SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
/ X / Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
OPPENHEIMER ASSET ALLOCATION FUND
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(Name of Registrant as Specified in Its Charter)
OPPENHEIMER ASSET ALLOCATION FUND
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/ X / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or
14a-6(j)(2).
/ / $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: 1
(4) Proposed maximum aggregate value of transaction:
/ / 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.:
(3) Filing Party:
(4) Date Filed:
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1 - Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE>
Preliminary Copy
Oppenheimer Asset Allocation Proxy for Shareholders Meeting To
Fund Be Held June 20, 1994
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.
OPPENHEIMER ASSET ALLOCATION FUND
PROXY FOR SHAREHOLDERS MEETING TO BE HELD JUNE 20, 1994
The undersigned shareholder of Oppenheimer Asset Allocation Fund (the
"Fund"), does hereby appoint Robert Bishop, George C. Bowen, Andrew J.
Donohue and Scott Farrar and each of them, as attorneys-in-fact and
proxies of the undersigned, with full power of substitution, to attend the
Meeting of Shareholders of the Fund to be held June 20, 1994, at 3410
South Galena Street, Denver, Colorado 80231 at 2:00 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.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHICH RECOMMENDS A
VOTE FOR THE ELECTION OF ALL NOMINEES FOR TRUSTEE AND FOR EACH PROPOSAL
ON THE REVERSE SIDE. THE SHARES REPRESENTED HEREBY WILL BE VOTED AS
INDICATED ON THE REVERSE SIDE OR FOR IF NO CHOICE IS INDICATED.
(over)
Your Shareholder Your prompt response can save your
Vote Is Important: Fund money.
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.
1. Election of Trustees
____ FOR all nominees listed _____ WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary at left) listed at left
L. Cherne E. Delaney R. Galli L. Levy B. Lipstein
(A) (B) (C) (D) (E)
E. Moynihan K. Randall E. Regan R. Reynolds S. Robbins
(F) (G) (H) (I) (J)
D. Spiro P. Trigere C. Yeutter
(K) (L) (M)
INSTRUCTION: To withhold authority to vote for any individual nominee,
line out that nominee's name at left.
2. Ratification of selection of KPMG Peat Marwick as independent auditors
(Proposal No. 1)
FOR ____ AGAINST ____ ABSTAIN ____
3.Approval of the Proposed Investment Advisory Agreement (Proposal No.
2)
FOR ____ AGAINST ____ ABSTAIN ____
4. To approve an amendment to the 12b-1 Service Plan for Class A shares
(Proposal No. 3)
Dated: _______________________, 1994
(Month) (Day)
____________________________
Signature(s)
____________________________
Signature(s)
Please read both sides of this ballot.
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.
Preliminary Copy
OPPENHEIMER ASSET ALLOCATION FUND
Two World Trade Center, New York, New York 10048-0203
NOTICE OF MEETING OF SHAREHOLDERS TO BE HELD
JUNE 20, 1994
To The Class A & Class C Shareholders of
Oppenheimer Asset Allocation Fund
Notice is hereby given that a Meeting of the Class A and Class C
Shareholders of Oppenheimer Asset Allocation Fund (the "Fund") will be
held at 3410 South Galena Street, Denver, Colorado, 80231, at 2:00 P.M.,
Denver time, on June 20, 1994, or any adjournments thereof, for the
following purposes:
(a) To elect thirteen 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;
(b) To ratify the selection of KPMG Peat Marwick as the independent
certified public accountants and auditors of the Fund for the fiscal year
beginning January 1, 1994 (Proposal No. 1);
(c) To approve an Investment Advisory Agreement between the Fund and
Oppenheimer Management Corporation (the "Manager") which would provide for
a decrease in the management fee rates at lower asset levels and an
increase in the management fee rates at higher asset levels (Proposal No.
2);
(d) To approve an amendment to the Service Plan under Rule 12b-1 for the
Fund's Class A shares which would broaden the asset base against which the
service fee is assessed (Proposal No. 3); and
(e) 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 22, 1994, are
entitled to vote 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 11, 1994
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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.
<PAGE>
OPPENHEIMER ASSET ALLOCATION FUND
Two World Trade Center, New York, New York 10048-0203
PROXY STATEMENT
MEETING OF SHAREHOLDERS
TO BE HELD JUNE 20, 1994
This statement is furnished to the Class A and Class C shareholders of
Oppenheimer Asset Allocation 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 3410 South Galena
Street, Denver, Colorado, 80231, at 2:00 A.M., Denver time, on June 20,
1994, or any adjournments thereof. It is expected that the mailing of
this Proxy Statement will be made on or about May 11, 1994. Financial
statements covering the operations of the Fund for the fiscal year ended
December 31, 1993 were mailed to all persons who were shareholders of
record on that date, and simultaneously with the mailing of the Proxy
Statement, and will be mailed to persons who became shareholders between
December 31, 1993 (the record date for the mailing of that Annual Report)
and the record date for this Proxy Statement at the same time this
shareholder meeting.
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, 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.
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 Two World Trade Center, New York, New
York, 10048-0203; (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 investment
adviser, Oppenheimer Management Corporation (the "Manager"), personally
or by telephone or telegraph; 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 22, 1994, the record
date, there were 21,461,094.283 shares of the Fund issued and outstanding,
consisting of 21,156,600.292 Class A shares and 304,493.991 Class C
shares. Each Class A and Class C shares of the has voting rights as to
the election of Trustees and as to each Proposal described herein, and the
holders of shares are 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 the record date, the only entity
owning of record or known by the management of the Fund to be the
beneficial owner of 5% or more of the outstanding shares of the Fund was
Massachusetts Mutual Life Insurance Company, 1295 State Street,
Springfield, MA 01111, an affiliate of the Manager (see "The Manager"
under Proposal No. 2, below) which was the record owner of 2,307,948.357
Class A shares (approximately 10.9% of the then-outstanding Class A
shares). As of the record date there were three entities owning of record
or known by the management of the Fund to be the beneficial owner of 5%
or more of the outstanding Class C shares of the Fund. These were: (1)
Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive, Jacksonville,
FL 32246, 21,827.000 Class C shares (7.16%), (2) FIDN TR Rollover IRA FBO
Jacqueline Winquist 112 Carlyle Drive, Palm Beach, FL 34683, 19,441.267
Class C shares (6.38%), and (3) H.P. Midgett and K.L. Sheppard, Jr.,
Charitable Remainder Trust, 11595 Meridian Street, Carmel, IN 46032,
65,484.228 Class C shares (21.50%).
ELECTION OF TRUSTEES
At the Meeting, thirteen Trustees are to be elected to hold office until
the next meeting of shareholders called for the purpose of electing
Trustees or until their successors shall be duly elected and shall have
qualified. 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 shareholders meeting is called for the
purpose of voting for Trustees and until their successors are elected and
shall qualify.
Each of the nominees is presently a Trustee and has agreed to be nominated
and, if elected, to continue to serve as a Trustee of the Fund. All
Trustees except Messrs. Galli, Regan and Yeutter have been elected by
shareholders of the Fund. Each of the Trustees is also a Trustee or
Director of Oppenheimer Fund, Oppenheimer Discovery Fund, Oppenheimer
Global Fund, Oppenheimer Global Bio-Tech Fund, Oppenheimer Global
Environment Fund, Oppenheimer Global Growth & Income Fund, Oppenheimer
Special Fund, Oppenheimer Time Fund, Oppenheimer Target Fund, Oppenheimer
Tax-Free Bond Fund, Oppenheimer Gold & Special Minerals Fund, Oppenheimer
New York Tax-Exempt Fund, Oppenheimer California Tax-Exempt Fund,
Oppenheimer Multi-State Tax-Exempt Trust, Oppenheimer Mortgage Income
Fund, Oppenheimer Money Market Fund, Inc., Oppenheimer U.S. Government
Trust, Oppenheimer Multi-Government Trust and Oppenheimer Multi-Sector
Income Trust (together with the Fund, the "New York OppenheimerFunds").
Mr. Spiro is President of the Fund and each of the other New York
OppenheimerFunds.
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 Fund due to the
positions indicated with the Manager or its affiliates, or other positions
described. The year given below indicates when the nominee first became
a Trustee or Director of any of the New York OppenheimerFunds without a
break in service. The beneficial ownership of Class A shares listed below
includes voting and investment control, unless otherwise indicated below.
If any of the nominees should be unable to accept nomination or election,
it is the intention of the persons named as attorneys-in-fact in the
enclosed proxy to vote such proxy for the election of such other person
or persons selected and nominated by disinterested Trustees as the Board
of Trustees may, in its discretion, recommend. As of April 22, 1994 the
Trustees and officers of the Fund as a group owned 4,953.255 Class A
shares of the Fund in the aggregate, which is less than 1% of the
outstanding shares of that class.
Shares
Beneficially
Name And Business Experience Owned as of
Other Information During the Past Five Years April
22, 1994
Leon Levy General Partner of Odyssey Partners, L.P. None
first became a (investment partnership); Chairman of
Trustee in 1959 Avatar Holdings, Inc. (real estate
Age: 68 development).
Leo Cherne Chairman Emeritus of the International None
first became a Rescue Committee (philanthropic organization);
Trustee in 1982 formerly Executive Director of the
Age: 81 Research Institute of America.
Edmund T. Delaney Attorney-at-law; formerly a member of None
first became a the Connecticut State Historical Commission
Trustee in 1959 and Counsel to Copp, Berall & Hempstead
Age: 80 (a law firm).
Robert G. Galli*
first became a Vice Chairman of the Manager; Vice None
Trustee in 1993 President and General Counsel of Oppenheimer
Age: 60 Acquisition Corp. ("OAC"), the Manager's
parent holding company; formerly he held the
following positions: a director of the Manager
and Oppenheimer Funds Distributor, Inc. (the
"Distributor"), Vice President and a director
of HarbourView Asset Management Corporation
("HarbourView") and Centennial Asset Management
Corporation ("Centennial"), investment adviser
subsidiaries of the Manager, a director of
Shareholder Financial Services, Inc. ("SFSI")
and Shareholder Services, Inc. ("SSI"),
transfer agent subsidiaries of the Manager,
an officer of other OppenheimerFunds and
Executive Vice President and General Counsel of
the Manager and the Distributor.
Benjamin Lipstein Professor Emeritus of Marketing, Stern None
first became a Graduate School of Business Administration,
Trustee in 1974 New York University.
Age: 71
Elizabeth B. Moynihan
first became a Author and architectural historian; a None
Trustee in 1992 trustee of the American Schools of
Age: 64 Oriental Research, the Institute of Fine
Arts (New York University), the Freer Gallery
of Art (Smithsonian Institution) and the
Preservation League of New York State; a member
of the Indo-U.S. Sub-Commission on Education
and Culture.
Kenneth A. Randall A director of Northeast Bancorp, Inc. 235.941
first became a bank holding company), Dominion Resources, Inc.
Trustee in 1980 (electric utility holding company), and
Age: 66 Kemper Corporation (insurance and financial
services company); formerly Chairman of the
Board of ICL Inc. (information systems).
Edward V. Regan
first became a President of Jerome Levy Econo
Trustee in 1993 Bard College; a member of the U.S. Competitiveness
Age: 63 Policy Council; a director of GranCare, Inc.
(health care provider); formerly New York State
Comptroller and a trustee, New York State and Local
Retirement Fund.
Russell S. Reynolds, Founder Chairman of Russell Reynolds None
Jr. Associates Inc. (executive recruiting);
first became a a trustee of Mystic Seaport Museum,
Trustee in 1989 International House, Greenwich Historical
Age: 62 Society and Greenwich Hospital.
Sidney M. Robbins Chase Manhattan Professor Emeritus of 1946.753(1)
first became a Financial Institutions, Graduate School of
Trustee in 1963 Business, Columbia University; Visiting
Age: 82 Professor of Finance, University of Hawaii;
a director of The Korea Fund, Inc. and The
Malaysia Fund, Inc. (closed-end investment
companies); member of the Board of Advisors
of Olympus Private Placement Fund, L.P.;
Professor Emeritus of Finance, Adelphi University.
Donald W. Spiro* Chairman Emeritus and a director of the None
first became a Manager; formerly Chairman of the Manager
Trustee in 1985 and the Distributor.
Age: 68
Pauline Trigere Chairman and Chief Executive Officer of None
first became a Trigere, Inc. (design and sale of
Trustee in 1977 women's fashions).
Age: 81
Clayton K. Yeutter
first became a Counsel to Hogan & Hartson (a law firm); None
Trustee in 1993 of B.A.T. Industries, Ltd. (tobacco and financial
Age: 63 services), Caterpillar, Inc. (machinery), ConAgra,
Inc. (food and agricultural products), FMC Corp.
(chemicals and machinery), Lindsay Manufacturing Co.
and Texas Instruments, Inc. (electronics); formerly
(in descending chronological order) Deputy Chairman,
Bush/Quayle Presidential Campaign; Counsellor to the
President (Bush) for Domestic Policy; Chairman of the
Republican National Committee; Secretary of the U.S.
Department of Agriculture and U.S. Trade
Representative, Executive Office of the President.
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* A nominee who is an "interested person" of the Fund on the Manager under
the Investment Company Act.
(1) Such shares are held by Mr. Robbins' spouse, of which Mr. Robbins
disclaims beneficial ownership.
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 in the fiscal year ended December 31, 1993. Each of the
Trustees other than Ms. Trigere was present for at least 75% of the
meetings held. The Trustees of the Fund have appointed an Audit
Committee, comprised of Messrs. Randall (Chairman), Robbins (Vice
Chairman) and Cherne, 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 (subject to
shareholder ratification); (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 four times during the fiscal
year ended December 31, 1993, and all members attended at least 75% of the
meetings held during that period. The Board of Trustees does not have a
standing nominating or compensation committee.
Remuneration of Trustees and Officers. Mr. Spiro and the other officers
of the Fund listed below and Mr. Galli are affiliated with the Manager and
receive no salary or fee from the Fund. The Fund currently pays each
other Trustee a fee varying from $3,126 to $8,460 for serving as Trustee,
or as Chairman or a member of the committees of the Board of Trustees.
During the fiscal year ended December 31, 1993, Trustees' fees and
expenses aggregated $101,437. In addition, the Fund has adopted a
retirement plan that provides for payment to a retired Independent Trustee
of up to 80% of the average compensation paid during that Trustee's five
years of service in which the highest compensation was received. A
Trustee must serve in that capacity for any of the funds listed above for
at least 15 years in order to be eligible for the maximum payment. No
Trustee has retired under this plan, and therefore no payments have been
made by the Fund. In the fiscal year ended December 31, 1993, the Fund
accrued $50,137 for retirement plan benefits for its Trustees under the
plan.
Officers of the Fund. Each officer of the Fund is elected by the Trustees
to serve an indefinite 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.
David P. Negri, Vice President and Portfolio Manager; Age 40.
Two World Trade Center, New York, NY 10048
Vice President of the Manager; Vice President and Portfolio Manager of
other OppenheimerFunds.
Richard H. Rubenstein, Vice President and Portfolio Manager, Age 45.
Vice President of the Manager; an officer of other OppenheimerFunds;
formerly Vice President and Portfolio Manager/Security Analyst for
Oppenheimer Capital Corp., and investment adviser.
Andrew J. Donohue, Secretary; Age: 43.
Executive Vice President and General Counsel of the Manager and the
Distributor; an officer of other OppenheimerFunds; formerly Senior Vice
President and 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) and director and an officer of
First Investors Family of Funds and First Investors Life Insurance
Company.
George C. Bowen, Vice President and Treasurer; Age 57.
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; Vice
President, Treasurer and Secretary of SSI, SFSI; an officer of other
OppenheimerFunds; formerly Senior Vice President/Comptroller and Secretary
of Oppenheimer Asset Management Corporation, a former investment advisory
subsidiary of the Manager.
Robert G. Zack, Assistant Secretary; Age 45.
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other OppenheimerFunds.
Robert Bishop, Assistant Treasurer; Age 35.
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other OppenheimerFunds; previously a Fund Controller for the Manager,
prior to which he was an Accountant for Yale & Seffinger, an accounting
firm, and previously an Accountant and Commissions Supervisor for Stuart
James Company, Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer; Age 28.
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other OppenheimerFunds; previously a Fund Controller for the Manager,
prior to which he was an International Mutual Fund Supervisor for Brown
Brothers Harriman & Co., a bank, and previously a Senior Fund Accountant
for State Street Bank & Trust Company, before which he was a sales
representative for Central Colorado Planning.
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 February 10, 1994, selected KPMG
Peat Marwick ("KPMG") as auditors of the Fund for the fiscal year
beginning January 1, 1994. KPMG also serves as auditors for certain other
funds for which the Manager acts as investment adviser. At the Meeting,
a resolution will be presented for the Class A and Class C shareholders'
vote to ratify the selection of KPMG as auditors. Representatives of KPMG
are not expected to be present at the Meeting but will be available should
any matter arise requiring their presence. The Board of Trustees
recommends approval of the selection of KPMG as auditors of the Fund.
APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENT
(Proposal No. 2)
The Fund has an Investment Advisory Agreement dated October 22, 1990, with
the Manager (the "Current Agreement") which was submitted to and approved
by the Fund's shareholders at a meeting held October 1, 1990.
At a meeting of the Fund's Board of Trustees held February 10, 1994, the
Board, 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 Current Agreement or in any related agreements, approved
the terms of a new Investment Advisory Agreement (the "Proposed
Agreement") between the Fund and the Manager. If approved by the
shareholders at this meeting, the Proposed Agreement will be effective on
such date and continue in effect until December 31, 1994, and thereafter
from year to year unless terminated, but only so long as such continuance
is approved in accordance with the Investment Company Act. If the
Proposed Agreement is not approved by shareholders, the Current Agreement
will continue in effect.
The Proposed Agreement differs from the Current Agreement in the schedule
of fee rates paid by the Fund. Under the Current Agreement, the
management fee payable monthly to the Manager is computed on the net
assets of the Fund as of the close of business each day at the annual
rates of 1.00% of the first $50 million of net assets; 0.75% of the next
$150 million; 0.70% of the next $200 million; 0.65% of the next $200
million of net assets; and 0.60% of net assets in excess of $600 million.
At December 31, 1993, the Fund's net assets were $278,309,678, and the
Fund paid a management fee of $2,130,917 to the Manager for the fiscal
year then ended. Under the Proposed Agreement the management fee would
be payable monthly to the Manager and computed on the net assets of the
Fund as of the close of business each day at annual rates of 0.75% of the
first $200 million; 0.72% of the next $200 million; 0.69% of the next $200
million; 0.66% of the next $200 million, and 0.60% thereafter. The
initial reduction in management fees under the Proposed Agreement for the
first $50 million in net assets is reduced for assets exceeding $200
million. The effective management fee will be lower for the Fund under
the Proposed Agreement when net assets are below $608,333,300 (as is
presently the case) and will be higher if net assets exceed that figure.
The Proposed Agreement and the Current Agreement (hereinafter jointly
referred to as the "Agreements") are identical other than the change in
the management fee rates described above and the date of the Agreements.
Under the Agreements, 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 Agreements require
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 Agreements or by
the distributor of the Fund's shares are paid by the Fund. The Agreements
list 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.
The Agreements contain no expense limitation. However, independently of
the Agreements, the Manager has undertaken that the total expenses of the
Fund in any fiscal year (including the management fee but excluding taxes,
interest, brokerage fees and any extraordinary non-recurring expenses,
such as litigation) shall not exceed the most stringent applicable
regulatory limitation. 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. The Manager reserves the right
to change or eliminate this expense limitation at any time.
The Agreements provide that in the absence of willful misfeasance, bad
faith or gross negligence in the performance of its duties or reckless
disregard of its obligations under the Agreements, as long as it has acted
with due care and in good faith, the Manager is not 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, good faith
error or omission on its part in connection with any matter to which the
Agreements pertain. The Agreements permit 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 Investment Advisory Agreements. One of the
duties of the Manager under the Agreements is to arrange the portfolio
transactions for the Fund. In doing so, the Manager is authorized by the
Agreements to employ broker-dealers, including "affiliated" brokers (as
that term is defined in the Investment Company Act) ("brokers"), 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
or base its selection on "posted" rates, but is expected to be aware of
the current rates of most eligible brokers and to minimize the commissions
paid to the extent consistent with the provisions of the Agreements and
the interests and policies of the Fund as established by its Board of
Trustees.
Under the Agreements, the Manager is authorized to select brokers, other
than affiliated 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, and pay commissions to such brokers
that may be higher than another qualified broker would have charged, if
a good faith determination is made by the Manager that the commission is
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider the willingness of
particular broker-dealers to sell shares of the Fund and of other
investment companies managed by the Manager and its affiliates as a factor
in their selection.
Description of Brokerage Practices. Subject to the provisions of the
Agreements, allocations of brokerage are made by portfolio managers 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 effected with principals or market makers. Brokerage
commissions are paid primarily for effecting transactions in listed
securities and otherwise 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 for any transactions 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. 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 for in
commission dollars. 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 enabling
the Manager to obtain market information for the valuation of securities
held in the Fund's portfolio or being considered for purchase. The Board,
including the independent Trustees of the Fund, annually reviews
information furnished by the Manager as to the commissions paid to brokers
furnishing such services in an effort to ascertain that the amount of such
commissions was reasonably related to the value or the benefit of such
services. The Board of Trustees has permitted the Manager to use
concessions of fixed-price offerings to obtain research in the same manner
as is permitted for agency transactions.
During the Fund's fiscal year ended December 31, 1993, total brokerage
commissions paid by the Fund (not including spreads or concessions on
principal transactions on a net trade basis) were $2,914,950, of which
$83,463 was paid to brokers as commissions in return for research services
(including special research, statistical information and execution). The
aggregate dollar amount of transactions for which commissions were paid
for research services was $32,594,147. The transactions giving rise to
those commissions were allocated in accordance with the internal
allocation procedures described above.
The Manager. Subject to the authority of the Board of Trustees, the
Manager is responsible for the day-to-day management of the Fund's
business. The Manager is a wholly-owned subsidiary of Oppenheimer
Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts
Mutual Life Insurance Company ("MassMutual"). MassMutual is located at
1295 State Street, Springfield, Massachusetts 01111. OAC acquired the
Manager on October 22, 1990 (the "Acquisition Date"). 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 Donald W. Spiro (5.24%) and MassMutual. MassMutual has engaged in
the life insurance business since 1851. It is the nation's twelfth
largest life insurance company by assets and has an A.M. Best Co. rating
of "A+".
The common stock of OAC is divided into three classes. At December 31,
1993, MassMutual held (i) all of the 2,160,000 shares of Class A voting
stock, (ii) 317,854 shares of Class B voting stock and (iii) 350,063
shares of Class C non-voting stock. This collectively represented 74.1%
of the outstanding common stock and 84.9% of the voting power of OAC as
of December 31, 1993. Certain officers and/or directors of the Manager
as a group held (i) 821,455 shares of the Class B voting stock,
representing 21.5% of the outstanding common stock and 12.6% of the voting
power, and (ii) options acquired without cash payment which, when they
become exercisable, allow the holders to purchase up to 706,150 shares of
Class C non-voting stock. That group includes persons who serve as
officers of the Fund and two of whom (Messrs. Donald W. Spiro and Robert
G. Galli) 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 at the same formula price, according
to a schedule that will commence on September 30, 1995. Since October 1,
1992, certain officers and/or directors of the Manager (i) sold 295,354
shares of Class B OAC common stock to MassMutual at the formula price, and
(ii) surrendered to OAC 436,053 stock appreciation rights issued in tandem
with the Class C OAC options. Cash payments aggregating $32,729,119 have
or will be made by MassMutual to such persons (including Messrs. Spiro and
Galli, identified above) as follows: one-third of the amount due (i)
within 30 days of the transaction, (ii) by the first anniversary following
the transaction (with interest), and (iii) by the second anniversary
following the transaction (with interest). On December 15, 1993,
MassMutual purchased its 350,063 shares of Class C OAC stock from OAC for
$17,751,718.
As part of the acquisition of the common stock of OAC, MassMutual also
purchased approximately $45 million of subordinated notes of a subsidiary
of OAC; the notes are now an obligation of the Manager. In addition to
the purchase of such notes, MassMutual holds warrants issued by OAC
exercisable over the life of the notes which will allow it to purchase
shares of Class C common stock representing approximately 15.4% of the
common stock of OAC on a fully diluted basis.
The Manager and its affiliates act as investment advisers to investment
companies having combined net assets of more than $27 billion as of
December 31, 1993, and having more than 1.8 million shareholder accounts.
Attached as Exhibit B to this Proxy Statement is a list of all registered
investment companies for which the Manager and its affiliates act as
investment advisers together with a description of the advisory fee paid
by each. A Consolidated Statement of Financial Condition of the Manager
as of December 31, 1993, is included in this Proxy Statement as Exhibit
A.
The names and principal occupations of the executive officers and
directors of the Manager are as follows: Jon S. Fossel, Chief Executive
Officer and Chairman; Bridget A. Macaskill, President and Director; Donald
W. Spiro, Chairman Emeritus of the Board of Directors; Robert G. Galli and
James C. Swain, Vice Chairmen of the Board; Samuel Freedman, Jr.,
Director; Robert Doll Jr. and O. Leonard Darling, Executive Vice
Presidents; Tilghman G. Pitts, Executive Vice President and Director;
Andrew J. Donohue, Executive Vice President and General Counsel; Kenneth
Eich, Executive Vice President and Chief Financial Officer; George C.
Bowen, Senior Vice President and Treasurer; Victor Babin, Loretta
McCarthy, Robert Patterson, Arthur Steinmetz, Ralph Stellmacher, Nancy
Sperte and Robert G. Zack, Senior Vice Presidents. The address of Messrs.
Bowen, Eich, Freedman and Swain is 3410 South Galena Street, Denver,
Colorado 80231. The address of all other officers is Two World Trade
Center, New York, New York 10048-0203, which is also the address of the
Manager and OAC.
Considerations by the Board of Trustees. In connection with the Manager's
request to the Board that the investment management fee be increased, the
Manager provided extensive information to the Independent Trustees. The
Independent Trustees were provided with data as to the qualifications of
the Manager's personnel, the quality and extent of the services rendered
and its commitment to its mutual fund advisory business. The Independent
Trustees also considered data presented by the Manager showing the extent
to which it had expanded its investment personnel and other services
dedicated to the global area of its mutual fund advisory activities.
Information prepared specifically for the purpose of assisting the
Independent Trustees in their evaluation of the Proposed Agreements
included an analysis of the performance and expenses of the Fund as
compared to other similar funds. This analysis was prepared by the
Manager from materials provided by Lipper Analytical Services, Inc.
("Lipper") and reviewed by an independent consultant retained by the
Independent Trustees on behalf of the Fund. The Independent Trustees also
relied upon information previously provided to them in connection with
their annual and ongoing review, on the nature, quality and extent of the
Manager's services to the Fund.
After consideration of all of the data and information provided to them
at a meeting called to evaluate the new management fee proposed by the
Manager, a committee of the Independent Trustees discussed with
representatives of the Manager changes in the proposed fee schedule.
After certain modifications in the proposed fee schedule were made, the
Independent Trustees met separately with their counsel to discuss the
information and to consider the factors to be weighed and standards to be
applied in evaluating the Manager's proposed fee schedule.
The Independent Trustees first examined the nature, quality and scope of
the services provided to the Fund by the Manager. Second, they reviewed
the basis for an increase in the management fee and analyzed the fee
proposed by the Manager in terms of management fees charged by the Manager
and other investment advisors for similar services. Finally, the
Independent Trustees examined the mutual fund related revenues and
expenses of the Manager.
Analysis of Nature, Quality and Extent of Services. The Independent
Trustees considered, among other factors: (1) the necessity of the Manager
maintaining and enhancing its ability to retain and attract capable
personnel to serve the Fund; (2) the investment record of the Manager in
managing the Fund, and the investment record of other investment companies
for which it acts as investment adviser; (3) the Manager's overall
profitability; (4) pro-forma profitability data giving effect to the
proposed increase in the investment management fee but before marketing
and promotional expenses anticipated to be paid by the Manager and its
affiliates; (5) the effect of the proposed investment management fee
increase on the expense ratio of the Fund; (6) possible economies of
scale; (7) data as to investment performance, advisory fees and expense
ratios of other flexible portfolio investment companies having net assets
in excess of $25 million not advised by the Manager but believed to be
generally comparable in many ways to the Fund; (8) other benefits to the
Manager from serving as investment manager to the Fund, as well as
benefits to its affiliates acting as principal underwriter and its
division acting as transfer agent to the Fund; (9) current and developing
conditions in the financial services industry, including the entry into
the industry of larger and highly capitalized companies which are spending
and appear to be prepared to continue to spend substantial sums to engage
personnel and to provide services to competing investment companies; and
(10) the financial resources of the Manager and the desirability of
appropriate incentives to assure that the Manager will continue to furnish
high quality services to the Fund.
Analysis of Proposed Fee Adjustment. In their review of the proposed
adjustment in the level of the investment advisory fees, the Independent
Trustees considered the fact that the current investment advisory fees
paid by the Fund, as well as the Fund's total expense ratio, including the
investment advisory fees, is below the median fee rate and expense ratio
of comparable funds. The proposed investment advisory fee is comparable
to that paid by most other flexible portfolio investment companies.
Analysis of Profitability of the Manager. The Independent Trustees were
advised that the Manager does not maintain its financial records on a
fund-by-fund basis. However, the Manager does provide the Independent
Trustee on an annual basis with its allocation of expenses on a fund-by-
fund basis. The Independent Trustees considered specific information
provided by the Manager regarding its profitability and also considered
comparative information relating to the profitability of other mutual fund
investment managers. The Independent Trustees also noted the substantial
marketing and promotional activities in which the Manager and its
affiliates engage and propose to engage on behalf of the Fund.
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
Proposed Agreement.
Vote Required. An affirmative vote of the holders of a "majority" (as
defined in the Investment Company Act) of all outstanding voting
securities of the Fund is required for approval of the Proposed Agreement;
the classes do not vote separately. Such "majority" vote is defined in
the Investment Company Act as the vote of the holders of the lesser of:
(1) 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 approving the Proposed Investment Advisory
Agreement.
APPROVAL OF AMENDMENTS TO THE FUND'S CLASS A SERVICE PLAN
(Proposal No. 2)
NOTE: This Proposal applies to Class A shareholders only.
In 1988, the Fund's shareholders approved a plan of distribution under
Rule 12b-1 of the Investment Company Act. Effective July 1993, this plan
was amended to restructure it as a Service Plan and Agreement for Class
A shareholders (the "Current Plan") under which the Fund reimburses
Oppenheimer Funds Distributor, Inc. (the "Distributor") for all or a
portion of its costs incurred in connection with the personal service and
maintenance of accounts that hold Class A shares of the Fund acquired on
or after April 1, 1988. The 1993 amendment did not increase the payments
made by the Fund.
The Fund's Board of Directors, including a majority of the Directors who
are not "interested persons" (as defined in the Investment Company Act)
of the Fund and who have no direct or indirect financial interest in the
operation of the Current Plan or in any related agreements ("Independent
Directors"), has approved amendments to the Fund's Current Plan, to allow
payments to be made with respect to all Class A Fund shares, including
those acquired prior to April 1, 1988. The Board determined to recommend
the proposed Class A Service Plan and Agreement (the "Proposed Class A
Service Plan") for approval by the shareholders. A copy of the Proposed
Class A Service Plan is attached as Exhibit C to this proxy statement.
Article III, Section 26 of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (the "NASD Rule") establishes
limits on the total amount of sales charges and asset-based charges that
may be applicable to shares of an investment company sold by a broker-
dealer member of the NASD. Under the Rule, the Fund may pay 0.25% of its
average annual net assets as a service fee to brokers, dealers or other
financial intermediaries for providing personal services and/or
maintenance of shareholder accounts. The Current Plan and the Proposed
Plan permit the Fund to make such service payments.
The rate of the fee payable under both the Current Plan and the Proposed
Class A Service Plan is the same. Each plan has the effect of increasing
the Fund's Class A expenses by up to an annual rate of 0.25% of the Fund's
average net assets represented by Class A shares. Under the Current Plan,
the Fund may make payments to the Distributor for a portion of its costs
incurred in connection with the personal service and maintenance of
accounts that hold Class A shares of the Fund acquired on or after April
1, 1988. Under the Proposed Class A Service Plan, the Fund may make
payments to the Distributor for costs incurred in connection with the
personal service and maintenance of shareholder accounts regardless of
when the shares held in the accounts were acquired. For the fiscal year
ended December 31, 1993, payments under the Class A Plan totalled
$313,174, all of which was paid by the Distributor to Recipients,
including $124,537 paid to an affiliate of the Distributor.
Description of the Proposed Class A Service Plan. Under the Proposed
Class A Service Plan, the Fund will reimburse the Distributor quarterly
for all or a portion of its costs incurred in connection with the service
and maintenance of shareholder accounts that hold Class A Shares of the
Fund. The Distributor will be reimbursed for quarterly payments made to
certain dealers, brokers, banks or other financial institutions (each is
referred to as a "Recipient") that have provided personal service and
maintenance of shareholder accounts. Such services may include but are
not limited to 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 Proposed Class A Service Plan provides that within 45 days of the end
of each calendar quarter, the Distributor shall pay each Recipient a fee
for its services at a rate to be determined from time to time by the
Board, but not to exceed .0625% (0.25% annually) of the average during the
quarter of the net asset value of Fund shares owned by the Recipient or
its customers, computed as of the close of each business day. However,
no payment will be made to a Recipient in any quarter if the aggregate
average value of all Fund shares held by the Recipient for itself and its
customers, does not exceed a minimum amount to be determined from time to
time by the Funds' Board of Directors and its Independent Directors. The
Board has not established any minimum amount. The Board of Directors has
set the annual rate for assets sold on or after April 1, 1988 at the
maximum rate; it is anticipated that initially, the annual rate of 0.15%
will apply to assets representing shares sold before April 1, 1988.
However, the rate may increase the rate for assets sold before April 1,
1988, but in no event greater than the maximum amount. A Recipient may
be affiliated with the Distributor. The Proposed Class A Service Plan
would permit the Distributor and the Manager to make additional
distribution payments to Recipients from their own resources at no cost
to the Fund. The Distributor and the Manager may, in their sole
discretion, increase or decrease the amount of payments they make to
Recipients from their own assets.
If approved at this meeting and implemented, the Proposed Class A Service
Plan would have the effect of increasing the Fund's expenses for Class A
shares from what they otherwise would be under the Current 12b-1 Plan, but
by no more than the annual rate, computed as stated above, of 0.25% of the
average annual net asset value of shares acquired before April 1, 1988.
It is estimated that the Fund's total expense ratio would have increased
from 1.14% of annual net assets to 1.22% of annual net assets based on the
Fund's actual annualized expenses for the fiscal year ended December 31,
1993, had the Proposed Class A Service Plan been in effect.
Under the Current Plan and the Proposed Class A Service Plan, the
Treasurer of the Fund shall provide a written report to the Fund's Board
of Directors at least quarterly for its review as to the amount of all
payments made pursuant to the Plan and, the purposes for which the
payments were made and, in the case of payments to Recipients, the
identity of each Recipient. The Plans further provide that while in
effect, the selection and nomination of those Directors of the Fund who
are not "interested persons" of the Fund is committed to the discretion
of the Independent Directors. 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
Directors.
If approved, the Proposed Class A Service Plan (unless terminated as
indicated below) shall take effect as of July 1, 1994, replacing the
Fund's Current Plan and shall continue in effect until October 31, 1994
and from year to year thereafter only as long as such continuance is
specifically approved at least annually by the Fund's Board of Directors
(and its Independent Directors) by a vote cast in person at a meeting
called for the purpose of voting on such continuance. The Proposed Class
A Service Plan may be terminated at any time by the vote of a majority of
the Independent Directors or by the vote of the holders of a "majority"
(as defined in the Act) of the outstanding Class A shares of the Fund.
The Proposed Class A Service Plan may not be amended to increase
materially the amount of payments to be made, unless such amendment is
approved by shareholders in the manner described below under "Vote
Required," and all material amendments must be approved by a vote of the
Board of the Fund, including a majority of the Independent Directors, cast
in person at a meeting called for that purpose.
Any expenses accrued under the Proposed Class A Service Plan by the
Distributor in one fiscal quarter of the Fund may not be paid from
distribution fees received from the Fund in subsequent fiscal quarters of
the Fund. Thus, if the proposed Class A Service Plan were terminated, no
amounts (other than amounts accrued prior to termination but not yet paid)
would be owed by the Fund to the Distributor. In addition, Class A
Service Plan fees received from the Fund would not be used to pay any
interest expense, carrying charges or other financial costs, or allocation
of overhead of the Distributor.
Analysis of the Proposed Class A Service Plan by the Board of Directors.
In considering whether to recommend the Current Plan amendments for
approval, the Board requested and evaluated information it deemed
necessary to make an informed determination. The Manager has represented
to the Board that, in its opinion, it would be injurious to the Fund and
result in increased redemption of shares of the Fund if the Current Plan
was not amended. The Manager believed that providing continuing payments
to dealers for services provided to Fund shareholders in connection with
all Class A shares could help reduce redemptions of Fund shares by giving
Recipients a financial incentive in having the Fund shares remain
outstanding. Stabilizing or increasing Fund assets by encouraging
Recipients to maintain accounts in the Fund can benefit the Fund and its
shareholders by maintaining or reducing per-share operating expenses and
providing a more stable cash flow for investment management purposes. The
Board therefore deemed it in the best interest of the Fund and its
shareholders to amend the Current Plan as described. The Board was
advised that many brokers, dealers and other financial institutions
currently provide services to customers who own shares of the Fund
acquired before April 1, 1988 for which they receive no compensation from
the Fund. The Manager further advised the Board that, especially in light
of the amendments to the NASD permitting certain payments as compensation
for continuing service, Recipients have complained that it is inequitable
to compensate Recipients for providing services for some shares of the
Fund (i.e., those sold on or after April 1, 1988) but not for others.
Vote Required. Pursuant to Rule 12b-1 under the Investment Company Act,
an affirmative vote of the holders of a "majority" of the Class A voting
securities is required for approval of this Proposal. Such "majority"
vote is defined in the Investment Company Act as the vote of the holders
of the lesser of (i) 67% or more of the shares present or represented by
proxy at the shareholder meeting, if the holders of more than 50% of the
outstanding shares of that class are present or represented by proxy, or
(ii) more than 50% of the outstanding shares of the Class. If the
Proposal is not approved, the Fund's Service Plan will remain unchanged
and will apply only to shares acquired on or after April 1, 1988. The
Board of Directors recommends a vote in favor of approving this Proposal.
ADDITIONAL INFORMATION
Distribution Agreement. Oppenheimer Funds Distributor, Inc., a wholly-
owned subsidiary of the Manager, is the general distributor of the Fund's
shares under a General Distributor's Agreement dated December 10, 1992.
The General Distributor's Agreement is subject to the same annual renewal
requirements and termination provisions as the Agreement. For the fiscal
year ended December 31, 1993, selling charges on the Fund's shares
amounted to $416,990, of which the Distributor and an affiliated broker-
dealer retained $167,958 in the aggregate.
C Distribution and Service Plan. In addition to the Proposed Class A
Service Plan described in Proposal No. 3, the Fund has also adopted a
Distribution and Service Plan and Agreement (the "Class C Plan") pursuant
to Rule 12b-1 of the Investment Company Act, under which it will
compensate the Distributor for its services and costs incurred in
connection with the distribution and service of the Fund's Class C shares,
which were first publicly sold on December 1, 1993. Pursuant to the Class
C Plan, the Fund will pay the Distributor an asset-based sales charge of
0.75% per annum on Class C shares outstanding for six years or less, plus
a service fee of 0.25% per annum. The Distributor will use the service
fee payment to compensate Recipients for providing personal service and
the maintenance of shareholder accounts that hold Class C shares, examples
of which are described in the above paragraph. The asset-based sales
charge and service fee payments by the Fund to the Distributor under the
Class C Plan are intended to allow the Distributor to recoup its sales
commissions and service fee advances to authorized dealers or brokers that
sell Class C shares, as well as financing costs. The Distributor
anticipates that it will take a number of years to recoup such sales
commissions from the Fund's payments to the Distributor under the Class
C Plan. At December 31, 1993, the Distributor had received payments from
the Fund under the Class C Plan of $155 and had incurred unreimbursed
expenses under that Plan of $3,758 (less than 1% of the Fund's net assets
attributable to Class C shares of the Fund on that date), which have been
carried over into the present Class C plan year. The Class C Plan has the
affect of increasing annual expenses of Class C shares of the Fund by up
to 0.25% of the Class's average annual net assets from what its expenses
would otherwise be.
Service Contract. Oppenheimer Shareholder Services ("OSS"), a division
of the Manager, serves as the Fund's transfer agent and registrar pursuant
to a Service Contract under which it is reimbursed by the Fund for its
costs in providing those services to the Fund, including the cost of
rental of office space. Similar services are provided by OSS to certain
other mutual funds advised by the Manager. OSS received $266,298 from the
Fund during the fiscal year ended December 31, 1993. The costs described
for these services are charged to the Fund as operating expenses and are
borne ratably by all shareholders in proportion to their holdings of
shares of the series of the Fund.
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 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 11, 1994
Exhibit A
INDEPENDENT AUDITORS' REPORT
Oppenheimer Management Corporation:
We have audited the accompanying consolidated statement of financial
condition of Oppenheimer Management Corporation and subsidiaries as of
December 31, 1993. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of financial
condition is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
statement of financial condition. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall statement of financial condition
presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, such consolidated statement of financial condition
presents fairly, in all material respects, the financial position of
Oppenheimer Management Corporation and subsidiaries at December 31, 1993
in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the Company changed
its method of accounting for income taxes to conform with Statement of
Financial Accounting Standards No. 109.
DELOITTE & TOUCHE
Denver, Colorado
February 16, 1994
<PAGE>
OPPENHEIMER MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1993
ASSETS NOTES
CURRENT ASSETS:
Cash $ 31,940,116
Investments in money market
mutual funds 26,850,605
Investments in managed mutual funds 4,981,458
Investments in Zero Coupon U.S.
Treasuries Trust, at market 3,897,237
Accounts receivable:
Brokers and dealers 2 49,538,320
Managed mutual funds 2,3 11,433,524
Affiliated companies 100,495
Income taxes 13,902,237
Other 4,471,131
Other current assets 2,124,857
-------------
Total current assets 149,239,980
--------------
PROPERTY AND EQUIPMENT - Less
accumulated depreciation and
amortization of $8,169,031 8,896,837
--------------
OTHER ASSETS:
Intangible assets, net 1 113,445,572
Deferred sales commissions 54,452,051
Deferred charges 1,550,484
Other 1,607,387
----------------
Total other assets 171,055,494
---------------
TOTAL $329,192,311
<PAGE>
LIABILITIES AND SHAREHOLDER'S EQUITY
NOTES
CURRENT LIABILITIES:
Accounts payable and accrued
expenses $ 33,866,353
Subscriptions payable to managed
mutual funds 2 71,371,285
Payable to brokers and dealers 2 9,483,935
Current portion of long-term debt 5,6 17,463,094
------------
Total current liabilities 132,184,667
--------------
LONG-TERM LIABILITIES:
Deferred income taxes4 4 15,447,486
Senior debt 5 59,781,186
Subordinated notes 6 44,450,000
-------------
Total liabilities 251,863,339
---------------
COMMITMENTS 1,8
SHAREHOLDER'S EQUITY: 5,7
Preferred stock - nonvoting;
$10 par value; 392,461 shares
authorized; 25,141 shares
issued and outstanding 251,410
Common Stock - voting; $.10 par
value; 229,246 shares authorized;
179,658 shares issued and
outstanding 17,966
Additional paid-in capital 49,241,234
Retained earnings 27,818,362
-----------
Total shareholder's equity 77,328,972
-----------
TOTAL $329,192,311
See notes to consolidated statement of financial condition.
<PAGE>
OPPENHEIMER MANAGEMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1993
1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Management Corporation (OMC) and its subsidiaries
(collectively, the "Company") are engaged in the business of
organizing, promoting, and managing registered investment companies
(hereafter referred to as "mutual funds").
OMC owns all the outstanding stock of Oppenheimer Funds Distributor,
Inc., Shareholder Services, Inc. (SSI), HarbourView Asset Management
Corporation, Centennial Asset Management Corporation, Oppenheimer
Partnership Holdings, Inc., and Shareholder Financial Services, Inc.
OMC is a wholly-owned subsidiary of Oppenheimer Acquisition Corporation
(OAC), which is controlled by Massachusetts Mutual Life Insurance
Company and senior management of OMC.
Principles of Consolidation - The accompanying consolidated statement
of financial condition includes the accounts of OMC and its
subsidiaries. All significant intercompany transactions and balances
have been eliminated in consolidation.
Investments in Money Market Mutual Funds - The Company invests
available cash in money market mutual funds managed by the Company.
The investments are recorded at cost which equals market.
Investments in Managed Mutual Funds - The Company owns shares of stock
in several of the mutual funds it manages. The shares are purchased at
their respective net asset values. The resulting investments are
recorded at cost which approximates market.
Investments in Zero Coupon U.S. Treasuries Trust - The Company is the
Sponsor for the Oppenheimer Zero Coupon U.S. Treasuries Trust and has
undertaken to maintain a secondary market for units in the Trust. The
investments are carried at market.
Property and Equipment - Property and equipment is recorded at cost.
Equipment depreciation expense is provided over the assets' estimated
useful lives on the straight-line method. Leasehold improvements are
amortized on the straight-line method over the remaining terms of the
lease agreements.
<PAGE>
<TABLE>
<CAPTION>
Intangible Assets - Intangible assets at December 31, 1993, are as follows:
Less
Useful Accumulated Net
Lives Cost Amortization Book Value
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Debt Issuance Costs 7 years $ 5,535,450 $ (2,999,400) $ 2,536,050
Management Contracts 7 years 38,600,000 (18,840,667) 19,759,333
Goodwill 25 years 100,766,565 (11,671,455) 89,095,110
Other 4-10 years 4,385,906 (2,330,827) 2,055,079
----------- ------------ ----------
$149,287,921 $(35,842,349) $113,445,572
</TABLE>
Deferred Sales Commissions - Sales commissions paid to brokers and dealers
in connection with sales of shares of certain mutual funds are charged to
deferred sales commissions and amortized over six years. Early withdrawal
charges received by the Company from redeeming shareholders reduce
unamortized deferred sales commissions.
Stock Appreciation Rights - OAC has granted certain stock appreciation
rights relating to OAC's stock to certain employees of OMC. During 1993,
OMC recorded $21,603,294 relating to these stock appreciation rights as
a credit to additional paid-in capital.
Income Taxes - OAC files a consolidated federal income tax return which
includes the Company. Income taxes are recorded as if the Company files
on a separate return basis. During 1993 the Company was required to adopt
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. Statement 109 requires a change from the deferred method of
accounting for income taxes of APB Opinion 11 to the asset and liability
method of accounting for income taxes. The asset and liability method
prescribed by Statement 109 results in deferred tax assets and liabilities
being recorded for the differences between the book and tax basis relating
to the Company's assets and liabilities.
The Company adopted Statement 109 in 1993 and has elected to restate prior
years beginning with the 1990 period. The effect of this restatement on
prior years has been reflected in retained earnings as of December 31,
1992.
2. TRANSACTIONS WITH BROKERS AND DEALERS
The Company acts as general distributor for the sale and distribution of
shares of several mutual funds. In this capacity, the Company records a
receivable when it issues confirmations of all accepted purchase orders
to the originating brokers and dealers; at the same time, the Company
records a liability to the mutual funds equal to the net asset value of
all shares subject to such confirmations. This liability must be paid to
the mutual funds within 11 business days unless the trade is canceled.
If the originating broker or dealer fails to make timely settlement of its
purchase order under the terms of its dealer agreement with the Company,
the Company may cancel the purchase order and, at the Company's risk, hold
responsible the originating broker or dealer.
When brokers and dealers place share redemption orders with a fund's
distributor, the Company records a receivable from the mutual funds equal
to the net asset value of all shares redeemed; at the same time the
Company records a corresponding liability payable to the originating
brokers.
3. RELATED PARTIES
The following is a summary of the significant balances, transactions and
relationships with affiliated companies and other related parties as of
December 31, 1993:
Officers and Directors of the Company; Shareholders of OAC - Several
officers and directors of the Company and shareholders of OAC are also
officers and directors or trustees of the mutual funds managed and
distributed by the Company.
Transfer Agents - SSI and Oppenheimer Shareholder Services (OSS), a
division of OMC, act as transfer and shareholder servicing agents for the
mutual funds managed by the Company and others. Amounts charged to
managed mutual funds are based on costs incurred on behalf of the mutual
funds pursuant to service agreements between SSI or OSS and the mutual
funds. SSI also acts as transfer agent for certain mutual funds not
managed by the Company, and amounts charged to those funds are based on
fees set by contracts with the respective mutual funds.
The receivable from managed mutual funds includes $2,466,000 resulting
from transfer agency fees and expenditures made on behalf of the mutual
funds at December 31, 1993.
4. INCOME TAXES
As discussed in note 1, the Company adopted Statement 109 in 1993 and has
applied the provisions of the Statement retroactively to 1990. The
principal effect of this change in accounting for income taxes related to
the remeasurement of the 1990 acquisition of Maximum Holdings, Inc. and
resulted in the recording of goodwill in the amount of $13,800,000 and
deferred taxes payable in the same amount. In addition, retained earnings
at December 31, 1992 was increased by $2,001,702 to reflect the effects
of the restatement as of that date.
Deferred tax assets of $20,165,000 have been recorded in the accompanying
financial statements. These amounts primarily relate to the benefit
associated with certain state tax loss carryforwards and compensation not
deductible for tax purposes until paid. A valuation allowance has not
been recorded with respect to this deferred tax asset. Deferred tax
liabilities of $35,612,000 have also been recorded. These amounts relate
primarily to the current deduction, for tax purposes, of deferred sales
commissions which are amortized over six years for book purposes and the
difference in book and tax basis relating to certain management contracts.
The Company has certain net operating loss carryforwards relating to
various states. If not used in the interim, these losses will generally
expire on December 31, 2008.
5. SENIOR DEBT
At December 31, 1993, the Company has outstanding $77.2 million of Senior
Debt borrowed from five banks. This amount is comprised of a term loan
of $23.7 million due September 30, 1997 and $53.5 million outstanding on
a $75 million revolving credit. The revolving credit is subject to annual
renewal, and, if not renewed, is repayable in four annual installments.
The debt bears interest at the Company's election at the rate for
Eurodollar deposits plus 1 1/2% or the higher of the prime rate, plus 1/2%
or the federal funds rate plus 1/2%. The credit agreement contains
covenants requiring certain minimum financial tests and restrictions on
capital expenditures, investments, indebtedness and dividends. At
December 31, 1993, the Company was in compliance with the terms of the
credit agreement. In addition, the banks have also received a pledge of
the shares of the Company's subsidiaries and guarantees of certain
subsidiaries. Borrowings under the credit agreement are collateralized
by certain assets of the Company.
The mandatory principal repayment schedule for the term loan is as follows
(000's):
1994 $ 10,000
1995 12,000
1996 1,700
--------
$ 23,700
=======
The credit agreement has certain provisions whereby specified amounts of
excess cash flow on a semi-annual basis, as defined in the agreement, must
be applied to reduce the outstanding loan balance. There are no
prepayment penalties.
The Company has entered into interest rate swap agreements whereby certain
banks have agreed to pay the Company interest on a floating rate
(Eurodollar) basis and the Company has agreed to pay the banks interest
on a fixed rate basis. At December 31, 1993, the Company has fixed an
interest rate of 10.00% on $29,000,000 of the Senior Debt. The interest
rate swap agreements mature December 31, 1994.
The Company is exposed to credit loss in the event of non-performance by
the other parties to the interest rate swap agreements; however, the
Company does not anticipate non-performance by the counterparties. Based
on borrowing rates currently available to the Company for senior and
subordinated loans with similar terms, maturities and prepayment options,
the Company estimates that the fair value of its interest bearing debt and
the related interest rate swap agreements is $124.6 million as compared
to the carrying amount shown on the balance sheet of $121.7 million.
6. SUBORDINATED NOTES
Pursuant to a Note Agreement as amended and restated as of November 24,
1992 (the Note Agreement), the Company issued to a group of insurance
companies owned by Massachusetts Mutual Life Insurance Company,
$44,450,000 face amount of Subordinated Notes (Notes) due October 31,
2000. The Notes are subordinated to the Senior Debt obligations, (see
Note 5). The Notes require semi-annual interest payments at a rate of 14%
on October 31 and April 30 of each year. The Company may make optional
prepayments of Notes, with a penalty, beginning November 1, 1995. The
Note Agreement contains covenants requiring certain minimum financial
tests and restrictions on capital expenditures, investments, indebtedness
and dividends. At December 31, 1993, the Company was in compliance with
the terms of the Note Agreement.
The mandatory principal repayment schedule for the Notes is as follows
(000's):
1998 $14,800
1999 14,825
2000 14,825
-------
$44,450
======
7. SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
The following table summarizes the various series and classes of preferred
and common stocks that are authorized, issued and outstanding as of
December 31, 1993:
Shares
-----------------------------
Issued and
Authorized Outstanding Amount
<S> <C> <C> <C>
Preferred stock - non-voting;
$10 par value:
Series A - $15.00 non-cumulative,
non-convertible 1,350
Series B - $1.50 non-cumulative,
non-convertible 186,500
Series C - $1.00 cumulative,
non-convertible 12,150 12,150 $121,500
Series D - $.60 cumulative,
convertible:
Class A 161,523
Class B 30,938 12,991 129,910
-------- --------- ---------
Total 392,461 25,141 $251,410
======= ======= =======
Common stock - voting; $.10
par value:
Common shares 212,461 162,873 $ 16,287
Class A common shares 16,785 16,785 1,679
----------- ---------- -------
Total 229,246 179,658 $ 17,966
======= ======= =======
</TABLE>
The outstanding preferred shares are redeemable, at the option of the
Company, at $10 per share plus all accrued and unpaid dividends. In
the event of dissolution or liquidation, the preferred shareholders are
entitled to receive these same amounts before any distributions are
made to the common shareholder. The Series D Preferred Shares are
convertible, at the option of the shareholder, into common shares on
a one-for-one basis.
8. COMMITMENTS
Leases - The Company rents office space and certain computer and other
equipment under leases expiring during the next 15 years. At December
31, 1993, the aggregate minimum annual rentals under noncancelable
operating leases were as follows:
Years Ending
December 31
------------
1994 $ 6,237,568
1995 4,406,666
1996 3,513,503
1997 2,573,471
1998 2,223,802
Thereafter 10,660,288
-----------
$29,615,298
===========
EXHIBIT B
INFORMATION ON INVESTMENT COMPANIES MANAGED BY
OPPENHEIMER MANAGEMENT CORPORATION
AND CENTENNIAL ASSET MANAGEMENT CORPORATION
<TABLE>
<CAPTION>
Maximum
Approximate Advisory Fee
Net Assets Rate as % of
as of Average
Name of 12/31/93 Annual
Name of Fund Advisor1 ($ Millions) Net Assets
- ------------ -------- ------------- ------------
<S> <C> <C> <C>
Oppenheimer Asset Allocation Fund OMC $ 278.6 1.00%6
Oppenheimer California Tax-Exempt OMC 276.4 .60%5
Fund
Oppenheimer Cash Reserves OMC 71.1 .50%9
Oppenheimer Champion High Yield OMC 125.1 .70%14
Fund
Oppenheimer Discovery Fund OMC 622.2 .75%4
Oppenheimer Equity Income Fund OMC 1,904.2 .75%10
Oppenheimer Fund OMC 229.0 .75%4
Oppenheimer Global Bio-Tech Fund OMC 216.9 1.00%3
Oppenheimer Global Environment Fund OMC 42.1 .75%2
Oppenheimer Global Fund OMC 1,691.5 .75%23
Oppenheimer Global Growth & Income OMC 112.9 .75%4
Fund
Oppenheimer Gold & Special Minerals OMC 190.1 .80%7
Fund
Oppenheimer Government Securities OMC 185.1 .50%18
Fund
Oppenheimer High Yield Fund OMC 1,203.2 .75%12
Oppenheimer Integrity Funds OMC 207.5 15
Oppenheimer Main Street Funds, Inc. OMC 256.7 16
Oppenheimer Money Market Fund, Inc. OMC 597.4 .45%11
Oppenheimer Mortgage Income Fund OMC 89.0 .75%13
Oppenheimer Multi-Government Trust OMC 56.5 .65%
Oppenheimer Multi-Sector Income OMC 319.2 .65%
Trust
Oppenheimer Multi-State Tax-Exempt OMC 81.9 .60%5
Trust
Oppenheimer New York Tax-Exempt OMC 827.3 .60%5
Fund
Oppenheimer Special Fund OMC 746.2 .75%4
Oppenheimer Strategic Funds Trust OMC 4,012.4 .75%12
Oppenheimer Strategic Income & OMC 66.0 .75%12
Growth Fund
Oppenheimer Strategic Investment OMC 44.9 .75%12
Grade Bond Fund
Oppenheimer Strategic Short-Term OMC 31.5 .65%22
Income Fund
Oppenheimer Target Fund OMC 369.0 .80%7
Oppenheimer Tax-Exempt Bond Fund OMC 153.1 19
Oppenheimer Tax-Exempt Cash OMC 23.9 .50%9
Reserves
Oppenheimer Tax-Free Bond Fund OMC 641.1 .60%5
Oppenheimer Time Fund OMC 414.3 .75%4
Oppenheimer Total Return Fund, OMC 1,440.4 .75%10
Inc.
Oppenheimer U.S. Government Trust OMC 363.7 .75%13
Oppenheimer Variable Account Funds OMC 815.9 8
Centennial America Fund, L.P. OMC 4.4 .45%17
Centennial California Tax Exempt Centennial 64.1 .50%9
Trust
Centennial Government Trust Centennial 648.8 .50%9
Centennial Money Market Trust Centennial 2,271.8 .50%9
Centennial New York Tax Exempt Centennial 22.0 .50%9
Centennial Tax Exempt Trust Centennial 1,008.9 .50%20
Daily Cash Accumulation Fund, Centennial 3,613.5 .45%21
Inc.
The New York Tax-Exempt Income OMC 24.8 .50%
Fund, Inc.
</TABLE>
[FN]
___________________
1 "OMC" and "Centennial" are abbreviations for Oppenheimer Management
Corporation and Centennial Asset Management Corporation, respectively.
Centennial is a wholly-owned subsidiary of OMC, and also acts as general
distributor of each fund advised by it.
2 This rate is charged on the first $200 million of average annual net
assets; the rate is .72% of the next $200 million, .69% of the next $200
million and .66% of net assets in excess of $600 million.
3 The rate is charged on the first $50 million of average annual net
assets; the rate is .75% of the next $150 million; .72% of the next $200
million; .69% of the next $200 million; .66% of the next $200 million,
and .60% of net assets in excess of $800 million.
4 This rate is charged on the first $200 million of average annual net
assets; the rate is .72% of the next $200 million, .69% of the next $200
million, .66% of the next $200 million and .60% of net assets in excess
of $800 million. A proposal has been made to shareholders of
Oppenheimer Global Growth & Income Fund to increase the rate paid by the
Fund at certain asset levels.
5 For Oppenheimer Florida Tax-Exempt Fund, Oppenheimer New Jersey Tax-
Exempt Fund and Oppenheimer Pennsylvania Tax-Exempt Fund, this rate is
charged on the first $200 million of average annual net assets; the rate
is .55% of the next $100 million, .50% of the next $200 million, .45%
of the next $250 million, .40% of the next $250 million and .35% of net
assets in excess of $1.0 billion.
6 This rate is charged on the first $50 million of average annual net
assets; the rate is .75% of the next $150 million, .70% of the next $200
million, .65% of the next $200 million and .60% of net assets in excess
of $600 million. Effective January 1, 1993, OMC has voluntarily agreed
to reduce its management fee, so that it will not exceed the following:
.75% of the first $200 million of average annual net assets, .72% of the
next $200 million, .69% of the next $200 million, .66% of the next $200
million, and .60% of average annual net assets in excess of $800
million. It is expected that shareholders will be asked to approve a
new Investment Advisory Agreement with OMC which includes this reduced
fee rate when a shareholder meeting is next held.
7 This rate is charged on the first $200 million of average annual net
assets; the rate is .75% of the next $200 million, .69% of the next $200
million, .66% of the next $200 million and .60% of assets over $800
million. Effective July 1, 1994, the first two breakpoints of that
management fee will be reduced to .75% of the first $200 million of
average annual net assets and .72% of the next $200 million.
8 For Oppenheimer Bond Fund, Oppenheimer Capital Appreciation Fund,
Oppenheimer Growth Fund and Oppenheimer Multiple Strategies Fund, a .50%
rate is charged on the first $250 million of average annual net assets
of the Trust; the rate is .45% of the next $50 million, .40% of the next
$100 million, .35% of the next $400 million and .30% of net assets in
excess of $800 million. The management fee of one series (Oppenheimer
Money Fund) is reduced from that rate by .05% on the first $250 million
of its net assets and on its net assets in excess of $4 billion.
Another series (Oppenheimer High Income Fund) pays an additional .15%
fee. The management fee of another series (Oppenheimer Global
Securities Fund) is .75% on the first $200 million of average annual net
assets, .72% on the next $200 million, .69% on the next $200 million,
.66% on the next $200 million and .60% of net assets in excess of $800
million. The management fee of another series (Oppenheimer Strategic
Bond Fund) is .65% of its average annual net assets.
9 This rate is charged on the first $250 million of average annual net
assets; the rate is .475% of the next $250 million, .450% of the next
$250 million, .425% of the next $250 million and .40% of net assets in
excess of $1 billion.
10 This rate is charged on the first $100 million of average annual net
assets; the rate is .70% of the next $100 million, .65% of the next $100
million, .60% of the next $100 million, .55% of the next $100 million and
.50% of net assets in excess of $500 million.
11 This rate is charged on the first $500 million of average annual net
assets; the rate is .425% of the next $500 million, .400% of the next $500
million and .375% of net assets in excess of $1.5 billion.
12 This rate is charged on the first $200 million of average annual net
assets; the rate is .72% of the next $200 million, .69% of the next $200
million, .66% of the next $200 million, .60% of the next $200 million of
net assets and .50% of net assets in excess of $1 billion.
13 This rate is charged on the first $200 million of average annual net
assets; the rate is .70% of the next $200 million, .65% of the next $400
million and .60% of net assets in excess of $800 million. The Manager has
voluntarily agreed to reduce its fees by .05% at each net asset level
effective January 1, 1994, with a further decrease of .05% at each net
asset level effective July 1, 1994.
14 This rate is charged on the first $250 million of average annual net
assets; the rate is .65% of the next $250 million, .60% of the next $500
million and .55% of net assets in excess of $1.0 billion.
15 For Oppenheimer Investment Grade Bond Fund, a .50% rate is charged on
the first $100 million of net assets; the rate is .45% of the next $200
million; .40% of the next $200 million, and .35% of net assets over $500
million. For Oppenheimer Value Stock Fund, the rate is .75% of the first
$100 million, .72% of the next $200 million, .69% of the next $200
million, and .66% of net assets over $500 million. OMC pays Massachusetts
Mutual Life Insurance Company ("MassMutual") a subadvisory fee of .35% of
Investment Grade Bond Fund's first $100 million of average annual net
assets, .25% of the next $200 million, .20% of the next $200 million, and
.15% of net assets in excess of $500 million. For Value Stock Fund, OMC
pays Concert Capital Management, Inc., a subsidiary of MassMutual, a sub-
advisory fee of .40% of Value Stock Fund's first $50 million of average
annual net assets and .20% of net assets in excess of $50 million.
16 For Oppenheimer Main Street Income & Growth Fund, a rate of .65% is
charged on the first $200 million of average annual net assets; the rate
is .60% of the next $150 million, .55% of the next $150 million and .45%
of net assets in excess of $500 million. For Oppenheimer Main Street
California Tax-Exempt Fund, a rate of .55% of net assets is charged when
that Fund's net assets exceed $100 million, .40% when net assets are $75
million or more but less than $100 million, .25% when net assets are $50
million or more but less than $75 million, .15% when net assets are $25
million or more but less than $50 million, and 0% when net assets are
less than $25 million.
17 This rate is charged on the first $500 million of average annual net
assets; the rate is .40% on net assets in excess of $500 million.
18 This rate is charged on the first $100 million of average annual net
assets; the rate is .45% on the next $150 million, .425% on the next $250
million, and .40% of net assets in excess of $500 million.
19 For Oppenheimer Intermediate Tax-Exempt Bond Fund, a .50% rate is
charged on the first $100 million of net assets; the rate is .450% of the
next $150 million, .425% of the next $250 million, and .400% of net assets
over $500 million. For Oppenheimer Insured Tax-Exempt Bond Fund, the rate
is .05% lower at each breakpoint.
20 This rate is charged on the first $250 million of average annual net
assets; the rate is .475% of the next $250 million, .450% of the next $250
million, .425% of the next $250 million, .400% of the next $250 million,
.375% of the next $250 million, .350% of the next $500 million, and .325%
of net assets in excess of $2.0 billion. In addition, until the net
assets of the Trust reach $1.5 billion, the fee otherwise payable to the
Manager will be reduced by $100,000 per annum, but in no event lower than
$0.
21 This rate is charged on the first $500 million of average annual net
assets; the rate is .425% of the next $500 million, .400% of the next $500
million, .375% of the next $500 million, .350% of the next $500 million,
.325% of the next $500 million, .300% of the next $500 million, .275% of
the next $500 million and .250% of net assets in excess of $4.0 billion.
Centennial has voluntarily agreed to reduce its management fee to the
extent necessary to ensure that the annual management fee does not exceed
.35% of the Fund's average net assets.
22 This rate is charged on the first $500 million of average annual net
assets; the rate is .62% of the next $500 million, .59% of the next $500
million, and .50% of average annual net assets in excess of $1.5 billion.
23 This rate is charged on the first $200 million of average annual net
assets; the rate is .72% of the next $200 million, .69% of the next $200
million, .66% of the next $200 million and .60% of the next $200 million,
and .57% of net assets in excess of $1.0 billion. A proposal has been
made to shareholders to increase the rate paid by the Fund at certain
asset levels.
Exhibit C
SERVICE PLAN AND AGREEMENT BETWEEN
OPPENHEIMER FUNDS DISTRIBUTOR, INC. AND
OPPENHEIMER ASSET ALLOCATION FUND
FOR CLASS A SHARES
SERVICE PLAN AND AGREEMENT (the "Plan") dated the 21st day of June, 1994,
by and between OPPENHEIMER ASSET ALLOCATION FUND (the "Fund") and
OPPENHEIMER FUNDS DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class
A Shares described in the Fund's registration statement as of the date
this Plan takes effect, contemplated by and to comply with Article III,
Section 26 of the Rules of Fair Practice of the National Association of
Securities Dealers, pursuant to which the Fund will reimburse the
Distributor for a portion of its costs incurred in connection with the
personal service and the maintenance of shareholder accounts ("Accounts")
that hold Class A Shares (the "Shares") of such series and class of the
Fund. The Fund may be deemed to be acting as distributor of securities
of which it is the issuer, pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act"), according to the terms of this Plan.
The Distributor is authorized under the Plan to pay "Recipients," as
hereinafter defined, for rendering services and for the maintenance of
Accounts. Such Recipients are intended to have certain rights as third-
party beneficiaries under this Plan.
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
institution which: (i) has rendered services in connection with the
personal service and maintenance of Accounts; (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 such service; and (iii) has been selected by the
Distributor to receive payments under the Plan. Notwithstanding the
foregoing, a majority of the Fund's Board of Trustees (the "Board") who
are not "interested persons" (as defined in the 1940 Act) and who have
no direct or indirect financial interest in the operation of this Plan
or in any agreements relating to this Plan (the "Independent Trustees")
may remove any broker, dealer, bank or other institution as a
Recipient, whereupon such entity's rights as a third-party beneficiary
hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such
customers, clients and/or accounts as to which such Recipient is a
fiduciary or custodian or co-fiduciary or co-custodian (collectively,
the "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 two entities would otherwise qualify as Recipients as to the same
Shares, the Recipient which is the dealer of record on the Fund's
books shall be deemed the Recipient as to such Shares for purposes of
this Plan.
3. Payments.
(a) Under the Plan, the Fund will make payments to the Distributor,
within forty-five (45) days of the end of each calendar quarter, in the
amount of the lesser of: (i) .0625% (.25% on an annual basis) of the
average during the calendar quarter of the aggregate net asset value
of the Shares computed as of the close of each business day of
Qualified Holdings, or (ii) the Distributor's actual expenses under the
Plan for that quarter of the type approved by the Board. The
Distributor will use such fee received from the Fund in its entirety
to reimburse itself for payments to Recipients and for its other
expenditures and costs of the type approved by the Board incurred in
connection with the personal service and maintenance of Accounts
including, but not limited to, the services described in the following
paragraph. 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.
The services to be rendered by the Distributor and Recipients in
connection with the personal service and the maintenance of 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. It may
be presumed that a Recipient has provided services qualifying for
compensation under the Plan if it has Qualified Holdings of Shares to
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 services, 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 services in this regard. If the Distributor still is not
satisfied, it may take appropriate steps to terminate the Recipient's
status as such under the Plan, whereupon such entity's rights as a
third-party beneficiary hereunder shall terminate.
Payments received by the Distributor from the Fund under the Plan will
not be used to pay any interest expense, carrying charges or other
financial costs, or allocation of overhead by the Distributor, or for
any other purpose other than for the payments described in this Section
3. The amount payable to the Distributor each quarter will be reduced
to the extent that reimbursement payments otherwise permissible under
the Plan have not been authorized by the Board of Trustees for that
quarter. Any unreimbursed expenses incurred for any quarter by the
Distributor may not be recovered in later periods.
(b) The Distributor shall make payments to any Recipient quarterly,
within forty-five (45) days of the end of each calendar quarter, at a
rate not to exceed .0625% (.25% on an annual basis) of the average
during the calendar quarter of the aggregate net asset value of the
Shares computed as of the close of each business day of Qualified
Holdings owned beneficially or of record by the Recipient or by its
Customers. 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, to be set from time to time by a majority
of the Independent Trustees. A majority of the Independent Trustees
may at any time or from time to time increase or decrease and
thereafter adjust the rate of fees to be paid to the Distributor or to
any Recipient, but not to exceed the rate set forth above, and/or
increase or decrease the number of shares constituting Minimum
Qualified Holdings. The Distributor shall notify all Recipients of the
Minimum Qualified Holdings 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.
(c) Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") 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 OMC), from
its own resources.
4. Selection and Nomination of Trustees. While this Plan is in effect,
the selection or replacement of Independent Trustees and the nomination
of those persons to be Trustees of the Fund who are not "interested
persons" of the Fund shall be committed to the discretion of the
Independent Trustees. Nothing herein shall prevent the Independent
Trustees from soliciting the views or the involvement of others in such
selection or nomination if the final decision on any such selection and
nomination is approved by a majority of the incumbent Independent
Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide at least quarterly a written report to the Fund's Board for its
review, detailing the amount of all payments made pursuant to this Plan,
the identity of the Recipient of each such payment, and the purposes for
which the payments were made. The report shall state whether all
provisions of Section 3 of this Plan have been complied with. The
Distributor shall annually certify to the Board the amount of its total
expenses incurred that year with respect to the personal service and
maintenance of Accounts in conjunction with the Board's annual review of
the continuation of the Plan.
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 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 securities of
the Class, on not more than sixty days written notice to any other party
to the agreement; (ii) such agreement shall automatically terminate in the
event of its "assignment" (as defined in the 1940 Act); (iii) it 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 (iv) it 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 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 Independent Trustees cast in person at a
meeting called on June 10, 1993 for the purpose of voting on this Plan.
It takes effect as of July 1, 1994, whereupon it replaces the Service Plan
and Agreement dated June 10, 1993. Unless terminated as hereinafter
provided, it shall continue in effect until December 31, 1994 and from
year to year thereafter or as the Board may otherwise determine only so
long as such continuance is specifically approved at least annually by the
Board and its Independent Trustees cast in person at a meeting called for
the purpose of voting on such continuance. 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 voting securities of the Class. This Plan may not be
amended to increase materially the amount of payments to be made without
approval of the Class A Shareholders, in the manner described above, and
all material amendments must be approved by a vote of the Board and of the
Independent Trustees.
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 ASSET ALLOCATION FUND
By: __________________________________________
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: -----------------------------
