<PAGE> 1
[PHOTO]
- --------------------------------------------------------------------------------
ANNUAL REPORT AUGUST 31, 1999
OPPENHEIMER
CAPITAL INCOME FUND
[OPPENHEIMERFUNDS LOGO]
THE RIGHT WAY TO INVEST
<PAGE> 2
REPORT HIGHLIGHTS
CONTENTS
3 President's Letter
5 An Interview
with Your Fund's
Managers
9 Fund Performance
14 FINANCIAL
STATEMENTS
41 INDEPENDENT
AUDITORS' REPORT
42 Federal
Income Tax
Information
43 Officers and Trustees
44 Information and
Services
A SHIFT IN INVESTOR PREFERENCE FROM GROWTH TO VALUE STOCKS in the second quarter
of 1999 helped to enhance Fund performance.
THE FUND'S TELECOMMUNICATIONS, PAPER AND OIL STOCKS produced strong returns over
the period.
IN THE COMING MONTHS WE ANTICIPATE SHIFTING A PORTION OF THE FUND'S CASH
POSITION INTO COMMON STOCKS AND BONDS that tend to perform well in a slower
growth environment.
- ------------------------
AVERAGE ANNUAL
TOTAL RETURNS
For the 1-Year Period
Ended 8/31/99*
Class A
Without With
Sales Chg. Sales Chg.
- ------------------------
11.03% 4.64%
Class B
Without With
Sales Chg. Sales Chg.
- ------------------------
10.22% 5.26%
Class C
Without With
Sales Chg. Sales Chg.
- ------------------------
10.15% 9.16%
- ------------------------
- ------------------------
NOT FDIC INSURED.
NO BANK GUARANTEE.
MAY LOSE VALUE.
- ------------------------
*See page 12 for further details.
2 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 3
PRESIDENT'S LETTER
[PHOTO]
JAMES C.SWAIN
Chairman
Oppenheimer
Capital Income Fund
[PHOTO]
BRIDGET A. MACASKILL
President
Oppenheimer
Capital Income Fund
DEAR SHAREHOLDER,
In many ways, the 1999 investment environment has, so far, unfolded as many
expected it would, producing both attractive opportunities and formidable
challenges for investors.
On the economic front, early worries about the effects of global weakness
in the wake of last year's credit and currency crises have abated. Instead, as
many economies around the world begin to strengthen, concerns now center around
whether the U.S. economy may be growing too quickly. Throughout the year,
consumers in the United States have continued to spend and borrow heavily, more
than offsetting any temporary slowdown in the industrial and export sectors.
The economy's strength has not gone unnoticed by the nation's monetary
policymakers. In an effort to ward off emerging inflationary pressures, the
Federal Reserve Board increased short-term interest rates this past summer.
Market reaction to robust economic growth has been mixed. The U.S. bond
market has generally declined, as fixed income investors became increasingly
concerned about the effects of rising interest rates.
In the stock market, the performance of largecapitalization growth stocks,
which has driven the market's advance over the past few years, has begun to
moderate, and many previously out-of-favor value-oriented mid-cap and small-cap
stocks have rallied. At the same time, a healthy percentage of actively managed
diversified portfolios have once again begun to outperform unmanaged stock
indices such as Standard & Poor's 500.
3 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 4
PRESIDENT'S LETTER
At OppenheimerFunds, we applaud the Fed's pre-emptive strike against inflation.
In our view, history has repeatedly demonstrated that most financial assets do
best in a lowinflation environment. What's more, we believe that the move to
higher interest rates should be temporary.
One recent development is quite troublesome to us however: the increasing
popularity of "day trading" among individuals seeking to make fast money in a
volatile stock market. In our opinion, day trading is not investing, it is
gambling. Experience proves that without extensive research and analysis,
attempting to time short-term price swings is a fool's errand. Instead, we
continue to encourage investors to maintain a long-term perspective that is
measured in years, not days.
Finally, while we remain alert to the potential impact of the Y2K issue,
we are encouraged by the progress made in addressing the matter. At
OppenheimerFunds, our shareholder accounting systems are already Y2K compliant,
and we have successfully participated in all required industrywide tests. We
intend to continue retesting our systems in order to help further protect
against any potential problems. After all, whether in our computer accounting
systems or the financial markets, managing risk is an important part of what
makes OppenheimerFunds The Right Way to Invest.
Sincerely,
/s/ JAMES C. SWAIN /s/ BRIDGET A. MACASKILL
James C. Swain Bridget A. Macaskill
September 22, 1999
4 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 5
AN INTERVIEW WITH YOUR FUND'S MANAGERS
[PHOTO]
PORTFOLIO MANAGEMENT
TEAM (L TO R)
John Doney
Michael Levine(1)
Q HOW DID THE FUND PERFORM DURING THE ONE-YEAR PERIOD THAT ENDED AUGUST 31,
1999?
A. We were pleased that Oppenheimer Capital Income Fund was able to meet its
primary objective of providing current income to its shareholders. This was
noteworthy because dividends paid by stocks have been falling for quite some
time. However, the Fund was less successful in generating capital appreciation.
CAN YOU DESCRIBE THE ECONOMIC AND STOCK MARKET ENVIRONMENT OVER THIS PAST FISCAL
YEAR?
The overall strength of the U.S. economy and equity markets continues to
surprise many financial experts. During the fourth quarter of 1998, the last of
three interest rate cuts by the Federal Reserve Board (the Fed) aided the
market, and in particular, growth stocks. As 1999 began, the market continued
its ascent, due largely to a buoyant economy, low inflation and receding fears
of a global financial crisis. But the market's rally was deceiving. Gains were
mostly limited to a few very large growth companies and the technology sector.
However, investors abruptly shifted gears in the second quarter--suddenly
appearing to favor economically sensitive and more value-oriented stocks. In
recent months, we've seen yet another shift in the market. The economy is still
going strong, but there have been concerns over an increase in inflation. As a
result, the Fed raised short-term interest rates this summer. Initially, both
the stock and bond markets reacted negatively. But as the fiscal year ended,
inflationary fears subsided, and it remained uncertain whether further rate
hikes would occur.
1. Effective 6/1/99, Michael Levine became a Portfolio Manager of the Fund.
5 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 6
AN INTERVIEW WITH YOUR FUND'S MANAGERS
"The overall strength of the U.S. economy, which is reflected in the performance
of the equity markets, continues to surprise many financial experts."
HOW HAVE YOU MANAGED THE PORTFOLIO IN LIGHT OF THESE MARKET CHANGES?
We continued to emphasize our disciplined investment process--one that has
helped us seek a high level of current income, while attempting to cushion the
portfolio from market downswings.
Because our analysis suggested that economic growth was likely to slow, we
gradually reduced our exposure to common stocks during the fiscal year. We
invested the proceeds from these sales into securities that tend to hold up well
in a slow-growth environment, including Real Estate Investment Trusts (REITs)
and utility stocks. We also increased our exposure to bonds in recent months in
order to seek to take advantage of their higher yields.
CAN YOU SHARE SOME EXAMPLES OF STRONG PERFORMERS FOR THE FUND?
Several of our telecommunications stocks generated outstanding results during
the fiscal year. The industry is experiencing rapid growth, due to increased
Internet use and strong demand for wireless services. Accordingly, there have
also been quite a few successful mergers within the industry, which has helped
to further drive up stock prices. One holding in this area was GTE Corp. The
firm exceeded analysts' earnings expectations, and is currently in the process
of being acquired by Bell Atlantic.
In addition, several of our stocks in the paper industry performed
well--benefiting from strong product demand and healthy profits. And when oil
prices increased in early 1999, so did the value of a number of the Fund's
energy stocks.
6 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 7
- -------------------------
AVERAGE ANNUAL
TOTAL RETURNS
For the Periods Ended 9/30/99(2)
<TABLE>
<CAPTION>
Class A
1-Year 5-Year 10-Year
- -------------------------
<S> <C> <C>
- -2.94% 13.41% 10.35%
</TABLE>
<TABLE>
<CAPTION>
Class B Since
1-Year 5-Year Inception
- -------------------------
<S> <C> <C>
- -2.50% 13.60% 11.49%
</TABLE>
<TABLE>
<CAPTION>
Class C Since
1-Year 5-Year Inception
- -------------------------
<S> <C> <C>
1.18% N/A 13.24%
</TABLE>
WERE THERE ANY AREAS THAT DID NOT LIVE UP TO YOUR EXPECTATIONS?
Some of our holdings in the financial services sector failed to keep pace with
the market's advances due to rising interest rates. Interest rates affect
financial companies in a variety of ways. For example, as interest rates
increase, the value of existing fixed-interest loans falls. In addition, the
overall level of financial activity tends to decrease as the cost of capital
rises.
WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND THE FUND OVER THE NEXT FEW MONTHS?
We are in the midst of one of the longest economic booms the country has ever
experienced. However, we expect to see slower growth rates as the year
progresses. In fact, with the recent rise in interest rates, home refinancing
has already declined.
Should the economy slow, interest rates could come down from their current
levels. In our opinion, this would bode well for our financial services stocks
and fixed income securities. In the coming months we anticipate shifting a
portion of the Fund's cash position into common stocks and bonds that tend to
perform well in a slower growth environment.
WHY WAS THE FUND'S NAME CHANGED TO OPPENHEIMER CAPITAL INCOME FUND?
The new name better reflects the primary objective of the Fund, which is to
provide current income compatible with prudent investing. The change also
denotes the Fund's increased flexibility with regard to its investment strategy.
2. See page 12 for further details.
7 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 8
AN INTERVIEW WITH YOUR FUND'S MANAGERS
- ---------------------------
PORTFOLIO ALLOCATION(3)
[PIE CHART]
<TABLE>
<S> <C>
- - l Stocks 69.2%
- - l Bonds 21.5
- - l Cash Equivalents 9.3
- ---------------------------
</TABLE>
Rather than limiting the portfolio to primarily income-producing equity
securities, the Fund can now invest in a broader selection of securities in
order to meet its objective. These changes are indicative of the way we do
business. Because at OppenheimerFunds, we do what we say we're going to do. It's
just another example of why Oppenheimer Capital Income Fund is an important part
of The Right Way to Invest.
<TABLE>
<CAPTION>
TOP 5 COMMON STOCK INDUSTRIES(3)
- --------------------------------------------------------
<S> <C>
Banks 15.7%
- --------------------------------------------------------
Diversified Financial 4.7
- --------------------------------------------------------
Insurance 4.7
- --------------------------------------------------------
Electric Utilities 4.3
- --------------------------------------------------------
Oil: Domestic 3.8
TOP 10 COMMON STOCK HOLDINGS(3)
- --------------------------------------------------------
Chase Manhattan Corp. 2.5%
- --------------------------------------------------------
Citigroup, Inc. 2.4
- --------------------------------------------------------
First Union Corp. 2.2
- --------------------------------------------------------
Philip Morris Cos., Inc. 2.2
- --------------------------------------------------------
Bank of America Corp. 2.2
- --------------------------------------------------------
Bank One Corp. 1.5
- --------------------------------------------------------
American General Corp. 1.3
- --------------------------------------------------------
Bristol-Myers Squibb Co. 1.1
- --------------------------------------------------------
GTE Corp. 1.0
- --------------------------------------------------------
BankBoston Corp. 0.9
</TABLE>
3. Portfolio is subject to change. Percentages are as of August 31, 1999, and
are based on total market value of investments.
8 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 9
FUND PERFORMANCE
HOW HAS THE FUND PERFORMED? Below is a discussion, by the Managers, of the
Fund's performance during its fiscal year ended August 31, 1999, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
MANAGEMENT'S DISCUSSION OF PERFORMANCE. During the fiscal year that ended August
31, 1999, Oppenheimer Capital Income Fund's performance was affected by a number
of factors. These included a general shift in investor preference during the
second quarter of 1999 from growth to value stocks, as well as rising interest
rates toward the end of the reporting period. The Fund's investments in
telecommunications, paper and oil stocks enhanced performance. However, with the
Federal Reserve Board raising interest rates to help stem inflation, many of the
Fund's financial services issues were hurt. While equity yields steadily
declined during the period, the Fund continued to be able to provide current
income for its shareholders. The dividend declined slightly. The Fund's
portfolio holdings, allocation and strategies are subject to change.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in Class A, Class B and Class C
shares of the Fund held until August 31, 1999. In the case of Class A shares,
performance is measured over a ten-year period, and in the case of Class B
shares, performance is measured from the inception of the class on August 17,
1993. In the case of Class C shares, performance is measured from the inception
of the class on November 1, 1995. The graphs assume that all dividends and
capital gains distributions were reinvested in additional shares. The graphs
reflect the deduction of the maximum initial sales charge on Class A shares and
the applicable contingent deferred sales charge for Class B and Class C shares.
The Fund's performance is compared to the performance of the Standard &
Poor's (S&P) 500 Index. The S&P 500 Index is a broad-based index of equity
securities widely regarded as a general measurement of the performance of the
U.S. equity securities market. Index performance reflects the reinvestment of
dividends but does not consider the effect of capital gains or transaction cost,
and none of the data in the graphs shows the effect of taxes. The Fund's
performance reflects the effects of Fund business and operating expenses. While
index comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited to the
securities in the S&P 500 Index, which does not include debt securities.
9 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 10
FUND PERFORMANCE
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Income Fund (Class A)
and S&P 500
[The following table was originally a line graph in the printed materials.]
<TABLE>
<CAPTION>
OPPENHEIMER CAPITAL
DATE INCOME FUND CLASS A S&P 500
<S> <C> <C>
06/30/89 $ 9,425 $ 10,000
06/30/90 10,279 11,646
06/30/91 10,658 12,503
06/30/92 11,751 14,177
06/30/93 13,721 16,107
06/30/94 13,810 16,334
06/30/95 15,974 20,584
06/30/96 18,948 25,928
08/31/96 18,898 25,305
08/31/97 25,207 35,581
08/31/98 26,761 38,466
08/31/99 29,712 53,774
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS A SHARES OF THE FUND AT 8/31/99(2)
1-YEAR 4.64% 5-YEAR 13.80% 10-YEAR 10.66%
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Income Fund (Class B)
and S&P 500
[The following table was originally a line graph in the printed materials.]
<TABLE>
<CAPTION>
OPPENHEIMER CAPITAL
DATE INCOME FUND CLASS B S&P 500
<S> <C> <C>
08/17/93 $ 10,000 $ 10,000
06/30/94 9,765 9,810
06/30/95 11,216 12,362
06/30/96 13,188 15,571
08/31/96 13,141 15,197
08/31/97 17,369 21,369
08/31/98 18,292 23,102
08/31/99 20,166 32,295
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS B SHARES OF THE FUND AT 8/31/99(2)
1-YEAR 5.26% 5-YEAR 13.99% 10-YEAR 12.32%
10 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 11
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Capital Income Fund (Class C)
and S&P 500
[The following table was originally a line graph in the printed materials]
<TABLE>
<CAPTION>
OPPENHEIMER CAPITAL
DATE INCOME FUND CLASS C S&P 500
<S> <C> <C>
11/01/95 $ 10,000 $ 10,000
06/30/96 11,050 11,712
08/30/96 11,001 11,430
08/31/97 14,554 16,072
08/31/98 15,327 17,375
08/31/99 16,883 24,290
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS C SHARES OF THE FUND AT 8/31/99(2)
1-YEAR 9.16% LIFE 14.64%
The performance information for S&P 500 in the graphs begins on 6/30/89
for Class A, 8/31/93 for Class B and 10/31/95 for Class C.
1. The Fund changed its fiscal year end from 6/30 to 8/31.
2. See page 12 for further details.
Past performance is not predictive of future performance. Graphs are not drawn
to the same scale.
11 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 12
NOTES
IN REVIEWING PERFORMANCE AND RANKINGS, PLEASE REMEMBER THAT PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. BECAUSE OF ONGOING
MARKET VOLATILITY, THE FUND'S PERFORMANCE MAY BE SUBJECT TO SUBSTANTIAL
SHORT-TERM CHANGES. FOR UPDATES ON THE FUND'S PERFORMANCE, PLEASE CONTACT YOUR
FINANCIAL ADVISOR, CALL US AT 1-800-525-7048 OR VISIT OUR WEBSITE,
WWW.OPPENHEIMERFUNDS.COM.
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown.
CLASS A
The inception date of the Fund was 12/1/70. Class A returns include the current
maximum initial sales charge of 5.75%. The Fund's maximum sales charge for Class
A shares was higher prior to 10/18/91, so actual performance may have been
higher.
CLASS B
Class B shares of the Fund were first publicly offered on 8/17/93. Class B
returns include the applicable contingent deferred sales charge of 5% (1-year).
Class B shares are subject to an annual 0.75% asset-based sales charge. Because
Class B shares convert to Class A shares 72 months after purchase, the
"life-of-class" return for Class B uses Class A performance for the period after
conversion.
CLASS C
Class C shares of the Fund were first publicly offered on 11/1/95. 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.
An explanation of the different performance calculations is in the Fund's
prospectus.
12 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 13
FINANCIALS
13 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 14
STATEMENT OF INVESTMENTS August 31, 1999
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
====================================================================================================================
<S> <C> <C>
COMMON STOCKS--60.8%
- --------------------------------------------------------------------------------------------------------------------
BASIC MATERIALS--2.2%
- --------------------------------------------------------------------------------------------------------------------
CHEMICALS--0.7%
Dexter Corp. 500,000 $ 18,218,750
- --------------------------------------------------------------------------------------------------------------------
Engelhard Corp. 485,000 9,669,687
-------------
27,888,437
- --------------------------------------------------------------------------------------------------------------------
PAPER--1.5%
International Paper Co. 344,820 16,228,091
- --------------------------------------------------------------------------------------------------------------------
Smurfit-Stone Container Corp.(1) 257,142 5,448,196
- --------------------------------------------------------------------------------------------------------------------
Sonoco Products Co. 660,000 15,675,000
- --------------------------------------------------------------------------------------------------------------------
Westvaco Corp. 375,000 9,820,312
- --------------------------------------------------------------------------------------------------------------------
Weyerhaeuser Co. 200,000 11,250,000
-------------
58,421,599
- --------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS--3.1%
- --------------------------------------------------------------------------------------------------------------------
INDUSTRIAL SERVICES--0.4%
Allied Waste Industries, Inc.(1) 200,000 2,550,000
- --------------------------------------------------------------------------------------------------------------------
Republic Services, Inc.(1) 625,000 6,796,875
- --------------------------------------------------------------------------------------------------------------------
Waste Management, Inc. 240,000 5,235,000
-------------
14,581,875
- --------------------------------------------------------------------------------------------------------------------
MANUFACTURING--2.7%
AlliedSignal, Inc. 400,000 24,500,000
- --------------------------------------------------------------------------------------------------------------------
Cooper Industries, Inc. 163,333 8,472,899
- --------------------------------------------------------------------------------------------------------------------
Mettler-Toledo International, Inc.(1) 50,000 1,331,250
- --------------------------------------------------------------------------------------------------------------------
Pall Corp. 800,000 15,900,000
- --------------------------------------------------------------------------------------------------------------------
Temple-Inland, Inc. 250,000 15,500,000
- --------------------------------------------------------------------------------------------------------------------
Tenneco, Inc. 88,200 1,775,025
- --------------------------------------------------------------------------------------------------------------------
Tyco International Ltd. 331,512 33,586,309
-------------
101,065,483
- --------------------------------------------------------------------------------------------------------------------
COMMUNICATION SERVICES--2.1%
- --------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS: LONG DISTANCE--0.2%
MCI WorldCom, Inc.(1) 102,500 7,764,375
- --------------------------------------------------------------------------------------------------------------------
TELEPHONE UTILITIES--1.9%
GTE Corp. 565,000 38,773,125
- --------------------------------------------------------------------------------------------------------------------
SBC Communications, Inc. 625,400 30,019,200
- --------------------------------------------------------------------------------------------------------------------
US West, Inc. 30,000 1,567,500
--------------
70,359,825
</TABLE>
14 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 15
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER CYCLICALS--4.4%
- --------------------------------------------------------------------------------------------------------------------
AUTOS & HOUSING--1.0%
Dana Corp. 30,000 $ 1,306,875
- --------------------------------------------------------------------------------------------------------------------
Delphi Automotive Systems Corp. 647,700 12,144,375
- --------------------------------------------------------------------------------------------------------------------
Snap-On, Inc. 675,000 22,823,437
-------------
36,274,687
- --------------------------------------------------------------------------------------------------------------------
CONSUMER SERVICES--1.1%
Dun & Bradstreet Corp. 900,000 23,568,750
- --------------------------------------------------------------------------------------------------------------------
H&R Block, Inc. 300,000 16,687,500
- --------------------------------------------------------------------------------------------------------------------
Stewart Enterprises, Inc. 65,000 351,406
- --------------------------------------------------------------------------------------------------------------------
United Road Services, Inc.(1) 370,000 1,341,250
-------------
41,948,906
- --------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--0.1%
Harrah's Entertainment, Inc.(1) 215,000 4,837,500
- --------------------------------------------------------------------------------------------------------------------
MEDIA--0.9%
Deluxe Corp. 650,000 22,140,625
- --------------------------------------------------------------------------------------------------------------------
Hollinger International, Inc. 700,000 7,525,000
- --------------------------------------------------------------------------------------------------------------------
R.H. Donnelley Corp. 160,000 2,770,000
-------------
32,435,625
- --------------------------------------------------------------------------------------------------------------------
RETAIL: GENERAL--0.7%
Family Dollar Stores, Inc. 700,000 13,781,250
- --------------------------------------------------------------------------------------------------------------------
Sears Roebuck & Co. 300,000 11,250,000
-------------
25,031,250
- --------------------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY--0.6%
AutoZone, Inc.(1) 102,500 2,440,781
- --------------------------------------------------------------------------------------------------------------------
Blockbuster, Inc., Cl. A(1) 75,000 1,115,625
- --------------------------------------------------------------------------------------------------------------------
CSK Auto Corp.(1) 750,000 17,812,500
-------------
21,368,906
- --------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--7.2%
- --------------------------------------------------------------------------------------------------------------------
BROADCASTING--0.9%
AMFM, Inc.(1) 175,000 8,618,750
- --------------------------------------------------------------------------------------------------------------------
CBS Corp.(1) 57,500 2,702,500
- --------------------------------------------------------------------------------------------------------------------
Clear Channel Communications, Inc.(1) 45,000 3,152,812
- --------------------------------------------------------------------------------------------------------------------
Emmis Communications Corp., Cl. A(1) 67,500 3,813,750
- --------------------------------------------------------------------------------------------------------------------
Fox Entertainment Group, Inc., A Shares(1) 150,000 3,459,375
</TABLE>
15 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 16
STATEMENT OF INVESTMENTS Continued
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BROADCASTING Continued
Infinity Broadcasting Corp., Cl. A(1) 125,000 $ 3,382,812
- --------------------------------------------------------------------------------------------------------------------
RCN Corp.(1) 250,000 10,500,000
-------------
35,629,999
- --------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT--0.6%
SFX Entertainment, Inc., Cl. A(1) 525,000 21,623,437
- --------------------------------------------------------------------------------------------------------------------
FOOD--1.0%
General Mills, Inc. 100,000 8,375,000
- --------------------------------------------------------------------------------------------------------------------
Nabisco Group Holdings Corp. 1,662,000 29,500,500
-------------
37,875,500
- --------------------------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--0.7%
Albertson's, Inc. 50,000 2,396,875
- --------------------------------------------------------------------------------------------------------------------
SUPERVALU, Inc. 1,000,000 22,500,000
-------------
24,896,875
- --------------------------------------------------------------------------------------------------------------------
HOUSEHOLD GOODS--1.1%
Fort James Corp. 803,433 25,910,714
- --------------------------------------------------------------------------------------------------------------------
Newell Rubbermaid, Inc. 345,700 14,173,700
-------------
40,084,414
- --------------------------------------------------------------------------------------------------------------------
TOBACCO--2.9%
Philip Morris Cos., Inc. 2,202,500 82,456,094
- --------------------------------------------------------------------------------------------------------------------
R.J. Reynolds Tobacco Holdings, Inc.(1) 565,341 15,511,544
- --------------------------------------------------------------------------------------------------------------------
UST, Inc. 400,000 12,675,000
-------------
110,642,638
- --------------------------------------------------------------------------------------------------------------------
ENERGY--4.8%
- --------------------------------------------------------------------------------------------------------------------
ENERGY SERVICES--0.2%
Coastal Corp. 200,000 8,662,500
- --------------------------------------------------------------------------------------------------------------------
OIL: DOMESTIC--3.8%
Atlantic Richfield Co. 238,000 20,929,125
- --------------------------------------------------------------------------------------------------------------------
Conoco, Inc., Cl. B 1,164,200 31,287,875
- --------------------------------------------------------------------------------------------------------------------
Enron Oil & Gas Co. 270,000 6,446,250
- --------------------------------------------------------------------------------------------------------------------
Phillips Petroleum Co. 275,000 14,025,000
- --------------------------------------------------------------------------------------------------------------------
Tosco Corp. 150,000 3,825,000
- --------------------------------------------------------------------------------------------------------------------
Ultramar Diamond Shamrock Corp. 416,900 10,891,512
</TABLE>
16 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 17
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OIL: DOMESTIC Continued
Unocal Corp. 500,000 $ 20,937,500
- --------------------------------------------------------------------------------------------------------------------
USX-Marathon Group 800,000 24,900,000
- --------------------------------------------------------------------------------------------------------------------
Valero Energy Corp. 500,000 10,625,000
-------------
143,867,262
- --------------------------------------------------------------------------------------------------------------------
OIL: INTERNATIONAL--0.8%
Chevron Corp. 200,000 18,450,000
- --------------------------------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co., NY Shares 200,000 12,375,000
-------------
30,825,000
- --------------------------------------------------------------------------------------------------------------------
FINANCIAL--28.5%
- --------------------------------------------------------------------------------------------------------------------
BANKS--15.6%
Bank of America Corp. 1,355,260 81,993,230
- --------------------------------------------------------------------------------------------------------------------
Bank of New York Co., Inc. (The) 900,000 32,175,000
- --------------------------------------------------------------------------------------------------------------------
Bank One Corp. 1,418,500 56,917,313
- --------------------------------------------------------------------------------------------------------------------
BankBoston Corp. 750,000 34,828,125
- --------------------------------------------------------------------------------------------------------------------
Charter One Financial, Inc. 600,000 14,043,750
- --------------------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. 1,123,360 94,011,190
- --------------------------------------------------------------------------------------------------------------------
Commercial Federal Corp. 357,500 8,311,875
- --------------------------------------------------------------------------------------------------------------------
Compass Bancshares, Inc. 90,000 2,390,625
- --------------------------------------------------------------------------------------------------------------------
First Union Corp. 1,997,980 82,916,170
- --------------------------------------------------------------------------------------------------------------------
Fleet Financial Group, Inc. 500,000 19,906,250
- --------------------------------------------------------------------------------------------------------------------
Hibernia Corp., Cl. A 100,000 1,293,750
- --------------------------------------------------------------------------------------------------------------------
KeyCorp 600,000 17,400,000
- --------------------------------------------------------------------------------------------------------------------
Mellon Bank Corp. 886,600 29,590,275
- --------------------------------------------------------------------------------------------------------------------
National City Corp. 383,000 10,580,375
- --------------------------------------------------------------------------------------------------------------------
PNC Bank Corp. 301,600 15,777,450
- --------------------------------------------------------------------------------------------------------------------
Summit Bancorp 712,450 23,778,019
- --------------------------------------------------------------------------------------------------------------------
SunTrust Banks, Inc. 400,000 25,725,000
- --------------------------------------------------------------------------------------------------------------------
U.S. Bancorp 700,000 21,612,500
- --------------------------------------------------------------------------------------------------------------------
Union Planters Corp. 389,324 16,424,606
-------------
589,675,503
- --------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--4.7%
American Express Co. 186,000 25,575,000
- --------------------------------------------------------------------------------------------------------------------
Anthracite Capital, Inc. 600,000 4,050,000
- --------------------------------------------------------------------------------------------------------------------
Associates First Capital Corp., Cl. A 157,250 5,395,641
- --------------------------------------------------------------------------------------------------------------------
C.I.T. Group, Inc., Cl. A 127,500 3,036,094
- --------------------------------------------------------------------------------------------------------------------
Capital One Financial Corp. 401,300 15,149,075
</TABLE>
17 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 18
STATEMENT OF INVESTMENTS Continued
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DIVERSIFIED FINANCIAL Continued
Citigroup, Inc. 2,011,900 $ 89,403,806
- --------------------------------------------------------------------------------------------------------------------
Household International, Inc. 694,732 26,226,133
- --------------------------------------------------------------------------------------------------------------------
Imperial Credit Commercial Mortgage Investment Corp. 500,000 5,468,750
- --------------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 27,500 2,052,188
-------------
176,356,687
- --------------------------------------------------------------------------------------------------------------------
INSURANCE--4.7%
ACE Ltd. 35,000 750,313
- --------------------------------------------------------------------------------------------------------------------
Aetna, Inc. 292,300 22,726,325
- --------------------------------------------------------------------------------------------------------------------
Allstate Corp. 712,998 23,395,247
- --------------------------------------------------------------------------------------------------------------------
American General Corp. 698,200 49,572,200
- --------------------------------------------------------------------------------------------------------------------
Enhance Financial Services Group, Inc. 703,425 14,420,213
- --------------------------------------------------------------------------------------------------------------------
Everest Reinsurance Holdings, Inc. 325,000 9,018,750
- --------------------------------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. 200,000 9,087,500
- --------------------------------------------------------------------------------------------------------------------
IPC Holdings Ltd. 359,964 7,761,724
- --------------------------------------------------------------------------------------------------------------------
Reliance Group Holdings, Inc. 1,541,500 7,322,125
- --------------------------------------------------------------------------------------------------------------------
St. Paul Cos., Inc. 1,000,000 32,062,500
- --------------------------------------------------------------------------------------------------------------------
XL Capital Ltd. 12,500 628,906
-------------
176,745,803
- --------------------------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS--2.2%
Archstone Communities Trust 400,000 8,550,000
- --------------------------------------------------------------------------------------------------------------------
Avalonbay Communities, Inc. 300,000 10,575,000
- --------------------------------------------------------------------------------------------------------------------
Cornerstone Properties, Inc. 500,000 7,968,750
- --------------------------------------------------------------------------------------------------------------------
Developers Diversified Realty Corp. 60,000 896,250
- --------------------------------------------------------------------------------------------------------------------
Equity Office Properties Trust 750,000 19,171,875
- --------------------------------------------------------------------------------------------------------------------
Equity Residential Properties Trust 375,000 16,500,000
- --------------------------------------------------------------------------------------------------------------------
FBR Asset Investment Corp.(2)(9) 500,000 6,750,000
- --------------------------------------------------------------------------------------------------------------------
Horizon Group Properties, Inc.(1) 30,000 93,750
- --------------------------------------------------------------------------------------------------------------------
Prime Retail, Inc. 600,000 4,500,000
- --------------------------------------------------------------------------------------------------------------------
Reckson Associates Realty Corp. 425,000 8,818,750
-------------
83,824,375
- --------------------------------------------------------------------------------------------------------------------
SAVINGS & LOANS--1.3%
Golden State Bancorp, Inc.(1) 390,650 7,837,416
- --------------------------------------------------------------------------------------------------------------------
Greenpoint Financial Corp. 400,000 10,350,000
- --------------------------------------------------------------------------------------------------------------------
Greenpoint Financial Corp.(1)(2) 50,000 1,176,150
- --------------------------------------------------------------------------------------------------------------------
Sovereign Bancorp, Inc. 461,440 4,628,820
- --------------------------------------------------------------------------------------------------------------------
Washington Mutual, Inc. 780,000 24,765,000
-------------
48,757,386
</TABLE>
18 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 19
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE--1.4%
- --------------------------------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS--1.4%
Bristol-Myers Squibb Co. 600,000 $ 42,225,000
- --------------------------------------------------------------------------------------------------------------------
Pharmacia & Upjohn, Inc. 198,700 10,382,075
-------------
52,607,075
- --------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--1.8%
- --------------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES--0.1%
First Data Corp. 100,000 4,400,000
- --------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE--0.4%
Structural Dynamics Research Corp.(1) 450,000 7,256,250
- --------------------------------------------------------------------------------------------------------------------
Unigraphics Solutions, Inc.(1) 202,500 6,872,344
-------------
14,128,594
- --------------------------------------------------------------------------------------------------------------------
ELECTRONICS--0.9%
Motorola, Inc. 350,000 32,287,500
- --------------------------------------------------------------------------------------------------------------------
PHOTOGRAPHY--0.4%
Eastman Kodak Co. 200,000 14,687,500
- --------------------------------------------------------------------------------------------------------------------
UTILITIES--5.3%
- --------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--4.3%
Allegheny Energy, Inc. 300,000 10,125,000
- --------------------------------------------------------------------------------------------------------------------
Central & South West Corp. 603,000 13,642,875
- --------------------------------------------------------------------------------------------------------------------
DQE, Inc. 190,700 7,377,706
- --------------------------------------------------------------------------------------------------------------------
FirstEnergy Corp. 400,000 11,425,000
- --------------------------------------------------------------------------------------------------------------------
Florida Progress Corp. 600,100 28,129,688
- --------------------------------------------------------------------------------------------------------------------
Illinova Corp. 699,500 22,296,563
- --------------------------------------------------------------------------------------------------------------------
New Century Energies, Inc. 321,000 11,596,125
- --------------------------------------------------------------------------------------------------------------------
Potomac Electric Power Co. 409,100 10,841,150
- --------------------------------------------------------------------------------------------------------------------
SCANA Corp. 300,000 7,500,000
- --------------------------------------------------------------------------------------------------------------------
Texas Utilities Co. 501,600 20,283,450
- --------------------------------------------------------------------------------------------------------------------
Unicom Corp. 501,700 19,378,163
-------------
162,595,720
- --------------------------------------------------------------------------------------------------------------------
GAS UTILITIES--1.0%
Enron Corp. 830,000 34,756,250
- --------------------------------------------------------------------------------------------------------------------
MCN Energy Group, Inc. 135,000 2,413,125
-------------
37,169,375
-------------
Total Common Stocks (Cost $1,575,629,908) 2,289,321,611
</TABLE>
19 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 20
STATEMENT OF INVESTMENTS Continued
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
====================================================================================================================
<S> <C> <C>
PREFERRED STOCKS--2.5%
Adelphia Communications Corp., 5.50% Cv., Series D, Non-Vtg. 32,500 $ 5,992,187
- --------------------------------------------------------------------------------------------------------------------
Armco, Inc., $7.25 Cum. Cv., Vtg. 200,000 10,125,000
- --------------------------------------------------------------------------------------------------------------------
California Federal Preferred Capital Corp., 9.125% Non-Cum.
Exchangeable, Series A, Non-Vtg. 55,000 1,368,125
- --------------------------------------------------------------------------------------------------------------------
Chiquita Brands International, Inc., $3.75 Cum. Cv., Series B, Non-Vtg. 180,000 6,795,000
- --------------------------------------------------------------------------------------------------------------------
Fresenius Medical Care Capital Trust III, 9% Trust Preferred Nts., 12/1/06 5,985,000 5,850,338
- --------------------------------------------------------------------------------------------------------------------
Hercules Trust II, Units (each unit consists of $1,000 principal amount
of 6.50% sr. exchangeable preferred stock and one warrant to purchase
23.1492 shares of common stock)(1)(3) 21,500 19,874,170
- --------------------------------------------------------------------------------------------------------------------
ICG Communications, Inc., 6.75% Cum. Cv., Non-Vtg.(4) 37,500 1,889,062
- --------------------------------------------------------------------------------------------------------------------
ICG Communications, Inc., 6.75% Cum. Cv., Non-Vtg. 62,500 3,148,437
- --------------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc., 7% Cv.(1) 17,500 382,813
- --------------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc., 7% Cv.(1)(4) 32,500 710,938
- --------------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc., 7% Cum. Cv., Non-Vtg.(1)(4) 40,000 1,445,000
- --------------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc., 7% Cv., Non-Vtg.(1) 122,500 3,093,125
- --------------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc., Depositary Shares Representing
one one-hundredth 7% Cum. Cv. Jr., Series D, Non-Vtg.(1) 35,000 1,264,375
- --------------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc., Depositary Shares Representing
one one-hundredth 7% Cum. Cv. Jr., Series E, Non-Vtg.(1)(4) 2,500 63,125
- --------------------------------------------------------------------------------------------------------------------
McLeodUSA, Inc., 6.75% Cv., Series A(1) 20,000 6,560,000
- --------------------------------------------------------------------------------------------------------------------
National Australia Bank Ltd., ExCaps (each ExCap consists of $25 principal
amount of 7.875% Perpetual Capital Security and a purchase contract entitling
the holder to exchange ExCaps for ordinary shares of the Bank)(3) 590,000 16,630,625
- --------------------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., 6% Cv. Sub. Debs. 35,000 1,540,000
- --------------------------------------------------------------------------------------------------------------------
Trans World Airlines, Inc., $4.625 Cum. Cv.(1)(4) 200,000 5,525,000
-------------
Total Preferred Stocks (Cost $97,559,312) 92,257,320
====================================================================================================================
OTHER SECURITIES--5.9%
American General Delaware LLC, 6% Cum. Cv. Monthly Income
Preferred Securities, Series A, Non-Vtg. 75,000 6,726,562
- --------------------------------------------------------------------------------------------------------------------
American Heritage Life Investment Corp., 8.50% Cum. Cv. Preferred
Redeemable Increased Dividend Equity Securities 35,000 2,957,500
- --------------------------------------------------------------------------------------------------------------------
Automatic Commission Exchange Security Trust II, 6.50% Cv. (Exchangeable to
Common Stock of Republic Industries, Inc. Trust Automatic Common Exchange
Securities effective 5/1/00) 300,000 4,125,000
- --------------------------------------------------------------------------------------------------------------------
Banco Commercial Portuguese International Bank Ltd., 8% Cv., Series A 98,300 9,879,150
- --------------------------------------------------------------------------------------------------------------------
Budget Group, Inc., 6.25% Cv., Non-Vtg.(1) 75,700 2,545,412
- --------------------------------------------------------------------------------------------------------------------
Carriage Services, Inc., 7% Cv. Term Income Deferrable Equity Securities(1)(4) 57,500 2,314,375
- --------------------------------------------------------------------------------------------------------------------
Coastal Corp., 6.625% Cv.(1) 600,000 16,462,500
</TABLE>
20 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 21
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
====================================================================================================================
<S> <C> <C>
OTHER SECURITIES Continued
DECS Trust IV, 7% Cv. Debt Exchangeable for Common Stock of
Maxtor Corp., Non-Vtg. 250,000 $ 1,843,750
- --------------------------------------------------------------------------------------------------------------------
Dollar General Corp., 8.50% Cv. Structured Yield Product Exchangeable for Stock 451,800 17,140,162
- --------------------------------------------------------------------------------------------------------------------
Georgia-Pacific Corp., 7.50% Cv. Premium Equity Participating Security Units(1) 25,000 1,134,375
- --------------------------------------------------------------------------------------------------------------------
Host Marriott Financial Trust, 6.75% Cv.(1)(4) 10,000 341,250
- --------------------------------------------------------------------------------------------------------------------
Host Marriott Financial Trust, 6.75% Cv. Quarterly Income
Preferred Stock(1) 17,500 597,188
- --------------------------------------------------------------------------------------------------------------------
Kaufman & Broad Home Corp., 8.25% Cv. Preferred Redeemable
Increased Dividend Equity Securities 1,700,000 12,006,250
- --------------------------------------------------------------------------------------------------------------------
Kerr-McGee Corp., 7.50% Cv. Sub. Debs., 5/15/14 6,648,000 6,672,930
- --------------------------------------------------------------------------------------------------------------------
MCN Energy Group, Inc., 8% Cv. Preferred Redeemable Increased
Dividend Equity Securities, Non-Vtg. 50,000 1,715,625
- --------------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 6.25% Structured Yield Product
Exchangeable for Stock of IMC Global, Inc. 32,500 613,438
- --------------------------------------------------------------------------------------------------------------------
Monsanto Co., 6.50% Cv. Adjustable Conversion-rate Equity Security Units 75,000 3,131,250
- --------------------------------------------------------------------------------------------------------------------
Newell Financial Trust I, 5.25% Cv.(1)(4) 244,000 12,047,500
- --------------------------------------------------------------------------------------------------------------------
Nisource, Inc., 7.75% Premium Income Equity Securities 200,000 9,125,000
- --------------------------------------------------------------------------------------------------------------------
Owens Corning Capital LLC, 6.50% Cv. Monthly Income Preferred
Securities, Non-Vtg. 200,000 8,825,000
- --------------------------------------------------------------------------------------------------------------------
PLC Capital Trust II, 6.50% Cum. Cv. Preferred Redeemable Increased
Dividend Equity Securities, Non-Vtg. 56,500 2,952,125
- --------------------------------------------------------------------------------------------------------------------
Premier Parks, Inc., 7.50% Cum. Cv. Premium Income Equity Securities, Non--Vtg 499,000 30,938,000
- --------------------------------------------------------------------------------------------------------------------
Qwest Trends Trust, 5.75% Cv. (1)(4) 125,000 5,937,500
- --------------------------------------------------------------------------------------------------------------------
Reliant Energy, Inc., 7% Automatic Common Exchange Securities for
Time Warner, Inc. Common Stock 150,000 15,450,000
- --------------------------------------------------------------------------------------------------------------------
Seagram Co. Ltd., Automatic Common Exchangeable Securities(1) 100,000 5,231,250
- --------------------------------------------------------------------------------------------------------------------
St. George Bank, ADR 9% Cv. Structured Yield Product Exchangeable for
Common Stock of St. George Bank(1)(4) 114,000 5,329,500
- --------------------------------------------------------------------------------------------------------------------
Texas Utilities Co., 9.25% Cv. Preferred Redeemable Increased Dividend
Equity Securities, Non-Vtg. 176,500 9,178,000
- --------------------------------------------------------------------------------------------------------------------
Union Pacific Capital Trust, 6.25% Cum. Term Income Deferrable
Equity Securities, Non-Vtg.(1) 131,400 6,044,400
- --------------------------------------------------------------------------------------------------------------------
United Rental Trust I, 6.50% Cv. Quarterly Income Preferred Securities(1)(4) 110,000 4,276,250
- --------------------------------------------------------------------------------------------------------------------
United Rental Trust I, 6.50% Cv. Quarterly Income Preferred Securities 90,000 3,498,750
- --------------------------------------------------------------------------------------------------------------------
WBK Trust, 10% Cv. Structured Yield Product Exchangeable Stock 450,000 13,078,125
-------------
Total Other Securities (Cost $212,659,348) 222,118,117
<CAPTION>
UNITS
====================================================================================================================
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
<S> <C> <C>
Golden State Bancorp, Inc. Wts., Exp. 1/01 (Cost $1,316,782) 390,650 598,183
</TABLE>
21 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 22
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(5) SEE NOTE 1
================================================================================================================
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--11.4%
U.S. Treasury Bonds, STRIPS, 6.17%, 8/15/23(6) $610,000,000 $136,779,690
- ----------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, STRIPS, 6.26%, 8/15/22(6) 550,000,000 128,093,350
- ----------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, STRIPS, 6.91%, 5/15/21(6) 160,000,000 39,585,440
- ----------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, STRIPS, 7.20%, 8/15/08(6) 150,000,000 85,333,950
- ----------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, STRIPS, 7.22%, 8/15/20(6) 150,000,000 38,709,450
------------
Total U.S. Government Obligations (Cost $426,284,099) 428,501,880
================================================================================================================
FOREIGN GOVERNMENT OBLIGATIONS--1.7%
Argentina (Republic of) Bonds, Series L, 5.938%, 3/31/05(7) 6,045,000 5,168,475
- ----------------------------------------------------------------------------------------------------------------
Canada (Government of) Bonds, 7.50%, 9/1/00 [CAD] 19,460,000 13,332,287
- ----------------------------------------------------------------------------------------------------------------
Fideicomiso Petacalco Trust Nts., 10.16%, 12/23/09(4) 9,000,000 8,077,500
- ----------------------------------------------------------------------------------------------------------------
Hashemite (Kingdom of Jordan) Disc. Bonds, 6.188%, 12/23/23(7) 1,250,000 784,375
- ----------------------------------------------------------------------------------------------------------------
New South Wales State Bank Bonds, 9.25%, 2/18/03 [AUD] 9,900,000 6,871,807
- ----------------------------------------------------------------------------------------------------------------
Queensland Treasury Corp. Global Exchangeable Gtd. Nts., 8%, 8/14/01 [AUD] 33,650,000 22,365,314
- ----------------------------------------------------------------------------------------------------------------
South Africa (Republic of) Bonds, Series 153, 13%, 8/31/10 [ZAR] 27,500,000 3,983,759
- ----------------------------------------------------------------------------------------------------------------
South Australia (Government of) Bonds, 9%, 9/23/02 [AUD] 3,000,000 2,057,516
------------
Total Foreign Government Obligations (Cost $69,934,962) 62,641,033
================================================================================================================
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--6.4%
AK Steel Corp., 9.125% Sr. Nts., 12/15/06 4,000,000 4,060,000
- ----------------------------------------------------------------------------------------------------------------
Allied Waste North America, Inc., 7.875% Sr. Unsec. Nts., Series B, 1/1/09 5,995,000 5,425,475
- ----------------------------------------------------------------------------------------------------------------
Amtran, Inc., 9.625% Nts., 12/15/05 3,000,000 2,898,750
- ----------------------------------------------------------------------------------------------------------------
Auburn Hills Trust, 12% Gtd. Exchangeable Certificates, 5/1/20(7) 5,000,000 7,426,690
- ----------------------------------------------------------------------------------------------------------------
Bank Plus Corp., 12% Sr. Nts., 7/18/07 2,500,000 2,187,500
- ----------------------------------------------------------------------------------------------------------------
Building Materials Corp. of America, 8% Sr. Unsec. Nts., 12/1/08 5,000,000 4,625,000
- ----------------------------------------------------------------------------------------------------------------
Canadaiqua Brands, Inc., 8.625% Unsec. Sr. Nts., 8/1/06 2,250,000 2,216,250
- ----------------------------------------------------------------------------------------------------------------
Chancellor Media Corp., 9% Sr. Unsec. Sub. Nts., 10/1/08 7,000,000 7,000,000
- ----------------------------------------------------------------------------------------------------------------
Charter Communication Holdings LLC/Charter Communication Holdings
Capital Corp., 8.625% Sr. Nts., 4/1/09(4) 3,000,000 2,827,500
- ----------------------------------------------------------------------------------------------------------------
Chesapeake Energy Corp., 9.125% Sr. Unsec. Nts., 4/15/06 2,400,000 2,172,000
- ----------------------------------------------------------------------------------------------------------------
Comcast Corp., 10.25% Sr. Sub. Debs., 10/15/01 6,000,000 6,375,000
- ----------------------------------------------------------------------------------------------------------------
Cott Corp., 9.375% Sr. Nts., 7/1/05 6,350,000 6,191,250
- ----------------------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 7.625% Sr. Unsec. Debs., 7/15/18 3,000,000 2,681,250
- ----------------------------------------------------------------------------------------------------------------
EchoStar DBS Corp., 9.375% Sr. Unsec. Nts., 2/1/09(4) 8,000,000 7,920,000
- ----------------------------------------------------------------------------------------------------------------
El Paso Electric Co., 9.40% First Mtg. Sec. Nts., Series E, 5/1/11 6,000,000 6,516,558
- ----------------------------------------------------------------------------------------------------------------
Emmis Communications Corp., 8.125% Sr. Unsec. Sub. Nts., Series B, 3/15/09 6,500,000 6,175,000
- ----------------------------------------------------------------------------------------------------------------
Fairchild Corp., 10.75% Sr. Sub. Gtd. Nts., 4/15/09(4) 2,000,000 1,840,000
- ----------------------------------------------------------------------------------------------------------------
Fairchild Semiconductor Corp., 10.375% Sr. Sub. Nts., 10/1/07(4) 2,500,000 2,450,000
</TABLE>
22 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 23
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(5) SEE NOTE 1
================================================================================================================
<S> <C> <C>
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
Falcon Holding Group LP, 8.375% Sr. Unsec. Debs., Series B, 4/15/10 $ 2,550,000 $ 2,537,250
- ----------------------------------------------------------------------------------------------------------------
Ferrellgas Partners LP, 9.375% Sr. Sec. Nts., Series B, 6/15/06 5,000,000 4,950,000
- ----------------------------------------------------------------------------------------------------------------
Fleming Cos., Inc., 10.625% Sr. Nts., 12/15/01 3,000,000 3,090,000
- ----------------------------------------------------------------------------------------------------------------
Fruit of the Loom, Inc., 8.875% Sr. Unsec. Nts., 4/15/06(4) 4,000,000 2,700,000
- ----------------------------------------------------------------------------------------------------------------
Gaylord Container Corp., 9.75% Sr. Nts., 6/15/07 1,000,000 942,500
- ----------------------------------------------------------------------------------------------------------------
Gulf Canada Resources Ltd., 8.375% Sr. Nts., 11/15/05 2,500,000 2,487,500
- ----------------------------------------------------------------------------------------------------------------
HMH Properties, Inc., 8.45% Sr. Nts., Series C, 12/1/08 10,000,000 9,275,000
- ----------------------------------------------------------------------------------------------------------------
Hollinger International Publishing, Inc., 8.625% Sr. Unsec. Nts., 3/15/05 4,710,000 4,710,000
- ----------------------------------------------------------------------------------------------------------------
Hollinger International Publishing, Inc., 9.25% Sr. Unsec. Sub. Nts., 2/1/06 4,200,000 4,200,000
- ----------------------------------------------------------------------------------------------------------------
ICN Pharmaceuticals, Inc., 8.75% Sr. Nts., 11/15/08(4) 2,000,000 1,865,000
- ----------------------------------------------------------------------------------------------------------------
Imax Corp., 7.875% Sr. Nts., 12/1/05 5,000,000 4,725,000
- ----------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc., 8.60% Sr. Unsec. Nts., Series B, 6/1/08 5,500,000 4,922,500
- ----------------------------------------------------------------------------------------------------------------
Intrawest Corp., 9.75% Sr. Nts., 8/15/08 2,000,000 1,950,000
- ----------------------------------------------------------------------------------------------------------------
Jacor Communications Co., 8.75% Sr. Sub. Nts., Series B, 6/15/07(2) 1,745,000 1,814,800
- ----------------------------------------------------------------------------------------------------------------
Kindercare Learning Centers, Inc., 9.50% Sr. Sub. Nts., 2/15/09 6,000,000 5,655,000
- ----------------------------------------------------------------------------------------------------------------
Lenfest Communications, Inc., 8.375% Sr. Unsec. Nts., 11/1/05 6,000,000 6,270,000
- ----------------------------------------------------------------------------------------------------------------
McLeodUSA, Inc., 8.125% Sr. Unsec. Nts., 2/15/09 4,500,000 4,162,500
- ----------------------------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority, 8.125% Sr. Nts., 1/1/06 1,000,000 977,500
- ----------------------------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority, 8.75% Sr. Unsec. Sub. Nts., 1/1/09 2,000,000 1,980,000
- ----------------------------------------------------------------------------------------------------------------
NEXTLINK Communications, Inc., 10.75% Sr. Unsec. Nts., 6/1/09 3,000,000 3,063,750
- ----------------------------------------------------------------------------------------------------------------
Nortek, Inc., 9.125% Sr. Nts., Series B, 9/1/07 7,500,000 7,387,500
- ----------------------------------------------------------------------------------------------------------------
NTL, Inc., 11.50% Sr. Unsec. Nts., Series B, 10/1/08 7,650,000 8,166,375
- ----------------------------------------------------------------------------------------------------------------
P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08 4,000,000 3,925,000
- ----------------------------------------------------------------------------------------------------------------
PSINet, Inc., 10% Sr. Unsec. Nts., Series B, 2/15/05 5,000,000 4,800,000
- ----------------------------------------------------------------------------------------------------------------
RBF Finance Co., 11% Sr. Sec. Nts., 3/15/06 4,000,000 4,220,000
- ----------------------------------------------------------------------------------------------------------------
Regal Cinemas, Inc., 8.875% Sr. Unsec. Sub. Nts., 12/15/10 6,000,000 4,095,000
- ----------------------------------------------------------------------------------------------------------------
Reliance Group Holdings, Inc., 9.75% Sr. Sub. Debs., 11/15/03 9,000,000 9,022,500
- ----------------------------------------------------------------------------------------------------------------
Revlon Consumer Products Corp., 8.625% Sr. Unsec. Sub. Nts., 2/1/08 6,000,000 5,002,500
- ----------------------------------------------------------------------------------------------------------------
SFX Entertainment, Inc., 9.125% Sr. Unsec. Sub. Nts., 12/1/08 7,000,000 6,772,500
- ----------------------------------------------------------------------------------------------------------------
Station Casinos, Inc., 10.125% Sr. Sub. Nts., 3/15/06 8,000,000 8,200,000
- ----------------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp., 8.125% Sr. Unsec. Sub. Nts., Series B, 12/1/08 5,750,000 5,390,625
- ----------------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp., 8.625% Sr. Sub. Nts., 1/15/07 2,000,000 1,910,000
- ----------------------------------------------------------------------------------------------------------------
Time Warner Telecom LLC, 9.75% Sr. Nts., 7/15/08 6,000,000 6,120,000
- ----------------------------------------------------------------------------------------------------------------
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(2) 1,913,472 951,952
- ----------------------------------------------------------------------------------------------------------------
TV Guide, Inc., 8.125% Sr. Sub. Nts., 3/1/09 5,500,000 5,211,250
- ----------------------------------------------------------------------------------------------------------------
United Rentals, Inc., 9% Sr. Unsec. Sub. Nts., Series B, 4/1/09 3,000,000 2,887,500
- ----------------------------------------------------------------------------------------------------------------
World Color Press, Inc., 7.75% Sr. Unsec. Sub. Nts., 2/15/09 3,000,000 2,910,000
------------
Total Non-Convertible Corporate Bonds and Notes (Cost $245,656,064) 240,239,225
</TABLE>
23 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 24
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(5) SEE NOTE 1
================================================================================================================
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS AND NOTES--1.6%
Cirrus Logic, Inc., 6% Cv. Sub. Nts., 12/15/03(4) $11,000,000 $ 8,208,750
- ----------------------------------------------------------------------------------------------------------------
Inco Ltd., 5.75% Cv. Debs., 7/1/04 9,700,000 9,142,250
- ----------------------------------------------------------------------------------------------------------------
Inco Ltd., 7.75% Cv. Debs., 3/15/16 9,800,000 8,881,250
- ----------------------------------------------------------------------------------------------------------------
Integrated Device Technology, Inc., 5.50% Cv. Sub. Nts., 6/1/02 7,905,000 7,420,819
- ----------------------------------------------------------------------------------------------------------------
Lennar Corp., Zero Coupon Cv. Debs., 4.34%, 7/29/18(6) 4,000,000 1,625,000
- ----------------------------------------------------------------------------------------------------------------
Loews Corp., 3.125% Cv. Sub. Nts., 9/15/07 7,000,000 6,203,750
- ----------------------------------------------------------------------------------------------------------------
Mutual Risk Management Ltd., Zero Coupon Exchangeable
Sub. Debs., 5.25%, 10/30/15(4),(6) 19,500,000 11,626,875
- ----------------------------------------------------------------------------------------------------------------
National Semiconductor Corp., 6.50% Cv. Sub. Debs., 10/1/02 4,500,000 4,381,875
- ----------------------------------------------------------------------------------------------------------------
Network Associates, Inc., Zero Coupon Cv. Unsec. Sub. Debs., 3.09%, 2/13/18(6) 15,000,000 4,631,250
==============
Total Convertible Corporate Bonds and Notes (Cost $60,506,694) 62,121,819
================================================================================================================
STRUCTURED INSTRUMENTS--0.4%
Shoshone Partners Loan Trust Sr. Nts., 7.063%, 4/28/02
(representing a basket of reference loans and a total return swap
between Chase Manhattan Bank and the Trust) (Cost $17,230,669)(2),(7) 16,800,000 16,128,503
================================================================================================================
SHORT-TERM NOTES--7.9%8
CIT Group Holdings, Inc., 5.08%, 9/2/99 50,000,000 49,992,944
- ----------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.05%, 9/1/99 50,000,000 50,000,000
- ----------------------------------------------------------------------------------------------------------------
Homeside Lending, Inc., 5.16%, 9/15/99 50,000,000 49,899,667
- ----------------------------------------------------------------------------------------------------------------
New Center Asset Trust, 5.14%, 9/9/99 50,000,000 49,942,889
- ----------------------------------------------------------------------------------------------------------------
Prudential Funding Corp., 5.28%, 10/7/99 50,000,000 49,736,000
- ----------------------------------------------------------------------------------------------------------------
Wells Fargo & Co., 5.24%, 9/27/99 50,000,000 49,810,778
==============
Total Short-Term Notes (Cost $299,382,278) 299,382,278
================================================================================================================
REPURCHASE AGREEMENTS--1.3%
Repurchase agreement with First Chicago Capital Markets, 5.41%,
dated 8/31/99, to be repurchased at $50,307,559 on 9/1/99,
collateralized by U.S. Treasury Nts., 4%-6.375%, 11/30/99-2/28/03,
with a value of $49,855,245, and U.S. Treasury Bills, 9/15/99, with a
value of $1,489,466 (Cost $50,300,000) 50,300,000 50,300,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $3,056,460,116) 99.9% 3,763,609,969
- ----------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.1 3,317,990
--------------------------------
NET ASSETS 100.0% $3,766,927,959
================================
</TABLE>
24 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 25
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 7 of
Notes to Financial Statements.
3. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units which
represent debt securities, face amount disclosed represents total underlying
principal.
4. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $87,395,125 or 2.32% of the Fund's net
assets as of August 31, 1999.
5. Face amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
AUD Australian Dollar
CAD Canadian Dollar
ZAR South African Rand
6. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
7. Represents the current interest rate for a variable rate security.
8. Short-term notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase.
9. Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer, and is or was an affiliate, as defined in the
Investment Company Act of 1940, at or during the period ended August 31, 1999.
There were no affiliate securities held by the Fund as of August 31, 1999.
Transactions during the period in which the issuer was an affiliate are as
follows:
<TABLE>
<CAPTION>
SHARES SHARES
AUGUST 31, GROSS GROSS AUGUST 31,
1998 ADDITIONS REDUCTIONS 1999
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FBR Asset Investment Corp.* 500,000 -- -- 500,000
</TABLE>
* Not an affiliate as of August 31, 1999.
See accompanying Notes to Financial Statements.
25 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 26
STATEMENT OF ASSETS AND LIABILITIES August 31, 1999
<TABLE>
<S> <C>
=================================================================================================================
ASSETS
Investments, at value (Cost $3,056,460,116)--see accompanying statement $ 3,763,609,969
- -----------------------------------------------------------------------------------------------------------------
Cash 54,283
- -----------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest and dividends 14,440,651
Investments sold 6,382,518
Shares of beneficial interest sold 1,524,098
Other 133,685
---------------
Total assets 3,786,145,204
=================================================================================================================
LIABILITIES
Options written, at value (premiums received $286,740)--see accompanying statement--Note 6 150,000
- -----------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 10,064,115
Shares of beneficial interest redeemed 6,615,603
Distribution and service plan fees 1,427,161
Transfer and shareholder servicing agent fees 435,886
Shareholder reports 337,905
Trustees' compensation 37,177
Custodian fees 16,911
Other 132,487
---------------
Total liabilities 19,217,245
=================================================================================================================
NET ASSETS $ 3,766,927,959
===============
=================================================================================================================
COMPOSITION OF NET ASSETS
Paid-in capital $ 2,802,312,798
- -----------------------------------------------------------------------------------------------------------------
Undistributed net investment income 27,856,168
- -----------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 229,480,539
- -----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies 707,278,454
---------------
Net assets $ 3,766,927,959
===============
</TABLE>
26 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 27
<TABLE>
================================================================================================================
<S> <C>
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$2,926,923,311 and 214,756,742 shares of beneficial interest outstanding) $13.63
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price) $14.46
- ----------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $720,721,071 and 53,361,565 shares of beneficial interest outstanding) $13.51
- ----------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $119,283,577 and 8,836,395 shares of beneficial interest outstanding) $13.50
</TABLE>
See accompanying Notes to Financial Statements.
27 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 28
STATEMENT OF OPERATIONS For the Year Ended August 31, 1999
<TABLE>
<S> <C>
================================================================================================================
INVESTMENT INCOME
Interest $ 96,837,960
- ----------------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $8,837) 80,122,443
============
Total income 176,960,403
================================================================================================================
EXPENSES
Management fees--Note 4 20,872,455
- ----------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 6,477,338
Class B 7,487,764
Class C 1,195,262
- ----------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 4,993,136
- ----------------------------------------------------------------------------------------------------------------
Shareholder reports 994,511
- ----------------------------------------------------------------------------------------------------------------
Registration and filing fees 168,444
- ----------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 134,171
- ----------------------------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 109,305
- ----------------------------------------------------------------------------------------------------------------
Trustees' compensation 105,874
- ----------------------------------------------------------------------------------------------------------------
Insurance expenses 19,627
- ----------------------------------------------------------------------------------------------------------------
Other 308,754
============
Total expenses 42,866,641
Less expenses paid indirectly--Note 1 (34,482)
------------
Net expenses 42,832,159
================================================================================================================
NET INVESTMENT INCOME 134,128,244
================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 339,194,260
Closing and expiration of option contracts written--Note 6 (173,375)
Foreign currency transactions (26,415)
------------
Net realized gain 338,994,470
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments (72,841,110)
Translation of assets and liabilities denominated in foreign currencies 3,957,619
------------
Net change (68,883,491)
============
Net realized and unrealized gain 270,110,979
================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $404,239,223
============
</TABLE>
See accompanying Notes to Financial Statements.
28 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 29
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, 1999 1998
================================================================================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 134,128,244 $ 120,767,267
- ----------------------------------------------------------------------------------------------------------------
Net realized gain 338,994,470 232,056,916
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (68,883,491) (176,538,903)
-----------------------------------
Net increase in net assets resulting from operations 404,239,223 176,285,280
================================================================================================================
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A (106,190,111) (99,500,973)
Class B (19,189,145) (13,977,579)
Class C (3,049,848) (1,859,540)
- ----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (245,592,889) (154,035,012)
Class B (57,343,807) (26,561,696)
Class C (8,928,939) (3,223,836)
================================================================================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting
from beneficial interest transactions--Note 2:
Class A 60,856,819 253,723,804
Class B 96,317,221 234,393,363
Class C 26,567,442 52,477,300
================================================================================================================
NET ASSETS
Total increase 147,685,966 417,721,111
- ----------------------------------------------------------------------------------------------------------------
Beginning of period 3,619,241,993 3,201,520,882
-----------------------------------
End of period (including undistributed net investment
income of $27,856,168 and $24,389,841, respectively) $3,766,927,959 $3,619,241,993
===================================
</TABLE>
See accompanying Notes to Financial Statements.
29 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 30
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
AUG. 31, JUNE 30,
CLASS A 1999 1998 1997 1996(1) 1996 1995
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $13.75 $14.12 $11.36 $11.39 $10.25 $ 9.44
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .51 .50 .47 .09 .50 .50
Net realized and unrealized gain (loss) 1.03 .41 3.17 (.12) 1.36 .92
-----------------------------------------------------------------
Total income (loss) from
investment operations 1.54 .91 3.64 (.03) 1.86 1.42
- -----------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.49) (.49) (.48) -- (.48) (.48)
Distributions from net realized gain (1.17) (.79) (.40) -- (.24) (.13)
-----------------------------------------------------------------
Total dividends and distributions
to shareholders (1.66) (1.28) (.88) -- (.72) (.61)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.63 $13.75 $14.12 $11.36 $11.39 $10.25
=================================================================
=================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 11.03% 6.17% 33.39% (0.26)% 18.61% 15.66%
=================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $2,927 $2,889 $2,722 $2,110 $2,141 $1,893
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $3,156 $3,072 $2,446 $2,109 $2,054 $1,798
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 3.51% 3.47% 3.97% 3.28% 4.51% 5.15%
Expenses 0.89% 0.87%(4) 0.88%(4) 0.94%(4) 0.89%(4) 0.96%(4)
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 40% 18% 24% 14% 43% 46%
</TABLE>
1. For the two months ended August 31, 1996. The Fund changed its fiscal year
end from June 30 to August 31.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized for periods of less than one full year.
4. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended August 31, 1999, were $1,439,646,035 and $1,230,476,899, respectively.
See accompanying Notes to Financial Statements.
30 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 31
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
AUG. 31, JUNE 30,
CLASS B 1999 1998 1997 1996(1) 1996 1995
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $13.63 $14.01 $11.29 $11.33 $10.21 $ 9.40
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .39 .39 .37 .07 .41 .43
Net realized and unrealized gain (loss) 1.03 .40 3.13 (.11) 1.35 .91
-----------------------------------------------------------------
Total income (loss) from
investment operations 1.42 .79 3.50 (.04) 1.76 1.34
- -----------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.37) (.38) (.38) -- (.40) (.40)
Distributions from net realized gain (1.17) (.79) (.40) -- (.24) (.13)
-----------------------------------------------------------------
Total dividends and distributions
to shareholders (1.54) (1.17) (.78) -- (.64) (.53)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.51 $13.63 $14.01 $11.29 $11.33 $10.21
=================================================================
=================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 10.22% 5.32% 32.17% (0.35)% 17.58% 14.87%
=================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $721 $635 $431 $260 $252 $161
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $749 $575 $344 $255 $208 $122
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 2.71% 2.68% 3.16% 2.48% 3.68% 4.34%
Expenses 1.69% 1.67%(4) 1.69%(4) 1.76%(4) 1.72%(4) 1.79%(4)
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 40% 18% 24% 14% 43% 46%
</TABLE>
1. For the two months ended August 31, 1996. The Fund changed its fiscal year
end from June 30 to August 31.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized for periods of less than one full year.
4. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended August 31, 1999, were $1,439,646,035 and $1,230,476,899, respectively.
See accompanying Notes to Financial Statements.
31 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 32
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
AUGUST 31, JUNE 30,
CLASS C 1999 1998 1997 1996(1) 1996(6)
=================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $13.63 $14.02 $11.30 $11.35 $10.76
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .39 .39 .40 .07 .28
Net realized and unrealized gain (loss) 1.02 .40 3.12 (.12) .88
--------------------------------------------------------------
Total income (loss) from
investment operations 1.41 .79 3.52 (.05) 1.16
- -----------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.38) (.39) (.40) -- (.33)
Distributions from net realized gain (1.16) (.79) (.40) -- (.24)
--------------------------------------------------------------
Total dividends and distributions
to shareholders (1.54) (1.18) (.80) -- (.57)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.50 $13.63 $14.02 $11.30 $11.35
==============================================================
=================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 10.15% 5.30% 32.31% (0.44)% 10.50%
=================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $119 $95 $48 $7 $6
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $120 $77 $25 $7 $3
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 2.70% 2.68% 3.15% 2.55% 3.53%
Expenses 1.69% 1.67%(4) 1.69%(4) 1.79%(4) 1.81%(4)
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 40% 18% 24% 14% 43%
</TABLE>
1. For the two months ended August 31, 1996. The Fund changed its fiscal year
end from June 30 to August 31.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized for periods of less than one full year.
4. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended August 31, 1999, were $1,439,646,035 and $1,230,476,899,
respectively.
6. For the period from November 1, 1995 (inception of offering) to June 30,
1996.
See accompanying Notes to Financial Statements.
32 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Capital Income Fund (the Fund), operated under the name of
Oppenheimer Equity Income Fund through March 31, 1999, is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is to seek as
much current income as is compatible with prudent investment. The Fund's
investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers
Class A, Class B and Class C shares. Class A shares are sold with a front-end
sales charge on investments up to $1 million. Class B and Class C shares may be
subject to a contingent deferred sales charge (CDSC). All classes of shares have
identical rights to earnings, assets and voting privileges, except that each
class has its own expenses directly attributable to that class and exclusive
voting rights with respect to matters affecting that class. Classes A, B and C
have separate distribution and/or service plans. 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. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Trustees. Such securities which cannot be valued by an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Foreign currency exchange contracts are valued based on the
closing prices of the foreign currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
Options are valued based upon the last sale price on the principal exchange on
which the option is traded or, in the absence of any transactions that day, the
value is based upon the last sale price on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
33 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES Continued
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments
is separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
34 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 35
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of distributions made during the year from net
investment income or net realized gains may differ from its ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which the income or realized gain was recorded by
the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended August 31, 1999, amounts have been reclassified to reflect a decrease
in paid-in capital of $86,208, a decrease in undistributed net investment income
of $2,232,813, and an increase in accumulated net realized gain on investments
of $2,319,021.
- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENTS. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Foreign dividend income is often
recorded on the payable date. Realized gains and losses on investments and
unrealized appreciation and depreciation are determined on an identified cost
basis, which is the same basis used for federal income tax purposes.
The preparation of financial statements in conformity with 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 lia-bilities 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.
35 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, 1999 YEAR ENDED AUGUST 31, 1998
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Sold 21,887,567 $ 314,043,113 28,301,749 $ 425,894,349
Dividends and/or
distributions reinvested 23,478,035 330,924,974 16,366,250 238,084,133
Redeemed (40,770,834) (584,111,268) (27,270,231) (410,254,678)
---------------------------------------------------------------------------
Net increase 4,594,768 $ 60,856,819 17,397,768 $ 253,723,804
===========================================================================
- ------------------------------------------------------------------------------------------------------------
CLASS B
Sold 13,221,669 $ 188,310,904 17,875,704 $ 267,182,429
Dividends and/or
distributions reinvested 5,207,911 72,839,456 2,649,899 38,263,417
Redeemed (11,626,909) (164,833,139) (4,755,561) (71,052,483)
---------------------------------------------------------------------------
Net increase 6,802,671 $ 96,317,221 15,770,042 $ 234,393,363
===========================================================================
- ------------------------------------------------------------------------------------------------------------
CLASS C
Sold 4,107,119 $ 58,508,668 4,117,941 $ 61,626,191
Dividends and/or
distributions reinvested 831,248 11,618,577 342,326 4,949,150
Redeemed (3,071,848) (43,559,803) (941,057) (14,098,041)
---------------------------------------------------------------------------
Net increase 1,866,519 $ 26,567,442 3,519,210 $ 52,477,300
===========================================================================
</TABLE>
================================================================================
3. UNREALIZED GAINS AND LOSSES ON SECURITIES
As of August 31, 1999, net unrealized appreciation on securities and options
written of $707,286,593 was composed of gross appreciation of $848,802,019, and
gross depreciation of $141,515,426.
================================================================================
4. MANAGEMENT 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 of 0.75% of
the first $100 million of average annual net assets of the Fund, 0.70% of the
next $100 million, 0.65% of the next $100 million, 0.60% of the next $100
million, 0.55% of the next $100 million and 0.50% of average annual net assets
in excess of $500 million. The Fund's management fee for the year ended August
31, 1999 was 0.52% of average annual net assets for each class of shares.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund and for other
Oppenheimer funds. OFS's total costs of providing such services are allocated
ratably to these funds.
36 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 37
================================================================================
DISTRIBUTION AND SERVICE PLAN FEES. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the period
indicated.
<TABLE>
<CAPTION>
AGGREGATE CLASS A COMMISSIONS COMMISSIONS COMMISSIONS
FRONT-END FRONT-END ON CLASS A ON CLASS B ON CLASS C
SALES CHARGES SALES CHARGES SHARES SHARES SHARES
ON CLASS A RETAINED BY ADVANCED BY ADVANCED BY ADVANCED BY
YEAR ENDED SHARES DISTRIBUTOR DISTRIBUTOR(1) DISTRIBUTOR(1) DISTRIBUTOR(1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
August 31, 1999 $5,280,270 $1,692,621 $533,123 $5,659,987 $484,484
</TABLE>
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
CONTINGENT DEFERRED CONTINGENT DEFERRED CONTINGENT DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES
YEAR ENDED RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
August 31, 1999 $3,248 $1,405,862 $38,726
</TABLE>
The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B and Class C shares under Rule 12b-1 of the Investment
Company Act. Under those plans the Fund pays the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
================================================================================
CLASS A SERVICE PLAN FEES. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of Class A
shares. The Distributor makes payments to plan recipients quarterly at an annual
rate not to exceed 0.25% of the average annual net assets consisting of Class A
shares of the Fund. For the fiscal year ended August 31, 1999, payments under
the Class A Plan totaled $6,477,338, all of which was paid by the Distributor to
recipients. That included $483,135 paid to an affiliate of the Distributor's
parent company. Any unreimbursed expenses the Distributor incurs with respect to
Class A shares in any fiscal year cannot be recovered in subsequent years.
================================================================================
CLASS B AND CLASS C DISTRIBUTION AND SERVICE PLAN FEES. Under each plan, service
fees and distribution fees are computed on the average of the net asset value of
shares in the respective class, determined as of the close of each regular
business day during the period. The Class B and Class C plans provide for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
37 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
CLASS B AND CLASS C DISTRIBUTION AND SERVICE PLAN FEES. Continued
The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The asset-based sales charges on Class B
and Class C shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
The Distributor's actual expenses in selling Class B and Class C shares
may be more than the payments it receives from the contingent deferred sales
charges collected on redeemed shares and from the Fund under the plans. If
either the Class B or the Class C plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales charge
to the Distributor for distributing shares before the plan was terminated. The
plans allow for the carry-forward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the year ended August 31, 1999
were as follows:
<TABLE>
<CAPTION>
DISTRIBUTOR'S DISTRIBUTOR'S
AGGREGATE UNREIMBURSED
UNREIMBURSED EXPENSES AS %
TOTAL PAYMENTS AMOUNT RETAINED EXPENSES OF NET ASSETS
UNDER PLAN BY DISTRIBUTOR UNDER PLAN OF CLASS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B Plan $7,487,764 $6,131,624 $15,983,560 2.22%
Class C Plan 1,195,262 718,537 1,535,378 1.29
</TABLE>
================================================================================
5. FOREIGN CURRENCY CONTRACTS
A foreign currency exchange 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 exchange contracts for operational purposes and to seek to
protect against 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 foreign currency exchange
rates as provided by a reliable bank, dealer or pricing service. Unrealized
appreciation and depreciation on foreign currency contracts are reported in the
Statement of Assets and Liabilities.
The Fund may realize a gain or loss upon the closing or settlement of
the forward transaction. Realized gains and losses are reported with all other
foreign currency gains and losses in the Statement of Operations.
Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency contracts are noted in the Statement of Investments
where applicable.
38 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 39
================================================================================
6. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options
to hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the
principal exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in
the Statement of Investments where applicable. Shares subject to call,
expiration date, exercise price, premium received and market value are detailed
in a note to the Statement of Investments. Options written are reported as a
liability in the Statement of Assets and Liabilities. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.
Written option activity for the year ended August 31, 1999, was as follows:
<TABLE>
<CAPTION>
PUT OPTIONS
------------------------------
NUMBER OF AMOUNT OF
OPTIONS PREMIUMS
- --------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding as of August 31, 1998 -- $ --
Options written 500 370,365
Options closed or expired (250) (83,625)
------------------------------
Options outstanding as of August 31, 1999 250 $ 286,740
==============================
</TABLE>
39 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 40
NOTES TO FINANCIAL STATEMENTS Continued
================================================================================
7. ILLIQUID OR RESTRICTED SECURITIES
As of August 31, 1999, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Trustees as reflecting fair value. A security may also be
considered illiquid if it lacks a readily available market or if its valuation
has not changed for a certain period of time. The Fund intends to invest no more
than 10% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of August 31, 1999, was $26,821,405,
which represents 0.71% of the Fund's net assets, of which $1,176,150 is
considered restricted. Information concerning restricted securities is as
follows:
<TABLE>
<CAPTION>
VALUATION
PER UNIT AS OF
SECURITY ACQUISITION DATE COST PER UNIT AUGUST 31, 1999
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS
Greenpoint Financial Corp. 3/12/99 $30.00 $23.52
</TABLE>
================================================================================
8. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended August 31,
1999.
40 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 41
INDEPENDENT AUDITORS' REPORT
================================================================================
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
OPPENHEIMER CAPITAL INCOME FUND:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Capital Income Fund (formerly
Oppenheimer Equity Income Fund) as of August 31, 1999, the related statement of
operations for the year then ended, the statements of changes in net assets for
the years ended August 31, 1999 and 1998 and the financial highlights for the
period July 1, 1994, to August 31, 1999. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1999, by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Oppenheimer
Capital Income Fund as of August 31, 1999, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
September 22, 1999
41 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 42
FEDERAL INCOME TAX INFORMATION (Unaudited)
================================================================================
In early 2000 shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1999. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
Distributions of $1.2961, $1.2638 and $1.2644 per share were paid to
Class A, Class B and Class C shareholders, respectively, on December 18, 1998,
of which $1.1652 was designated as a "capital gain distribution" for federal
income tax purposes. Whether received in stock or in cash, the capital gain
distribution should be treated by shareholders as a gain from the sale of
capital assets held for more than one year (long-term capital gains).
Dividends paid by the Fund during the fiscal year ended August 31,
1999, which are not designated as capital gain distributions should be
multiplied by 51.10% to arrive at the net amount eligible for the corporate
dividend-received deduction.
The foregoing information is presented to assist shareholders in
reporting distributions received from the Fund to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
42 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 43
OPPENHEIMER CAPITAL INCOME FUND
================================================================================
OFFICERS AND TRUSTEES James C. Swain, Trustee and Chairman of the Board
Bridget A. Macaskill, Trustee and President
William L. Armstrong, Trustee
Robert G. Avis, Trustee
William A. Baker, Trustee
George C. Bowen, Trustee
Jon S. Fossel, Trustee
Sam Freedman, Trustee
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
John P. Doney, Vice President
Michael L. Levine, Vice President
Andrew J. Donohue, Vice President and Secretary
Brian W. Wixted, Treasurer
Robert G. Zack, Assistant Secretary
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
================================================================================
INVESTMENT ADVISOR OppenheimerFunds, Inc.
================================================================================
DISTRIBUTOR OppenheimerFunds Distributor, Inc.
================================================================================
TRANSFER AND SHAREHOLDER OppenheimerFunds Services
SERVICING AGENT
================================================================================
CUSTODIAN OF The Bank of New York
PORTFOLIO SECURITIES
================================================================================
INDEPENDENT AUDITORS Deloitte & Touche LLP
================================================================================
LEGAL COUNSEL Myer, Swanson, Adams & Wolf, P.C.
This is a copy of a report to shareholders of
Oppenheimer Capital Income Fund. This report must
be preceded by a Prospectus of Oppenheimer
Capital Income Fund. For material information
concerning the Fund, see the Prospectus.
SHARES OF OPPENHEIMER FUNDS ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT GUARANTEED BY
ANY BANK, ARE NOT INSURED BY THE FDIC OR ANY
OTHER AGENCY, AND INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.
43 OPPENHEIMER CAPITAL INCOME FUND
<PAGE> 44
INFORMATION AND SERVICES
As an Oppenheimer fund shareholder, you can
benefit from special services designed to make
investing simple. Whether it's automatic
investment plans, timely market updates, or
immediate account access, you can count on us
whenever you need assistance. So call us today,
or visit our website--we're here to help.
INTERNET
24-hr access to account information and
transactions
WWW.OPPENHEIMERFUNDS.COM
-------------------------------------------------
GENERAL INFORMATION
Mon-Fri 8:30am-9pm ET, Sat 10am-4pm ET
1.800.525.7048
-------------------------------------------------
TELEPHONE TRANSACTIONS
Mon-Fri 8:30am-9pm ET, Sat 10am-4pm ET
1.800.852.8457
-------------------------------------------------
PHONELINK
24-hr automated information and automated
transactions
1.800.533.3310
-------------------------------------------------
TELECOMMUNICATIONS DEVICE FOR THE DEAF (TDD)
Mon-Fri 8:30am-7pm ET
1.800.843.4461
-------------------------------------------------
OPPENHEIMERFUNDS INFORMATION HOTLINE
24 hours a day, timely and insightful messages on
the economy and issues that may affect your
investments
1.800.835.3104
-------------------------------------------------
TRANSFER AND SHAREHOLDER SERVICING AGENT
OppenheimerFunds Services
P.O. Box 5270, Denver, CO 80217-5270
[OPPENHEIMERFUNDS LOGO]
Distributor, Inc.
RA0300.001.0899 October 29, 1999
