SCHEDULE 14A
Information Required in Proxy Statement
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant / X /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or 14a-12
OPPENHEIMER EQUITY INCOME FUND
- -----------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
KATHERINE P. FELD, ESQ.
- -----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) or Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
- -----------------------------------------------------------------
(1) Title of each class of securities to which transaction
applies:
- -----------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -----------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount
on which the filing fee is calculated and state how it was
determined):
- -----------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -----------------------------------------------------------------
(5) Total fee paid:
- -----------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
(1) Amount Previously Paid:
- -----------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party: Katherine P. Feld
- -----------------------------------------------------------------
(4) Date Filed: 4/21/97
<PAGE>
[Bridget Macaskill Letterhead]
May, 1997
Dear Oppenheimer Equity Income Fund Shareholder:
We have scheduled a shareholder meeting in June for you to decide upon
some important proposals for the Fund. Your ballot card and a detailed statement
of the issues are enclosed with this letter.
Your vote is very important because these decisions can affect your
investment, and it's your chance to help shape the policies of the Fund. So we
urge you to consider these issues carefully and to make your vote count.
How do you vote?
To vote, simply complete the ballot by marking your choices, sign it, and
return it in the postage-paid envelope provided. Remember, it can be expensive
for the Fund -- a portion of which is owned by you as a shareholder -- to remail
ballots if not enough responses are received to conduct the meeting.
What are the issues?
After consideration, the Board of Trustees, which represents your
interests in the day-to-day management of the Fund, recommends approval of the
following items:
|_| Election of Trustees. There are eleven Trustees up for reelection in
June. You will find detailed information on the Trustees in the enclosed proxy
statement.
|_| Ratification of Auditors. Each year, outside auditors are employed to
review the Fund's annual financial statements, as explained in the proxy
statement.
|_| Approval of Certain Changes to Fundamental Investment Policies. Your
approval is requested to change certain of the Fund's fundamental investment
policies. These proposed changes would give the Fund further investment
flexibility.
|_| Approval of the current Investment Advisory Agreement. The Fund's
Investment Advisory Agreement establishes the Manager's responsibility for
day-to-day management of the Fund, including managing the Fund's investments,
adherence to investment policies and arranging for the purchase and sale of
securities. The Agreement also requires the Manager to maintain effective
administration and recordkeeping for the Fund.
<PAGE>
|_| Changes in Distribution and Service Plan for Class B Shares (Class B
Shareholders Only). Currently, the Fund's distributor is reimbursed for a
portion of its distribution expenses from the service fee and the asset-based
sales charge. Your approval is requested to change the way the distributor is
paid so that it is compensated for its distribution efforts at the same rate.
This is a common type of plan in the mutual fund industry. Any distribution
costs in excess of that rate will be the responsibility of the distributor. This
proposed Class B 12b-1 Plan is the same as the current Class C 12b-1 Plan,
discussed below.
|_| Approval of current Distribution and Service Plan for Class C Shares
(Class C Shareholders Only). You are asked to approve the Fund's current Class B
12b-1 Distribution and Service Plan. The Fund's current Class C 12b-1 plan was
initially approved by the Manager as the sole initial shareholder of the Fund's
Class C shares, and is now being submitted to all shareholders for approval.
Please read the enclosed proxy statement for complete details on these
proposals. Of course if you have any questions, please contact your financial
advisor or call us at 1-800-525- 7048.
As always, we appreciate your confidence in OppenheimerFunds and thank you
for allowing us to manage a portion of your investment assets.
Sincerely,
[Bridget Macaskill signature]
Enclosures
<PAGE>
Oppenheimer Equity Income Proxy for Shareholders Meeting To
Fund - Class A Shares Be Held June 25, 1997
Your shareholder Your prompt response can save your
vote is important! Fund the expense of another mailing.
Please mark your proxy on the reverse
side, date and sign it, and return it
promptly in the accompanying envelope,
which requires no postage if mailed in
the United States.
Please detach at perforation before mailing.
Oppenheimer Equity Income Proxy For Shareholders Meeting To
Fund - Class A Shares Be Held June 25, 1997
The undersigned shareholder of Proxy solicited on behalf of the
Oppenheimer Equity Income Fund Board of Trustees, which
(the "Fund"), does hereby appoint recommends a vote FOR the election
Robert Bishop, George C. Bowen, of all nominees for Trustee and FOR
Rendle Myer and Scott Farrar, each proposal on the reverse side.
and each of them, as attorneys-in The shares represented hereby
fact and proxies of the undersigned, will be voted as indicated on the
with full power of substitution, to reverse side or FOR if no choice
attend the Meeting of Shareholders is indicated.
of the Fund to be held June 25, 1997,
at 6803 South Tucson Way, Englewood,
Colorado 80112 at 11:00 A.M., Denver
time, and at all adjournments thereof,
and to vote the shares held in the name
of the undersigned on the record date for
said meeting for the election of Trustees
and on the proposals specified on the
reverse side. Said attorneys-in-fact
shall vote in accordance with their best
judgment as to any other matter.
OVER
300
<PAGE>
Oppenheimer Equity Income Proxy for Shareholders Meeting to be held
Fund - Class A Shares June 25, 1997
Your shareholder Your prompt response can save your Fund money.
vote is important! Please vote, sign and mail your proxy ballot (this
card) in the enclosed postage-paid envelope today,
no matter how many shares you own. A majority of
the Fund's shares must be represented in person or
by proxy. Please vote your proxy so your Fund can
avoid the expense of another mailing.
Please detach at perforation before mailing.
1. Election of A) R. Avis H) R. Kirchner 1.// For all nominees
of Trustees B) W. Baker I) B. Macaskill listed except as marked
C) C. Conrad J) N Steel to the contrary at left.
D) J. Fossel K) J. Swain Instruction: To withhold
E) S. Freedman authority to vote for
F) R. Kalinowski any individual nominees,
G)C.H. Kast line out that nominee's
name at left.
// Withhold authority to
vote for all nominees
listed at left.
2. Ratification of selection 2./ /For / /Against / /Abstain
of Deloitte & Touche LLP as
independent auditors
(Proposal No. 1)
3. Approval of changes to the 3./ /For / /Against / /Abstain
Fund's fundamental investment
policies (Proposal No. 2)
/ / Real Estate Investment Trusts
/ / Investments in Other Investment Companies
/ / Commodities
/ / Hedging
/ / Borrowing
/ / Underwriting
4. Approval of the current 4./ /For / /Against / /Abstain
Investment Advisory Agreement
(Proposal No. 3)
NOTE: Please sign exactly as your name(s) appear hereon. When signing as
custodian, attorney, executor, administrator, trustee, etc., please give your
full title as such. All joint owners should sign this proxy. If the account is
registered in the name of a corporation, partnership or other entity, a duly
authorized individual must sign on its behalf and give title.
OVER
Dated: , 1997
-------------------------------------
(Month) (Day)
Signature(s)
-------------------------------------
Signature(s)
-------------------------------------
Please read both sides of this ballot. 300
proxy\300bal.a
<PAGE>
Oppenheimer Equity Income Proxy for Shareholders Meeting To
Fund - Class B Shares Be Held June 25, 1997
Your shareholder Your prompt response can save your
vote is important! Fund the expense of another mailing.
Please mark your proxy on the reverse
side, date and sign it, and return it
promptly in the accompanying envelope,
which requires no postage if mailed in
the United States.
Please detach at perforation before mailing.
Oppenheimer Equity Income Proxy For Shareholders Meeting To
Fund - Class B Shares Be Held June 25, 1997
The undersigned shareholder of Proxy solicited on behalf of the
Oppenheimer Equity Income Fund Board of Trustees, which
(the "Fund"), does hereby appoint recommends a vote FOR the election
Robert Bishop, George C. Bowen, of all nominees for Trustee and FOR
Rendle Myer and Scott Farrar, each proposal on the reverse side.
and each of them, as attorneys-in The shares represented hereby
fact and proxies of the undersigned, will be voted as indicated on the
with full power of substitution, to reverse side or FOR if no choice
attend the Meeting of Shareholders is indicated.
of the Fund to be held June 25, 1997,
at 6803 South Tucson Way, Englewood,
Colorado 80112 at 11:00 A.M., Denver time,
and at all adjournments thereof, and
to vote the shares held in the name of the
undersigned on the record date for
said meeting for the election of Trustees
and on the proposals specified on the
reverse side. Said attorneys-in-fact
shall vote in accordance with their best
judgment as to any other matter.
OVER
300
<PAGE>
Oppenheimer Equity Income Proxy for Shareholders Meeting to be held
Fund - Class B Shares June 25, 1997
Your shareholder Your prompt response can save your Fund money.
vote is important! Please vote, sign and mail your proxy ballot (this
card) in the enclosed postage-paid envelope today,
no matter how many shares you own. A majority of
the Fund's shares must be represented in person or
by proxy. Please vote your proxy so your Fund can
avoid the expense of another mailing.
Please detach at perforation before mailing.
1. Election of A) R. Avis H) R. Kirchner 1.// For all nominees
of Trustees B) W. Baker I) B. Macaskill listed except as marked
C) C. Conrad J) N Steel to the contrary at left.
D) J. Fossel K) J. Swain Instruction: To withhold
E) S. Freedman authority to vote for
F) R. Kalinowski any individual nominees,
G)C.H. Kast line out that nominee's
name at left.
// Withhold authority to
vote for all nominees
listed at left.
2. Ratification of selection 2./ /For / /Against / /Abstain
of Deloitte & Touche LLP as
independent auditors
(Proposal No. 1)
3. Approval of changes to the 3./ /For / /Against / /Abstain
Fund's fundamental investment
policies (Proposal No. 2)
/ / Real Estate Investment Trusts
/ / Investments in Other Investment Companies
/ / Commodities
/ / Hedging
/ / Borrowing
/ / Underwriting
4. Approval of the current 4./ /For / /Against / /Abstain
Investment Advisory Agreement
(Proposal No. 3)
5. Approval of the Fund's Class B 5./ /For / /Against / /Abstain
12b-1 Distribution and Service
Plan (Proposal No. 4)
NOTE: Please sign exactly as your name(s) appear hereon. When signing as
custodian, attorney, executor, administrator, trustee, etc., please give your
full title as such. All joint owners should sign this proxy. If the account is
registered in the name of a corporation, partnership or other entity, a duly
authorized individual must sign on its behalf and give title.
OVER
Dated: , 1997
-------------------------------------
(Month) (Day)
Signature(s)
-------------------------------------
Signature(s)
-------------------------------------
Please read both sides of this ballot. 300
proxy\300bal.b
<PAGE>
Oppenheimer Equity Income Proxy for Shareholders Meeting To
Fund - Class C Shares Be Held June 25, 1997
Your shareholder Your prompt response can save your
vote is important! Fund the expense of another mailing.
Please mark your proxy on the reverse
side, date and sign it, and return it
promptly in the accompanying envelope,
which requires no postage if mailed in
the United States.
Please detach at perforation before mailing.
Oppenheimer Equity Income Proxy For Shareholders Meeting To
Fund - Class C Shares Be Held June 25, 1997
The undersigned shareholder of Proxy solicited on behalf of the
Oppenheimer Equity Income Fund Board of Trustees, which
(the "Fund"), does hereby appoint recommends a vote FOR the election
Robert Bishop, George C. Bowen, of all nominees for Trustee and FOR
Rendle Myer and Scott Farrar, each proposal on the reverse side.
and each of them, as attorneys-in The shares represented hereby
fact and proxies of the undersigned, will be voted as indicated on the
with full power of substitution, to reverse side or FOR if no choice
attend the Meeting of Shareholders is indicated.
of the Fund to be held June 25, 1997,
at 6803 South Tucson Way, Englewood,
Colorado 80112 at 11:00 A.M., Denver time,
and at all adjournments thereof, and
to vote the shares held in the name of the
undersigned on the record date for
said meeting for the election of Trustees
and on the proposals specified on the
reverse side. Said attorneys-in-fact
shall vote in accordance with their best
judgment as to any other matter.
OVER
300
<PAGE>
Oppenheimer Equity Income Proxy for Shareholders Meeting to be held
Fund - Class C Shares June 25, 1997
Your shareholder Your prompt response can save your Fund money.
vote is important! Please vote, sign and mail your proxy ballot (this
card) in the enclosed postage-paid envelope today,
no matter how many shares you own. A majority of
the Fund's shares must be represented in person or
by proxy. Please vote your proxy so your Fund can
avoid the expense of another mailing.
Please detach at perforation before mailing.
1. Election of A) R. Avis H) R. Kirchner 1.// For all nominees
of Trustees B) W. Baker I) B. Macaskill listed except as marked
C) C. Conrad J) N Steel to the contrary at left.
D) J. Fossel K) J. Swain Instruction: To withhold
E) S. Freedman authority to vote for
F) R. Kalinowski any individual nominees,
G)C.H. Kast line out that nominee's
name at left.
// Withhold authority to
vote for all nominees
listed at left.
2. Ratification of selection 2./ /For / /Against / /Abstain
of Deloitte & Touche LLP as
independent auditors
(Proposal No. 1)
3. Approval of changes to the 3./ /For / /Against / /Abstain
Fund's fundamental investment
policies (Proposal No. 2)
/ / Real Estate Investment Trusts
/ / Investments in Other Investment Companies
/ / Commodities
/ / Hedging
/ / Borrowing
/ / Underwriting
4. Approval of the current 4./ /For / /Against / /Abstain
Investment Advisory Agreement
(Proposal No. 3)
5. Approval of the Fund's Class C 5./ /For / /Against / /Abstain
12b-1 Distribution and Service
Plan (Proposal No. 5)
NOTE: Please sign exactly as your name(s) appear hereon. When signing as
custodian, attorney, executor, administrator, trustee, etc., please give your
full title as such. All joint owners should sign this proxy. If the account is
registered in the name of a corporation, partnership or other entity, a duly
authorized individual must sign on its behalf and give title.
OVER
Dated: , 1997
-------------------------------------
(Month) (Day)
Signature(s)
-------------------------------------
Signature(s)
-------------------------------------
Please read both sides of this ballot. 300
proxy\300bal.c
<PAGE>
OPPENHEIMER EQUITY INCOME FUND
6803 South Tucson Way, Englewood, Colorado 80112
Notice Of Meeting Of Shareholders To Be Held
June 25, 1997
To The Shareholders of Oppenheimer Equity Income Fund:
Notice is hereby given that a Meeting of the Shareholders of Oppenheimer Equity
Income Fund (the "Fund") will be held at 6803 South Tucson Way, Englewood,
Colorado, 80112, at 11:00 A.M., Denver time, on June 25, 1997, or any
adjournments thereof, for the following purposes:
To be voted on by holders of:
Class A Class B Class C
Shares Shares Shares
X X X (a) To elect eleven Trustees to hold office
until the next meeting of shareholders called for
the purpose of electing Trustees and until their
successors are elected and shall qualify;
X X X (b) To ratify the selection of Deloitte & Touche
LLP as the independent certified public accountants
and auditors of the Fund for the fiscal year
beginning September 1, 1996 (Proposal No. 1);
X X X (c) To approve changes to certain of the Fund's
fundamental investment policies (Proposal No. 2);
X X X (d) To approve the current Investment Advisory
Agreement between the Fund and OppenheimerFunds,
Inc. (the "Manager") (Proposal No. 3);
X (e) To approve the Fund's Class B 12b-1 Distribution
and Service Plan (only shareholders of Class B
shares vote on this proposal) (Proposal No. 4);
X (f) To approve the Fund's Class C 12b-1 Distribution
and Service Plan (only shareholders of Class C
shares vote on this proposal) (Proposal No. 5); and
X X X (g) To transact such other business as may
properly come before the meeting, or any
adjournments thereof.
Shareholders of record at the close of business on April 2, 1997, are entitled
to notice of and to vote
<PAGE>
at the meeting. The election of Trustees and the Proposals are more fully
discussed in the Proxy Statement. Please read it carefully before telling us,
through your proxy or in person, how you wish your shares to be voted. The Board
of Trustees of the Fund recommends a vote to elect each of the nominees as
Trustee and in favor of each Proposal. WE URGE YOU TO MARK, SIGN, DATE AND MAIL
THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Trustees,
Andrew J. Donohue, Secretary
May 1, 1997
- ----------------------------------------------------------------------------
Shareholders who do not expect to attend the Meeting are asked to indicate
voting instructions on the enclosed proxy and to date, sign and return it in the
accompanying postage-paid envelope. To avoid unnecessary duplicate mailings, we
ask your cooperation in promptly mailing your proxy no matter how large or small
your holdings may be.
300
<PAGE>
OPPENHEIMER EQUITY INCOME FUND
6803 South Tucson Way, Englewood, Colorado 80112
PROXY STATEMENT
Meeting of Shareholders
To Be Held June 25, 1997
This statement is furnished to the shareholders of Oppenheimer Equity Income
Fund (the "Fund") in connection with the solicitation by the Fund's Board of
Trustees of proxies to be used at a meeting (the "Meeting") of shareholders to
be held at 6803 South Tucson Way, Englewood, Colorado, 80112, at 11:00 A.M.,
Denver time, on June 25, 1997, or any adjournments thereof. It is expected that
the mailing of this Proxy Statement will be made on or about May 1, 1997. For a
free copy of the Fund's annual report for its most recent fiscal year ended
August 31, 1996, or semi-annual report for the six months ended February 28,
1997, call OppenheimerFunds Services, the Fund's transfer agent, at
1-800-525-7048.
The enclosed proxy, if properly executed and returned, will be voted (or counted
as an abstention or withheld from voting) in accordance with the choices
specified thereon, and will be included in determining whether there is a quorum
to conduct the meeting. The proxy will be voted in favor of the nominees for
Trustee named in this Proxy Statement unless a choice is indicated to withhold
authority to vote for all listed nominees or any individual nominee. The proxy
will be voted in favor of each Proposal unless a choice is indicated to vote
against or to abstain from voting on that Proposal.
Shares owned of record by broker-dealers for the benefit of their customers
("street account shares") will be voted by the broker-dealer based on
instructions received from its customers. If no instructions are received
("broker non-votes"), the broker-dealer may (if permitted under applicable stock
exchange rules) as record holder vote such shares for the election of Trustees
and on the Proposals in the same proportion as that broker-dealer votes street
account shares for which voting instructions were received in time to be voted.
Abstentions and broker non-votes will be counted as present for purposes of
determining a quorum and will have the same effect as a vote against the
proposal.
If a shareholder executes and returns a proxy but fails to indicate how the
votes should be cast, the proxy will be voted in favor of the election of each
of the nominees named herein for Trustee and in favor of each Proposal.
The proxy may be revoked at any time prior to the voting by: (1) writing to the
Secretary of the Fund at 6803 South Tucson Way, Englewood, Colorado 80112 (if
received in time to be acted upon); (2) attending the meeting and voting in
person; or (3) signing and returning a new proxy (if returned and received in
time to be voted).
The cost of printing and distributing these proxy materials is an expense of the
Fund. In addition to the solicitation of proxies by mail, proxies may be
solicited by officers or employees of the Fund's
-1-
<PAGE>
transfer agent, personally or by telephone or other means; any expenses so
incurred will also be borne by the Fund. Brokers, banks and other fiduciaries
may be required to forward soliciting material to their principals and to obtain
authorization for the execution of proxies. For those services they will be
reimbursed by the Fund for their out-of-pocket expenses.
Shares Outstanding and Entitled to Vote. As of April 2, 1997, the record date,
there were approximately 222,569,054 shares of the Fund issued and outstanding,
consisting of approximately 192,440,531 Class A shares, 27,830,928 Class B
shares and 2,297,595 Class C shares. Each Class A, Class B and Class C share of
the Fund has voting rights as stated in this Proxy Statement and is entitled to
one vote for each share (and a fractional vote for a fractional share) held of
record at the close of business on the record date. As of April 2, 1997, no
shareholder was known by management of the Fund to be the record or beneficial
owner of 5% or more of the outstanding shares of any class of the Fund's shares.
ELECTION OF TRUSTEES
At the Meeting, eleven Trustees are to be elected to hold office until the next
meeting of shareholders called for the purpose of electing Trustees and until
their successors shall be duly elected and shall have qualified. Each nominee
has agreed to be named and to serve. The persons named as attorneys-in-fact in
the enclosed proxy have advised the Fund that unless a proxy instructs them to
withhold authority to vote for all listed nominees or any individual nominee,
all validly executed proxies will be voted by them for the election of the
nominees named below as Trustees of the Fund. As a Massachusetts business trust,
the Fund does not contemplate holding annual shareholder meetings for the
purpose of electing Trustees. Thus, the Trustees will be elected for indefinite
terms until a shareholder meeting is called for the purpose of voting for
Trustees and until their successors are elected and shall qualify.
Each of the nominees is also a trustee, director or managing general partner of
Oppenheimer Total Return Fund, Inc., Oppenheimer Cash Reserves, Centennial
America Fund, L.P., Oppenheimer Variable Account Funds, Oppenheimer Champion
Income Fund, Oppenheimer High Yield Fund, Oppenheimer Main Street Funds, Inc.,
Oppenheimer Municipal Fund, Oppenheimer Real Asset Fund, Oppenheimer Strategic
Income Fund, Oppenheimer Strategic Income & Growth Fund, Oppenheimer
International Bond Fund, Oppenheimer Integrity Funds, Oppenheimer Limited-Term
Government Fund, The New York Tax-Exempt Income Fund, Inc., Panorama Series
Fund, Inc., Centennial Money Market Trust, Centennial Government Trust,
Centennial New York Tax Exempt Trust, Centennial California Tax Exempt Trust,
Daily Cash Accumulation Fund, Inc. and Centennial Tax Exempt Trust (which
together with the Fund, comprise the "Denver-based Oppenheimer funds"), except
that Mr. Fossel and Ms. Macaskill are not trustees of Oppenheimer Strategic
Income Fund, Panorama Series Fund, Inc., Oppenheimer Variable Account Funds and
Oppenheimer Integrity Funds and Mr. Fossel is not a trustee of Centennial New
York Tax Exempt Trust or a managing general partner of Centennial America Fund,
L.P. Ms. Macaskill is the President, and Mr.
Swain is the Chairman and CEO, of all the Denver Oppenheimer funds.
Each nominee indicated below by an asterisk is an "interested person" (as that
term is defined in the Investment Company Act of 1940, hereinafter referred to
as the "Investment Company Act") of the
-2-
<PAGE>
Fund due to the positions indicated with the Fund's investment adviser,
OppenheimerFunds, Inc. (the "Manager") or its affiliates, or other positions
described. Mr. Fossel may also be considered an "interested person" of the Fund
or the Manager. Please see the section entitled "The Manager, the Distributor
and the Transfer Agent" under Proposal No. 3 for more information. The year
given below indicates when the nominee first became a Trustee or Director of any
of the Denver-based Oppenheimer funds without a break in service. The beneficial
ownership of Class A shares listed below includes voting and investment control,
unless otherwise indicated below. If a nominee should be unable to accept
election, the Board of Trustees may, in its discretion, select another person to
fill the vacant position. As of April 2, 1997, the Trustees and officers of the
Fund as a group owned 42,288.256 Class A shares of the Fund in the aggregate
(including 6,415.494 shares owned by Mr. Steel's spouse, of which he disclaims
beneficial ownership), which is less than 1% of the outstanding shares of that
class. None of the Trustees or officers owned any Class B or Class C shares of
the Fund.
Class A Shares
Beneficially
Name And Business Experience Owned as of
Other Information During the Past Five Years April 2, 1997
- ----------------- -------------------------- -------------
Robert G. Avis* Vice Chairman of A.G. Edwards & Sons, -0-
first became a Inc. (a broker-dealer) and A.G. Edwards,
Trustee in 1993. Inc. (its parent holding company);
Age: 65 Chairman of A.G.E. Asset Management and
A.G. Edwards Trust Company (its affiliated
investment adviser and trust company,
respectively).
William A. Baker Management Consultant. -0-
first became a
Trustee in 1966.
Age: 82
Charles Conrad, Jr. Chairman and Chief Executive Officer 1,978.902
first became a of Universal Space Lines, Inc. (a
Trustee in 1970. space services management company);
Age: 66 formerly Vice President of McDonnell
Douglas Space Systems Co. and associated
with the National Aeronautics and Space
Administration.
- --------
*A nominee who is an "interested person" of the Fund and the Manager under the
Investment Company Act.
-3-
<PAGE>
Class A Shares
Beneficially
Name And Business Experience Owned as of
Other Information During the Past Five Years April 2, 1997
- ----------------- -------------------------- -------------
Jon S. Fossel* Member of the Board of Governors of the -0-
first became a Investment Company Institute (a national
Trustee in 1990. trade association of investment companies),
Age: 54 Chairman of the Investment Company Institute
Education Foundation; formerly Chairman
and a director of the Manager, President and a
director of Oppenheimer Acquisition Corp.
("OAC"), the Manager's parent holding
company, and formerly a director of
Shareholder Services, Inc. ("SSI") and
Shareholder Financial Services, Inc. ("SFSI"),
transfer agent subsidiaries of the Manager.
Sam Freedman Formerly Chairman and Chief Executive -0-
first become a Officer of OppenheimerFunds Services,
Trustee in 1996. a division of the Manager which is a
Age 56 transfer agent; formerly Chairman, Chief
Executive Officer and a director of SSI & SFSI, Vice
President and director of OAC, and a director of the
Manager.
Raymond J. Kalinowski Director of Wave Technologies Internatio17,895.389
first became a Inc. (a computer products training company);
Trustee in 1988. formerly Vice Chairman and a director of
Age: 67 A.G. Edwards, Inc., parent holding company
of A.G. Edwards & Sons, Inc. (a broker-dealer),
of which he was a Senior Vice President.
C. Howard Kast Formerly Managing Partner of Deloitte, -0-
first became a Haskins & Sells (an accounting firm).
Trustee in 1988.
Age: 75
Robert M. Kirchner President of The Kirchner Company 7,725.280
first became a Trustee (management consultants).
in 1963.
Age: 75
- --------
*A nominee who is an "interested person" of the Fund and the Manager under the
Investment Company Act.
-4-
<PAGE>
Class A Shares
Beneficially
Name And Business Experience Owned as of
Other Information During the Past Five Years April 2, 1997
- ----------------- -------------------------- -------------
Bridget A. Macaskill* President, Chief Executive Officer and a-0-
first become a a Director of the Manager and HarbourView
Trustee in 1995. Asset Management Corporation
Age: 48 ("HarbourView"), an investment adviser
subsidiary of the Manager; Chairman and a director of SSI
and SFSI; President and a director of OAC and Oppenheimer
Partnership Holdings, Inc., a holding company subsidiary
of the Manager; a director of Oppenheimer Real Asset
Management, Inc.; formerly Executive Vice President of
the Manager.
Ned M. Steel Chartered Property and Casualty Underwri8,746.349**
first became a a director of Visiting Nurse Corporation of
Trustee in 1963. Colorado; formerly Senior Vice President
Age: 81 and a director of Van Gilder Insurance Corp.
(insurance brokers).
James C. Swain* Vice Chairman of the Manager; formerly a-0-
first became a director of the Manager, President and a
Trustee in 1969. director of Centennial Asset Management
Age: 63 Corporation ("Centennial"), an investment
adviser subsidiary of the Manager, and
Chairman of the Board of SSI.
Vote Required. The affirmative vote of a majority of the votes cast by
shareholders of the Fund without regard to class is required for the election of
a nominee as Trustee. The Board of Trustees recommends a vote for the election
of each nominee.
Functions of the Board of Trustees. The primary responsibility for the
management of the Fund rests with the Board of Trustees. The Trustees meet
regularly to review the activities of the Fund and of the Manager, which is
responsible for its day-to-day operations. Six regular meetings of the Trustees
were held during the fiscal period ended June 30, 1996. The Fund has changed its
fiscal
- --------
*A nominee who is an "interested person" of the Fund and the Manager under the
Investment Company Act.
**6,415.494 of these shares are owned by Mr. Steel's spouse, of which he
disclaims beneficial ownership.
-5-
<PAGE>
year from June 30 to August 31,during which period the Board met once. Each of
the Trustees was present for at least 75% of the meetings held of the Board
(except Mr. Freedman who was appointed a Trustee on June 27, 1996 and attended
the Board meeting during the remainder of the Fund's fiscal year ended August
31, 1996) and of all committees on which that Trustee served.
The Trustees of the Fund have appointed an Audit Committee, comprised of Messrs.
Baker (Chairman), Conrad and Kirchner, none of whom is an "interested person"
(as that term is defined in the Investment Company Act) of the Manager or the
Fund. The functions of the Committee include (i) making recommendations to the
Board concerning the selection of independent auditors for the Fund; (ii)
reviewing the methods, scope and results of audits and the fees charged; (iii)
reviewing the adequacy of the Fund's internal accounting procedures and
controls; and (iv) establishing a separate line of communication between the
Fund's independent auditors and its independent Trustees. The Committee met six
times during the fiscal period ended June 30, 1996. The Board of Trustees does
not have a standing nominating or compensation committee.
o Remuneration of Trustees. The officers of the Fund are affiliated with the
Manager. They and the Trustees of the Fund who are affiliated with the Manager
(Ms. Macaskill and Mr. Swain, who are both officers and Trustees) receive no
salary or fee from the Fund. The remaining Trustees of the Fund (excluding Mr.
Fossel) received the compensation shown below from the Fund during its fiscal
year ended June 30, 1996, and during the period from July 1, 1996 to August 31,
1996, and from all of the Denver-based Oppenheimer funds (including the Fund)
for which they served as Trustee, Director or Managing General Partner. Mr.
Freedman became a Trustee on June 27, 1996. Mr. Fossel received no payments from
the Fund during any period noted below. Compensation is paid for services in the
positions listed beneath their names:
Aggregate Aggregate
Compensation Compensation Total Compensation
From the Fund From the Fund From All
Fiscal Year Fiscal Period Denver-based
Name and Position Ended 6/30/96 Ended 8/31/96 Oppenheimer funds1
Robert G. Avis $7,926 $1,348 $53,000
Trustee
William A. Baker $10,955 $1,862 $73,255
Audit and Review
Committee Chairman
and Trustee
Charles Conrad, Jr. $9,618 $1,635 $64,309
Audit and Review
Committee Member
and Trustee
-6-
<PAGE>
Sam Freedman $
Trustee
Raymond J. Kalinowski $9,721 $1,653 $65,000
Risk Management
Oversight Committee
member and Trustee
C. Howard Kast $9,721 $1,653 $65,000
Risk Management
Oversight Committee
member and Trustee
Robert M. Kirchner $10,213 $1,736 $68,292
Audit and Review
Committee Member
and Trustee
Ned M. Steel $7,927 $1,347 $53,000
Trustee
- ----------------------
1For the 1996 calendar year during which the Denver-based funds listed in the
first paragraph of this section included Panorama Series Fund, Inc., which
became an Oppenheimer fund in March of 1996.
Officers of the Fund. Each officer of the Fund is elected by the Trustees to
serve an annual term. Information is given below about the executive officers
who are not Trustees of the Fund, including their business experience during the
past five years.
John P. Doney, Vice President and Portfolio Manager; Age: 67
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; formerly Senior Vice President and Chief
Investment Officer- Equities of National Securities & Research Corporation
(mutual fund investment adviser) and Vice President of the National affiliated
investment companies.
Andrew J. Donohue, Vice President and Secretary; Age 46.
Executive Vice President and General Counsel of the Manager and OppenheimerFunds
Distributor, Inc. (the "Distributor"); President and a director of Centennial
Asset Management Corporation ("Centennial") Executive Vice President, General
Counsel and a director of HarbourView, SFSI, SSI and Oppenheimer Partnership
Holdings Inc.; President and a director of Oppenheimer Real Asset Management,
Inc.; General Counsel of OAC; Executive Vice President, General Counsel and a
director of MultiSource Services, Inc. (a broker-dealer); an officer of other
Oppenheimer funds; formerly Senior Vice President and Associate General Counsel
of the Manager and the Distributor; Partner in Kraft & McManimon (a law firm);
an officer of First Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser); director and an
officer of First Investors Family of Funds and First Investors Life Insurance
Company.
George C. Bowen, Vice President, Assistant Secretary and Treasurer; Age 60.
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer of the Manager; Vice President and Treasurer
of the Distributor and HarbourView; Senior Vice President, Treasurer and
Assistant Secretary and a director of Centennial; Senior Vice President,
Treasurer and Secretary of SSI; Vice President, Treasurer and Secretary of SFSI;
Treasurer of OAC; Vice President and Treasurer of Oppenheimer Real Asset
Management, Inc.; Chief Executive Officer, Treasurer and a director of
MultiSource Services, Inc.
and an officer of other Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age 48.
Senior Vice President and Associate General Counsel of the Manager; Assistant
Secretary of SSI and SFSI; an officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age 38.
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds; previously a Fund Controller for the Manager, prior to which
he was an Accountant for Yale & Seffinger, P.C., an accounting firm and
previously an Accountant and Commissions Supervisor for Stuart James Company
Inc., a broker-dealer.
Scott T. Farrar, Assistant Treasurer; Age 31.
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds; previously a Fund Controller for the Manager.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
(Proposal No. 1)
The Investment Company Act requires that independent certified public
accountants and auditors ("auditors") be selected annually by the Board of
Trustees and that such selection be ratified by the shareholders at the
next-convened annual meeting of the Fund, if one is held. The Board of Trustees
of the Fund, including a majority of the Trustees who are not "interested
persons" (as defined in the Investment Company Act) of the Fund or the Manager,
at a meeting held June 27, 1996, selected Deloitte & Touche LLP ("Deloitte") as
auditors of the Fund for the ensuing fiscal year. Deloitte also serves as
auditors for certain other funds for which the Manager acts as investment
adviser and also serves as auditors for the Manager and certain of its
affiliates. At the Meeting, a resolution will be presented for the shareholders'
vote to ratify the selection of Deloitte as auditors. Representatives of
Deloitte are not expected to be present at the Meeting but will have the
opportunity to make a statement if they desire to do so and will be available
should any matter arise requiring their presence. The Board of Trustees
recommends approval of the selection of Deloitte as auditors of the Fund.
-7-
<PAGE>
APPROVAL OF CHANGES TO CERTAIN OF THE
FUND'S FUNDAMENTAL INVESTMENT POLICIES
(Proposal No. 2)
The Manager proposes that certain of the Fund's fundamental investment policies
be changed, as described below, to give the Fund further investment flexibility.
An investment policy that has been designated as "fundamental" is one that
cannot be changed without the requisite shareholder approval described below
under "Vote Required." Non-fundamental investment policies may be changed by the
Manager in consultation with and approval by the Board of Trustees without the
expense and delay of seeking shareholder approval. A vote in favor of this
Proposal shall be a vote in favor of all proposed investment policy changes
described in this Proposal. If approved, the effective date of this Proposal may
be delayed until the Fund's Prospectus or Statement of Additional Information is
updated to reflect these changes.
At a meeting held February 25, 1997, the Fund's Board of Trustees, including a
majority of its independent Trustees, determined that the best interests of the
Fund would be served by allowing the Fund greater investment flexibility, as set
forth in these proposed investment policy changes, in response to market or
regulatory developments.
o Real Estate Investment Trusts. As a matter of fundamental policy, "The Fund
cannot buy or sell real estate or interests in real estate investment trusts."
The Manager proposes that this fundamental policy be replaced, subject to
shareholder approval, with the following fundamental policy, thereby removing
the prohibition on investing in real estate investment trusts ("REITs"):
o The Fund cannot invest in real estate or in interests in real estate,
but may purchase securities of issuers holding real estate or interests
therein.
This new policy on investments in real estate must be fundamental, as required
by sections 8(b)(1) and 13(a)(2) of the Investment Company Act of 1940.
Securities of companies holding real estate or interests therein, including
REITs and real estate limited partnerships, seek to earn profits for investors
by managing income-producing real estate or lending money to developers. Assets
are generally managed by one or more trustees (in the case of a REIT) or general
partners (in the case of a real estate limited partnership) who control
acquisitions and investments. There are special risks associated with these
types of investments. The value of the Fund's investments in REITs or real
estate limited partnerships will be affected by changes in the values of the
underlying real estate investments as well as changes in interest rates. At
times, the real estate market can be volatile and prices can change
substantially. These risks may affect the Fund's net asset values per share.
o Investments in Other Investment Companies. Currently, as a matter of
fundamental policy, the Fund cannot buy securities of other investment
companies, except in connection with a merger or consolidation. The Manager
proposes that this fundamental policy be eliminated.
Until the recent enactment of the National Securities Markets Improvement Act of
1996 (the "Securities Markets Improvement Act"), the ability of investment
companies to invest in other investment companies had been significantly
limited. With the passage of the Securities Markets
-8-
<PAGE>
Improvement Act, the ability to invest in other investment companies has been
greatly expanded and the Securities and Exchange Commission has been granted
broad exemptive authority to permit other arrangements. Accordingly, the
elimination of this fundamental restriction will allow the Fund to purchase
securities of other investment companies to the extent permitted by law,
regulation and exemptions, subject to the approval by the Board of Trustees.
This change would also permit the Fund, subject to approval by the Board of
Trustees, to adopt a "master-feeder" or "fund of funds" structure. Either type
of arrangement might result in duplication of certain fees. The Fund has no
current plans to adopt a "master-feeder" or "fund of funds" structure or to
engage in significant purchases of shares of other investment companies.
o Commodities. As a matter of fundamental policy, "The Fund cannot buy or sell
commodities or commodity contracts other than those hedging instruments which
are considered commodities."
This policy prohibits the Fund from trading in physical commodities, and the
Fund does not seek permission to trade physical commodities. However, this
investment policy could be read to prohibit the Fund from buying or selling
options, futures, securities or other instruments backed by, or the investment
return from which is linked to changes in the price of, physical commodities,
including "commodity-linked" notes unless they are hedging instruments.
The Manager proposes that this fundamental investment policy be deleted and
replaced with a new policy that is also fundamental, as required by sections
8(b)(1) and 13(a)(2) of the Investment Company Act of 1940. Although the Fund's
current Prospectus contains disclosure regarding options, futures, securities or
other instruments backed by, or the investment return from which is linked to
changes in the price of, physical commodities, including "commodity-linked"
notes, replacing this fundamental investment policy as described below will
resolve any ambiguity as to whether the Fund may invest in those instruments.
The new fundamental policy would read as follows:
o The Fund cannot invest in physical commodities or physical commodity
contracts; however, the Fund may: (i) buy and sell hedging instruments
permitted by any of its other investment policies, and (ii) buy and sell
options, futures, securities or other instruments backed by, or the
investment return from which is linked to changes in the price of,
physical commodities.
The use of derivative instruments requires special skills and knowledge and
investment techniques that are different from what is required for normal
portfolio management. In some cases, the Fund may buy a call option , a futures
contract or a commodity-linked note for the purpose of increasing its exposure
in a particular market segment, which may affect the the Fund's net asset values
per share. Risks of commodity-linked notes include risk of loss of principal,
risk of loss of interest, lack of a secondary market, volatility of the
instrument, and counterparty risk.
o Hedging. The Fund has two fundamental investment policies that pertain to the
use of hedging instruments, as follows:
o The Fund cannot engage in short sales or purchase securities on margin,
however, the Fund may
-9-
<PAGE>
make margin deposits in connection with any of the hedging instruments it may
use.
o The Fund cannot mortgage, pledge or hypothecate the Fund's assets; the escrow,
collateral and margin arrangements involved with hedging instruments are not
considered to involve a mortgage, hypothecation or pledge.
The Manager proposes that these two fundamental policies be amended to allow the
Fund to enter into escrow, collateral and margin arrangements in connection not
only with its hedging instruments, but also with any of its permitted
investments.
These revised fundamental investment policies would read as follows:
o The Fund cannot engage in short sales or purchase securities on margin;
however, the Fund may make margin deposits in connection with any of its other
investments.
o The Fund cannot mortgage, pledge or hypothecate the Fund's assets; the escrow,
collateral and margin arrangements involved with any of its investments are not
considered to involve a mortgage, hypothecation or pledge.
o Borrowing. The Fund has a fundamental investment policy that it cannot borrow
money. The Manager proposes that this fundamental investment policy be revised
to give the Fund flexibility to borrow money in the event of an emergency. An
emergency might be, for example, unanticipated redemptions which would require
the sale of portfolio securities at a time or price disadvantageous to the Fund.
This revised fundamental investment policy would read as follows:
o The Fund cannot borrow money, except for temporary, emergency purposes
or under other unusual circumstances.
o Underwriting Securities. The Fund currently has a fundamental investment
policy that, "The Fund cannot act as an underwriter of securities of other
issuers." The Manager wishes to revise this policy to clearly state the
exception to the underwriting prohibition that is permitted by the Investment
Company Act of 1940. This revised fundamental policy would read as follows:
o The Fund cannot act as an underwriter of securities of other issuers, except
in connection with sales of its portfolio securities.
Vote Required. An affirmative vote of the holders of a "majority of the
outstanding voting securities" (as defined in the Investment Company Act) of the
Fund is required for approval of this Proposal; the classes do not vote
separately. The requirement for such "majority" is defined in the Investment
Company Act as the vote of the holders of the lesser of: (i) 67% or more of the
voting securities present or represented by proxy at the shareholders meeting,
if the holders of more than 50% of the outstanding voting securities are present
or represented by proxy; or (ii) more than 50% of the outstanding voting
securities. The Board of Trustees recommends a vote in favor of
-10-
<PAGE>
approving this Proposal.
APPROVAL OF CURRENT INVESTMENT ADVISORY AGREEMENT
(Proposal No. 3)
The Fund has an Investment Advisory Agreement dated October 22, 1990 with the
Manager (the "Agreement") which was most recently approved by the Fund's Board
of Trustees, including a majority of the Trustees who are not "interested
persons" (as defined in the Investment Company Act) of the Fund or of the
Manager, on December 17, 1996. Prior to January 5, 1996, the Manager was known
as Oppenheimer Management Corporation. The Agreement was approved by
shareholders of the Fund at a meeting held on October 1, 1990 because of the
acquisition of the Manager by Massachusetts Mutual Life Insurance Company
("MassMutual") through a wholly-owned subsidiary, Oppenheimer Acquisition Corp.
The Board of Trustees has determined to submit the Fund's current Investment
Advisory Agreement for shareholder approval. A copy of the Agreement is included
in this Proxy Statement as Exhibit A. If approved by the shareholders at this
meeting, the Agreement will continue in effect until December 31, 1997, and
thereafter from year to year unless terminated, but only so long as such
continuance is approved in accordance with the Investment Company Act.
Under the Agreement, the Manager supervises the investment operations of the
Fund and the composition of its portfolio and furnishes the Fund advice and
recommendations with respect to investments, investment policies and the
purchase and sale of securities. The management fee, computed daily and payable
monthly under the Agreement to the Manager, is computed on the average annual
net assets of the Fund at the following annual rates: 0.75% of the first $100
million of average annual net assets; 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. During
the fiscal year ended June 30, 1996, and the fiscal period ended August 31,
1996, the Fund paid the Manager a fee of $12,078,956 and $2,134,834,
respectively, under the Agreement. The Manager also acts as investment adviser
to other Oppenheimer funds that have similar or comparable investment
objectives. A list of those funds and the net assets and advisory fee rates paid
by those funds is contained in Exhibit B to this Proxy Statement.
The Agreement requires the Manager, at its expense, to provide the Fund with
adequate office space, facilities and equipment as well as to provide, and
supervise the activities of all administrative and clerical personnel required
to provide effective administration for the Fund, including the compilation and
maintenance of records with respect to its operations, the preparation and
filing of specified reports, and composition of proxy materials and registration
statements for continuous public sale of shares of the Fund. Expenses not
expressly assumed by the Manager under the Agreement or by the Distributor of
the Fund's shares are paid by the Fund. The Agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share certificate issuance costs, certain
printing and registration costs, and non-recurring expenses, including
litigation.
-11-
<PAGE>
The Agreement contains an expense limitation. Under the Agreement, the Manager
guarantees that the total expenses of the Fund in any calendar year, including
the management fee but exclusive of taxes, interest, brokerage commissions and
extraordinary non-recurring expenses shall not exceed, and the Manager
undertakes to pay or refund to the Fund any amount by which such expenses shall
exceed, the aggregate of one and one-half percent of the first $30 million of
the Fund's average annual net assets plus one percent of the Fund's average
annual net assets in excess of $30 million. The payment of the management fee at
the end of any month will be reduced so that there will not be any accrued but
unpaid liability under this expense limitation. During the Fund's most recent
fiscal year ended June 30, 1996, and its most recent fiscal period ended August
31, 1996 (the Fund has changed its fiscal year from June 30 to August 31), the
Fund's expenses did not exceed the threshold set in the Investment Advisory
Agreement.
So long as it shall have acted with due care and in good faith, the Manager
shall not be liable for any loss sustained by reason of any investment, the
adoption of any investment policy, or the purchase, sale or retention of any
security irrespective of whether the determinations of the Manager relative
thereto shall have been based, wholly or partly, upon the investigation or
research of any other individual, firm or corporation believed by it to be
reliable. Nothing contained in the Agreement shall, however, be construed to
protect the Manager against any liability to the Fund or its shareholders by
reason of willful misfeasance, bad faith or gross negligence in the performance
of its duties, or by reason of its reckless disregard of its obligations and
duties under this Agreement.
The Agreement permits the Manager to act as investment adviser for any other
person, firm or corporation and to use the name "Oppenheimer" in connection with
other investment companies for which it may act as investment adviser. If the
Manager shall no longer act as investment adviser to the Fund, the right of the
Fund to use the name "Oppenheimer" as part of its name may be withdrawn.
Brokerage Provisions of the Agreement. One of the duties of the Manager under
the Agreement is to arrange the portfolio transactions for the Fund. The
Agreement contains provisions relating to the employment of broker-dealers
("brokers") to effect the Fund's portfolio transactions. In doing so, the
Manager is authorized by the Agreement to employ such broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company Act, as
may, in its best judgment based on all relevant factors, implement the policy of
the Fund to obtain, at reasonable expense, the "best execution" (prompt and
reliable execution at the most favorable price obtainable) of such transactions.
The Manager need not seek competitive commission bidding but is expected to be
aware of the current rates of eligible brokers and to minimize the commissions
paid to the extent consistent with the interest and policies of the Fund as
established by its Board of Trustees. Purchases of securities from underwriters
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers include a spread between the bid and asked price.
Under the Agreement, the Manager is authorized to select brokers that provide
brokerage and/or research services for the Fund and/or the other accounts over
which the Manager or its affiliates have investment discretion. The commissions
paid to such brokers may be higher than another qualified broker would have
charged if a good faith determination is made by the Manager that the
commissions are fair and reasonable in relation to the services provided.
Subject to the foregoing
-12-
<PAGE>
considerations, the Manager may also consider sales of shares of the Fund and
other investment companies managed by the Manager or its affiliates as a factor
in the selection of brokers for the Fund's portfolio transactions.
Description of Brokerage Practices. Subject to the provisions of the Agreement,
and the procedures and rules described above, allocations of brokerage are
generally made by the Manager's portfolio traders based upon recommendations
from the Manager's portfolio managers. In certain instances, portfolio managers
may directly place trades and allocate brokerage, also subject to the provisions
of the Agreement and the procedures and rules described above. In either case,
brokerage is allocated under the supervision of the Manager's executive
officers. Transactions in securities other than those for which an exchange is
the primary market are generally done with principals or market makers.
Brokerage commissions are paid primarily for effecting transactions in listed
securities or for certain fixed-income agency transactions in the secondary
market and are otherwise paid only if it appears likely that a better price or
execution can be obtained. When the Fund engages in an option transaction,
ordinarily the same broker will be used for the purchase or sale of the option
and any transaction in the securities to which the option relates. When
possible, concurrent orders to purchase or sell the same security by more than
one of the accounts managed by the Manager or its affiliates are combined. The
transactions effected pursuant to such combined orders are averaged as to price
and allocated in accordance with the purchase or sale orders actually placed for
each account. Option commissions may be relatively higher than those which would
apply to direct purchases and sales of portfolio securities.
The research services provided by a particular broker may be useful only to one
or more of the advisory accounts of the Manager and its affiliates, and
investment research received for the commissions of those other accounts may be
useful both to the Fund and one or more of such other accounts. Such research,
which may be supplied by a third party at the instance of a broker, includes
information and analyses on particular companies and industries as well as
market or economic trends and portfolio strategy, receipt of market quotations
for portfolio evaluations, information systems, computer hardware and similar
products and services. If a research service also assists the Manager in a
non-research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the Manager in
the investment decision-making process may be paid in commission dollars. The
Board of Trustees permits the Manager to use concessions on fixed price
offerings to obtain research, in the same manner as is permitted for agency
transactions. The Board also permits the Manager to use stated commissions on
secondary fixed-income agency trades to obtain research where the broker has
represented to the Manager that: (i) the trade is not from or for the broker's
own inventory; (ii) the trade was executed by the broker on an agency basis at
the stated commission; and (iii) the trade is not a riskless principal
transaction.
The research services provided by brokers broaden the scope and supplement the
research activities of the Manager, by making available additional views for
consideration and comparisons, and by enabling the Manager to obtain market
information for the valuation of securities held in the Fund's portfolio or
being considered for purchase.
The Manager, the Distributor and the Transfer Agent. Subject to the authority of
the Board of
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<PAGE>
Trustees, the Manager is responsible for the day-to-day management of the Fund's
business, pursuant to its investment advisory agreement with the Fund.
OppenheimerFunds Distributor, Inc., a wholly-owned subsidiary of the Manager, is
the general distributor (the "Distributor") of the Fund's shares.
OppenheimerFunds Services, a division of the Manager, serves as the transfer and
shareholder servicing agent for the Fund on an "at-cost" basis, for which it was
paid $2,688,008 and $570,503 by the Fund during its prior fiscal year ended June
30, 1996 and its fiscal period ended August 31, 1996, respectively.
The Manager (including a subsidiary) currently manages investment companies,
including other Oppenheimer funds, with assets of more than $62 billion as of
March 31, 1997, and with more than 3 million shareholder accounts. The Manager
is a wholly-owned subsidiary of Oppenheimer Acquisition Corp. ("OAC"), a holding
company controlled by Massachusetts Mutual Life Insurance Company
("MassMutual"). The Manager, the Distributor and OAC are located at Two World
Trade Center, New York, New York 10048. MassMutual is located at 1295 State
Street, Springfield, Massachusetts 01111. OAC acquired the Manager on October
22, 1990. As indicated below, the common stock of OAC is owned by (i) certain
officers and/or directors of the Manager, (ii) MassMutual and (iii) another
investor. No institution or person holds 5% or more of OAC's outstanding common
stock except MassMutual. MassMutual has engaged in the life insurance business
since 1851.
The common stock of OAC is divided into three classes. At December 31, 1996,
MassMutual held (i) all of the 2,160,000 shares of Class A voting stock, (ii)
716,943 shares of Class B voting stock, and (iii) 1,353,873 shares of Class C
non-voting stock. This collectively represented 86.2% of the outstanding common
stock and 94.2% of the voting power of OAC as of that date. Certain officers
and/or directors of the Manager held (i) 407,866 shares of the Class B voting
stock, representing 8.3% of the outstanding common stock and 4.1% of the voting
power, and (ii) options acquired without cash payment which, when they become
exercisable, allow the holders to purchase up to 684,407 shares of Class C
non-voting stock. That group includes persons who serve as officers of the Fund,
and Ms. Macaskill and Mr. Swain, who serve as Trustees of the Fund. Holders of
OAC Class B and Class C common stock may put (sell) their shares and vested
options to OAC or MassMutual at a formula price (based on earnings of the
Manager). MassMutual may exercise call (purchase) options on all outstanding
shares of both such classes of common stock and vested options at the same
formula price. From the period November 1, 1995 to December 31, 1996, the only
transactions by persons who serve as Directors of the Fund were by Ms.
Macaskill, who surrendered to OAC 20,000 stock appreciation rights issued in
tandem with the Class C OAC options, for cash payments aggregating $1,421,800,
Mr. Fossel who sold 117,838 shares of Class B OAC common stock to MassMutual for
an aggregate of $15,133,735, Mr. Swain who surrendered to OAC 20,000 stock
appreciation rights issued in tandem with Class C OAC options, for a cash
payment aggregating $2,267,780, and Mr. Freedman who surrendered to OAC 45,474
stock appreciation rights issued in tandem with Class C OAC options, for a cash
payment of $4,808,876. Mr. Freedman and Mr. Fossel no longer hold any OAC stock,
stock appreciation rights or other financial interests in the Manager or any of
its affiliates. Mr. Fossel, however, may be entitled to an additional payment to
be made in 1997.
The names and principal occupations of the executive officers and directors of
the Manager are as
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<PAGE>
follows: Bridget A. Macaskill, President, Chief Executive Officer and a
director; Donald W. Spiro, Chairman Emeritus; Robert G. Galli and James C.
Swain, Vice Chairmen; Robert C. Doll, O. Leonard Darling, Paula Gabriele,
Barbara Hennigar, James Ruff, Loretta McCarthy, Tilghman G. Pitts III and Nancy
Sperte, Executive Vice Presidents; Andrew J. Donohue, Executive Vice President
and General Counsel; George C. Bowen, Senior Vice President and Treasurer; Peter
M. Antos, Victor Babin, Robert A. Densen, Ronald H. Fielding, Robert E.
Patterson, Richard Rubinstein, Arthur Steinmetz, Ralph Stellmacher, John Stoma,
Jerry A. Webman, William L. Wilby and Robert G. Zack, Senior Vice Presidents.
These officers are located at one of the four offices of the Manager: Two World
Trade Center, New York, NY 10048; 6803 South Tucson Way, Englewood, CO 80112;
350 Linden Oaks, Rochester, NY 14625 and One Financial Plaza, 755 Main Street,
Hartford, CT 06103.
Considerations by the Board of Trustees. In connection with the annual review by
the Board of Trustees in December 1996 to determine if the Investment Advisory
Agreement should be approved and renewed, the Board and the Independent Trustees
considered and reviewed materials prepared for this purpose by a consultant. The
Board also considered materials provided by the Manager. As a result of its
deliberations, the Board of Trustees including the Independent Trustees
concluded to approve and renew the Agreement without amendment for an additional
one year period.
The materials reviewed and considered by the Board included information on: the
nature, quality and extent of services rendered by the Manager to the Fund; an
analysis of the Fund's investment advisory fee, investment performance, expense
ratios and expenses of the Fund as compared in each case to comparable mutual
funds; the investment performance of other mutual funds for which the Manager
acts as investment adviser; information on the portfolio manager for the Fund
and his experience and qualifications; the profitability of the Manager from its
investment advisory operations for the Fund and other mutual funds for which it
or its affiliates are the investment adviser; the financial condition and
resources of the Manager and its parent, OAC; the benefits which the Manager
obtains from its relationship with the Fund; and economies of scale made
available to the Fund by the Manager. The Board also considered the terms and
conditions of the current Agreement, and considered alternatives to the use of
the Manager.
The Board of Trustees including the Independent Trustees considered all of the
above matters in reaching its decision to approve the Agreement and to renew it
for an additional year. The Board did not single out any one factor or group of
factors as being more important than other factors, but considered such matters
together in arriving at its decision. The Board of Trustees also considered that
the Manager has been the investment adviser for the Fund for a number of years
and the Board has found the performance of the Manager pursuant to the
Investment Advisory Agreement to be satisfactory.
Determination by the Independent Trustees and the Board of Trustees. After
completion of its review, the Independent Trustees recommended that the Board of
Trustees approve, and the Board unanimously approved, the Agreement.
Vote Required. An affirmative vote of the holders of a "majority of the
outstanding voting securities" (as defined in the Investment Company Act) of the
Fund is required for approval of the
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Agreement; the classes do not vote separately. The requirements for such
"majority" are described in Proposal No. 2. The Board of Trustees recommends a
vote in favor of approving the current Investment Advisory Agreement.
APPROVAL OF THE FUND'S CLASS B 12b-1 DISTRIBUTION
AND SERVICE PLAN AND AGREEMENT
(Proposal No. 4)
NOTE: This Proposal applies to Class B Shareholders only.
Class B shares were first offered to the public on August 17, 1993. In
connection with the initial public offering of those shares, the Fund adopted a
Distribution and Service Plan dated June 22, 1993 for Class B shares pursuant to
Rule 12b-1 of the Investment Company Act, in conformity with the National
Association of Securities Dealers, Inc. ("NASD") Rule which permits the Fund to
pay up to 0.25% of its average annual net assets as a service fee and up to
0.75% of its average annual net assets as an asset-based sales charge. The
Manager, as the sole initial shareholder of the Fund's Class B shares, approved
this Distribution and Service Plan for Class B shares of the Fund. At a meeting
held June 22, 1993, the Fund's Board of Trustees, including a majority of the
Trustees who are not "interested persons" (as defined in the Investment Company
Act) of the Fund or the Manager, and who have no direct or indirect financial
interest in the operation of the Fund's 12b-1 plans or in any related agreements
("Independent Trustees"), approved this Distribution and Service Plan.
At meetings of the Fund's Board of Trustees held February 25, 1997 and April 29,
1997, the Manager proposed the adoption of a new Class B Distribution and
Service Plan and Agreement for Class B shares (the "Distribution and Service
Plan") which is recharacterized as a "compensation type plan" instead of a
"reimbursement type plan." The Fund's Board of Trustees, including a majority of
the Independent Trustees, approved the new Distribution and Service Plan,
subject to shareholder approval, and determined to recommend it for approval by
Class B shareholders. A copy of this Distribution and Service Plan is attached
as Exhibit C to this proxy statement.
Description of the Current and Proposed Distribution and Service Plans. Except
as explained below, the terms of the current and proposed 12b-1 plans are
substantially the same. Under both the proposed and current Distribution and
Service Plans, the Fund makes payments to the Distributor for its services in
connection with the distribution of Class B Shares and the personal service and
maintenance of accounts that hold Class B shares. The Fund pays the Distributor
an asset-based sales charge of 0.75% per annum of Class B shares outstanding no
more than for six years, and also pays the Distributor a service fee of 0.25%
per annum, each of which is computed on the average annual net assets of Class B
shares of the Fund.
Both the proposed and current Distribution and Service Plans provide for
payments for two different distribution related functions. The Distributor pays
certain brokers, dealers, banks or other persons or entities ("Recipients") a
service fee of 0.25% for personal services to Class B shareholders and
maintenance of shareholder accounts by those Recipients. The services rendered
by Recipients in connection with personal services and the maintenance of Class
B shareholder accounts may include,
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<PAGE>
but shall not be limited to, the following: answering routine inquiries from the
Recipient's customers concerning the Fund, providing such customers with
information on their investment in shares, assisting in the establishment and
maintenance of accounts or sub-accounts in the Fund, making the Fund's
investment plans and dividend payment options available, and providing such
other information and customer liaison services and the maintenance of accounts
as the Distributor or the Fund may reasonably request. The Distributor is
permitted under the Distribution and Service Plan to retain service fee payments
to compensate it for rendering such services.
Service fee payments by the Distributor to Recipients are made (i) in advance
for the first year Class B shares are outstanding, following the purchase of
shares, in an amount equal to 0.25% of the net asset value of the shares
purchased by the Recipient or its customers and (ii) thereafter, on a quarterly
basis, computed as of the close of business each day at an annual rate of 0.25%
of the net asset value of Class B shares held in accounts of the Recipient or
its customers. The Dsitributor retains the service fee during the first year
sahres are outstanding. In the event Class B shares are redeemed less than one
year after the date such shares were sold, the Recipient is obligated to repay
to the Distributor on demand a pro rata portion of such advance service fee
payments, based on the ratio of the remaining period to one year.
Both the proposed and current Distribution and Service Plans also provide that
the Fund will pay the Distributor on a monthly basis an asset-based sales charge
at an annual rate of 0.75% of the net asset value of Class B shares outstanding
to compensate it for other services in connection with the distribution of the
Fund's Class B shares. The distribution assistance and administrative support
services rendered by the Distributor in connection with the sales of Class B
shares may include: (i) paying sales commissions to any broker, dealer, bank or
other person or entity that sells the Fund's Class B shares and/opr paying such
Recipients advance service fees, (ii) paying compensation to and expenses of
personnel of the Distributor who support distribution of Class B shares by
Recipients, (iii) obtaining financing or providing such financing from its own
resources or from an affiliate, for the interest and other borrowing costs of
the Distributor's unreimbursed expenses incurred in rendering distribution
assistance for Class B shares, and (iv) paying certain other
distribution-related expenses. The other distribution assistance in connection
with the sale of Class B shares rendered by the Distributor and Recipients may
include, but shall not be limited to, the following: distributing sales
literature and prospectuses other than those furnished to current Class B
shareholders, processing Class B share purchase and redemption transactions, and
providing such other information in connection with the distribution of Class B
shares as the Distributor or the Fund may reasonably request.
The Distributor currently pays sales commissions from its own resources to
Recipients at the time of sale equal to 3.75% of the purchase price of Fund
shares sold by such Recipient, and advances the first year service fee of 0.25%.
The proposed Distribution and Service Plan will also provide that the
Distributor may pay to the dealer on a quarterly basis the service fee and the
asset-based sales charge payable on Class B shares in lieu of paying the sales
commission of 3.75% and the advance of the service fee at the time of purchase.
Asset-based sales charge payments are designed to permit an investor to purchase
shares of the Fund without the assessment of a front-end sales load and at the
same time permit the Distributor to compensate Recipients in connection with the
sale of shares of the Fund. The Distributor and the Fund anticipate that it will
take a number of years for
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the Distributor to recoup the sales commissions paid to Recipients and other
distribution-related expenses, from the Fund's payments to the Distributor under
the Class B Distribution and Service Plan, and from the contingent deferred
sales charge deducted from redemption proceeds for Class B shares redeemed
before the end of six years of their purchase, as described in the Fund's
prospectus.
The Distribution and Service Plan has the effect of increasing annual expenses
of Class B shares of the Fund by 1.00% of the class's average annual net assets
from what those expenses would otherwise be. Payments by the Fund to the
Distributor under the current Class B Plan during the fiscal period ended June
30, 1996, and the fiscal period from July 1, 1996 through August 31, 1996,
totalled $2,077,724 and $432,504, respectively (1.00% and 1.00% of the Fund's
average net assets represented by Class B shares during those periods), of which
$1,728,635 and $355,295 was retained by the Distributor and $34,064 and $6,798
was paid to an affiliated broker/dealer.
If the Class B shareholders approve this Proposal, the Distribution and Service
Plan shall, unless terminated as described below, continue in effect until
October 31, 1997 and from year to year thereafter only so long as such
continuance is specifically approved, at least annually, by the Fund's Board of
Trustees and its Independent Trustees by a vote cast in person at a meeting
called for the purpose of voting on such continuance. The Distribution and
Service Plan may be terminated at any time by a vote of a majority of the
Independent Trustees or by a vote of the holders of a "majority" under the
Investment Company Act of the Fund's outstanding Class B shares. Both the
proposed and current Distribution and Service Plans contain a provision which
provides that the Board may allow the Fund to continue payments to the
Distributor for Class B shares sold prior to termination of the Distribution and
Service Plan. Pursuant to this provision, payment of the asset-based sales
charge and service fee could be continued by the Board after termination. The
Distribution and Service Plan may not be amended to increase materially the
amount of payments to be made without approval by Class B shareholders. All
material amendments must be approved by a majority of the Independent Trustees.
If the Class B shareholders do not approve this Proposal, the current Class B
Distribution and Service Plan will remain in effect.
Additional Information. Both the proposed and current Distribution and Service
Plans provide that while it is in effect, the selection and nomination of those
Trustees of the Fund who are not "interested persons" of the Fund is committed
to the discretion of the Independent Trustees. This does not prevent the
involvement of others in such selection and nomination if the final decision on
any such selection or nomination is approved by a majority of the Independent
Trustees.
Under either Distribution and Service Plan, no payment for service fees will be
made to any Recipient in any quarter if the aggregate net asset value of all
Fund shares held by the Recipient for itself and its customers does not exceed a
minimum amount, if any, that may be determined from time to time by a majority
of the Independent Trustees. Under both Plans, the Board of Trustees has set the
fee at the maximum rate and set no minimum amount. The Distribution and Service
Plan permits the Distributor and the Manager to make additional distribution
payments to Recipients from their own resources (including profits from
management fees) at no cost to the Fund. The Distributor and the Manager may, in
their sole discretion, increase or decrease the amount of distribution
assistance payments they make to Recipients from their own assets.
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<PAGE>
Analysis of the Proposed Distribution and Service Plan by the Board of Trustees.
In considering whether to recommend the Proposed Distribution and Service Plan
for approval, the Board requested and evaluated information it deemed necessary
to make an informed determination. The Board, incuding the Independent Trustees,
did not single out any one factor or group of factors as being more important
than other factors, but considered such matters together in arriving at its
decision. The Board found that there is a reasonable likelihood that the
Distribution and Service Plan benefits the Fund and its Class B shareholders by
providing financial incentives to financial intermediaries to attract new Class
B shareholders to the Fund and by assisting the efforts of the Fund and the
Distributor to service and retain existing shareholders and attract new
investors. The Distribution and Service Plan enables the Fund to be competitive
with similar funds, including funds that impose sales charges, provide financial
incentives to institutions that direct investors to such Fund, and provide
shareholder servicing and administrative services.
The Board also focused on the two principal differences in the proposed
Distribution and Service Plan and its predecessor. First, the proposed plan
provides for compensating the Distributor at a flat rate for its distribution
efforts rather than reimbursing it for its costs. While it was possible for the
Fund's Class B 12b-1 payments to be reduced when limited by the Distributor's
expenses (including past expenses which were not previously reimbursed, and
which were, therefore, carried forward with interest) under a reimbursement-type
plan, under normal circumstances this is unlikely. Therefore, adoption of this
Proposal is not expected to materially increase the Fund's expenses under normal
circumstances. Payments under the proposed Distribution and Service Plan still
remain subject to limits imposed on asset-based sales charges by the NASD.
The Board also recognized that current shareholders who purchased Class B shares
may have reasonably expected to pay the asset-based sales charge for six years
although they may also have reasonably expected that the Fund's payments would
reimburse the Distributor within a reasonable time. The level of annual payments
by the Fund under the Proposed Plan will not increase over the amounts currently
paid by the Fund. Under the Proposed Plan, however, over time, the Fund's Plan
payments may exceed the amount which the Fund might pay under the Current Plan.
The length of time over which the Fund's payments will continue under the
Proposed Plan is not limited by any reimbursement factor, and the Fund's
payments may thus continue for a longer period of time than under the Current
Plan, thus potentially increasing the amount of Plan payments which reduce the
dividends and total return on Fund shares. The Board also recognized that Class
B shares convert to Class A shares at the end of 6 years after their purchase.
A second difference in the Proposed Distribution and Service Plan over its
predecessor is that the proposed Plan expressly provides that distribution and
administrative support services may be rendered in connection with Class B
shares acquired either in exchange for shares of other Oppenheimer funds or by
reorganization with another fund. It occasionally happens that, for various
reasons, it is desirable for one fund to reorganize into another fund when it is
anticipated that such a reorganization will benefit the funds involved. When
reorganizations occur, the Distributor currently must write off and thus is
unable to recover previously spent, but unrecovered, distribution expenses for
the fund which will go out of existence. The Board determined that although
these changes are less likely to have significance under a compensation-type
Plan, it should have the flexibility to approve reorganizations among funds
without concern that the transaction
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<PAGE>
would affect payments to the Distributor for its distribution efforts. The Board
also noted that investors who purchase Class B shares of the Fund reasonably
expect that they will be paying an asset-based sales charge of 0.75% per annum
regardless of share exchanges or the occurrence of reorganizations to which
their Fund is a party.
The Board concluded that it is extremely difficult to predict purchases, sales
and exchanges by shareholders, and how future individual, market and economic
events may influence individual investor decisions. The Board thus concluded
that it is not reasonably possible to determine with any degree of certainty at
this time whether the Fund will pay more under the Proposed Plan than it would
under the Current Plan. The Distributor has agreed to provide the Board with
certain quarterly reports as to the amount of payments made by the Fund under
the Proposed Plan and the purpose for which payments were made (similar to what
the Board now receives under the Current Plan). The Distributor will provide
more extensive annual reports to the Board which set forth the Distributor's
allocated distribution-related expenses and recovery of money by the Distributor
from the asset-based sales charges and contingent deferred sales charges, and
information on sales, redemptions and exchanges of Fund shares and related data.
The Board determined that under these quarterly and annual reports, the Board
will be provided with adequate information about the payments which the Fund
makes to the Distributor, about the payments which the Distributor makes and
receives in connection with the distribution of the Fund's shares, and about the
Distributor's other distribution expenses. The Board anticipates that with this
information, the Board will be able to review each year the benefits which the
Fund is receiving from the Plan payments it makes to determine if the Fund is
benefiting at a level commensurate with those payments.
The Board concluded that it is likely that because the Distribution and Service
Plan provides an alternative means for investors to acquire Fund shares without
paying an initial sales charge, it will benefit Class B shareholders of the Fund
by enabling the Fund to maintain or increase its present asset base in the face
of competition from a variety of financial products. The Trustees recognized
that payments made pursuant to the Distribution and Service Plan may be offset
in part by economies of scale associated with the growth of the Fund's assets.
With larger assets, the Class B shareholders as well as the Fund's other
shareholders should benefit as the Distribution and Service Plan should help
maintain Fund assets. Costs of shareholder administration and transfer agency
operations will be spread among a larger number of shareholders as the Fund
grows larger, thereby reducing the Fund's expense ratio. The Manager has advised
the Trustees that investing larger amounts of money is made more readily, more
efficiently, and at lesser cost to the Fund. The Board found that a positive
flow of new investment money is desirable primarily to offset the potentially
adverse effects that might result from a pattern of net redemptions. Net cash
outflow increases the likelihood that the Fund will have to dispose of portfolio
securities for other than investment purposes. Net cash inflow minimizes the
need to sell securities to meet redemptions when investment considerations would
dictate otherwise, reduces daily liquidity requirements, and may assist in a
prompt restructuring of the portfolio without the need to dispose of present
holdings.
Stimulation of distribution of mutual fund shares and providing for shareholder
services and account maintenance services by payments to a mutual fund's
distributor and to brokers, dealers, banks and other financial institutions has
become common in the mutual fund industry. Competition among brokers and dealers
for these types of payments has intensified. The Trustees concluded that
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<PAGE>
promotion, sale and servicing of mutual fund shares and shareholders through
various brokers, dealers, banks and other financial institutions is a successful
way of distributing shares of a mutual fund. The Trustees concluded that without
an effective means of selling and distributing Fund shares and servicing
shareholders and providing account maintenance, expenses might be higher on a
per share basis than those of some competing funds. By providing an alternative
means of acquiring Fund shares, the Distribution and Service Plan proposed for
shareholder approval is designed to stimulate sales by and services from many
types of financial institutions.
The Trustees recognize that the Manager will benefit from the Distribution and
Service Plan through larger investment advisory fees resulting from an increase
in Fund assets, since its fees are based upon a percentage of net assets of the
Fund. The Board, including each of the Independent Trustees, determined that the
Proposed Distribution and Service Plan is in the best interests of the Fund, and
that its adoption has a reasonable likelihood of benefiting the Fund and its
Class B shareholders. In its annual review of the Distribution and Service Plan,
the Board will consider the continued appropriateness of the Distribution and
Service Plan, including the level of payments provided for therein.
Vote Required. Pursuant to Rule 12b-1 under the Investment Company Act, an
affirmative vote of the holders of a "majority" (as defined in the Investment
Company Act) of the Fund's Class B voting securities is required for approval of
the Distribution and Service Plan. The requirements for such "majority" vote
under the Investment Company Act are described in Proposal No. 2. A vote in
favor of this Proposal shall be deemed a vote to approve the prior Plan and the
proposed Distribution and Service Plan. The Board of Trustees recommends a vote
in favor of approving this Proposal.
APPROVAL OF THE FUND'S CLASS C 12b-1 DISTRIBUTION
AND SERVICE PLAN AND AGREEMENT
(Proposal No. 5)
NOTE: This Proposal applies to Class C Shareholders only.
Class C shares were first offered to the public on November 5, 1995. In
connection with the initial public offering of these shares, the Fund adopted a
Distribution and Service Plan for Class C shares pursuant to Rule 12b-1 of the
Investment Company Act, in conformity with the National Association of
Securities Dealers, Inc. ("NASD") Rule which permits the Fund to pay up to 0.25%
of its average annual net assets as a service fee and up to 0.75% of its average
annual net assets as an asset-based sales charge. The Manager, as the sole
initial shareholder of the Fund's Class C shares, approved this Distribution and
Service Plan for the Class C shares of the Fund. At a meeting held October 22,
1996, the Fund's Board of Trustees, including a majority of the Independent
Trustees, approved and renewed for an additional year the Distribution and
Service Plan for Class C shares with non-material changes. On February 25, 1997,
the Fund's Board reviewed its previous deliberations at the October 22, 1996
Board meeting and determined to submit the Distribution and Service Plan to
Class C shareholders for approval. A copy of this Distribution and Service Plan
for Class C shares (the "Distribution and Service Plan") is attached as Exhibit
D to this proxy statement, and is hereby submitted to Class C shareholders for
approval.
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<PAGE>
Description of the Distribution and Service Plan. Under the Distribution and
Service Plan, the Fund compensates the Distributor for its services in
connection with the distribution of Class C Shares and the personal service and
maintenance of accounts that hold Class C shares. The Fund pays the Distributor
an asset-based sales charge of 0.75% per annum of Class C shares, and also pays
the Distributor a service fee of 0.25% per annum, each of which is computed on
the average annual net assets of Class C shares of the Fund.
The Distribution and Service Plan provides for payments for two different
distribution-related functions. The Distributor pays certain brokers, dealers,
banks or other institutions, persons or entities ("Recipients") a service fee of
0.25% for personal services to Class C shareholders and maintenance of
shareholder accounts by those Recipients. The services rendered by Recipients in
connection with personal services and the maintenance of Class C shareholder
accounts may include but shall not be limited to, the following: answering
routine inquiries from the Recipient's customers concerning the Fund, providing
such customers with information on their investment in shares, assisting in the
establishment and maintenance of accounts or sub-accounts in the Fund, making
the Fund's investment plans and dividend payment options available, and
providing such other information and customer liaison services and the
maintenance of accounts as the Distributor or the Fund may reasonably request.
The Distributor is permitted under the Distribution and Service Plan to retain
service fee payments to compensate it for rendering such services.
Service fee payments by the Distributor to Recipients are made (i) in advance
for the first year Class C shares are outstanding, following the purchase of
shares, in an amount equal to 0.25% of the net asset value of the shares
purchased by the Recipient or its customers and (ii) thereafter, on a quarterly
basis, computed as of the close of business each day at an annual rate of 0.25%
of the net asset value of Class C shares held in accounts of the Recipient or
its customers. The Distributor retains the service fee during the first year
shares are outstanding. In the event Class C shares are redeemed less than one
year after the date such shares were sold, the Recipient is obligated to repay
to the Distributor on demand a pro rata portion of such advance service fee
payments, based on the ratio of the remaining period to one year.
The Distribution and Service Plan also provides that the Fund will pay the
Distributor on a monthly basis an asset-based sales charge at an annual rate of
0.75% of the net asset value of Class C shares outstanding to compensate it for
other services in connection with the distribution of the Fund's Class C shares.
The distribution assistance and administrative support services rendered by the
Distributor in connection with the sales of Class C shares may include: (i)
paying sales commissions and advance service fee payments to any broker, dealer,
bank or other person or entity that sells the Fund's Class C shares, (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Class C shares by Recipients, (iii) obtaining financing or
providing such financing from its own resources or from an affiliate, for the
interest and other borrowing costs of the Distributor's unreimbursed expenses
incurred in rendering distribution assistance for Class C shares, and (iv)
paying certain other distribution-related expenses. The other distribution
assistance in connection with the sale of Class C shares rendered by the
Distributor and Recipients may include, but shall not be limited to, the
following: distributing sales literature and prospectuses other than those
furnished to current Class C shareholders, processing Class C share purchase and
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<PAGE>
redemption transactions, and providing such other information in connection with
the distribution of Class C shares as the Distributor or the Fund may reasonably
request.
The Distributor currently pays sales commissions from its own resources to
Recipients at the time of sale equal to 0.75% of the purchase price of Fund
shares sold by such Recipient, and advances the first year service fee of 0.25%.
The Distributor retains the asset-based sales charge during the first year
shares are outstanding to recoup the sales commissions it pays, the advances of
service fee payments it makes, and its financing costs. The Distributor plans to
pay the asset-based sales charge as an ongoing commission to Recipients on Class
C shares that have been outstanding for a year or more. The Distributor may pay
to the dealer on a quarterly basis the service fee and asset-based sales charge
in lieu of paying the 0.75% sales commission and the advance of the service fee
at the time of purchase. Asset-based sales charge payments are designed to
permit an investor to purchase shares of the Fund without the assessment of a
front-end sales load and at the same time permit the Distributor to compensate
Recipients in connection with the sale of shares of the Fund.
The Distribution and Service Plan has the effect of increasing annual expenses
of Class C shares of the Fund by 1.00% of the class's average annual net assets
from what those expenses would otherwise be. Payments by the Fund to the
Distributor under the current Class C Plan during the fiscal period ended June
30, 1996 and the fiscal period from July 1, 1996 through August 31, 1996
totalled $16,702 and $11,319 (1.00% and 1.00% of the Fund's average net assets
represented by Class C shares during that period), of which $15,925 and $9,940
was retained by the Distributor and $15 and $10 was paid to an affiliated
broker/dealer.
If the Class C shareholders approve this Proposal, the Distribution and Service
Plan shall, unless terminated as described below, continue in effect until
October 31, 1997 and from year to year thereafter only so long as such
continuance is specifically approved, at least annually, by the Fund's Board of
Trustees and its Independent Trustees by a vote cast in person at a meeting
called for the purpose of voting on such continuance. The Distribution and
Service Plan may be terminated at any time by a vote of a majority of the
Independent Trustees or by a vote of the holders of a "majority" (as defined in
the Investment Company Act) of the Fund's outstanding Class C shares. The
Distribution and Service Plan contains a provision which provides that the Board
may allow the Fund to continue payments to the Distributor for Class C shares
sold prior to termination of the Distribution and Service Plan. Pursuant to this
provision, payment of the asset-based sales charge and service fee could be
continued by the Board after termination. The Distribution and Service Plan may
not be amended to increase materially the amount of payments to be made without
approval by Class C shareholders. All material amendments must be approved by a
majority of the Independent Trustees.
Additional Information. The Distribution and Service Plan provides that while it
is in effect, the selection and nomination of those Trustees of the Fund who are
not "interested persons" of the Fund is committed to the discretion of the
Independent Trustees. This does not prevent the involvement of others in such
selection and nomination if the final decision on any such selection or
nomination is approved by a majority of the Independent Trustees.
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Under the Distribution and Service Plan, no payment for service fees will be
made to any Recipient in any quarter if the aggregate net asset value of all
Fund shares held by the Recipient for itself and its customers does not exceed a
minimum amount, if any, that may be determined from time to time by a majority
of the Independent Trustees. The Board of Trustees has set the fee at the
maximum rate and set no minimum amount. The Distribution and Service Plan
permits the Distributor and the Manager to make additional distribution payments
to Recipients from their own resources (including profits from management fees)
at no cost to the Fund. The Distributor and the Manager may, in their sole
discretion, increase or decrease the amount of distribution assistance payments
they make to Recipients from their own assets.
Analysis of the Distribution and Service Plan by the Board of Trustees. In
considering whether to renew the Distribution and Service Plan and to recommend
the Distribution and Service Plan for approval, the Board requested and
evaluated information it deemed necessary to make an informed determination. The
Board, including the Independent Trsutees, did not single out any one factor or
gruop of factors as being more important htan other factors, but considered such
matters together in arriving at its decision. The Board found that there is a
reasonable likelihood that the Distribution and Service Plan benefits the Fund
and its Class C shareholders by providing financial incentives to financial
intermediaries to attract new Class C shareholders to the Fund and by assisting
the efforts of the Fund and the Distributor to service and retain existing
shareholders and attract new investors. The Distribution and Service Plan
enables the Fund to be competitive with similar funds, including funds that
impose sales charges, provide financial incentives to institutions that direct
investors to such funds, and provide shareholder servicing and administrative
services.
The Board concluded that it is likely that because the Distribution and Service
Plan provides an alternative means for investors to acquire Fund shares without
paying an initial sales charge, it will benefit Class C shareholders of the Fund
by enabling the Fund to maintain or increase its present asset base in the face
of competition from a variety of financial products. The Trustees recognized
that payments made pursuant to the Distribution and Service Plan may be offset
in part by economies of scale associated with the growth of the Fund's assets.
With larger assets, the Class C shareholders should benefit as the Distribution
and Service Plan should help maintain Fund assets. Costs of shareholder
administration and transfer agency operations will be spread among a larger
number of shareholders as the Fund grows larger, thereby reducing the Fund's
expense ratio. The Manager has advised the Trustees that investing larger
amounts of money is made more readily, more efficiently, and at lesser cost to
the Fund. The Board found that a positive flow of new investment money is
desirable primarily to offset the potentially adverse effects that might result
from a pattern of net redemptions. Net cash outflow increases the likelihood
that the Fund will have to dispose of portfolio securities for other than
investment purposes. Net cash inflow minimizes the need to sell securities to
meet redemptions when investment considerations would dictate otherwise, reduces
daily liquidity requirements, and may assist in a prompt restructuring of the
portfolio without the need to dispose of present holdings.
Stimulation of distribution of mutual fund shares and providing for shareholder
services and account maintenance services by payments to a mutual fund's
distributor and to brokers, dealers, banks and other financial institutions has
become common in the mutual fund industry. Competition among brokers and dealers
for these types of payments has intensified. The Trustees concluded that
-24-
<PAGE>
promotion, sale and servicing of mutual fund shares and shareholders through
various brokers, dealers, banks and other financial institutions is a successful
way of distributing shares of a mutual fund. The Trustees concluded that without
an effective means of selling and distributing Fund shares and servicing
shareholders and providing account maintenance, expenses might be higher on a
per share basis than those of some competing funds. By providing an alternative
means of acquiring Fund shares, the Distribution and Service Plan proposed for
shareholder approval is designed to stimulate sales by and services from many
types of financial institutions.
The Trustees recognize that the Manager will benefit from the Distribution and
Service Plan through larger investment advisory fees resulting from an increase
in Fund assets, since its fees are based upon a percentage of net assets of the
Fund. The Board, including each of the Independent Trustees, determined that the
Distribution and Service Plan is in the best interests of the Fund, and that its
continuation has a reasonable likelihood of benefiting the Fund and its Class C
shareholders. In its annual review of the Distribution and Service Plan, the
Board will consider the continued appropriateness of the Distribution and
Service Plan, including the level of payments provided for therein.
Vote Required. Pursuant to Rule 12b-1 under the Investment Company Act, an
affirmative vote of the holders of a "majority" (as defined in the Investment
Company Act) of the Fund's Class C voting securities is required for approval of
the Distribution and Service Plan. The requirements for such "majority" vote
under the Investment Company Act are described in Proposal No. 2. A vote in
favor of this Proposal shall be deemed a vote to approve the prior Plan and the
Distribution and Service Plan. The Board of Trustees recommends a vote in favor
of approving this Proposal.
RECEIPT OF SHAREHOLDER PROPOSALS
The Fund is not required to hold shareholder meetings on a regular basis.
Special meetings of shareholders may be called from time to time by either the
Fund or the shareholders (under special conditions described in the Fund's
Statement of Additional Information). Under the proxy rules of the Securities
and Exchange Commission, shareholder proposals which meet certain conditions may
be included in the Fund's proxy statement and proxy for a particular meeting.
Those rules require that for future meetings the shareholder must be a record or
beneficial owner of Fund shares with a value of at least $1,000 at the time the
proposal is submitted and for one year prior thereto, and must continue to own
such shares through the date on which the meeting is held. Another requirement
relates to the timely receipt by the Fund of any such proposal. Under those
rules, a proposal submitted for inclusion in the Fund's proxy material for the
next meeting after the meeting to which this proxy statement relates must be
received by the Fund a reasonable time before the solicitation is made. The fact
that the Fund receives a proposal from a qualified shareholder in a timely
manner does not ensure its inclusion in the proxy material, since there are
other requirements under the proxy rules for such inclusion.
OTHER BUSINESS
Management of the Fund knows of no business other than the matters specified
above that will be
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<PAGE>
presented at the Meeting. Since matters not known at the time of the
solicitation may come before the Meeting, the proxy as solicited confers
discretionary authority with respect to such matters as properly come before the
Meeting, including any adjournment or adjournments thereof, and it is the
intention of the persons named as attorneys-in-fact in the proxy to vote the
proxy in accordance with their judgment on such matters.
By Order of the Board of Trustees,
Andrew J. Donohue, Secretary
May 1, 1997
proxy\300-697.pre
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<PAGE>
Exhibit A
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT made as of the 22 day of October, 1990, by and between
OPPENHEIMER EQUITY INCOME FUND (hereinafter the "Fund"), and OPPENHEIMER
MANAGEMENT CORPORATION (hereinafter the "Manager"):
WHEREAS, the Fund is an open-end, diversified investment company
registered as such with the Securities and Exchange Commission (the
"Commission") pursuant to the Investment Company Act of 1940, as amended (the
"Investment Company Act") and the Manager is a registered investment adviser;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, it is agreed by and between the parties, as follows:
1. GENERAL PROVISION.
The Fund hereby employs the Manager and the Manager hereby undertakes to act
as the investment adviser of the Fund and to perform for the Fund such other
duties and functions as are hereinafter set forth. The Manager shall, in all
matters, give to the Fund and its Board of Trustees the benefit of its best
judgment, effort, advice and recommendations and shall, at all times conform to,
and use its best efforts to enable the Fund to conform to (i) the provisions of
the Investment Company Act and any rules and regulations thereunder; (ii) any
other applicable provisions of state or federal law; (iii) the provisions of the
Declaration of Trust and By-Laws of the Fund as amended from time to time; (iv)
policies and determinations of the Board of Trustees of the Fund; (v) the
fundamental policies and investment restrictions of the Fund as reflected in its
registration statement under the Investment Company Act and in the Fund's
By-Laws, or as such policies may, from time to time, be amended by the Fund's
shareholders; and (vi) the Prospectus of the Fund in effect from time to time.
The appropriate officers and employees of the Manager shall be available upon
reasonable notice for consultations with any of the Trustees and officers of the
Fund with respect to any matters dealing with the business and affairs of the
Fund including the valuation of any of the Fund's portfolio securities which are
either not registered for public sale or not being traded on any securities
market.
2. INVESTMENT MANAGEMENT.
(a) The Manager shall, subject to the direction and control by the Fund's
Board of Trustees (i) regularly provide investment advice and recommendations to
the Fund with respect to its investments, investment policies and the purchase
and sale of securities; (ii) supervise continuously the investment program of
the Fund and the composition of its portfolio and determine what securities
shall be purchased or sold by the Fund; and (iii) arrange, subject to the
provisions of paragraph "7" hereof, for the purchase of securities and other
investments for the Fund and the sale of securities and other investments held
in the portfolio of the Fund. The Manager shall also conduct investigations and
research in the securities field and furnish to the Fund's Board of Trustees
statistical and other factual information and reports on industries, businesses
or corporations, to
A-1
<PAGE>
assist the Manager and the Fund's Board of Trustees in furthering the investment
policies of the Fund; and the Manager shall compile, for its use and that of the
Fund, and furnish to the Fund's Board of Trustees, information and advice on
economic and business trends, and render such other complete investment
management services as may be necessary or appropriate to effectuate the
investment of the resources of the Fund through the acquisition, holding and
disposition of portfolio securities.
(b) Provided that the Fund shall not be required to pay any compensation
other than as provided by the terms of this Agreement and subject to the
provisions of paragraph "7" hereof, the Manager may obtain investment
information, research or assistance from any other person, firm or corporation
to supplement, update or otherwise improve its investment management services.
(c) So long as it shall have acted with due care and in good faith, the
Manager shall not be liable for any loss sustained by reason of any investment,
the adoption of any investment policy, or the purchase, sale or retention of any
security irrespective of whether the determinations of the Manager relative
thereto shall have been based, wholly or partly, upon the investigation or
research of any other individual, firm or corporation believed by it to be
reliable. Nothing herein contained shall, however, be construed to protect the
Manager against any liability to the Fund or its shareholders by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and duties
under this Agreement.
(d) Nothing in this Agreement shall prevent the Manager or any officer
thereof from acting as investment adviser or performing management services for
any other person, firm or corporation and shall not in any way limit or restrict
the Manager or any of its directors, officers, shareholders or employees from
buying, selling or trading any securities for its or their own account or for
the account of others for whom it or they may be acting, provided that such
activities will not adversely affect or otherwise impair the performance by the
Manager of its duties and obligations under this Agreement, nor adversely affect
the Fund.
3. OTHER DUTIES OF THE MANAGER.
The Manager shall, at its own expense, provide and supervise the activities
of all executive, administrative and clerical personnel as shall be required to
provide effective corporate administration for the Fund, including the
compilation and maintenance of such records with respect to its operations as
may reasonably be required; the preparation and filing of such reports with
respect thereto as shall be required by the Commission, and the laws of any
state, territory or possession of the United States or any foreign country;
composition of periodic reports with respect to its operations for the
shareholders of the Fund; composition of proxy materials for meetings of the
Fund's shareholders to be held at least annually; and the composition of such
registration statements as may be required by federal securities laws and the
laws of any state, territory or possession of the United States or any foreign
country for continuous public sale of shares of the Fund. The Manager shall, at
its own cost and expense, provide such officers for the Fund as the Fund's Board
may request and shall also provide the Fund's Trustees, at their request, with
adequate office space, and normal office equipment and secretarial assistance as
may be necessary for them to perform their functions as such, and the Manager
shall, at its own cost and expense, calculate the daily net asset value of the
Fund's shares and maintain the Fund's general accounting books and records. The
cost and expenses of the Manager set forth in this paragraph 3 do not include
the
A-2
<PAGE>
transfer agent and other costs and expenses set forth in paragraph 4 following.
4. ALLOCATION OF EXPENSES TO THE FUND.
All other costs and expenses not expressly assumed by the Manager under this
Agreement, or to be paid by the General Distributor of the shares of the Fund,
shall be paid by the Fund, including but not limited to (i) interest and taxes;
(ii) brokerage commissions; (iii) insurance premiums on fidelity and other
coverage requisite to its operations; (iv) compensation and expenses of its
Trustees except as qualified further in this paragraph 4; (v) legal and audit
expenses; (vi) custodian and transfer agent fees and expenses; (vii) expenses
incident to the redemption of its shares; (viii) expenses incident to the
issuance of its shares against payment therefor by or on behalf of the
subscribers thereto; (ix) fees and expenses, other than as hereinabove provided,
incident to the registration of the "Funds shares for public sale under federal
securities laws or the laws of any state, territory or possession of the United
States or any foreign country; (x) expenses of printing and mailing reports and
notices and proxy material to shareholders of the Fund; (xi) except as noted in
paragraph 3 hereof, all other expenses incidental to holding any meetings of the
Fund's shareholders; and (xii) such extraordinary non-recurring expenses as may
arise, including litigation, affecting the Fund and the legal obligation or
right which the Fund may have to indemnify its officers and Trustees with
respect thereto unless the Fund has the right to recover said indemnity payments
from the Manager. Any officers or employees of the Manager or any entity
controlling, controlled by or under common control with the Manager who may also
serve as officers, Trustees or employees of the Fund shall not receive any
compensation by the Fund for their services.
5. LIMITATION OF FUND EXPENSES.
Regardless of the provisions in the foregoing paragraph 4 hereof, the
Manager guarantees that the total expenses of the Fund in any calendar year,
including the compensation of the Manager as provided in paragraph 6 hereof but
exclusive of taxes, interest, brokerage commissions and extraordinary
non-recurring expenses shall not exceed, and the Manager undertakes to pay or
refund to the Fund any amount by which such expenses shall exceed the aggregate
of one and one-half percent of the first $30 million of the Fund's average
annual net assets plus one percent of the Fund's average annual net assets in
excess of $30 million.
6. COMPENSATION OF THE MANAGER.
The Fund agrees to pay the Manager and the Manager agrees to accept as full
compensation for the performance of all functions and duties on its part to be
performed pursuant to the provisions hereof, a fee computed on the net asset
value of the Fund as of the close of each business day and payable monthly at
the following annual rates:
.75% of the first $100 million of net assets; .70% of the next $100
million; .65% of the next $100 million; .60% of the next $100 million;
.55% of the next $100 million; .50% of net assets in excess of $500
million.
A-3
<PAGE>
7. PORTFOLIO TRANSACTIONS AND BROKERAGE.
(a) The Manager will render all services for the Fund in connection with
placing orders with brokers and dealers for the purchase, sale or trade of
securities for the Fund's portfolio.
(b) The Manager is authorized, in arranging the purchase and sale of the
fund's portfolio securities, to employ or deal with such members of securities
exchanges, brokers or dealers (hereinafter "broker-dealers"), including
"affiliated" broker-dealers, as that term is defined in the Investment Company
Act, as may, in its best judgment, implement the policy of the Fund to obtain,
at reasonable expense, the "best execution" (prompt and reliable execution at
the most favorable security price obtainable) of the Fund's portfolio
transactions as well as to obtain, consistent with provisions of subparagraph
(c) of this paragraph 7, the benefit of such investment information or research
as will be of significant assistance to the performance by the Manager of its
investment management functions.
(c) The Manager shall select broker-dealers to effect the Fund's portfolio
transactions on the basis of its estimate of their ability to obtain best
execution of particular and related portfolio transactions. The abilities of a
broker-dealer to obtain best execution of particular portfolio transaction(s)
will be judged by the Manager on the basis of all relevant factors and
considerations including, insofar as feasible, the execution capabilities
required by the transaction or transactions; the ability and willingness of the
broker-dealer to facilitate the Fund's portfolio transactions by participating
therein for its own account; the importance to the Fund of speed, efficiency or
confidentiality; the broker-dealer's apparent familiarity with sources from or
to whom particular securities might be purchased or sold; as well as any other
matters relevant to the selection of a broker-dealer for particular and related
transactions of the Fund.
(d) The Manager shall have discretion, in the interests of the Fund, to
allocate brokerage on the Fund's portfolio transactions to broker-dealers (other
than affiliated broker-dealers) qualified to obtain best execution of such
transactions and who provide "brokerage and/or research services" (as such
services are defined in Section 28 (e) (3) of the Securities Exchange Act of
1934) for the Fund and/or other accounts for which the Manager exercises
"investment discretion" (as that term is defined in Section 3 (a) (35) of the
Securities Exchange Act of 1934) and to cause the Fund to pay such
broker-dealers a commission for effecting a portfolio transaction for the Fund
that is in excess of the amount of commission another broker-dealer adequately
qualified to effect such transaction would have charged for effecting that
transaction, if the Manager determines, in good faith, that such commission is
reasonable in relation to the value of the brokerage and/or research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or the Manager's overall responsibilities with respect to the
accounts as to which it exercises investment discretion. In reaching such
determination, the Manager will not be required to place or attempt to place a
specific dollar value on the brokerage and/or research services provided or
being provided by such broker-dealer. In demonstrating that such determinations
were made in good faith, the Manager shall be prepared to show that all
commissions were allocated for purposes contemplated by this Agreement and that
the total commissions paid by the Fund over a representative period selected by
the Fund's Trustees were reasonable in relation to the benefits to the Fund.
(e) The Manager shall have discretion in the interests of the Fund and when
consistent with the then effective rules of the Commission and the National
Association of Securities Dealers, Inc.,
A-4
<PAGE>
to consider the sales of shares of the Fund and other Funds managed by the
Manager and its affiliates as a factor in the selection of broker-dealers to
execute portfolio transactions for the Fund. In doing so, the portfolio
transactions must be (i) consistent with obtaining the "best execution" of the
Fund's portfolio transactions (as defined in subparagraph (b) of this
paragraph), and (ii) the commissions paid to brokers selected wholly or partly
on this basis do not exceed the commissions otherwise authorized by this
Investment Advisory Agreement.
(f) The Manager shall have no duty or obligation to seek advance competitive
bidding for the most favorable commission rate applicable to any particular
portfolio transactions or to select any broker-dealer on the basis of its
purported or "posted" commission rate but will, to the best of its ability,
endeavor to be aware of the current level of the charges of eligible
broker-dealers and to minimize the expense incurred by the Fund for effecting,
its portfolio transactions to the extent consistent with the interests and
policies of the Fund as established by the determinations of its Board of
Trustees and the provisions of this paragraph 7.
(g) Transactions with affiliated broker-dealers are required to conform to a
number of restrictions and conditions: (1) affiliated broker-dealers may effect
portfolio transactions for the Fund only if the commissions, fees or other
remuneration received or to be received by them are determined in accordance
with procedures contemplated by any rule, regulation or order adopted under the
Investment Company Act for determining the permissible level of such
commissions; and (2) if required by Section 11(a) of the Securities Exchange Act
of 1934, affiliated broker-dealers may not receive compensation in connection
with any portfolio transaction effected on a national securities exchange for
the Fund if the affiliated broker-dealers are members of such exchange unless
there is an effective separate written contract between the affiliated
broker-dealers and the Fund expressly providing otherwise and which refers to
said Section 11(a) and the rules promulgated thereunder and provides that any
transactions executed on an exchange of which the affiliated broker-dealers are
members must be executed on the floor of such exchange by a member which is not
an "associated person" of the affiliated broker-dealers.
8. DURATION.
This Agreement will take effect on the date first set forth above and shall
continue in effect until December 31, 1991, and thereafter, from year to year,
unless earlier terminated by operation of law, so long as such continuance shall
be approved annually by the Fund's Board of Trustees, including the vote of a
majority of the Trustees of the Fund who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval, or by the holders of a majority of the
outstanding, voting securities of the Fund and by such a vote of the Fund's
Board of Trustees.
9. TERMINATION.
This Agreement may be terminated (i) by the Manager at any time without
penalty by giving sixty days' written notice (which notice may be waived by the
Fund); or (ii) by the Fund at any time without penalty upon sixty days' written
notice to the Manager (which notice may be waived by the Manager), provided that
such termination by the Fund shall be directed or approved by the Board of
Trustees of the Fund or by the vote of the holders of a majority of the
outstanding voting securities of the Fund.
A-5
<PAGE>
10. ASSIGNMENT OR AMENDMENT.
This Agreement may not be amended or the rights of the Manager thereunder
sold, transferred, pledged or otherwise in any manner encumbered without the
affirmative vote or written consent of the holders of the majority of the
outstanding voting securities of the Fund; this Agreement shall automatically
and immediately terminate in the event of its assignment.
11. DISCLAIMER OF SHAREHOLDER LIABILITY.
The Manager understands that the obligations of the Fund under this
Agreement are not binding upon any Trustee or shareholder of the Fund
personally, but bind only the Fund and the Fund's property. The Manager
represents that it has notice of the provisions of the Declaration of Trust of
the Fund disclaiming Trustee and shareholder liability for acts or obligations
of the Fund.
12. USE OF NAME "OPPENHEIMER".
The Manager hereby grants to the Fund a royalty-free, non-exclusive license
to use the name "Oppenheimer" in the name of the Fund for the duration of this
Agreement and any extensions or renewals thereof. To the extent necessary to
protect the Manager's rights to the name "Oppenheimer" under applicable law,
such license shall allow the Manager to inspect and, subject to control by the
Fund's Board, control the nature and quality of services offered by the Fund
under such name. Such license may, upon termination of this Agreement, be
terminated by the Manager, in which event the Fund shall promptly take whatever
action may be necessary to change its name and discontinue any further use of
the name "Oppenheimer" in the name of the Fund or otherwise. The name
"Oppenheimer" may be used by the Manager in connection with any of its
activities, or licensed by the Manager to any other party.
13. DEFINITIONS.
The terms and provisions of this Agreement shall be interpreted and defined
in a manner consistent with the provisions and definitions of the Investment
Company Act and other applicable laws.
OPPENHEIMER EQUITY INCOME FUND
ATTEST:
/s/ Sara L. Badler /s/ Robert G. Galli
_______________________ By:____________________________________
Sara L. Badler Robert G. Galli
OPPENHEIMER MANAGEMENT
CORPORATION
ATTEST:
/s/ Sara L. Badler /s/ Robert G. Galli
_______________________ By:____________________________________
Sara L. Badler Robert G. Galli
A-6
<PAGE>
Exhibit B
<TABLE>
<CAPTION>
Approximate
Net Assets as
of 12/31/96 Advisory Fee Rate as % of
Name of Fund ($ Millions) Average Annual Net Assets
- ------------ ------------ -------------------------
<S> <C> <C>
Oppenheimer Total Return $2,615.1 .75% of the first $100 million of average
Fund, Inc. annual net assets,
.70% of the next $100 million,
Oppenheimer Equity Income $2,678.3 .65% of the next $100 million,
Fund .60% of the next $100 million,
.55% of the next $100 million, and
.50% of average annual net assets in excess
of $500 million
Oppenheimer Main Street $6,809.1 .65% of the first $200 million of average
Income & Growth Fund, annual net assets,
a series of Oppenheimer .60% of the next $150 million,
Main Street Funds, Inc. .55% of the next $150 million, and
.45% of average annual net assets in excess
of $500 million
Oppenheimer Growth & Income Fu$ 46.9
a series of Oppenheimer
Variable Account Funds .75% of the first $200 million of
average annual net assets,
Oppenheimer Multiple $ 484.3 .72% of the next $200 million,
Strategies Fund, a series of .69% of the next $200 million,
Oppenheimer Variable .66% of the next $200 million, and
Account Funds .60% of average annual net assets in excess
of $800 million
Oppenheimer Multiple Strategie$ 308.6
</TABLE>
B-1
<PAGE>
Exhibit C
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
With
OppenheimerFunds Distributor, Inc.
For Class B Shares of
Oppenheimer Equity Income Fund
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the ____ day of
__________, 1997, by and between Oppenheimer Equity Income Fund (the "Fund") and
OppenheimerFunds Distributor, Inc. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class B shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it may
be amended from time to time (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any amendment or successor to such rule (the "NASD
Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Trustees" shall mean the members of the Fund's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund and who have no direct or indirect financial interest in the operation of
this Plan or in any agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or investment
advisory or other clients of a Recipient, and/or accounts as to which such
Recipient provides administrative
C-1
<PAGE>
support services or is a custodian or other fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
Customers, but in no event shall any such Shares be deemed owned by more than
one Recipient for purposes of this Plan. In the event that more than one person
or entity would otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books as determined by the
Distributor shall be deemed the Recipient as to such Shares for purposes of this
Plan.
3. Payments for Distribution Assistance and Administrative Support Services.
(a) Payments to the Distributor. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution assistance services to the
Fund. Such services include distribution assistance and administrative support
services rendered in connection with Shares acquired (1) by purchase, (2) in
exchange for shares of another investment company for which the Distributor
serves as distributor or sub-distributor, or (3) pursuant to a plan of
reorganization to which the Fund is a party. If the Board believes that the
Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Services Fees. Within forty-five (45)
days of the end of each calendar quarter, the Fund will make payments in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(ii) below.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge). Within
ten (10) days of the end of each month, the Fund will make payments in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average during the
month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge") outstanding for no more than
six years (the "Maximum Holding Period"). Such Asset-Based Sales Charge payments
received from the Fund will compensate the Distributor for providing
distribution assistance in connection with the sale of Shares.
The distribution assistance to be rendered by the Distributor in
connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and\or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and\or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses
C-2
<PAGE>
of personnel of the Distributor who support distribution of Shares by
Recipients; (iii) obtaining financing or providing such financing from its own
resources, or from an affiliate, for the interest and other borrowing costs of
the Distributor's unreimbursed expenses incurred in rendering distribution
assistance and administrative support services to the Fund; and (iv) paying
other direct distribution costs, including without limitation the costs of sales
literature, advertising and prospectuses (other than those prospectuses
furnished to current holders of the Fund's shares ("Shareholders")) and state
"blue sky" registration expenses.
(b) Payments to Recipients. The Distributor is authorized under the Plan
to pay Recipients (1) distribution assistance fees for rendering distribution
assistance in connection with the sale of Shares and/or (2) service fees for
rendering administrative support services with respect to Accounts. However, no
such payments shall be made to any Recipient for any such quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, that may be set from time
to time by a majority of the Independent Trustees. All fee payments made by the
Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
(i) Service Fee. In consideration of the administrative support
services provided by a Recipient during a calendar quarter, the Distributor
shall make service fee payments to that Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter, at a rate not to exceed 0.0625%
(0.25% on an annual basis) of the average during the calendar quarter of the
aggregate net asset value of Shares, computed as of the close of each business
day, constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum period (the
"Minimum Holding Period"), if any, that may be set from time to time by a
majority of the Independent Trustees.
Alternatively, the Distributor may, at its sole option, make the
following service fee payments to any Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter: (i) "Advance Service Fee
Payments" at a rate not to exceed 0.25% of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
business on the day such Shares are sold, constituting Qualified Holdings, sold
by the Recipient during that quarter and owned beneficially or of record by the
Recipient or by its Customers, plus (ii) service fee payments at a rate not to
exceed 0.0625% (0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
each business day, constituting Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers for a period of more than one (1)
year. At the Distributor's sole option, the Advance Service Fee Payments may be
made more often than quarterly, and sooner than the end of the calendar quarter.
In the event Shares are redeemed less than one year after the date such Shares
were sold, the Recipient is obligated to and will repay the Distributor on
demand a pro rata portion of such Advance Service Fee Payments, based on the
ratio of the time such Shares were held to one (1) year.
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<PAGE>
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries concerning the Fund, assisting in the
establishment and maintenance of accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other information and
services in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably request.
(ii) Distribution Assistance Fees: (Asset-Based Sales Charge) Payments. In
its sole discretion and irrespective of whichever alternative method of making
service fee payments to Recipients is selected by the Distributor, in addition
the Distributor may make distribution service fee payments to a Recipient
quarterly, within forty-five (45) days after the end of each calendar quarter,
at a rate not to exceed 0.1875% (0.075% on an annual basis) of the average
during the calendar quarter of the aggregate net asset value of shares computed
as of the close of each business day constituting Qualified Holdings owned
beneficially or of record by the Recipient or its Customers for no more than six
years and for any minimum period that the Distributor may establish. Such
payments shall be made only to Recipients that are registered with the SEC as a
broker-dealer or are exempt from registration.
The distribution assistance to be rendered by the Recipients in
connection with the sale of Shares may include, but shall not be limited to, the
following: distributing sales literature and prospectuses other than those
furnished to current Shareholders, providing compensation to and expenses of
personnel of the Recipient who support the distribution of Shares by the
Recipient, and providing such other information and services in connection with
the distribution of Shares as the Distributor or the Fund may reasonably
request.
(c) A majority of the Independent Trustees may at any time or from time to
time increase or decrease the rate of fees to be paid to the Distributor or to
any Recipient, but not to exceed the rates set forth above, and/or direct the
Distributor to increase or decrease (the "Maximum Holding Period"), any Minimum
Holding Period or any Minimum Qualified Holdings. The Distributor shall notify
all Recipients of any Minimum Qualified Holdings, Maximum Holding Period and
Minimum Holding Period, if any, that are established and the rate of payments
hereunder applicable to Recipients, and shall provide each Recipient with
written notice within thirty (30) days after any change in these provisions.
Inclusion of such provisions or a change in such provisions in a revised current
prospectus shall constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits to which the Distributor is, or may
become, subject under of the NASD Conduct Rules.
(e) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset- Based
Sales Charge payments or from the proceeds of its borrowings.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this
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<PAGE>
Plan, subject to the limitations set forth below. It may be presumed that a
Recipient has provided distribution assistance or administrative support
services qualifying for payment under the Plan if it has Qualified Holdings of
Shares that entitle it to payments under the Plan. In the event that either the
Distributor or the Board should have reason to believe that, notwithstanding the
level of Qualified Holdings, a Recipient may not be rendering appropriate
distribution assistance in connection with the sale of Shares or administrative
support services for Accounts, then the Distributor, at the request of the
Board, shall require the Recipient to provide a written report or other
information to verify that said Recipient is providing appropriate distribution
assistance and/or services in this regard. If the Distributor or the Board of
Trustees still is not satisfied after the receipt of such report, either may
take appropriate steps to terminate the Recipient's status as such under the
Plan, whereupon such Recipient's rights as a third-party beneficiary hereunder
shall terminate. Additionally, in their discretion, a majority of the Fund's
Independent Trustees at any time may remove any broker, dealer, bank or other
person or entity as a Recipient, where upon such person's or entity's rights as
a third-party beneficiary hereof shall terminate. Notwithstanding any other
provision of this Plan, this Plan does not obligate or in any way make the Fund
liable to make any payment whatsoever to any person or entity other than
directly to the Distributor.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of persons to be Trustees of the Fund who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of the incumbent Disinterested Trustees. Nothing herein shall
prevent the incumbent Disinterested Trustees from soliciting the views or the
involvement of others in such selection or nominations as long as the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing services
rendered in connection with the distribution of the Shares, the amount of all
payments made under this Plan and the purpose for which the payments were made.
The reports shall be provided quarterly, and shall state whether all provisions
of Section 3 of this Plan have been complied with.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding Class B voting shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such agreement; and (v)
such agreement shall, unless terminated as herein provided, continue in effect
from year to year only so long as such continuance is specifically approved at
least annually by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved
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<PAGE>
by a vote of the Board and its Independent Trustees cast in person at meetings
called on February 25, 1997 and April 29, 1997, for the purpose of voting on
this Plan, and shall take effect after being approved by Class B shareholders of
the Fund, at which time it shall replace the Fund's Distribution and Service
Plan for the Shares dated February 23, 1994. Unless terminated as hereinafter
provided, it shall continue in effect until October 31, 1997 and thereafter from
year to year or as the Board may otherwise determine but only so long as such
continuance is specifically approved at least annually by a vote of the Board
and its Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the Class B Shareholders in the
manner described above, and all material amendments must be approved by a vote
of the Board and of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class B voting shares. In the event
of such termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and the
Fund's property. The Distributor represents that it has notice of the provisions
of the Declaration of Trust of the Fund disclaiming shareholder and Trustee
liability for acts or obligations of the Fund.
Oppenheimer Equity Income Fund
By:
---------------------------------------------
OppenheimerFunds Distributor, Inc.
By:
--------------------------------------------
C-6
<PAGE>
Exhibit D
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
with
OppenheimerFunds Distributor, Inc.
For Class C Shares of
Oppenheimer Equity Income Fund
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the ____ day of
______, 1997, by and between Oppenheimer Equity Income Fund (the "Fund") and
OppenheimerFunds Distributor, Inc. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan for
Class C shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it may
be amended from time to time (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any applicable amendment or successor to such rule
(the "NASD Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.
(b) "Independent Trustees" shall mean the members of the Fund's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund and who have no direct or indirect financial interest in the operation of
this Plan or in any agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other customers or investment
advisory
D-1
<PAGE>
or other clients of a Recipient, and/or accounts as to which such Recipient
provides administrative support services or is a custodian or other fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
Customers, but in no event shall any such Shares be deemed owned by more than
one Recipient for purposes of this Plan. In the event that more than one person
or entity would otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books as determined by the
Distributor shall be deemed the Recipient as to such Shares for purposes of this
Plan.
3. Payments for Distribution Assistance and Administrative Support Services.
(a) Payments to the Distributor. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution services to the Fund. Such
services include distribution assistance and administrative support services
rendered in connection with Shares (1) sold in purchase transactions, (2) issued
in exchange for shares of another investment company for which the Distributor
serves as distributor or sub-distributor, or (3) issued pursuant to a plan of
reorganization to which the Fund is a party. If the Board believes that the
Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Services Fees. Within forty-five (45)
days of the end of each calendar quarter, the Fund will make payments in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(i) below.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge). Within
ten (10) days of the end of each month, the Fund will make payments in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average during the
month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge"). Such Asset-Based Sales
Charge payments received from the Fund will compensate the Distributor for
providing distribution assistance in connection with the sale of Shares.
The distribution assistance services to be rendered by the Distributor in
connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and/or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and/or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of
D-2
<PAGE>
personnel of the Distributor who support distribution of Shares by Recipients;
(iii) obtaining financing or providing such financing from its own resources, or
from an affiliate, for the interest and other borrowing costs of the
Distributor's unreimbursed expenses incurred in rendering distribution
assistance and administrative support services to the Fund; and (iv) paying
other direct distribution costs, including without limitation the costs of sales
literature, advertising and prospectuses (other than those prospectuses
furnished to current holders of the Fund's shares ("Shareholders")) and state
"blue sky" registration expenses.
(b) Payments to Recipients. The Distributor is authorized under the
Plan to pay Recipients (1) distribution assistance fees for rendering
distribution assistance in connection with the sale of Shares and/or (2) service
fees for rendering administrative support services with respect to Accounts.
However, no such payments shall be made to any Recipient for any quarter in
which its Qualified Holdings do not equal or exceed, at the end of such quarter,
the minimum amount ("Minimum Qualified Holdings"), if any, that may be set from
time to time by a majority of the Independent Trustees. All fee payments made by
the Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
In consideration of the services provided by Recipients, the Distributor
shall make the following payments to Recipients:
(i) Service Fee. In consideration of administrative support services
provided by a Recipient during a calendar quarter, the Distributor shall make
service fee payments to that Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter, at a rate not to exceed 0.0625% (0.25% on an
annual basis) of the average during the calendar quarter of the aggregate net
asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than the minimum period (the "Minimum
Holding Period"), if any, that may be set from time to time by a majority of the
Independent Trustees.
Alternatively, the Distributor may, at its sole option, make the following
service fee payments to any Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter: (A) "Advance Service Fee Payments" at a rate
not to exceed 0.25% of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of business on the day such
Shares are sold, constituting Qualified Holdings, sold by the Recipient during
that quarter and owned beneficially or of record by the Recipient or by its
Customers, plus (B) service fee payments at a rate not to exceed 0.0625% (0.25%
on an annual basis) of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than one (1) year. At the Distributor's
sole option, Advance Service Fee Payments may be made more often than quarterly,
and sooner than the end of the calendar quarter. In the event Shares are
redeemed less than one year after the date such Shares were sold,
D-3
<PAGE>
the Recipient is obligated to and will repay the Distributor on demand a pro
rata portion of such Advance Service Fee Payments, based on the ratio of the
time such Shares were held to one (1) year.
The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries concerning the Fund, assisting in the
establishment and maintenance of accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other information and
services in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably request.
(ii) Distribution Assistance Fee (Asset-Based Sales Charge)
Payments. Irrespective of whichever alternative method of making service fee
payments to Recipients is selected by the Distributor, in addition the
Distributor shall make distribution service fee payments to each Recipient
quarterly, within forty-five (45) days after the end of each calendar quarter,
at a rate not to exceed 0.1875% (0.75% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of Shares computed as of
the close of each business day constituting Qualified Holdings owned
beneficially or of record by the Recipient or its Customers for a period of more
than one (1) year. Alternatively, at its sole option, the Distributor may make
distribution assistance fee payments to a Recipient quarterly, at the rate
described above, on Shares constituting Qualified Holdings owned beneficially or
of record by the Recipient or its Customers without regard to the 1-year holding
period described above. Such payments shall be made only to Recipients that are
registered with the SEC as a broker-dealer or are exempt from registration.
The distribution assistance to be rendered by the Recipients in connection
with the sale of Shares may include, but shall not be limited to, the following:
distributing sales literature and prospectuses other than those furnished to
current Shareholders, providing compensation to and expenses of personnel of the
Recipient who support the distribution of Shares by the Recipient, and providing
such other information and services in connection with the distribution of
Shares as the Distributor or the Fund may reasonably request.
(c) A majority of the Independent Trustees may at any time or from time to
time (i) increase or decrease the rate of fees to be paid to the Distributor or
to any Recipient, but not to exceed the rates set forth above, and/or (ii)
direct the Distributor to increase or decrease any Minimum Holding Period, any
maximum period set by a majority of the Independent Trustees during which fees
will be paid on Shares constituting Qualified Holdings owned beneficially or of
record by a Recipient or by its Customers (the "Maximum Holding Period") or
Minimum Qualified Holdings. The Distributor shall notify all Recipients of any
Minimum Qualified Holdings, Maximum Holding Period and Minimum Holding Period,
if any, that are established and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice within thirty
(30) days after any change in these provisions. Inclusion of such provisions or
a change in such provisions in a supplement or amendment to or revision of the
prospectus of the Fund shall constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction
D-4
<PAGE>
or elimination under the limits to which the Distributor is, or may become,
subject under the NASD Conduct Rules.
(e) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset- Based
Sales Charge payments or from the proceeds of its borrowings.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. If
either the Distributor or the Board believe that, notwithstanding the level of
Qualified Holdings, a Recipient may not be rendering appropriate distribution
assistance in connection with the sale of Shares or administrative support
services for Accounts, then the Distributor, at the request of the Board, shall
require the Recipient to provide a written report or other information to verify
that said Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor or the Board of Trustees still is
not satisfied after the receipt of such report, either may take appropriate
steps to terminate the Recipient's status as a Recipient under the Plan,
whereupon such Recipient's rights as a third-party beneficiary hereunder shall
terminate. Additionally, in their discretion a majority of the Fund's
Independent Trustees at any time may remove any broker, dealer, bank or other
person or entity as a Recipient, whereupon such person's or entity's rights as a
third-party beneficiary hereof shall terminate. Notwithstanding any other
provision of this Plan, this Plan does not obligate or in any way make the Fund
liable to make any payment whatsoever to any person or entity other than
directly to the Distributor.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of persons to be Trustees of the Fund who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of the incumbent Disinterested Trustees. Nothing herein shall
prevent the incumbent Disinterested Trustees from soliciting the views or the
involvement of others in such selection or nomination as long as the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing services
rendered in connection with the distribution of the Shares, the amount of all
payments made under this Plan and the purpose for which the payments were made.
The reports shall be provided quarterly, and shall state whether all provisions
of Section 3 of this Plan have been complied with.
6. Related Agreements. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting Class C shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall
D-5
<PAGE>
automatically terminate in the event of its "assignment" (as defined in the 1940
Act); (iv) such agreement shall go into effect when approved by a vote of the
Board and its Independent Trustees cast in person at a meeting called for the
purpose of voting on such agreement; and (v) such agreement shall, unless
terminated as herein provided, continue in effect from year to year only so long
as such continuance is specifically approved at least annually by a vote of the
Board and its Independent Trustees cast in person at a meeting called for the
purpose of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Board and its Independent Trustees cast in person at a
meeting called on February 25, 1997, for the purpose of voting on this Plan, and
shall take effect as of the date first set forth above, at which time it shall
replace the Fund's Distribution and Service Plan for the Shares dated August 4,
1997. Unless terminated as hereinafter provided, it shall continue in effect
until October 31, 1997 and thereafter from year to year or as the Board may
otherwise determine but only so long as such continuance is specifically
approved at least annually by a vote of the Board and its Independent Trustees
cast in person at a meeting called for the purpose of voting on such
continuance.
This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the Class C Shareholders in the
manner described above, and all material amendments must be approved by a vote
of the Board and of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class C voting shares. In the event
of such termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor understands
that the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and the
Fund's property. The Distributor represents that it has notice of the provisions
of the Declaration of Trust of the Fund disclaiming shareholder and Trustee
liability for acts or obligations of the Fund.
Oppenheimer Equity Income Fund
By:
-----------------------------------
OppenheimerFunds Distributor, Inc.
By:
----------------------------------
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<PAGE>
