UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-1512
OPPENHEIMER CAPITAL INCOME FUND
(Exact name of registrant as specified in charter)
6803 SOUTH TUCSON WAY, CENTENNIAL, COLORADO 80112-3924
(Address of principal executive offices) (Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
TWO WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10281-1008
(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
Date of fiscal year end: AUGUST 31
Date of reporting period: SEPTEMBER 1, 2004 - FEBRUARY 28, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
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TOP TEN COMMON STOCK INDUSTRIES
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Oil & Gas 11.6%
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Tobacco 5.6
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Insurance 5.1
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Commercial Banks 4.1
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Diversified Financial Services 3.8
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Specialty Retail 3.3
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Aerospace & Defense 2.2
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Media 2.1
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Pharmaceuticals 1.6
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Industrial Conglomerates 1.0
Portfolio holdings and allocations are subject to change. Percentages are as of
February 28, 2005, and are based on net assets.
TOP TEN COMMON STOCK HOLDINGS
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Kinder Morgan Management LLC 4.7%
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Altria Group, Inc. 4.6
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Kinder Morgan, Inc. 4.5
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CSK Auto Corp. 3.3
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Citigroup, Inc. 3.3
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Everest Re Group Ltd. 3.2
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Washington Mutual, Inc. 1.5
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Bank of America Corp. 1.5
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Raytheon Co. 1.4
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BP plc, ADR 1.3
Portfolio holdings and allocations are subject to change. Percentages are as of
February 28, 2005, and are based on net assets.
For up-to-date Top 10 Fund holdings, please visit www.oppenheimerfunds.com.
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9 | OPPENHEIMER CAPITAL INCOME FUND
TOP HOLDINGS AND ALLOCATIONS
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[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
PORTFOLIO ALLOCATION
Stocks 49.5%
Bonds and Notes 34.8
Convertible Corporate Bonds and Notes 15.5
Cash Equivalents 0.2
Portfolio holdings and allocations are subject to change. Percentages are as of
February 28, 2005, and are based on total market value of investments.
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10 | OPPENHEIMER CAPITAL INCOME FUND
NOTES
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Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
Cumulative total returns are not annualized. The Fund's total returns shown do
not reflect the deduction of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or gains paid by the Fund or
any gains you may realize if you sell your shares.
INVESTORS SHOULD CONSIDER THE FUND'S INVESTMENT OBJECTIVES, RISKS, AND OTHER
CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE FUND'S PROSPECTUS CONTAINS
THIS AND OTHER INFORMATION ABOUT THE FUND, AND MAY BE OBTAINED BY ASKING YOUR
FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR VISITING OUR WEBSITE AT
WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
CLASS A shares of the Fund were first publicly offered on 12/1/70. Unless
otherwise noted, Class A returns include the current maximum initial sales
charge of 5.75%.
CLASS B shares of the Fund were first publicly offered on 8/17/93. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 2% (5-year). Because Class B shares convert to
Class A shares 72 months after purchase, the 10-year return for Class B uses
Class A performance for the period after conversion and the ending account value
does not reflect the deduction of any sales charges. Class B shares are subject
to an annual 0.75% asset-based sales charge.
CLASS C shares of the Fund were first publicly offered on 11/1/95. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
CLASS N shares of the Fund were first publicly offered on 3/1/01. Class N shares
are offered only through retirement plans. Unless otherwise noted, Class N
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
11 | OPPENHEIMER CAPITAL INCOME FUND
FUND EXPENSES
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FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include sales charges (loads) on purchase payments,
contingent deferred sales charges on redemptions; and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and service fees;
and other Fund expenses. The following examples are intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended February 28, 2005.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions
12 | OPPENHEIMER CAPITAL INCOME FUND
described in the Statement of Additional Information). Therefore, the
"hypothetical" lines of the table are useful in comparing ongoing costs only,
and will not help you determine the relative total costs of owning different
funds. In addition, if these transactional costs were included, your costs would
have been higher.
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BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(9/1/04) (2/28/05) FEBRUARY 28, 2005
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Class A Actual $1,000.00 $ 1,114.70 $4.68
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Class A Hypothetical 1,000.00 1,020.38 4.47
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Class B Actual 1,000.00 1,109.90 9.14
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Class B Hypothetical 1,000.00 1,016.17 8.74
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Class C Actual 1,000.00 1,109.80 8.93
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Class C Hypothetical 1,000.00 1,016.36 8.53
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Class N Actual 1,000.00 1,111.60 6.56
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Class N Hypothetical 1,000.00 1,018.60 6.28
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 181/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended February 28, 2005 are as follows:
CLASS EXPENSE RATIOS
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Class A 0.89%
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Class B 1.74
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Class C 1.70
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Class N 1.25
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13 | OPPENHEIMER CAPITAL INCOME FUND
STATEMENT OF INVESTMENTS February 28, 2005 / Unaudited
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VALUE
SHARES SEE NOTE 1
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COMMON STOCKS--45.5%
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CONSUMER DISCRETIONARY--5.4%
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MEDIA--2.1%
Cablevision Systems New York Group, Cl. A 1,2 1,250,000 $ 38,825,000
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Clear Channel Communications, Inc. 2 650,000 21,632,000
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EchoStar Communications Corp., Cl. A 105,000 3,123,750
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Liberty Media Corp., Cl. A 1 225,000 2,281,500
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65,862,250
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SPECIALTY RETAIL--3.3%
CSK Auto Corp. 1,3 6,500,000 103,350,000
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CONSUMER STAPLES--6.4%
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BEVERAGES--0.0%
Anheuser-Busch Cos., Inc. 25,000 1,186,250
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FOOD & STAPLES RETAILING--0.4%
Wal-Mart Stores, Inc. 215,000 11,096,150
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FOOD PRODUCTS--0.4%
B&G Foods, Inc. 850,000 12,665,000
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TOBACCO--5.6%
Altria Group, Inc. 2 2,174,200 142,736,230
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Loews Corp./Carolina Group 2 1,000,000 32,740,000
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175,476,230
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ENERGY--12.0%
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ENERGY EQUIPMENT & SERVICES--0.4%
GlobalSantaFe Corp. 2 275,000 10,312,500
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OIL & GAS--11.6%
BP plc, ADR 2 600,000 38,952,000
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Enbridge Energy Management LLC 3 675,783 35,836,780
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Kinder Morgan Management LLC 3,417,800 146,691,976
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Kinder Morgan, Inc. 2 1,750,000 140,297,500
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361,778,256
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FINANCIALS--14.0%
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COMMERCIAL BANKS--4.1%
Bank of America Corp. 1,000,000 46,650,000
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U.S. Bancorp 2 1,125,900 33,495,525
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Washington Mutual, Inc. 1,120,800 47,028,768
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127,174,293
14 | OPPENHEIMER CAPITAL INCOME FUND
VALUE
SHARES SEE NOTE 1
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DIVERSIFIED FINANCIAL SERVICES--3.8%
Citigroup, Inc. 2,125,000 $101,405,000
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JPMorgan Chase & Co. 182,500 6,670,375
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Morgan Stanley 157,500 8,894,025
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116,969,400
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INSURANCE--5.1%
ACE Ltd. 2 775,000 34,456,500
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Assured Guaranty Ltd. 60,100 1,138,294
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Everest Re Group Ltd. 2 1,147,000 99,639,890
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Prudential Financial, Inc. 2 415,000 23,655,000
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158,889,684
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REAL ESTATE--0.4%
Anthracite Capital, Inc. 1,000,000 11,940,000
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Origen Financial, Inc. 225,000 1,633,500
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13,573,500
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THRIFTS & MORTGAGE FINANCE--0.6%
PMI Group, Inc. (The) 500,000 20,125,000
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HEALTH CARE--2.0%
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BIOTECHNOLOGY--0.4%
MedImmune, Inc. 1 300,000 7,224,000
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Wyeth 2 150,000 6,123,000
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13,347,000
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PHARMACEUTICALS--1.6%
Abbott Laboratories 450,000 20,695,500
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Pfizer, Inc. 1,050,000 27,604,500
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48,300,000
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INDUSTRIALS--4.1%
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AEROSPACE & DEFENSE--2.2%
Honeywell International, Inc. 2 52,500 1,993,425
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Lockheed Martin Corp. 2 350,000 20,727,000
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Raytheon Co. 2 1,175,000 44,932,000
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67,652,425
15 | OPPENHEIMER CAPITAL INCOME FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
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VALUE
SHARES SEE NOTE 1
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COMMERCIAL SERVICES & SUPPLIES--0.9%
Cendant Corp. 1,225,000 $ 27,097,000
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PHH Corp. 1 49,000 1,029,000
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28,126,000
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INDUSTRIAL CONGLOMERATES--1.0%
General Electric Co. 350,000 12,320,000
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Tyco International Ltd. 2 625,000 20,925,000
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33,245,000
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INFORMATION TECHNOLOGY--0.4%
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SOFTWARE--0.4%
Microsoft Corp. 312,500 7,868,750
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Synopsys, Inc. 1 175,000 3,167,500
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11,036,250
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MATERIALS--0.3%
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CONTAINERS & PACKAGING--0.2%
Packaging Corp. of America 256,600 6,291,832
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PAPER & FOREST PRODUCTS--0.1%
Bowater, Inc. 40,000 1,553,200
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TELECOMMUNICATION SERVICES--0.9%
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DIVERSIFIED TELECOMMUNICATION SERVICES--0.6%
Citizens Communications Co. 575,000 7,670,500
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FairPoint Communications, Inc. 1 290,000 5,046,000
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SBC Communications, Inc. 2 25,000 601,250
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Sprint Corp. 100,000 2,368,000
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Verizon Communications, Inc. 100,000 3,597,000
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19,282,750
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WIRELESS TELECOMMUNICATION SERVICES--0.3%
AT&T Corp. 2 175,000 3,400,250
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Nextel Communications, Inc., Cl. A 1,2 150,000 4,414,500
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7,814,750
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Total Common Stocks (Cost $966,920,742) 1,415,107,720
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PREFERRED STOCKS--8.4%
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AES Trust III, 6.75% Cv. 119,700 6,014,925
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Aquila, Inc., 6.75% Cv. 355,000 11,668,850
16 | OPPENHEIMER CAPITAL INCOME FUND
VALUE
SHARES SEE NOTE 1
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PREFERRED STOCKS Continued
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Calpine Capital Trust III, 5% Cum. Cv. Remarketable Term Income
Deferrable Equity Securities, Non-Vtg. 370,000 $ 18,037,500
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CenterPoint Energy, Inc., 2% Cv. Zero-Premium Exchangeable Sub. Nts., 9/15/29
(exchangeable for cash based on value of Time Warner, Inc. common stock) 1,000,000 35,002,000
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Credit Suisse First Boston, Inc., (New York) 2.32% Cv. Equity Linked Nts.
(redemption linked to Comcast Corp., Cl. A common stock) 1 1,060,200 32,799,938
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Emmis Communications Corp., 6.25% Cum. Cv., Series A, Non-Vtg. 400,000 18,332,000
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Federal National Mortgage Assn., Cv. 5.375%, Non-Vtg. 1 130 13,305,062
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Freeport-McMoRan Copper & Gold, Inc., 5.50% Cv. 4 8,750 9,001,563
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McKesson Financing Trust, 5% Cum. Cv., Non-Vtg. 37,500 1,987,500
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Sempra Energy, 8.50% Cv. Equity Units (each equity unit consists of income
equity units, each has a stated value of $25 and consists of a purchase
contract to purchase Sempra Energy common stock and $25 principal
amount of Sempra Energy, 5.60% sr. nts., 5/17/07) 5 575,000 18,934,750
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Six Flags, Inc., 7.25% Cum. Cv. Preferred Income Equity Redeemable Shares,
Non-Vtg. 525,360 11,268,972
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Travelers Property Casualty Corp., 4.50% Cv. Jr. Unsec. Sub. Nts. 1,750,000 40,512,500
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United Rentals Trust I, 6.50% Cv. Quarterly Income Preferred Securities 575,000 24,796,875
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Williams Cos., Inc. (The), 5.50% Cv. Jr. Unsec. Sub. Debs. 65,000 5,988,125
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XL Capital Ltd., 6.50% Cv. 595,300 14,549,132
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Total Preferred Stocks (Cost $252,580,165) 262,199,692
PRINCIPAL
AMOUNT
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MORTGAGE-BACKED OBLIGATIONS--16.0%
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Banc of America Commercial Mortgage, Inc., Commercial Mtg.
Pass-Through Certificates, Series 2004-6, Cl. A3, 4.512%, 12/10/42 $ 2,310,000 2,284,910
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Bank of America Mortgage Securities, Inc., Collateralized Mtg. Obligations
Pass-Through Certificates:
Series 2004-2, Cl. 2A1, 6.50%, 7/20/32 3,979,269 4,047,008
Series 2004-8, Cl. 5A1, 6.50%, 5/25/32 3,070,630 3,168,506
Series 2004-E, Cl. 2A9, 3.712%, 6/25/34 2,058,507 2,061,273
Series 2004-G, Cl. 2A1, 2.469%, 8/25/34 1,109,718 1,108,578
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Countrywide Alternative Loan Trust, Collateralized Mtg. Obligations:
Series 2004-J9, Cl. 1A1, 2.83%, 10/25/34 6 2,559,157 2,561,837
Series 2005-J1, Cl. 3A1, 6.50%, 8/25/32 4,081,664 4,184,337
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Federal Home Loan Mortgage Corp.:
6%, 9/1/34-10/1/34 32,891,926 33,807,056
6.50%, 7/1/28-4/1/34 1,718,361 1,792,977
7%, 9/1/31-11/1/33 15,017,435 15,845,374
7%, 3/1/35 7 7,853,000 8,280,007
8%, 4/1/16 924,583 977,945
9%, 8/1/22-5/1/25 265,408 294,873
17 | OPPENHEIMER CAPITAL INCOME FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
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PRINCIPAL VALUE
AMOUNT SEE NOTE 1
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MORTGAGE-BACKED OBLIGATIONS Continued
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Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through Certificates:
Series 1669, Cl. G, 6.50%, 2/15/23 $ 503,730 $ 506,768
Series 2034, Cl. Z, 6.50%, 2/15/28 1,097,789 1,131,052
Series 2053, Cl. Z, 6.50%, 4/15/28 1,238,793 1,281,058
Series 2055, Cl. ZM, 6.50%, 5/15/28 1,482,367 1,530,021
Series 2075, Cl. D, 6.50%, 8/15/28 3,832,071 3,960,338
Series 2080, Cl. Z, 6.50%, 8/15/28 956,973 979,018
Series 2387, Cl. PD, 6%, 4/15/30 1,924,057 1,983,116
Series 2466, Cl. PD, 6.50%, 4/15/30 378,304 379,177
Series 2498, Cl. PC, 5.50%, 10/15/14 234,733 236,307
Series 2500, Cl. FD, 3.09%, 3/15/32 6 628,574 632,520
Series 2526, Cl. FE, 2.99%, 6/15/29 6 748,138 752,037
Series 2550, Cl. QK, 4.50%, 4/15/22 900,000 901,776
Series 2551, Cl. FD, 2.99%, 1/15/33 6 598,839 603,111
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Federal Home Loan Mortgage Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 176, Cl. IO, 1.299%, 6/1/26 8 1,016,255 200,759
Series 183, Cl. IO, (0.44)%, 4/1/27 8 1,643,372 325,461
Series 184, Cl. IO, 3.56%, 12/1/26 8 1,669,764 326,514
Series 192, Cl. IO, 2.654%, 2/1/28 8 504,844 99,367
Series 200, Cl. IO, 2.426%, 1/1/29 8 619,695 123,873
Series 2130, Cl. SC, 12.351%, 3/15/29 8 1,211,145 113,535
Series 2796, Cl. SD, 18.889%, 7/15/26 8 1,760,681 177,872
Series 2920, Cl. S, 30.763%, 1/15/35 8 11,219,359 649,362
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Federal Home Loan Mortgage Corp., Principal-Only Stripped Mtg.-Backed
Security, Series 176, Cl. PO, 6.694%, 6/1/26 9 483,716 415,676
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Federal National Mortgage Assn.:
5%, 3/1/20-3/1/35 7 97,871,000 97,718,089
5.50%, 3/1/20-3/1/35 7 54,960,000 55,763,816
5.50%, 3/1/33-4/1/34 24,047,810 24,313,699
6%, 3/1/20-3/1/35 7 42,903,000 44,213,573
6%, 3/1/23-8/1/24 11,974,573 12,343,276
6.50%, 10/1/30 600,283 626,516
6.50%, 4/1/35 7 59,309,000 61,774,001
7%, 1/1/31-7/1/34 13,061,496 13,783,576
7%, 3/5/35 7 2,545,000 2,684,181
7.50%, 8/1/29-3/1/30 3,893,172 4,172,796
8.50%, 7/1/32 138,607 150,334
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Federal National Mortgage Assn., Collateralized Mtg. Obligations,
Trust 2002-T1, Cl. A2, 7%, 11/25/31 3,482,197 3,680,247
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Federal National Mortgage Assn., Collateralized Mtg. Obligations, Gtd.
Real Estate Mtg. Investment Conduit Pass-Through Certificates:
Trust 1993-87, Cl. Z, 6.50%, 6/25/23 2,948,677 3,064,844
Trust 1998-63, Cl. PG, 6%, 3/25/27 481,278 482,840
Trust 2001-50, Cl. NE, 6%, 8/25/30 1,133,235 1,148,172
Trust 2001-70, Cl. LR, 6%, 9/25/30 1,002,412 1,017,767
18 | OPPENHEIMER CAPITAL INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- ---------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mtg. Obligations, Gtd.
Real Estate Mtg. Investment Conduit Pass-Through Certificates: Continued
Trust 2001-72, Cl. NH, 6%, 4/25/30 $ 777,926 $ 790,511
Trust 2001-74, Cl. PD, 6%, 5/25/30 333,899 337,246
Trust 2002-50, Cl. PD, 6%, 9/25/27 151,567 151,415
Trust 2002-77, Cl. WF, 2.99%, 12/18/32 6 951,426 957,327
Trust 2002-94, Cl. MA, 4.50%, 8/25/09 1,306,337 1,307,757
Trust 2003-10, Cl. HP, 5%, 2/25/18 3,950,000 3,951,826
Trust 2003-81, Cl. PA, 5%, 2/25/12 400,076 400,784
Trust 2004-101, Cl. BG, 5%, 1/25/20 2,550,000 2,557,282
- ---------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Interest-Only Stripped Mtg.-Backed Security:
Trust 2002-47, Cl. NS, 6.37%, 4/25/32 8 2,248,767 232,339
Trust 2002-51, Cl. S, 6.641%, 8/25/32 8 2,064,676 209,756
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Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security:
Trust 222, Cl. 2, (4.11)%, 6/1/23 8 3,399,279 688,619
Trust 240, Cl. 2, (1.35)%, 9/1/23 8 5,051,239 1,030,050
Trust 252, Cl. 2, (4.531)%, 11/1/23 8 2,606,194 522,852
Trust 254, Cl. 2, (1.243)%, 1/1/24 8 1,287,307 260,333
Trust 273, Cl. 2, (1.564)%, 7/1/26 8 739,982 142,223
Trust 303, Cl. IO, 1.27%, 11/1/29 8 1,028,025 209,219
Trust 308, Cl. 2, 1.541%, 9/1/30 8 3,176,618 585,754
Trust 321, Cl. 2, (9.75)%, 3/1/32 8 11,365,581 2,343,780
Trust 329, Cl. 2, (1.85)%, 1/1/33 8 4,664,957 1,030,019
Trust 333, Cl. 2, (0.83)%, 3/1/33 8 8,762,801 1,956,204
Trust 334, Cl. 17, (11.32)%, 2/1/33 8 1,863,018 412,098
Trust 2001-81, Cl. S, 10.982%, 1/25/32 8 1,186,362 120,277
Trust 2002-52, Cl. SD, 7.422%, 9/25/32 8 2,576,750 219,735
Trust 2002-77, Cl. SH, 15.832%, 12/18/32 8 1,460,146 149,235
Trust 2002-9, Cl. MS, 7.685%, 3/25/32 8 1,417,439 150,210
Trust 2004-54, Cl. DS, 14.421%, 11/25/30 8 2,445,168 207,146
Trust 2005-19, Cl. SA, 28.60%, 6/30/31 8 29,687,210 1,855,451
Trust 2005-6, Cl. SE, 28.154%, 2/25/35 8 7,370,207 521,264
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Federal National Mortgage Assn., Principal-Only
Stripped Mtg.-Backed Security,
Trust 1993-184, Cl. M, 10.087%, 9/25/23 9 1,118,037 959,052
- ---------------------------------------------------------------------------------------------------------
First Union National Bank/Lehman Brothers/Bank of America Commercial
Mtg. Trust, Pass-Through Certificates, Series 1998-C2, Cl. A2, 6.56%, 11/18/35 1,730,000 1,836,548
- ---------------------------------------------------------------------------------------------------------
GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations:
Series 2004-C3, Cl. A2, 4.433%, 7/10/39 1,720,000 1,721,077
Series 2005-C1, Cl. A3, 4.578%, 6/10/48 1,000,000 993,086
- ---------------------------------------------------------------------------------------------------------
GMAC Commercial Mortgage Securities, Inc., Commercial Mtg. Obligations,
Series 2004-C3, Cl.A4, 4.547%, 12/10/41 1,480,000 1,468,295
- ---------------------------------------------------------------------------------------------------------
GMAC Commercial Mortgage Securities, Inc., Commercial Mtg.
Pass-Through Certificates, Series 1997-C1, Cl. A3, 6.869%, 7/15/29 1,277,219 1,338,813
- ---------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 8.50%, 8/15/17-12/15/17 335,709 365,900
19 | OPPENHEIMER CAPITAL INCOME FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- ----------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security:
Series 2001-21, Cl. SB, 10.244%, 1/16/27 8 $ 2,359,388 $ 215,917
Series 2002-15, Cl. SM, 4.757%, 2/16/32 8 2,156,947 193,104
Series 2002-76, Cl. SY, 6.792%, 12/16/26 8 5,157,864 481,747
Series 2004-11, Cl. SM, 5.717%, 1/17/30 8 2,023,029 163,734
- ---------------------------------------------------------------------------------------------------------
Greenwich Capital Commercial Funding Corp., Commercial Mtg.
Pass-Through Certificates, Series 2005-G G3, Cl. A2, 4.305%, 8/10/42 1,990,000 1,977,485
- ---------------------------------------------------------------------------------------------------------
GS Mortgage Securities Corp. II, Commercial Mtg. Pass-Through Certificates:
Series 2004-C1, Cl. A1, 3.659%, 10/10/28 1,665,658 1,629,824
Series 2004-GG2, Cl. A3, 4.602%, 8/10/38 1,080,000 1,087,960
- ---------------------------------------------------------------------------------------------------------
GSR Mortgage Loan Trust, Collateralized Mtg. Obligations, Series 04-12,
Cl. 3A1, 4.577%, 12/25/34 6,10 4,323,522 4,322,626
- ---------------------------------------------------------------------------------------------------------
Mastr Alternative Loan Trust, Pass-Through Collateralized Mtg. Obligations,
Series 2004-6, Cl. 10A1, 6%, 7/25/34 4,373,313 4,486,157
- ---------------------------------------------------------------------------------------------------------
Mastr Seasoned Securities Trust, Collateralized Mtg. Obligations,
Series 2004-2, Cl. A1, 6.50%, 8/25/32 6,185,269 6,345,699
- ---------------------------------------------------------------------------------------------------------
Nomura Asset Securities Corp., Commercial Mtg. Pass-Through Certificates,
Series 1998-D6, Cl. A1B, 6.59%, 3/15/30 1,950,000 2,082,152
- ---------------------------------------------------------------------------------------------------------
Prudential Mortgage Capital Co. II LLC, Commercial Mtg. Pass-Through
Certificates, Series PRU-HTG 2000-C1, Cl. A2, 7.306%, 10/6/15 2,380,000 2,704,926
- ---------------------------------------------------------------------------------------------------------
Wachovia Bank Commercial Mortgage Trust, Commercial Mtg. Obligations,
Series 2005-C16, Cl. A2, 4.38%, 10/15/41 3,030,000 3,018,489
- ---------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed Securities Trust, Collateralized
Mtg. Obligations:
Series 2004-DD, Cl. 2 A1, 4.548%, 1/25/35 4,861,355 4,869,901
Series 2004-N, Cl. A10, 3.803%, 8/25/34 10 3,760,854 3,769,722
Series 2004-W, Cl. A2, 4.629%, 11/25/34 6 2,037,964 2,038,853
------------
Total Mortgage-Backed Obligations (Cost $498,184,612) 496,032,905
- ---------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--3.0%
- ---------------------------------------------------------------------------------------------------------
Aesop Funding II LLC, Automobile Asset-Backed Certificates,
Series 2005-1A, Cl. A2, 2.68%, 4/20/08 6 900,000 900,000
- ---------------------------------------------------------------------------------------------------------
Bank One Auto Securitization Trust, Automobile Receivable Certificates,
Series 2003-1, Cl. A2, 1.29%, 8/21/06 632,464 631,572
- ---------------------------------------------------------------------------------------------------------
BMW Vehicle Owner Trust, Automobile Loan Certificates,
Series 2004-A, Cl. A2, 1.88%, 10/25/06 2,554,858 2,548,176
- ---------------------------------------------------------------------------------------------------------
Capital Auto Receivables Asset Trust, Automobile Mtg.-Backed Nts.,
Series 2004-2, Cl. A3, 3.58%, 1/15/09 2,990,000 2,951,773
- ---------------------------------------------------------------------------------------------------------
Centex Home Equity Co. LLC, Home Equity Loan Asset-Backed Certificates:
Series 2004-A, Cl. AF1, 2.03%, 6/25/19 394,781 394,154
Series 2004-D, Cl. AF1, 2.98%, 4/25/20 10 1,298,821 1,292,670
20 | OPPENHEIMER CAPITAL INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- --------------------------------------------------------------------------------------------------
Chase Funding Mortgage Loan Asset-Backed Certificates,
Home Equity Mtg. Obligations:
Series 2002-4, Cl. 1A3, 3.44%, 4/25/23 $ 278,385 $ 278,133
Series 2003-1, Cl. 1A3, 3.14%, 7/25/23 863,745 862,697
Series 2003-4, Cl. 1A2, 2.138%, 7/25/18 884,107 881,558
Series 2003-5, Cl. 1A2, 2.451%, 11/25/18 610,000 605,546
Series 2004-1, Cl. 2A1, 2.76%, 9/25/21 6 1,128,059 1,128,779
- --------------------------------------------------------------------------------------------------
Chase Manhattan Auto Owner Trust, Automobile Loan Pass-Through
Certificates, Series 2002-A, Cl. A4, 4.24%, 9/15/08 628,295 632,274
- --------------------------------------------------------------------------------------------------
CIT Equipment Collateral, Equipment Receivable-Backed Nts.,
Series 2004-DFS, Cl. A2, 2.66%, 11/20/06 10 2,250,000 2,235,991
- --------------------------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust, Credit Card Receivable Nts.:
Series 2001-A6, Cl. A6, 5.65%, 6/16/08 2,780,000 2,849,383
Series 2002-A3, Cl. A3, 4.40%, 5/15/07 2,230,000 2,237,886
Series 2003-C4, Cl. C4, 5%, 6/10/15 430,000 423,323
- --------------------------------------------------------------------------------------------------
CitiFinancial Mortgage Securities, Inc., Home Equity Collateralized Mtg.
Obligations, Series 2003-3, Cl. AF1, 2.77%, 8/25/33 6 509,197 509,511
- --------------------------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc., Home Equity Mtg. Obligations,
Series 2004-OPT1, Cl. A1B, 2.388%, 9/1/34 10 1,463,724 1,461,894
- --------------------------------------------------------------------------------------------------
Countrywide Asset-Backed Certificates, Inc., Home Equity Asset-Backed
Certificates, Series 2002-4, Cl. A1, 3.02%, 2/25/33 6 392,683 396,659
- --------------------------------------------------------------------------------------------------
DaimlerChrysler Auto Trust, Automobile Loan Pass-Through Certificates:
Series 2001-D, Cl. A4, 3.78%, 2/6/07 626,024 628,000
Series 2003-B, Cl. A2, 1.61%, 7/10/06 2,152,527 2,149,753
Series 2004-B, Cl. A2, 2.48%, 2/8/07 10 2,700,000 2,694,826
Series 2004-C, Cl. A2, 2.62%, 6/8/07 4,210,000 4,193,964
Series 2005-A, Cl. A2, 3.22%, 9/8/07 10 3,670,000 3,658,146
- --------------------------------------------------------------------------------------------------
Ford Credit Auto Owner Trust, Automobile Loan Pass-Through Certificates:
Series 2004-A, Cl. A2, 2.13%, 10/15/06 4,467,853 4,454,024
Series 2005-A, Cl. A3, 3.56%, 11/17/08 2,200,000 2,187,933
- --------------------------------------------------------------------------------------------------
Harley-Davidson Motorcycle Trust, Motorcycle Receivable Nts.,
Series 2003-3, Cl. A1, 1.50%, 1/15/08 1,589,196 1,584,662
- --------------------------------------------------------------------------------------------------
Honda Auto Receivables Owner Trust, Automobile Receivable Obligations:
Series 2003-3, Cl. A2, 1.52%, 4/21/06 1,121,345 1,119,776
Series 2003-4, Cl. A2, 1.58%, 7/17/06 1,860,170 1,856,463
Series 2005-1, Cl. A2, 3.21%, 5/21/07 10 1,470,000 1,468,383
- --------------------------------------------------------------------------------------------------
Household Automotive Trust, Automobile Loan Certificates,
Series 2003-2, Cl. A2, 1.56%, 12/18/06 700,442 699,368
- --------------------------------------------------------------------------------------------------
M&I Auto Loan Trust, Automobile Loan Certificates:
Series 2002-1, Cl. A3, 2.49%, 10/22/07 841,791 841,464
Series 2003-1, Cl. A2, 1.60%, 7/20/06 898,823 898,060
- --------------------------------------------------------------------------------------------------
MBNA Credit Card Master Note Trust, Credit Card Receivables,
Series 2003-C7, Cl. C7, 3.94%, 3/15/16 6 4,080,000 4,330,493
21 | OPPENHEIMER CAPITAL INCOME FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- ---------------------------------------------------------------------------------------------------
National City Auto Receivables Trust, Automobile Receivable Obligations,
Series 2004-A, Cl. A2, 1.50%, 2/15/07 $ 1,387,885 $ 1,383,782
- ---------------------------------------------------------------------------------------------------
Nissan Auto Lease Trust, Automobile Lease Obligations, Series 2004-A,
Cl. A2, 2.55%, 1/15/07 1,950,000 1,941,199
- ---------------------------------------------------------------------------------------------------
Nissan Auto Receivables Owner Trust, Automobile Receivable Nts.:
Series 2002-A, Cl. A4, 4.28%, 10/16/06 441,038 442,592
Series 2004-A, Cl. A2, 1.40%, 7/17/06 1,585,854 1,580,249
- ---------------------------------------------------------------------------------------------------
Option One Mortgage Loan Trust, Home Equity Mtg. Obligations,
Series 2004-3, Cl. A2, 2.80%, 11/25/34 6,10 1,116,358 1,117,201
- ---------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust,
Home Equity Pass-Through Certificates:
Series 2004-5, Cl. A F2, 3.735%, 11/10/34 10 800,000 793,657
Series 2005-1, Cl. A F2, 3.914%, 5/25/35 600,000 596,063
- ---------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Collateralized Mtg. Obligations,
Mtg. Pass-Through Certificates, Series 2005-4XS, Cl. 3A1, 5.18%, 3/26/35 5,670,000 5,724,928
- ---------------------------------------------------------------------------------------------------
Toyota Auto Receivables Owner Trust, Automobile Mtg.-Backed Obligations:
Series 2002-B, Cl. A3, 3.76%, 6/15/06 44,463 44,510
Series 2003-B, Cl. A2, 1.43%, 2/15/06 108,094 108,090
- ---------------------------------------------------------------------------------------------------
USAA Auto Owner Trust, Automobile Loan Asset-Backed Nts.:
Series 2002-1, Cl. A3, 2.41%, 10/16/06 311,905 311,862
Series 2004-1, Cl. A2, 1.43%, 9/15/06 3,484,028 3,474,733
Series 2004-2, Cl. A2, 2.41%, 2/15/07 2,730,000 2,722,662
Series 2004-3, Cl. A2, 2.79%, 6/15/07 1,980,000 1,973,268
- ---------------------------------------------------------------------------------------------------
Volkswagen Auto Lease Trust, Automobile Lease Asset-Backed Securities:
Series 2004-A, Cl. A2, 2.47%, 1/22/07 2,660,000 2,645,661
Series 2005-A, Cl. A2, 3.52%, 4/20/07 7 2,580,000 2,579,742
- ---------------------------------------------------------------------------------------------------
Volkswagen Auto Loan Enhanced Trust, Automobile Loan Receivable
Certificates, Series 2003-2, Cl. A2, 1.55%, 6/20/06 925,574 923,993
- ---------------------------------------------------------------------------------------------------
Wachovia Auto Owner Trust, Automobile Receivable Nts.,
Series 2004-B, Cl. A2, 2.40%, 5/21/07 1,940,000 1,931,919
- ---------------------------------------------------------------------------------------------------
Wells Fargo Home Equity Trust, Collateralized Mtg. Obligations,
Series 2004-2, Cl. AI1B, 2.94%, 9/25/18 3,846,460 3,821,692
- ---------------------------------------------------------------------------------------------------
Whole Auto Loan Trust, Automobile Loan Receivable Certificates:
Series 2003-1, Cl. A2A, 1.40%, 4/15/06 1,068,476 1,067,066
Series 2004-1, Cl. A2A, 2.59%, 5/15/07 2,500,000 2,488,009
-----------
Total Asset-Backed Securities (Cost $93,968,820) 93,660,172
- ---------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--2.6%
- ---------------------------------------------------------------------------------------------------
Fannie Mae Unsec. Nts., 3.69%, 10/5/07 11 2,255,000 2,035,722
- ---------------------------------------------------------------------------------------------------
Federal Home Loan Bank Unsec. Bonds, 2.75%, 10/15/06 6,000,000 5,921,784
- ---------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Unsec. Nts.:
6.25%, 7/15/32 550,000 644,999
6.625%, 9/15/09 4,670,000 5,133,035
22 | OPPENHEIMER CAPITAL INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS Continued
- ----------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Unsec. Nts.:
4.25%, 7/15/07 $ 9,790,000 $ 9,879,304
6.625%, 9/15/09 9,455,000 10,372,381
7.25%, 5/15/30 1,625,000 2,121,546
- ----------------------------------------------------------------------------------------------
Tennessee Valley Authority Bonds:
5.375%, 11/13/08 238,000 248,589
7.125%, 5/1/30 1,689,000 2,181,501
Series A, 6.79%, 5/23/12 22,112,000 25,144,462
- ----------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
5.50%, 8/15/28 8,053,000 8,855,473
6.125%, 11/15/27 12 4,639,000 5,488,883
STRIPS, 2.99%, 2/15/10 11 1,075,000 883,429
STRIPS, 3.76%, 2/15/13 11 1,274,000 902,550
STRIPS, 4.96%, 2/15/16 11 1,157,000 701,483
------------
Total U.S. Government Obligations (Cost $80,495,349) 80,515,141
- ----------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--0.0%
- ----------------------------------------------------------------------------------------------
United Mexican States Nts., 7.50%, 1/14/12 (Cost $1,237,760) 1,205,000 1,358,638
- ----------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--12.5%
- ----------------------------------------------------------------------------------------------
Aetna, Inc., 7.375% Sr. Unsec. Nts., 3/1/06 14 3,060,000 3,163,795
- ----------------------------------------------------------------------------------------------
AIG SunAmerica Global Financing II, 7.60% Sr. Sec. Nts., 6/15/05 4 1,100,000 1,113,916
- ----------------------------------------------------------------------------------------------
Albertson's, Inc.:
8% Sr. Unsec. Debs., 5/1/31 1,450,000 1,824,535
8.70% Sr. Unsec. Debs., 5/1/30 751,000 1,001,010
- ----------------------------------------------------------------------------------------------
Allied Waste North America, Inc.:
5.75% Sr. Sec. Nts., Series B, 2/15/11 5,000,000 4,750,000
8.50% Sr. Sub. Nts., 12/1/08 2,500,000 2,700,000
8.875% Sr. Nts., Series B, 4/1/08 1,230,000 1,331,475
- ----------------------------------------------------------------------------------------------
Allstate Financial Global Funding LLC, 4.25% Nts., 9/10/08 4 625,000 623,806
- ----------------------------------------------------------------------------------------------
Allstate Life Global Funding II, 3.50% Nts., 7/30/07 850,000 839,204
- ----------------------------------------------------------------------------------------------
American Express Centurion Bank, 4.375% Nts., 7/30/09 1,140,000 1,142,765
- ----------------------------------------------------------------------------------------------
American Honda Finance Corp., 3.85% Nts., 11/6/08 4 2,025,000 1,992,879
- ----------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc.:
7.50% Sr. Unsec. Nts., 5/1/07 14 770,000 825,652
8.125% Sr. Unsec. Nts., 5/1/12 2,370,000 2,827,661
- ----------------------------------------------------------------------------------------------
AXA, 8.60% Unsec. Sub. Nts., 12/15/30 1,810,000 2,443,457
- ----------------------------------------------------------------------------------------------
Bank of America Corp., 4.875% Sr. Unsec. Nts., 1/15/13 40,000 40,376
- ----------------------------------------------------------------------------------------------
Bank Plus Corp., 12% Sr. Nts., 7/18/07 2,500,000 2,687,500
- ----------------------------------------------------------------------------------------------
Bankers Trust Corp., 7.375% Unsec. Sub. Nts., 5/1/08 250,000 272,888
- ----------------------------------------------------------------------------------------------
Beazer Homes USA, Inc.:
8.375% Sr. Nts., 4/15/12 800,000 883,000
8.625% Sr. Unsec. Nts., 5/15/11 1,285,000 1,397,438
23 | OPPENHEIMER CAPITAL INCOME FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- -------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- -------------------------------------------------------------------------------------------------
Boeing Capital Corp., 5.75% Sr. Nts., 2/15/07 $ 261,000 $ 269,609
- -------------------------------------------------------------------------------------------------
British Telecommunications plc:
7.875% Nts., 12/15/05 1,940,000 2,002,518
8.125% Nts., 12/15/10 1,420,000 1,676,702
- -------------------------------------------------------------------------------------------------
Calpine Canada Energy Finance ULC, 8.50% Sr. Unsec. Nts., 5/1/08 19,500,000 14,722,500
- -------------------------------------------------------------------------------------------------
Calpine Corp., 8.50% Sr. Unsec. Nts., 2/15/11 2,500,000 1,787,500
- -------------------------------------------------------------------------------------------------
Canadian National Railway Co., 4.25% Nts., 8/1/09 433,000 430,064
- -------------------------------------------------------------------------------------------------
CenterPoint Energy, Inc.:
5.875% Sr. Nts., 6/1/08 1,710,000 1,776,758
8.125% Unsec. Nts., Series B, 7/15/05 475,000 483,383
- -------------------------------------------------------------------------------------------------
Chancellor Media CCU, 8% Sr. Unsec. Nts., 11/1/08 3,050,000 3,372,751
- -------------------------------------------------------------------------------------------------
Charter Communications Holdings LLC/Charter Communications
Holdings Capital Corp.:
0%/13.50% Sr. Sub. Disc. Nts., 1/15/11 13 4,250,000 3,474,375
8.625% Sr. Unsec. Nts., 4/1/09 42,500,000 34,956,250
9.92% Sr. Unsec. Disc. Nts., 4/1/11 50,000,000 41,000,000
- -------------------------------------------------------------------------------------------------
Chesapeake Energy Corp.:
6.875% Sr. Unsec. Nts., 1/15/16 5,601,000 6,049,080
7.50% Sr. Nts., 6/15/14 1,660,000 1,867,500
- -------------------------------------------------------------------------------------------------
CIGNA Corp., 7.40% Unsec. Nts., 5/15/07 3,613,000 3,852,618
- -------------------------------------------------------------------------------------------------
CIT Group, Inc., 7.75% Sr. Unsec. Unsub. Nts., 4/2/12 2,320,000 2,715,077
- -------------------------------------------------------------------------------------------------
Citigroup, Inc., 6.625% Unsec. Sub. Nts., 6/15/32 3,045,000 3,485,523
- -------------------------------------------------------------------------------------------------
Citizens Communications Co., 9.25% Sr. Nts., 5/15/11 462,000 534,765
- -------------------------------------------------------------------------------------------------
Columbia/HCA Healthcare Corp., 6.91% Nts., 6/15/05 1,069,000 1,083,816
- -------------------------------------------------------------------------------------------------
ConAgra Foods, Inc., 6% Nts., 9/15/06 1,585,000 1,633,396
- -------------------------------------------------------------------------------------------------
Conectiv, Inc., 5.30% Unsec. Unsub. Nts., Series B, 6/1/05 372,000 373,452
- -------------------------------------------------------------------------------------------------
Constellation Energy Group, 7% Unsec. Nts., 4/1/12 2,395,000 2,714,974
- -------------------------------------------------------------------------------------------------
Cox Communications, Inc., 7.875% Unsec. Nts., 8/15/09 395,000 442,046
- -------------------------------------------------------------------------------------------------
Cox Enterprises, Inc., 7.375% Unsec. Debs., 6/15/09 4 1,745,000 1,894,093
- -------------------------------------------------------------------------------------------------
Credit Suisse First Boston (USA), Inc., 5.50% Nts., 8/15/13 3,335,000 3,463,304
- -------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 7.625% Sr. Unsec. Debs., 7/15/18 3,000,000 3,510,000
- -------------------------------------------------------------------------------------------------
CSX Corp., 6.25% Unsec. Nts., 10/15/08 1,460,000 1,551,403
- -------------------------------------------------------------------------------------------------
D.R. Horton, Inc., 6.125% Nts., 1/15/14 1,265,000 1,332,085
- -------------------------------------------------------------------------------------------------
DaimlerChrysler NA Holdings Corp., 7.20% Unsec. Nts., 9/1/09 3,030,000 3,329,194
- -------------------------------------------------------------------------------------------------
Delhaize America, Inc., 9% Unsub. Debs., 4/15/31 1,285,000 1,705,099
- -------------------------------------------------------------------------------------------------
Delphi Corp., 6.55% Nts., 6/15/06 864,000 881,028
- -------------------------------------------------------------------------------------------------
Deutsche Telekom International Finance BV, 8.50% Unsub. Nts., 6/15/10 1,790,000 2,105,679
- -------------------------------------------------------------------------------------------------
Dominion Resources, Inc., 8.125% Sr. Unsub. Nts., 6/15/10 1,300,000 1,512,633
- -------------------------------------------------------------------------------------------------
DTE Energy Co., 6.45% Sr. Unsub. Nts., 6/1/06 1,430,000 1,473,539
- -------------------------------------------------------------------------------------------------
Duke Capital LLC, 5.668% Nts., 8/15/14 1,630,000 1,687,816
24 | OPPENHEIMER CAPITAL INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------------------
EOP Operating LP, 6.763% Sr. Unsec. Nts., 6/15/07 $ 275,000 $ 289,079
- --------------------------------------------------------------------------------------------
Federated Department Stores, Inc., 6.625% Sr. Unsec. Nts., 9/1/08 2,150,000 2,304,286
- --------------------------------------------------------------------------------------------
FedEx Corp., 2.65% Unsec. Nts., 4/1/07 3,360,000 3,264,348
- --------------------------------------------------------------------------------------------
FirstEnergy Corp.:
5.50% Sr. Unsub. Nts., Series A, 11/15/06 1,230,000 1,257,857
7.375% Sr. Unsub. Nts., Series C, 11/15/31 1,427,000 1,681,660
- --------------------------------------------------------------------------------------------
Ford Holdings, Inc., 9.30% Unsec. Unsub. Debs., 3/1/30 580,000 653,770
- --------------------------------------------------------------------------------------------
Ford Motor Credit Co., 7.375% Nts., 10/28/09 615,000 645,402
- --------------------------------------------------------------------------------------------
France Telecom SA:
8.50% Sr. Unsec. Nts., 3/1/11 6 1,005,000 1,174,185
9.25% Sr. Unsec. Nts., 3/1/31 6 755,000 1,031,873
- --------------------------------------------------------------------------------------------
Franklin Resources, Inc., 3.70% Nts., 4/15/08 1,025,000 1,011,287
- --------------------------------------------------------------------------------------------
Gap, Inc. (The):
6.90% Nts., 9/15/07 10 896,000 956,480
9.80% Unsub. Nts., 12/15/08 6 359,000 429,005
- --------------------------------------------------------------------------------------------
General Mills, Inc., 3.875% Nts., 11/30/07 2,505,000 2,481,438
- --------------------------------------------------------------------------------------------
General Motors Acceptance Corp.:
7.25% Nts., 3/2/11 2,945,000 2,991,354
8% Bonds, 11/1/31 2,370,000 2,383,947
- --------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The), 5.70% Sr. Unsec. Nts., 9/1/12 3,225,000 3,395,393
- --------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The), 2.375% Nts., 6/1/06 845,000 826,609
- --------------------------------------------------------------------------------------------
Hertz Corp. (The), 6.35% Nts., 6/15/10 3,750,000 3,755,494
- --------------------------------------------------------------------------------------------
Hilton Hotels Corp., 7.95% Sr. Nts., 4/15/07 1,165,000 1,248,365
- --------------------------------------------------------------------------------------------
HSBC Finance Corp., 4.75% Sr. Unsec. Nts., 7/15/13 3,500,000 3,457,916
- --------------------------------------------------------------------------------------------
IPALCO Enterprises, Inc., 8.375% Sr. Sec. Nts., 11/14/08 6,10 1,410,000 1,579,200
- --------------------------------------------------------------------------------------------
Isle of Capri Casinos, Inc., 9% Sr. Sub. Nts., 3/15/12 1,000,000 1,110,000
- --------------------------------------------------------------------------------------------
iStar Financial, Inc.:
4.875% Sr. Unsec. Nts., Series B, 1/15/09 1,390,000 1,395,111
8.75% Sr. Unsec. Nts., 8/15/08 1,020,000 1,143,272
- --------------------------------------------------------------------------------------------
ITT Corp., 6.75% Unsec. Nts., 11/15/05 1,565,000 1,600,213
- --------------------------------------------------------------------------------------------
J.C. Penney Co., Inc., 8% Nts., 3/1/10 3,000,000 3,413,391
- --------------------------------------------------------------------------------------------
John Hancock Global Funding II, 7.90% Nts., 7/2/10 4 1,137,000 1,309,929
- --------------------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc., 8.875% Sr. Sub. Nts., 4/1/12 1,600,000 1,784,000
- --------------------------------------------------------------------------------------------
Kinder Morgan, Inc., 6.50% Sr. Unsec. Nts., 9/1/12 1,450,000 1,584,909
- --------------------------------------------------------------------------------------------
Kraft Foods, Inc., 5.25% Nts., 6/1/07 3,720,000 3,813,357
- --------------------------------------------------------------------------------------------
Kroger Co. (The), 7.80% Sr. Nts., 8/15/07 2,230,000 2,408,146
- --------------------------------------------------------------------------------------------
Lear Corp., 8.11% Sr. Unsec. Nts., Series B, 5/15/09 2,560,000 2,870,825
- --------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 7% Nts., 2/1/08 1,990,000 2,141,037
- --------------------------------------------------------------------------------------------
Lehman Brothers, Inc., 6.625% Sr. Sub. Nts., 2/15/08 325,000 345,595
- --------------------------------------------------------------------------------------------
Lennar Corp., 5.95% Sr. Unsec. Nts., 3/1/13 1,505,000 1,582,682
25 | OPPENHEIMER CAPITAL INCOME FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- ---------------------------------------------------------------------------------------------------
Liberty Media Corp., 5.70% Sr. Unsec. Nts., 5/15/13 $ 1,740,000 $ 1,710,373
- ---------------------------------------------------------------------------------------------------
Liberty Property Trust, 5.65% Sr. Nts., 8/15/14 1,600,000 1,654,622
- ---------------------------------------------------------------------------------------------------
Lockheed Martin Corp., 7.65% Unsec. Unsub. Debs., 5/1/16 1,076,000 1,305,827
- ---------------------------------------------------------------------------------------------------
Lucent Technologies, Inc., 6.45% Unsec. Debs., 3/15/29 32,500,000 31,078,125
- ---------------------------------------------------------------------------------------------------
Marsh & McLennan Cos., Inc., 5.375% Sr. Unsec. Nts., 3/15/07 1,990,000 2,030,475
- ---------------------------------------------------------------------------------------------------
May Department Stores Co.:
3.95% Nts., 7/15/07 1,290,000 1,278,549
7.90% Unsec. Debs., 10/15/07 1,175,000 1,275,144
- ---------------------------------------------------------------------------------------------------
MBNA Corp., 7.50% Sr. Nts., Series F, 3/15/12 2,655,000 3,032,206
- ---------------------------------------------------------------------------------------------------
McDonnell Douglas Corp., 6.875% Unsec. Unsub. Nts., 11/1/06 416,000 434,847
- ---------------------------------------------------------------------------------------------------
Mellon Bank NA, 4.75% Unsec. Sub. Nts., 12/15/14 2,795,000 2,769,540
- ---------------------------------------------------------------------------------------------------
Merck & Co., Inc., 4.726% Nts., 2/22/06 4 2,785,000 2,806,592
- ---------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., 5% Sr. Unsub. Nts., Series C, 2/3/14 3,440,000 3,433,732
- ---------------------------------------------------------------------------------------------------
MidAmerican Energy Holdings Co., 5.875% Sr. Unsec. Nts., 10/1/12 2,300,000 2,423,469
- ---------------------------------------------------------------------------------------------------
Morgan Stanley, 6.60% Nts., 4/1/12 1,370,000 1,516,923
- ---------------------------------------------------------------------------------------------------
National City Bank, 6.20% Sub. Nts., 12/15/11 213,000 231,104
- ---------------------------------------------------------------------------------------------------
Nationwide Financial Services, Inc., 5.90% Nts., 7/1/12 1,090,000 1,152,746
- ---------------------------------------------------------------------------------------------------
NiSource Finance Corp.:
3.20% Nts., 11/1/06 440,000 432,380
7.875% Sr. Unsec. Nts., 11/15/10 1,820,000 2,105,966
- ---------------------------------------------------------------------------------------------------
Northrop Grumman Corp., 7.125% Sr. Nts., 2/15/11 2,080,000 2,353,537
- ---------------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust, 7.875% Unsec. Unsub. Nts., 2/1/09 1,030,000 1,143,300
- ---------------------------------------------------------------------------------------------------
PF Export Receivables Master Trust, 3.748% Sr. Nts., Series B, 6/1/13 4 1,078,303 1,028,932
- ---------------------------------------------------------------------------------------------------
Prudential Holdings LLC, 8.695% Bonds, Series C, 12/18/23 4 2,235,000 2,838,888
- ---------------------------------------------------------------------------------------------------
Prudential Insurance Co. of America, 8.30% Nts., 7/1/25 4 2,330,000 3,059,535
- ---------------------------------------------------------------------------------------------------
PSE&G Power LLC, 6.875% Sr. Unsec. Nts., 4/15/06 1,272,000 1,313,831
- ---------------------------------------------------------------------------------------------------
PSEG Energy Holdings LLC, 7.75% Unsec. Nts., 4/16/07 10 1,390,000 1,469,925
- ---------------------------------------------------------------------------------------------------
Rite Aid Corp.:
6.875% Sr. Unsec. Debs., 8/15/13 5,000,000 4,725,000
7.125% Sr. Unsub. Nts., 1/15/07 7,500,000 7,650,000
- ---------------------------------------------------------------------------------------------------
Safeway, Inc., 4.80% Sr. Unsec. Nts., 7/16/07 3,330,000 3,357,393
- ---------------------------------------------------------------------------------------------------
Sempra Energy, 7.95% Sr. Unsec. Unsub. Nts., 3/1/10 1,347,000 1,538,581
- ---------------------------------------------------------------------------------------------------
Simon Property Group LP:
5.45% Unsec. Nts., 3/15/13 1,345,000 1,376,762
5.625% Unsec. Unsub. Nts., 8/15/14 1,305,000 1,344,801
- ---------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., 8% Sr. Unsec. Sub. Nts., 3/15/12 1,000,000 1,065,000
- ---------------------------------------------------------------------------------------------------
Spieker Properties LP, 6.75% Unsec. Unsub. Nts., 1/15/08 2,230,000 2,376,402
- ---------------------------------------------------------------------------------------------------
Sprint Capital Corp.:
7.125% Sr. Unsec. Nts., 1/30/06 1,790,000 1,842,025
8.75% Nts., 3/15/32 1,150,000 1,548,814
26 | OPPENHEIMER CAPITAL INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- ----------------------------------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc., 7.375% Nts., 5/1/07 $ 1,084,000 $ 1,157,170
- ----------------------------------------------------------------------------------------------------
SunTrust Banks, Inc.:
4% Nts., 10/15/08 1,655,000 1,642,298
7.75% Unsec. Sub. Nts., 5/1/10 149,000 170,804
- ----------------------------------------------------------------------------------------------------
TCI Communications, Inc., 9.80% Sr. Unsec. Debs., 2/1/12 2,995,000 3,827,110
- ----------------------------------------------------------------------------------------------------
TECO Energy, Inc., 10.50% Sr. Unsec. Nts., 12/1/07 1,280,000 1,478,400
- ----------------------------------------------------------------------------------------------------
Telefonos de Mexico SA de CV, 4.75% Nts., 1/27/10 4 1,710,000 1,708,151
- ----------------------------------------------------------------------------------------------------
Terex Corp., 9.25% Sr. Unsec. Sub. Nts., 7/15/11 1,000,000 1,120,000
- ----------------------------------------------------------------------------------------------------
Time Warner Cos., Inc., 9.125% Debs., 1/15/13 1,130,000 1,430,496
- ----------------------------------------------------------------------------------------------------
Time Warner Entertainment Co. LP, 10.15% Sr. Nts., 5/1/12 651,000 845,897
- ----------------------------------------------------------------------------------------------------
Toll Corp., 8.25% Sr. Sub. Nts., 12/1/11 10 1,285,000 1,424,744
- ----------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., 3.75% Sr. Unsec. Nts., 3/15/08 2,485,000 2,441,637
- ----------------------------------------------------------------------------------------------------
TXU Corp., 4.80% Nts., 11/15/09 4 1,420,000 1,413,415
- ----------------------------------------------------------------------------------------------------
Tyco International Group SA:
6.375% Sr. Unsec. Unsub. Nts., 2/15/06 2,380,000 2,433,257
6.75% Sr. Unsub. Nts., 2/15/11 870,000 962,499
- ----------------------------------------------------------------------------------------------------
Univision Communications, Inc.:
2.875% Sr. Unsec. Nts., 10/15/06 430,000 421,762
3.50% Sr. Unsec. Nts., 10/15/07 2,245,000 2,194,005
- ----------------------------------------------------------------------------------------------------
Vornado Realty LP, 5.625% Sr. Unsec. Unsub. Nts., 6/15/07 3,080,000 3,168,371
- ----------------------------------------------------------------------------------------------------
Walt Disney Co. (The), 5.375% Sr. Unsec. Nts., 6/1/07 1,265,000 1,297,913
- ----------------------------------------------------------------------------------------------------
Waste Management, Inc.:
7% Sr. Nts., 7/15/28 1,050,000 1,197,533
7.125% Sr. Unsec. Nts., 10/1/07 1,955,000 2,088,964
- ----------------------------------------------------------------------------------------------------
Weyerhaeuser Co., 5.50% Unsec. Unsub. Nts., 3/15/05 631,000 631,359
- ----------------------------------------------------------------------------------------------------
Yum! Brands, Inc., 8.50% Sr. Unsec. Nts., 4/15/06 3,145,000 3,305,430
------------
Total Non-Convertible Corporate Bonds and Notes (Cost $364,624,358) 387,399,863
- ----------------------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS AND NOTES--16.8%
- ----------------------------------------------------------------------------------------------------
Advanced Micro Devices, Inc., 4.75% Cv. Sr. Unsec. Debs., 2/1/22 6 2,500,000 2,587,500
- ----------------------------------------------------------------------------------------------------
Agere Systems, Inc., 6.50% Cv. Unsec. Unsub. Nts., 12/15/09
(cv. into Agere Systems, Inc., Cl. A common stock) 6,600,000 7,111,500
- ----------------------------------------------------------------------------------------------------
Allied Waste Industries, Inc., 4.25% Cv. Sr. Unsec. Sub. Debs., 4/15/34 11,250,000 9,829,688
- ----------------------------------------------------------------------------------------------------
Calpine Corp.:
4.75% Cv. Sr. Unsec. Nts., 11/15/23 4 15,000,000 11,437,500
4.75% Cv. Sr. Unsec. Nts., 11/15/23 2,500,000 1,906,250
- ----------------------------------------------------------------------------------------------------
Charter Communications, Inc., 5.875% Cv. Sr. Nts., 11/16/09 4 3,000,000 2,955,000
- ----------------------------------------------------------------------------------------------------
Continental Airlines, Inc., 4.50% Cv. Sr. Unsec. Unsub. Nts., 2/1/07 8,500,000 6,842,500
- ----------------------------------------------------------------------------------------------------
Curagen Corp., 6% Cv. Jr. Unsec. Sub. Debs., 2/2/07 16,000,000 15,740,000
- ----------------------------------------------------------------------------------------------------
Delta Air Lines, Inc., 8% Cv. Sr. Unsec. Bonds, 6/3/23 12,500,000 6,390,625
27 | OPPENHEIMER CAPITAL INCOME FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS AND NOTES Continued
- --------------------------------------------------------------------------------------------------------
Enzon Pharmaceuticals, Inc., 4.50% Cv. Unsec. Sub. Nts., 7/1/08 $ 20,750,000 $ 19,505,000
- --------------------------------------------------------------------------------------------------------
Gap, Inc. (The), 5.75% Cv. Unsec. Nts., 3/15/09 4,750,000 6,323,438
- --------------------------------------------------------------------------------------------------------
JDS Uniphase Corp., 3.20% Cv. Sr. Nts., 11/15/10 11 9,500,000 7,837,500
- --------------------------------------------------------------------------------------------------------
Level 3 Communications, Inc.:
5.25% Cv. Sr. Nts., 12/15/11 4 10,000,000 7,512,500
6% Cv. Unsec. Sub. Nts., 3/15/10 14,250,000 7,107,188
- --------------------------------------------------------------------------------------------------------
Liberty Media Corp.:
0.75% Cv. Sr. Unsec. Unsub. Debs., 3/30/23 17,500,000 19,096,875
3.25% Exchangeable Sr. Sec. Debs., 3/15/31
(exchangeable for Viacom, Inc., Cl. B common stock) 4 7,500,000 6,796,875
3.25% Exchangeable Sr. Unsec. Debs., 3/15/31
(exchangeable for Viacom, Inc., Cl. B common stock or
cash based on the value thereof) 120,000,000 108,750,000
4% Exchangeable Sr. Unsec. Debs., 11/15/29
(exchangeable for Sprint Corp. PCS, Series 1 common stock
or cash based on the value of that stock) 30,000,000 21,150,000
- --------------------------------------------------------------------------------------------------------
LSI Logic Corp., 4% Cv. Sub. Nts., 5/15/10 12,500,000 11,875,000
- --------------------------------------------------------------------------------------------------------
Lucent Technologies, Inc., 2.75% Cv. Sr. Unsec. Debs., Series A, 6/15/23 7,750,000 9,009,375
- --------------------------------------------------------------------------------------------------------
Nextel Communications, Inc., 5.25% Cv. Sr. Nts., 1/15/10 15,000,000 15,356,250
- --------------------------------------------------------------------------------------------------------
Nortel Networks Corp., 4.25% Cv. Sr. Unsec. Nts., 9/1/08 15,000,000 14,418,750
- --------------------------------------------------------------------------------------------------------
Novell, Inc.:
0.50% Cv. Sr. Unsec. Debs., 7/15/24 4 11,000,000 9,432,500
0.50% Cv. Sr. Unsec. Debs., 7/15/24 10,500,000 9,003,750
- --------------------------------------------------------------------------------------------------------
Pride International, Inc., 3.25% Cv. Sr. Nts., 5/1/33 15,250,000 18,147,500
- --------------------------------------------------------------------------------------------------------
Providian Financial Corp., 6.36% Cv. Sr. Unsec. Unsub. Nts., 2/15/21 10,11 57,500,000 30,546,875
- --------------------------------------------------------------------------------------------------------
Six Flags, Inc., 4.50% Cv. Nts., 5/15/15 7,050,000 7,050,000
- --------------------------------------------------------------------------------------------------------
Solectron Corp., 0.50% Cv. Sr. Unsec. Nts., Series B, 2/15/34 6,500,000 5,386,875
- --------------------------------------------------------------------------------------------------------
Tyco International Group SA:
2.75% Cv. Sr. Unsec. Unsub. Debs., Series A, 1/15/18 4 36,000,000 53,505,000
2.75% Cv. Sr. Unsec. Unsub. Debs., Series A, 1/15/18 38,750,000 57,592,188
- --------------------------------------------------------------------------------------------------------
XM Satellite Radio, Inc., 1.75% Cv. Sr. Nts., 12/1/09 4 13,500,000 13,027,500
------------
Total Convertible Corporate Bonds and Notes (Cost $489,524,660) 523,231,502
- --------------------------------------------------------------------------------------------------------
STRUCTURED NOTES--3.8%
- --------------------------------------------------------------------------------------------------------
Citigroup Global Markets Holdings, Inc.:
EchoStar Communications Corp. Cv. Equity Linked Nts., 6%, 4/29/05 287,026 8,681,159
Liberty Media Corp. Cv. Equity Linked Nts., 4%, 11/25/05 956,938 9,811,964
- --------------------------------------------------------------------------------------------------------
Core Investment Grade Bond Trust I, Pass-Through Certificates,
Series 2002-1, 4.727%, 11/30/07 1,400,000 1,412,607
- --------------------------------------------------------------------------------------------------------
Dow Jones CDX High Yield Index Pass-Through Certificates,
Series 3-1, 7.75%, 12/29/09 4,15 13,600,000 13,770,000
28 | OPPENHEIMER CAPITAL INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- --------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The):
EchoStar Communications Corp. Cv. Linked Nts., 4%, 12/30/05 $ 595,780 $ 18,288,659
GlobalSantaFe Corp. Cv. Linked Nts., 4.50%, 9/29/05 496,860 17,369,717
- ---------------------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc.:
Cv. Yield Enhanced Equity Linked Debt Securities, 12%, 12/29/05
(linked to CarMax, Inc.) 764,498 24,272,812
Cv. Yield Enhanced Equity Linked Debt Securities, Series G, 5%, 12/14/05
(linked to EchoStar Communications Corp. Cl. A common stock) 310,753 9,477,967
- ---------------------------------------------------------------------------------------------------------------
Morgan Stanley, Cv. Performance Equity Linked Redemption Quarterly-pay
Securities, 5%, 12/30/05 (linked to Dollar Tree Stores, Inc.) 4 605,830 16,414,964
----------------
Total Structured Notes (Cost $120,721,960) 119,499,849
- ---------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--0.3%
- ---------------------------------------------------------------------------------------------------------------
Undivided interest of 0.44% in joint repurchase agreement (Principal
Amount/Value $1,752,409,000, with a maturity value of $1,752,535,563) with
UBS Warburg LLC, 2.60%, dated 2/28/05, to be repurchased at $7,660,553
on 3/1/05, collateralized by Federal National Mortgage Assn., 6%, 2/1/34,
with a value of $1,789,443,338 (Cost $7,660,000) 7,660,000 7,660,000
- ---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $2,875,918,426) 108.9% 3,386,665,482
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (8.9) (276,182,781)
----------------------------------
NET ASSETS 100.0% $ 3,110,482,701
==================================
29 | OPPENHEIMER CAPITAL INCOME FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. A sufficient amount of liquid assets has been designated to cover outstanding
written call options, as follows:
CONTRACTS EXPIRATION EXERCISE PREMIUM VALUE
SUBJECT TO CALL DATES PRICE RECEIVED SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------
ACE Ltd. 1,375 5/23/05 $ 45.00 $ 263,469 $ 178,750
Altria Group, Inc. 375 6/20/05 75.00 17,437 15,000
AT&T Corp. 1,500 3/21/05 20.00 28,744 22,500
BP plc, ADR 250 4/18/05 60.00 21,000 127,500
Cablevision Systems New York Group, Cl. A 3,750 1/23/06 30.00 744,282 1,725,000
Cablevision Systems New York Group, Cl. A 1,000 3/21/05 25.00 131,997 620,000
Cablevision Systems New York Group, Cl. A 7,750 6/20/05 25.00 2,209,113 5,115,000
Clear Channel Communications, Inc. 3,500 3/21/05 35.00 146,656 35,000
Everest Re Group Ltd. 1,470 4/18/05 90.00 124,580 183,750
GlobalSantaFe Corp. 2,750 3/21/05 35.00 546,737 728,750
Honeywell International, Inc 525 3/21/05 37.50 33,599 47,250
Kinder Morgan, Inc. 1,000 3/21/05 80.00 50,249 150,000
Lockheed Martin Corp. 2,750 3/21/05 60.00 215,985 151,250
Loews Corp./Carolina Group 500 3/21/05 35.00 14,500 --
Nextel Communications, Inc., Cl. A 500 4/18/05 30.00 31,999 30,000
Nextel Communications, Inc., Cl. A 1,000 5/23/05 32.50 41,124 25,000
Prudential Financial, Inc. 3,150 6/20/05 55.00 1,558,513 1,260,000
Prudential Financial, Inc. 1,000 6/20/05 60.00 195,495 145,000
Raytheon Co. 250 3/21/05 37.50 26,749 25,000
SBC Communications, Inc. 250 7/18/05 25.00 13,505 12,500
Tyco International Ltd. 5,625 4/18/05 35.00 570,915 253,125
Tyco International Ltd. 625 4/18/05 32.50 262,181 109,375
U.S. Bancorp 259 3/21/05 30.00 19,165 6,475
Wyeth 250 3/21/05 40.00 19,750 30,000
-----------------------------
$ 7,287,744 $ 10,996,225
=============================
3. 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 February 28, 2005.
The aggregate fair value of securities of affiliated companies held by the Fund
as of February 28, 2005 amounts to $139,186,780. Transactions during the period
in which the issuer was an affiliate are as follows:
SHARES SHARES
AUGUST 31, GROSS GROSS FEBRUARY 28,
2004 ADDITIONS REDUCTIONS 2005
- ----------------------------------------------------------------------------------------------
CSK Auto Corp. 6,500,000 2,750 2,750 6,500,000
Enbridge Energy Management LLC 650,000 25,783 -- 675,783
UNREALIZED DIVIDEND REALIZED
APPRECIATION INCOME LOSS
- ----------------------------------------------------------------------------------------------
CSK Auto Corp. $ 39,307,405 $ -- $ 29,945
Enbridge Energy Management LLC 11,867,055 1,225,573 --
----------------------------------------------
$ 51,174,460 $ 1,225,573 $ 29,945
==============================================
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 $163,643,538 or 5.26% of the Fund's net
assets as of February 28, 2005.
5. 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, principal amount disclosed represents total
underlying principal.
30 | OPPENHEIMER CAPITAL INCOME FUND
6. Represents the current interest rate for a variable or increasing rate
security.
7. When-issued security or forward commitment to be delivered and settled after
February 28, 2005. See Note 1 of Notes to Financial Statements.
8. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $15,917,809 or 0.51% of the Fund's net assets
as of February 28, 2005.
9. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of coupon-bearing
bonds of the same maturity. Interest rates disclosed represent current yields
based upon the current cost basis and estimated timing of future cash flows.
These securities amount to $1,374,728 or 0.04% of the Fund's net assets as of
February 28, 2005.
10. Illiquid security. The aggregate value of illiquid securities as of February
28, 2005 was $58.792.340, which represents 1.89% of the Fund's net assets. See
Note 8 of Notes to Financial Statements.
11. Zero coupon bond reflects effective yield on the date of purchase.
12. A sufficient amount of securities has been designated to cover outstanding
written put options, as follows:
CONTRACTS EXPIRATION EXERCISE PREMIUM VALUE
SUBJECT TO PUT DATES PRICE RECEIVED SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
Amerada Hess Corp. 1,000 4/18/05 $ 85.00 $ 38,999 $ 40,000
Bank of America Corp. 250 4/18/05 45.00 12,826 12,500
Boston Scientific Corp. 9,500 3/21/05 32.50 675,013 807,500
Boston Scientific Corp. 1,500 4/18/05 32.50 135,495 180,000
CarMax, Inc. 2,550 7/18/05 30.00 648,960 357,000
Cendant Corp. 5,000 3/21/05 22.50 249,834 225,000
Citigroup, Inc. 2,000 4/18/05 47.50 142,995 180,000
General Electric Co. 1,000 4/18/05 35.00 53,998 55,000
Hewlett-Packard Co. 5,000 5/23/05 22.50 1,559,963 1,025,000
Kroger Co. (The) 2,500 4/18/05 17.50 298,743 75,000
Marathon Oil Corp. 1,000 3/21/05 37.50 51,499 --
May Department Stores Co. (The) 7,500 3/21/05 30.00 509,638 187,500
Microsoft Corp. 725 3/21/05 25.00 15,587 18,125
Nextel Communications, Inc., Cl. A 5,000 3/21/05 27.50 194,995 --
PMI Group, Inc. (The) 250 4/18/05 40.00 28,937 31,250
Pfizer, Inc. 5,000 3/21/05 27.50 938,728 650,000
Sprint Corp. 2,500 3/21/05 22.50 194,420 37,500
Tyco International Ltd. 2,500 3/21/05 35.00 264,992 400,000
-----------------------------
$ 6,015,622 $ 4,281,375
=============================
13. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
14. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures sales contracts with an aggregate
market value of $574,344. See Note 5 of Notes to Financial Statements.
15. Interest rate represents a weighted average rate comprised of the interest
rates of the underlying securities.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31 | OPPENHEIMER CAPITAL INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited
- --------------------------------------------------------------------------------
February 28, 2005
- -----------------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $2,787,906,106) $3,247,478,702
Affiliated companies (cost $88,012,320) 139,186,780
--------------
3,386,665,482
- -----------------------------------------------------------------------------------------------------------
Cash 1,180,261
- -----------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold (including $36,265,619 sold on a when-issued basis or forward commitment) 64,369,533
Interest, dividends and principal paydowns 18,755,017
Shares of beneficial interest sold 3,537,537
Other 99,691
--------------
Total assets 3,474,607,521
- -----------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $13,303,366)--
see accompanying statement of investments 15,277,600
- -----------------------------------------------------------------------------------------------------------
Unrealized depreciation on swap contracts 55,404
- -----------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $311,003,831 purchased on a when-issued basis or
forward commitment) 343,397,008
Shares of beneficial interest redeemed 3,474,545
Distribution and service plan fees 1,185,749
Transfer and shareholder servicing agent fees 289,178
Shareholder communications 236,320
Futures margins 134,307
Trustees' compensation 38,883
Other 35,826
--------------
Total liabilities 364,124,820
- -----------------------------------------------------------------------------------------------------------
NET ASSETS $3,110,482,701
==============
- -----------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 249,272
- -----------------------------------------------------------------------------------------------------------
Additional paid-in capital 2,542,064,088
- -----------------------------------------------------------------------------------------------------------
Accumulated net investment income 10,797,653
- -----------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 47,820,001
- -----------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 509,551,687
--------------
NET ASSETS $3,110,482,701
==============
32 | OPPENHEIMER CAPITAL INCOME FUND
- --------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$2,622,290,251 and 209,770,623 shares of beneficial interest outstanding) $12.50
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $13.26
- --------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of
$312,149,678 and 25,242,193 shares of beneficial interest outstanding) $12.37
- --------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $153,268,471 and
12,426,667 shares of beneficial interest outstanding) $12.33
- --------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $22,774,301
and 1,832,972 shares of beneficial interest outstanding) $12.42
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33 | OPPENHEIMER CAPITAL INCOME FUND
STATEMENT OF OPERATIONS Unaudited
- --------------------------------------------------------------------------------
For the Six Months Ended February 28, 2005
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Interest $ 36,694,291
- --------------------------------------------------------------------------------
Dividends:
Unaffiliated companies 25,804,172
Affiliated companies 1,225,573
-------------
Total investment income 63,724,036
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 7,784,136
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 2,935,705
Class B 1,546,379
Class C 708,290
Class N 48,537
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 1,325,943
Class B 260,426
Class C 108,851
Class N 19,622
- --------------------------------------------------------------------------------
Shareholder communications:
Class A 183,155
Class B 56,742
Class C 14,121
Class N 1,639
- --------------------------------------------------------------------------------
Custodian fees and expenses 29,645
- --------------------------------------------------------------------------------
Trustees' compensation 25,265
- --------------------------------------------------------------------------------
Other 108,038
-------------
Total expenses 15,156,494
Less reduction to custodian expenses (19,722)
-------------
Net expenses 15,136,772
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 48,587,264
34 | OPPENHEIMER CAPITAL INCOME FUND
- -----------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -----------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments:
Unaffiliated companies (including premiums on options exercised) $ 53,157,026
Affiliated companies (29,945)
Closing of futures contracts 3,332,059
Closing and expiration of option contracts written 28,829,423
Swap contracts 580,323
--------------
Net realized gain 85,868,886
- -----------------------------------------------------------------------------------
Net change in unrealized appreciation on:
Investments 191,249,376
Futures contracts 710,305
Option contracts (5,467,488)
Swap contracts (463,430)
--------------
Net change in unrealized appreciation 186,028,763
- -----------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 320,484,913
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35 | OPPENHEIMER CAPITAL INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR
FEBRUARY 28, ENDED
2005 AUGUST 31,
(UNAUDITED) 2004
- ------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------
Net investment income $ 48,587,264 $ 105,321,259
- ------------------------------------------------------------------------------------------
Net realized gain 85,868,886 183,533,222
- ------------------------------------------------------------------------------------------
Net change in unrealized appreciation 186,028,763 (26,459,650)
-----------------------------------
Net increase in net assets resulting from operations 320,484,913 262,394,831
- ------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (57,771,326) (102,927,701)
Class B (5,856,144) (12,688,798)
Class C (2,739,737) (4,369,847)
Class N (416,746) (513,100)
- ------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (79,227,344) --
Class B (9,824,773) --
Class C (4,580,294) --
Class N (642,942) --
- ------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A 108,317,737 132,826,225
Class B (21,372,013) (46,403,963)
Class C 12,426,764 34,609,632
Class N 5,100,698 7,276,288
- ------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------
Total increase 263,898,793 270,203,567
- ------------------------------------------------------------------------------------------
Beginning of period 2,846,583,908 2,576,380,341
-----------------------------------
End of period (including accumulated net investment
income of $10,797,653 and $28,994,342, respectively)
$ 3,110,482,701 $ 2,846,583,908
===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36 | OPPENHEIMER CAPITAL INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR
FEBRUARY 28, ENDED
2005 AUGUST 31,
CLASS A (UNAUDITED) 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.84 $ 11.22 $ 9.76 $ 12.72 $ 12.88 $ 13.63
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .21 1 .46 .54 .51 .42 .49
Net realized and unrealized gain (loss) 1.13 .69 1.35 (2.66) .41 .32
-----------------------------------------------------------------------------------------
Total from investment operations 1.34 1.15 1.89 (2.15) .83 .81
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.29) (.53) (.43) (.48) (.48) (.49)
Distributions from net realized gain (.39) -- -- (.33) (.51) (1.07)
-----------------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.68) (.53) (.43) (.81) (.99) (1.56)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.50 $ 11.84 $ 11.22 $ 9.76 $ 12.72 $ 12.88
=========================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 11.47% 10.32% 20.10% (17.75)% 6.84% 7.24%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $2,622,290 $2,379,956 $2,130,486 $1,873,458 $2,458,272 $2,395,444
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $2,520,853 $2,356,948 $1,900,896 $2,224,911 $2,432,151 $2,502,535
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 3.40% 3.85% 5.41% 4.48% 3.21% 3.78%
Total expenses 0.89% 4 0.89% 4,5 0.93% 4 0.98% 4 0.91% 4 0.93% 4
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 31% 6 52% 141% 148% 74% 37%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
6. The portfolio turnover rate excludes purchase and sales transactions of To Be
Announced (TBA) mortgage-related securities of $1,905,788,310 and
$1,954,253,711, respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37 | OPPENHEIMER CAPITAL INCOME FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 2005 AUGUST 31,
CLASS B (UNAUDITED) 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.72 $ 11.10 $ 9.67 $ 12.60 $ 12.76 $ 13.51
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .16 1 .36 .45 .41 .32 .38
Net realized and unrealized gain (loss) 1.11 .68 1.33 (2.62) .41 .32
-----------------------------------------------------------------------------------
Total from investment operations 1.27 1.04 1.78 (2.21) .73 .70
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.23) (.42) (.35) (.39) (.38) (.38)
Distributions from net realized gain (.39) -- -- (.33) (.51) (1.07)
-----------------------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (.62) (.42) (.35) (.72) (.89) (1.45)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.37 $ 11.72 $ 11.10 $ 9.67 $ 12.60 $ 12.76
===================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 10.99% 9.46% 18.94% (18.31)% 6.05% 6.34%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $312,150 $316,568 $343,074 $327,368 $477,223 $472,222
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $312,766 $349,853 $312,457 $410,652 $469,690 $546,390
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.55% 3.00% 4.55% 3.67% 2.44% 3.01%
Total expenses 1.74% 4 1.76% 4,5 1.81% 4 1.76% 4 1.68% 4 1.70% 4
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 31% 6 52% 141% 148% 74% 37%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
6. The portfolio turnover rate excludes purchase and sales transactions of To Be
Announced (TBA) mortgage-related securities of $1,905,788,310 and
$1,954,253,711, respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38 | OPPENHEIMER CAPITAL INCOME FUND
SIX MONTHS
ENDED YEAR
FEBRUARY 28, ENDED
2005 AUGUST 31,
CLASS C (UNAUDITED) 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.69 $ 11.09 $ 9.66 $ 12.59 $ 12.76 $ 13.50
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .15 1 .35 .45 .42 .32 .38
Net realized and unrealized gain (loss) 1.12 .69 1.34 (2.62) .40 .32
-----------------------------------------------------------------------------------
Total from investment operations 1.27 1.04 1.79 (2.20) .72 .70
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.24) (.44) (.36) (.40) (.38) (.37)
Distributions from net realized gain (.39) -- -- (.33) (.51) (1.07)
-----------------------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (.63) (.44) (.36) (.73) (.89) (1.44)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.33 $ 11.69 $ 11.09 $ 9.66 $ 12.59 $ 12.76
===================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 10.98% 9.40% 19.05% (18.30)% 6.00% 6.40%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $153,269 $133,368 $ 93,797 $ 72,792 $ 89,547 $ 73,346
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $143,338 $122,458 $ 75,459 $ 84,049 $ 80,390 $ 84,898
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.59% 3.01% 4.55% 3.74% 2.44% 3.01%
Total expenses 1.70% 4 1.72% 4,5 1.78% 4 1.76% 4 1.68% 4 1.70% 4
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 31% 6 52% 141% 148% 74% 37%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
6. The portfolio turnover rate excludes purchase and sales transactions of To Be
Announced (TBA) mortgage-related securities of $1,905,788,310 and
$1,954,253,711, respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
39 | OPPENHEIMER CAPITAL INCOME FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 2005 AUGUST 31,
CLASS N (UNAUDITED) 2004 2003 2002 2001 1
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.78 $11.16 $ 9.73 $12.69 $12.96
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .19 2 .39 .46 .50 .28
Net realized and unrealized gain (loss) 1.11 .72 1.37 (2.66) (.30)
--------------------------------------------------------------------
Total from investment operations 1.30 1.11 1.83 (2.16) (.02)
- --------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.27) (.49) (.40) (.47) (.25)
Distributions from net realized gain (.39) -- -- (.33) --
--------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (.66) (.49) (.40) (.80) (.25)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.42 $11.78 $11.16 $ 9.73 $12.69
====================================================================
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 11.16% 10.01% 19.45% (17.89)% (0.18)%
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $22,774 $16,692 $9,023 $4,071 $ 648
- --------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $19,660 $13,301 $5,968 $2,839 $ 214
- --------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 3.06% 3.42% 4.92% 4.74% 2.94%
Total expenses 1.25% 5 1.28% 5,6 1.35% 5 1.25% 5 1.17% 5
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 31% 7 52% 141% 148% 74%
1. For the period from March 1, 2001 (inception of offering) to August 31, 2001.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.
6. Voluntary waiver of transfer agent fees less than 0.01%.
7. The portfolio turnover rate excludes purchase and sales transactions of To Be
Announced (TBA) mortgage-related securities of $1,905,788,310 and
$1,954,253,711, respectively.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
40 | OPPENHEIMER CAPITAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Capital Income Fund (the Fund) is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment objective is to seek as much current income as is
compatible with prudent investment. The Fund has a secondary objective to
conserve principal while providing an opportunity for capital appreciation. The
Fund's investment advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C and Class N shares. Class A
shares are sold at their offering price, which is normally net asset value plus
a front-end sales charge. Class B, Class C and Class N shares are sold without a
front-end sales charge but may be subject to a contingent deferred sales charge
(CDSC). Class N shares are sold only through retirement plans. Retirement plans
that offer Class N shares may impose charges on those accounts. All classes of
shares have identical rights and voting privileges with respect to the Fund in
general and exclusive voting rights on matters that affect that class alone.
Earnings, net assets and net asset value per share may differ due to each class
having its own expenses, such as transfer and shareholder servicing agent fees
and shareholder communications, directly attributable to that class. Class A, B,
C and N have separate distribution and/or service plans. Class B shares will
automatically convert to Class A shares six years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities listed
or traded on National Stock Exchanges or other domestic or foreign exchanges are
valued based on the last sale price of the security traded on that exchange
prior to the time when the Fund's assets are valued. Securities traded on NASDAQ
are valued based on the closing price provided by NASDAQ prior to the time when
the Fund's assets are valued. In the absence of a sale, the security is valued
at the last sale price on the prior trading day, if it is within the spread of
the closing bid and asked prices, and if not, at the closing bid price.
Corporate, government and municipal debt instruments having a remaining maturity
in excess of sixty days and all mortgage-backed securities will be valued at the
mean between the "bid" and "asked" prices. Securities may be valued primarily
using dealer-supplied valuations or a portfolio pricing service authorized by
the Board of Trustees. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value.
Foreign and domestic securities whose values have been materially affected by
what the Manager identifies as a significant event occurring before the Fund's
assets are valued but after the close of their respective exchanges will be fair
valued. Fair value is determined in good faith using consistently applied
procedures under the supervision of the Board of Trustees. Short-term "money
market type" debt securities with remaining maturities of sixty days or less are
valued at amortized cost (which approximates market value).
41 | OPPENHEIMER CAPITAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
STRUCTURED NOTES. The Fund invests in structured notes whose market values,
interest rates and/or redemption prices are linked to the performance of
underlying foreign currencies, interest rate spreads, stock market indices,
prices of individual securities, commodities or other financial instruments or
the occurrence of other specific events. The structured notes are often
leveraged, increasing the volatility of each note's market value relative to the
change in the underlying linked financial element or event. Fluctuations in
value of these securities are recorded as unrealized gains and losses in the
accompanying financial statements. The Fund records a realized gain or loss when
a structured note is sold or matures. As of February 28, 2005, the market value
of these securities comprised 3.8% of the Fund's net assets and resulted in
unrealized cumulative losses of $1,222,111.
- --------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment can take place up to ten days or more after the trade date.
Normally the settlement date occurs within six months after the trade date;
however, the Fund may, from time to time, purchase securities whose settlement
date extends six months or more beyond trade date. During this period, such
securities do not earn interest, are subject to market fluctuation and may
increase or decrease in value prior to their delivery. The Fund maintains
internally designated assets with a market value equal to or greater than the
amount of its purchase commitments. The purchase of securities on a when-issued
basis or forward commitment may increase the volatility of the Fund's net asset
value to the extent the Fund executes such transactions while remaining
substantially fully invested. The Fund may also sell securities that it
purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase. As of February 28, 2005, the Fund had purchased
$311,003,831 of securities on a when-issued basis or forward commitment and sold
$36,265,619 of securities issued on a when-issued basis or forward commitment.
In connection with its ability to purchase or sell securities on a
when-issued basis, the Fund may enter into forward roll transactions with
respect to mortgage-related securities. Forward roll transactions require the
sale of securities for delivery in the current month, and a simultaneous
agreement with the same counterparty to repurchase similar (same type, coupon
and maturity) but not identical securities on a specified future date. The Fund
records the incremental difference between the forward purchase and sale of each
forward roll as realized gain (loss) on investments or as fee income in the case
of such transactions that have an associated fee in lieu of a difference in the
forward purchase and sale price.
42 | OPPENHEIMER CAPITAL INCOME FUND
Risks of entering into forward roll transactions include the potential
inability of the counterparty to meet the terms of the agreement; the potential
of the Fund to receive inferior securities at redelivery as compared to the
securities sold to the counterparty; counterparty credit risk; and the potential
pay down speed variance between the mortgage-related pools.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund.
During the year ended August 31, 2004, the Fund utilized $105,823,276 of
capital loss carryforward to offset realized capital gains.
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets
43 | OPPENHEIMER CAPITAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
and Liabilities. Deferral of trustees' fees under the plan will not affect the
net assets of the Fund, and will not materially affect the Fund's assets,
liabilities or net investment income per share. Amounts will be deferred until
distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income distributions, if any, are declared
and paid quarterly. Capital gain distributions, if any, are declared and paid
annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts at a rate equal to the Federal
Funds Rate plus 0.50%. The Reduction to Custodian Expenses line item, if
applicable, represents earnings on cash balances maintained by the Fund during
the period. Such interest expense and other custodian fees may be paid with
these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
44 | OPPENHEIMER CAPITAL INCOME FUND
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
SIX MONTHS ENDED FEBRUARY 28, 2005 YEAR ENDED AUGUST 31, 2004
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------
CLASS A
Sold 10,884,180 $ 133,986,016 27,395,516 $ 328,897,834
Dividends and/or
distributions reinvested 10,416,608 128,068,611 8,032,385 94,957,085
Redeemed (12,492,536) (153,736,890) (24,375,517) (291,028,694)
----------------------------------------------------------------------
Net increase 8,808,252 $ 108,317,737 11,052,384 $ 132,826,225
======================================================================
- ----------------------------------------------------------------------------------------------------
CLASS B
Sold 1,942,913 $ 23,719,063 6,888,752 $ 81,662,144
Dividends and/or
distributions reinvested 1,217,028 14,830,107 1,020,466 11,950,178
Redeemed (4,937,273) (59,921,183) (11,792,254) (140,016,285)
----------------------------------------------------------------------
Net decrease (1,777,332) $ (21,372,013) (3,883,036) $ (46,403,963)
======================================================================
- ----------------------------------------------------------------------------------------------------
CLASS C
Sold 1,499,623 $ 18,284,175 4,346,905 $ 51,194,830
Dividends and/or
distributions reinvested 554,145 6,736,833 339,300 3,974,837
Redeemed (1,034,442) (12,594,244) (1,740,267) (20,560,035)
----------------------------------------------------------------------
Net increase 1,019,326 $ 12,426,764 2,945,938 $ 34,609,632
======================================================================
- ----------------------------------------------------------------------------------------------------
CLASS N
Sold 454,133 $ 5,580,621 715,430 $ 8,550,182
Dividends and/or
distributions reinvested 85,010 1,040,173 42,495 501,477
Redeemed (123,735) (1,520,096) (148,746) (1,775,371)
----------------------------------------------------------------------
Net increase 415,408 $ 5,100,698 609,179 $ 7,276,288
======================================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than U.S. government obligations and short-term obligations, for the six months
ended February 28, 2005, were $983,979,668 and $732,156,430, respectively. There
were purchases of $92,989,774 and sales of $131,511,840 of U.S. government and
government agency obligations for the six months ended February 28, 2005. In
addition, there were purchases of $1,905,788,310 and sales of $1,954,253,711 of
To Be Announced (TBA) mortgage-related securities for the six months ended
February 28, 2005.
45 | OPPENHEIMER CAPITAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.75% of the first $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.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICES. The Fund pays the Manager a fee of $1,500 per year for
preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the six months ended February 28, 2005, the Fund paid
$1,725,301 to OFS for services to the Fund.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate of up to 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor currently uses all of those fees to
pay dealers, brokers, banks and other financial institutions quarterly for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in subsequent
years. Fees incurred by the Fund under the Plan are detailed in the Statement of
Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% per year on
Class B and Class C shares and 0.25% per year on Class N shares. The Distributor
also receives a service fee of up to 0.25% per year under each plan. If either
the Class B, Class C or Class N plan is terminated by the Fund or by the
shareholders of a class, the Board of Trustees and its independent trustees must
determine whether the Distributor shall be entitled to payment from the Fund of
all or a portion of the service fee and/or asset-based sales charge in respect
to shares sold prior to the effective date of such termination. The
Distributor's aggregate uncompensated expenses under the plan at February 28,
2005 for Class B, Class C and Class N shares were $8,749,051, $2,952,410 and
$314,251, respectively. Fees incurred by the Fund under the plans are detailed
in the Statement of Operations.
46 | OPPENHEIMER CAPITAL INCOME FUND
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the table below for the period indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
SIX MONTHS ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- ----------------------------------------------------------------------------------------------------------------------------
February 28, 2005 $457,190 $32,726 $247,488 $6,632 $3,463
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.
- --------------------------------------------------------------------------------
5. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. Futures contracts are traded on a commodity exchange. The Fund may buy and
sell futures contracts that relate to broadly based securities indices
(financial futures) or debt securities (interest rate futures) in order to gain
exposure to or protection from changes in market value of stocks and bonds or
interest rates. The Fund may also buy or write put or call options on these
futures contracts.
The Fund generally sells futures contracts as a hedge against increases in
interest rates and decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes as it may
be more efficient or cost effective than actually buying securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or has expired.
Cash held by the broker to cover initial margin requirements on open
futures contracts is noted in the Statement of Assets and Liabilities.
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the Statement of Investments. The
Statement of Assets and Liabilities reflects a receivable and/or payable for the
daily mark to market for variation margin. Realized gains and losses are
reported in the Statement of Operations as the closing and expiration of futures
contracts. The net change in unrealized appreciation and depreciation is
reported in the Statement of Operations.
47 | OPPENHEIMER CAPITAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. FUTURES CONTRACTS Continued
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
As of February 28, 2005, the Fund had outstanding futures contracts as
follows:
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS FEBRUARY 28, 2005 (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
U.S. Long Bonds 6/21/05 657 $ 73,809,844 $ (420,675)
U.S. Treasury Nts., 10 yr. 6/21/05 83 9,119,625 (35,483)
--------------
(456,158)
--------------
CONTRACTS TO SELL
U.S. Treasury Nts., 2 yr. 3/31/05-6/30/05 507 105,336,359 427,699
U.S. Treasury Nts., 10 yr. 3/21/05-6/21/05 1,060 114,237,344 862,728
--------------
1,290,427
--------------
$ 834,269
==============
- --------------------------------------------------------------------------------
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. Contracts 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. Realized gains and losses are reported
in the Statement of Operations.
48 | OPPENHEIMER CAPITAL INCOME FUND
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 six months ended February 28, 2005 was as
follows:
CALL OPTIONS PUT OPTIONS
--------------------------- ----------------------------
NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
- ----------------------------------------------------------------------------------------------------
Options outstanding as of
August 31, 2004 30,425 $ 5,660,279 76,716 $ 20,807,385
Options written 160,096 22,383,047 236,175 28,132,886
Options closed or expired (123,407) (16,264,419) (246,692) (39,552,575)
Options exercised (25,710) (4,491,163) (11,424) (3,372,074)
----------------------------------------------------------
Options outstanding as of
February 28, 2005 41,404 $ 7,287,744 54,775 $ 6,015,622
==========================================================
- --------------------------------------------------------------------------------
7. TOTAL RETURN SWAP CONTRACTS
The Fund may enter into a total return swap transaction to maintain a total
return on a particular investment, or portion of its portfolio, or for other
non-speculative purposes. Because the principal amount is not exchanged, it
represents neither an asset nor a liability to either counterparty, and is
referred to as notional. The Fund records an increase or decrease to unrealized
gain (loss), in the amount due to or owed by the Fund at termination or
settlement. Total return swaps are subject to risks (if the counterparty fails
to meet its obligations).
As of February 28, 2005, the Fund had entered into the following total return
swap agreements:
PAID BY RECEIVED BY
SWAP NOTIONAL THE FUND AT THE FUND AT TERMINATION UNREALIZED
COUNTERPARTY AMOUNT FEB. 28, 2005 FEBRUARY 28, 2005 DATE DEPRECIATION
- ---------------------------------------------------------------------------------------------------------------
Value of total return
Goldman Sachs One-Month of Lehman Brothers
Capital Markets LP $9,700,000 LIBOR flat CMBS Index 3/31/05 $55,404
Index abbreviations are as follows:
CMBS Commercial Mortgage Backed Securities Markets
LIBOR London-Interbank Offered Rate
- --------------------------------------------------------------------------------
8. ILLIQUID SECURITIES
As of February 28, 2005, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund will not invest more than 10% of its net assets (determined at the time of
purchase and reviewed periodically) in illiquid securities.
49 | OPPENHEIMER CAPITAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor (collectively, the
"Oppenheimer defendants"), as well as 51 of the Oppenheimer funds (as "Nominal
Defendants") including the Fund, 30 present and former Directors or Trustees and
8 present and former officers of the funds. This complaint, initially filed in
the U.S. District Court for the Southern District of New York on January 10,
2005 and amended on March 4, 2005, consolidates into a single action and amends
six individual previously-filed putative derivative and class action complaints.
Like those prior complaints, the complaint alleges that the Manager charged
excessive fees for distribution and other costs, improperly used assets of the
funds in the form of directed brokerage commissions and 12b-1 fees to pay
brokers to promote sales of the funds, and failed to properly disclose the use
of assets of the funds to make those payments in violation of the Investment
Company Act of 1940 and the Investment Advisers Act of 1940. Also, like those
prior complaints, the complaint further alleges that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers breached
their fiduciary duties to shareholders of the funds under the Investment Company
Act of 1940 and at common law. The complaint seeks unspecified compensatory and
punitive damages, rescission of the funds' investment advisory agreements, an
accounting of all fees paid, and an award of attorneys' fees and litigation
expenses.
The Oppenheimer defendants believe that the allegations contained in the
Complaints are without merit and that they, the funds named as Nominal
Defendants, and the Directors/Trustees of those funds have meritorious defenses
against the claims asserted. The Oppenheimer defendants intend to defend these
lawsuits vigorously and to contest any claimed liability. The Oppenheimer
defendants believe that it is premature to render any opinion as to the
likelihood of an outcome unfavorable to them and that no estimate can yet be
made with any degree of certainty as to the amount or range of any potential
loss.
50 | OPPENHEIMER CAPITAL INCOME FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
51 | OPPENHEIMER CAPITAL INCOME FUND
ITEM 2. CODE OF ETHICS
Not applicable to semiannual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
Not applicable to semiannual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable to semiannual reports.
ITEM 5. NOT APPLICABLE
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable
ITEM 7. DISCLOSURE OF PROXY POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT
INVESTMENT COMPANIES
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT COMPANIES
Not applicable.
ITEM 9. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The registrant's Board of Trustees has established a Governance Committee,
one function of which is to create and oversee the process by which shareholders
can submit nominees for positions on the Board. The Governance Committee has not
yet adopted a charter, but anticipates that it will do so in the coming months.
The Committee has temporarily adopted the process previously adopted by the
Audit Committee regarding shareholder submission of nominees for board
positions. Shareholders may submit names of individuals, accompanied by complete
and properly supported resumes, for the Governance Committee's consideration by
mailing such information to the Committee in care of the Fund. The Committee may
consider such persons at such time as it meets to consider possible nominees.
The Committee, however, reserves sole discretion to determine the candidates for
trustees and independent trustees to recommend to the Board and/or shareholders
and may identify candidates other than those submitted by Shareholders. The
Committee may, but need not, consider the advice and recommendation of the
Manager and its affiliates in selecting nominees. The full Board elects new
trustees except for those instances when a shareholder vote is required.
Shareholders who desire to communicate with the Board should address
correspondence to the Board of Trustees of the registrant, or to an individual
Trustee c/o the Secretary of the Fund at 6803 South Tucson Way, Centennial,
Colorado 80112 and may submit their correspondence electronically at
WWW.OPPENHEIMERFUNDS.COM under the caption "contact us." If your correspondence
is intended for a particular Trustee, please indicate the name of the Trustee
for whom it is intended. The sender should indicate in the address whether it is
intended for the entire board, the Independent Trustees as group, or to an
individual Trustee. The Governance Committee will consider if a different
process should be recommended to the Board.
ITEM 11. CONTROLS AND PROCEDURES
(a) Based on their evaluation of registrant's disclosure controls and
procedures (as defined in rule 30a-3(c) under the Investment Company
Act of 1940 (17 CFR 270.30a-3(c)) as of February 28, 2005,
registrant's principal executive officer and principal financial
officer found registrant's disclosure controls and procedures to
provide reasonable assurances that information required to be
disclosed by registrant in the reports that it files under the
Securities Exchange Act of 1934 (a) is accumulated and communicated
to registrant's management, including its principal executive
officer and principal financial officer, to allow timely decisions
regarding required disclosure, and (b) is recorded, processed,
summarized and reported, within the time periods specified in the
rules and forms adopted by the U.S. Securities and Exchange
Commission.
(b) There have been no changes in registrant's internal controls over
financial reporting that occurred during the registrant's last
fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over
financial reporting.
ITEM 12. EXHIBITS.
(A) EXHIBIT ATTACHED HERETO. (ATTACH CODE OF ETHICS AS EXHIBIT)(NOT
APPLICABLE TO SEMIANNUAL REPORTS)
(B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Oppenheimer Capital Income Fund
By: ____________________________
John V. Murphy
Chief Executive Officer
Date: April 11, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: ____________________________
John V. Murphy
Chief Executive Officer
Date: April 11, 2005
By: ____________________________
Brian W. Wixted
Chief Financial Officer
Date: April 11, 2005