N-CSR 1 ra0320_11810.txt RA0320_11810 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 811-3105 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. Two World Financial Center, New York, New York 10281-1008 -------------------------------------------------------------------------------- (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, 2003 - August 31, 2004 ----------------------------------- ITEM 1. REPORTS TO STOCKHOLDERS. TOP HOLDINGS AND ALLOCATIONS -------------------------------------------------------------------------------- TOP TEN COMMON STOCK INDUSTRIES ------------------------------------------------------------------ Media 10.3% ------------------------------------------------------------------ Pharmaceuticals 9.1 ------------------------------------------------------------------ Diversified Financial Services 7.5 ------------------------------------------------------------------ Software 6.9 ------------------------------------------------------------------ Industrial Conglomerates 5.7 ------------------------------------------------------------------ Oil & Gas 5.1 ------------------------------------------------------------------ Health Care Equipment & Supplies 4.3 ------------------------------------------------------------------ Communications Equipment 4.2 ------------------------------------------------------------------ Beverages 3.9 ------------------------------------------------------------------ Biotechnology 3.7 Portfolio's holdings and allocations are subject to change. Percentages are as of August 31, 2004, and are based on net assets. TOP TEN COMMON STOCK HOLDINGS ------------------------------------------------------------------ General Electric Co. 4.9% ------------------------------------------------------------------ Microsoft Corp. 3.6 ------------------------------------------------------------------ Pfizer, Inc. 2.7 ------------------------------------------------------------------ Comcast Corp., Cl. A Special, Non-Vtg. 2.6 ------------------------------------------------------------------ Citigroup, Inc. 2.4 ------------------------------------------------------------------ Medtronic, Inc. 2.2 ------------------------------------------------------------------ Viacom, Inc., Cl. B 2.2 ------------------------------------------------------------------ International Business Machines Corp. 2.2 ------------------------------------------------------------------ Cisco Systems, Inc. 2.0 ------------------------------------------------------------------ Exxon Mobil Corp. 2.0 Portfolio's holdings and allocations are subject to change. Percentages are as of August 31, 2004, and are based on net assets. For more current Fund holdings, please visit www.oppenheimerfunds.com. 7 | OPPENHEIMER CAPITAL APPRECIATION FUND TOP HOLDINGS AND ALLOCATIONS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECTOR ALLOCATION [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Information Technology 21.7% Health Care 18.1 Consumer Discretionary 16.2 Industrials 13.6 Financials 11.1 Consumer Staples 9.3 Energy 7.1 Materials 2.4 Telecommunication Services 0.5 Portfolio's holdings and allocations are subject to change. Percentages are as of August 31, 2004, and are based on common stocks. 8 | OPPENHEIMER CAPITAL APPRECIATION FUND 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, 2004, FOLLOWED BY A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO AN APPROPRIATE BROAD-BASED MARKET INDEX. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Over the 12-month period ended August 31, 2004, the Fund delivered mildly weaker gains than its benchmark. The Fund's overall performance was driven primarily by the stock market's broadly based upward trend during the first half of the period, which outweighed declines during the second half of the period. Performance relative to the benchmark suffered largely as a result of the Fund's exposure to technology stocks, an area which sustained particularly sharp losses during the market downturn. The Fund's investment strategy focuses on companies that we believe offer 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. Our disciplined stock selection process delivered particularly strong returns among health care stocks. The health care sector generally faced a difficult environment during the period due to election year uncertainties and concerns regarding the drug development pipelines at several major U.S. pharmaceutical firms. As a result, the health care component of the S&P 500 Index produced only slight gains. However, the Fund's health care holdings appreciated much more substantially, bolstered by gains among biotechnology holdings, health insurers, diversified medical product companies, such as Johnson & Johnson, Inc.; and certain European pharmaceutical firms. Other sectors that contributed positively to the Fund's returns included industrials and consumer staples. Although neither is a traditional growth-oriented area, we found attractive investment opportunities in both that we believed featured good growth potential at a reasonable price. For example, among industrials, we established a significant position in General Electric Co., a diversified company that has recently moved to emphasize growth-oriented areas of its business, such as entertainment and medical. Among consumer staples, we focused on companies, such as PepsiCo, Inc., that is increasing its revenues by gaining traction in developing global markets. The Fund added to its exposure in both of these areas during the period, a move that enhanced performance. On the negative side, prices for media stocks remained depressed despite improving business fundamentals. At the end of the reporting period, the Fund's largest industry allocation (10.3% of assets) was in media stocks, such as Viacom, Inc. In addition, the Fund's growth-oriented investment strategy led us to place greater emphasis than the 9 | OPPENHEIMER CAPITAL APPRECIATION FUND FUND PERFORMANCE DISCUSSION -------------------------------------------------------------------------------- benchmark on technology stocks, a group that experienced sharp declines during the second half of the period. During the reporting period, weak technology stocks in the Fund included telecommunications equipment maker Nokia Corp.; semiconductor maker Intel Corp.; and a leading manufacturer of scientific instruments. However, we succeeded in limiting the Fund's losses in technology by, in part, seeking to avoid high-flying stocks that failed to meet our criteria for growth at a reasonable price. Such stocks tended to suffer the sharpest declines during the technology downturn. As prices declined for technology stocks across the board, we trimmed holdings in relatively small-cap cyclical technology names and increased the Fund's exposure to stable, bellwether companies, such as Cisco Systems, Inc. During the period, we also trimmed consumer discretionary holdings such as cruise lines, hotels, and casinos and gaming when they rose above attractive price levels, a move that illustrates our disciplined, valuation sensitive approach to growth investing. The Fund's portfolio holdings, allocations and strategies are subject to change. COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the performance of a hypothetical $10,000 investment in each class of shares of the Fund held until August 31, 2004. In the case of Class A and Class C shares, performance is measured over a ten-fiscal-year period; in the case of Class B shares, from the inception of the class on November 1, 1995. In the case of Class N shares, performance is measured from inception of the Class on March 1, 2001, and in the case of Class Y shares, from the inception of the class on November 3, 1997. The Fund's performance reflects the deduction of the maximum initial sales charge on Class A shares, the applicable contingent deferred sales charge on Class B, Class C, and Class N shares, and reinvestments of all dividends and capital gains distributions. Past performance cannot guarantee future results. 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 income but does not consider the effect of transaction costs, and none of the data in the graphs shows the effect of taxes. The Fund's performance reflects the effects of the Fund's 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 investments in the index. 10 | 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 [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Capital S&P 500 Index Appreciation Fund (Class A) 12/31/1993 9,425 10,000 03/31/1994 9,179 9,621 06/30/1994 8,927 9,662 09/30/1994 9,447 10,133 12/31/1994 9,468 10,131 03/31/1995 10,321 11,117 06/30/1995 11,535 12,176 09/30/1995 12,543 13,143 12/31/1995 12,768 13,934 03/31/1996 13,684 14,682 06/30/1996 14,387 15,340 08/31/1996 1 14,336 14,972 11/30/1996 16,578 17,477 02/28/1997 16,948 18,344 05/31/1997 18,241 19,780 08/31/1997 20,145 21,055 11/30/1997 20,578 22,459 02/28/1998 22,338 24,762 05/31/1998 23,003 25,844 08/31/1998 19,326 22,765 11/30/1998 23,390 27,778 02/28/1999 26,193 29,655 05/31/1999 27,676 31,280 08/31/1999 28,479 31,826 11/30/1999 31,605 33,582 02/29/2000 38,989 33,132 05/31/2000 38,223 34,554 08/31/2000 42,152 37,016 11/30/2000 34,762 32,163 02/28/2001 34,293 30,417 05/31/2001 35,146 30,910 08/31/2001 31,032 27,993 11/30/2001 30,881 28,235 02/28/2002 28,970 27,525 05/31/2002 28,189 26,633 08/31/2002 23,745 22,958 11/30/2002 24,950 23,574 02/28/2003 22,168 21,285 05/31/2003 25,654 24,485 08/31/2003 27,354 25,726 11/30/2003 28,715 27,129 02/29/2004 30,554 29,479 05/31/2004 29,998 28,971 08/31/2004 29,039 28,671 AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT 8/31/04 1-Year 5-Year 10-Year ------ ------ ------- 0.06% -0.79% 10.94% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. THE 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 THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM, OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE, REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES, THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 16 FOR FURTHER INFORMATION. 1. The Fund changed its fiscal year end from December 31 to August 31. 11 | OPPENHEIMER CAPITAL APPRECIATION FUND FUND PERFORMANCE DISCUSSION -------------------------------------------------------------------------------- CLASS B SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: OPPENHEIMER CAPITAL APPRECIATION FUND (CLASS B) S&P 500 Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Capital S&P 500 Index Appreciation Fund (Class B) 11/01/1995 10,000 10,000 12/31/1995 10,167 10,640 03/31/1996 10,873 11,211 06/30/1996 11,411 11,713 08/31/1996 1 11,352 11,432 11/30/1996 13,098 13,345 02/28/1997 13,362 14,007 05/31/1997 14,347 15,104 08/31/1997 15,813 16,077 11/30/1997 16,120 17,149 02/28/1998 17,458 18,907 05/31/1998 17,945 19,734 08/31/1998 15,044 17,382 11/30/1998 18,171 21,211 02/28/1999 20,310 22,643 05/31/1999 21,418 23,884 08/31/1999 21,995 24,301 11/30/1999 24,362 25,642 02/29/2000 29,998 25,299 05/31/2000 29,350 26,385 08/31/2000 32,305 28,264 11/30/2000 26,589 24,559 02/28/2001 26,179 23,226 05/31/2001 26,782 23,602 08/31/2001 23,601 21,375 11/30/2001 23,455 21,559 02/28/2002 22,003 21,018 05/31/2002 21,411 20,336 08/31/2002 18,035 17,530 11/30/2002 18,951 18,000 02/28/2003 16,837 16,253 05/31/2003 19,485 18,696 08/31/2003 20,777 19,644 11/30/2003 21,810 20,715 02/29/2004 23,207 22,509 05/31/2004 22,784 22,121 08/31/2004 22,056 21,892 AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT 8/31/04 1-Year 5-Year Since Inception ------ ------ ---------------- 0.23% -0.73% 9.37% 1. The Fund changed its fiscal year end from December 31 to August 31. 12 | OPPENHEIMER CAPITAL APPRECIATION FUND CLASS C SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: OPPENHEIMER CAPITAL APPRECIATION FUND (CLASS C) S&P 500 Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Capital S&P 500 Index Appreciation Fund (Class C) 12/31/1993 10,000 10,121 03/31/1994 9,712 9,621 06/30/1994 9,421 9,662 09/30/1994 9,946 10,133 12/31/1994 9,950 10,131 03/31/1995 10,816 11,117 06/30/1995 12,054 12,176 09/30/1995 13,080 13,143 12/31/1995 13,289 13,934 03/31/1996 14,215 14,682 06/30/1996 14,911 15,340 08/31/1996 1 14,838 14,972 11/30/1996 17,122 17,477 02/28/1997 17,468 18,344 05/31/1997 18,760 19,780 08/31/1997 20,676 21,055 11/30/1997 21,076 22,459 02/28/1998 22,828 24,762 05/31/1998 23,464 25,844 08/31/1998 19,675 22,765 11/30/1998 23,763 27,778 02/28/1999 26,553 29,655 05/31/1999 28,002 31,280 08/31/1999 28,757 31,826 11/30/1999 31,849 33,582 02/29/2000 39,223 33,132 05/31/2000 38,381 34,554 08/31/2000 42,242 37,016 11/30/2000 34,763 32,163 02/28/2001 34,235 30,417 05/31/2001 35,017 30,910 08/31/2001 30,857 27,993 11/30/2001 30,649 28,235 02/28/2002 28,706 27,525 05/31/2002 27,870 26,633 08/31/2002 23,448 22,958 11/30/2002 24,586 23,574 02/28/2003 21,802 21,285 05/31/2003 25,184 24,485 08/31/2003 26,798 25,726 11/30/2003 28,075 27,129 02/29/2004 29,820 29,479 05/31/2004 29,214 28,971 08/31/2004 28,231 28,671 AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT 8/31/04 1-Year 5-Year 10-Year ------ ------ ------- 4.35% -0.37% 10.71% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. THE 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 THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM, OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE, REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES, THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO CLASS A SHARES 72 MONTHS AFTER PURCHASE, SINCE-INCEPTION RETURNS FOR CLASS B SHARES USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 16 FOR FURTHER INFORMATION. 1. The Fund changed its fiscal year end from December 31 to August 31. 13 | OPPENHEIMER CAPITAL APPRECIATION FUND FUND PERFORMANCE DISCUSSION -------------------------------------------------------------------------------- CLASS N SHARES COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN: OPPENHEIMER CAPITAL APPRECIATION FUND (CLASS N) S&P 500 Index [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Capital S&P 500 Index Appreciation Fund (Class N) 03/01/2001 10,000 10,000 05/31/2001 10,206 10,162 08/31/2001 9,006 9,203 11/30/2001 8,956 9,283 02/28/2002 8,398 9,049 05/31/2002 8,164 8,756 08/31/2002 6,875 7,548 11/30/2002 7,221 7,750 02/28/2003 6,414 6,998 05/31/2003 7,418 8,050 08/31/2003 7,901 8,458 11/30/2003 8,288 8,919 02/29/2004 8,811 9,692 05/31/2004 8,643 9,524 08/31/2004 8,360 9,426 AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT 8/31/04 1-Year Since Inception ------ ---------------- 4.80% -4.99% 14 | 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 [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] Oppenheimer Capital S&P 500 Index Appreciation Fund (Class Y) 11/03/1997 10,000 10,000 11/30/1997 9,833 10,463 02/28/1998 10,680 11,535 05/31/1998 11,009 12,039 08/31/1998 9,255 10,605 11/30/1998 11,211 12,940 02/28/1999 12,564 13,815 05/31/1999 13,291 14,572 08/31/1999 13,688 14,826 11/30/1999 15,203 15,644 02/29/2000 18,778 15,435 05/31/2000 18,430 16,097 08/31/2000 20,347 17,244 11/30/2000 16,789 14,983 02/28/2001 16,579 14,170 05/31/2001 17,009 14,399 08/31/2001 15,034 13,041 11/30/2001 14,965 13,153 02/28/2002 14,053 12,823 05/31/2002 13,690 12,407 08/31/2002 11,541 10,695 11/30/2002 12,138 10,982 02/28/2003 10,797 9,916 05/31/2003 12,508 11,406 08/31/2003 13,349 11,984 11/30/2003 14,023 12,638 02/29/2004 14,938 13,733 05/31/2004 14,679 13,496 08/31/2004 14,223 13,356 AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES WITH SALES CHARGE OF THE FUND AT 8/31/04 1-Year 5-Year Since Inception ------ ------ --------------- 6.55% 0.77% 5.29% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. THE 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 THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM, OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE, REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES, THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD. THERE IS NO SALES CHARGE FOR CLASS Y SHARES. SEE PAGE 16 FOR FURTHER INFORMATION. 15 | OPPENHEIMER CAPITAL APPRECIATION FUND NOTES -------------------------------------------------------------------------------- Total returns and the ending account values in the graphs include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown. The Fund's total returns shown do not reflect the deduction of income taxes on an individual's investment. Taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares. Investors should consider the Fund's investment objectives, risks, and other charges and expenses carefully before investing. The Fund's prospectus contains this and other information about the Fund, and may be obtained by asking your financial advisor, calling us at 1.800.525.7048 or visiting our website at www.oppenheimerfunds.com. Read the prospectus carefully before investing. The Fund's investment strategy and focus can change over time. The mention of specific fund holdings does not constitute a recommendation by OppenheimerFunds, Inc. 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. 16 | OPPENHEIMER CAPITAL APPRECIATION FUND FUND EXPENSES -------------------------------------------------------------------------------- FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended August 31, 2004. ACTUAL EXPENSES. The "actual" lines of the table provide information about actual account values and actual expenses. You may use the information on this line for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the "actual" line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio for each class of shares, and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or contingent deferred sales charges (loads), or a $12.00 fee imposed annually on accounts valued at less than $500.00 (subject to exceptions described in 17 | OPPENHEIMER CAPITAL APPRECIATION FUND FUND EXPENSES -------------------------------------------------------------------------------- the Statement of Additional Information). Therefore, the "hypothetical" lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. BEGINNING ENDING ACCOUNT ACCOUNT EXPENSES PAID VALUE VALUE DURING 6 MONTHS (3/1/04) (8/31/04) ENDED AUGUST 31, 2004 ---------------------------------------------------------------------- Class A Actual $ 1,000.00 $ 950.40 $ 5.26 ---------------------------------------------------------------------- Class A Hypothetical 1,000.00 1,019.76 5.45 ---------------------------------------------------------------------- Class B Actual 1,000.00 946.20 9.79 ---------------------------------------------------------------------- Class B Hypothetical 1,000.00 1,015.13 10.13 ---------------------------------------------------------------------- Class C Actual 1,000.00 946.70 9.10 ---------------------------------------------------------------------- Class C Hypothetical 1,000.00 1,015.84 9.42 ---------------------------------------------------------------------- Class N Actual 1,000.00 948.70 6.98 ---------------------------------------------------------------------- Class N Hypothetical 1,000.00 1,018.00 7.23 ---------------------------------------------------------------------- Class Y Actual 1,000.00 952.10 3.39 ---------------------------------------------------------------------- Class Y Hypothetical 1,000.00 1,021.67 3.51 Hypothetical assumes 5% annual return before expenses. Expenses are equal to the Fund's annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Those expense ratios for the 6-month period ended August 31, 2004 are as follows: CLASS EXPENSE RATIOS ------------------------ Class A 1.07% ------------------------ Class B 1.99 ------------------------ Class C 1.85 ------------------------ Class N 1.42 ------------------------ Class Y 0.69 The expense ratios reflect voluntary reimbursements of expenses by the Fund's Transfer Agent that can be terminated at any time, without advance notice. The "Financial Highlights" tables in the Fund's financial statements, included in this report, also show the gross expense ratios, without such reimbursements. 18 | OPPENHEIMER CAPITAL APPRECIATION FUND STATEMENT OF INVESTMENTS August 31, 2004 --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 --------------------------------------------------------------------------------- COMMON STOCKS--96.1% --------------------------------------------------------------------------------- CONSUMER DISCRETIONARY--15.6% --------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE--1.8% Carnival Corp. 1,680,700 $ 76,959,253 --------------------------------------------------------------------------------- Royal Caribbean Cruises Ltd. 1,843,200 76,124,160 ---------------- 153,083,413 --------------------------------------------------------------------------------- MEDIA--10.3% Clear Channel Communications, Inc. 2,366,930 79,315,824 --------------------------------------------------------------------------------- Comcast Corp., Cl. A Special, Non-Vtg. 1 8,125,825 225,491,644 --------------------------------------------------------------------------------- Cox Communications, Inc., Cl. A 1 685,300 22,518,958 --------------------------------------------------------------------------------- News Corp. Ltd. (The), Sponsored ADR 3,044,900 95,153,125 --------------------------------------------------------------------------------- Omnicom Group, Inc. 469,500 32,306,295 --------------------------------------------------------------------------------- Time Warner, Inc. 1 10,586,200 173,084,370 --------------------------------------------------------------------------------- Univision Communications, Inc., Cl. A 1 2,048,896 67,613,568 --------------------------------------------------------------------------------- Viacom, Inc., Cl. B 5,570,000 185,536,700 ---------------- 881,020,484 --------------------------------------------------------------------------------- MULTILINE RETAIL--2.0% Federated Department Stores, Inc. 983,000 42,662,200 --------------------------------------------------------------------------------- J.C. Penney Co., Inc. (Holding Co.) 632,900 24,252,728 --------------------------------------------------------------------------------- Target Corp. 2,350,780 104,797,772 ---------------- 171,712,700 --------------------------------------------------------------------------------- SPECIALTY RETAIL--1.5% Gap, Inc. (The) 3,842,200 72,002,828 --------------------------------------------------------------------------------- Home Depot, Inc. 1,173,500 42,903,160 --------------------------------------------------------------------------------- PetsMart, Inc. 308,230 8,648,934 ---------------- 123,554,922 --------------------------------------------------------------------------------- CONSUMER STAPLES--9.0% --------------------------------------------------------------------------------- BEVERAGES--3.9% Anheuser-Busch Cos., Inc. 2,725,700 143,916,960 --------------------------------------------------------------------------------- Coca-Cola Co. (The) 872,400 39,005,004 --------------------------------------------------------------------------------- PepsiCo, Inc. 2,920,410 146,020,500 ---------------- 328,942,464 --------------------------------------------------------------------------------- FOOD & STAPLES RETAILING--2.3% Costco Wholesale Corp. 1,377,388 56,707,064 --------------------------------------------------------------------------------- Wal-Mart Stores, Inc. 1,760,600 92,730,802 --------------------------------------------------------------------------------- Walgreen Co. 1,297,400 47,290,230 ---------------- 196,728,096 --------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS--2.2% Clorox Co. (The) 887,900 46,916,636 --------------------------------------------------------------------------------- Kimberly-Clark Corp. 325,600 21,717,520 --------------------------------------------------------------------------------- Procter & Gamble Co. (The) 2,147,000 120,167,590 ---------------- 188,801,746 --------------------------------------------------------------------------------- PERSONAL PRODUCTS--0.6% Estee Lauder Cos., Inc. (The), Cl. A 1,193,760 52,465,752 --------------------------------------------------------------------------------- ENERGY--6.8% --------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES--1.7% BJ Services Co. 1 1,026,000 49,299,300 --------------------------------------------------------------------------------- Halliburton Co. 1,022,500 29,826,325 --------------------------------------------------------------------------------- Schlumberger Ltd. 1,035,200 63,975,360 ---------------- 143,100,985 --------------------------------------------------------------------------------- OIL & GAS--5.1% Amerada Hess Corp. 380,300 30,614,150 --------------------------------------------------------------------------------- Apache Corp. 282,800 12,638,332 --------------------------------------------------------------------------------- Burlington Resources, Inc. 1,145,100 41,486,973 --------------------------------------------------------------------------------- Encana Corp. 1,085,480 44,368,416 --------------------------------------------------------------------------------- Exxon Mobil Corp. 3,779,200 174,221,120
19 | OPPENHEIMER CAPITAL APPRECIATION FUND STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 --------------------------------------------------------------------------------- OIL & GAS Continued Kinder Morgan Management LLC 1,318,375 $ 51,245,236 --------------------------------------------------------------------------------- Murphy Oil Corp. 324,900 24,533,199 --------------------------------------------------------------------------------- TotalFinaElf SA, Sponsored ADR 597,000 58,500,030 ---------------- 437,607,456 --------------------------------------------------------------------------------- FINANCIALS--10.6% --------------------------------------------------------------------------------- COMMERCIAL BANKS--0.6% Bank of America Corp. 1,003,400 45,132,932 --------------------------------------------------------------------------------- Commerce Bancorp, Inc. 166,000 8,710,020 ---------------- 53,842,952 --------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES--7.5% American Express Co. 2,194,640 109,775,893 --------------------------------------------------------------------------------- Bear Stearns Cos., Inc. (The) 519,600 45,683,232 --------------------------------------------------------------------------------- Citigroup, Inc. 4,424,300 206,083,894 --------------------------------------------------------------------------------- JPMorgan Chase & Co. 3,612,020 142,963,752 --------------------------------------------------------------------------------- Morgan Stanley 2,661,100 134,997,603 --------------------------------------------------------------------------------- Providian Financial Corp. 1 286,700 4,139,948 ---------------- 643,644,322 --------------------------------------------------------------------------------- INSURANCE--2.5% American International Group, Inc. 1,697,900 120,958,396 --------------------------------------------------------------------------------- Prudential Financial, Inc. 1,495,000 69,039,100 --------------------------------------------------------------------------------- XL Capital Ltd., Cl. A 305,200 21,425,040 ---------------- 211,422,536 --------------------------------------------------------------------------------- HEALTH CARE--17.4% -------------------------------------------------------------------------------- BIOTECHNOLOGY--3.7% Amgen, Inc. 1 1,931,900 114,542,351 --------------------------------------------------------------------------------- Applera Corp./ Applied Biosystems Group 1,177,080 22,411,603 --------------------------------------------------------------------------------- Biogen Idec, Inc. 1 1,117,000 66,271,610 --------------------------------------------------------------------------------- Digene Corp. 1 880,871 22,065,819 --------------------------------------------------------------------------------- Gilead Sciences, Inc. 1 1,077,500 74,487,575 --------------------------------------------------------------------------------- Martek Biosciences Corp. 1 81,900 4,373,460 --------------------------------------------------------------------------------- MedImmune, Inc. 1 569,000 13,582,030 ---------------- 317,734,448 --------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES--4.3% Medtronic, Inc. 3,740,095 186,069,726 --------------------------------------------------------------------------------- Millipore Corp. 1 1,685,700 84,790,710 --------------------------------------------------------------------------------- PerkinElmer, Inc. 1,763,100 30,818,988 --------------------------------------------------------------------------------- Stryker Corp. 1,124,100 50,921,730 --------------------------------------------------------------------------------- Waters Corp. 1 387,600 16,786,956 ---------------- 369,388,110 --------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES--0.3% Pharmaceutical Product Development, Inc. 1 691,100 23,462,845 --------------------------------------------------------------------------------- PHARMACEUTICALS--9.1% Eli Lilly & Co. 1,585,100 100,574,595 --------------------------------------------------------------------------------- Johnson & Johnson 2,777,200 161,355,320 --------------------------------------------------------------------------------- Merck & Co., Inc. 1,873,421 84,247,742 --------------------------------------------------------------------------------- Novartis AG 2,340,028 108,153,331 --------------------------------------------------------------------------------- Pfizer, Inc. 7,016,689 229,235,230 --------------------------------------------------------------------------------- Roche Holdings AG 350,247 33,938,127 --------------------------------------------------------------------------------- Teva Pharmaceutical Industries Ltd., Sponsored ADR 2,236,250 60,937,813 ---------------- 778,442,158 --------------------------------------------------------------------------------- INDUSTRIALS--13.1% --------------------------------------------------------------------------------- AEROSPACE & DEFENSE--3.7% Boeing Co. 600,500 31,358,110 --------------------------------------------------------------------------------- Honeywell International, Inc. 1,625,000 58,467,500 --------------------------------------------------------------------------------- L-3 Communications Holdings, Inc. 641,100 40,158,504 --------------------------------------------------------------------------------- Lockheed Martin Corp. 1,297,500 69,779,550
20 | OPPENHEIMER CAPITAL APPRECIATION FUND
VALUE SHARES SEE NOTE 1 --------------------------------------------------------------------------------- AEROSPACE & DEFENSE Continued Northrop Grumman Corp. 664,000 $ 34,295,600 --------------------------------------------------------------------------------- Rockwell Collins, Inc. 175,700 6,042,323 --------------------------------------------------------------------------------- United Technologies Corp. 796,700 74,818,097 ---------------- 314,919,684 --------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS--1.9% Expeditors International of Washington, Inc. 824,306 40,209,647 --------------------------------------------------------------------------------- FedEx Corp. 571,800 46,881,882 --------------------------------------------------------------------------------- United Parcel Service, Inc., Cl. B 998,400 72,933,120 ---------------- 160,024,649 --------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES--1.0% Manpower, Inc. 443,400 18,724,782 --------------------------------------------------------------------------------- Waste Management, Inc. 2,528,100 70,255,899 ---------------- 88,980,681 --------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT--0.1% Rockwell Automation, Inc. 221,100 8,622,900 --------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES--5.7% General Electric Co. 12,884,900 422,495,871 --------------------------------------------------------------------------------- Tyco International Ltd. 2,190,700 68,612,724 ---------------- 491,108,595 --------------------------------------------------------------------------------- MACHINERY--0.7% Ingersoll-Rand Co., Cl. A 864,500 56,201,145 --------------------------------------------------------------------------------- INFORMATION TECHNOLOGY--20.7% --------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT--4.2% Cisco Systems, Inc. 1 9,315,140 174,752,026 --------------------------------------------------------------------------------- Lucent Technologies, Inc. 1 6,212,600 19,445,438 --------------------------------------------------------------------------------- Motorola, Inc. 2,873,000 46,398,950 --------------------------------------------------------------------------------- Nokia Corp., Sponsored ADR 4,494,200 53,391,096 --------------------------------------------------------------------------------- QUALCOMM, Inc. 491,800 18,712,990 --------------------------------------------------------------------------------- Telefonaktiebolaget LM Ericsson, Sponsored ADR 1 1,598,700 43,228,848 ---------------- 355,929,348 --------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS--3.3% Dell, Inc. 1 2,421,400 84,361,576 --------------------------------------------------------------------------------- EMC Corp. 1 1,164,800 12,544,896 --------------------------------------------------------------------------------- International Business Machines Corp. 2,171,500 183,904,335 ---------------- 280,810,807 --------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--1.4% Agilent Technologies, Inc. 1 2,321,100 47,582,550 --------------------------------------------------------------------------------- Tektronix, Inc. 1,647,000 47,054,790 --------------------------------------------------------------------------------- Vishay Intertechnology, Inc. 1 1,942,000 24,760,500 ---------------- 119,397,840 --------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES--1.5% Yahoo!, Inc. 1 4,505,200 128,443,252 --------------------------------------------------------------------------------- IT SERVICES--0.4% Accenture Ltd., Cl. A 1 1,522,600 39,739,860 --------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.0% Analog Devices, Inc. 987,540 34,287,389 --------------------------------------------------------------------------------- Cypress Semiconductor Corp. 1 1,518,200 14,817,632 --------------------------------------------------------------------------------- Intel Corp. 7,386,140 157,250,921 --------------------------------------------------------------------------------- Texas Instruments, Inc. 2,804,600 54,801,884 ---------------- 261,157,826 --------------------------------------------------------------------------------- SOFTWARE--6.9% Adobe Systems, Inc. 2,374,134 108,901,527 --------------------------------------------------------------------------------- Cadence Design Systems, Inc. 1 2,378,700 29,567,241 --------------------------------------------------------------------------------- Citrix Systems, Inc. 1 2,110,680 33,580,919
21 | OPPENHEIMER CAPITAL APPRECIATION FUND STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 --------------------------------------------------------------------------------- SOFTWARE Continued Microsoft Corp. 11,336,111 $ 309,475,830 --------------------------------------------------------------------------------- Novell, Inc. 1 1,283,800 7,574,420 --------------------------------------------------------------------------------- SAP AG, Sponsored ADR 2,326,300 84,816,898 --------------------------------------------------------------------------------- Symantec Corp. 1 278,300 13,347,268 ---------------- 587,264,103 --------------------------------------------------------------------------------- MATERIALS--2.4% --------------------------------------------------------------------------------- CHEMICALS--2.4% Air Products & Chemicals, Inc. 952,600 49,897,188 --------------------------------------------------------------------------------- Dow Chemical Co. 629,400 26,944,614 --------------------------------------------------------------------------------- E.I. DuPont de Nemours & Co. 700,700 29,611,582 --------------------------------------------------------------------------------- Monsanto Co. 238,800 8,740,080 --------------------------------------------------------------------------------- Praxair, Inc. 2,111,800 85,696,844 ---------------- 200,890,308 --------------------------------------------------------------------------------- TELECOMMUNICATION SERVICES--0.5% --------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES--0.5% Telefonos de Mexico SA de CV, Sponsored ADR 1,360,900 44,079,548 ---------------- Total Common Stocks (Cost $7,979,201,836) 8,212,525,935 PRINCIPAL AMOUNT --------------------------------------------------------------------------------- SHORT-TERM NOTES--2.8% --------------------------------------------------------------------------------- Barton Capital Corp., 1.58%, 10/7/04 2 $ 38,945,000 38,883,467 --------------------------------------------------------------------------------- Old Line Funding Corp.: 1.58%, 10/4/04 2 18,186,000 18,159,661 1.62%, 10/12/04 2 24,997,000 24,950,881 --------------------------------------------------------------------------------- Sheffield Receivables Corp.: 1.50%, 9/7/04 2 30,000,000 29,992,500 1.60%, 9/28/04 2 45,000,000 44,946,000 --------------------------------------------------------------------------------- Windmill Funding Corp.: 1.42%, 9/2/04 2 25,000,000 24,999,014 1.49%, 9/7/04 2 33,000,000 32,991,805 1.60%, 10/8/04 2 20,000,000 19,967,111 ---------------- Total Short-Term Notes (Cost $234,890,439) 234,890,439 --------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--2.0% --------------------------------------------------------------------------------- Undivided interest of 42.24% in joint repurchase agreement (Principal Amount/ Value $400,335,000, with a maturity value of $400,352,125) with Cantor Fitzgerald & Co./Cantor Fitzgerald Securities, 1.54%, dated 8/31/04, to be repurchased at $169,121,234 on 9/1/04, collateralized by U.S. Treasury Bonds, 1.625%--11.25%, 1/31/05--2/15/15, with a value of $408,806,656 (Cost $169,114,000) 169,114,000 169,114,000 --------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $8,383,206,275) 100.9% 8,616,530,374 --------------------------------------------------------------------------------- LIABILITIES IN EXCESS OF OTHER ASSETS (0.9) (72,782,919) ---------------------------------- NET ASSETS 100.0% $ 8,543,747,455 ==================================
FOOTNOTES TO STATEMENT OF INVESTMENTS 1. Non-income producing security. 2. Security issued in an exempt transaction without registration under the Securities Act of 1933. Such securities amount to $234,890,439, or 2.75% of the Fund's net assets, and have been determined to be liquid pursuant to guidelines adopted by the Board of Trustees. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 22 | OPPENHEIMER CAPITAL APPRECIATION FUND STATEMENT OF ASSETS AND LIABILITIES August 31, 2004 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------- ASSETS --------------------------------------------------------------------------------------------------------- Investments, at value (cost $8,383,206,275)--see accompanying statement of investments $ 8,616,530,374 --------------------------------------------------------------------------------------------------------- Cash 1,146,172 --------------------------------------------------------------------------------------------------------- Receivables and other assets: Interest and dividends 10,336,976 Investments sold 8,711,332 Shares of beneficial interest sold 2,643,646 Other 131,932 ---------------- Total assets 8,639,500,432 --------------------------------------------------------------------------------------------------------- LIABILITIES --------------------------------------------------------------------------------------------------------- Payables and other liabilities: Investments purchased 78,270,623 Shares of beneficial interest redeemed 10,341,842 Distribution and service plan fees 2,971,213 Transfer and shareholder servicing agent fees 1,801,184 Trustees' compensation 1,180,215 Shareholder communications 840,462 Other 347,438 ---------------- Total liabilities 95,752,977 --------------------------------------------------------------------------------------------------------- NET ASSETS $ 8,543,747,455 ================ --------------------------------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS --------------------------------------------------------------------------------------------------------- Par value of shares of beneficial interest $ 230,510 --------------------------------------------------------------------------------------------------------- Additional paid-in capital 9,084,470,773 --------------------------------------------------------------------------------------------------------- Accumulated net investment loss (1,140,376) --------------------------------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (773,140,623) --------------------------------------------------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 233,327,171 ---------------- NET ASSETS $ 8,543,747,455 ================
23 | OPPENHEIMER CAPITAL APPRECIATION FUND STATEMENT OF ASSETS AND LIABILITIES Continued --------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE --------------------------------------------------------------------------------------------------------- Class A Shares: Net asset value and redemption price per share (based on net assets of $5,218,309,811 and 138,895,139 shares of beneficial interest outstanding) $ 37.57 Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $ 39.86 --------------------------------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $1,104,347,802 and 31,717,717 shares of beneficial interest outstanding) $ 34.82 --------------------------------------------------------------------------------------------------------- Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $638,675,932 and 18,530,610 shares of beneficial interest outstanding) $ 34.47 --------------------------------------------------------------------------------------------------------- Class N Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $190,696,095 and 5,124,686 shares of beneficial interest outstanding) $ 37.21 --------------------------------------------------------------------------------------------------------- Class Y Shares: Net asset value, redemption price and offering price per share (based on net assets of $1,391,717,815 and 36,241,580 shares of beneficial interest outstanding) $ 38.40
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 24 | OPPENHEIMER CAPITAL APPRECIATION FUND STATEMENT OF OPERATIONS For the Year Ended August 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- INVESTMENT INCOME -------------------------------------------------------------------------------- Dividends (net of foreign withholding taxes of $1,051,101) $ 92,209,476 -------------------------------------------------------------------------------- Interest 4,328,054 -------------- Total investment income 96,537,530 -------------------------------------------------------------------------------- EXPENSES -------------------------------------------------------------------------------- Management fees 46,800,100 -------------------------------------------------------------------------------- Distribution and service plan fees: Class A 12,071,622 Class B 11,697,728 Class C 6,231,668 Class N 772,104 -------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Class A 12,824,955 Class B 4,257,798 Class C 1,660,764 Class N 581,681 Class Y 1,761,300 -------------------------------------------------------------------------------- Shareholder communications: Class A 256,263 Class B 555,377 Class C 132,075 Class N 2,358 -------------------------------------------------------------------------------- Trustees' compensation 379,427 -------------------------------------------------------------------------------- Custodian fees and expenses 224,677 -------------------------------------------------------------------------------- Other 288,516 -------------- Total expenses 100,498,413 Less reduction to custodian expenses (16,398) Less payments and waivers of expenses (338,516) -------------- Net expenses 100,143,499 -------------------------------------------------------------------------------- NET INVESTMENT LOSS (3,605,969) 25 | OPPENHEIMER CAPITAL APPRECIATION FUND STATEMENT OF OPERATIONS Continued --------------------------------------------------------------------------------
--------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN --------------------------------------------------------------------------------------- Net realized gain on: Investments $ 302,169,142 Foreign currency transactions 1,813,922 Net increase from payment by affiliate 550,217 ------------- Net realized gain 304,533,281 --------------------------------------------------------------------------------------- Net change in unrealized appreciation on: Investments 113,687,536 Translation of assets and liabilities denominated in foreign currencies 2,329,522 ------------- Net change in unrealized appreciation 116,017,058 --------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 416,944,370 =============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 26 | OPPENHEIMER CAPITAL APPRECIATION FUND STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2004 2003 ------------------------------------------------------------------------------------------------ OPERATIONS ------------------------------------------------------------------------------------------------ Net investment loss $ (3,605,969) $ (14,584,020) ------------------------------------------------------------------------------------------------ Net realized gain (loss) 304,533,281 (737,292,237) ------------------------------------------------------------------------------------------------ Net change in unrealized appreciation (depreciation) 116,017,058 1,676,110,664 ---------------------------------- Net increase in net assets resulting from operations 416,944,370 924,234,407 ------------------------------------------------------------------------------------------------ BENEFICIAL INTEREST TRANSACTIONS ------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from beneficial interest transactions: Class A 678,678,523 504,686,099 Class B (70,119,032) (50,319,183) Class C 71,136,610 24,021,003 Class N 74,734,764 25,028,168 Class Y 166,178,783 142,226,078 ------------------------------------------------------------------------------------------------ NET ASSETS ------------------------------------------------------------------------------------------------ Total increase 1,337,554,018 1,569,876,572 ------------------------------------------------------------------------------------------------ Beginning of period 7,206,193,437 5,636,316,865 ---------------------------------- End of period (including accumulated net investment loss of $1,140,376 and $948,533, respectively) $ 8,543,747,455 $ 7,206,193,437 ==================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 27 | OPPENHEIMER CAPITAL APPRECIATION FUND FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
CLASS A YEAR ENDED AUGUST 31, 2004 2003 2002 2001 2000 ------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA ------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 35.39 $ 30.72 $ 41.11 $ 62.12 $ 44.73 ------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income (loss) .01 (.05) (.09) .10 (.02) Net realized and unrealized gain (loss) 2.17 4.72 (9.31) (15.86) 20.63 ----------------------------------------------------------------------------------- Total from investment operations 2.18 4.67 (9.40) (15.76) 20.61 ------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Distributions from net realized gain -- -- (.99) (5.25) (3.22) ------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 37.57 $ 35.39 $ 30.72 $ 41.11 $ 62.12 =================================================================================== ------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 1 6.16% 15.20% (23.48)% (26.38)% 48.01% ------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA ------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 5,218,310 $ 4,288,332 $ 3,219,391 $ 3,055,197 $ 3,648,961 ------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 4,971,315 $ 3,655,594 $ 3,204,793 $ 3,255,995 $ 2,898,088 ------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment income (loss) 0.09% (0.11)% (0.15)% 0.28% 0.00% Total expenses 1.09% 3,4 1.17% 3 1.22% 3,4 1.03% 3 1.06% 3 ------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 45% 42% 28% 46% 44%
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. 28 | OPPENHEIMER CAPITAL APPRECIATION FUND
CLASS B YEAR ENDED AUGUST 31, 2004 2003 2002 2001 2000 ----------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA ----------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 33.09 $ 28.95 $ 39.09 $ 59.80 $ 43.48 ----------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (.36) (.31) (.26) (.07) (.20) Net realized and unrealized gain (loss) 2.09 4.45 (8.89) (15.39) 19.74 --------------------------------------------------------------------------- Total from investment operations 1.73 4.14 (9.15) (15.46) 19.54 ----------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Distributions from net realized gain -- -- (.99) (5.25) (3.22) ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 34.82 $ 33.09 $ 28.95 $ 39.09 $ 59.80 =========================================================================== ----------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 1 5.23% 14.30% (24.07)% (26.95)% 46.88% ----------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA ----------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 1,104,348 $ 1,114,052 $ 1,029,322 $ 1,242,098 $ 1,333,387 ----------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 1,169,402 $ 1,001,311 $ 1,221,005 $ 1,265,753 $ 922,480 ----------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment loss (0.81)% (0.89)% (0.92)% (0.48)% (0.76)% Total expenses 1.99% 2.10% 1.99% 1.80% 1.83% Expenses after payments and waivers and reduction to custodian expenses 1.97% 1.96% N/A 3,4 N/A 3 N/A 3 ----------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 45% 42% 28% 46% 44%
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. 29 | OPPENHEIMER CAPITAL APPRECIATION FUND FINANCIAL HIGHLIGHTS Continued --------------------------------------------------------------------------------
CLASS C YEAR ENDED AUGUST 31, 2004 2003 2002 2001 2000 -------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 32.72 $ 28.63 $ 38.64 $ 59.19 $ 43.06 -------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (.16) (.23) (.11) (.01) (.18) Net realized and unrealized gain (loss) 1.91 4.32 (8.91) (15.29) 19.53 ------------------------------------------------------------------------ Total from investment operations 1.75 4.09 (9.02) (15.30) 19.35 -------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Distributions from net realized gain -- -- (.99) (5.25) (3.22) -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 34.47 $ 32.72 $ 28.63 $ 38.64 $ 59.19 ======================================================================== -------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 1 5.35% 14.28% (24.01)% (26.95)% 46.89% -------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA -------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 638,676 $ 540,118 $ 450,989 $ 426,476 $ 402,442 -------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 623,172 $ 463,768 $ 477,369 $ 400,009 $ 278,800 -------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment loss (0.69)% (0.89)% (0.87)% (0.48)% (0.76)% Total expenses 1.87% 3,4 1.96% 3 1.94% 3,4 1.80% 3 1.83% 3 -------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 45% 42% 28% 46% 44%
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. 30 | OPPENHEIMER CAPITAL APPRECIATION FUND
CLASS N YEAR ENDED AUGUST 31, 2004 2003 2002 2001 1 ----------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA ----------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 35.17 $ 30.60 $ 41.05 $ 45.58 ----------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (.08) (.10) (.07) 2 (.01) Net realized and unrealized gain (loss) 2.12 4.67 (9.39) 2 (4.52) ------------------------------------------------- Total from investment operations 2.04 4.57 (9.46) (4.53) ----------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Distributions from net realized gain -- -- (.99) -- ----------------------------------------------------------------------------------------------------- Net asset value, end of period $ 37.21 $ 35.17 $ 30.60 $ 41.05 ================================================= ----------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 5.80% 14.94% (23.67)% (9.94)% ----------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA ----------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 190,696 $ 111,374 $ 72,178 $ 6,791 ----------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 154,605 $ 86,761 $ 38,232 $ 3,173 ----------------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment loss (0.25)% (0.35)% (0.37)% (0.11)% Total expenses 1.46% 1.46% 1.46% 1.36% Expenses after payments and waivers and reduction to custodian expenses 1.44% 1.42% N/A 5,6 N/A 5 ----------------------------------------------------------------------------------------------------- Portfolio turnover rate 45% 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, 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. 31 | OPPENHEIMER CAPITAL APPRECIATION FUND FINANCIAL HIGHLIGHTS Continued --------------------------------------------------------------------------------
CLASS Y YEAR ENDED AUGUST 31, 2004 2003 2002 2001 2000 -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 36.04 $ 31.16 $ 41.55 $ 62.51 $ 44.81 -------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .09 .01 .02 1 .27 .13 Net realized and unrealized gain (loss) 2.27 4.87 (9.42) 1 (15.98) 20.79 ------------------------------------------------------------------------------ Total from investment operations 2.36 4.88 (9.40) (15.71) 20.92 -------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Distributions from net realized gain -- -- (.99) (5.25) (3.22) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 38.40 $ 36.04 $ 31.16 $ 41.55 $ 62.51 ============================================================================== -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 2 6.55% 15.66% (23.23)% (26.12)% 48.64% -------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA -------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 1,391,718 $ 1,152,318 $ 864,437 $ 974,820 $ 1,295,087 -------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 1,327,404 $ 930,500 $ 968,867 $ 1,095,575 $ 855,270 -------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 3 Net investment income 0.47% 0.29% 0.17% 0.66% 0.45% Total expenses 0.71% 4 0.78% 4,5 0.89% 4 0.66% 4 0.64% 4 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 45% 42% 28% 46% 44%
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. 32 | 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, however, the institutional investor may impose charges on those accounts. All classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. Class 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. The Fund calculates the net asset value of its shares as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. 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. Corporate, government and municipal debt instruments having a remaining maturity in excess of 60 days and all mortgage-backed securities will be valued at the mean between the "bid" and "asked" prices. Securities may be valued primarily using dealer-supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value. Foreign and domestic securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund's assets are valued but after the close of their respective exchanges will be fair valued. Fair value is determined in good faith using consistently applied procedures under the supervision of the Board of Trustees. Short-term "money market type" debt securities 33 | OPPENHEIMER CAPITAL APPRECIATION FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued 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 as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. 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. Foreign exchange rates may be valued primarily using dealer supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates. 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. -------------------------------------------------------------------------------- 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. 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 34 | OPPENHEIMER CAPITAL APPRECIATION FUND not offset by capital loss carryforwards, if any, to shareholders, therefore, no federal income or excise tax provision is required. The tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes. NET UNREALIZED APPRECIATION UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED BASED ON COST OF NET INVESTMENT LONG-TERM LOSS SECURITIES FOR FEDERAL INCOME GAIN CARRYFORWARD 1,2,3 INCOME TAX PURPOSES ---------------------------------------------------------------------------- $ -- $ -- $ 733,161,333 $ 193,347,875 1. As of August 31, 2004, the Fund had $733,161,333 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, 2004, details of the capital carryforwards were as follows: EXPIRING ------------------------ 2010 $ 61,636,235 2011 374,938,776 2012 296,586,322 ------------- Total $ 733,161,333 ============= 2. During the fiscal year ended August 31, 2004, the Fund did not utilize any capital loss carryforward. 3. During the fiscal year ended August 31, 2003, the Fund did not utilize any capital loss carryforward. 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, 2004. Net assets of the Fund were unaffected by the reclassifications. REDUCTION TO REDUCTION TO ACCUMULATED NET REDUCTION TO ACCUMULATED NET REALIZED LOSS PAID-IN CAPITAL INVESTMENT LOSS ON INVESTMENTS --------------------------------------------------- $ 8,137,473 $ 3,414,126 $ 4,723,347 No distributions were paid during the years ended August 31, 2004 and August 31, 2003. The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of August 31, 2004 are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss. 35 | OPPENHEIMER CAPITAL APPRECIATION FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued Total federal tax cost $ 8,423,185,571 ================ Gross unrealized appreciation $ 802,141,286 Gross unrealized depreciation (608,793,411) ---------------- Net unrealized appreciation $ 193,347,875 ================ -------------------------------------------------------------------------------- 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, 2004, the Fund's projected benefit obligations were increased by $143,178 and payments of $73,625 were made to retired trustees, resulting in an accumulated liability of $1,018,121 as of August 31, 2004. 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. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of "Other" within the asset section of the Statement of Assets and Liabilities. Deferral of trustees' fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund's assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan. -------------------------------------------------------------------------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded 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, if applicable, 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 U.S. generally accepted accounting principles requires management to make estimates and assumptions that 36 | OPPENHEIMER CAPITAL APPRECIATION FUND 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, 2004 YEAR ENDED AUGUST 31, 2003 SHARES AMOUNT SHARES AMOUNT -------------------------------------------------------------------------------- CLASS A Sold 44,049,927 $ 1,683,774,151 45,225,452 $ 1,394,693,911 Redeemed (26,327,315) (1,005,095,628) (28,851,156) (890,007,812) --------------------------------------------------------------- Net increase 17,722,612 $ 678,678,523 16,374,296 $ 504,686,099 =============================================================== -------------------------------------------------------------------------------- CLASS B Sold 6,370,743 $ 226,256,788 6,747,394 $ 197,106,768 Redeemed (8,319,344) (296,375,820) (8,635,132) (247,425,951) --------------------------------------------------------------- Net decrease (1,948,601) $ (70,119,032) (1,887,738) $ (50,319,183) =============================================================== -------------------------------------------------------------------------------- CLASS C Sold 5,516,439 $ 193,981,052 4,972,919 $ 143,578,548 Redeemed (3,492,729) (122,844,442) (4,220,870) (119,557,545) --------------------------------------------------------------- Net increase 2,023,710 $ 71,136,610 752,049 $ 24,021,003 =============================================================== -------------------------------------------------------------------------------- CLASS N Sold 3,052,463 $ 116,239,098 1,644,398 $ 50,946,387 Redeemed (1,094,111) (41,504,334) (836,639) (25,918,219) --------------------------------------------------------------- Net increase 1,958,352 $ 74,734,764 807,759 $ 25,028,168 =============================================================== -------------------------------------------------------------------------------- CLASS Y Sold 9,392,719 $ 365,551,482 9,921,935 $ 316,008,775 Redeemed (5,128,257) (199,372,699) (5,689,335) (173,782,697) --------------------------------------------------------------- Net increase 4,264,462 $ 166,178,783 4,232,600 $ 142,226,078 =============================================================== -------------------------------------------------------------------------------- 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, 2004, were $4,554,482,042 and $3,490,902,536, respectively. -------------------------------------------------------------------------------- 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES MANAGEMENT FEES. Effective January 1, 2004, management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund which provides for a fee at an annual rate of 0.75% of the first $200 million of average annual net assets 37 | OPPENHEIMER CAPITAL APPRECIATION FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued of the Fund, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $700 million, 0.58% of the next $1.0 billion, 0.56% of the next $2.0 billion, 0.54% of the next $2.0 billion, 0.52% of the next $2.0 billion, and 0.50% of average annual net assets over $8.5 billion. Prior to January 1, 2004, the annual advisory fee rate was 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. -------------------------------------------------------------------------------- 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, 2004, the Fund paid $20,650,549 to OFS for services to the Fund. Additionally, Class Y shares are subject to minimum fees of $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. -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor) acts as the Fund's principal underwriter in the continuous public offering of the Fund's classes of shares. -------------------------------------------------------------------------------- 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. The Distributor currently uses all of those fees to pay dealers, brokers, banks and other financial institutions quarterly for providing personal services and maintenance of accounts of their customers that hold Class A shares. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years. Fees incurred by the Fund under the Plan are detailed in the Statement of Operations. -------------------------------------------------------------------------------- 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 to compensate the Distributor for its services in connection with the distribution of those shares and servicing accounts. Under the plans, the Fund pays the Distributor an annual asset-based sales charge of 0.75% per year on Class B and Class C shares and 0.25% per year on Class N shares. The Distributor also receives a service fee of up to 0.25% per year under each plan. If either the Class B, Class C or Class N plan is terminated by the Fund or by the shareholders of a class, the Board of Trustees and its independent trustees must determine whether the Distributor shall be entitled to payment from the Fund of all or a portion of the service fee and/or asset-based sales charge in respect to shares sold prior to the effective date of such termination. The Distributor's aggregate uncompensated 38 | OPPENHEIMER CAPITAL APPRECIATION FUND expenses under the plan at August 31, 2004 for Class B, Class C and Class N shares were $23,948,753, $9,273,924 and $2,251,979, respectively. Fees incurred by the Fund under the plans are detailed in the Statement of Operations. -------------------------------------------------------------------------------- SALES CHARGES. Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. The sales charges retained by the Distributor from the sale of shares and the CDSC retained by the Distributor on the redemption of shares is shown in the table below for the period indicated.
CLASS A CLASS B CLASS C CLASS N CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR ----------------------------------------------------------------------------------------------- August 31, 2004 $ 2,506,575 $ 78,402 $ 2,425,021 $ 105,674 $ 115,630
-------------------------------------------------------------------------------- PAYMENTS AND WAIVERS OF EXPENSES. Following a review of its use of brokerage commissions for sales that is permitted under its investment advisory agreement, the Fund's Manager terminated that practice in July 2003. Subsequently, the Manager paid the Fund $550,217, an amount equivalent to certain of such commissions incurred in prior years. Effective July 1, 2003, the Manger has voluntarily undertaken to waive fees or reimburse expenses of Class Y shares so that "Total Annual Operating Expenses" of Class Y shares do not exceed 0.75% of average daily net assets. The Manager may amend or withdraw these waivers and reimbursements at any time without notice to shareholders. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes to 0.35% of average daily net assets per fiscal year for all classes. During the year ended August 31, 2004, OFS waived $86,214, $195,605, $18,323 and $38,374 for Class A, Class B, Class C and Class N shares, respectively. This undertaking may be amended or withdrawn at any time. -------------------------------------------------------------------------------- 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. 39 | OPPENHEIMER CAPITAL APPRECIATION FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 5. FOREIGN CURRENCY CONTRACTS Continued 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 gains or losses. Such realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. As of August 31, 2004, the Fund had no outstanding foreign currency contracts. -------------------------------------------------------------------------------- 6. LITIGATION Six complaints have been filed as putative derivative and class actions against the Manager, OFS and the Distributor (collectively, "OppenheimerFunds"), as well as 51 of the Oppenheimer funds (collectively, the "Funds") including this Fund, and nine directors/trustees of certain of the Funds (collectively, the "Directors/Trustees"). The complaints allege that the Manager charged excessive fees for distribution and other costs, improperly used assets of the Funds in the form of directed brokerage commissions and 12b-1 fees to pay brokers to promote sales of the Funds, and failed to properly disclose the use of Fund assets to make those payments in violation of the Investment Company Act of 1940 and the Investment Advisers Act of 1940. The complaints further allege that by permitting and/or participating in those actions, the Directors/Trustees breached their fiduciary duties to Fund shareholders under the Investment Company Act of 1940 and at common law. OppenheimerFunds believes that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them, the Funds or the Directors/Trustees and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. However, OppenheimerFunds, the Funds and the Directors/Trustees believe that the allegations contained in the complaints are without merit and intend to defend these lawsuits vigorously. 40 | OPPENHEIMER CAPITAL APPRECIATION FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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, 2004, 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 the standards of the Public Company Accounting Oversight Board (United States). 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, 2004, 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, 2004, 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 U.S. generally accepted accounting principles. KPMG LLP Denver, Colorado September 22, 2004 41 | OPPENHEIMER CAPITAL APPRECIATION FUND FEDERAL INCOME TAX INFORMATION Unaudited -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- In early 2005, if applicable, shareholders of record will receive information regarding all dividends and distributions paid to them by the Fund during calendar year 2004. 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; UPDATES TO STATEMENTS OF INVESTMENTS 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 1.800.525.7048, (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 is 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 Fund's Form N-PX filing is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.525.7048, and (ii) on the SEC's website at www.sec.gov. The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund's Form N-Q filings are available on the SEC's website at http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public Reference Room in Washington D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 42 | OPPENHEIMER CAPITAL APPRECIATION FUND TRUSTEES AND OFFICERS Unaudited --------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------- NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS; OTHER FUND, LENGTH OF SERVICE, AGE TRUSTEESHIPS/DIRECTORSHIPS HELD 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 TRUSTEES WAY, 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 June 1993) Hogan & Hartson (a law firm); a Chairman of the Board of director (since 2002) of Danielson Holding Corp. Formerly a Trustees (since 2003); director of Weyerhaeuser Corp. (1999-April 2004), Caterpillar, Trustee (since 1993) Inc. (1993-December 2002), ConAgra Foods (1993-2001), Texas Age: 73 Instruments (1993-2001) and FMC Corporation (1993-2001). Oversees 25 portfolios in the OppenheimerFunds complex. ROBERT G. GALLI, A trustee or director of other Oppenheimer funds. Oversees 35 Trustee (since 1993) portfolios in the OppenheimerFunds complex. Age: 71 PHILLIP A. GRIFFITHS, A director (since 1991) of the Institute for Advanced Study, Trustee (since 1999) Princeton, N.J., a director (since 2001) of GSI Lumonics, a Age: 65 trustee (since 1983) of Woodward Academy, a Senior Advisor (since 2001) of The Andrew W. Mellon Foundation. A member of: the National Academy of Sciences (since 1979), American Academy of Arts and Sciences (since 1995), American Philosophical Society (since 1996) and Council on Foreign Relations (since 2002). Formerly a director of Bankers Trust New York Corporation (1994-1999). Oversees 25 portfolios in the OppenheimerFunds complex. MARY F. MILLER, Formerly a Senior Vice President and General Auditor, American Trustee (since 2004) Express Company (July 1998-February 2003). Member of Trustees of Age: 61 the American Symphony Orchestra (October 1998 to present). Oversees 14 portfolios in the OppenheimerFunds complex. JOEL W. MOTLEY, Director (since January 2002) Columbia Equity Financial Corp. Trustee (since 2002) (privately-held financial adviser); Managing Director (since Age: 52 January 2002) Carmona Motley, Inc. (privately-held financial adviser). Formerly a Managing Director of Carmona Motley Hoffman Inc. (privately-held financial adviser) (January 1998-December 2001). Oversees 25 portfolios in the OppenheimerFunds complex. KENNETH A. RANDALL, A director (since February 1972) of Dominion Resources, Inc. Trustee (since 1987) (electric utility holding company); formerly a director of Prime Age: 77 Retail, Inc. (real estate investment trust) and 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 25 portfolios in the OppenheimerFunds complex. EDWARD V. REGAN, President, Baruch College, CUNY; a director of RBAsset (real Trustee (since 1993) estate manager); a director of OffitBank; formerly Trustee, Age: 74 Financial Accounting Foundation (FASB and GASB), Senior Fellow of Jerome Levy Economics Institute, Bard College, Chairman of Municipal Assistance Corporation for the City of New York, New York State Comptroller and Trustee of New York State and Local Retirement Fund. Oversees 25 investment companies in the OppenheimerFunds complex.
43 | OPPENHEIMER CAPITAL APPRECIATION FUND TRUSTEES AND OFFICERS Unaudited / Continued -------------------------------------------------------------------------------- RUSSELL S. REYNOLDS, JR., Chairman (since 1993) of The Directorship Search Group, Inc. Trustee (since 1989) (corporate governance consulting and executive recruiting); a Life Age: 72 Trustee of International House (non-profit educational organization); a former trustee of The Historical Society of the Town of Greenwich. Oversees 25 portfolios in the OppenheimerFunds complex. DONALD W. SPIRO,* Chairman Emeritus (since January 1991) of the Manager. Formerly a Vice Chairman of the director (January 1969-August 1999) of the Manager. Oversees 25 Board of Trustees, portfolios in the OppenheimerFunds complex. Trustee (since 1987) Age: 78 *Mr. Spiro is expected to retire as Trustee of the Board I Funds effective October 31, 2004. ---------------------------------------------------------------------------------------------------- INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IN THE CHART BELOW IS TWO WORLD AND OFFICER FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW YORK, NY 10281-1008. 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) President and Trustee and President (since September 2000) of the Manager; President and (since 2001) a director or trustee of other Oppenheimer funds; President and a Age: 55 director (since July 2001) of Oppenheimer Acquisition Corp. (the Manager's parent holding company) and of Oppenheimer Partnership Holdings, Inc. (a holding company subsidiary of the Manager); a director (since November 2001) of OppenheimerFunds Distributor, Inc. (a subsidiary of the Manager); Chairman and a director (since July 2001) of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager); President and a director (since July 2001) of OppenheimerFunds Legacy Program (a charitable trust program established by the Manager); a director of the following investment advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (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.; 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 Babson Capital Management LLC); a member of the Investment Company Institute's Board of Governors (elected to serve from October 3, 2003 through September 30, 2006). 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 73 portfolios as Trustee/Director and 10 portfolios as Officer in the OppenheimerFunds complex.
44 | OPPENHEIMER CAPITAL APPRECIATION FUND ---------------------------------------------------------------------------------------------------- OFFICERS THE ADDRESS OF THE OFFICERS IN THE CHART BELOW IS AS FOLLOWS: FOR MS. PUTNAM AND MR. ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW YORK, NY 10281-1008, AND FOR MR. WIXTED AND MR. VANDEHEY, 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 Vice President and portfolios in the OppenheimerFunds complex. Portfolio Manager (since 1995) Age: 43 BRIAN W. WIXTED, Senior Vice President and Treasurer (since March 1999) of the Treasurer (since 1999) Manager; Treasurer of HarbourView Asset Management Corporation, Age: 44 Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), of OFI Private Investments, Inc. (since March 2000), of OppenheimerFunds International Ltd. and OppenheimerFunds plc (since May 2000), of OFI Institutional Asset Management, Inc. (since November 2000), and of OppenheimerFunds Legacy Program (a Colorado non-profit corporation) (since June 2003); Treasurer and Chief Financial Officer (since May 2000) of OFI Trust Company (a trust company subsidiary of the Manager); Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp. Formerly Assistant Treasurer of Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief Operating Officer (March 1995-March 1999) at Bankers Trust Company-Mutual Fund Services Division. An officer of 83 portfolios in the OppenheimerFunds complex. ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel Secretary (since 2001) (since February 2002) of the Manager; General Counsel and a Age: 56 director (since November 2001) of the Distributor; General Counsel (since November 2001) of Centennial Asset Management Corporation; Senior Vice President and General Counsel (since November 2001) of HarbourView Asset Management Corporation; Secretary and General Counsel (since November 2001) of Oppenheimer Acquisition Corp.; Assistant Secretary and a director (since October 1997) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and a director (since November 2001) of Oppenheimer Partnership Holdings, Inc.; a director (since November 2001) of Oppenheimer Real Asset Management, Inc.; Senior Vice President, General Counsel and a director (since November 2001) of Shareholder Financial Services, Inc., Shareholder Services, Inc., OFI Private Investments, Inc. and OFI Trust Company; Vice President (since November 2001) of OppenheimerFunds Legacy Program; Senior Vice President and General Counsel (since November 2001) of OFI Institutional Asset Management, Inc.; a director (since June 2003) of OppenheimerFunds (Asia) Limited. Formerly Senior Vice President (May 1985-December 2003), 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); and OppenheimerFunds International Ltd. (October 1997-November 2001). An officer of 83 portfolios in the OppenheimerFunds complex.
45 | OPPENHEIMER CAPITAL APPRECIATION FUND TRUSTEES AND OFFICERS Unaudited / Continued -------------------------------------------------------------------------------- MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer (since March Vice President and 2004) of the Manager; Vice President (since June 1983) of Chief Compliance Officer OppenheimerFunds Distributor, Inc., Centennial Asset Management (since 2004) Corporation and Shareholder Services, Inc. Formerly (until Age: 53 February 2004) Vice President and Director of Internal Audit of OppenheimerFunds, Inc. An officer of 83 portfolios in the Oppenheimer funds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION ABOUT THE FUND'S TRUSTEES AND IS AVAILABLE WITHOUT CHARGE UPON REQUEST BY CALLING 1.800.525.7048. 46 | OPPENHEIMER CAPITAL APPRECIATION FUND ITEM 2. CODE OF ETHICS The registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT The Board of Trustees of the registrant 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 (a) Audit Fees The principal accountant for the audit of the registrant's annual financial statements billed $45,000 in fiscal 2004 and $45,000 in fiscal 2003. (b) Audit-Related Fees The principal accountant for the audit of the registrant's annual financial statements billed no such fees to the registrant during the last two fiscal years. The principal accountant for the audit of the registrant's annual financial statements billed $39,500 in fiscal 2004 and no such fees in fiscal 2003 to the registrant's investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant. Such fees would include, among others: due diligence related to mergers and acquisitions, accounting consultations and audits in connection with acquisitions, internal control reviews and consultation concerning financial accounting and reporting standards. (c) Tax Fees The principal accountant for the audit of the registrant's annual financial statements billed no such fees to the registrant during the last two fiscal years. The principal accountant for the audit of the registrant's annual financial statements billed $6,000 in fiscal 2004 and $5,000 in fiscal 2003 to the registrant's investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant. Such fees would include, among others: tax compliance, tax planning and tax advice. Tax compliance generally involves preparation of original and amended tax returns, claims for a refund and tax payment-planning services. Tax planning and tax advice includes assistance with tax audits and appeals, tax advice related to mergers and acquisitions and requests for rulings or technical advice from taxing authorities. (d) All Other Fees The principal accountant for the audit of the registrant's annual financial statements billed no such fees in fiscal 2004 and $1,456 in fiscal 2003. The principal accountant for the audit of the registrant's annual financial statements billed no such fees during the last two fiscal years to the registrant's investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant. Such fees would include consultations regarding the registrant's retirement plan with respect to its directors. (e) (1) During its regularly scheduled periodic meetings, the registrant's audit committee will pre-approve all audit, audit-related, tax and other services to be provided by the principal accountants of the registrant. The audit committee has delegated pre-approval authority to its Chairman for any subsequent new engagements that arise between regularly scheduled meeting dates provided that any fees such pre-approved are presented to the audit committee at its next regularly scheduled meeting. Pre-approval of non-audit services is waived provided that: 1) the aggregate amount of all such services provided constitutes no more than five percent of the total amount of fees paid by the registrant to it principal accountant during the fiscal year in which services are provided 2) such services were not recognized by the registrant at the time of engagement as non-audit services and 3) such services are promptly brought to the attention of the audit committee of the registrant and approved prior to the completion of the audit. (2) 100% (f) Not applicable as less than 50%. (g) The principal accountant for the audit of the registrant's annual financial statements billed $45,500 in fiscal 2004 and $6,456 in fiscal 2003 to the registrant and the registrant's investment adviser or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant related to non-audit fees. Those billings did not include any prohibited non-audit services as defined by the Securities Exchange Act of 1934. (h) The registrant's audit committee of the board of directors has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal account's independence. No such services were rendered. ITEM 5. NOT APPLICABLE ITEM 6. SCHEDULE OF INVESTMENTS Not applicable ITEM 7. NOT APPLICABLE ITEM 8. NOT APPLICABLE ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At a meeting of the Board of Trustees of the registrant held on February 18, 2004, the Board adopted (1) a policy that, should the Board determine that a vacancy exists or is likely to exist on the Board, the Governance Committee of the Board, which is comprised entirely of independent trustees, shall consider any candidates for Board membership recommended by the registrant's security holders and (2) a policy that security holders wishing to submit a nominee for election to the Board may do so by mailing their submission to the offices of OppenheimerFunds, Inc., Two World Financial Center, 225 Liberty Street - 11th Floor, New York, NY 10281-1008, to the attention of the Chair of the Governance Committee. Prior to February 18, 2004, the Board did not have a formalized policy with respect to consideration of security holder nominees or a procedure by which security holders may make their submissions. In addition to security holder nominees, the Governance Committee may also consider nominees recommended by independent Board members or recommended by any other Board members and is authorized under its Charter, upon Board approval, to retain an executive search firm to assist in screening potential candidates. Upon Board approval, the Governance Committee may also obtain legal, financial, or other external counsel that may be necessary or desirable in the screening process. ITEM 10. CONTROLS AND PROCEDURES (a) Based on their evaluation of registrant's disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR 270.30a-3(c)) as of August 31, 2004, registrant's principal executive officer and principal financial officer found registrant's disclosure controls and procedures to provide reasonable assurances 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 over financial reporting that occurred during the registrant's last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (A) EXHIBIT ATTACHED HERETO. (ATTACH CODE OF ETHICS AS EXHIBIT)(NOT APPLICABLE TO SEMIANNUAL REPORTS) (B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS)