fail to take any action in connection with his or her official acts on behalf of a Fund that causes the Fund to violate applicable laws, rules and regulations. No Covered Officer shall, in connection with carrying out his or her official duties and responsibilities on behalf of a Fund: (i) employ any device, scheme or artifice to defraud a Fund or its shareholders; (ii) intentionally cause a Fund to make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading in its official documents, regulatory filings, financial statements or communications to the public; (iii) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any Fund or its shareholders; (iv) engage in any manipulative practice with respect to any Fund; (v) use his or her personal influence or personal relationships to influence any business decision, investment decisions, or financial reporting by a Fund whereby the Covered Officer would benefit personally to the detriment of the Fund or its shareholders; (vi) intentionally cause a Fund to fail to comply with applicable laws, rules and regulations, including failure to comply with the requirement of full, fair, accurate, understandable and timely disclosure in reports and documents that a Fund files with, or submits to, the SEC and in other public communications made by the Fund; (vii) intentionally mislead or omit to provide material information to the Fund's independent auditors or to the Board of Trustees/Directors or the officers of the Fund or its investment adviser in connection with financial reporting matters; (viii) fail to notify the Code Administrator or the Chief Executive Officer of the Fund or its investment adviser promptly if he or she becomes aware of any existing or potential violations of this Code or applicable laws; (ix) retaliate against others for, or otherwise discourage the reporting of, actual or apparent violations of this Code; or (x) fails to acknowledge or certify compliance with this Code if requested to do so. 3. Reports of Conflicts of Interests --------------------------------- If a Covered Officer becomes aware of a conflict of interest under this Code or, to the Covered Officer's reasonable belief, the appearance of one, he or she must immediately report the matter to the Code's Administrator. If the Code Administrator is involved or believed to be involved in the conflict of interest or appearance of conflict of interest, the Covered Officer shall report the matter directly to the OFI's Chief Executive Officer. Upon receipt of a report of a conflict, the Code Administrator will take prompt steps to determine whether a conflict of interest exists. If the Code Administrator determines that an actual conflict of interest exists, the Code Administrator will take steps to resolve the conflict. If the Code Administrator determines that the appearance of a conflict exists, the Code Administrator will take appropriate steps to remedy such appearance. If the Code Administrator determines that no conflict or appearance of a conflict exists, the Code Administrator shall meet with the Covered Officer to advise him or her of such finding and of his or her reason for taking no action. In lieu of determining whether a conflict or appearance of conflict exists, the Code Administrator may in his or her discretion refer the matter to the Fund's Board of Trustees/Directors. 4. Waivers ------- Any Covered Officer requesting a waiver of any of the provisions of this Code must submit a written request for such waiver to the Code Administrator, setting forth the basis of such request and all necessary facts upon which such request can be evaluated. The Code Administrator shall review such request and make a written determination thereon, which shall be binding. The Code Administrator may in reviewing such request, consult at his discretion with legal counsel to OFI or to the Fund. In determining whether to waive any of the provisions of this Code, the Code Administrator shall consider whether the proposed waiver: : (i) is prohibited by this Code; (ii) is consistent with honest and ethical conduct; and (iii) will result in a conflict of interest between the Covered Officer's personal and professional obligations to a Fund. In lieu of determining whether to grant a waiver, the Code Administrator in his or her discretion may refer the matter to the appropriate Fund's Board of Trustees/Directors. 5. Reporting Requirements ---------------------- (a) Each Covered Officer shall, upon becoming subject to this Code, be provided with a copy of this Code and shall affirm in writing that he or she has received, read, understands and shall adhere to this Code. (b) At least annually, all Covered Officers shall be provided with a copy of this Code and shall certify that they have read and understand this Code and recognize that they are subject thereto. (c) At least annually, all Covered Officers shall certify that they have complied with the requirements of this Code and that they have disclosed or reported any violations of this Code to the Code Administrator or the Chief Executive Officer of the Fund or its investment adviser. (d) The Code Administrator shall submit a quarterly report to the Board of Trustees/Directors of each Fund containing (i) a description of any report of a conflict of interest or apparent conflict and the disposition thereof; (ii) a description of any request for a waiver from this Code and the disposition thereof; (iii) any violation of the Code that has been reported or found and the sanction imposed; (iv) interpretations issued under the Code by the Code Administrator; and (v) any other significant information arising under the Code including any proposed amendments. (e) Each Covered Officer shall notify the Code Administrator promptly if he or she knows of or has a reasonable belief that any violation of this Code has occurred or is likely to occur. Failure to do so is itself a violation of this Code. (f) Any changes to or waivers of this Code, including "implicit" waivers as defined in applicable SEC rules, will, to the extent required, be disclosed by the Code Administrator or his or her designee as provided by applicable SEC rules.(2) 6. Annual Renewal -------------- At least annually, the Board of Trustees/Directors of each Fund shall review the Code and determine whether any amendments (including any amendments that may be recommended by OFI or the Fund's legal counsel) are necessary or desirable, and shall consider whether to renew and/or amend the Code. 7. Sanctions --------- Any violation of this Code of Ethics shall be subject to the imposition of such sanctions by OFI as may be deemed appropriate under the circumstances to achieve the purposes of this Code and may include, without limitation, a letter of censure, suspension from employment or termination of employment, in the sole discretion of OFI. 8. Administration and Construction ------------------------------- (a) The administration of this Code of Ethics shall be the responsibility of OFI's General Counsel or his designee as the "Code Administrator" of this Code, acting under the terms of this Code and the oversight of the Trustees/Directors of the Funds. (b) The duties of such Code Administrator will include: (i) Continuous maintenance of a current list of the names of all Covered Officers; (ii) Furnishing all Covered Officers a copy of this Code and initially and periodically informing them of their duties and obligations thereunder; (iii) Maintaining or supervising the maintenance of all records required by this Code, including records of waivers granted hereunder; (iv) Issuing interpretations of this Code which appear to the Code Administrator to be consistent with the objectives of this Code and any applicable laws or regulations; (v) Conducting such inspections or investigations as shall reasonably be required to detect and report any violations of this Code, with his or her recommendations, to the Chief Executive Officer of OFI and to the Trustees/Directors of the - ------------------ 2 An "implicit waiver" is the failure to take action within a reasonable period of time regarding a material departure from a provision of this Code that has been made known to the General Counsel, the Code Administrator, an executiv officer of the Fund or OFI. affected Fund(s) or any committee appointed by them to deal with such information; and (vi) Periodically conducting educational training programs as needed to explain and reinforce the terms of this Code. (c) In carrying out the duties and responsibilities described under this Code, the Code Administrator may consult with legal counsel, who may include legal counsel to the applicable Funds, and such other persons as the Administrator shall deem necessary or desirable. The Code Administrator shall be protected from any liability hereunder or under any applicable law, rule or regulation, for decisions made in good faith based upon his or her reasonable judgment. 9. Required Records ---------------- The Administrator shall maintain and cause to be maintained in an easily accessible place, the following records for the period required by applicable SEC rules (currently six years following the end of the fiscal year of OFI in which the applicable event or report occurred): (a) A copy of any Code which has been in effect during the period; (b) A record of any violation of any such Code and of any action taken as a result of such violation, during the period; (c) A copy of each annual report pursuant to the Code made by a Covered Officer during the period; (d) A copy of each report made by the Code Administrator pursuant to this Code during the period; (e) A list of all Covered Officers who are or have been required to make reports pursuant to this Code during the period, plus those person(s) who are or were responsible for reviewing these reports; (f) A record of any request to waive any requirement of this Code, the decision thereon and the reasons supporting the decision; and (g) A record of any report of any conflict of interest or appearance of a conflict of interest received by the Code Administrator or discovered by the Code Administrator during the period, the decision thereon and the reasons supporting the decision. 10. Amendments and Modifications ---------------------------- This Code may not be amended or modified except by an amendment in writing which is approved or ratified by OFI and by a majority vote of the Independent Trustees/Directors of each of the applicable Funds. 11. Confidentiality. ---------------- This Code is identified for the internal use of the Funds and OFI. Reports and records prepared or maintained under this Code are considered confidential and shall be maintained and protected accordingly to the extent permitted by applicable laws, rules and regulations. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Trustees/Directors of the affected Fund(s) and their counsel, the independent auditors of the affected Funds and/or OFI, and to OFI, except as such disclosure may be required pursuant to applicable judicial or regulatory process. Dated as of: June 25, 2003 Adopted by Board I of the Oppenheimer Funds June 13, 2003 /S/ ROBERT G. ZACK Robert G. Zack, Secretary Adopted by Board II of the Oppenheimer/Centennial Funds June 24, 2003 /S/ ROBERT G. ZACK Robert G. Zack, Secretary Adopted by Board III of the Oppenheimer Funds June 9, 2003 /S/ ROBERT G. ZACK Robert G. Zack, Secretary Adopted by Board IV of the Oppenheimer Funds May 21, 2003 /S/ ROBERT G. ZACK Robert G. Zack, Secretary Adopted by the Boards of Directors of OppenheimerFunds, Inc. and its subsidiaries and affiliates that act as investment adviser to the Oppenheimer or Centennial funds June 1, 2003 /S/ ROBERT G. ZACK Robert G. Zack, Senior Vice President and General Counsel EXHIBIT A - --------- POSITIONS COVERED BY THIS CODE OF ETHICS FOR SENIOR OFFICERS Each Oppenheimer or Centennial fund - ----------------------------------- Principal Executive Officer Principal Financial Officer Treasurer Assistant Treasurer Personnel of OFI who by virtue of their jobs perform critical financial and - --------------------------------------------------------------------------- accounting functions for OFI on behalf of a Fund, including: - ------------------------------------------------------------ Treasurer Senior Vice President/Fund Accounting Vice President/Fund Accounting EX-99.CERT 4 ex99_302cert-500.txt EX99_302CERT-500 Exhibit 99.CERT Section 302 Certifications CERTIFICATIONS I, John V. Murphy, certify that: -------------- 1. I have reviewed this report on Form N-CSR of Oppenheimer Discovery Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of trustees (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. Date: 11/14/03 /s/John V. Murphy --------------------------- John V. Murphy Chief Executive Officer Exhibit 99.CERT Section 302 Certifications CERTIFICATIONS I, Brian W. Wixted, certify that: --------------- 1. I have reviewed this report on Form N-CSR of Oppenheimer Discovery Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of trustees (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. Date: 11/14/03 /s/Brian W. Wixted ---------------------------- Brian W. Wixted Chief Financial Officer EX-99.CERT 5 ex99_906cert-500.txt EX99_906CERT-500 EX-99.906CERT Section 906 Certifications CERTIFICATION PURSUANT TO 18 U.S.C SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003 John V. Murphy, Chief Executive Officer, and Brian W. Wixted, Chief -------------- --------------- Financial Officer, of Oppenheimer Discovery Fund (the "Registrant"), each certify to the best of his or her knowledge that: 1. The Registrant's periodic report on Form N-CSR for the period ended September 30, 2003 (the "Form N-CSR") fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Form N-CSR filed with the Commission. Chief Executive Officer Chief Financial Officer Oppenheimer Discovery Fund Oppenheimer Discovery Fund /s/John V. Murphy /s/Brian W. Wixted - ---------------------------- ---------------------------- John V. Murphy Brian W. Wixted Date: 11/14/03 Date: 11/14/03 -----END PRIVACY-ENHANCED MESSAGE-----