497 1 discoveryfund.htm

 

STATEMENT OF ADDITIONAL INFORMATION

TO PROSPECTUS AND PROXY STATEMENT
OF
OPPENHEIMER DISCOVERY FUND

PART B

Acquisition of the Assets of
OPPENHEIMER MIDCAP FUND
 
By and in exchange for Shares of
OPPENHEIMER DISCOVERY FUND

This Statement of Additional Information to this Prospectus and Proxy Statement (the "SAI") relates specifically to the proposed delivery of substantially all of the assets of Oppenheimer MidCap Fund ("MidCap Fund") for Class A, Class B, Class C, Class N and Class Y shares of Oppenheimer Discovery Fund ("Discovery Fund") (the "Reorganization").

This SAI consists of this Cover Page and the following documents which are incorporated into this SAI by reference: (i) the Statement of Additional Information of MidCap Fund dated February 27, 2009, revised May 8, 2009; (ii) the annual report of MidCap Fund which includes audited financial statements of MidCap Fund and Management's Discussion of Fund Performance for the 12-month period ended October 31, 2008; (iii) the Statement of Additional Information of Discovery Fund dated January 28, 2009, revised May 12, 2009; (iv) the annual report of Discovery Fund, which includes the audited financial statements of Discovery Fund and Management's Discussion of Fund Performance for the 12-month period ended September 30, 2008; and the semi-annual report of Discovery Fund dated March 31, 2009.

The semi-annual report of MidCap Fund dated April 30, 2009 will be made available no later than 60 days thereafter.

This SAI is not a Prospectus; you should read this SAI in conjunction with the combined Prospectus and Proxy Statement dated June 8, 2009 relating to the Reorganization. You can request a copy of the Prospectus and Proxy Statement by writing OppenheimerFunds Services at P.O. Box 5270, Denver, Colorado 80217, by visiting the website at www.oppenheimerfunds.com or by calling toll-free 1.800.647.1963. The date of this SAI is June 8, 2009.

PRO FORMA FINANCIAL STATEMENTS

     Shown below are pro forma financial statements for the combined Discovery Fund, assuming the Reorganization had been consummated as of March 31, 2009. The first table presents pro forma Statements of Assets and Liabilities for the combined Discovery Fund. The second table presents pro forma Statements of Operations for the combined Discovery Fund. The third table presents a pro forma Statement of Investments for the combined Discovery Fund. 

 

      The pro forma Statement of Investments and Statement of Assets and Liabilities reflect the combined financial position of MidCap Fund and Discovery Fund for the year ended March 31, 2009. The pro forma statement of operations reflects the combined results of operations of MidCap Fund and Discovery Fund at March 31, 2009. The pro forma combined financial statements may not necessarily be representative of what the actual combined financial statements would have been had the Reorganization occurred at March 31, 2009. The historical cost of investment securities will be carried forward to the surviving entity and results of operations of MidCap Fund for pre-combination periods will not be restated. The pro forma statement of investments and statements of assets and liabilities and operations should be read in conjunction with the historical financial statements of the Funds incorporated by reference in the Statements of Additional Information for each Fund.

 

 

 

 

Pro Forma Combining Statements of Investments            March 31, 2009 (Unaudited)
Oppenheimer Discovery Fund and Oppenheimer MidCap Fund
                                                 
                    Combined                     Combined  
                    ProForma                     ProForma  
    Oppenheimer     Oppenheimer     Oppenheimer     Oppenheimer     Oppenheimer     Oppenheimer  
    Discovery     MidCap     Discovery     Discovery     MidCap     Discovery  
    Fund     Fund     Fund     Fund     Fund     Fund  
    Shares     Shares     Shares     Value     Value     Value  
 
Common Stocks—95.2%
                                               
Consumer Discretionary—13.9%
                                               
Diversified Consumer Services—4.4%
                                               
American Public Education, Inc.1
    188,151       0       188,151       7,913,631       0       7,913,631  
Capella Education Co.1
    50,953       0       50,953       2,700,509       0       2,700,509  
DeVry, Inc.
    0       85,900       85,900       0       4,138,662       4,138,662  
Grand Canyon Education, Inc.1
    150,300       0       150,300       2,594,178       0       2,594,178  
ITT Educational Services, Inc.1
    0       26,400       26,400       0       3,205,488       3,205,488  
Strayer Education, Inc.
    48,900       27,600       76,500       8,795,643       4,964,412       13,760,055  
                             
 
                            22,003,961       12,308,562       34,312,523  
Hotels, Restaurants & Leisure—2.9%
                                               
Buffalo Wild Wings, Inc.1
    78,600       0       78,600       2,875,188       0       2,875,188  
Burger King Holdings, Inc.
    0       569,700       569,700       0       13,074,615       13,074,615  
Darden Restaurants, Inc.
    0       54,800       54,800       0       1,877,448       1,877,448  
Panera Bread Co., Cl. A1
    85,400       0       85,400       4,773,860       0       4,773,860  
                             
 
                            7,649,048       14,952,063       22,601,111  
Media—1.8%
                                               
Cablevision Systems Corp. New York Group, Cl. A
    0       702,900       702,900       0       9,095,526       9,095,526  
Liberty Media Corp.-Entertainment, Series A1
    0       241,800       241,800       0       4,823,910       4,823,910  
                             
 
                            0       13,919,436       13,919,436  
Multiline Retail—1.6%
                                               
Dollar Tree, Inc.1
    125,100       152,400       277,500       5,573,205       6,789,420       12,362,625  
Specialty Retail—2.6%
                                               
Aaron Rents, Inc.
    118,300       0       118,300       3,153,878       0       3,153,878  
Aeropostale, Inc.1
    74,500       0       74,500       1,978,720       0       1,978,720  
GameStop Corp., Cl. A1
    0       256,700       256,700       0       7,192,734       7,192,734  
O’Reilly Automotive, Inc.1
    0       112,200       112,200       0       3,928,122       3,928,122  
Urban Outfitters, Inc.1
    130,400       133,400       263,800       2,134,648       2,183,758       4,318,406  
                             
 
                            7,267,246       13,304,614       20,571,860  
Textiles, Apparel & Luxury Goods—0.6%
                                               
Polo Ralph Lauren Corp., Cl. A
    0       102,600       102,600       0       4,334,850       4,334,850  
Consumer Staples—4.3%
                                               

 

 

                                                 
                    Combined                     Combined  
                    ProForma                     ProForma  
    Oppenheimer     Oppenheimer     Oppenheimer     Oppenheimer     Oppenheimer     Oppenheimer  
    Discovery     MidCap     Discovery     Discovery     MidCap     Discovery  
    Fund     Fund     Fund     Fund     Fund     Fund  
    Shares     Shares     Shares     Value     Value     Value  
 
Food Products—3.1%
                                               
American Italian Pasta Co.1
    56,700       0       56,700       1,973,727       0       1,973,727  
Diamond Foods, Inc.
    172,300       0       172,300       4,812,339       0       4,812,339  
Flowers Foods, Inc.
    238,800       234,100       472,900       5,607,024       5,496,668       11,103,692  
TreeHouse Foods, Inc.1
    216,500       0       216,500       6,233,035       0       6,233,035  
                             
 
                            18,626,125       5,496,668       24,122,793  
Personal Products—1.2%
                                               
Alberto-Culver Co.
    124,500       0       124,500       2,814,945       0       2,814,945  
Chattem, Inc.1
    84,349       35,400       119,749       4,727,761       1,984,170       6,711,931  
                             
 
                            7,542,706       1,984,170       9,526,876  
Energy—8.1%
                                               
Energy Equipment & Services—3.2%
                                               
Atwood Oceanics, Inc.1
    105,700       0       105,700       1,753,563       0       1,753,563  
Cameron International Corp.1
    0       228,000       228,000       0       5,000,040       5,000,040  
Core Laboratories NV
    37,100       0       37,100       2,714,236       0       2,714,236  
IHS, Inc., Cl. A1
    113,910       211,500       325,410       4,690,814       8,709,570       13,400,384  
Willbros Group, Inc.1
    232,151       0       232,151       2,251,865       0       2,251,865  
                             
 
                            11,410,478       13,709,610       25,120,088  
Oil, Gas & Consumable Fuels—4.9%
                                               
Arena Resources, Inc.1
    172,267       0       172,267       4,389,363       0       4,389,363  
Carrizo Oil & Gas, Inc.1
    277,793       0       277,793       2,466,802       0       2,466,802  
Concho Resources, Inc.1
    92,000       72,800       164,800       2,354,280       1,862,952       4,217,232  
Petrohawk Energy Corp.1
    263,800       498,100       761,900       5,072,874       9,578,463       14,651,337  
Range Resources Corp.
    0       309,600       309,600       0       12,743,136       12,743,136  
                             
 
                            14,283,319       24,184,551       38,467,870  
Financials—8.6%
                                               
Capital Markets—4.2%
                                               
Affiliated Managers Group, Inc.1
    0       121,200       121,200       0       5,055,252       5,055,252  
Eaton Vance Corp.
    0       195,900       195,900       0       4,476,315       4,476,315  
Greenhill & Co., Inc.
    49,812       0       49,812       3,678,616       0       3,678,616  
Lazard Ltd., Cl. A
    0       268,100       268,100       0       7,882,140       7,882,140  
optionsXpress Holdings, Inc.
    165,677       0       165,677       1,883,747       0       1,883,747  
Stifel Financial Corp.1
    117,888       0       117,888       5,105,729       0       5,105,729  
Waddell & Reed Financial, Inc., Cl. A
    238,600       0       238,600       4,311,502       0       4,311,502  
                             
 
                            14,979,594       17,413,707       32,393,301  
Commercial Banks—0.5%
                                               
Signature Bank1
    144,379       0       144,379       4,075,819       0       4,075,819  
Diversified Financial Services—1.6%
                                               
IntercontinentalExchange, Inc.1
    0       63,300       63,300       0       4,713,951       4,713,951  
MSCI, Inc., Cl. A1
    186,740       277,460       464,200       3,157,773       4,691,849       7,849,622  
                             
 
                            3,157,773       9,405,800       12,563,573  
Insurance—1.2%
                                               
RenaissanceRe Holdings Ltd.
    88,700       103,100       191,800       4,385,328       5,097,264       9,482,592  
Real Estate Investment Trusts—0.5%
                                               
Digital Realty Trust, Inc.
    110,500       0       110,500       3,666,390       0       3,666,390  

 

 

                                                 
                    Combined                     Combined  
                    ProForma                     ProForma  
    Oppenheimer     Oppenheimer     Oppenheimer     Oppenheimer     Oppenheimer     Oppenheimer  
    Discovery     MidCap     Discovery     Discovery     MidCap     Discovery  
    Fund     Fund     Fund     Fund     Fund     Fund  
    Shares     Shares     Shares     Value     Value     Value  
 
Thrifts & Mortgage Finance—0.6%
                                               
Dime Community Bancshares, Inc.
    193,309       0       193,309       1,813,238       0       1,813,238  
Hudson City Bancorp, Inc.
    0       264,500       264,500       0       3,092,005       3,092,005  
                             
 
                            1,813,238       3,092,005       4,905,243  
Health Care—21.3%
                                               
Biotechnology—3.7%
                                               
Alexion Pharmaceuticals, Inc.1
    222,600       213,000       435,600       8,383,116       8,021,580       16,404,696  
Cephalon, Inc.1
    0       86,900       86,900       0       5,917,890       5,917,890  
Genomic Health, Inc.1
    115,946       0       115,946       2,826,763       0       2,826,763  
Myriad Genetics, Inc.1
    0       73,400       73,400       0       3,337,498       3,337,498  
                             
 
                            11,209,879       17,276,968       28,486,847  
Health Care Equipment & Supplies—8.2%
                                               
ABIOMED, Inc.1
    255,859       0       255,859       1,253,709       0       1,253,709  
Bard (C.R.), Inc.
    0       132,600       132,600       0       10,570,872       10,570,872  
Edwards Lifesciences Corp.1
    0       159,400       159,400       0       9,664,422       9,664,422  
Haemonetics Corp.1
    113,977       57,600       171,577       6,277,853       3,172,608       9,450,461  
IDEXX Laboratories, Inc.1
    0       88,100       88,100       0       3,046,498       3,046,498  
Immucor, Inc.1
    87,600       0       87,600       2,203,140       0       2,203,140  
Masimo Corp.1
    186,799       0       186,799       5,413,435       0       5,413,435  
Meridian Bioscience, Inc.
    188,293       0       188,293       3,411,869       0       3,411,869  
Neogen Corp.1
    104,902       0       104,902       2,290,011       0       2,290,011  
NuVasive, Inc.1
    216,281       176,600       392,881       6,786,898       5,541,708       12,328,606  
Thoratec Corp.1
    158,600       0       158,600       4,074,434       0       4,074,434  
                             
 
                            31,711,349       31,996,108       63,707,457  
Health Care Providers & Services—4.3%
                                               
Bio-Reference Laboratories, Inc.1
    145,196       0       145,196       3,036,048       0       3,036,048  
CardioNet, Inc.1
    182,000       0       182,000       5,106,920       0       5,106,920  
Genoptix, Inc.1
    217,253       0       217,253       5,926,662       0       5,926,662  
Hanger Orthopedic Group, Inc.1
    174,200       0       174,200       2,308,150       0       2,308,150  
HMS Holdings Corp.1
    222,176       0       222,176       7,309,590       0       7,309,590  
PSS World Medical, Inc.1
    249,300       0       249,300       3,577,455       0       3,577,455  
Schein (Henry), Inc.1
    0       107,100       107,100       0       4,285,071       4,285,071  
Sun Healthcare Group, Inc.1
    256,100       0       256,100       2,161,484       0       2,161,484  
                             
 
                            29,426,309       4,285,071       33,711,380  
Health Care Technology—0.5%
                                               
athenahealth, Inc.1
    145,392       0       145,392       3,505,401       0       3,505,401  
Life Sciences Tools & Services—2.8%
                                               
Covance, Inc.1
    0       85,300       85,300       0       3,039,239       3,039,239  
ICON plc, Sponsored ADR1
    135,778       0       135,778       2,192,815       0       2,192,815  
Illumina, Inc.1
    135,900       200,205       336,105       5,060,916       7455634       12,516,550  
Luminex Corp.1
    232,900       0       232,900       4,220,148       0       4,220,148  
                             
 
                            11,473,879       10,494,873       21,968,752  

 

 

                                                 
                    Combined                     Combined  
                    ProForma                     ProForma  
    Oppenheimer     Oppenheimer     Oppenheimer     Oppenheimer     Oppenheimer     Oppenheimer  
    Discovery     MidCap     Discovery     Discovery     MidCap     Discovery  
    Fund     Fund     Fund     Fund     Fund     Fund  
    Shares     Shares     Shares     Value     Value     Value  
 
Pharmaceuticals—1.8%
                                               
Perrigo Co.
    158,200       175,700       333,900       3,928,106       4,362,631       8,290,737  
Shire Ltd., ADR
    0       163,000       163,000       0       5,858,220       5,858,220  
                             
 
                            3,928,106       10,220,851       14,148,957  
Industrials—13.1%
                                               
Aerospace & Defense—1.7%
                                               
Aerovironment, Inc.1
    122,874       0       122,874       2,568,067       0       2,568,067  
American Science & Engineering, Inc.
    39,400       0       39,400       2,198,520       0       2,198,520  
Axsys Technologies, Inc.1
    77,231       0       77,231       3,246,791       0       3,246,791  
Curtiss-Wright Corp.
    0       87,700       87,700       0       2,459,985       2,459,985  
Rockwell Collins, Inc.
    0       85,400       85,400       0       2,787,456       2,787,456  
                             
 
                            8,013,378       5,247,441       13,260,819  
Air Freight & Logistics—1.4%
                                               
C.H. Robinson Worldwide, Inc.
    0       160,900       160,900       0       7,338,649       7,338,649  
Expeditors International of Washington, Inc.
    0       135,200       135,200       0       3,824,808       3,824,808  
                             
 
                            0       11,163,457       11,163,457  
Commercial Services & Supplies—7.9%
                                               
Clean Harbors, Inc.1
    159,442       96,700       256,142       7,653,216       4,641,600       12,294,816  
Copart, Inc.1
    60,600       62,300       122,900       1,797,396       1,847,818       3,645,214  
FTI Consulting, Inc.1
    61,200       94,700       155,900       3,028,176       4,685,756       7,713,932  
ICF International, Inc.1
    102,925       0       102,925       2,364,187       0       2,364,187  
Stericycle, Inc.1
    209,500       264,500       474,000       9,999,435       12,624,585       22,624,020  
Tetra Tech, Inc.1
    125,000       0       125,000       2,547,500       0       2,547,500  
Waste Connections, Inc.1
    228,835       172,500       401,335       5,881,060       4,433,250       10,314,310  
                             
 
                            33,270,970       28,233,009       61,503,979  
Construction & Engineering—1.4%
                                               
Aecom Technology Corp.1
    126,203       0       126,203       3,291,374       0       3,291,374  
Quanta Services, Inc.1
    131,400       242,000       373,400       2,818,530       5,190,900       8,009,430  
                             
 
                            6,109,904       5,190,900       11,300,804  
Transportation Infrastructure—0.7%
                                               
Aegean Marine Petroleum Network, Inc.
    320,700       0       320,700       5,371,725       0       5,371,725  
Information Technology—21.2%
                                               
Communications Equipment—1.2%
                                               
F5 Networks, Inc.1
    93,700       0       93,700       1,963,015       0       1,963,015  
Neutral Tandem, Inc.1
    226,530       0       226,530       5,574,903       0       5,574,903  
Riverbed Technology, Inc.1
    147,100       0       147,100       1,924,068       0       1,924,068  
                             
 
                            9,461,986       0       9,461,986  
Computers & Peripherals—0.7%
                                               
NetApp, Inc.1
    0       377,600       377,600       0       5,603,584       5,603,584  
Electronic Equipment & Instruments—2.2%
                                               
Amphenol Corp., Cl. A
    0       331,300       331,300       0       9,438,737       9,438,737  
FLIR Systems, Inc.1
    215,156       180,000       395,156       4,406,395       3,686,400       8,092,795  
                             
 
                            4,406,395       13,125,137       17,531,532  

 

 

                                                 
                    Combined                     Combined  
                    ProForma                     ProForma  
    Oppenheimer     Oppenheimer     Oppenheimer     Oppenheimer     Oppenheimer     Oppenheimer  
    Discovery     MidCap     Discovery     Discovery     MidCap     Discovery  
    Fund     Fund     Fund     Fund     Fund     Fund  
    Shares     Shares     Shares     Value     Value     Value  
 
Internet Software & Services—2.6%
                                               
Baidu, Inc., ADR1
    0       10,600       10,600       0       1,871,960       1,871,960  
comScore, Inc.1
    161,500       0       161,500       1,952,535       0       1,952,535  
Equinix, Inc.1
    92,300       122,300       214,600       5,182,645       6,867,145       12,049,790  
VistaPrint Ltd.1
    71,500       0       71,500       1,965,535       0       1,965,535  
Vocus, Inc.1
    151,967       0       151,967       2,019,641       0       2,019,641  
                             
 
                            11,120,356       8,739,105       19,859,461  
IT Services—2.6%
                                               
Cognizant Technology Solutions Corp.1
    0       282,900       282,900       0       5,881,491       5,881,491  
ManTech International Corp.1
    98,200       0       98,200       4,114,580       0       4,114,580  
SAIC, Inc.1
    0       559,100       559,100       0       10,438,397       10,438,397  
                             
 
                            4,114,580       16,319,888       20,434,468  
Semiconductors & Semiconductor Equipment—3.5%
                                               
Cavium Networks, Inc.1
    224,600       0       224,600       2,591,884       0       2,591,884  
Lam Research Corp.1
    0       157,300       157,300       0       3,581,721       3,581,721  
MEMC Electronic Materials, Inc.1
    0       110,800       110,800       0       1,827,092       1,827,092  
Monolithic Power Systems, Inc.1
    296,561       0       296,561       4,596,696       0       4,596,696  
Netlogic Microsystems, Inc.1
    156,000       0       156,000       4,286,880       0       4,286,880  
Power Integrations, Inc.
    135,700       0       135,700       2,334,040       0       2,334,040  
Silicon Laboratories, Inc.1
    142,400       0       142,400       3,759,360       0       3,759,360  
 
Varian Semiconductor Equipment Associates, Inc.1
    191,600       0       191,600       4,150,056       0       4,150,056  
                             
 
                            21,718,916       5,408,813       27,127,729  
Software—8.4%
                                               
Ansys, Inc.1
    156,996       338,300       495,296       3,940,600       8,491,330       12,431,930  
Ariba, Inc.1
    506,900       0       506,900       4,425,237       0       4,425,237  
Blackboard, Inc.1
    121,212       0       121,212       3,847,269       0       3,847,269  
FactSet Research Systems, Inc.
    55,100       167,550       222,650       2,754,449       8,375,825       11,130,274  
Longtop Financial Technologies Ltd., ADR1
    101,526       0       101,526       2,155,397       0       2,155,397  
Macrovision Solutions Corp.1
    0       529,105       529,105       0       9,412,778       9,412,778  
Nuance Communications, Inc.1
    326,800       0       326,800       3,549,048       0       3,549,048  
Salesforce.com, Inc.1
    0       194,400       194,400       0       6,362,712       6,362,712  
Solera Holdings, Inc.1
    342,000       0       342,000       8,474,760       0       8,474,760  
Sybase, Inc.1
    124,600       0       124,600       3,774,134       0       3,774,134  
                             
 
                            32,920,894       32,642,645       65,563,539  
Materials—2.0%
                                               
Chemicals—1.5%
                                               
Airgas, Inc.
    0       86,100       86,100       0       2,911,041       2,911,041  
Intrepid Potash, Inc.1
    132,380       124,230       256,610       2,442,411       2,292,044       4,734,455  
Lubrizol Corp. (The)
    0       122,600       122,600       0       4,169,626       4,169,626  
                             
 
                            2,442,411       9,372,711       11,815,122  
Containers & Packaging—0.5%
                                               
Rock-Tenn Co., Cl. A
    138,500       0       138,500       3,746,425       0       3,746,425  

 

 

                                                 
                    Combined                     Combined  
                    ProForma                     ProForma  
    Oppenheimer     Oppenheimer     Oppenheimer     Oppenheimer     Oppenheimer     Oppenheimer  
    Discovery     MidCap     Discovery     Discovery     MidCap     Discovery  
    Fund     Fund     Fund     Fund     Fund     Fund  
    Shares     Shares     Shares     Value     Value     Value  
 
Telecommunication Services—2.1%
                                               
Wireless Telecommunication Services—2.1%
                                               
American Tower Corp.1
    0       187,900       187,900       0       5,717,797       5,717,797  
SBA Communications Corp.1
    325,400       131,400       456,800       7,581,822       3,061,619       10,643,441  
                             
 
                            7,581,822       8,779,416       16,361,238  
Utilities—0.6%
                                               
Gas Utilities—0.6%
                                               
Questar Corp.
    0       166,600       166,600       0       4,903,038       4,903,038  
                             
 
                                               
Total Common Stocks (Cost $377,124,681, Cost $444,052,487, Combined $821,177,168)
                            367,968,915       374,995,735       742,964,650  
 
                                               
 
Investment Company—4.9%
                                               
Oppenheimer Institutional Money Market Fund, Cl. E, 0.80%2,3 (Cost $19,935,536, Cost $18,235,898, Combined $38,171,434)
    19,935,536       18,235,898       38,171,434       19,935,536       18,235,898       38,171,434  
 
                                               
 
                                               
Total Investments, at Value (Cost $397,060,217, Cost $462,288,385, Combined $859,348,602)
    100.5       100.2       100.1       387,904,451       393,231,633       781,136,084  
Liabilities in Excess of Other Assets
    (0.5 )     (0.2 )     (0.4 )     (2,642,759 )     (779,000 )     (3,421,759 )
ProForma Adjustment
                    0.3                       2,472,205  
     
Net Assets
    100.0 %     100.0 %     100.0 %   $ 385,261,692     $ 392,452,633     $ 780,186,530  
     
Footnotes to Statement of Investments
 
1.   Non-income producing security.
 
2.   Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended March 31, 2009, by virtue of the Fund owning at least 5% of the voting securities of the issuer or as a result of the Fund and the issuer having the same investment adviser. Transactions during the period in which the issuer was an affiliate are as follows:
                                 
    Shares     Gross     Gross     Shares  
Oppenheimer Discovery Fund   September 30, 2008     Additions     Reductions     March 31, 2009  
 
Oppenheimer Institutional Money Market Fund, Cl. E
    27,382,050       124,236,830       131,683,344       19,935,536  
                 
    Value     Income  
 
Oppenheimer Institutional Money Market Fund, Cl. E
  $ 19,935,536     $ 679,462  
                                 
    Shares     Gross     Gross     Shares  
Oppenheimer MidCap Fund   September 30, 2008     Additions     Reductions     September 30, 2008  
 
Oppenheimer Institutional Money Market Fund, Cl. E
    9,905,967       107,671,007       99,341,076       18,235,898  
                 
    Value     Income  
 
Oppenheimer Institutional Money Market Fund, Cl. E
  $ 18,235,898     $ 396,811  

 

 

3. Rate shown is the 7-day yield as of March 31, 2009.
Valuation Inputs
Various data inputs are used in determining the value of each of the Funds’ investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:
1) Level 1–quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2) Level 2–inputs other than quoted prices that are observable for the asset (such as quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
3) Level 3–unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset).
The market value of the Fund’s investments was determined based on the following inputs as of March 31, 2009:
                                                 
                                            Combined  
                    Combined                     Pro Forma  
                    Pro Forma     Oppenheimer     Oppenheimer     Oppenheimer  
    Oppenheimer     Oppenheimer     Oppenheimer     Discovery     MidCap     Discovery  
    Discovery     MidCap     Discovery     Fund     Fund     Fund  
    Fund     Fund     Fund     Other     Other     Other  
    Investment in     Investment in     Investment in     Financial     Financial     Financial  
Valuation Description   Securities     Securities     Securities     Instruments*     Instruments*     Instruments*  
 
Level 1—Quoted Prices
  $ 387,904,451     $ 393,231,633     $ 781,136,084     $ 0     $ 0     $ 0  
Level 2—Other Significant Observable Inputs
    0       0       0       0       0       0  
Level 3—Significant Unobservable Inputs
    0       0       0       0       0       0  
 
                                           
 
                  $ 781,136,084                     $ 0  
 
                                           
*   Other financial instruments include options written, currency contracts, futures, forwards and swap contracts. Currency contracts and forwards are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. Futures are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. Options written and swaps are reported at their market value at measurement date.

 

 

Pro Forma Combining Statements of Assets and Liabilities March 31, 2009 (Unaudited)
Oppenheimer Discovery Fund and Oppenheimer MidCap Fund
                                 
                            Pro Forma
    Oppenheimer   Oppenheimer           Combined
    Discovery   MidCap   Pro Forma   Oppenheimer
    Fund   Fund   Adjustments   Discovery Fund
     
ASSETS:
                               
Investments, at value - see accompanying statement of investments:
                               
Unaffiliated Companies (cost $377,124,681, $444,052,487 and $821,177,168)
  $ 367,968,915     $ 374,995,735       —     $ 742,964,650  
Affiliated Companies (cost $19,935,536, $18,235,898 and $38,171,434)
    19,935,536       18,235,898       —       38,171,434  
Cash
    546,591       521,897       —       1,068,488  
Receivables and other assets:
                               
Investments sold
    5,967,680       2,441,126       —       8,408,806  
Shares of beneficial interest sold
    297,865       501,895       —       799,760  
Dividends
    19,300       105,664       —       124,964  
Due from Manager
    —       —     $ 2,508,205  (1)     2,508,205  
Other
    47,379       36,571       —       83,950  
     
Total assets
    394,783,266       396,838,786       2,508,205       794,130,257  
     
LIABILITIES:
                               
Payables and other liabilities:
                               
Investments purchased
    7,711,015       3,099,405       —       10,810,420  
Shares of beneficial interest redeemed
    1,228,535       625,191       —       1,853,726  
Distributions and service plan fees
    226,171       150,162       —       376,333  
Trustees’ compensation
    165,028       187,317       —       352,345  
Shareholder communications
    84,282       157,820       —       242,102  
Transfer and shareholder servicing agent fees
    77,203       133,732       —       210,935  
Other
    29,340       32,526       36,000  (3)     97,866  
     
Total liabilities
    9,521,574       4,386,153       36,000       13,943,727  
     
NET ASSETS
  $ 385,261,692     $ 392,452,633     $ 2,472,205     $ 780,186,530  
     
COMPOSITION OF NET ASSETS:
                               
Par value of shares of capital stock
  $ 12,346     $ —     $ 12,773     $ 25,119  
Additional paid-in capital
    535,166,938       1,494,678,410       (12,773 )     2,029,832,575  
Accumulated net investment gain (loss)
    (2,245,901 )     (2,159,213 )     2,472,205  (1)     (1,932,909 )
Accumulated net realized loss from investments
    (138,515,926 )     (1,031,009,812 )     —       (1,169,525,738 )
Net unrealized depreciation on investments
    (9,155,765 )     (69,056,752 )     —       (78,212,517 )
     
NET ASSETS
  $ 385,261,692     $ 392,452,633     $ 2,472,205     $ 780,186,530  
     

 

 

Pro Forma Combining Statements of Assets and Liabilities March 31, 2009 (Unaudited)
Oppenheimer Discovery Fund and Oppenheimer MidCap Fund
                                 
                            Pro Forma
    Oppenheimer   Oppenheimer           Combined
    Discovery   MidCap   Pro Forma   Oppenheimer
    Fund   Fund   Adjustments   Discovery Fund
     
Net Asset Value Per Share
                               
 
                               
Outstanding Shares
                               
Class A Shares
    9,829,076       24,618,175       7,503,752       17,332,828  (2)
Class B Shares
    941,333       5,716,348       1,853,821       2,795,154  (2)
Class C Shares
    839,535       5,425,377       1,722,530       2,562,065  (2)
Class N Shares
    207,607       1,456,845       446,213       653,820  (2)
Class Y Shares
    528,913       4,076,425       1,246,280       1,775,193  (2)
 
                               
Net Assets
                               
Class A Shares
  $ 311,897,745     $ 238,072,918     $ 1,752,745     $ 551,723,408  (2)
Class B Shares
  $ 25,815,710     $ 50,827,403     $ 248,045     $ 76,891,158  (2)
Class C Shares
  $ 23,508,102     $ 48,229,720     $ 221,400     $ 71,959,222  (2)
Class N Shares
  $ 6,429,029     $ 13,819,765     $ 62,669     $ 20,311,463  (2)
Class Y Shares
  $ 17,611,106     $ 41,502,827     $ 187,346     $ 59,301,279  (2)
 
                               
Net Asset Value Per Share
                               
Class A Shares
  $ 31.73     $ 9.67     $ 0.10     $ 31.83  (2)
Class A Shares - Maximum offering price (net asset value plus sales charge of 5.75% of maximum offering price)
  $ 33.67     $ 10.26     $ 0.10     $ 33.77  (2)
Class B Shares
  $ 27.42     $ 8.89     $ 0.09     $ 27.51  (2)
Class C Shares
  $ 28.00     $ 8.89     $ 0.09     $ 28.09  (2)
Class N Shares
  $ 30.97     $ 9.49     $ 0.10     $ 31.07  (2)
Class Y Shares
  $ 33.30     $ 10.18     $ 0.11     $ 33.41  (2)
(1)   Adjustment to reflect the management fees using Discovery’s management fee schedule.
 
(2)   Oppenheimer MidCap Fund Class A shares will be exchanged for Oppenheimer Discovery Fund Class A shares.

Oppenheimer MidCap Fund Class B shares will be exchanged for Oppenheimer Discovery Fund Class B shares.

Oppenheimer MidCap Fund Class C shares will be exchanged for Oppenheimer Discovery Fund Class C shares.

Oppenheimer MidCap Fund Class N shares will be exchanged for Oppenheimer Discovery Fund Class N shares.

Oppenheimer MidCap Fund Class Y shares will be exchanged for Oppenheimer Discovery Fund Class Y shares.
 
(3)   The estimated total reorganization-related costs for Oppenheimer Discovery Fund.

 

 

Pro Forma Combining Statements of Operations For The Year Ended March 31, 2009 (Unaudited)
Oppenheimer Discovery Fund and Oppenheimer MidCap Fund
                                 
                            Pro Forma
    Oppenheimer   Oppenheimer           Combined
    Discovery   MidCap   Pro Forma   Oppenheimer
    Fund   Fund   Adjustments   Discovery Fund
     
INVESTMENT INCOME:
                               
Dividends:
                               
Unaffiliated companies (net of foreign withholding taxes of $14,314, $12,509 and $26,823)
  $ 1,383,965     $ 2,098,413       —     $ 3,482,378  
Affiliated companies
    679,462       396,811       —       1,076,273  
Interest
    15,415       11,306       —       26,721  
Other income
    47,225       86,476       —       133,701  
     
Total investment income
    2,126,067       2,593,006       —       4,719,073  
     
EXPENSES:
                               
Management fees
    3,970,423       4,378,486     $ (2,508,205 ) (1)     5,840,704  
Distribution and service plan fees:
                               
Class A
    1,057,589       948,366       —       2,005,955  
Class B
    417,948       861,968       —       1,279,916  
Class C
    309,656       760,382       —       1,070,038  
Class N
    40,875       110,697       —       151,572  
Transfer and shareholder servicing agent fees:
                               
Class A
    1,431,949       2,226,122       —       3,658,071  
Class B
    172,519       410,127       —       582,646  
Class C
    135,899       417,182       —       553,081  
Class N
    37,897       121,029       —       158,926  
Class Y
    92,047       22,800       —       114,847  
Shareholder communications:
                               
Class A
    186,473       186,666       —       373,139  
Class B
    41,695       80,925       —       122,620  
Class C
    14,785       30,988       —       45,773  
Class N
    2,226       4,183       —       6,409  
Class Y
    —       781       —       781  
Trustees’ compensation
    22,434       31,904       —       54,338  
Custodian fees and expenses
    3,455       13,818       —       17,273  
Other
    34,059       63,025       36,000  (2)     133,084  
     
Total Expenses
    7,971,929       10,669,449       (2,472,205 )     16,169,173  
Less reduction to custodian expenses
    (2,425 )     (1,043 )     —       (3,468 )
Less waivers and reimbursements of expenses
    (259,394 )     (1,260,226 )     —       (1,519,620 )
     
Net Expenses
    7,710,110       9,408,180       (2,472,205 )     14,646,085  
     
(1)   Adjustment to reflect the management fees using Discovery’s management fee schedule.
 
(2)   The estimated total reorganization-related costs for Oppenheimer Discovery Fund.

 

 

Pro Forma Combining Statements of Operations For The Year Ended March 31, 2009 (Unaudited)
                                 
                            Pro Forma
    Oppenheimer   Oppenheimer           Combined
    Discovery   MidCap   Pro Forma   Oppenheimer
    Fund   Fund   Adjustments   Discovery Fund
     
NET INVESTMENT INCOME (LOSS)
  $ (5,584,043 )   $ (6,815,174 )   $ 2,472,205     $ (9,927,012 )
     
REALIZED AND UNREALIZED GAIN (LOSS):
                               
 
                               
Net realized loss on investments from unaffiliated companies
    (112,035,899 )     (287,523,892 )     —       (399,559,791 )
     
 
                               
Net change in unrealized appreciation (depreciation) on investments
    (94,815,285 )     (41,207,584 )     —       (136,022,869 )
     
 
                               
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
  $ (212,435,227 )   $ (335,546,650 )   $ 2,472,205     $ (545,509,672 )
     

 

 

Reorganization between Oppenheimer MidCap Fund and Oppenheimer Discovery Fund Notes to Pro Forma Financial Statements March 31, 2009 (Unaudited)
1. Significant Accounting Policies
Oppenheimer MidCap Fund (“MidCap”) and Oppenheimer Discovery Fund (“Discovery”) (each individually a “Fund” and collectively the “Funds”), are registered under the Investment Company Act of 1940, as amended, as open-end management investment companies. The Funds’ investment adviser is OppenheimerFunds, Inc. (the “Manager”).
In April 2009, the Boards of Trustees of the Funds approved a plan of reorganization, which, subject to the approval of the shareholders of MidCap, will transfer substantially all of the assets of MidCap to Discovery, in exchange for an equal value of shares of Discovery and the assumption of certain liabilities, if any, described in the Reorganization Agreement. The shares of Discovery will then be distributed to MidCap shareholders, and MidCap will subsequently be liquidated. If the reorganization is approved by the shareholders of MidCap, those shareholders will no longer be shareholders of MidCap; instead, those shareholders will become shareholders of Discovery.
The reorganization is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes. The unaudited pro forma combined financial statements are presented for informational purposes and may not be representative of what the actual combined financial statements would have been had the reorganization occurred at March 31, 2009. The unaudited pro forma combined statement of investments and combined statement of assets and liabilities reflect the financial position of MidCap and Discovery at March 31, 2009 under the assumption, which is currently believed to be accurate, that the Discovery investment portfolio will not be realigned in connection with the reorganization. The unaudited pro forma combined statement of operations reflects the results of operations of MidCap and Discovery for the twelve month period ended March 31, 2009. These statements were derived from the books and records of MidCap and Discovery under generally accepted accounting principles in the United States. The historical cost of investments from MidCap will be carried forward to Discovery. The accompanying pro forma financial statements should be read in conjunction with the financial statements of MidCap and Discovery included in their annual reports dated October 31, 2008 and September 30, 2008, respectively.
The following is a summary of significant accounting policies consistently followed by the Funds.
Securities Valuation. The Funds calculate the net asset value of their shares as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading. Securities may be valued primarily using dealer-supplied valuations or a portfolio pricing service authorized by their respective Board of Trustees. Securities traded on a registered U.S. securities exchange are valued based on the last sale price of the security traded on that exchange prior to the time when the Funds’ assets are valued. Securities whose principal exchange is NASDAQ® are valued based on the closing price reported by NASDAQ prior to the time when the Funds’ 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 traded on foreign exchanges are valued based on the last sale price on the principal exchange on which the security is traded, as identified by the portfolio pricing service, prior to the time when the Funds’ assets are valued.

 

 

In the absence of a sale, the security is valued at the official closing price on the principal exchange. Corporate, government and municipal debt instruments having a remaining maturity in excess of sixty days and all mortgage-backed securities, collateralized mortgage obligations and other asset-backed securities will be valued at the mean between the “bid” and “asked” prices. Securities for which market quotations are not readily available are valued at their fair value. Securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Funds’ assets are valued but after the close of their respective exchanges will be fair valued. Fair value is determined in good faith using consistently applied procedures under the supervision of the Funds’ Board of Trustees. Shares of a registered investment company that are not traded on an exchange are valued at the acquired investment company’s net asset value per share. “Money market-type” debt instruments with remaining maturities of sixty days or less are valued at cost adjusted by the amortization of discount or premium to maturity (amortized cost), which approximates market value.
Investment in Oppenheimer Institutional Money Market Fund. The Funds are permitted to invest daily available cash balances in an affiliated money market fund. The Funds may invest the available cash in Class E shares of Oppenheimer Institutional Money Market Fund (“IMMF”) to seek current income while preserving liquidity. IMMF is a registered open-end management investment company, regulated as a money market fund under the Investment Company Act of 1940, as amended. The Manager is also the investment adviser of IMMF. The Funds’ investment in IMMF is included in the Statement of Investments. As a shareholder, the Funds are subject to their proportional share of IMMF’s Class E expenses, including its management fee. The Manager will waive fees and/or reimburse the Funds’ expenses in an amount equal to the indirect management fees incurred through the Funds’ investment in IMMF.
Federal Taxes. The Funds intend to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of their 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 Funds file income tax returns in U.S. federal and applicable state jurisdictions. The statute of limitations on the Funds’ tax return filings generally remain open for the three preceding fiscal reporting period ends.
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 Funds.
2. Fees and Other Transactions with Affiliates
Management Fees. Under the investment advisory agreement, the Funds pay the Manager a management fee based on the daily net assets of the Funds at an annual rate as shown in the following tables:
                     
MidCap Fee Schedule           Discovery Fee Schedule        
 
Up to $200 million
    0.75 %   Up to $200 million     0.75 %
Next $200 million
    0.72     Next $200 million     0.72  
Next $200 million
    0.69     Next $200 million     0.69  
Next $200 million
    0.66     Next $200 million     0.66  

 

 

                     
MidCap Fee Schedule           Discovery Fee Schedule        
 
Next $700 million
    0.60     Next $700 million     0.60  
Next $1.0 billion
    0.58     Over $1.5 billion     0.58  
Over $2.5 billion
    0.56              
The Funds and OFI may directly assume certain out-of-pocket expenses associated with the reorganization. OFI has estimated that the total reorganization-related costs to be approximately $36,000 for Discovery and approximately $560,000 for MidCap.
3. Capital Shares The pro forma net asset value per share in the Statement of Assets and Liabilities assumes the issuance of additional Class A, Class B, Class C, Class N, and Class Y shares of Discovery as if the reorganization were to have taken place on March 31, 2009. The following table reflects the number of Discovery shares assumed to be issued to the shareholders of MidCap.
                         
    Discovery     Shares issued to     Total Shares  
    Shares     MidCap Shareholders     Outstanding Post-  
Class   Outstanding     in Reorganization     Reorganization  
A
    9,829,076       7,503,752       17,332,828  
 
B
    941,333       1,853,821       2,795,154  
 
C
    839,535       1,722,530       2,562,065  
 
N
    207,607       446,213       653,820  
 
Y
    528,913       1,246,280       1,775,193