N-CSR 1 ra0320_8058vef.txt RA0320_8058VEF 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 811-03105 OPPENHEIMER CAPITAL APPRECIATION 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: August 31 Date of reporting period: September 1, 2002 - August 31, 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 August 31, 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, the Fund produced a total return of 15.20% for Class A shares at net asset value. This compares favorably with a 12.06% total return for the Fund's benchmark, the S&P 500 Index, during the same period. The Fund's strong relative performance was driven primarily by the stock market's broadly based upward trend. Performance relative to the benchmark benefited from the Fund's emphasis on consumer cyclical stocks, technology and the above-average performance of our stock selections in the health care area. The Fund's investment strategy focuses on companies that we believe offer strong potential for above-average growth, but that exhibit reasonable valuations relative to their future growth prospects. In particular, we target companies with a history of positive earnings or cash flow, together with increasing earnings momentum and the potential for positive earnings surprises. During the reporting period, we found the greatest number of investment opportunities meeting these criteria among consumer discretionary stocks in such areas as media, leisure and other forms of entertainment. Most of these stocks began the reporting period at exceptionally low valuations, with prices driven down by a year of disappointing advertising and travel revenues. However, these same industries bounced back strongly in late 2002 and 2003, reporting better-than-average earnings growth and improving estimates for future growth. The Fund's top performers included the two major cruise lines, Carnival Corp. and Royal Caribbean Cruises Ltd., as well as cable service provider Comcast Corp. The Fund also derived relatively good returns from its investments in health care stocks, where we found the greatest opportunities among generic drug manufacturers; medical device producers, such as Medtronic, Inc.; and a few select biotechnology firms. Biotechnology holdings delivered exceptionally strong performance during the period, supported by a rapidly increasing number of approved products with wide applications. Top-performers included Genentech, Inc., which announced positive test results for Avastin, a new cancer-fighting drug; and Amgen, Inc., which has emerged as a leading developer of biotechnology products. We were underweight in large pharmaceutical companies, most of which were plagued by expiring patents on major products and dwindling new product pipelines. A small number of other stocks also contributed positively to the Fund's above-average returns. Holdings of Intel Corp., the world's leading semiconductor manufacturer, gained ground on the basis of market's favorable bias toward technology and the company's success with its latest generation of wireless, computer microprocessor chips. In the financial area, Citigroup, Inc. recovered from its depressed levels of September 2002, rising 5 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- FUND PERFORMANCE DISCUSSION -------------------------------------------------------------------------------- on the strength of increasing brokerage activity, improvements in banking revenues and gains in market share. On the other hand, a few holdings in other areas undermined the Fund's performance. The Fund's utility stocks underperformed due to weakness among energy trading companies. However, since utilities represented only a small percentage of the Fund's assets, such losses had only slight impact on overall returns. The Fund also suffered losses when energy drilling company, Amerada Hess Corp., reported disappointing financial results due to exploration disappointments. We subsequently sold the Fund's position. As the period progressed, we found an increasing number of investment opportunities among stocks of high-quality technology companies, particularly among beneficiaries of the uptake of broadband, high-speed internet technology--which we believe is finally hitting critical mass. We believe such companies are especially well positioned to benefit from a continuing, broad-based economic recovery and increasing spending on technology. We also expanded the Fund's exposure to generic drug, medical device and equipment stocks, although we remained ready to sell shares in such stocks when valuations, in our opinion, became excessive. For example, we eliminated holdings of Genentech, one of the Fund's best performers during the period, when the stock appreciated more rapidly than we believed was warranted by the company's actual growth prospects. The Fund's holdings, strategies and management 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 each Class of shares of the Fund held until Aug5st 31, 2003. In the case of Class A shares, performance is measured over a ten year period; in the case of Class B shares, from the inception of the Class on November 1, 1995, in the case of Class C shares, from the inception of the Class on December 1, 1993, and in the case of Class Y shares, from the inception of the Class on November 3, 1997. 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 reinvestment 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, a broad-based index of equity securities widely regarded as a general measure of the performance of the U.S. equity securities market. 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 show the effect of taxes. The Fund's performance reflects the effect 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 index shown. 6 OPPENHEIMER CAPITAL APPRECIATION FUND Class A Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: Oppenheimer Capital Appreciation Fund (Class A) S&P 500 Index [GRAPHIC] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Oppenheimer Capital Date Appreciation Fund (Class A) S&P 500 Index 12/31/1993 9,425.00 10,000.00 03/31/1994 9,179.00 9,621.00 06/30/1994 8,927.00 9,662.00 09/30/1994 9,447.00 10,133.00 12/31/1994 9,468.00 10,131.00 03/31/1995 10,321.00 11,117.00 06/30/1995 11,535.00 12,176.00 09/30/1995 12,543.00 13,143.00 12/31/1995 12,768.00 13,934.00 03/31/1996 13,684.00 14,682.00 06/30/1996 14,387.00 15,340.00 08/31/1996 1 14,336.00 14,972.00 11/30/1996 16,578.00 17,477.00 02/28/1997 16,948.00 18,344.00 05/31/1997 18,241.00 19,780.00 08/31/1997 20,145.00 21,055.00 11/30/1997 20,578.00 22,459.00 02/28/1998 22,338.00 24,762.00 05/31/1998 23,003.00 25,844.00 08/31/1998 19,326.00 22,765.00 11/30/1998 23,390.00 27,778.00 02/28/1999 26,193.00 29,655.00 05/31/1999 27,676.00 31,280.00 08/31/1999 28,479.00 31,826.00 11/30/1999 31,605.00 33,582.00 02/29/2000 38,989.00 33,132.00 05/31/2000 38,223.00 34,554.00 08/31/2000 42,152.00 37,016.00 11/30/2000 34,762.00 32,163.00 02/28/2001 34,293.00 30,417.00 05/31/2001 35,146.00 30,910.00 08/31/2001 31,032.00 27,993.00 11/30/2001 30,881.00 28,235.00 02/28/2002 28,970.00 27,525.00 05/31/2002 28,189.00 26,633.00 08/31/2002 23,745.00 22,958.00 11/30/2002 24,950.00 23,574.00 02/28/2003 22,168.00 21,285.00 05/31/2003 25,654.00 24,485.00 08/31/2003 27,354.00 25,726.00 Average Annual Total Returns of Class A Shares of the Fund at 8/31/03 2 1-Year 8.58% 5-Year 5.93% 10-Year 11.05% Class B Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: Oppenheimer Capital Appreciation Fund (Class B) S&P 500 Index [GRAPHIC] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Oppenheimer Capital Date Appreciation Fund (Class B) S&P 500 Index 11/01/1995 10,000.00 10,000.00 12/31/1995 10,167.00 10,640.00 03/31/1996 10,873.00 11,211.00 06/30/1996 11,411.00 11,713.00 08/31/1996 1 11,352.00 11,432.00 11/30/1996 13,098.00 13,345.00 02/28/1997 13,362.00 14,007.00 05/31/1997 14,347.00 15,104.00 08/31/1997 15,813.00 16,077.00 11/30/1997 16,120.00 17,149.00 02/28/1998 17,458.00 18,907.00 05/31/1998 17,945.00 19,734.00 08/31/1998 15,044.00 17,382.00 11/30/1998 18,171.00 21,211.00 02/28/1999 20,310.00 22,643.00 05/31/1999 21,418.00 23,884.00 08/31/1999 21,995.00 24,301.00 11/30/1999 24,362.00 25,642.00 02/29/2000 29,998.00 25,299.00 05/31/2000 29,350.00 26,385.00 08/31/2000 32,305.00 28,264.00 11/30/2000 26,589.00 24,559.00 02/28/2001 26,179.00 23,226.00 05/31/2001 26,782.00 23,602.00 08/31/2001 23,601.00 21,375.00 11/30/2001 23,455.00 21,559.00 02/28/2002 22,003.00 21,018.00 05/31/2002 21,411.00 20,336.00 08/31/2002 18,035.00 17,530.00 11/30/2002 18,951.00 18,000.00 02/28/2003 16,837.00 16,253.00 05/31/2003 19,485.00 18,696.00 08/31/2003 20,777.00 19,644.00 Average Annual Total Returns of Class B Shares of the Fund at 8/31/03 2 1-Year 9.30% 5-Year 6.05% Since Inception 9.78% 1. The Fund changed its fiscal year end from December 31 to August 31. 2. See Notes on page 10 for further details. The performance information for the S&P 500 Index in the graphs begins on 12/31/93 for Class A, 10/31/95 for Class B, 11/30/93 for Class C, 2/28/01 for Class N and 10/31/97 for Class Y. Past performance cannot guarantee future results. Graphs are not drawn to same scale. 7 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- FUND PERFORMANCE DISCUSSION -------------------------------------------------------------------------------- Class C Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: Oppenheimer Capital Appreciation Fund (Class C) S&P 500 Index [GRAPHIC] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Oppenheimer Capital Date Appreciation Fund (Class C) S&P 500 Index 12/01/1993 10,000.00 10,000.00 12/31/1993 10,117.00 10,121.00 03/31/1994 9,825.00 9,738.00 06/30/1994 9,530.00 9,778.00 09/30/1994 10,061.00 10,256.00 12/31/1994 10,066.00 10,254.00 03/31/1995 10,942.00 11,251.00 06/30/1995 12,195.00 12,324.00 09/30/1995 13,233.00 13,302.00 12/31/1995 13,444.00 14,103.00 03/31/1996 14,381.00 14,859.00 06/30/1996 15,085.00 15,525.00 08/31/1996 1 15,011.00 15,153.00 11/30/1996 17,322.00 17,689.00 02/28/1997 17,671.00 18,566.00 05/31/1997 18,978.00 20,020.00 08/31/1997 20,917.00 21,309.00 11/30/1997 21,322.00 22,731.00 02/28/1998 23,094.00 25,061.00 05/31/1998 23,737.00 26,157.00 08/31/1998 19,904.00 23,040.00 11/30/1998 24,040.00 28,114.00 02/28/1999 26,863.00 30,013.00 05/31/1999 28,329.00 31,658.00 08/31/1999 29,092.00 32,211.00 11/30/1999 32,220.00 33,988.00 02/29/2000 39,681.00 33,533.00 05/31/2000 38,829.00 34,972.00 08/31/2000 42,735.00 37,463.00 11/30/2000 35,168.00 32,552.00 02/28/2001 34,634.00 30,785.00 05/31/2001 35,426.00 31,283.00 08/31/2001 31,217.00 28,332.00 11/30/2001 31,007.00 28,576.00 02/28/2002 29,041.00 27,858.00 05/31/2002 28,195.00 26,955.00 08/31/2002 23,721.00 23,236.00 11/30/2002 24,873.00 23,859.00 02/28/2003 22,056.00 21,542.00 05/31/2003 25,478.00 24,781.00 08/31/2003 27,110.00 26,037.00 Average Annual Total Returns of Class C Shares of the Fund at 8/31/03 2 1-Year 13.28% 5-Year 6.37% Since Inception 10.77% Class N Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: Oppenheimer Capital Appreciation Fund (Class N) S&P 500 Index [GRAPHIC] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Oppenheimer Capital Date Appreciation Fund (Class N) S&P 500 Index 03/01/2001 10,000.00 10,000.00 05/31/2001 10,206.00 10,162.00 08/31/2001 9,006.00 9,203.00 11/30/2001 8,956.00 9,283.00 02/28/2002 8,398.00 9,049.00 05/31/2002 8,164.00 8,756.00 08/31/2002 6,875.00 7,548.00 11/30/2002 7,221.00 7,750.00 02/28/2003 6,414.00 6,998.00 05/31/2003 7,418.00 8,050.00 08/31/2003 7,901.00 8,458.00 Average Annual Total Returns of Class N Shares of the Fund at 8/31/03 2 1-Year 13.94% Since Inception -8.99% 1. The Fund changed its fiscal year end from December 31 to August 31. 2. See Notes on page 10 for further details. 8 OPPENHEIMER CAPITAL APPRECIATION FUND Class Y Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: Oppenheimer Capital Appreciation Fund (Class Y) S&P 500 Index [GRAPHIC] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Oppenheimer Capital Date Appreciation Fund (Class Y) S&P 500 Index 11/03/1997 10,000.00 10,000.00 11/30/1997 9,833.00 10,463.00 02/28/1998 10,680.00 11,535.00 05/31/1998 11,009.00 12,039.00 08/31/1998 9,255.00 10,605.00 11/30/1998 11,211.00 12,940.00 02/28/1999 12,564.00 13,815.00 05/31/1999 13,291.00 14,572.00 08/31/1999 13,688.00 14,826.00 11/30/1999 15,203.00 15,644.00 02/29/2000 18,778.00 15,435.00 05/31/2000 18,430.00 16,097.00 08/31/2000 20,347.00 17,244.00 11/30/2000 16,789.00 14,983.00 02/28/2001 16,579.00 14,170.00 05/31/2001 17,009.00 14,399.00 08/31/2001 15,034.00 13,041.00 11/30/2001 14,965.00 13,153.00 02/28/2002 14,053.00 12,823.00 05/31/2002 13,690.00 12,407.00 08/31/2002 11,541.00 10,695.00 11/30/2002 12,138.00 10,982.00 02/28/2003 10,797.00 9,916 .00 05/31/2003 12,508.00 11,406.00 08/31/2003 13,349.00 11,984.00 Average Annual Total Returns of Class Y Shares of the Fund at 8/31/03 2 1-Year 15.66% 5-Year 7.60% Since Inception 5.08% The performance information for the S&P 500 Index in the graphs begins on 12/31/93 for Class A, 10/31/95 for Class B, 11/30/93 for Class C, 2/28/01 for Class N and 10/31/97 for Class Y. Past performance cannot guarantee future results. Graphs are not drawn to same scale. 9 OPPENHEIMER CAPITAL APPRECIATION 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 graph includes 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). Read the prospectus carefully before you invest or send money. Class A shares of the Fund were first publicly offered on 1/22/81. Class A returns include the current maximum initial sales charge of 5.75%. Class B shares of the Fund were first publicly offered on 11/1/95. 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 12/1/93. Class C returns include the contingent deferred sales charge of 1% for the 1-year period. Class C shares are subject to an annual 0.75% asset-based sales charge. Class 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 1-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 11/3/97. Class Y shares are offered only to certain institutional investors under special agreements with the Distributor. An explanation of the calculation of performance is in the Fund's Statement of Additional Information. 10 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- STATEMENT OF INVESTMENTS August 31, 2003 -------------------------------------------------------------------------------- Market Value Shares See Note 1 -------------------------------------------------------------------------------- Common Stocks--92.9% -------------------------------------------------------------------------------- Consumer Discretionary--23.2% -------------------------------------------------------------------------------- Hotels, Restaurants & Leisure--5.5% Brinker International, Inc. 1 1,589,400 $ 54,357,480 -------------------------------------------------------------------------------- Carnival Corp. 3,788,200 131,033,838 -------------------------------------------------------------------------------- International Game Technology 1,832,000 47,338,880 -------------------------------------------------------------------------------- Mandalay Resort Group 482,400 18,331,200 -------------------------------------------------------------------------------- Royal Caribbean Cruises Ltd. 4,206,800 131,041,820 -------------------------------------------------------------------------------- Starwood Hotels & Resorts Worldwide, Inc. 491,800 16,637,594 -------------- 398,740,812 -------------------------------------------------------------------------------- Household Durables--0.4% Ethan Allen Interiors, Inc. 742,170 28,729,401 -------------------------------------------------------------------------------- Media--14.9% AOL Time Warner, Inc. 1 9,436,600 154,382,776 -------------------------------------------------------------------------------- Cablevision Systems New York Group, Cl. A 1 590,700 11,902,605 -------------------------------------------------------------------------------- Clear Channel Communications, Inc. 1 2,325,530 104,927,913 -------------------------------------------------------------------------------- Comcast Corp., Cl. A Special, Non-Vtg. 1 8,162,250 231,481,410 -------------------------------------------------------------------------------- Cox Communications, Inc., Cl. A 1 528,800 17,302,336 -------------------------------------------------------------------------------- Hispanic Broadcasting Corp. 1 1,067,525 33,520,285 -------------------------------------------------------------------------------- Liberty Media Corp., Cl. A 1 2,805,700 33,948,970 -------------------------------------------------------------------------------- McGraw-Hill Cos., Inc. (The) 520,200 31,732,200 -------------------------------------------------------------------------------- New York Times Co., Cl. A 893,300 39,653,587 -------------------------------------------------------------------------------- News Corp. Ltd. (The), Sponsored ADR 2,724,200 93,576,270 -------------------------------------------------------------------------------- Omnicom Group, Inc. 461,500 36,043,150 -------------------------------------------------------------------------------- Univision Communications, Inc., Cl. A 1 1,004,000 37,639,960 Market Value Shares See Note 1 -------------------------------------------------------------------------------- Media Continued Viacom, Inc., Cl. B 1 5,471,000 $ 246,195,000 -------------- 1,072,306,462 -------------------------------------------------------------------------------- Multiline Retail--1.1% Target Corp. 1,968,400 79,917,040 -------------------------------------------------------------------------------- Specialty Retail--0.9% Gap, Inc. (The) 2,452,800 51,238,992 -------------------------------------------------------------------------------- Pier 1 Imports, Inc. 456,300 9,386,091 -------------- 60,625,083 -------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods--0.4% Nike, Inc., Cl. B 493,600 28,125,328 -------------------------------------------------------------------------------- Consumer Staples--5.6% -------------------------------------------------------------------------------- Beverages--3.3% Anheuser-Busch Cos., Inc. 2,721,700 140,276,418 -------------------------------------------------------------------------------- PepsiCo, Inc. 2,118,100 94,340,174 -------------- 234,616,592 -------------------------------------------------------------------------------- Food & Staples Retailing--0.2% Costco Wholesale Corp. 1 554,600 17,797,114 -------------------------------------------------------------------------------- Food Products--0.7% General Mills, Inc. 1,038,200 48,130,952 -------------------------------------------------------------------------------- Household Products--0.6% Procter & Gamble Corp. (The) 501,200 43,749,748 -------------------------------------------------------------------------------- Personal Products--0.6% Avon Products, Inc. 287,200 18,409,520 -------------------------------------------------------------------------------- Estee Lauder Cos., Inc. (The), Cl. A 791,160 27,287,108 -------------- 45,696,628 -------------------------------------------------------------------------------- Tobacco--0.2% Altria Group, Inc. 382,900 15,783,138 -------------------------------------------------------------------------------- Energy--5.6% -------------------------------------------------------------------------------- Energy Equipment & Services--1.5% BJ Services Co. 1 1,130,300 42,239,311 -------------------------------------------------------------------------------- Halliburton Co. 759,200 18,357,456 -------------------------------------------------------------------------------- Noble Corp. 1 551,110 19,939,160 -------------------------------------------------------------------------------- Rowan Cos., Inc. 1 839,400 21,018,576 -------------------------------------------------------------------------------- Varco International, Inc. 1 655,400 11,305,650 -------------- 112,860,153 11 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- Market Value Shares See Note 1 -------------------------------------------------------------------------------- Oil & Gas--4.1% Burlington Resources, Inc. 516,100 $ 24,989,562 -------------------------------------------------------------------------------- ConocoPhillips 746,500 41,684,560 -------------------------------------------------------------------------------- Encana Corp. 1,420,180 53,176,765 -------------------------------------------------------------------------------- Exxon Mobil Corp. 3,406,400 128,421,280 -------------------------------------------------------------------------------- TotalFinaElf SA, Sponsored ADR 586,600 45,174,066 ------------- 293,446,233 -------------------------------------------------------------------------------- Financials--12.4% -------------------------------------------------------------------------------- Commercial Banks--2.1% Bank of America Corp. 968,400 76,745,700 -------------------------------------------------------------------------------- Bank One Corp. 1,991,100 78,588,717 ------------- 155,334,417 -------------------------------------------------------------------------------- Diversified Financial Services--7.6% American Express Co. 2,234,000 100,641,700 -------------------------------------------------------------------------------- Citigroup, Inc. 4,221,700 183,010,695 -------------------------------------------------------------------------------- Goldman Sachs Group, Inc. (The) 477,500 42,253,975 -------------------------------------------------------------------------------- J.P. Morgan Chase & Co. 803,500 27,495,770 -------------------------------------------------------------------------------- Merrill Lynch & Co., Inc. 929,300 49,977,754 -------------------------------------------------------------------------------- Morgan Stanley 2,137,300 104,278,867 -------------------------------------------------------------------------------- Schwab (Charles) Corp. 3,576,800 38,844,048 ------------- 546,502,809 -------------------------------------------------------------------------------- Insurance--1.7% American International Group, Inc. 1,435,600 85,518,692 -------------------------------------------------------------------------------- Everest Re Group Ltd. 163,700 11,999,210 -------------------------------------------------------------------------------- St. Paul Cos., Inc. 376,900 13,101,044 -------------------------------------------------------------------------------- XL Capital Ltd., Cl. A 164,500 12,460,875 ------------- 123,079,821 -------------------------------------------------------------------------------- Real Estate--0.5% Host Marriott Corp. 1 3,283,200 32,897,664 -------------------------------------------------------------------------------- Thrifts & Mortgage Finance--0.5% Fannie Mae 604,000 39,133,160 -------------------------------------------------------------------------------- Health Care--14.1% -------------------------------------------------------------------------------- Biotechnology--2.8% Amgen, Inc. 1 1,266,100 83,435,990 -------------------------------------------------------------------------------- Celgene Corp. 1 1,248,900 48,070,161 Market Value Shares See Note 1 -------------------------------------------------------------------------------- Biotechnology Continued Chiron Corp. 1 445,700 $ 22,650,474 -------------------------------------------------------------------------------- Invitrogen Corp. 1 130,000 7,497,100 -------------------------------------------------------------------------------- Serono SA, ADR 1,373,000 22,270,060 -------------------------------------------------------------------------------- Sicor, Inc. 1 879,200 17,452,120 ------------- 201,375,905 -------------------------------------------------------------------------------- Health Care Equipment & Supplies--3.4% Applera Corp./Applied Biosystems Group 805,080 17,518,541 -------------------------------------------------------------------------------- Medtronic, Inc. 2,809,100 139,275,178 -------------------------------------------------------------------------------- Millipore Corp. 1 1,121,600 50,920,640 -------------------------------------------------------------------------------- Steris Corp. 1 93,200 2,182,744 -------------------------------------------------------------------------------- Varian Medical Systems, Inc. 1 614,100 34,297,485 -------------- 244,194,588 -------------------------------------------------------------------------------- Health Care Providers & Services--1.7% Aetna, Inc. 894,000 50,958,000 -------------------------------------------------------------------------------- Anthem, Inc. 1 98,800 7,232,160 -------------------------------------------------------------------------------- Apria Healthcare Group, Inc. 1 292,400 7,573,160 -------------------------------------------------------------------------------- UnitedHealth Group, Inc. 488,600 24,151,498 -------------------------------------------------------------------------------- WellPoint Health Networks, Inc. 1 432,100 33,703,800 ------------- 123,618,618 -------------------------------------------------------------------------------- Pharmaceuticals--6.2% Abbott Laboratories 1,003,700 40,449,110 -------------------------------------------------------------------------------- Barr Laboratories, Inc. 1 714,300 48,336,681 -------------------------------------------------------------------------------- Bristol-Myers Squibb Co. 1,044,600 26,501,502 -------------------------------------------------------------------------------- Dr. Reddy's Laboratories Ltd., Sponsored ADR 456,000 11,559,600 -------------------------------------------------------------------------------- Forest Laboratories, Inc. 1 413,300 19,425,100 -------------------------------------------------------------------------------- GlaxoSmithKline plc, ADR 274,400 10,654,952 -------------------------------------------------------------------------------- Medicis Pharmaceutical Corp., Cl. A 264,000 16,125,120 -------------------------------------------------------------------------------- Merck & Co., Inc. 518,300 26,080,856 -------------------------------------------------------------------------------- Perrigo Co. 1,819,610 25,565,520 -------------------------------------------------------------------------------- Pfizer, Inc. 3,898,500 116,643,120 -------------------------------------------------------------------------------- Schering-Plough Corp. 642,000 9,751,980 12 OPPENHEIMER CAPITAL APPRECIATION FUND Market Value Shares See Note 1 -------------------------------------------------------------------------------- Pharmaceuticals Continued Teva Pharmaceutical Industries Ltd., Sponsored ADR 1,644,400 $ 96,546,013 -------------- 447,639,554 -------------------------------------------------------------------------------- Industrials--5.5% -------------------------------------------------------------------------------- Aerospace & Defense--1.0% Honeywell International, Inc. 1,237,000 35,860,630 -------------------------------------------------------------------------------- Northrop Grumman Corp. 373,100 35,623,588 -------------- 71,484,218 -------------------------------------------------------------------------------- Air Freight & Logistics--1.3% Expeditors International of Washington, Inc. 810,000 30,545,100 -------------------------------------------------------------------------------- FedEx Corp. 950,200 63,758,420 -------------- 94,303,520 -------------------------------------------------------------------------------- Commercial Services & Supplies--1.1% Dun & Bradstreet Corp. 1 384,200 16,174,820 -------------------------------------------------------------------------------- Waste Management, Inc. 2,191,700 58,321,137 -------------- 74,495,957 -------------------------------------------------------------------------------- Industrial Conglomerates--1.0% 3M Co. 123,300 17,566,551 -------------------------------------------------------------------------------- General Electric Co. 1,907,100 56,392,947 -------------- 73,959,498 -------------------------------------------------------------------------------- Machinery--1.1% Danaher Corp. 241,600 18,663,600 -------------------------------------------------------------------------------- Dover Corp. 437,700 16,641,354 -------------------------------------------------------------------------------- Ingersoll-Rand Co., Cl. A 744,500 44,312,640 -------------- 79,617,594 -------------------------------------------------------------------------------- Information Technology--23.1% -------------------------------------------------------------------------------- Communications Equipment--3.5% Cisco Systems, Inc. 1 4,408,700 84,426,605 -------------------------------------------------------------------------------- Lucent Technologies, Inc. 1 6,883,600 13,147,676 -------------------------------------------------------------------------------- Nokia Corp., Sponsored ADR, A Shares 7,663,300 124,835,157 -------------------------------------------------------------------------------- UTStarcom, Inc. 1 729,200 31,326,432 -------------- 253,735,870 Market Value Shares See Note 1 -------------------------------------------------------------------------------- Computers & Peripherals--2.7% Dell, Inc. 1 2,437,500 $ 79,535,625 -------------------------------------------------------------------------------- EMC Corp. 1 1,580,000 20,145,000 -------------------------------------------------------------------------------- International Business Machines Corp. 1,169,600 95,918,896 -------------------------------------------------------------------------------- Seagate Technology International, Inc. (Escrow Shares) 1,2 1,000,000 -- ------------- 195,599,521 -------------------------------------------------------------------------------- Electronic Equipment & Instruments--1.0% Sanmina-SCI Corp. 1 4,047,700 36,348,346 -------------------------------------------------------------------------------- Vishay Intertechnology, Inc. 1 2,257,600 37,182,672 ------------- 73,531,018 -------------------------------------------------------------------------------- Internet Software & Services--1.0% Yahoo!, Inc. 1 2,117,600 70,727,840 -------------------------------------------------------------------------------- IT Services--1.3% CACI International, Inc., Cl. A 1 19,100 852,051 -------------------------------------------------------------------------------- First Data Corp. 1,421,120 54,571,008 -------------------------------------------------------------------------------- Infosys Technologies Ltd. 400,000 34,122,164 -------------- 89,545,223 -------------------------------------------------------------------------------- Semiconductors & Semiconductor Equipment--7.0% Analog Devices, Inc. 1 559,600 22,943,600 -------------------------------------------------------------------------------- Applied Materials, Inc. 1 1,700,100 36,722,160 -------------------------------------------------------------------------------- Broadcom Corp., Cl. A 1 618,400 16,894,688 -------------------------------------------------------------------------------- Cypress Semiconductor Corp. 1 2,794,700 51,897,579 -------------------------------------------------------------------------------- Intel Corp. 6,017,700 172,226,574 -------------------------------------------------------------------------------- International Rectifier Corp. 1 1,017,900 42,334,461 -------------------------------------------------------------------------------- National Semiconductor Corp. 1 1,302,900 37,966,506 -------------------------------------------------------------------------------- STMicroelectronics NV, NY Registered Shares 928,500 23,156,790 -------------------------------------------------------------------------------- Taiwan Semiconductor Manufacturing Co. Ltd., ADR 3,195,944 37,648,220 -------------------------------------------------------------------------------- Texas Instruments, Inc. 2,681,400 63,951,390 -------------- 505,741,968 13 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- Market Value Shares See Note 1 -------------------------------------------------------------------------------- Software--6.6% Adobe Systems, Inc. 1,892,500 $ 73,485,775 -------------------------------------------------------------------------------- Cadence Design Systems, Inc. 1 1,983,700 28,208,214 -------------------------------------------------------------------------------- Electronic Arts, Inc. 1 679,830 61,014,743 -------------------------------------------------------------------------------- Intuit, Inc. 1 440,800 19,977,056 -------------------------------------------------------------------------------- Microsoft Corp. 9,065,700 240,422,364 -------------------------------------------------------------------------------- Peoplesoft, Inc. 1 327,200 5,922,320 -------------------------------------------------------------------------------- SAP AG (Systeme, Anwendungen, Produkte in der Datenverarbeitung), Sponsored ADR 450,400 13,484,976 -------------------------------------------------------------------------------- Veritas Software Corp. 1 924,000 31,859,520 --------------- 474,374,968 -------------------------------------------------------------------------------- Materials--2.2% -------------------------------------------------------------------------------- Chemicals--1.6% Air Products & Chemicals, Inc. 781,500 36,980,580 -------------------------------------------------------------------------------- Ecolab, Inc. 572,400 14,762,196 -------------------------------------------------------------------------------- Praxair, Inc. 934,000 59,607,880 --------------- 111,350,656 -------------------------------------------------------------------------------- Paper & Forest Products--0.6% International Paper Co. 1,107,800 44,921,290 -------------------------------------------------------------------------------- Telecommunication Services--0.6% -------------------------------------------------------------------------------- Diversified Telecommunication Services--0.4% Telefonos de Mexico SA, Sponsored ADR 935,100 28,342,881 -------------------------------------------------------------------------------- Wireless Telecommunication Services--0.2% Vodafone Group plc, Sponsored ADR 725,900 13,283,970 -------------------------------------------------------------------------------- Utilities--0.6% -------------------------------------------------------------------------------- Gas Utilities--0.5% Kinder Morgan Management LLC 1,080,825 40,314,772 -------------------------------------------------------------------------------- Water Utilities--0.1% Philadelphia Suburban Corp. 208,175 4,923,339 --------------- Total Common Stocks (Cost $6,583,024,789) 6,694,555,323 Market Value Shares See Note 1 -------------------------------------------------------------------------------- Other Securities--0.5% Nasdaq-100 Unit Investment Trust 1 (Cost $28,087,898) 1,014,300 $ 33,867,477 Principal Amount -------------------------------------------------------------------------------- Short-Term Notes--5.4% Gemini Securitization Corp.: 1.05%, 9/12/03 $ 30,000,000 29,990,375 1.07%, 9/15/03 50,000,000 49,979,194 -------------------------------------------------------------------------------- Old Line Funding Corp.: 1.06%, 9/30/03 50,055,000 50,012,259 1.07%, 9/3/03 20,056,000 20,054,808 -------------------------------------------------------------------------------- Sheffield Receivables Corp.: 1.07%, 9/22/03 50,000,000 49,969,083 1.07%, 9/24/03 32,970,000 32,947,461 -------------------------------------------------------------------------------- Ticonderoga Funding LLC, 1.07%, 10/3/03 3 50,000,000 49,952,445 -------------------------------------------------------------------------------- Windmill Funding Corp., 1.07%, 9/2/03 50,000,000 49,998,514 -------------------------------------------------------------------------------- Yorktown Capital LLC, 1.06%, 9/19/03 59,802,000 59,770,305 --------------- Total Short-Term Notes (Cost $392,674,444) 392,674,444 -------------------------------------------------------------------------------- Joint Repurchase Agreements--1.4% Undivided interest of 22.56% in joint repurchase agreement (Principal Amount/ Market Value $433,610,000, with a maturity value of $433,657,215) with Banc One Capital Markets, Inc., 0.98%, dated 8/29/03, to be repurchased at $97,837,652 on 9/2/03, collateralized by U.S. Treasury Nts., 3.25%--3.375%, 4/30/04--5/31/04, with a value of $382,438,290 and U.S. Treasury Bills, 9/25/03, with a value of $60,192,630 (Cost $97,827,000) 97,827,000 97,827,000 -------------------------------------------------------------------------------- Total Investments, at Value (Cost $7,101,614,131) 100.2% 7,218,924,244 -------------------------------------------------------------------------------- Liabilities in Excess of Other Assets (0.2) (12,730,807) ----------------------------- Net Assets 100.0% $7,206,193,437 ============================= 14 OPPENHEIMER CAPITAL APPRECIATION FUND Footnotes to Statement of Investments 1. Non-income producing security. 2. Identifies issues considered to be illiquid. See Note 6 of Notes to Financial Statements. 3. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $49,952,445 or 0.69% of the Fund's net assets as of August 31, 2003. See accompanying Notes to Financial Statements. 15 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES August 31, 2003 --------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------- Assets Investments, at value (cost $7,101,614,131)--see accompanying statement $ 7,218,924,244 -------------------------------------------------------------------------------------------------- Cash 844,662 -------------------------------------------------------------------------------------------------- Receivables and other assets: Investments sold 17,646,336 Shares of beneficial interest sold 11,291,402 Interest and dividends 5,423,654 Other 20,062 ---------------- Total assets 7,254,150,360 -------------------------------------------------------------------------------------------------- Liabilities Payables and other liabilities: Investments purchased 34,087,188 Shares of beneficial interest redeemed 7,151,237 Distribution and service plan fees 2,417,545 Transfer and shareholder servicing agent fees 1,703,751 Shareholder reports 1,383,412 Trustees' compensation 983,279 Other 230,511 ---------------- Total liabilities 47,956,923 -------------------------------------------------------------------------------------------------- Net Assets $ 7,206,193,437 ================ -------------------------------------------------------------------------------------------------- Composition of Net Assets Par value of shares of beneficial interest $ 206,489 -------------------------------------------------------------------------------------------------- Additional paid-in capital 8,172,022,619 -------------------------------------------------------------------------------------------------- Accumulated net investment loss (948,533) -------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (1,082,397,251) -------------------------------------------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 117,310,113 ---------------- Net Assets $ 7,206,193,437 ================
16 OPPENHEIMER CAPITAL APPRECIATION FUND
------------------------------------------------------------------------------------------------- Net Asset Value Per Share Class A Shares: Net asset value and redemption price per share (based on net assets of $4,288,331,772 and 121,172,527 shares of beneficial interest outstanding) $35.39 Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $37.55 ------------------------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $1,114,052,303 and 33,666,318 shares of beneficial interest outstanding) $33.09 ------------------------------------------------------------------------------------------------- Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $540,117,770 and 16,506,900 shares of beneficial interest outstanding) $32.72 ------------------------------------------------------------------------------------------------- Class N Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $111,373,718 and 3,166,334 shares of beneficial interest outstanding) $35.17 ------------------------------------------------------------------------------------------------- Class Y Shares: Net asset value, redemption price and offering price per share (based on net assets of $1,152,317,874 and 31,977,118 shares of beneficial interest outstanding) $36.04
See accompanying Notes to Financial Statements. 17 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS For the Year Ended August 31, 2003 --------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------- Investment Income Dividends (net of foreign withholding taxes of $806,699) $ 58,135,208 -------------------------------------------------------------------------------------------------- Interest 7,513,162 ---------------- Total investment income 65,648,370 -------------------------------------------------------------------------------------------------- Expenses Management fees 35,661,577 -------------------------------------------------------------------------------------------------- Distribution and service plan fees: Class A 8,832,561 Class B 10,010,756 Class C 4,580,168 Class N 433,274 -------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Class A 11,002,173 Class B 4,695,421 Class C 1,561,469 Class N 283,974 Class Y 1,408,039 -------------------------------------------------------------------------------------------------- Trustees' compensation 356,988 -------------------------------------------------------------------------------------------------- Custodian fees and expenses 75,633 -------------------------------------------------------------------------------------------------- Other 2,773,659 ---------------- Total expenses 81,675,692 Less reduction to custodian expenses (8,948) Less voluntary waiver of transfer and shareholder servicing agent fees--Class B (1,378,709) Less voluntary waiver of transfer and shareholder servicing agent fees--Class N (36,445) Less voluntary waiver of transfer and shareholder servicing agent fees--Class Y (19,200) ---------------- Net expenses 80,232,390 -------------------------------------------------------------------------------------------------- Net Investment Loss (14,584,020) -------------------------------------------------------------------------------------------------- Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments (737,382,709) Foreign currency transactions 90,472 ---------------- Net realized loss (737,292,237) -------------------------------------------------------------------------------------------------- Net change in unrealized appreciation on: Investments 1,672,429,608 Translation of assets and liabilities denominated in foreign currencies 3,681,056 ---------------- Net change in unrealized appreciation 1,676,110,664 -------------------------------------------------------------------------------------------------- Net Increase in Net Assets Resulting from Operations $ 924,234,407 ================
See accompanying Notes to Financial Statements. 18 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
Year Ended August 31, 2003 2002 ------------------------------------------------------------------------------------------------------------ Operations Net investment loss $ (14,584,020) $ (18,671,997) ------------------------------------------------------------------------------------------------------------ Net realized loss (737,292,237) (330,072,053) ------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation (depreciation) 1,676,110,664 (1,276,143,258) ---------------------------------- Net increase (decrease) in net assets resulting from operations 924,234,407 (1,624,887,308) ------------------------------------------------------------------------------------------------------------ Dividends and/or Distributions to Shareholders Distributions from net realized gain: Class A -- (78,925,210) Class B -- (32,881,006) Class C -- (12,072,075) Class N -- (448,693) Class Y -- (23,930,560) ------------------------------------------------------------------------------------------------------------ Beneficial Interest Transactions Net increase (decrease) in net assets resulting from beneficial interest transactions: Class A 504,686,099 1,117,051,404 Class B (50,319,183) 155,846,095 Class C 24,021,003 173,690,841 Class N 25,028,168 78,890,789 Class Y 142,226,078 178,600,006 ------------------------------------------------------------------------------------------------------------ Net Assets Total increase (decrease) 1,569,876,572 (69,065,717) ------------------------------------------------------------------------------------------------------------ Beginning of period 5,636,316,865 5,705,382,582 ---------------------------------- End of period [including accumulated net investment loss of $948,533 and $858,396, respectively] $7,206,193,437 $ 5,636,316,865 ==================================
See accompanying Notes to Financial Statements. 19 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
Class A Year Ended August 31, 2003 2002 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $30.72 $41.11 $ 62.12 $44.73 $32.53 ------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) (.05) (.09) .10 (.02) (.04) Net realized and unrealized gain (loss) 4.72 (9.31) (15.86) 20.63 14.87 ------------------------------------------------------------- Total from investment operations 4.67 (9.40) (15.76) 20.61 14.83 ------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- -- -- -- (.09) Distributions from net realized gain -- (.99) (5.25) (3.22) (2.54) ------------------------------------------------------------- Total dividends and/or distributions to shareholders -- (.99) (5.25) (3.22) (2.63) ------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $35.39 $30.72 $ 41.11 $62.12 $44.73 ============================================================= ------------------------------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 1 15.20% (23.48)% (26.38)% 48.01% 47.36% ------------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $4,288,332 $3,219,391 $3,055,197 $3,648,961 $2,071,317 ------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $3,655,594 $3,204,793 $3,255,995 $2,898,088 $1,788,774 ------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment income (loss) (0.11)% (0.15)% 0.28% 0.00% (0.05)% Total expenses 1.17% 3 1.22% 3,4 1.03% 3 1.06% 3 1.04% 3 ------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 42% 28% 46% 44% 59% 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%. 4. Voluntary waiver of transfer agent fees less than 0.01%.
See accompanying Notes to Financial Statements. 20 OPPENHEIMER CAPITAL APPRECIATION FUND
Class B Year Ended August 31, 2003 2002 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $28.95 $39.09 $ 59.80 $43.48 $31.85 ------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (.31) (.26) (.07) (.20) (.21) Net realized and unrealized gain (loss) 4.45 (8.89) (15.39) 19.74 14.38 ------------------------------------------------------------ Total from investment operations 4.14 (9.15) (15.46) 19.54 14.17 ------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- -- -- -- -- Distributions from net realized gain -- (.99) (5.25) (3.22) (2.54) ------------------------------------------------------------ Total dividends and/or distributions to shareholders -- (.99) (5.25) (3.22) (2.54) ------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $33.09 $28.95 $ 39.09 $59.80 $43.48 ============================================================ ------------------------------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 1 14.30% (24.07)% (26.95)% 46.88% 46.20% ------------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $1,114,052 $1,029,322 $1,242,098 $1,333,387 $531,625 ------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $1,001,311 $1,221,005 $1,265,753 $ 922,480 $372,157 ------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment loss (0.89)% (0.92)% (0.48)% (0.76)% (0.86)% Total expenses 2.10% 1.99% 1.80% 1.83% 1.84% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.96% N/A 3,4 N/A 3 N/A 3 N/A 3 ------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 42% 28% 46% 44% 59% 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%. 4. Voluntary waiver of transfer agent fees less than 0.01%.
See accompanying Notes to Financial Statements. 21 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Continued --------------------------------------------------------------------------------
Class C Year Ended August 31, 2003 2002 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $28.63 $38.64 $ 59.19 $43.06 $31.57 ------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (.23) (.11) (.01) (.18) (.23) Net realized and unrealized gain (loss) 4.32 (8.91) (15.29) 19.53 14.26 ------------------------------------------------------------ Total from investment operations 4.09 (9.02) (15.30) 19.35 14.03 ------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- -- -- -- -- Distributions from net realized gain -- (.99) (5.25) (3.22) (2.54) ------------------------------------------------------------ Total dividends and/or distributions to shareholders -- (.99) (5.25) (3.22) (2.54) ------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $32.72 $28.63 $ 38.64 $59.19 $43.06 ============================================================ ------------------------------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 1 14.28% (24.01)% (26.95)% 46.89% 46.16% ------------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $540,118 $450,989 $426,476 $402,442 $165,231 ------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $463,768 $477,369 $400,009 $278,800 $126,443 ------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment loss (0.89)% (0.87)% (0.48)% (0.76)% (0.86)% Total expenses 1.96% 3 1.94% 3,4 1.80% 3 1.83% 3 1.85% 3 ------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 42% 28% 46% 44% 59% 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%. 4. Voluntary waiver of transfer agent fees less than 0.01%.
See accompanying Notes to Financial Statements. 22 OPPENHEIMER CAPITAL APPRECIATION FUND
Class N Year Ended August 31, 2003 2002 2001 1 ----------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $30.60 $41.05 $45.58 ----------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (.10) (.07) 2 (.01) Net realized and unrealized gain (loss) 4.67 (9.39) 2 (4.52) ---------------------------------- Total from investment operations 4.57 (9.46) (4.53) ----------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- -- -- Distributions from net realized gain -- (.99) -- ---------------------------------- Total dividends and/or distributions to shareholders -- (.99) -- ----------------------------------------------------------------------------------------------- Net asset value, end of period $35.17 $30.60 $41.05 ================================== ----------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 3 14.94% (23.67)% (9.94)% ----------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $111,374 $72,178 $6,791 ----------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 86,761 $38,232 $3,173 ----------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment loss (0.35)% (0.37)% (0.11)% Total expenses 1.46% 1.46% 1.36% Expenses after expense reimbursement or fee waiver and reduction to custodian expenses 1.42% N/A 5,6 N/A 5 ----------------------------------------------------------------------------------------------- Portfolio turnover rate 42% 28% 46% 1. For the period from March 1, 2001 (inception of offering) to August 31, 2001. 2. Per share amounts calculated based on the average shares outstanding during the period. 3. 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. 4. Annualized for periods of less than one full year. 5. Reduction to custodian expenses less than 0.01%. 6. Voluntary waiver of transfer agent fees less than 0.01%.
See accompanying Notes to Financial Statements. 23 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Continued --------------------------------------------------------------------------------
Class Y Year Ended August 31, 2003 2002 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $31.16 $41.55 $ 62.51 $44.81 $32.56 ------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .01 .02 1 .27 .13 .13 Net realized and unrealized gain (loss) 4.87 (9.42) 1 (15.98) 20.79 14.85 ------------------------------------------------------------ Total from investment operations 4.88 (9.40) (15.71) 20.92 14.98 ------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- -- -- -- (.19) Distributions from net realized gain -- (.99) (5.25) (3.22) (2.54) ------------------------------------------------------------ Total dividends and/or distributions to shareholders -- (.99) (5.25) (3.22) (2.73) ------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $36.04 $31.16 $ 41.55 $62.51 $44.81 ============================================================ ------------------------------------------------------------------------------------------------------------------------- Total Return, at Net Asset Value 2 15.66% (23.23)% (26.12)% 48.64% 47.90% ------------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data Net assets, end of period (in thousands) $1,152,318 $864,437 $ 974,820 $1,295,087 $420,455 ------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 930,500 $968,867 $1,095,575 $ 855,270 $307,498 ------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 0.29% 0.17% 0.66% 0.45% 0.30% Total expenses 0.78% 4,5 0.89% 4 0.66% 4 0.64% 4 0.68% 4 ------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 42% 28% 46% 44% 59% 1. Per share amounts calculated based on the average shares outstanding during the period. 2. 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. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. 5. Voluntary waiver of transfer agent fees less than 0.01%.
See accompanying Notes to Financial Statements. 24 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. Significant Accounting Policies Oppenheimer Capital Appreciation 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 CAPITAL APPRECIATION 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 investment for federal income tax purposes. Net Unrealized Appreciation Based Undistributed Undistributed Accumulated on Cost of Securities Net Investment Long-Term Loss for Federal Income Income Gain Carryforward 1,2,3 Tax Purposes ------------------------------------------------------------------------- $-- $-- $1,038,585,529 $73,498,385 1. As of August 31, 2003, the Fund had $436,575,011 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. As of August 31, 2003, details of the capital loss carryforwards were as follows: Expiring ---------------------- 2010 $ 61,636,235 2011 374,938,776 ------------ Total $436,575,011 ============ 2. During the fiscal years ended August 31, 2003 and August 31, 2002, the Fund did not utilize any capital loss carryforwards. 3. As of August 31, 2003, the Fund had $602,003,735 of post-October losses available to offset future realized capital gains, if any. Such losses, if unutilized, will expire in 2012. Additionally, the Fund had $6,783 of post- October foreign currency losses which were deferred. 26 OPPENHEIMER CAPITAL APPRECIATION 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 August 31, 2003. Net assets of the Fund were unaffected by the reclassifications. From From Net Ordinary Capital Tax Return Investment Loss Loss of Capital Loss ------------------------------------------------------ $14,493,883 $19,715 $-- $14,513,598 The tax character of distributions paid during the years ended August 31, 2003 and August 31, 2002 was as follows: Year Ended Year Ended August 31, 2003 August 31, 2002 ------------------------------------------------------ Distributions paid from: Long-term capital gain $-- $148,257,544 The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investments for federal income tax purposes as of August 31, 2003 are noted below. The primary difference between book and tax appreciation or depreciation of investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss. Federal tax cost $7,145,425,859 ============== Gross unrealized appreciation $ 546,285,142 Gross unrealized depreciation (472,786,757) -------------- Net unrealized appreciation $ 73,498,385 ============== -------------------------------------------------------------------------------- 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 August 31, 2003, the Fund's projected benefit obligations were increased by $128,301 and payments of $38,164 were made to retired trustees, resulting in an accumulated liability of $948,568 as of August 31, 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. 27 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. Significant Accounting Policies Continued Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. 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 August 31, 2003 Year Ended August 31, 2002 Shares Amount Shares Amount -------------------------------------------------------------------------------------------------------- Class A Sold 45,225,452 $1,394,693,911 53,070,823 $1,905,539,371 Dividends and/or distributions reinvested -- -- 1,755,869 72,763,164 Redeemed (28,851,156) (890,007,812) (24,347,868) (861,251,131) ------------------------------------------------------------------------ Net increase 16,374,296 $ 504,686,099 30,478,824 $1,117,051,404 ======================================================================== -------------------------------------------------------------------------------------------------------- Class B Sold 6,747,394 $ 197,106,768 12,282,673 $ 436,416,730 Dividends and/or distributions reinvested -- -- 786,310 30,886,268 Redeemed (8,635,132) (247,425,951) (9,289,206) (311,456,903) ------------------------------------------------------------------------ Net increase (decrease) (1,887,738) $ (50,319,183) 3,779,777 $ 155,846,095 ========================================================================
28 OPPENHEIMER CAPITAL APPRECIATION FUND
Year Ended August 31, 2003 Year Ended August 31, 2002 Shares Amount Shares Amount -------------------------------------------------------------------------------------------------------- Class C Sold 4,972,919 $ 143,578,548 8,394,929 $ 291,814,714 Dividends and/or distributions reinvested -- -- 277,019 10,753,885 Redeemed (4,220,870) (119,557,545) (3,953,474) (128,877,758) ------------------------------------------------------------------------ Net increase 752,049 $ 24,021,003 4,718,474 $ 173,690,841 ======================================================================== -------------------------------------------------------------------------------------------------------- Class N Sold 1,644,398 $ 50,946,387 2,573,390 $ 92,009,980 Dividends and/or distributions reinvested -- -- 10,848 448,566 Redeemed (836,639) (25,918,219) (391,091) (13,567,757) ------------------------------------------------------------------------ Net increase 807,759 $ 25,028,168 2,193,147 $ 78,890,789 ======================================================================== -------------------------------------------------------------------------------------------------------- Class Y Sold 9,921,935 $ 316,008,775 10,706,767 $ 404,655,100 Dividends and/or distributions reinvested -- -- 557,609 23,369,417 Redeemed (5,689,335) (173,782,697) (6,979,040) (249,424,511) ------------------------------------------------------------------------ Net increase 4,232,600 $ 142,226,078 4,285,336 $ 178,600,006 ========================================================================
-------------------------------------------------------------------------------- 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 August 31, 2003, were $3,117,067,251 and $2,333,866,432, 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 aggregate 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, 0.58% of the next $1.0 billion, 0.56% of the next $2.0 billion, 0.54% of the next $4.0 billion, and 0.52% of aggregate net assets over $8.5 billion. Effective July 1, 2003, the Manager has voluntarily undertaken to limit total annual operating expenses of Class Y shares so that the annualized rate of such expenses for the remainder of the fiscal year ending August 31, 2003 shall be 0.75% of average daily net assets, and to limit total annual operating expenses of Class Y shares to 0.75% of average daily net assets for the fiscal year commencing September 1, 2003. The Manager may amend or withdraw this limitation at any time. -------------------------------------------------------------------------------- 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 August 31, 2003, the Fund paid $18,220,767 to OFS for services to the Fund. 29 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 4. Fees and Other Transactions with Affiliates Continued 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 -------------------------------------------------------------------------------------------------------- August 31, 2003 $6,165,627 $1,306,916 $2,013,246 $5,339,379 $1,079,724 $315,363
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. 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 ------------------------------------------------------------------------------- August 31, 2003 $67,713 $3,086,814 $140,485 $326,760 -------------------------------------------------------------------------------- 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 August 31, 2003, expense under the Class A Plan totaled $8,832,561, all of which were paid by the Distributor to recipients, which included $227,233 retained by the Distributor and $352,981 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. 30 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- 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 August 31, 2003, were as follows: Distributor's Distributor's Aggregate Aggregate Unreimbursed Unreimbursed Expenses as % Total Payments Amount Retained Expenses of Net Assets Under Plan by Distributor Under Plan of Class -------------------------------------------------------------------------------- Class B Plan $10,010,756 $8,006,737 $26,949,124 2.42% Class C Plan 4,580,168 1,356,808 7,404,866 1.37 Class N Plan 433,274 369,761 1,333,950 1.20 -------------------------------------------------------------------------------- 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 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 August 31, 2003, the Fund had no outstanding foreign currency contracts. -------------------------------------------------------------------------------- 6. Illiquid Securities As of August 31, 2003, investments in securities included issues that are illiquid. A security may be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund intends to invest no more than 10% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid securities. The aggregate value of illiquid securities subject to this limitation as of August 31, 2003 was zero. 31 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 7. 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 August 31, 2003. 32 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- The Board of Trustees and Shareholders of Oppenheimer Capital Appreciation Fund: We have audited the accompanying statement of assets and liabilities of Oppenheimer Capital Appreciation Fund, including the statement of investments, as of August 31, 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 August 31, 2003, by correspondence with the custodian and brokers 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 Capital Appreciation Fund as of August 31, 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 September 22, 2003 33 OPPENHEIMER CAPITAL APPRECIATION 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. 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. 34 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- SHAREHOLDER MEETING Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- On November 22, 2002, the initial shareholder meeting was held at which shareholders elected all of the nominated Trustees and approved proposals 2(a) - 2(d), 2(f), 2(i) and 2(j), 3(a) - 3(d) and 4 as described in the Trust's proxy statement for the meeting. The initial meeting was adjourned until December 18, 2002 with respect to proposals 2(e), 2(g) and 2(h) in order to solicit addition votes. On December 18, 2002, shareholders approved proposals 2(e), 2(g) and 2(h) as described in the Trust's proxy statement for that meeting. The following is a report of the votes cast at the meetings: -------------------------------------------------------------------------------- Proposal No. 1 1. The twelve persons named below to serve as Trustee of the Fund until their successors are elected and shall qualify: Nominee For Withheld Total ------------------------------------------------------------------------------ Leon Levy* 94,011,274.662 3,463,642.662 97,474,917.324 Donald W. Spiro 94,202,655.174 3,272,262.150 97,474,917.324 John V. Murphy 94,039,849.423 3,435,067.901 97,474,917.324 Robert G. Galli 94,304,895.405 3,170,021.919 97,474,917.324 Phillip A. Griffiths 94,465,790.326 3,009,126.998 97,474,917.324 Benjamin Lipstein* 94,128,273.556 3,346,643.768 97,474,917.324 Joel W. Motley 94,343,602.930 3,131,314.394 97,474,917.324 Elizabeth B. Moynihan* 94,248,413.333 3,226,503.991 97,474,917.324 Kenneth A. Randall 94,317,230.179 3,157,687.145 97,474,917.324 Edward V. Regan 94,331,204.164 3,143,713.160 97,474,917.324 Russell S. Reynolds, Jr. 94,362,502.585 3,112,414.739 97,474,917.324 Clayton K. Yeutter 94,256,885.508 3,218,031.816 97,474,917.324 *Messrs. Levy and Lipstein and Ms. Moynihan resigned from the Board of Trustees effective January 1, 2003, March 31, 2003 and July 31, 2003, respectively. Each was elected at the above referenced meeting and served until their respective dates of resignation.
Broker For Against Abstain Non-Votes Total ------------------------------------------------------------------------------------- Proposal Nos. 2(a) through 2(j) 2(a)Eliminate the Fund's fundamental investment policy with respect to purchasing securities on margin: 83,805,624.192 7,985,628.141 3,537,719.991 2,145,945.000 97,474,917.324 2(b)Amend the Fund's fundamental investment policy with respect to investing in real estate: 69,735,567.196 22,555,819.265 3,037,585.863 2,145,945.000 97,474,917.324 2(c)Eliminate the Fund's fundamental investment policy with respect to purchasing securities of issuers in which officers or trustees have interest: 81,373,425.919 10,293,106.872 3,662,439.533 2,145,945.000 97,474,917.324 2(d)Eliminate the Fund's fundamental investment policy with respect to investing in oil, gas or other mineral exploration or development programs: 68,071,702.221 23,679,735.814 3,577,534.289 2,145,945.000 97,474,917.324 2(e)Eliminate the Fund's fundamental investment policy with respect to investing in a company for the purpose of acquiring control: 69,011,000.925 25,027,274.195 3,762,695.884 983,116.000 98,784,087.004 2(f)Replacement of the fundamental investment policy with respect to investing in other investment companies with a non-fundamental investment policy: 85,647,032.724 6,061,944.189 3,619,995.411 2,145,945.000 97,474,917.324 2(g)Amend the Fund's fundamental investment policy with respect to borrowing: 67,603,572.411 26,626,207.596 3,571,190.997 983,116.000 98,784,087.004 2(h)Eliminate the Fund's fundamental investment policy with respect to pledging or mortgaging assets: 67,573,287.758 26,633,567.545 3,594,115.701 983,116.000 98,784,087.004
35 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- SHAREHOLDER MEETING Unaudited / Continued --------------------------------------------------------------------------------
Broker For Against Abstain Non-Votes Total ------------------------------------------------------------------------------------- 2(i)Amend the Fund's fundamental investment policy with respect to lending: 66,781,867.602 24,937,951.207 3,609,153.515 2,145,945.000 97,474,917.324 2(j)Amend the Fund's fundamental investment policy with respect investing in commodities: 66,809,144.418 24,964,978.386 3,554,849.520 2,145,945.000 97,474,917.324 ------------------------------------------------------------------------------------- Proposal Nos. 3(a) through 3(d) 3. Approval authorizing the Fund's Trustees to adopt an Amended and Restated Declaration of Trust: (a)Future amendments of the Declaration of Trust: 67,157,257.198 23,541,858.835 4,629,856.291 2,145,945.000 97,474,917.324 (b)Reorganization of the Trust or its series or class: 85,567,665.971 5,104,564.424 4,656,741.929 2,145,945.000 97,474,917.324 (c)Involuntary redemptions: 84,268,992.778 6,112,107.112 4,947,872.434 2,145,945.000 97,474,917.324 (d)Other changes under the new Declaration of Trust: 66,923,919.972 23,612,418.953 4,792,633.399 2,145,945.000 97,474,917.324 ------------------------------------------------------------------------------------- Proposal No. 4 Approval of an Amended and Restated Class B 12b-1 Distribution and Service Plan and Agreement (Class C shareholders only): 5,766,111.980 366,912.404 483,534.895 1,492,358.000 8,108,917.279
36 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- TRUSTEES AND OFFICERS Unaudited --------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------- Name, Position(s) Held with Principal Occupation(s) During Past 5 Years; Other Trusteeships/Directorships Held Fund, Length of Service, Age by Trustee; Number of Portfolios in Fund Complex Currently Overseen by Trustee INDEPENDENT The address of each Trustee in the chart below is 6803 S. Tucson Way, TRUSTEES Centennial, CO 80112-3924. 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 firm). Other directorships: Chairman of the Board Weyerhaeuser Corp. (since 1999) and Danielson Holding Corp. (since 2002); of Trustees (since 2003), formerly a director of Caterpillar, Inc. (1993-December 2002). Oversees 29 Trustee (since 1991) portfolios in the OppenheimerFunds complex. Age: 72 Robert G. Galli, A trustee or director of other Oppenheimer funds. Formerly Trustee (May Trustee (since 1996) 2000-2002) of Research Foundation of AIMR (investment research, non-profit) and Age: 70 Vice Chairman (October 1995-December 1997) of OppenheimerFunds, Inc. (the Manager). Oversees 39 portfolios in the OppenheimerFunds complex. Phillip A. Griffiths, A director (since 1991) of the Institute for Advanced Study, Princeton, N.J., a Trustee (since 1999) director (since 2001) of GSI Lumonics, a trustee (since 1983) of Woodward Age: 64 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). Oversees 29 portfolios in the OppenheimerFunds complex. Joel W. Motley, Director (since 2002) Columbia Equity Financial Corp. (privately-held financial Trustee (since 2002) adviser); Managing Director (since 2002) Carmona Motley, Inc. (privately-held Age: 51 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). Oversees 29 portfolios in the OppenheimerFunds complex. Kenneth A. Randall, A director of Dominion Resources, Inc. (electric utility holding company) and Trustee (since 1981) Prime Retail, Inc. (real estate investment trust); formerly a director of Age: 76 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. Oversees 29 portfolios in the OppenheimerFunds complex. Edward V. Regan, President, Baruch College, CUNY; a director of RBAsset (real estate manager); a Trustee (since 1993) director of OffitBank; formerly Trustee, Financial Accounting Foundation (FASB Age: 73 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. Oversees 29 investment companies in the OppenheimerFunds complex. Russell S. Reynolds, Jr., Chairman (since 1993) of The Directorship Search Group, Inc. (corporate Trustee (since 1989) governance consulting and executive recruiting); a life trustee of International Age: 71 House (non-profit educational organization), and a trustee (since 1996) of the Greenwich Historical Society. Oversees 29 portfolios in the OppenheimerFunds complex.
37 OPPENHEIMER CAPITAL APPRECIATION FUND -------------------------------------------------------------------------------- TRUSTEES AND OFFICERS Unaudited / Continued --------------------------------------------------------------------------------
Donald W. Spiro, Chairman Emeritus (since January 1991) of the Manager. Formerly a director Vice Chairman of the (January 1969-August 1999) of the Manager. Oversees 29 portfolios in the Board of Trustees, OppenheimerFunds complex. Trustee (since 1985) Age: 77 ---------------------------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEE The address of Mr. Murphy in the chart below is 498 Seventh Avenue, New York, AND OFFICER NY 10018. Mr. Murphy serves for an indefinite term, until his resignation, death or removal. John V. Murphy, Chairman, Chief Executive Officer and director (since June 2001) and President President and Trustee, (since September 2000) of the Manager; President and a director or trustee of Trustee (since 2001) other Oppenheimer funds; President and a director (since July 2001) of Age: 54 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 75 portfolios in the OppenheimerFunds complex. ---------------------------------------------------------------------------------------------------------------------------- OFFICERS The address of the Officers in the chart below is as follows: for Mr. Zack and Ms. Putnam, 498 Seventh Avenue, New York, NY 10018, for Mr. Wixted, 6803 S. Tucson Way, Centennial, CO 80112-3924. Each Officer serves for an annual term or until his or her earlier resignation, death or removal. Jane Putnam, Vice President of the Manager (since October 1995); an officer of 2 portfolios Vice President (since 1995) in the OppenheimerFunds complex. Age: 42
38 OPPENHEIMER CAPITAL APPRECIATION FUND
Brian W. Wixted, Senior Vice President and Treasurer (since March 1999) of the Manager; Treasurer Treasurer (since 1999) (since March 1999) of HarbourView Asset Management Corporation, Shareholder Age: 43 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. An officer of 91 portfolios in the OppenheimerFunds complex. Robert G. Zack, Senior Vice President (since May 1985) and General Counsel (since February 2002) Secretary (since 2001) of the Manager; General Counsel and a director (since November 2001) of Age: 55 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). An officer of 91 portfolios in the OppenheimerFunds complex.
The Fund's Statement of Additional Information contains additional information about the Fund's Trustees and is available without charge upon request. 39 OPPENHEIMER CAPITAL APPRECIATION 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 August 31, 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)