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 HIGH YIELD FUND
- ------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
OPPENHEIMER HIGH YIELD 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.
Preliminary Copy
YOUR SHAREHOLDER VOTE IS IMPORTANT!
Your prompt response can save your 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.
(Reverse side:)
Your prompt response can save your 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.
Preliminary Copy
YOUR SHAREHOLDER VOTE IS IMPORTANT!
Your prompt response can save your 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.
(Reverse side:)
Your prompt response can save your 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.
Preliminary Copy
Oppenheimer High Yield Fund Proxy for Shareholders Meeting
to be held June 20, 1994
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Your shareholder Your prompt response can save your Fund the
vote is important! 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.
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Oppenheimer High Yield Fund Proxy for Shareholders Meeting to be held
June 20, 1994
The undersigned shareholder of Oppenheimer High Yield 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 at 10:00 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.
Oppenheimer High Yield Fund Proxy for Shareholders Meeting to be held
June 20, 1994
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Your shareholder Your prompt response can save your Fund
vote is important! money. Please vote, sign and mail your
your proxy ballot (this card) in the
enclosed postage-paid envelope today,
no matter how many shares you own. A
majority of the Fund's shares must be
represented in person or by proxy.
Please vote your proxy so your Fund can
avoid the expense of another mailing.
Please detach at preforation before mailing.
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1. Election of Trustees
- ----- FOR all nominees listed ---- WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) list below)
R. Avis W. Baker C. Conrad J. Fossel R. Kalinowski
(A) (B) (C) (D) (E)
C. Kast R. Kirchner N. Steel J. Swain
(F) (G) (H) (I)
INSTRUCTION: To withhold authority to vote for any individual nominee,
line out that nominee's name above.
2. Ratification of selection of Deloitte & Touche as independent auditors
(Proposal No. 1)
FOR____ AGAINST____ ABSTAIN____
3. Approval of the Fund's Amended Class A 12b-1 Service Plan (Proposal
No. 2)
FOR____ AGAINST____ ABSTAIN____
4. For Vote of Class B Shareholders Only: Approval of the Fund's Class
B 12b-1 Distribution and Service Plan (Proposal No. 3)
FOR____ AGAINST____ ABSTAIN____
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.
Date -------------------, 1994
(Month) (Day)
Signature(s)---------------------
Signature(s)---------------------
Please read both sides of this ballot.
Preliminary Copy
OPPENHEIMER HIGH YIELD FUND
3410 South Galena Street, Denver, Colorado 80231
NOTICE OF MEETING OF SHAREHOLDERS TO BE HELD
JUNE 20, 1994
To The Class A & Class B Shareholders of
Oppenheimer High Yield Fund:
Notice is hereby given that a Meeting of the shareholders of Oppenheimer
High Yield Fund (the "Fund") will be held at 3410 South Galena Street,
Denver, Colorado 80231, at 10:00 A.M., Denver time, on June 20, 1994, or
any adjournments thereof, for the following purposes:
(a) To elect nine Trustees to hold office until the next meeting of
shareholders called for the purpose of electing Trustees or until their
successors are elected and shall qualify;
(b) To ratify the selection of Deloitte & Touche as the independent
certified public accountants and auditors of the Fund for the fiscal year
beginning July 1, 1993 (Proposal No. 1);
(c) To approve the Fund's Amended Class A 12b-1 Service Plan (Proposal
No. 2);
(d) For the vote of Class B Shareholders only: To approve the Fund's
Class B 12b-1 Distribution and Service Plan (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 SIGN, DATE AND MAIL THE ENCLOSED PROXY
PROMPTLY.
By Order of the Board of Trustees,
George C. Bowen, Secretary
May 6, 1994
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Shareholders who do not expect to attend the meeting are requested 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.
OPPENHEIMER HIGH YIELD FUND
3410 South Galena Street, Denver, Colorado 80231
PROXY STATEMENT
MEETING OF SHAREHOLDERS
TO BE HELD JUNE 20, 1994
This statement is furnished to the Class A & Class B shareholders of
Oppenheimer High Yield 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 10:00 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 6, 1994. Financial
statements covering the operations of the Fund for the fiscal year ended
June 30, 1993, were mailed to all persons who were shareholders of record
on June 30, 1993, and will be mailed to persons who became shareholders
between June 30, 1993 and the record date for this Meeting simultaneously
with the mailing of this Proxy Statement.
The enclosed proxy, if properly executed and returned, will be voted (or
counted as an abstention) 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), vote such shares as record holder 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 3410 South Galena Street, Denver,
Colorado, 80231; (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 the preparation and distribution of 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, if any,
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 --- Class A shares and --- Class B shares of the Fund
issued and outstanding. Each Class A and Class B share of the Fund has
voting rights as stated in this Proxy Statement, and is entitled to one
vote (and a fractional share is entitled to a fractional vote) on the
record date. As of the record date, no person owned of record or was
known by the management of the Fund to be the beneficial owner of 5% or
more of the outstanding shares of the Fund.
ELECTION OF TRUSTEES
At the Meeting, nine 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, they will vote all
validly executed proxies for the election of the nominees named below as
Trustees of the Fund. As a Massachusetts business trust, the Fund does
not contemplate holding annual shareholder meetings for the purpose of
electing Trustees. Thus, the Trustees will be elected for indefinite
terms until a shareholder meeting is called for the purpose of voting for
Trustees.
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 Mr. Avis have been elected by shareholders of the Fund.
All of the Trustees are also trustees, directors or managing general
partners of Oppenheimer Total Return Fund, Inc., Oppenheimer Equity Income
Fund, Oppenheimer Cash Reserves, Oppenheimer Tax-Exempt Cash Reserves,
Oppenheimer Strategic Funds Trust, Centennial America Fund, L.P., The New
York Tax-Exempt Income Fund, Inc., Oppenheimer Variable Account Funds,
Oppenheimer Champion High Yield Fund, Main Street Funds, Inc., Oppenheimer
Strategic Short-Term Income Fund, Oppenheimer Strategic Income & Growth
Fund, Oppenheimer Strategic Investment Grade Bond Fund, Oppenheimer
Integrity Funds, Oppenheimer Limited-Term Government Fund, Oppenheimer
Tax-Exempt Bond Fund, Centennial Money Market Trust, Centennial Government
Trust, Centennial New York Tax Exempt Trust, Centennial California Tax
Exempt Trust, Daily Cash Accumulation Fund, Inc. and Centennial Tax Exempt
Trust (all of the foregoing funds are collectively referred to as the
"Denver-based OppenheimerFunds"). Mr. Fossel and Mr. Swain are President
and Chairman, respectively, of all the Denver-based OppenheimerFunds.
The nominees indicated below by an asterisk are "interested persons" (as
that term is defined in the Investment Company Act of 1940, hereinafter
referred to as the "Investment Company Act") of the Manager or 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 Denver-based
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 as the Board of Trustees may, in
its discretion, recommend. As of ------------------, the Trustees and
officers of the Fund as a group owned --------- shares of the Fund in the
aggregate, which was less than 1% of the Fund's outstanding shares.
Name and Other Information:
Robert G. Avis*
first became a Trustee or Director in 1990.
Age: 62
Business Experience During the Past Five Years:
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
Shares Beneficially Owned as of April 22, 1994:
Name And Other Information:
William A. Baker
first became a Trustee or Director in 1966.
Age: 79
Business Experience During Past Five Years:
Management Consultant.
Shares Beneficially Owned as of April 22, 1994:
Name And Other Information:
Charles Conrad, Jr.
first became a Trustee or Director in 1970.
Age: 63
Business Experience During Past Five Years:
Vice President of McDonnell Douglas, Ltd.; formerly associated with the
National Aeronautics and Space Administration.
Shares Beneficially Owned as of April 22, 1994:
Name And Other Information:
Jon S. Fossel*
first became a Trustee or Director in 1990.
Age: 52
Business Experience During Past Five Years:
Chairman, Chief Executive Officer and a director of the Manager; President
and a director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company; President and a director of HarbourView Asset
Management Corp. ("HarbourView"), a subsidiary of the Manager; a director
of Shareholder Services, Inc. ("SSI") and Shareholder Financial Services,
Inc. ("SFSI"), transfer agent subsidiaries of the Manager; formerly
President of the Manager.
Shares Beneficially Owned as of April 22, 1994:
Name And Other Information:
Raymond J. Kalinowski
first became a Trustee or Director in 1988.
Age: 64
Business Experience During Past Five Years:
Formerly Vice Chairman and a director of A.G. Edwards, Inc., parent
holding company of A.G. Edwards & Sons, Inc. (a broker-dealer) of which
he was Senior Vice President.
Shares Beneficially Owned as of April 22, 1994:
Name And Other Information:
C. Howard Kast
first became a Trustee or Director in 1988.
Age: 72
Business Experience During Past Five Years:
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
Shares Beneficially Owned as of April 22, 1994:
Name And Other Information:
Robert M. Kirchner
first became a Trustee or Director in 1963.
Age: 72
Business Experience During Past Five Years:
President of The Kirchner Company (management consultants).
Shares Beneficially Owned as of April 22, 1994:
Name And Other Information:
Ned M. Steel
first became a Trustee or Director in 1963.
Age: 78
Business Experience During Past Five Years:
Chartered Property and Casualty Underwriter; formerly Senior Vice
President and a director of Van Gilder Insurance Corp. (insurance
brokers).
Shares Beneficially Owned as of April 22, 1994:
Name And Other Information:
James C. Swain*
first became a Trustee or Director in 1969.
Age: 60
Business Experience During Past Five Years:
Vice Chairman of the Manager, President and a director of Centennial Asset
Management Corporation ("Centennial"), an investment adviser subsidiary
of the Manager; formerly President and a director of Oppenheimer Asset
Management Corporation ("OAMC"), an investment adviser which was a
subsidiary of the Manager, and Chairman of the Board of SSI.
Shares Beneficially Owned as of April 22, 1994:
_______________________
* A nominee who is an "interested person" of the Fund or the Manager under
the Investment Company Act.
Vote Required. The affirmative vote of a plurality of the votes cast by
shareholders of the Fund without regard to class is required for the
election of each nominee. The Board of Trustees recommends a vote in
favor of electing each nominee.
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 the Fund's day-
to-day operations. Six meetings of the Trustees were held in the fiscal
year ended June 30, 1993, and all of the Trustees were present for at
least 75% of those meetings. The Trustees of the Fund have appointed an
Audit Committee, comprised of Messrs. Baker (Chairman), Conrad and
Kirchner, none of whom is an "interested person" (as that term is defined
in the Investment Company Act) of the Manager or the Fund. The functions
of the Committee include (i) making recommendations to the Board
concerning the selection of independent auditors for the Fund; (ii)
reviewing the methods, scope and results of audits and the fees charged;
(iii) reviewing the adequacy of the Fund's internal accounting procedures
and controls; and (iv) establishing a separate line of communication
between the Fund's independent auditors and its independent Trustees. The
Committee met six times during the fiscal year ended June 30, 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. Messrs. Swain and Fossel and the
other officers of the Fund listed below are affiliated with the Manager
and receive no salary or fee from the Fund. The Fund currently pays the
other Trustees an annual fee varying from $6,000 to $8,641 for serving as
Trustee or as Chairman or a member of the Audit and Review Committee of
the Board of Trustees. The fees include fees for attending meetings,
which vary according to the number of meetings attended. During the
fiscal year ended June 30, 1993, Trustees' fees and expenses aggregated
$44,389.
Officers of the Fund. Each officer of the Fund is elected by the Trustees
to serve an annual term. Information is given below about the executive
officers who are not Trustees of the Fund, including their business
experience during the past five years. Messrs. Bowen, Donohue, Zack,
Bishop and Farrar serve in a similar capacity with the other Denver-based
OppenheimerFunds listed above.
Ralph W. Stellmacher, Vice President and Portfolio Manager; Age: 35
Senior Vice President of the Manager; an officer of other
OppenheimerFunds.
Andrew J. Donohue, Vice President; Age: 43
Executive Vice President and General Counsel of Oppenheimer Management
Company ("OMC") (the "Manager") and Oppenheimer Funds Distributor, Inc.
(the "Distributor"); an officer of other OppenheimerFunds; formerly Senior
Vice President and Associate General Counsel of the Manager and the
Distributor; Partner in, Kraft & McManimon (a law firm); an officer of
First Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser); director
and an officer of First Investors Family of Funds and First Investors Life
Insurance Company.
George C. Bowen, Vice President, Secretary 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, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of other
OppenheimerFunds; formerly Senior Vice President/Comptroller and Secretary
of OAMC.
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 Resolution Trust Corporation 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 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, selected Deloitte & Touche ("Deloitte") as auditors
of the Fund for the fiscal year beginning July 1, 1993. Deloitte also
serves as auditors for the Manager and 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 B shareholders' vote to ratify the
selection of Deloitte as auditors. Representatives of Deloitte 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 Deloitte & Touche as auditors of the Fund.
APPROVAL OF AMENDMENTS TO THE FUND'S CLASS A SERVICE PLAN
(Proposal No. 2)
In July of 1991, the Fund's shareholders approved a plan of distribution
under Rule 12b-1 of the Investment Company Act. In June of 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, 1991. The 1993 amendment did not increase the payments
made by the Fund.
The Fund's Board of Trustees, including a majority of the Trustees who are
not "interested persons" (as defined in the Investment Company Act) of the
Fund and who have no direct or indirect financial interest in the
operation of the Current Plan or in any related agreements ("Independent
Trustees"), 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, 1991. 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 B 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 0.25% of the Fund's average net
assets. 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, 1991. 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 June 30, 1993, payments under
the class A Plan totalled $1,022,746, all of which was paid by the
Distributor to Recipients, including $27,357 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 net asset
value of Class A Fund shares owned by the Recipient or its customers.
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 Trustees and its
Independent Trustees. The Board has not established any minimum amount.
Initially, the Board of Trustees has set the rate for assets sold on or
after April 1, 1991 at the maximum rate and has initially set the rate
that will apply to assets representing shares sold before April 1, 1991
at the annual rate of 0.15%. However, the Board may increase the rate for
assets sold before April 1, 1991, 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 .25% of the average annual net asset value of shares
acquired before April 1, 1991. It is estimated that the Fund's total
expense ratio would have increased from 0.95% of annual net assets to
1.02% of annual net assets based on the Fund's actual annualized expenses
for the six month period ended December 31, 1993, had the Proposed Class
A Service Plan been in effect. As the proportion of Fund shares purchased
before April 1, 1991 to outstanding Fund shares decreases, the actual
incremental expenses, on a percentage basis, created by Proposed Class A
Service Plan payments over Current 12b-1 Plan payments will decrease, but
overall, Class A expenses will increase.
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 Trustees 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 Trustees of the Fund who are
not "interested persons" of the Fund is committed to the discretion of the
Independent Trustees. This does not prevent the involvement of others in
such selection and nomination if the final decision on any such selection
or nomination is approved by a majority of the Independent Trustees.
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 Trustees
(and its Independent Trustees) 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 Trustees 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 Trustees, 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 Trustees.
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, 1991 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 Rule 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, 1991) but not
for others.
Vote Required. Class B shares of the Fund automatically convert into
Class A shares after six years, as described in the Fund's Prospectus.
For that reason, the Fund is required by an exemptive order issued by the
Securities and Exchange Commission to obtain the approval of Class B as
well as Class A shareholders to the proposed change to the Class A Service
Plan. An affirmative vote of the holders of a "majority" of the Class A
and Class B shares of the Fund, voting separately by class, 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, 1991. The Board of Trustees recommends a
vote in favor of approving this Proposal.
APPROVAL OF THE FUND'S CLASS B 12b-1 DISTRIBUTION
AND SERVICE PLAN AND AGREEMENT
(Proposal No. 3)
NOTE: This Proposal applies to Class B Shareholders only.
Class B shares were first offered to the public on May 3, 1994. At that
time, the Fund had adopted a Distribution Plan and Agreement for Class B
shares pursuant to Rule 12b-1 of the Investment Company Act. In June of
1993, the Fund's Board of Trustees, including a majority of the
Independent Trustees (as defined in Proposal number 2 above) approved
amendments to this plan to recharacterize it as a Distribution and Service
Plan and Agreement (the "Distribution and Service Plan") in conformity
with the NASD Rule which permits the Fund to pay up to 0.25% of its
average annual net assets as a service fee and up to 0.75% of its average
annual assets as an asset-based sales charge. In February of 1994, the
Distribution and Service Plan was further amended to eliminate a provision
which would require the Fund to continue to make payments to the
Distributor after a termination of the Distribution and Service Plan.
Under the Distribution and Service Plan, the Fund may use a portion of its
assets to compensate the Distributor for costs incurred in connection with
the personal service and maintenance of shareholder accounts that hold
Class B shares and for its other costs incurred in connection with the
distribution of Class B shares of the Fund. A copy of the Distribution
and Service Plan is included as Exhibit C to this Proxy Statement.
If the Class B shareholders approve this Proposal, the Distribution and
Service Plan shall, unless terminated as described below, continue in
effect until October 31, 1994 and from year to year thereafter only so
long as such continuance is specifically approved at least annually by the
Fund's Board of Trustees and its Independent Trustees by a vote cast in
person at a meeting called for the purpose of voting on such continuance.
The Distribution and Service Plan may be terminated at any time by a vote
of a majority of the Independent Trustees or by a vote of the holders of
a "majority" (as defined in the Investment Company Act) of the Fund's
outstanding Class B shares. The Distribution and Service Plan may not be
amended to increase materially the amount of payments to be made without
approval by Class B shareholders. All material amendments must be
approved by the Independent Trustees.
Description of the Distribution and Service Plan. Under the Distribution
and Service Plan, the Fund will reimburse the Distributor for some or all
of its costs incurred in the rendition of personal services and account
maintenance and also for other services rendered to the Fund in connection
with the distribution of the Fund's Class B shares. The Fund will pay to
the Distributor an asset-based sales charge of 0.75% per annum of Class
B shares outstanding for six years or less, and will also pay a service
fee of 0.25% per annum, each of which is computed on the average annual
net assets of Class B shares of the Fund.
The Distribution and Service Plan provides for payments for two different
distribution related functions. The Distributor pays certain brokers
dealers, banks or other institutions ("Recipients") a service fee of 0.25%
for personal services to Class B shareholders and maintenance of
shareholder accounts by those Recipients. The services to be rendered by
Recipients in connection with personal services and the maintenance of
Class B shareholder accounts may include but shall not be limited to, the
following: answering routine inquiries from the Recipient's customers
concerning the Fund, providing such customers with information on their
investment in shares, assisting in the establishment and maintenance of
accounts or sub-accounts in the Fund, making the Fund's investment plans
and dividend payment options available, and providing such other
information and customer liaison services and the maintenance of accounts
as the Distributor or the Fund may reasonably request. If the Distributor
renders such services, it is permitted under the Distribution and Service
Plan to retain service fee payments to reimburse it for its costs in
rendering such services.
Service fee payments by the Distributor to Recipients will be made (i) in
advance for the first year Class B shares are outstanding, following the
purchase of shares, in an amount equal to 0.25% of the net asset value of
the shares purchased by the Recipient or its customers and (ii)
thereafter, on a quarterly basis, computed as of the close of business
each day at an annual rate of 0.25% of the net asset value of Class B
shares held in accounts of the Recipient or its customers. In the event
Class B shares are redeemed less than one year after the date such shares
were sold, the Recipient is obligated to repay to the Distributor on
demand a pro rata portion of such advance service fee payments, based on
the ratio of the time such shares were held to one (1) year.
The Distribution and Service Plan also provides that the Fund will pay the
Distributor an asset-based sales charge of 0.75% to reimburse it for other
costs incurred by the Distributor in connection with the distribution of
the Fund's Class B shares. The distribution assistance and administrative
support services rendered by the Distributor in connection with the sales
of Class B shares may include: (i) paying sales commissions to any broker,
dealer, bank or other institution that sell the Fund's Class B shares,
(ii) paying compensation to and expenses of personnel of the Distributor
who support distribution of Class B shares by Recipients, and (iii) paying
of or reimbursing the Distributor for interest and other borrowing costs
incurred on any unreimbursed expenses carried forward to subsequent fiscal
quarters. The other distribution assistance in connection with the sale
of Class B shares to be rendered by the Distributor and Recipients
include, but shall not be limited to, the following: distributing sales
literature and prospectuses other than those furnished to current Class
B shareholders, processing Class B share purchase and redemption
transactions and providing such other information in connection with the
distribution of Class B shares as the Distributor or the Fund may
reasonably request.
The Distributor currently pays sales commissions from its own resources
to Recipients at the time of sale equal to 3.75% of the purchase price of
Fund shares sold by such Recipient, and advances the first year service
fee of 0.25%. The asset-based sales charge payments by the Fund to the
Distributor under the Distribution and Service Plan are intended to allow
it to recoup such sales commissions plus financing costs. The Distributor
anticipates that it will take a number of years to recoup the sales
commissions paid to Recipients from the Fund's payments to the Distributor
under the Distribution and Service Plan, and from the contingent deferred
sales charge deducted from redemption proceeds for Class B shares redeemed
before the end of six years of their purchase.
Asset-based sales charge payments are designed to permit an investor to
purchase shares of the Fund without the assessment of a front-end sales
load and at the same time permit the Distributor to compensate Recipients
in connection with the sale of shares of the Fund. Actual distribution
expenses for any given quarter may exceed the aggregate of payments
received pursuant to the Distribution and Service Plan and contingent
deferred sales charges, and such expenses will be carried forward and paid
in future periods. The Fund will be charged only for interest expenses,
carrying charges or other financial costs that are directly related to the
carry-forward of actual distribution expenses. For example, if the
Distributor incurred distribution expenses of $4 million in a given fiscal
year, of which $2,000,000 was recovered in the form of contingent deferred
sales charges paid by investors and $1,600,000 was reimbursed in the form
of payments made by the Fund to the Distributor under the Distribution and
Service Plan, the balance of $400,000 (plus interest) would be subject to
recovery in future fiscal years from such sources.
The Distribution and Service Plan contains a provision which provides that
the Board may allow the Fund to continue payments to the Distributor until
the Distributor is reimbursed for certain expenses incurred for Class B
shares sold prior to termination of the Distribution and Service Plan.
Pursuant to this provision, payment of the asset-based sales charge of up
to 0.75% per annum could continue after termination. The Distribution and
Service Plan has the effect of increasing annual expenses of Class B
shares of the Fund by up to 1.00% of the class's average annual net assets
from what those expenses would otherwise be. Payments under the Class B
Plan through March 31, 1994 were $_______, and the amount of carry-forward
expenses were $__________.
Additional Information. While the Distribution and Service Plan is in
effect, the Treasurer of the Fund shall provide a separate written report
to the Fund's Board of Trustees at least quarterly on the amount of all
payments made pursuant to the Distribution and Service Plan, the purpose
for which the payment was made and the identity of each Recipient that
received any such payment. The report for the Distribution and Service
Plan shall also include the distribution and service costs for that
quarter, and such costs for previous fiscal periods that are carried
forward, as explained above. Each report, including the allocations on
which such payments are based, will be subject to the review and approval
of the Independent Trustees in the exercise of their fiduciary duty. The
Distribution and Service Plan further provides that while it is in effect,
the selection and nomination of those Trustees of the Fund who are not
"interested persons" of the Fund is committed to the discretion of the
Independent Trustees. This does not prevent the involvement of others in
such selection and nomination if the final decision on any such selection
or nomination is approved by a majority of the Independent Trustees.
Under the Distribution and Service Plan, no payment will be made to any
Recipient in any quarter if the aggregate net asset value of all Fund
shares held by the Recipient for itself and its customers did not exceed
a minimum amount, if any, that may be determined from time to time by a
majority of the Independent Trustees. Initially, the Board of Trustees
has set the fee at the maximum rate and set no minimum amount. The
Distribution and Service Plan permits the Distributor and the Manager to
make additional distribution payments to Recipients from their own
resources (including profits from management fees) at no cost to the Fund.
The Distributor and the Manager may, in their sole discretion, increase
or decrease the amount of distribution assistance payments they make to
Recipients from their own assets.
Analysis of the Distribution and Service Plan by the Board of Trustees.
In considering whether to recommend the Distribution and Service Plan for
approval, the Board requested and evaluated information it deemed
necessary to make an informed determination. The Board found that there
is a reasonable likelihood that the Distribution and Service Plan will
benefit the Fund and its Class B shareholders by providing financial
incentives to financial intermediaries to attract new Class B shareholders
to the Fund and by assisting the efforts of the Fund and the Distributor
to service and retain existing shareholders and attract new investments.
The Distribution and Service Plan should enable the Fund to be competitive
with similar funds, including funds which impose sales charges, that
provide financial incentives to institutions that direct investors to such
funds, and which provide shareholder servicing and administrative
services.
The Board concluded that it is likely that the Distribution and Service
Plan will benefit Class B shareholders of the Fund by enabling the Fund
to maintain or increase its present asset base in the face of competition
from a variety of financial products. The Trustees recognized that
payments made pursuant to the Distribution and Service Plan might be
offset in part by economies of scale associated with the growth of the
Fund's assets. Costs of shareholder administration and transfer agency
operations will be spread among a larger number of shareholders as the
Fund grows larger, thereby reducing the Fund's expense ratio. The Manager
has advised the Trustees that investing larger amounts of money is made
more readily, more efficiently, and at lesser cost to the Fund. The Board
found that a positive flow of new investment money is desirable primarily
to offset the potentially adverse effects that might result from a pattern
of net redemptions. Net cash outflow increases the likelihood that the
Fund will have to dispose of portfolio securities for other than
investment purposes. Net cash inflow minimizes the need to sell
securities to meet redemptions when investment considerations would
dictate otherwise, reduces daily liquidity requirements, and may assist
in a prompt restructuring of the portfolio without the need to dispose of
present holdings.
Stimulation of distribution of mutual fund shares and providing for
shareholder services and account maintenance services by payments to a
mutual fund's distributor and to brokers, dealers, banks and other
financial institutions has become common in the mutual fund industry.
Competition among brokers and dealers for these types of payments has
intensified. The Trustees concluded that promotion, sale and servicing
of mutual fund shares and shareholders through various brokers, dealers,
banks and other financial institutions is a successful way of distributing
shares of a mutual fund. The Trustees concluded that without an effective
means of selling and distributing Fund shares and servicing shareholders
and providing account maintenance, expenses may remain higher on a per
share basis that those of some competing funds. The Distribution and
Service Plan proposed for shareholder approval is designed to stimulate
sales by and services from many types of financial institutions.
The Trustees recognize that the Manager will benefit from the
implementation of the Distribution and Service Plan through larger
investment advisory fees resulting from an increase in Fund assets, since
its fees are based upon a percentage of net assets of the Fund. The
Board, including each of the Independent Trustees, determined that the
Distribution and Service Plan would be in the best interests of the Fund,
and that its implementation has a reasonable likelihood of benefiting the
Fund and its Class B shareholders. In its annual review of the
Distribution and Service Plan, the Board will consider the continued
appropriateness of the Distribution and Service Plan, including the level
of payments provided for therein.
Vote Required. Pursuant to Rule 12b-1 under the Investment Company Act
and the Distribution and Service Plan, an affirmative vote of the holders
of a "majority" (as defined in the Investment Company Act) of the Fund's
Class B voting securities is required for approval of the Distribution and
Service Plan. The requirements for such "majority" vote under the
Investment Company Act are as described in Proposal No. 2. A vote in
favor of this Proposal shall be deemed a vote to approve the payments
under the prior Distribution Plan and to approve the Distribution and
Service Plan. The Board of Trustees recommends a vote in favor of
approving Distribution and Service Plan.
ADDITIONAL INFORMATION
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 OAC, a holding
company controlled by Massachusetts Mutual Life Insurance Company
("MassMutual"), 1295 State Street, Springfield, MA 01111. OAC acquired
the Manager on October 22, 1990. As indicated below, the common stock of
OAC is owned by (i) certain officers and/or directors of the Manager (ii)
MassMutual and (iii) another investor. No institution or person holds 5%
or more of OAC's outstanding common stock except 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. Jon S. Fossel and James C.
Swain) serve as Trustees of the Fund. Holders of OAC Class B and Class
C common stock may put (sell) their shares and vested options to OAC or
MassMutual at a formula price (based on earnings of the Manager).
MassMutual may exercise call (purchase) options on all outstanding shares
of both such classes of common stock and vested options at the same
formula price, according to a schedule that will commence on September 30,
1995. Since July 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 OAC or
MassMutual to such persons (including Messrs. Fossel and Swain, 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 $25 billion as of
December 31, 1993, and having more than 1.8 million shareholder accounts.
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 Manager; 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.
Investment Advisory Agreement. The Fund has an Investment Advisory
Agreement with the Manager dated October 22, 1990 (the "Agreement"). The
Agreement was submitted to and approved by the Fund's shareholders at a
meeting held October 1, 1990, because the acquisition of the Manager by
OAC on October 22, 1990, terminated the previous investment advisory
agreement. Under the Agreement, the Manager supervises the investment
operations of the Fund and the composition of its portfolio and furnishes
the Fund advice and recommendations with respect to investments,
investment policies and the purchase and sale of securities. The
management fee payable monthly to the Manager under the terms of the
Agreement is computed on the net assets of the Fund as of the close of
business each day at an annual rate of 0.75% on the first $200 million of
net assets; 0.72% on the next $200 million; 0.69% on the next $200
million; 0.66% on the next $200 million, 0.60% on the next $200 million;
and 0.50% on net assets in excess of $1 billion. During the fiscal year
ended June 30, 1993, the Fund paid a management fee of $6,696,256 to the
Manager.
Under the Agreement, the Manager supervises the investment operations of
the Fund and the composition of its portfolio and furnishes the Fund
advice and recommendations with respect to investments, investment
policies and the purchase and sale of securities. The Agreement requires
the Manager, at its expense, to provide the Fund with adequate office
space, facilities and equipment as well as to provide, and supervise the
activities of, all administrative and clerical personnel required to
provide effective administration for the Fund, including the compilation
and maintenance of records with respect to its operations, the preparation
and filing of specified reports, and composition of proxy materials and
registration statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the Agreement or by
the distributor of the Fund's shares are paid by the Fund. The Agreement
lists examples of expenses paid by the Fund, the major categories of which
relate to interest, taxes, brokerage commissions, fees to certain
Trustees, legal and audit expenses, custodian and transfer agent expenses,
share certificate issuance costs, certain printing and registration costs,
and non-recurring expenses, including litigation.
The Agreement contains no expense limitation. However, independently of
the Agreement, the Manager has undertaken that the total expenses of the
Fund in any year (including the management fee but excluding taxes,
interest, brokerage commissions, distribution assistance payments and
extraordinary non-recurring expenses such as litigation costs) shall not
exceed (and the Manager undertakes to reduce the Fund's management fee in
the amount by which such expenses shall exceed) the most stringent
applicable state regulatory limitation. The Manager reserves the right
to change or eliminate this expense limitation at any time. The payment
of the management fee at the end of any month will be reduced or
eliminated so that there will not be any accrued but unpaid liability
under this expense limitation.
The Agreement provides 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, irrespective
of whether the determinations of the Manager relative thereto shall have
been based, wholly or partly, upon the investigation or research of any
other individual, firm or corporation believed by it to be reliable. The
Agreement permits the Manager to act as investment adviser for any other
person, firm or corporation and to use the name "Oppenheimer" in
connection with any of its activities. 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.
Portfolio Transactions. Portfolio decisions are made by the Portfolio
manager, under the supervision of executive officers of the Manager. As
most purchases made by the Fund are principal transactions at net prices,
the Fund does not incur substantial brokerage costs. The Fund deals
directly with the selling or purchasing principal or market maker without
incurring charges for the services of a broker in its behalf unless it is
determined that a better price or execution may be obtained by utilizing
the services of broker. Purchases of portfolio securities from
underwriters include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers include a spread between the bid
and asked price. The Fund seeks to obtain prompt execution of orders at
the most favorable net prices. Transactions may be directed to brokers
or dealers in return for special research and statistical information as
well as for services rendered by such brokers or dealers in the execution
of orders. The allocation of transactions in order to obtain additional
research service permits the Manager to supplement its own research and
analysis activities and to make available to the Manager the views and
information of individuals and research staffs of other securities firms.
The Board of Trustees has permitted the Manager to use concession on fixed
price offerings to obtain research, in the same manner as is permitted for
agency transactions. The Fund does not direct the handling of purchases
or sales of portfolio securities, whether on a principal or agency basis,
to brokers or dealers for selling shares of the Fund.
The Manager is authorized by the Agreement to employ such brokers or
dealers 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 the Fund's portfolio transactions. Most purchases
made by the Fund are principal transactions at net prices, and the Fund
incurs little or no brokerage costs.
When brokerage costs are incurred, the Fund's policy is to pay a
reasonable commission in terms of the range and quality of the broker's
service which benefit the Fund, rather than always to seek the lowest
commission cost. The requirement to seek the lowest commission cost could
exclude the Fund and the Manager from information, analysis, research and
other services which are of value to the Fund, as well as proper
execution. In all cases, the Manager is required to be aware of a
broker's purported or "posted" commission rates, if any, as may be
applicable to the transaction, as well as other information available at
the time as to the level of commissions known to be charged on comparable
transactions by other qualified brokers.
The Board of Trustees of the Fund has adopted a procedure permitting the
combination of purchase or sale transactions in instances in which more
than one of the funds managed by the Manager and its affiliates
simultaneously elect to effect portfolio transactions in the same
security. It is recognized that in some cases this procedure could have
a detrimental effect on the price or volume of such securities as far as
the Fund is concerned. In other cases, however, it is believed that the
ability of the Fund to participate in volume transactions will produce
better execution for the Fund.
During the Fund's fiscal year ended June 30, 1993, total brokerage
commissions paid by the Fund (not including spreads or concessions on
principal transactions on a net trade basis) were $7,850, and $500 was
paid to brokers as commissions in return for research services (including
special research, statistical information and execution); the aggregate
dollar amount of those transactions was $289,375.
Distribution Agreement and Service Contract. Oppenheimer Funds
Distributor, Inc. (formerly named Oppenheimer Fund Management, Inc.), a
wholly-owned subsidiary of the Manager, is the Distributor of the Fund's
shares. For the fiscal year ended June 30, 1993, selling charges on the
Fund's shares amounted to $6,953,223, of which the Distributor and an
affiliated broker dealer retained $1,564,094 in the aggregate.
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 $996,646 from the Fund
during the fiscal year ended June 30, 1993. The costs described for these
services are charged to the respective class as operating expenses and are
borne ratably by all shareholders of that class in proportion to their
holdings of shares.
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,
George C. Bowen, Secretary
May 6, 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
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
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.
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.
Intangible Assets - Intangible assets at December 31, 1993, are as
follows:
Less
Useful Accumulated Net
Lives Cost Amortization Book Value
------- ------ ------------ -----------
Debt Issuance 7 years $5,535,450 $(2,999,400) $2,536,050
Costs
Management 7 years 38,600,000 (18,840,667) 19,759,333
Contracts
Goodwill 25 years 100,766,565 (11,671,455) 89,095,110
Other 4-10 4,385,906 (2,330,827) 2,055,079
years
----------- ------------ ----------
$149,287,921 $(35,842,349) $113,445,572
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
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
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
======= ======= ========
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
SERVICE PLAN AND AGREEMENT BETWEEN OPPENHEIMER FUNDS DISTRIBUTOR, INC.
AND OPPENHEIMER HIGH YIELD FUND FOR CLASS A SHARES
SERVICE PLAN AND AGREEMENT (the "Plan") dated the 21st day of June,
1994, by and between OPPENHEIMER HIGH YIELD 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 April 26, 1994 for the purpose of voting on this
Plan, and takes effect as of July 1, 1994, whereupon it replaces the
Service Plan and Agreement dated June 22, 1993. Unless terminated as
hereinafter provided, it shall continue in effect until October 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.
Exhibit C
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT WITH OPPENHEIMER FUNDS
DISTRIBUTOR, INC. FOR CLASS B SHARES OF OPPENHEIMER HIGH YIELD FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 21st
day of June, 1994 by and between OPPENHEIMER HIGH YIELD FUND (the
"Fund") and OPPENHEIMER FUNDS DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service
plan for Class B shares of the Fund (the "Shares"), contemplated by
Rule 12b-1 (the "Rule") under the Investment Company Act of 1940 (the
"1940 Act"), pursuant to which the Fund will compensate the Distributor
for a portion of its costs incurred in connection with the distribution
of Shares, and the personal service and maintenance of shareholder
accounts that hold Shares ("Accounts"). The Fund may act as
distributor of securities of which it is the issuer, pursuant to the
Rule, according to the terms of this Plan. The Distributor is
authorized under the Plan to pay "Recipients," as hereinafter defined,
for rendering (1) distribution assistance in connection with the sale
of Shares and/or (2) administrative support services with respect to
Accounts. Such Recipients are intended to have certain rights as
third-party beneficiaries under this Plan. The terms and provisions of
this Plan shall be interpreted and defined in a manner consistent with
the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Article III, Section 26, of the Rules of Fair Practice of
the National Association of Securities Dealers, Inc., or its successor
(the "NASD Rules of Fair Practice") and (iv) any conditions pertaining
either to distribution related expenses or to a plan of distribution,
to which the Fund is subject under any order on which the Fund relies,
issued at any time by the Securities and Exchange Commission.
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 assistance (whether direct,
administrative or both) in the distribution of Shares or has provided
administrative support services with respect to Shares held by
Customers (defined below) of the Recipient; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may
arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan. 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 for Distribution Assistance and Administrative Support
Services.
(a) The Fund will make payments to the Distributor, (i) within forty-
five (45) days of the end of each calendar quarter, in the aggregate
amount of 0.0625% (0.25% 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 (the "Service Fee"), plus
(ii) within ten (10) days of the end of each month, in the aggregate
amount of 0.0625% (0.75% on an annual basis) of the average during the
month of the aggregate net asset value of Shares computed as of the
close of each business day (the "Asset Based Sales Charge") outstanding
for six years or less (the "Maximum Holding Period"). Such Service Fee
payments received from the Fund will compensate the Distributor and
Recipients for providing administrative support services of the type
approved by the Board with respect to Accounts. Such Asset Based Sales
Charge payments received from the Fund will compensate the Distributor
and Recipients for providing distribution assistance in connection with
the sales of Shares.
The administrative support services in connection with the Accounts to
be rendered by Recipients may include, but shall not be limited to, the
following: answering routine inquiries concerning the Fund, assisting
in the establishment and maintenance of accounts or sub-accounts in the
Fund and processing Share redemption transactions, making the Fund's
investment plans and dividend payment options available, and providing
such other information and services in connection with the rendering of
personal services and/or the maintenance of Accounts, as the
Distributor or the Fund may reasonably request.
The distribution assistance in connection with the sale of Shares to be
rendered by the Distributor and Recipients may include, but shall not
be limited to, the following: distributing sales literature and
prospectuses other than those furnished to current holders of the
Fund's Shares ("Shareholders"), and providing such other information
and services in connection with the distribution of Shares as the
Distributor or the Fund may reasonably request.
It may be presumed that a Recipient has provided distribution
assistance or administrative support services qualifying for payment
under the Plan if it has Qualified Holdings of Shares 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
distribution assistance in connection with the sale of Shares or
administrative support services for Accounts, then the Distributor, at
the request of the Board, shall require the Recipient to provide a
written report or other information to verify that said Recipient is
providing appropriate distribution assistance and/or services in this
regard. If the Distributor 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.
(b) The Distributor shall make service fee payments to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis) of
the average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum
period (the "Minimum Holding Period"), if any, to be set from time to
time by a majority of the Independent Trustees. Alternatively, the
Distributor may, at its sole option, make service fee payments
("Advance Service Fee Payments") to any Recipient quarterly, within
forty-five (45) days of the end of each calendar quarter, at a rate not
to exceed (i) 0.25% of the average during the calendar quarter of the
aggregate net asset value of Shares, computed as of the close of
business on the day such Shares are sold, constituting Qualified
Holdings sold by the Recipient during that quarter and owned
beneficially or of record by the Recipient or by its Customers, plus
(ii) 0.0625% (0.25% on an annual basis) of the average during the
calendar quarter of the aggregate net asset value of Shares computed as
of the close of each business day, constituting Qualified Holdings
owned beneficially or of record by the Recipient or by its Customers
for a period of more than one (1) year, subject to reduction or
chargeback so that the Advance Service Fee Payments do not exceed the
limits on payments to Recipients that are, or may be, imposed by
Article III, Section 26, of the NASD Rules of Fair Practice. In the
event Shares are redeemed less than one year after the date such Shares
were sold, the Recipient is obligated and will repay to the Distributor
on demand a pro rata portion of such Advance Service Fee Payments,
based on the ratio of the time such shares were held to one (1) year.
The Advance Service Fee Payments described in part (i) of the preceding
sentence may, at the Distributor's sole option, be made more often than
quarterly, and sooner than the end of the calendar quarter. 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 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 direct the Distributor to increase or decrease
the Maximum Holding Period, the Minimum Holding Period or the Minimum
Qualified Holdings. The Distributor shall notify all Recipients of the
Minimum Qualified Holdings, Maximum Holding Period or Minimum Holding
Period, if any, 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. 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.
(c) The Distributor is entitled to retain from the payments described
in Section 3(a) the aggregate amount of (i) the Service Fee on Shares
outstanding for less than the Minimum Holding Period plus (ii) the
Asset-Based Sales Charge on Shares outstanding for not more than the
Maximum Holding Period, in each case computed as of the close of each
business day during that period and subject to reduction or elimination
of such amounts under the limits to which the Distributor is, or may
become, subject under Article III, Section 26, of the NASD Rules of
Fair Practice. Such amount is collectively referred to as the
"Quarterly Limitation." The distribution assistance and administrative
support services in connection with the sale of Shares to be rendered
by the Distributor may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or
other institution that sell Shares, and/or paying such persons Advance
Service Fee Payments in advance of, and/or greater than, the amount
provided for in Section 3(a) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who
support distribution of Shares by Recipients; (iii) paying of or
reimbursing the Distributor for interest and other borrowing costs on
unreimbursed Carry Forward Expenses (as hereafter defined) at the rate
paid by the Distributor or, if such amounts are financed by the
Distributor from its own resources or by an affiliate, at the rate of
1% per annum above the prime rate (which shall mean the most
preferential interest rate on corporate loans at large U.S. money
center commercial banks) then being reported in the Eastern edition of
the Wall Street Journal (or if such prime rate is no longer so
reported, such other rate as may be designated from time to time by the
Distributor with the approval of the Independent Trustees); (iv) other
direct distribution costs of the type approved by the Board, including
without limitation the costs of sales literature, advertising and
prospectuses (other than those furnished to current Shareholders) and
state "blue sky" registration expenses; and (v) any service rendered by
the Distributor that a Recipient may render pursuant to part (a) of
this Section 3. The Distributor's costs of providing the above-
mentioned services are hereinafter collectively referred to as
"Distribution and Service Costs." "Carry Forward Expenses" are
Distribution and Service Costs that are not paid in the fiscal quarter
in which they arise because they exceed the Quarterly Limitation. In
the event that the Board should have reason to believe that the
Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares,
then the Distributor, at the request of the Board, shall provide the
Board with a written report or other information to verify that the
Distributor is providing appropriate services in this regard.
(d) The excess in any fiscal quarter of (i) the Quarterly Limitation
plus any contingent deferred sales charge ("CDSC") payments recovered
by the Distributor on the proceeds of redemption of Shares over (ii)
Distribution and Service Costs during that quarter, shall be applied in
the following order of priority: first to interest on unreimbursed
Carry Forward Expenses, second to reduce any unreimbursed Carry Forward
Expenses, third to reduce Distribution and Service Costs during that
quarter, and fourth, to reduce the Asset Based Sales Charge payments by
the Fund to the Distributor in that quarter. Carry Forward Expenses
shall be carried forward by the Fund until payment can be made under
the Quarterly Limitation.
(e) 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, from Asset Based Sales Charge payments or from its
borrowings.
4. Selection and Nomination of Trustees. While this Plan is in effect,
the selection and nomination of those persons to be Trustees of the
Fund who are not "interested persons" of the Fund ("Disinterested
Trustees") shall be committed to the discretion of such Disinterested
Trustees. Nothing herein shall prevent the Disinterested 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 Disinterested 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 distribution expenditures properly
attributable to the Shares, including the amount of all payments made
pursuant to this Plan, the identity of the Recipient of each such
payment, the amount paid to the Distributor and the Distribution and
Service Costs and Carry Forward Expenses for that period. 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 and its total expenses
incurred in prior years and not previously recovered with respect to
the distribution of Shares 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 a vote of a majority of
the Independent Trustees or by a vote of the holders of a "majority"
(as defined in the 1940 Act) of the Fund's outstanding voting
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 a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such
continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved by a vote of the Board and its Independent Trustees
cast in person at a meeting called on April 26, 1994 for the purpose of
voting on this Plan, and takes effect as of June 21, 1994, whereupon it
replaces the Distribution and Service Plan and Agreement dated June 22,
1993. Unless terminated as hereinafter provided, it shall continue in
effect until October 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 a vote of the Board and its
Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance. This Plan may not be amended to
increase materially the amount of payments to be made without approval
of the Class B Shareholders, in the manner described above, and all
material amendments must be approved by a vote of the Board and of the
Independent Trustees. This Plan may be terminated at any time by vote
of a majority of the Independent Trustees or by the vote of the holders
of a "majority" (as defined in the 1940 Act) of the Fund's outstanding
voting securities of the Class. In the event of such termination, the
Board and its Independent Trustees shall determine whether the
Distributor is entitled to payment from the Fund of all Carry Forward
Expenses and related costs properly incurred in respect of Shares sold
prior to the effective date of such termination, and whether the Fund
shall continue to make payment to the Distributor in the amount the
Distributor is entitled to retain under part (c) of Section 3 hereof,
until such time as the Distributor has been reimbursed for all such
amounts by the Fund and by retaining CDSC payments.
8. Disclaimer of Shareholder 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 HIGH YIELD FUND
By: ________________________________________
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: ________________________________________