<PAGE>
May, 1994
Your vote counts...
Dear Oppenheimer Tax-Free Bond Fund Shareholder:
We have scheduled a shareholder meeting for June 20, 1994 to review
several important proposals for your Fund. A notice of the meeting and
a proxy statement detailing the proposals are enclosed. Your Board of
Trustees, which represents you in matters regarding your Fund, recommends
approval of the proposals now being submitted to shareholders for a vote.
How do you vote?
No matter how large or small your investment, your vote is important,
so please review the proxy statement carefully. To cast your vote, simply
mark, sign and date the enclosed ballot and return it in the postage-paid
envelope today.
What are the proposals?
* Election of Trustees. The current members of the Board of
Trustees have been nominated to continue in office. A brief
statement of Trustees' names and background is included for your
information.
* Ratification of Auditors. Your approval is required on the
appointment of the independent auditing firm that reviews the
financial statements of your Fund.
* Approval of New Class A Service Plan. In 1993, a service plan
was adopted, reimbursing the Fund's Distributor for the cost of
servicing and maintaining accounts which hold Class A shares
purchased on or after April 1, 1988. Approval of this proposal
will allow the Plan to be amended to include Class A shares
purchased prior to April 1, 1988.
If you have questions regarding the proposals, please contact your
financial advisor or call us at 1-800-525-7048.
Sincerely,
Jon S. Fossel
P.S. Casting your vote is quick and easy, so please take a moment to
complete the ballot.
<PAGE>
Oppenheimer Tax-Free Bond Fund Proxy for Shareholders Meeting to be
held June 20, 1994
- - --------------------------------------------------------------------------
Your shareholder Your prompt response can save your
vote is important! Fund the expense of another mailing.
Please mark your proxy on the reverse
side, date and sign it, and return it
promptly in the accompanying envelope,
which requires no postage if mailed in
the United States.
Please detach at perforation before mailing.
Oppenheimer Tax-Free Bond Fund Proxy for Shareholders Meeting to be
held June 20, 1994
- - --------------------------------------------------------------------------
The undersigned shareholder of PROXY SOLICITED ON BEHALF OF
Oppenheimer Tax-Free Bond Fund TRUSTEES, WHICH RECOMMENDS A VOTE
(the "Fund"), does hereby appoint FOR THE ELECTION OF ALL NOMINEES
Robert Bishop, George C. Bowen, FOR TRUSTEES AND FOR EACH PROPOSAL
Andrew J. Donohue and Scott ON THE REVERSE SIDE. THE SHARES
Farrar, and each of them, as REPRESENTED HEREBY WILL BE VOTED
attorneys-in-fact and proxies of AS INDICATED ON THE REVERSE SIDE
the undersigned, with full power OR FOR IF NO CHOICE IS INDICATED.
of substitution, to attend the
Meeting of Shareholders of the
Fund to be held June 20, 1994,
at 3410 South Galena Street,
Denver, Colorado 80231 at 2:00
P.M., Denver time and at all
adjournments thereof, and to
vote the shares held in the name
of the undersigned on the record
date for said meeting for the
election of Trustees and on the
proposals specified on the reverse
side. Said attorneys-in-fact shall
vote in accordance with their best
judgment as to any other matter.
Over
<PAGE>
Oppenheimer Tax-Free Bond Fund Proxy for Shareholders Meeting to be
held June 20, 1994
- - --------------------------------------------------------------------------
Your shareholder Your prompt response can save your
vote is important! Fund money.
Please vote, sign and mail your proxy
ballot (this card) in the enclosed
postage-paid envelope today, no matter
how many shares you own. A majority
of the Fund's shares must be
represented in person or by proxy.
Please vote your proxy so your Fund
can avoid the expense of another
mailing.
Please detach at perforation before mailing.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1. Election of TrusteesA)L. CherneE)B. LipsteinI)R. Reynolds1. --- For all nominees listed except as marked
B)E. DelaneyF)E. MoynihanJ)S. Robbinsto the contrary at left.
C)R. Galli G) K. RandallK) D. Spiro Instruction: To withhold authority to vote for any
D)L. Levy H) E. Regan L) P. Trigereindividual nominee, line out that nominee's name
M) C. Yeutterat left.
--- Withhold authority to vote for all nominees
listed at left.
</TABLE>
2. Ratification of selection of KPMG Peat Marwick as independent auditors
(Proposal No. 1)
2. --- For --- Against --- Abstain
3. Approval of the Fund's Amended Class A 12b-1 Service Plan (Proposal No.
2)
2. --- 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.
Dated , 1994
-------------------------------------------------
Month Day
Signatures(s)
-------------------------------------------------
Signatures(s)
-------------------------------------------------
Please read both sides of this ballot. 310
<PAGE>
OPPENHEIMER TAX-FREE BOND FUND
Two World Trade Center, New York, New York 10048-0203
NOTICE OF MEETING OF SHAREHOLDERS TO BE HELD
June 20, 1994
To The Class A and Class B Shareholders of
Oppenheimer Tax-Free Bond Fund
Notice is hereby given that a Meeting of the Shareholders of Oppenheimer
Tax-Free Bond Fund (the "Fund") will be held at 3410 South Galena Street,
Denver, Colorado, 80231, at 2:00 P.M., Denver time, on June 20, 1994, or
any adjournments thereof, for the following purposes:
(a) To elect thirteen Trustees to hold office until the next meeting of
shareholders called for the purpose of electing Trustees and until their
successors are elected and shall qualify;
(b) To ratify the selection of KPMG Peat Marwick as the
independent certified public accountants and auditors of the Fund for the
fiscal year beginning January 1, 1994 (Proposal No. 1);
(c) To approve the Fund's Amended Class A 12b-1 Plan (Proposal No. 2); and
(d) 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,
Andrew J. Donohue, Secretary
May 13, 1994
- - --------------------------------------------------------------------------
Shareholders who do not expect to attend the meeting are asked to indicate
voting instructions on the enclosed proxy and to date, sign and return it
in the accompanying postage-paid envelope. To avoid unnecessary duplicate
mailings, we ask your cooperation in promptly mailing your proxy no matter
how large or small your holdings may be.
<PAGE>
OPPENHEIMER TAX-FREE BOND FUND
Two World Trade Center, New York, New York 10048-0203
PROXY STATEMENT
MEETING OF SHAREHOLDERS
TO BE HELD JUNE 20, 1994
This statement is furnished to the Class A and Class B shareholders of
Oppenheimer Tax-Free Bond Fund (the "Fund") in connection with the
solicitation by the Fund's Board of Trustees of proxies to be used at a
meeting (the "Meeting") of shareholders to be held at 3410 South Galena
Street, Denver, Colorado, 80231, at 2:00 P.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 13, 1994. Financial
statements covering the operations of the Fund for the fiscal year ended
December 31, 1993 were mailed to all persons who were shareholders of
record on that date, and simultaneously with the mailing of this Proxy
Statement will be mailed to persons who became shareholders between
December 31, 1993 (the record date for the mailing of that Annual Report)
and the record date for this shareholder meeting.
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 accounts shares for which instructions were
timely received. If a shareholder executes and returns a proxy but fails
to indicate how the votes should be cast, the proxy will be voted in favor
of the election of each of the nominees named herein for Trustee and in
favor of each Proposal.
The proxy may be revoked at any time prior to the voting by: (1) writing
to the Secretary of the Fund at Two World Trade Center, New York, New
York, 10048-0203; (2) attending the meeting and voting in person; or (3)
signing and returning a new proxy (if returned and received in time to be
voted).
The cost of printing and distributing these proxy materials is an expense
of the Fund. In addition to the solicitation of proxies by mail, proxies
may be solicited by officers or employees of the Fund's investment
adviser, Oppenheimer Management Corporation (the "Manager"), personally
or by telephone or telegraph; any expenses so incurred will also be borne
by the Fund. Brokers, banks and other fiduciaries may be required to
forward soliciting material to their principals and to obtain
authorization for the execution of proxies. For those services, they will
be reimbursed by the Fund for their out-of-pocket expenses.
Shares Outstanding and Entitled to Vote. As of April 22, 1994, the record
date, there were 62,008,562.919 Class A shares and 4,597,937.659 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, thirteen Trustees are to be elected to hold office until
the next meeting of shareholders called for the purpose of electing
Trustees and until their successors shall be duly elected and shall have
qualified. The persons named as attorneys-in-fact in the enclosed proxy
have advised the Fund that unless a proxy instructs them to withhold
authority to vote for all listed nominees or any individual nominee, all
validly executed proxies will be voted by them for the election of the
nominees named below as Trustees of the Fund. As a Massachusetts business
trust, the Fund does not contemplate holding annual shareholder meetings
for the purpose of electing Trustees. Thus, the Trustees will be elected
for indefinite terms until a shareholders meeting is called for the
purpose of voting for Trustees and until their successors are elected and
shall qualify.
Each of the nominees is presently a Trustee and has agreed to be nominated
and, if elected, to continue to serve as a Trustee of the Fund. All
Trustees except Messrs. Robert G. Galli, Edward V. Regan and Clayton K.
Yeutter have been elected by shareholders of the Fund. Each of the
Trustees is also a Trustee or Director of Oppenheimer Fund, Oppenheimer
Discovery Fund, Oppenheimer Global Bio-Tech Fund, Oppenheimer Global Fund,
Oppenheimer Global Growth & Income Fund, Oppenheimer Special Fund,
Oppenheimer Time Fund, Oppenheimer Target Fund, Oppenheimer Global
Environment Fund, Oppenheimer Gold & Special Minerals Fund, Oppenheimer
New York Tax-Exempt Fund, Oppenheimer California Tax-Exempt Fund,
Oppenheimer Multi-State Tax-Exempt Trust, Oppenheimer Asset Allocation
Fund, Oppenheimer Mortgage Income Fund, Oppenheimer Money Market Fund,
Inc., Oppenheimer U.S. Government Trust, Oppenheimer Multi-Government
Trust and Oppenheimer Multi-Sector Income Trust (together with the Fund,
the "New York OppenheimerFunds"). Mr. Spiro is President of the Fund and
each of the other New York OppenheimerFunds.
Each nominee indicated below by an asterisk is an "interested person" (as
that term is defined in the Investment Company Act of 1940, hereinafter
referred to as the "Investment Company Act") of the Fund due to the
positions indicated with the Manager or its affiliates. The year given
below indicates when the nominee first became a Trustee or Director of any
of the New York OppenheimerFunds without a break in service. The
beneficial ownership of Class A shares listed below includes voting and
investment control, unless otherwise indicated below. If any of the
nominees should be unable to accept nomination or election, it is the
intention of the persons named as attorneys-in-fact in the enclosed proxy
to vote such proxy for the election of such other person or persons
selected and nominated by disinterested Trustees as the Board of Trustees
may, in its discretion, recommend. As of April 22, 1994 the Trustees and
officers of the Fund as a group owned 69,524.666 Class A shares of the
Fund in the aggregate, which is less than 1% of the outstanding shares.
<TABLE>
<CAPTION>
Class A Shares
Name And Beneficially Owned
Other Information Business Experience During the Past Five Yearsas of April 22, 1994
<S> <C> <C>
Leon Levy General Partner of Odyssey Partners, L.P. (investmentNone
first became a partnership); Chairman of Avatar Holdings, Inc. (real estate
Trustee in 1959 development).
Age: 68
Leo Cherne Chairman Emeritus of the International RescueNone
first became a Committee (philanthropic organization); formerly Executive
Trustee in 1982 Director of the Research Institute of America.
Age: 81
Edmund T. Delaney Attorney-at-law; formerly a member of the Connecticut17,600.554 (1)
first became a State Historical Commission and Counsel to Copp,
Trustee in 1959 Berall & Hempstead (a law firm).
Age: 80
Robert G. Galli* Vice Chairman of the Manager; Vice President and General33,033.925
first became a Counsel of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
Trustee in 1993 Manager's parent holding company; formerly he held the
Age: 60 following positions: a director of the Manager and
Oppenheimer Funds Distributor, Inc. (the "Distributor"), Vice
President and a director of HarbourView Asset Management
Corporation ("HarbourView") and Centennial Asset Management
Corporation ("Centennial"), investment adviser subsidiaries of
the Manager, a director of Shareholder Financial Services, Inc.
("SFSI") and Shareholder Services, Inc. ("SSI"), transfer agent
subsidiaries of the Manager, an officer of other OppenheimerFunds
and Executive Vice President and General Counsel of the Manager
and the Distributor.
Benjamin Lipstein Professor Emeritus of Marketing, Stern Graduate School ofNone
first became a Business Administration, New York University.
Trustee in 1974
Age: 71
Elizabeth B. Moynihan Author and architectural historian; a trustee of theNone
first became a American Schools of Oriental Research, the Freer Gallery
Trustee in 1992 of Art (Smithsonian Institution), the Institute of Fine
Age: 64 Arts (New York University) and Preservation League of New
York State; a member of the Indo-U.S. Sub-Commission on
Education and Culture.
Kenneth A. Randall A director of Northeast Bancorp, Inc. (bank holding company),295.071
first became a Dominion Resources, Inc. (electric utility holding company),
Trustee in 1980 and Kemper Corporation (insurance and financial services
Age: 66 company); formerly Chairman of the Board of ICL Inc.
(information systems).
Edward V. Regan President of Jerome Levy Economics Institute, Bard College; aNone
first became a member of the U.S. Competitiveness Policy Council; a director
Trustee in 1993 of GranCare, Inc. (health care provider); formerly
Age: 63 New York State Comptroller and a trustee, New York State
and Local Retirement Fund.
<PAGE>
Class A Shares
Name And Beneficially Owned
Other Information Business Experience During the Past Five Yearsas of April 22, 1994
Russell S. Reynolds, Jr.Founder and Chairman of Russell Reynolds Associates, Inc.None
first became a (executive recruiting); a trustee of Mystic Seaport
Trustee in 1989 Museum, International House, Greenwich Historical
Age: 62 Society and Greenwich Hospital.
Sidney M. Robbins Chase Manhattan Professor Emeritus of Financial Institutions,18,595.116 (2)
first became a Graduate School of Business, Columbia University; Visiting
Trustee in 1963 Professor of Finance, University of Hawaii; a director of
Age: 82 The Korea Fund, Inc. and The Malaysia Fund, Inc. (closed-end
investment companies); member of the Board of Advisors of
Olympus Private Placement Fund, L.P.; Professor Emeritus of
Finance, Adelphi University.
Donald W. Spiro* Chairman Emeritus and a director of the Manager;None
first became a formerly Chairman of the Manager and the Distributor.
Trustee in 1985
Age: 68
Pauline Trigere Chairman and Chief Executive Officer of Trigere,None
first became a Inc. (design and sale of women's fashions).
Trustee in 1977
Age: 81
Clayton K. Yeutter Counsel to Hogan & Hartson (a law firm); a director of B.A.T.None
first became a Industries, Ltd. (tobacco and financial services), Caterpillar,
Trustee in 1993 Inc. (machinery), ConAgra, Inc. (food and agricultural products),
Age: 63 FMC Corp. (chemicals and machinery), Lindsay Manufacturing Co.
and Texas Instruments, Inc. (electronics); formerly (in descending
chronological order) Deputy Chairman, Bush/Quayle Presidential
campaign, Counsellor to the President (Bush) for Domestic Policy,
Chairman of the Republican National Committee, Secretary of the U.S.
Department of Agriculture, and U.S. Trade Representative, Executive
Office of the President.
- - ------------------------
* A nominee who is an "interested person" of the Fund under the Investment Company Act.
(1) Includes 4,711.722 shares held by Mr. Delaney's spouse; Mr. Delaney disclaims beneficial ownership of such shares.
(2) Such shares are held by Mr. Robbins' spouse; Mr. Robbins disclaims beneficial ownership of such shares.
</TABLE>
<PAGE>
Vote Required. The affirmative vote of a majority of the votes cast by
shareholders of the Fund without regard to Class is required for the
election of a nominee as Trustee. The Board of Trustees recommends a vote
for the election of each nominee.
Functions of the Board of Trustees. The primary responsibility for the
management of the Fund rests with the Board of Trustees. The Trustees meet
regularly to review the activities of the Fund and of the Manager, which
is responsible for its day-to-day operations. Six regular meetings of the
Trustees were held in the fiscal year ended December 31, 1993. Each of the
Trustees other than Ms. Trigere was present for at least 75% of the
meetings held. The Trustees of the Fund have appointed an Audit
Committee, comprised of Messrs. Randall (Chairman), Robbins (Vice
Chairman) and Cherne, none of whom is an "interested person" (as that term
is defined in the Investment Company Act) of the Manager or the Fund. The
functions of the Committee include (i) making recommendations to the Board
concerning the selection of independent auditors for the Fund (subject to
shareholder ratification); (ii) reviewing the methods, scope and results
of audits and the fees charged; (iii) reviewing the adequacy of the Fund's
internal accounting procedures and controls; and (iv) establishing a
separate line of communication between the Fund's independent auditors and
its independent Trustees. The Committee met four times during the fiscal
year ended December 31, 1993, and all members attended at least 75% of the
meetings held during that period. The Board of Trustees does not have a
standing nominating or compensation committee.
Remuneration of Trustees and Officers. The officers of the Fund listed
below are affiliated with the Manager. They and the Trustees who are
affiliated with the Manager (Messrs. Spiro and Galli) receive no salary
or fee from the Fund. The Fund currently pays each other Trustee a fee
varying from $3,647 to $9,870 for serving as Trustee, or as Chairman or
a member of the committees of the Board of Trustees. During the fiscal
year ended December 31, 1993, Trustees' fees and expenses aggregated
$65,316. In addition, the Fund has adopted a retirement plan that
provides for payment to a retired independent Trustee of up to 80% of the
average compensation paid during that Trustee's five years of service in
which the highest compensation was received. A Trustee must serve in that
capacity for any of the New York OppenheimerFunds listed above for at
least 15 years in order to be eligible for the maximum payment. No
Trustee has retired under this plan, and therefore no payments have been
made by the Fund. At December 31, 1993, the Fund had accrued $99,371 for
retirement plan benefits for its Trustees under the plan.
Officers of the Fund. Each officer of the Fund is elected by the Trustees
to serve an indefinite term. Information is given below about the
executive officers who are not Trustees of the Fund, including their
business experience during the past five years. Messrs. Bishop, Bowen,
Donohue, Farrar and Zack serve in a similar capacity with the other New
York-based OppenheimerFunds listed above.
Robert E. Patterson, Vice President and Portfolio Manager; Age: 50.
Senior Vice President of the Manager; an officer of other
OppenheimerFunds.
Andrew J. Donohue, Secretary; Age: 43.
Executive Vice President and General Counsel of the Manager and the
Distributor; an officer of other OppenheimerFunds; formerly Senior
Vice President and General Counsel of the Manager and the
Distributor, Partner in Kraft & McManimon (a law firm), an officer
of First Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser) and
director and an officer of First Investors Family of Funds and First
Investors Life Insurance Company.
George C. Bowen, 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 Oppenheimer Asset Management
Corporation, a former investment advisory subsidiary of the Manager.
Robert G. Zack, Assistant Secretary; Age 45.
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI, SFSI and other OppenheimerFunds.
Robert Bishop, Assistant Treasurer; Age 35.
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an Accountant for Yale &
Seffinger, an accounting firm, and previously an Accountant and
Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott Farrar, Assistant Treasurer; Age: 28.
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company,
before which he was a sales representative for Central Colorado
Planning.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
(Proposal No. 1)
The Investment Company Act requires that independent certified public
accountants and auditors ("auditors") be selected annually by the Board
of Trustees and that such selection be ratified by the shareholders at the
next-convened annual meeting of the Fund, if one is held. The Board of
Trustees of the Fund, including a majority of the Trustees who are not
"interested persons" (as defined in the Investment Company Act) of the
Fund or the Manager, at a meeting held December 9, 1993, selected KPMG
Peat Marwick ("KPMG") as auditors of the Fund for the fiscal year
beginning January 1, 1994. KPMG also serves as auditors for certain other
funds for which the Manager acts as investment adviser. At the Meeting,
a resolution will be presented for the Class A and Class B shareholders'
vote to ratify the selection of KPMG as auditors. Representatives of KPMG
are not expected to be present at the Meeting but will be available should
any matter arise requiring their presence. The Board of Trustees
recommends approval of the selection of KPMG as auditors of the Fund.
APPROVAL OF AMENDMENTS TO THE FUND'S CLASS A SERVICE PLAN
(Proposal No. 2)
In 1988, the Fund's shareholders approved a plan of distribution under
Rule 12b-1 of the Investment Company Act. Effective July 1993, this plan
was amended to restructure it as a Service Plan and Agreement for Class
A shareholders (the "Current Plan") under which the Fund reimburses
Oppenheimer Funds Distributor, Inc. (the "Distributor") for all or a
portion of its costs incurred in connection with the personal service and
maintenance of accounts that hold Class A shares of the Fund acquired on
or after April 1, 1988. The 1993 amendment did not increase the payments
made by the Fund.
The Fund's Board of 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, 1988. The Board determined to recommend
the proposed Class A Service Plan and Agreement (the "Proposed Class A
Service Plan") for approval by the shareholders. A copy of the Proposed
Class A Service Plan is attached as Exhibit 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 an annual rate of 0.25% of the Fund's
average net assets represented by Class A shares. Under the Current Plan,
the Fund may make payments to the Distributor for a portion of its costs
incurred in connection with the personal service and maintenance of
accounts that hold Class A shares of the Fund acquired on or after April
1, 1988. Under the Proposed Class A Service Plan, the Fund may make
payments to the Distributor for costs incurred in connection with the
personal service and maintenance of shareholder accounts regardless of
when the shares held in the accounts were acquired. For the fiscal year
ended December 31, 1993, payments under the Class A Plan totalled
$1,117,086, all of which was paid by the Distributor to Recipients,
including $121,448 paid to an affiliate of the Distributor.
Description of the Proposed Class A Service Plan. Under the Proposed
Class A Service Plan, the Fund will reimburse the Distributor quarterly
for all or a portion of its costs incurred in connection with the service
and maintenance of shareholder accounts that hold Class A shares of the
Fund. The Distributor will be reimbursed for quarterly payments made to
certain dealers, brokers, banks or other financial institutions (each is
referred to as a "Recipient") that have provided personal service and
maintenance of shareholder accounts. Such services may include but are
not limited to answering routine inquiries from the Recipient's customers
concerning the Fund, providing such customers with information on their
investment in shares, assisting in the establishment and maintenance of
accounts or sub-accounts in the Fund, making the Fund's investment plans
and dividend payment options available, and providing such other
information and customer liaison services and the maintenance of accounts
as the Distributor or the Fund may reasonably request.
The Proposed Class A Service Plan provides that within 45 days of the end
of each calendar quarter, the Distributor shall pay each Recipient a fee
for its services at a rate to be determined from time to time by the
Board, but not to exceed .0625% (0.25% annually) of the average during the
quarter of the net asset value of Class A Fund shares owned by the
Recipient or its customers, computed as of the close of each business day.
However, no payment will be made to a Recipient in any quarter if the
aggregate average value of all Fund shares held by the Recipient for
itself and its customers, does not exceed a minimum amount to be
determined from time to time by the Funds' Board of Trustees and its
Independent Trustees. The Board has not established any minimum amount.
The Board of Trustees has set the annual rate for assets sold on or after
April 1, 1988 at the maximum rate. It is anticipated that initially the
annual rate of 0.15% will apply to assets representing shares sold before
April 1, 1988. However, the rate may increase for assets sold before
April 1, 1988, but in no event will it exceed the maximum amount. A
Recipient may be affiliated with the Distributor. The Proposed Class A
Service Plan would permit the Distributor and the Manager to make
additional distribution payments to Recipients from their own resources
at no cost to the Fund. The Distributor and the Manager may, in their
sole discretion, increase or decrease the amount of payments they make to
Recipients from their own assets.
If approved at this meeting and implemented, the Proposed Class A Service
Plan would have the effect of increasing the Fund's expenses for Class A
shares from what they otherwise would be under the Current 12b-1 Plan, but
by no more than the annual rate, computed as stated above, of 0.25% of the
average annual net asset value of shares acquired before April 1, 1988.
It is estimated that the Fund's total expense ratio would have increased
from 0.88% of annual net assets to 0.91% of annual net assets based on the
Fund's actual annualized expenses for the fiscal year ended December 31,
1993, had the Proposed Class A Service Plan been in effect.
Under the Current Plan and the Proposed Class A Service Plan, the
Treasurer of the Fund shall provide a written report to the Fund's Board
of 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 December 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 shares of the Class 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, 1988 for which they receive no compensation from
the Fund. The Manager further advised the Board that, especially in light
of the amendments to the NASD 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, 1988) 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 that class. If the Proposal is not approved, the
Fund's Service Plan will remain unchanged and will apply only to shares
acquired on or after April 1, 1988. The Board of Trustees recommends a
vote in favor of approving this Proposal.
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 Oppenheimer
Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts
Mutual Life Insurance Company ("MassMutual"). MassMutual is located at
1295 State Street, Springfield, Massachusetts 01111. OAC acquired the
Manager on October 22, 1990 (the "Acquisition Date"). As indicated below,
the common stock of OAC is owned by (i) certain officers and/or directors
of the Manager, (ii) MassMutual and (iii) another investor. No
institution or person holds 5% or more of OAC's outstanding common stock
except Donald W. Spiro (5.24%) and MassMutual. MassMutual has engaged in
the life insurance business since 1851. It is the nation's twelfth
largest life insurance company by assets and has an A.M. Best Co. rating
of "A+".
The common stock of OAC is divided into three classes. At December 31,
1993, MassMutual held (i) all of the 2,160,000 shares of Class A voting
stock, (ii) 317,854 shares of Class B voting stock, and (iii) 350,063
shares of Class C non-voting stock. This collectively represented 74.1%
of the outstanding common stock and 84.9% of the voting power of OAC as
of December 31, 1993. Certain officers and/or directors of the Manager
as a group held (i) 821,455 shares of the Class B voting stock,
representing 21.5% of the outstanding common stock and 12.6% of the voting
power, and (ii) options acquired without cash payment which, when they
become exercisable, allow the holders to purchase up to 706,150 shares of
Class C non-voting stock. That group includes persons who serve as
officers of the Fund and two of whom (Messrs. Donald W. Spiro and Robert
G. Galli) serve as Trustees of the Fund. Holders of OAC Class B and Class
C common stock may put (sell) their shares and vested options to OAC or
MassMutual at a formula price (based on earnings of the Manager).
MassMutual may exercise call (purchase) options on all outstanding shares
of both such classes of common stock and vested options at the same
formula price, according to a schedule that will commence on September 30,
1995. Since January 1, 1993, 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. Spiro and Galli, identified
above) as follows: one-third of the amount due (i) within 30 days of the
transaction, (ii) by the first anniversary following the transaction (with
interest), and (iii) by the second anniversary following the transaction
(with interest). On December 15, 1993, MassMutual purchased its 350,063
shares of Class C OAC stock from OAC for $17,751,718.
As part of the acquisition of the common stock of OAC, MassMutual also
purchased approximately $45 million of subordinated notes of a subsidiary
of OAC; the notes are now an obligation of the Manager. In addition to
the purchase of such notes, MassMutual holds warrants issued by OAC
exercisable over the life of the notes which will allow it to purchase
shares of Class C common stock representing approximately 15.4% of the
common stock of OAC on a fully diluted basis.
The Manager and its affiliates act as investment advisers to investment
companies having combined net assets of more than $27 billion as of
December 31, 1993, and having more than 1.8 million shareholder accounts.
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, Chairman, Chief
Executive Officer and Director; Bridget A. Macaskill, President and
Director; Donald W. Spiro, Chairman Emeritus and a Director; Robert G.
Galli and James C. Swain, Vice Chairmen; 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 shareholders of the Fund
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. The Agreement continues in effect from year to year unless
terminated, but only so long as such continuance is approved annually in
accordance with the Investment Company Act. At a meeting held on December
9, 1993, the Fund's Board of Trustees, including a majority of the
Independent Trustees, approved the renewal of the Agreement between the
Manager and the Fund until December 31, 1994. At the time of such
approval, Messrs. Spiro and Galli were shareholders of OAC, the parent of
the Manager. Under the Agreement, the Manager supervises the investment
operations of the Fund and the composition of its portfolio and furnishes
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. The annual rates of the fee paid by the Fund are .60% of the first
$200 million of net assets; .55% of the next $100 million; .50% of the
next $200 million; .45% of the next $250 million; .40% of the next $250
million; and .35% of net assets over $1 billion. During the fiscal year
ended December 31, 1993, the Fund's fees payable under its Agreement with
the Manager were $3,113,588.
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
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 under the General
Distributor's Agreement 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, bookkeeping and audit expenses, custodian and transfer
agent expenses, stock certificate issuance costs, certain printing and
registration costs, and non-recurring expenses, including litigation
costs.
Independently of the Agreement, the Manager has voluntarily undertaken
that the total expenses of the Fund in any year (including the management
fee but excluding taxes, interest, brokerage commissions, distribution
and/or service plan payments and extraordinary non-recurring expenses such
as litigation costs) shall not exceed (and the Manager undertakes to pay
or refund to the Fund any amount by which such expenses shall exceed) the
most stringent state regulatory limitation on fund expenses applicable to
the Fund. At present, that limitation is imposed by California and limits
expenses (with specified exclusions) to 2.5% of the first $30 million of
average annual net assets, 2% of the next $70 million, and 1.5% of average
annual net assets in excess of $100 million. The payment of the
management fee at the end of any month will be reduced so that there will
not be any accrued but unpaid liability under this expense limitation.
The Manager reserves the right to amend or terminate the expense
assumption undertaking at any time.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard for its obligations
thereunder, the Manager is not liable for any loss sustained by reason of
any good faith error or omission on its part in connection with any matter
to which the Agreement relates. The Agreement permits the Manager to act
as investment adviser for any other person, firm or corporation. Pursuant
to a license from the Manager, the Fund may use the name "Oppenheimer" in
connection with its business. If the Manager shall no longer act as
investment adviser to the Fund, the right of the Fund to use the name
"Oppenheimer" as part of its name may be withdrawn.
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the Agreement is to arrange the portfolio
transactions for the Fund. In doing so, the Manager is authorized by the
Agreement to employ broker-dealers ("brokers"), including "affiliated"
brokers, as that term is defined in the Investment Company Act, as may,
in its best judgment based on all relevant factors, implement the policy
of the Fund to obtain, at reasonable expense, the "best execution" (prompt
and reliable execution at the most favorable price obtainable) of such
transactions. The Manager need not seek competitive commission bidding
or base its selection on "posted" rates, but is expected to be aware of
the current rates of eligible brokers and to minimize the commissions paid
to the extent consistent with the provisions of the Agreement and the
interests and policies of the Fund as established by its Board of
Trustees.
Under the Agreement, the Manager is authorized to select brokers that
provide brokerage and/or research services for the Fund and/or the other
accounts over which the Manager or its affiliates have investment
discretion. The commissions paid to such brokers may be higher than
another qualified broker would have charged, if a good faith determination
is made by the Manager that the commission is fair and reasonable in
relation to the services provided. There is no formula under which any
of the brokers selected for the Fund's portfolio transactions are entitled
to the allocation of a particular amount of commissions. The Manager may
also consider sales of shares of the Fund and of other investment
companies managed by the Manager or its affiliates as a factor in the
selection of brokers for the Fund's portfolio transactions.
Description of Brokerage Practices. Subject to the provisions of the
Agreement, when brokers are used for the Fund's portfolio transactions,
allocations of brokerage are made by portfolio managers under the
supervision of executive officers of the Manager. As most purchases made
by the Fund are principal transactions, the Fund incurs little or no
brokerage costs. For those transactions, instead of using a broker the
Fund normally deals directly with the selling or purchasing principal or
market maker unless it is determined that a better price or execution can
be obtained by using a broker. Purchases of these 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 such orders
at the most favorable net price.
When the Fund engages in an option transaction, ordinarily the same broker
will be used for the purchase or sale of the option and any transactions
in the securities to which the option relates. When possible, concurrent
orders to purchase or sell the same security by more than one of the
accounts managed by the Manager or its affiliates are combined.
Transactions effected pursuant to such combined orders are averaged as to
price and allocated in accordance with the purchase or sale orders
actually placed for each account. Option commissions may be relatively
higher than those which would apply to direct purchases and sales of
portfolio securities.
The research services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and its affiliates,
and investment research received for the commissions of those other
accounts may be useful both to the Fund and one or more of such other
accounts. Such research, which may be supplied by a third party at the
instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid for in
commission dollars. The research services provided by brokers broaden the
scope and supplement the research activities of the Manager, by making
available additional views for consideration and comparisons, and enabling
the Manager to obtain market information for the valuation of securities
held in the Fund's portfolio or being considered for purchase. The Board
of Trustees, including the Independent Trustees of the Fund, annually
reviews information furnished by the Manager as to the commissions paid
to brokers furnishing such services in an effort to ascertain that the
amount of such commissions was reasonably related to the value or benefit
of such services. The Board of Trustees has permitted the Manager to use
concessions on fixed-price offerings to obtain research, in the same
manner as is permitted for agency transactions.
General Distributor's Agreement. Oppenheimer Funds Distributor, Inc., a
wholly-owned subsidiary of the Manager, is the general distributor of the
Fund's shares under a General Distributor's Agreement dated October 22,
1990. The General Distributor's Agreement is subject to the same annual
renewal requirements and termination provisions as the Agreement. For the
fiscal year ended December 31, 1993, selling charges on the Fund's Class
A shares amounted to $4,020,669, of which the Distributor and an
affiliated broker-dealer retained $1,150,057 in the aggregate. For the
fiscal year ended December 31, 1993, the Distributor advanced sales
charges of $1,297,614 to broker-dealers on sales of the Fund's Class B
shares, including $109,445 advanced to an affiliated broker-dealer. The
Distributor collected contingent deferred sales charges of $24,041 during
the fiscal year ended December 31, 1993 on redemptions of the Fund's Class
B shares.
Service Contract. Oppenheimer Shareholder Services ("OSS"), a division
of the Manager, serves as the Fund's transfer agent and registrar pursuant
to a Service Contract under which it is reimbursed by the Fund for its
costs in providing those services to the Fund, including the cost of
rental of office space. Similar services are provided by OSS to certain
other mutual funds advised by the Manager. OSS received $390,817 from the
Fund during the fiscal year ended December 31, 1993. The costs described
for these services are charged to the Fund as operating expenses to the
respective class 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 Commission's proxy
rules, shareholder proposals which meet certain conditions may be included
in the Fund's proxy statement and proxy for a particular meeting. Those
rules require that for future meetings the shareholder must be a record
or beneficial owner of Fund shares with a value of at least $1,000 at the
time the proposal is submitted and for one year prior thereto, and must
continue to own such shares through the date on which the meeting is held.
Another requirement relates to the timely receipt by the Fund of any such
proposal. Under those rules, a proposal submitted for inclusion in the
Fund's proxy material for the next meeting after the meeting to which this
proxy statement relates must be received by the Fund a reasonable time
before the solicitation is made. The fact that the Fund receives a
proposal from a qualified shareholder in a timely manner does not ensure
its inclusion in the proxy material, since there are other requirements
under the proxy rules for such inclusion.
OTHER BUSINESS
Management of the Fund knows of no business other than the matters
specified above that will be presented at the Meeting. Since matters not
known at the time of the solicitation may come before the Meeting, the
proxy as solicited confers discretionary authority with respect to such
matters as properly come before the Meeting, including any adjournment or
adjournments thereof, and it is the intention of the persons named as
attorneys-in-fact in the proxy to vote the proxy in accordance with their
judgment on such matters.
By Order of the Board of Trustees,
Andrew J. Donohue, Secretary
May 13, 1994
<PAGE>
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
/s/ Deloitte & Touche
Denver, Colorado
February 16, 1994
<PAGE>
OPPENHEIMER MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1993
ASSETS NOTES
CURRENT ASSETS:
Cash $ 31,940,116
Investments in money market
mutual funds 26,850,605
Investments in managed mutual funds 4,981,458
Investments in Zero Coupon U.S.
Treasuries Trust, at market 3,897,237
Accounts receivable:
Brokers and dealers 2 49,538,320
Managed mutual funds 2,3 11,433,524
Affiliated companies 100,495
Income taxes 13,902,237
Other 4,471,131
Other current assets 2,124,857
-----------
Total current assets 149,239,980
-------------
PROPERTY AND EQUIPMENT - Less
accumulated depreciation and
amortization of $8,169,031 8,896,837
-----------
OTHER ASSETS:
Intangible assets, net 1 113,445,572
Deferred sales commissions 54,452,051
Deferred charges 1,550,484
Other 1,607,387
----------
Total other assets 171,055,494
------------
TOTAL $329,192,311
<PAGE>
LIABILITIES AND SHAREHOLDER'S EQUITY
NOTES
CURRENT LIABILITIES:
Accounts payable and accrued
expenses $ 33,866,353
Subscriptions payable to managed
mutual funds 2 71,371,285
Payable to brokers and dealers 2 9,483,935
Current portion of long-term debt 5,6 17,463,094
------------
Total current liabilities 132,184,667
--------------
LONG-TERM LIABILITIES:
Deferred income taxes4 4 15,447,486
Senior debt 5 59,781,186
Subordinated notes 6 44,450,000
-----------
Total liabilities 251,863,339
-----------
COMMITMENTS 1,8
SHAREHOLDER'S EQUITY: 5,7
Preferred stock - nonvoting;
$10 par value; 392,461 shares
authorized; 25,141 shares
issued and outstanding 251,410
Common Stock - voting; $.10 par
value; 229,246 shares authorized;
179,658 shares issued and
outstanding 17,966
Additional paid-in capital 49,241,234
Retained earnings 27,818,362
------------
Total shareholder's equity 77,328,972
--------------
TOTAL $329,192,311
See notes to consolidated statement of financial condition.
<PAGE>
OPPENHEIMER MANAGEMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1993
1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Management Corporation (OMC) and its subsidiaries
(collectively, the "Company") are engaged in the business of
organizing, promoting, and managing registered investment
companies (hereafter referred to as "mutual funds").
OMC owns all the outstanding stock of Oppenheimer Funds
Distributor, Inc., Shareholder Services, Inc. (SSI), HarbourView
Asset Management Corporation, Centennial Asset Management
Corporation, Oppenheimer Partnership Holdings, Inc., and
Shareholder Financial Services, Inc. OMC is a wholly-owned
subsidiary of Oppenheimer Acquisition Corporation (OAC), which is
controlled by Massachusetts Mutual Life Insurance Company and
senior management of OMC.
Principles of Consolidation - The accompanying consolidated
statement of financial condition includes the accounts of OMC and
its subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
Investments in Money Market Mutual Funds - The Company invests
available cash in money market mutual funds managed by the
Company. The investments are recorded at cost which equals
market.
Investments in Managed Mutual Funds - The Company owns shares of
stock in several of the mutual funds it manages. The shares are
purchased at their respective net asset values. The resulting
investments are recorded at cost which approximates market.
Investments in Zero Coupon U.S. Treasuries Trust - The Company is
the Sponsor for the Oppenheimer Zero Coupon U.S. Treasuries Trust
and has undertaken to maintain a secondary market for units in the
Trust. The investments are carried at market.
Property and Equipment - Property and equipment is recorded at
cost. Equipment depreciation expense is provided over the assets'
estimated useful lives on the straight-line method. Leasehold
improvements are amortized on the straight-line method over the
remaining terms of the lease agreements.
<PAGE>
<TABLE>
<CAPTION>
Intangible Assets - Intangible assets at December 31, 1993, are as
follows:
Less
Useful Accumulated Net
Lives Cost Amortization Book Value
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Debt Issuance Costs 7 years $ 5,535,450$ (2,999,400) $ 2,536,050
Management Contracts 7 years 38,600,000 (18,840,667) 19,759,333
Goodwill 25 years 100,766,565 (11,671,455) 89,095,110
Other 4-10 years 4,385,906 (2,330,827) 2,055,079
----------- ------------ ----------
$149,287,921$(35,842,349) $113,445,572
</TABLE>
Deferred Sales Commissions - Sales commissions paid to brokers and
dealers in connection with sales of shares of certain mutual funds
are charged to deferred sales commissions and amortized over six
years. Early withdrawal charges received by the Company from
redeeming shareholders reduce unamortized deferred sales
commissions.
Stock Appreciation Rights - OAC has granted certain stock
appreciation rights relating to OAC's stock to certain employees of
OMC. During 1993, OMC recorded $21,603,294 relating to these stock
appreciation rights as a credit to additional paid-in capital.
Income Taxes - OAC files a consolidated federal income tax return
which includes the Company. Income taxes are recorded as if the
Company files on a separate return basis. During 1993 the Company
was required to adopt Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes. Statement 109 requires a
change from the deferred method of accounting for income taxes of
APB Opinion 11 to the asset and liability method of accounting for
income taxes. The asset and liability method prescribed by
Statement 109 results in deferred tax assets and liabilities being
recorded for the differences between the book and tax basis relating
to the Company's assets and liabilities.
The Company adopted Statement 109 in 1993 and has elected to restate
prior years beginning with the 1990 period. The effect of this
restatement on prior years has been reflected in retained earnings
as of December 31, 1992.
2. TRANSACTIONS WITH BROKERS AND DEALERS
The Company acts as general distributor for the sale and
distribution of shares of several mutual funds. In this capacity,
the Company records a receivable when it issues confirmations of all
accepted purchase orders to the originating brokers and dealers; at
the same time, the Company records a liability to the mutual funds
equal to the net asset value of all shares subject to such
confirmations. This liability must be paid to the mutual funds
within 11 business days unless the trade is canceled. If the
originating broker or dealer fails to make timely settlement of its
purchase order under the terms of its dealer agreement with the
Company, the Company may cancel the purchase order and, at the
Company's risk, hold responsible the originating broker or dealer.
When brokers and dealers place share redemption orders with a fund's
distributor, the Company records a receivable from the mutual funds
equal to the net asset value of all shares redeemed; at the same
time the Company records a corresponding liability payable to the
originating brokers.
3. RELATED PARTIES
The following is a summary of the significant balances, transactions
and relationships with affiliated companies and other related
parties as of December 31, 1993:
Officers and Directors of the Company; Shareholders of OAC - Several
officers and directors of the Company and shareholders of OAC are
also officers and directors or trustees of the mutual funds managed
and distributed by the Company.
Transfer Agents - SSI and Oppenheimer Shareholder Services (OSS), a
division of OMC, act as transfer and shareholder servicing agents
for the mutual funds managed by the Company and others. Amounts
charged to managed mutual funds are based on costs incurred on
behalf of the mutual funds pursuant to service agreements between
SSI or OSS and the mutual funds. SSI also acts as transfer agent
for certain mutual funds not managed by the Company, and amounts
charged to those funds are based on fees set by contracts with the
respective mutual funds.
The receivable from managed mutual funds includes $2,466,000
resulting from transfer agency fees and expenditures made on behalf
of the mutual funds at December 31, 1993.
4. INCOME TAXES
As discussed in note 1, the Company adopted Statement 109 in 1993
and has applied the provisions of the Statement retroactively to
1990. The principal effect of this change in accounting for income
taxes related to the remeasurement of the 1990 acquisition of
Maximum Holdings, Inc. and resulted in the recording of goodwill in
the amount of $13,800,000 and deferred taxes payable in the same
amount. In addition, retained earnings at December 31, 1992 was
increased by $2,001,702 to reflect the effects of the restatement as
of that date.
Deferred tax assets of $20,165,000 have been recorded in the
accompanying financial statements. These amounts primarily relate
to the benefit associated with certain state tax loss carryforwards
and compensation not deductible for tax purposes until paid. A
valuation allowance has not been recorded with respect to this
deferred tax asset. Deferred tax liabilities of $35,612,000 have
also been recorded. These amounts relate primarily to the current
deduction, for tax purposes, of deferred sales commissions which are
amortized over six years for book purposes and the difference in
book and tax basis relating to certain management contracts.
The Company has certain net operating loss carryforwards relating to
various states. If not used in the interim, these losses will
generally expire on December 31, 2008.
5. SENIOR DEBT
At December 31, 1993, the Company has outstanding $77.2 million of
Senior Debt borrowed from five banks. This amount is comprised of a
term loan of $23.7 million due September 30, 1997 and $53.5 million
outstanding on a $75 million revolving credit. The revolving credit
is subject to annual renewal, and, if not renewed, is repayable in
four annual installments. The debt bears interest at the Company's
election at the rate for Eurodollar deposits plus 1 1/2% or the
higher of the prime rate, plus 1/2% or the federal funds rate plus
1/2%. The credit agreement contains covenants requiring certain
minimum financial tests and restrictions on capital expenditures,
investments, indebtedness and dividends. At December 31, 1993, the
Company was in compliance with the terms of the credit agreement.
In addition, the banks have also received a pledge of the shares of
the Company's subsidiaries and guarantees of certain subsidiaries.
Borrowings under the credit agreement are collateralized by certain
assets of the Company.
The mandatory principal repayment schedule for the term loan is as
follows (000's):
1994 $ 10,000
1995 12,000
1996 1,700
--------
$ 23,700
========
The credit agreement has certain provisions whereby specified
amounts of excess cash flow on a semi-annual basis, as defined in
the agreement, must be applied to reduce the outstanding loan
balance. There are no prepayment penalties.
The Company has entered into interest rate swap agreements whereby
certain banks have agreed to pay the Company interest on a floating
rate (Eurodollar) basis and the Company has agreed to pay the banks
interest on a fixed rate basis. At December 31, 1993, the Company
has fixed an interest rate of 10.00% on $29,000,000 of the Senior
Debt. The interest rate swap agreements mature December 31, 1994.
The Company is exposed to credit loss in the event of non-
performance by the other parties to the interest rate swap
agreements; however, the Company does not anticipate non-performance
by the counterparties. Based on borrowing rates currently available
to the Company for senior and subordinated loans with similar terms,
maturities and prepayment options, the Company estimates that the
fair value of its interest bearing debt and the related interest
rate swap agreements is $124.6 million as compared to the carrying
amount shown on the balance sheet of $121.7 million.
6. SUBORDINATED NOTES
Pursuant to a Note Agreement as amended and restated as of November
24, 1992 (the Note Agreement), the Company issued to a group of
insurance companies owned by Massachusetts Mutual Life Insurance
Company, $44,450,000 face amount of Subordinated Notes (Notes) due
October 31, 2000. The Notes are subordinated to the Senior Debt
obligations, (see Note 5). The Notes require semi-annual interest
payments at a rate of 14% on October 31 and April 30 of each year.
The Company may make optional prepayments of Notes, with a penalty,
beginning November 1, 1995. The Note Agreement contains covenants
requiring certain minimum financial tests and restrictions on
capital expenditures, investments, indebtedness and dividends. At
December 31, 1993, the Company was in compliance with the terms of
the Note Agreement.
The mandatory principal repayment schedule for the Notes is as
follows (000's):
1998 $14,800
1999 14,825
2000 14,825
-------
$44,450
=======
7. SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
The following table summarizes the various series and classes of
preferred and common stocks that are authorized, issued and
outstanding as of December 31, 1993:
Shares
Issued and
Authorized Outstanding Amount
<S> <C> <C> <C>
Preferred stock - non-voting;
$10 par value:
Series A - $15.00 non-cumulative,
non-convertible 1,350
Series B - $1.50 non-cumulative,
non-convertible 186,500
Series C - $1.00 cumulative,
non-convertible 12,150 12,150 $121,500
Series D - $.60 cumulative,
convertible:
Class A 161,523
Class B 30,938 12,991 129,910
--------- --------- ---------
Total 392,461 25,141 $251,410
======= ====== ========
Common stock - voting; $.10
par value:
Common shares 212,461 162,873 $ 16,287
Class A common shares 16,785 16,785 1,679
------------ ---------- -------
Total 229,246 179,658 $ 17,966
======= ======= ========
</TABLE>
The outstanding preferred shares are redeemable, at the option of
the Company, at $10 per share plus all accrued and unpaid dividends.
In the event of dissolution or liquidation, the preferred
shareholders are entitled to receive these same amounts before any
distributions are made to the common shareholder. The Series D
Preferred Shares are convertible, at the option of the shareholder,
into common shares on a one-for-one basis.
8. COMMITMENTS
Leases - The Company rents office space and certain computer and
other equipment under leases expiring during the next 15 years. At
December 31, 1993, the aggregate minimum annual rentals under
noncancelable operating leases were as follows:
Years Ending
December 31
------------
1994 $ 6,237,568
1995 4,406,666
1996 3,513,503
1997 2,573,471
1998 2,223,802
Thereafter 10,660,288
-----------
$29,615,298
===========
<PAGE>
Exhibit B
SERVICE PLAN AND AGREEMENT
BETWEEN
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
AND
OPPENHEIMER TAX-FREE BOND FUND
FOR CLASS A SHARES
SERVICE PLAN AND AGREEMENT (the "Plan") dated July 1, 1994, by and
between OPPENHEIMER TAX-FREE BOND 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 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 (excluding Shares acquired in
reorganizations with investment companies for which Oppenheimer
Management Corporation or an affiliate acts as investment adviser
and which have not adopted a distribution plan at the time of the
reorganization with the Fund). 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 February 10, 1994 for the purpose of voting on
this Plan. It takes effect as of July 1, 1994, whereupon it replaces
the Service Plan and Agreement dated June 10, 1993. Unless terminated
as hereinafter provided, it shall continue in effect until December 31,
1994 and from year to year thereafter or as the Board may otherwise
determine only so long as such continuance is specifically approved at
least annually by the Board and its Independent Trustees cast in person
at a meeting called for the purpose of voting on such continuance.
This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class. This Plan may not be amended to increase materially the
amount of payments to be made without approval of the shareholders of
the Class, in the manner described above, and all material amendments
must be approved by a vote of the Board and of the Independent
Trustees.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor
understands that the obligations of the Fund under this Plan are not
binding upon any Trustee or shareholder of the Fund personally, but
bind only the Fund and the Fund's property. The Distributor represents
that it has notice of the provisions of the Declaration of Trust of the
Fund disclaiming shareholder and Trustee liability for acts or
obligations of the Fund.
OPPENHEIMER TAX-FREE BOND FUND
By: _________________________________________
Robert G. Zack, Assistant Secretary
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: __________________________________________
Andrew J. Donohue
Executive Vice President
