  We present a status report on our study of long-distance contributions to the
decay amplitudes A(K^0 --> pi pi, I) in the framework of the 1/N expansion. We
argue that a modified prescription for the identification of meson momenta in
the chiral loop corrections has to be used to gain a self-consistent picture
which allows an appropriate matching with the short-distance part. Possible
uncertainties in the analysis of the density-density operators Q_6 and Q_8
which dominate the CP violation parameter epsilon'/epsilon are discussed. As a
first result we present the long-distance 1/N correction to the gluon penguin
operator Q_6 in the chiral limit.
