UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSRS
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: FEBRUARY 28, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
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TOP TEN COMMON STOCK INDUSTRIES
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Communications Equipment 7.0%
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Software 6.8
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Diversified Financial Services 5.6
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Biotechnology 5.1
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Semiconductors & Semiconductor Equipment 5.1
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Pharmaceuticals 4.6
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Specialty Retail 4.5
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Energy Equipment & Services 4.4
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Internet Software & Services 4.2
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Health Care Equipment & Supplies 4.1
Portfolio holdings and allocations are subject to change. Percentages are as of
February 28, 2006, and are based on net assets.
TOP TEN COMMON STOCK HOLDINGS
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Cisco Systems, Inc. 3.2%
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Microsoft Corp. 2.7
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Medtronic, Inc. 2.0
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Amgen, Inc. 1.9
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General Electric Co. 1.9
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Google, Inc., Cl. A 1.9
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Yahoo!, Inc. 1.8
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eBay, Inc. 1.7
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Monsanto Co. 1.7
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American International Group, Inc. 1.7
Portfolio holdings and allocations are subject to change. Percentages are as of
February 28, 2006, and are based on net assets.
For up-to-date Top 10 Fund holdings, please visit www.oppenheimerfunds.com.
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9 | OPPENHEIMER CAPITAL APPRECIATION FUND
TOP HOLDINGS AND ALLOCATIONS
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SECTOR ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Information Technology 30.2%
Communications Equipment 7.2
Software 6.9
Semiconductors & Semiconductor Equipment 5.1
Internet Software & Services 4.2
IT Services 3.5
Computers & Peripherals 3.3
Health Care 17.2
Consumer Discretionary 14.3
Financials 9.8
Industrials 8.5
Consumer Staples 7.8
Energy 7.1
Materials 3.2
Telecommunication Services 1.9
Portfolio holdings and allocations are subject to change. Percentages are as of
February 28, 2006, and are based on the total market value of common stocks.
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10 | OPPENHEIMER CAPITAL APPRECIATION FUND
NOTES
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Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
Cumulative total returns are not annualized. 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 "10-year" 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.
11 | OPPENHEIMER CAPITAL APPRECIATION FUND
NOTES
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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.
12 | OPPENHEIMER CAPITAL APPRECIATION FUND
FUND EXPENSES
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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 February 28, 2006.
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
13 | OPPENHEIMER CAPITAL APPRECIATION FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
described in 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 EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(9/1/05) (2/28/06) FEBRUARY 28, 2006
- --------------------------------------------------------------------------------
Class A Actual $1,000.00 $1,072.70 $ 5.46
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,019.54 5.32
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 1,068.30 10.00
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,015.17 9.74
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 1,068.60 9.48
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Class C Hypothetical 1,000.00 1,015.67 9.24
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Class N Actual 1,000.00 1,070.80 7.32
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Class N Hypothetical 1,000.00 1,017.75 7.13
- --------------------------------------------------------------------------------
Class Y Actual 1,000.00 1,074.40 3.76
- --------------------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,021.17 3.66
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 181/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended February 28, 2006 are as follows:
CLASS EXPENSE RATIOS
- -----------------------------
Class A 1.06%
- -----------------------------
Class B 1.94
- -----------------------------
Class C 1.84
- -----------------------------
Class N 1.42
- -----------------------------
Class Y 0.73
The expense ratios reflect voluntary waivers or 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
waivers or reimbursements.
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14 | OPPENHEIMER CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS February 28, 2006 / Unaudited
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VALUE
SHARES SEE NOTE 1
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COMMON STOCKS--99.3%
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CONSUMER DISCRETIONARY--14.3%
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AUTOMOBILES--0.5%
Toyota Motor Corp. 725,150 $ 38,846,041
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DIVERSIFIED CONSUMER SERVICES--0.9%
Apollo Group, Inc.,
Cl. A 1 1,486,000 73,378,680
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HOTELS, RESTAURANTS & LEISURE--2.0%
Carnival Corp. 1,976,600 102,091,390
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Starbucks Corp. 1 1,553,700 56,430,384
------------------
158,521,774
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HOUSEHOLD DURABLES--0.6%
Toll Brothers, Inc. 1 1,572,900 50,899,044
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INTERNET & CATALOG RETAIL--2.0%
eBay, Inc. 1 3,531,800 141,483,908
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Expedia, Inc. 1 1,103,400 20,931,498
------------------
162,415,406
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MEDIA--1.6%
Comcast Corp., Cl.
A Special, Non-Vtg. 1 2,349,225 62,841,769
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XM Satellite Radio
Holdings, Inc., Cl. A 1 2,920,700 64,518,263
------------------
127,360,032
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MULTILINE RETAIL--2.0%
J.C. Penney Co., Inc.
(Holding Co.) 1,009,000 59,167,760
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Kohl's Corp. 1 1,155,500 55,591,105
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Target Corp. 831,180 45,216,192
------------------
159,975,057
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SPECIALTY RETAIL--4.5%
Best Buy Co., Inc. 1,335,100 71,908,486
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Lowe's Cos., Inc. 1,494,000 101,860,920
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Michaels Stores, Inc. 1,608,300 51,626,430
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Staples, Inc. 1 3,958,200 97,134,228
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Urban Outfitters,
Inc. 1 1,565,900 44,001,790
------------------
366,531,854
VALUE
SHARES SEE NOTE 1
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TEXTILES, APPAREL & LUXURY GOODS--0.2%
Polo Ralph Lauren
Corp. 244,400 $ 14,165,424
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CONSUMER STAPLES--7.8%
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BEVERAGES--1.0%
PepsiCo, Inc. 1,347,610 79,657,227
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FOOD & STAPLES RETAILING--2.2%
Costco Wholesale
Corp. 695,488 35,664,625
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CVS Corp. 2,761,400 78,230,462
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Sysco Corp. 1,567,600 47,169,084
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Wal-Mart Stores,
Inc. 358,600 16,266,096
------------------
177,330,267
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FOOD PRODUCTS--2.1%
Cadbury Schweppes
plc 7,209,570 73,348,955
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Nestle SA 1 333,257 97,986,880
------------------
171,335,835
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HOUSEHOLD PRODUCTS--2.5%
Procter & Gamble
Co. (The) 2,000,400 119,883,972
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Reckitt Benckiser
plc 1 2,244,940 79,938,750
------------------
199,822,722
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ENERGY--7.0%
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ENERGY EQUIPMENT & SERVICES--4.4%
Halliburton Co. 958,200 65,157,600
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Schlumberger Ltd. 968,100 111,331,500
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Smith International,
Inc. 2,411,200 93,385,776
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Transocean, Inc. 1 1,215,100 90,136,118
------------------
360,010,994
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OIL & GAS--2.6%
Apache Corp. 599,600 40,125,232
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EOG Resources, Inc. 753,300 50,772,420
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Kinder Morgan
Management LLC 982,809 42,978,238
15 | OPPENHEIMER CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
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OIL & GAS Continued
Occidental Petroleum
Corp. 818,200 $ 74,898,028
------------------
208,773,918
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FINANCIALS--9.8%
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CAPITAL MARKETS--0.4%
Northern Trust
Corp. 653,200 34,436,704
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COMMERCIAL BANKS--0.4%
Bank of America
Corp. 743,000 34,066,550
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DIVERSIFIED FINANCIAL SERVICES--5.6%
American Express Co. 755,040 40,681,555
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Chicago Mercantile
Exchange (The) 183,300 78,012,480
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup, Inc. 876,141 40,626,658
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Franklin Resources,
Inc. 485,200 49,820,336
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Goldman Sachs
Group, Inc. (The) 686,800 97,037,972
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Legg Mason, Inc. 465,000 60,724,350
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Lehman Brothers
Holdings, Inc. 216,000 31,525,200
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Nomura Securities
Co. Ltd. 1,854,900 35,114,645
- ------------------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Group,
Inc. 242,800 18,642,184
------------------
452,185,380
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE--3.4%
American
International Group,
Inc. 2,091,600 138,798,576
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Hartford Financial
Services Group, Inc.
(The) 604,400 49,790,472
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Prudential Financial,
Inc. 1,048,000 80,737,920
------------------
269,326,968
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE--17.1%
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BIOTECHNOLOGY--5.1%
Amgen, Inc. 1 2,061,600 $ 155,630,184
- ------------------------------------------------------------------------------------------------------------------------------------
Genentech, Inc. 1 702,500 60,197,225
- ------------------------------------------------------------------------------------------------------------------------------------
Genzyme Corp.
(General Division) 1 1,062,100 73,646,014
- ------------------------------------------------------------------------------------------------------------------------------------
Gilead Sciences,
Inc. 1 544,900 33,930,923
- ------------------------------------------------------------------------------------------------------------------------------------
MedImmune, Inc. 1 1,471,800 53,705,982
- ------------------------------------------------------------------------------------------------------------------------------------
PDL BioPharma,
Inc. 1 1,188,400 37,208,804
------------------
414,319,132
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--4.1%
Fisher Scientific
International, Inc. 1 965,600 65,815,296
- ------------------------------------------------------------------------------------------------------------------------------------
Medtronic, Inc. 3,053,995 164,763,030
- ------------------------------------------------------------------------------------------------------------------------------------
PerkinElmer, Inc. 1,995,000 47,461,050
- ------------------------------------------------------------------------------------------------------------------------------------
Varian Medical
Systems, Inc. 1 861,600 49,869,408
------------------
327,908,784
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--3.3%
Caremark Rx, Inc. 1 782,500 38,929,375
- ------------------------------------------------------------------------------------------------------------------------------------
Medco Health
Solutions, Inc. 1 709,100 39,511,052
- ------------------------------------------------------------------------------------------------------------------------------------
Patterson Cos., Inc. 1 668,700 24,099,948
- ------------------------------------------------------------------------------------------------------------------------------------
Quest Diagnostics,
Inc. 1,162,800 61,477,236
- ------------------------------------------------------------------------------------------------------------------------------------
UnitedHealth Group,
Inc. 1 1,824,000 106,211,520
------------------
270,229,131
- ------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS--4.6%
Novartis AG 1 2,238,675 119,386,853
- ------------------------------------------------------------------------------------------------------------------------------------
Roche Holdings
AG 1 611,576 90,388,038
- ------------------------------------------------------------------------------------------------------------------------------------
Sanofi-Aventis SA 1 727,495 61,921,111
- ------------------------------------------------------------------------------------------------------------------------------------
Teva Pharmaceutical
Industries Ltd.,
Sponsored ADR 2,358,950 99,052,311
------------------
370,748,313
16 | OPPENHEIMER CAPITAL APPRECIATION FUND
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS--8.5%
- ------------------------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.7%
Empresa Brasileira
de Aeronautica SA,
ADR 1,940,700 $ 77,142,825
- ------------------------------------------------------------------------------------------------------------------------------------
General Dynamics
Corp. 564,600 69,598,242
- ------------------------------------------------------------------------------------------------------------------------------------
Lockheed Martin
Corp. 1,080,900 78,765,183
- ------------------------------------------------------------------------------------------------------------------------------------
United Technologies
Corp. 1,299,400 76,014,900
------------------
301,521,150
- ------------------------------------------------------------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--0.5%
Expeditors
International of
Washington, Inc. 530,106 41,236,946
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--1.1%
ChoicePoint, Inc. 1 602,200 26,737,680
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate Executive
Board Co. 573,742 57,374,200
------------------
84,111,880
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--1.9%
General Electric Co. 4,598,800 151,162,556
- ------------------------------------------------------------------------------------------------------------------------------------
MACHINERY--1.0%
Danaher Corp. 1,322,100 80,092,818
- ------------------------------------------------------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--0.3%
Fastenal Co. 584,100 25,647,831
- ------------------------------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--29.9%
- ------------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--7.0%
Cisco Systems, Inc. 1 12,914,040 261,380,170
- ------------------------------------------------------------------------------------------------------------------------------------
Corning, Inc. 1 2,632,600 64,261,766
- ------------------------------------------------------------------------------------------------------------------------------------
Motorola, Inc. 3,494,300 74,778,020
- ------------------------------------------------------------------------------------------------------------------------------------
Nokia Corp.,
Sponsored ADR 1 2,565,000 47,657,700
- ------------------------------------------------------------------------------------------------------------------------------------
QUALCOMM, Inc. 1,714,400 80,936,824
- ------------------------------------------------------------------------------------------------------------------------------------
Telefonaktiebolaget
LM Ericsson,
Sponsored ADR 1 1,217,600 41,520,160
------------------
570,534,640
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--3.3%
Apple Computer,
Inc. 1 960,500 $ 65,832,670
- ------------------------------------------------------------------------------------------------------------------------------------
Dell, Inc. 1 3,107,900 90,129,100
- ------------------------------------------------------------------------------------------------------------------------------------
EMC Corp. 1 5,114,300 71,702,486
- ------------------------------------------------------------------------------------------------------------------------------------
Network
Appliance, Inc. 1 1,230,600 40,806,696
------------------
268,470,952
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--4.2%
Google, Inc., Cl. A 1 416,000 150,849,920
- ------------------------------------------------------------------------------------------------------------------------------------
VeriSign, Inc. 1 1,687,200 39,919,152
- ------------------------------------------------------------------------------------------------------------------------------------
Yahoo!, Inc. 1 4,549,300 145,850,558
------------------
336,619,630
- ------------------------------------------------------------------------------------------------------------------------------------
IT SERVICES--3.5%
Affiliated Computer
Services, Inc., Cl. A 1 1,144,300 71,999,356
- ------------------------------------------------------------------------------------------------------------------------------------
Automatic Data
Processing, Inc. 2,695,800 124,519,002
- ------------------------------------------------------------------------------------------------------------------------------------
Cognizant
Technology
Solutions Corp. 1 1,268,800 73,095,568
- ------------------------------------------------------------------------------------------------------------------------------------
NAVTEQ Corp. 1 301,700 13,971,727
------------------
283,585,653
- ------------------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--5.1%
Advanced Micro
Devices, Inc. 1 1,563,800 60,472,146
- ------------------------------------------------------------------------------------------------------------------------------------
Broadcom Corp.,
Cl. A 1 2,595,150 117,015,314
- ------------------------------------------------------------------------------------------------------------------------------------
Linear Technology
Corp. 2,274,100 83,823,326
- ------------------------------------------------------------------------------------------------------------------------------------
Marvell Technology
Group Ltd. 1 570,300 34,913,766
- ------------------------------------------------------------------------------------------------------------------------------------
Microchip
Technology, Inc. 1,390,800 48,956,160
- ------------------------------------------------------------------------------------------------------------------------------------
Texas Instruments,
Inc. 2,201,800 65,723,730
------------------
410,904,442
17 | OPPENHEIMER CAPITAL APPRECIATION FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
SOFTWARE--6.8%
Adobe Systems,
Inc. 1 2,378,068 $ 91,840,986
- ------------------------------------------------------------------------------------------------------------------------------------
Amdocs Ltd. 1 1,653,400 54,760,608
- ------------------------------------------------------------------------------------------------------------------------------------
Autodesk, Inc. 1 1,099,500 41,396,175
- ------------------------------------------------------------------------------------------------------------------------------------
Electronic Arts, Inc. 1 340,400 17,690,588
- ------------------------------------------------------------------------------------------------------------------------------------
McAfee, Inc. 1 1,211,100 28,170,186
- ------------------------------------------------------------------------------------------------------------------------------------
Microsoft Corp. 8,033,611 216,104,136
- ------------------------------------------------------------------------------------------------------------------------------------
SAP AG, Sponsored
ADR 1 1,997,300 102,062,030
------------------
552,024,709
- ------------------------------------------------------------------------------------------------------------------------------------
MATERIALS--3.1%
- ------------------------------------------------------------------------------------------------------------------------------------
CHEMICALS--3.1%
Monsanto Co. 1,667,500 139,869,900
- ------------------------------------------------------------------------------------------------------------------------------------
Praxair, Inc. 2,111,100 113,957,178
------------------
253,827,078
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.8%
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.8%
American Tower
Corp. 1 2,002,300 63,733,209
- ------------------------------------------------------------------------------------------------------------------------------------
Sprint Nextel Corp. 3,566,600 85,705,396
------------------
149,438,605
------------------
Total Common Stocks
(Cost $6,557,298,825) 8,031,424,127
PRINCIPAL
AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM NOTES--0.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Grampian Funding LLC,
4.56%, 3/1/06 2
(Cost $60,000,000) $ 60,000,000 60,000,000
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--0.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Undivided interest of 3.17% in joint repurchase agreement (Principal Amount/Value
$1,088,683,000, with a maturity value of $1,088,819,993) with UBS Warburg LLC,
4.53%, dated 2/28/06, to be repurchased at $34,530,345 on 3/1/06, collateralized
by Federal National Mortgage Assn., 5%, 3/1/34, with a value of $1,113,530,100
(Cost $34,526,000) $ 34,526,000 $ 34,526,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $6,651,824,825) 100.4% 8,125,950,127
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.4) (31,004,173)
---------------------------------
NET ASSETS 100.0% $ 8,094,945,954
=================================
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 $60,000,000, or 0.74% 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.
18 | OPPENHEIMER CAPITAL APPRECIATION FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited
- --------------------------------------------------------------------------------
February 28, 2006
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investments, at value (cost $6,651,824,825)--
see accompanying statement of investments $ 8,125,950,127
- --------------------------------------------------------------------------------
Cash 1,076,259
- --------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 39,116,860
Interest and dividends 4,675,026
Shares of beneficial interest sold 1,883,667
Other 306,396
-----------------
Total assets 8,173,008,335
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 56,623,400
Shares of beneficial interest redeemed 14,623,138
Distribution and service plan fees 3,052,620
Transfer and shareholder servicing agent fees 1,658,564
Trustees' compensation 1,361,338
Shareholder communications 612,387
Other 130,934
-----------------
Total liabilities 78,062,381
- --------------------------------------------------------------------------------
NET ASSETS $ 8,094,945,954
=================
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 186,427
- --------------------------------------------------------------------------------
Additional paid-in capital 7,206,521,841
- --------------------------------------------------------------------------------
Accumulated net investment loss (19,864,354)
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (565,975,208)
- --------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign currencies 1,474,077,248
-----------------
NET ASSETS $ 8,094,945,954
=================
19 | OPPENHEIMER CAPITAL APPRECIATION FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on
net assets of $5,678,345,403 and 128,431,814 shares of
beneficial interest outstanding) $44.21
Maximum offering price per share (net asset value plus
sales charge of 5.75% of offering price) $46.91
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $1,000,796,623 and 24,601,906
shares of beneficial interest outstanding) $40.68
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $705,649,957 and 17,500,532
shares of beneficial interest outstanding) $40.32
- --------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $255,762,140 and 5,855,310
shares of beneficial interest outstanding) $43.68
- --------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per
share (based on net assets of $454,391,831 and 10,037,164
shares of beneficial interest outstanding) $45.27
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER CAPITAL APPRECIATION FUND
STATEMENT OF OPERATIONS Unaudited
- --------------------------------------------------------------------------------
For the Six Months Ended February 28, 2006
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $158,815) $ 24,635,191
- --------------------------------------------------------------------------------
Interest 3,014,010
- --------------------------------------------------------------------------------
Other income 239,529
-----------------
Total investment income 27,888,730
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 24,151,548
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 6,798,031
Class B 5,042,416
Class C 3,457,988
Class N 626,221
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 6,539,839
Class B 1,623,672
Class C 855,730
Class N 431,455
Class Y 778,846
- --------------------------------------------------------------------------------
Shareholder communications:
Class A 406,737
Class B 233,368
Class C 79,269
Class N 10,017
- --------------------------------------------------------------------------------
Trustees' compensation 194,742
- --------------------------------------------------------------------------------
Custodian fees and expenses 46,062
- --------------------------------------------------------------------------------
Other 113,205
-----------------
Total expenses 51,389,146
Less waivers and reimbursements of expenses (15,649)
-----------------
Net expenses 51,373,497
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS (23,484,767)
21 | OPPENHEIMER CAPITAL APPRECIATION FUND
STATEMENT OF OPERATIONS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS
- --------------------------------------------------------------------------------
Net realized loss on:
Investments $ (63,994,819)
Foreign currency transactions (3,471,883)
-----------------
Net realized loss (67,466,702)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation on:
Investments 681,728,387
Translation of assets and liabilities denominated in foreign
currencies 2,062,889
-----------------
Net change in unrealized appreciation 683,791,276
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 592,839,807
=================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | OPPENHEIMER CAPITAL APPRECIATION FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 2006 AUGUST 31,
(UNAUDITED) 2005
- -----------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income (loss) $ (23,484,767) $ 46,793,824
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) (67,466,702) 273,189,073
- -----------------------------------------------------------------------------------------------
Net change in unrealized appreciation 683,791,276 556,958,801
---------------------------------------
Net increase in net assets resulting from operations 592,839,807 876,941,698
- -----------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------
Dividends from net investment income:
- -----------------------------------------------------------------------------------------------
Class A (32,952,524) --
Class B -- --
Class C -- --
Class N (755,587) --
Class Y (11,953,955) --
- -----------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A (320,737,570) (134,210,079)
Class B (107,737,317) (162,283,904)
Class C (32,110,207) (7,839,660)
Class N (6,646,492) 34,784,677
Class Y (783,780,815) (352,359,573)
- -----------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------
Total increase (decrease) (703,834,660) 255,033,159
- -----------------------------------------------------------------------------------------------
Beginning of period 8,798,780,614 8,543,747,455
---------------------------------------
End of period (including accumulated net investment
income (loss) of $(19,864,354) and $49,282,479,
respectively) $ 8,094,945,954 $ 8,798,780,614
=======================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | OPPENHEIMER CAPITAL APPRECIATION FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 2006 AUGUST 31,
CLASS A (UNAUDITED) 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning
of period $ 41.45 $ 37.57 $ 35.39 $ 30.72 $ 41.11 $ 62.12
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income (loss) (.09) 1 .26 1,2 .01 (.05) (.09) .10
Net realized and unrealized
gain (loss) 3.10 3.62 2.17 4.72 (9.31) (15.86)
----------------------------------------------------------------------------------------------------
Total from investment
operations 3.01 3.88 2.18 4.67 (9.40) (15.76)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or
distributions to shareholders:
Dividends from net investment
income (.25) -- -- -- -- --
Distributions from net
realized gain -- -- -- -- (.99) (5.25)
----------------------------------------------------------------------------------------------------
Total dividends and
distributions to shareholders (.25) -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 44.21 $ 41.45 $ 37.57 $ 35.39 $ 30.72 $ 41.11
====================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET
VALUE 3 7.27% 10.33% 6.16% 15.20% (23.48)% (26.38)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 5,678,345 $ 5,633,688 $ 5,218,310 $ 4,288,332 $ 3,219,391 $ 3,055,197
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in
thousands) $ 5,676,657 $ 5,597,821 $ 4,971,315 $ 3,655,594 $ 3,204,793 $ 3,255,995
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net
assets: 4
Net investment income (loss) (0.42)% 0.64% 2 0.09% (0.11)% (0.15)% 0.28%
Total expenses 1.06% 1.06% 5 1.09% 5,6 1.17% 5 1.22% 5,6 1.03% 5
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 56% 38% 45% 42% 28% 46%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Net investment income per share and the net investment income ratio include
$.17 and 0.43%, respectively, resulting from a special dividend from Microsoft
Corp. in November 2004.
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.
24 | OPPENHEIMER CAPITAL APPRECIATION FUND
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 2006 AUGUST 31,
CLASS B (UNAUDITED) 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning
of period $ 38.08 $ 34.82 $ 33.09 $ 28.95 $ 39.09 $ 59.80
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment loss (.25) 1 (.08) 1,2 (.36) (.31) (.26) (.07)
Net realized and unrealized
gain (loss) 2.85 3.34 2.09 4.45 (8.89) (15.39)
---------------------------------------------------------------------------------------------
Total from investment
operations 2.60 3.26 1.73 4.14 (9.15) (15.46)
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and/or
distributions to shareholders:
Dividends from net investment
income -- -- -- -- -- --
Distributions from net
realized gain -- -- -- -- (.99) (5.25)
---------------------------------------------------------------------------------------------
Total dividends and
distributions to shareholders -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 40.68 $ 38.08 $ 34.82 $ 33.09 $ 28.95 $ 39.09
=============================================================================================
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET
VALUE 3 6.83% 9.36% 5.23% 14.30% (24.07)% (26.95)%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 1,000,797 $ 1,041,045 $ 1,104,348 $ 1,114,052 $ 1,029,322 $ 1,242,098
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in
thousands) $ 1,017,739 $ 1,099,380 $ 1,169,402 $ 1,001,311 $ 1,221,005 $ 1,265,753
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net
assets: 4
Net investment loss (1.28)% (0.21)% 2 (0.81)% (0.89)% (0.92)% (0.48)%
Total expenses 1.94% 1.93% 1.99% 2.10% 1.99% 1.80%
Expenses after payments and
waivers and reduction to
custodian expenses 1.94% 1.93% 1.97% 1.96% 1.99% 1.80%
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 56% 38% 45% 42% 28% 46%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Net investment income per share and the net investment income ratio include
$.16 and 0.43%, respectively, resulting from a special dividend from Microsoft
Corp. in November 2004.
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.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | OPPENHEIMER CAPITAL APPRECIATION FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 2006 AUGUST 31,
CLASS C (UNAUDITED) 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning
of period $ 37.73 $ 34.47 $ 32.72 $ 28.63 $ 38.64 $ 59.19
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment loss (.23) 1 (.05) 1,2 (.16) (.23) (.11) (.01)
Net realized and unrealized
gain (loss) 2.82 3.31 1.91 4.32 (8.91) (15.29)
---------------------------------------------------------------------------------------------
Total from investment
operations 2.59 3.26 1.75 4.09 (9.02) (15.30)
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and/or
distributions to shareholders:
Dividends from net
investment income -- -- -- -- -- --
Distributions from net
realized gain -- -- -- -- (.99) (5.25)
---------------------------------------------------------------------------------------------
Total dividends and
distributions to shareholders -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 40.32 $ 37.73 $ 34.47 $ 32.72 $ 28.63 $ 38.64
=============================================================================================
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET
VALUE 3 6.86% 9.46% 5.35% 14.28% (24.01)% (26.95)%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 705,650 $ 691,467 $ 638,676 $ 540,118 $ 450,989 $ 426,476
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in
thousands) $ 697,822 $ 681,646 $ 623,172 $ 463,768 $ 477,369 $ 400,009
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net
assets: 4
Net investment loss (1.20)% (0.14)% 2 (0.69)% (0.89)% (0.87)% (0.48)%
Total expenses 1.84% 1.84% 6 1.87% 5,6 1.96% 6 1.94% 5,6 1.80% 6
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 56% 38% 45% 42% 28% 46%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Net investment income per share and the net investment income ratio include
$.16 and 0.43%, respectively, resulting from a special dividend from Microsoft
Corp. in November 2004.
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. Voluntary waiver of transfer agent fees less than 0.01%.
6. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER CAPITAL APPRECIATION FUND
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 2006 AUGUST 31,
CLASS N (UNAUDITED) 2005 2004 2003 2002 2001 1
- --------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning
of period $ 40.91 $ 37.21 $ 35.17 $ 30.60 $ 41.05 $ 45.58
- --------------------------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income (loss) (.17) 2 .11 2,3 (.08) (.10) (.07) 2 (.01)
Net realized and unrealized
gain (loss) 3.07 3.59 2.12 4.67 (9.39) 2 (4.52)
-----------------------------------------------------------------------------------
Total from investment
operations 2.90 3.70 2.04 4.57 (9.46) (4.53)
- --------------------------------------------------------------------------------------------------------------------
Dividends and/or
distributions to shareholders:
Dividends from net investment
income (.13) -- -- -- -- --
Distributions from net
realized gain -- -- -- -- (.99) --
-----------------------------------------------------------------------------------
Total dividends and
distributions to shareholders (.13) -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 43.68 $ 40.91 $ 37.21 $ 35.17 $ 30.60 $ 41.05
===================================================================================
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET
VALUE 4 7.08% 9.94% 5.80% 14.94% (23.67)% (9.94)%
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 255,762 $ 245,932 $ 190,696 $ 111,374 $ 72,178 $ 6,791
- --------------------------------------------------------------------------------------------------------------------
Average net assets (in
thousands) $ 252,774 $ 221,007 $ 154,605 $ 86,761 $ 38,232 $ 3,173
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net
assets: 5
Net investment income (loss) (0.79)% 0.27% 3 (0.25)% (0.35)% (0.37)% (0.11)%
Total expenses 1.42% 1.42% 1.46% 1.46% 1.46% 1.36%
Expenses after payments and
waivers and reduction to
custodian expenses 1.42% 1.42% 1.44% 1.42% 1.46% 1.36%
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 56% 38% 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. Net investment income per share and the net investment income ratio include
$.17 and 0.43%, respectively, resulting from a special dividend from Microsoft
Corp. in November 2004.
4. 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.
5. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | OPPENHEIMER CAPITAL APPRECIATION FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 2006 AUGUST 31,
CLASS Y (UNAUDITED) 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning
of period $ 42.52 $ 38.40 $ 36.04 $ 31.16 $ 41.55 $ 62.51
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income -- 1,2 .45 1,3 .09 .01 .02 1 .27
Net realized and unrealized
gain (loss) 3.16 3.67 2.27 4.87 (9.42) 1 (15.98)
---------------------------------------------------------------------------------------------------
Total from investment
operations 3.16 4.12 2.36 4.88 (9.40) (15.71)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or
distributions to shareholders:
Dividends from net investment
income (.41) -- -- -- -- --
Distributions from net
realized gain -- -- -- -- (.99) (5.25)
---------------------------------------------------------------------------------------------------
Total dividends and
distributions to shareholders (.41) -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 45.27 $ 42.52 $ 38.40 $ 36.04 $ 31.16 $ 41.55
===================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET
VALUE 4 7.44% 10.73% 6.55% 15.66% (23.23)% (26.12)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 454,392 $ 1,186,649 $ 1,391,718 $ 1,152,318 $ 864,437 $ 974,820
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in
thousands) $ 987,969 $ 1,210,587 $ 1,327,404 $ 930,500 $ 968,867 $ 1,095,575
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net
assets: 5
Net investment income 0.02% 1.10% 3 0.47% 0.29% 0.17% 0.66%
Total expenses 0.73% 6 0.69% 7 0.71% 7 0.78% 6,7 0.89% 7 0.66% 7
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 56% 38% 45% 42% 28% 46%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Less than $0.005 per share.
3. Net investment income per share and the net investment income ratio include
$.18 and 0.43%, respectively, resulting from a special dividend from Microsoft
Corp. in November 2004.
4. 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.
5. Annualized for periods of less than one full year.
6. Voluntary waiver of transfer agent fees less than 0.01%.
7. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | OPPENHEIMER CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing "bid" and "asked"
prices, and if not, at the closing bid price. Securities traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, as identified by the portfolio pricing service,
prior to the time when the Fund's assets are valued. In the absence of a sale,
the security is valued at the official closing price on the principal exchange.
Corporate, government and municipal debt instruments having a remaining maturity
in excess of sixty days and all mortgage-backed securities will be valued at the
mean between the "bid" and "asked" prices. Futures contracts traded on a
commodities or futures exchange will be valued at the final settlement price or
official closing price on the principal exchange as reported by such principal
exchange at its trading session ending at, or most recently prior to, the time
when the Fund's assets are valued. Securities
29 | OPPENHEIMER CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
(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 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. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income 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. 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.
30 | OPPENHEIMER CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
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.
As of February 28, 2006, the Fund had available for federal income tax
purposes an estimated capital loss carryforward of $521,977,101 expiring by
2014. This estimated capital loss carryforward represents carryforward as of the
end of the last fiscal year, increased for losses deferred under tax accounting
rules to the current fiscal year and is increased or decreased by capital losses
or gains realized in the first six months of the current fiscal year. As of
February 28, 2006, it is estimated that the Fund will not utilize any capital
loss carryforward to offset realized capital gains. During the year ended August
31, 2005, the Fund utilized $278,650,934 of capital loss carryforward to offset
capital gains realized in that fiscal year.
As of August 31, 2005, the Fund had available for federal income tax purposes
unused capital loss carryforwards as follows:
EXPIRING
------------------------
2011 $ 157,924,077
2012 296,586,322
-------------
Total $ 454,510,399
=============
- --------------------------------------------------------------------------------
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 six months ended
February 28, 2006, the Fund's projected benefit obligations were increased by
$65,962 and payments of $98,894 were made to retired trustees, resulting in an
accumulated liability of $1,042,357 as of February 28, 2006.
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
31 | OPPENHEIMER CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. At February 28, 2006, the Fund had $281 of such earnings on
cash balances available to offset future custodian fees or interest expenses
incurred during the next fiscal year.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
32 | OPPENHEIMER CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------
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:
SIX MONTHS ENDED FEBRUARY 28, 2006 YEAR ENDED AUGUST 31, 2005
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
CLASS A
Sold 13,388,518 $ 573,387,185 40,436,717 $ 1,618,214,799
Dividends and/or
distributions reinvested 674,180 29,394,224 -- --
Redeemed (21,560,614) (923,518,979) (43,402,126) (1,752,424,878)
--------------------------------------------------------------------
Net decrease (7,497,916) $ (320,737,570) (2,965,409) $ (134,210,079)
====================================================================
- -----------------------------------------------------------------------------------------------
CLASS B
Sold 1,424,414 $ 56,089,392 4,382,455 $ 161,855,078
Dividends and/or
distributions reinvested -- -- -- --
Redeemed (4,161,968) (163,826,709) (8,760,712) (324,138,982)
--------------------------------------------------------------------
Net decrease (2,737,554) $ (107,737,317) (4,378,257) $ (162,283,904)
====================================================================
- -----------------------------------------------------------------------------------------------
CLASS C
Sold 1,656,518 $ 64,722,696 4,571,487 $ 167,476,288
Dividends and/or
distributions reinvested -- -- -- --
Redeemed (2,483,615) (96,832,903) (4,774,468) (175,315,948)
--------------------------------------------------------------------
Net decrease (827,097) $ (32,110,207) (202,981) $ (7,839,660)
====================================================================
- -----------------------------------------------------------------------------------------------
CLASS N
Sold 1,042,758 $ 43,927,013 3,078,565 $ 122,153,412
Dividends and/or
distributions reinvested 16,509 711,690 -- --
Redeemed (1,216,209) (51,285,195) (2,190,999) (87,368,735)
--------------------------------------------------------------------
Net increase (decrease) (156,942) $ (6,646,492) 887,566 $ 34,784,677
====================================================================
- -----------------------------------------------------------------------------------------------
CLASS Y
Sold 4,205,523 $ 184,619,874 8,329,891 $ 344,067,572
Dividends and/or
distributions reinvested 245,563 10,957,036 -- --
Redeemed (22,321,869) (979,357,725) (16,663,524) (696,427,145)
--------------------------------------------------------------------
Net decrease (17,870,783) $ (783,780,815) (8,333,633) $ (352,359,573)
====================================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the six months ended February 28, 2006, were as
follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
Investment securities $ 4,774,661,844 $ 5,895,180,548
33 | OPPENHEIMER CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.75% of the first $200 million of average annual net assets 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, 0.50% of the next $2.5 billion and, beginning January
1, 2006, 0.48% of average annual net assets over $11.0 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 six months ended February 28, 2006, the Fund paid
$10,359,931 to OFS for services to the Fund.
Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum 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
periodically 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 periodically 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
periods. 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% on Class B and
Class C shares and 0.25% on Class N shares. The Distributor also receives a
service fee of 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
34 | OPPENHEIMER CAPITAL APPRECIATION FUND
such termination. The Distributor's aggregate uncompensated expenses under the
plan at February 28, 2006 for Class B, Class C and Class N shares were
$18,042,757, $11,172,480 and $3,150,841, 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
SIX MONTHS RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -------------------------------------------------------------------------------------------------
February 28, 2006 $ 1,073,217 $ 14,209 $ 1,062,250 $ 48,159 $ 78,015
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. During the six months ended February 28,
2006, OFS waived $5,846, $3,433 and $6,370 for Class B, Class N and Class Y
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.
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
35 | OPPENHEIMER CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS Continued
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 February 28, 2006, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
6. LITIGATION
A complaint was filed as a putative class action against the Manager and the
Transfer Agent (and other defendants) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses. Seven of the eight counts in the complaint, including the
claims against certain of the Oppenheimer funds, as nominal defendants, and
against certain present and former Directors, Trustees and Officers of the
funds, and the Distributor, as defendants, were dismissed with prejudice, by
court order dated March 10, 2006, in response to motions to dismiss the suit
that had been filed by the defendants. The remaining count against the Manager
and the Transfer Agent was dismissed with prejudice by court order dated April
5, 2006. The time in which plaintiffs may file an appeal to those decisions has
not yet lapsed.
36 | OPPENHEIMER CAPITAL APPRECIATION FUND
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 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 voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing 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.
37 | OPPENHEIMER CAPITAL APPRECIATION FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services by the Manager and its affiliates,
(v) the extent to which economies of scale are realized as the Fund grows and
whether fee levels reflect these economies of scale for Fund investors and (vi)
other benefits to the Manager from its relationship with the Fund. The Board was
aware that there are alternatives to retaining the Manager.
NATURE AND EXTENT OF SERVICES. The Board considered information on the
nature and extent of the services provided to the Fund and information regarding
the Manager's key personnel that provide such services. The Manager's duties
include providing the Fund with the services of the portfolio managers and the
Manager's investment team, who provide research, analysis and other advisory
services in regard to the Fund's investments; securities trading services;
oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing, and supervising
the activities of, all administrative and clerical personnel that are necessary
in order to provide effective corporate administration for the Fund; compiling
and maintaining records with respect to the Fund's operations; preparing and
filing reports required by the Securities and Exchange Commission; preparing
periodic reports regarding the operations of the Fund for its shareholders;
preparing proxy materials for shareholder meetings; and preparing the
registration statements required by Federal and state securities laws for the
sale of the Fund's shares. The Manager also provides the Fund with office space,
facilities and equipment.
38 | OPPENHEIMER CAPITAL APPRECIATION FUND
QUALITY OF SERVICES. The Board also considered the quality of the services
provided and the quality of the Manager's resources that are available to the
Fund. The Board took account of the facts that the Manager has had over forty
years of experience as an investment adviser and that its assets under
management rank it among the top mutual fund managers in the United States. The
Board evaluated the Manager's administrative, accounting, legal and compliance
services, and information the Board has received regarding the experience and
professional qualifications of the Manager's personnel and the size and
functions of its staff. In its evaluation of the quality of the portfolio
management services provided, the Board considered the experience of William L.
Wilby and Marc Baylin and the Manager's Growth investment team and analysts. The
Board members also considered their experiences with the Manager and its
officers and other personnel through their service as directors or trustees of
the Fund and other funds advised by the Manager. The Board considered
information regarding the quality of services provided by affiliates of the
Manager, which it also reviews at other times during the year in connection with
the renewal of the Fund's service agreements. In light of the foregoing, the
Board concluded that the Fund benefits from the services provided under the
Agreement as a result of the Manager's experience, reputation, personnel,
operations, and resources.
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the performance of the Fund and the Manager at
each Board meeting, including comparative performance information. The Board
also reviewed information, prepared by the Manager and by the independent
consultant, comparing the Fund's historical performance to relevant market
indices and to the performance of other large-cap core funds advised by the
Manager and other investment advisers. The Board noted that the Fund's
three-year and ten-year performance were better than its peer group average.
However its one-year and five-year performance were below its peer group
average.
MANAGEMENT FEES AND EXPENSES. The Board reviewed the fees paid to the
Manager and its affiliates and the other expenses borne by the Fund. The Board
also evaluated the comparability of the fees charged and the services provided
to the Fund to those of other clients or accounts advised by the Manager. The
independent consultant provided comparative data in regard to the fees and
expenses of the Fund, other large-cap core funds and other funds with comparable
asset levels and distribution features. The Board noted that the Fund's
contractual management fees and total expenses were lower than its peer group
median but higher than its peer group average and its actual management fees
were higher than its peer group median and average.
39 | OPPENHEIMER CAPITAL APPRECIATION FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager may
realize economies of scale in managing and supporting the Fund, to what extent
those economies of scale benefit the Fund shareholders and the current level of
Fund assets in relation to the Fund's breakpoint schedule for its management
fees. The Board also noted the Fund's breakpoints, which are intended to share
economies of scale that may exist as the Fund grows with its shareholders. Based
on this evaluation, the Board requested and the Manager agreed to a revised
breakpoint schedule that, effective January 1, 2006, reduced the management fee
on average annual net assets over $11.0 billion to 0.48%.
PROFITS AND OTHER BENEFITS TO THE MANAGER. The Board considered
information regarding the Manager's costs in serving as the Fund's investment
adviser, including the costs associated with the personnel and systems necessary
to manage the Fund, and information regarding the Manager's profitability from
its relationship with the Fund. The Board considered that the Manager must be
able to pay and retain experienced professional personnel at competitive rates
to provide services to the Fund and that maintaining the financial viability of
the Manager is important in order for the Manager to continue to provide
significant services to the Fund and its shareholders. In addition to
considering the profits realized by the Manager, the Board also considered
information regarding the direct and indirect benefits the Manager receives as a
result of its relationship with the Fund, including compensation paid to the
Manager's affiliates for services provided and research provided to the Manager
in connection with permissible brokerage arrangements (soft dollar
arrangements).
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and the independent Trustees. Fund counsel is independent of the
Manager within the meaning and intent of the Securities and Exchange Commission
Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
concluded that the nature, extent and quality of the services provided to the
Fund by the Manager are a benefit to the Fund and in the best interest of the
Fund's shareholders and that the amount and structure of the compensation
received by the Manager and its affiliates, and the revised fee structure
adopted by the Board and the Manager, are reasonable in relation to the services
provided. Accordingly, the Board elected to continue the advisory agreement for
another year. In arriving at this decision, the Board did not single out any
factor or factors as being more important than others, but considered all of the
factors together. The Board judged the terms and conditions of the advisory
agreement, including the management fee, in light of all of the surrounding
circumstances.
40 | OPPENHEIMER CAPITAL APPRECIATION FUND
ITEM 2. CODE OF ETHICS.
Not applicable to semiannual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to semiannual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to semiannual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
THE FUND'S GOVERNANCE COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF
DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS
1. The Fund's Governance Committee (the "Committee") will evaluate potential
Board candidates to assess their qualifications. The Committee shall have
the authority, upon approval of the Board, to retain an executive search
firm to assist in this effort. The Committee may consider recommendations
by business and personal contacts of current Board members and by
executive search firms which the Committee may engage from time to time
and may also consider shareholder recommendations. The Committee may
consider the advice and recommendation of the Funds' investment manager
and its affiliates in making the selection.
2. The Committee shall screen candidates for Board membership. The Committee
has not established specific qualifications that it believes must be met
by a trustee nominee. In evaluating trustee nominees, the Committee
considers, among other things, an individual's
background, skills, and experience; whether the individual is an
"interested person" as defined in the Investment Company Act of 1940; and
whether the individual would be deemed an "audit committee financial
expert" within the meaning of applicable SEC rules. The Committee also
considers whether the individual's background, skills, and experience will
complement the background, skills, and experience of other nominees and
will contribute to the Board. There are no differences in the manner in
which the Committee evaluates nominees for trustees based on whether the
nominee is recommended by a shareholder.
3. The Committee may consider nominations from shareholders for the Board at
such times as the Committee meets to consider new nominees for the Board.
The Committee shall have the sole discretion to determine the candidates
to present to the Board and, in such cases where required, to
shareholders. Recommendations for trustee nominees should, at a minimum,
be accompanied by the following:
o the name, address, and business, educational, and/or other pertinent
background of the person being recommended;
o a statement concerning whether the person is an "interested person"
as defined in the Investment Company Act of 1940;
o any other information that the Funds would be required to include in
a proxy statement concerning the person if he or she was nominated;
and
o the name and address of the person submitting the recommendation
and, if that person is a shareholder, the period for which that
person held Fund shares.
The recommendation also can include any additional information which the
person submitting it believes would assist the Committee in evaluating the
recommendation.
4. Shareholders should note that a person who owns securities issued by
Massachusetts Mutual Life Insurance Company (the parent company of the
Funds' investment adviser) would be deemed an "interested person" under
the Investment Company Act of 1940. In addition, certain other
relationships with Massachusetts Mutual Life Insurance Company or its
subsidiaries, with registered broker-dealers, or with the Funds' outside
legal counsel may cause a person to be deemed an "interested person."
5. Before the Committee decides to nominate an individual as a trustee,
Committee members and other directors customarily interview the individual
in person. In addition, the individual customarily is asked to complete a
detailed questionnaire which is designed to elicit information which must
be disclosed under SEC and stock exchange rules and to determine whether
the individual is subject to any statutory disqualification from serving
as a trustee of a registered investment company.
ITEM 11. CONTROLS AND PROCEDURES.
Based on their evaluation of the 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 February 28, 2006, the registrant's principal executive
officer and principal financial officer found the registrant's disclosure
controls and procedures to provide reasonable assurances that information
required to be disclosed by the 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.
There have been no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's second fiscal quarter of the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a) (1) Not applicable to semiannual reports.
(2) Exhibits attached hereto.
(3) Not applicable.
(b) Exhibit attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Oppenheimer Capital Appreciation Fund
By: /s/ John V. Murphy
---------------------------
John V. Murphy
Principal Executive Officer
Date: April 19, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ John V. Murphy
---------------------------
Principal Executive Officer
Date: April 19, 2006
By: /s/ Brian W. Wixted
---------------------------
Brian W. Wixted
Principal Financial Officer
Date: April 19, 2006