As filed with the Securities and Exchange Commission on February
16, 1994
Registration No. 33-51779
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 1 / X /
OPPENHEIMER TAX-FREE BOND FUND
(Exact Name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048-0203
(Address of Principal Executive Offices)
212-323-0200
(Registrant's Telephone Number)
Andrew J. Donohue, Esq.
Executive Vice President & General Counsel
Oppenheimer Management Corporation
Two World Trade Center, New York, New York 10048-0203
(212) 323-0256
(Name and Address of Agent for Service)
It is proposed that this filing will become effective on February
16, 1994 pursuant to paragraph (b) of Rule 485.
No filing fee is due because the Registrant has previously
registered an indefinite number of shares under Rule 24f-2; a Rule
24f-2 notice for the year ended December 31, 1992 was filed on
February 25, 1993.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following pages and
documents:
Front Cover
Contents Page
Cross-Reference Sheet
Part A
Proxy Statement for M I Fund, Inc.
and
Prospectus for Oppenheimer Tax-Free Bond Fund
Part B
Statement of Additional Information
Part C
Other Information
Signatures
Exhibits
<PAGE>
FORM N-14
OPPENHEIMER TAX-FREE BOND FUND
Cross Reference Sheet
Part A of
Form N-14
Item No. Proxy Statement and Prospectus Heading and/or Title of
Document
1 (a) Cross Reference Sheet
(b) Front Cover Page
(c) *
2 (a) *
(b) Table of Contents
3 (a) Synopsis
(b) Principal Risk Factors
4 (a) Synopsis; The Reorganization; Comparison of Investment
Objectives and Policies; Additional Information
(b) The Reorganization - Capitalization Table (Unaudited)
5 (a) Registrant's Prospectus; Additional Information
(b) *
(c) *
(d) *
(e) Miscellaneous
(f) Miscellaneous
6 (a) Form N-2 Registration Statement of M I Fund, Inc.; Front
Cover Page
(b) Miscellaneous
(c) *
(d) *
7 (a) Synopsis; Information Concerning the Meeting
(b) *
(c) The Reorganization; Information Concerning the Meeting
8 (a) *
(b) *
9 *
Part B of
Form N-14
Item No. Statement of Additional Information Heading
10 Cover Page
11 Table of Contents
12 (a) Registrant's Statement of Additional Information
(b) *
13 (a)
(b) Form N-2 Registration Statement of M I Fund, Inc.
14 Registrant's Statement of Additional Information; M I
Fund, Inc. Annual Report at 12/31/92; M I Fund, Inc.
Semi-Annual Report at 6/30/93
<PAGE>
Part C of
Form N-14
Item No. Other Information Heading
15 Indemnification
16 Exhibits
17 Undertakings
_______________
* Not Applicable or negative answer
<PAGE>
M I FUND, INC.
1384 Broadway
New York, New York 10018
February 15, 1994
Dear Shareholder:
Enclosed for your consideration are proxy materials
relating to the proposed reorganization (the "Reorganization") of
M I Fund, Inc. (the "Fund") involving the transfer of the Fund's
assets to Oppenheimer Tax-Free Bond Fund ("OTFBF") in exchange for
class A shares of OTFBF, the distribution of those OTFBF shares to
Fund shareholders in a complete liquidation of the Fund, the
dissolution of the Fund and the cancellation of its outstanding
shares. As described in the accompanying materials, the value of
the OTFBF shares received will be equivalent to the net asset value
of the Fund assets sold to OTFBF.
As a result of the Reorganization, shareholders of the
Fund would become shareholders of OTFBF. As more fully described
in the accompanying proxy materials, the shares of OTFBF would be
received by Fund shareholders without payment of a sales charge and
may be redeemed by shareholders on any business day.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY ORADEQUACY OF
THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Shareholders are urged to carefully review the
accompanying proxy materials, including all exhibits thereto, in
considering the proposed transaction.
Very truly yours,
M I FUND, INC.
By: ______________________
Steven Meltzer
President
<PAGE>
M I FUND, INC.
1384 Broadway
New York, New York 10018
212-398-1066
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 18, 1994
To the Shareholders of M I Fund, Inc.:
Notice is hereby given that a Special Meeting of the
Shareholders of M I Fund, Inc. (the "Fund") will be held at 1384
Broadway, New York, New York, at 11:00 A.M., New York time, on
March 18, 1994, or any adjournments thereof (the "Meeting"), for
the following purposes:
1. To consider and vote upon an agreement and plan of
reorganization, dated October 22, 1993 (the "Reorganization
Agreement"), by and between the Fund and Oppenheimer Tax-Free
Bond Fund ("OTFBF"), and the transactions contemplated thereby
(the "Reorganization"), including the transfer of
substantially all the assets of the Fund to OTFBF in exchange
for Class A shares of OTFBF, the distribution of such OTFBF
shares to the shareholders of the Fund (other than
shareholders who have properly exercised their dissenters'
rights under New York law) in complete liquidation of the Fund
and the cancellation of the outstanding shares of the Fund.
A vote in favor of the Reorganization by a shareholder of the
Fund will also constitute a vote in favor of the liquidation
and dissolution of the Fund and the termination of its
registration under the Investment Company Act of 1940, as
amended.
2. To act upon such other matters as may properly come before
the Meeting.
The Reorganization is more fully described in the accompanying
Proxy Statement and Prospectus and a copy of the Reorganization
Agreement is attached as Exhibit A thereto. A copy of Section 623
of the Business Corporation Law of the State of New York, which
sets forth the procedures to be followed by Fund shareholders who
choose to exercise dissenters' rights under New York law, is
attached as Exhibit B to the accompanying Proxy Statement and
Prospectus. Shareholders of record at the close of business on
February 15, 1994 are entitled to notice of, and to vote at, the
Meeting. Please read the Proxy Statement and Prospectus carefully
in considering the proposed Reorganization. The Board of Directors
of the Fund recommends a vote in favor of the Reorganization. WE
URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Directors,
Harvey Silverman,
Secretary
February 15, 1994
__________________________________________________________________
Shareholders who do not expect to attend the Meeting are requested
to indicate voting instructions on the enclosed proxy and to sign,
date 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>
M I FUND, INC.
1384 Broadway
New York, New York 10018
212- 398-1066
PROXY STATEMENT
____________________
OPPENHEIMER TAX-FREE BOND FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROSPECTUS
____________________
FOR A SPECIAL MEETING OF SHAREHOLDERS OF
M I FUND, INC. TO BE HELD ON MARCH 18, 1994
M I Fund, Inc. (the "Fund"), a New York corporation registered
with the Securities and Exchange Commission (the "SEC") as a
closed-end investment company, is furnishing this Proxy Statement
and Prospectus to its shareholders in connection with the
solicitation by the Board of Directors of the Fund (the "Board") of
proxies to be used at the Special Meeting of Shareholders of the
Fund to be held at 1384 Broadway, New York, New York, at 11:00
A.M., New York time, on March 18, 1994, and any adjournments
thereof (the "Meeting"). It is expected that this Proxy Statement
and Prospectus will be mailed on or about February 16, 1994.
At the Meeting, shareholders of the Fund will be asked to
consider and vote upon an agreement and plan of reorganization,
dated October 22, 1993 (the "Reorganization Agreement"), by and
between the Fund and Oppenheimer Tax-Free Bond Fund ("OTFBF"), a
Massachusetts business trust registered with the SEC as an open-end
investment company, and the transactions contemplated by the
Reorganization Agreement (the "Reorganization"). The
Reorganization Agreement provides for the transfer of substantially
all of the assets of the Fund to OTFBF in exchange for Class A
shares of OTFBF, the distribution of such OTFBF shares to the
shareholders of the Fund (other than shareholders who have properly
exercised their dissenters' rights under New York law) in complete
liquidation of the Fund, the deregistration of the Fund as an
investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), the dissolution of the Fund as a
corporation and the cancellation of the outstanding shares of
common stock, par value $.10 per share, of the Fund (the "Common
Shares"). A copy of the Reorganization Agreement is attached
hereto as Exhibit A and is incorporated by reference herein.
OTFBF is an open-end management investment company with the
investment objective of seeking as high a level of current income
which is exempt from Federal income taxes as is available from
investing in Municipal Securities (as hereinafter defined), while
attempting to preserve capital. OTFBF currently offers two classes
of shares: (a) Class A shares, with a sales charge imposed at the
time of purchase subject to certain exceptions; and (b) Class B
shares, with a sales charge imposed on a contingent deferred basis
on most redemptions of such shares within six years of their
purchase. Class B shares are also subject to an asset-based sales
charge. The shares to be issued by OTFBF pursuant to the
Reorganization will be issued at net asset value without a sales
charge. Such shares will be Class A shares and will not be subject
to a contingent deferred sales charge applicable to future
redemptions. Unless otherwise specified herein and unless the
context otherwise requires, all further references in this Proxy
Statement and Prospectus to shares of OTFBF and shareholders of
OTFBF shall be deemed to refer to Class A shares of OTFBF and
holders of Class A shares of OTFBF, respectively. Further
information relating to Class B shares of OTFBF is set forth in the
current Prospectus of OTFBF accompanying this Proxy Statement and
Prospectus and is incorporated herein by reference.
The net asset value of OTFBF shares issued in the exchange will
equal the value of the assets of the Fund received by OTFBF. As a
result of the Reorganization, each Fund shareholder will receive
that number of full and fractional OTFBF shares equal in value to
such shareholder's pro rata interest in the assets transferred to
OTFBF as of the close of business of the New York Stock Exchange on
the business day immediately preceding the closing date (the
"Valuation Time") scheduled for the Reorganization (the "Closing
Date"). The Fund has received a ruling of the Internal Revenue
Service confirming that the Reorganization will constitute a tax-
free reorganization for Federal income tax purposes; as a result,
no gain or loss will be recognized by the Fund, OTFBF, or the non-
dissenting shareholders of the Fund as a result of the
Reorganization. See "The Reorganization."
As described elsewhere in this Proxy Statement and Prospectus,
holders of Common Shares outstanding at the Valuation Time who have
not voted in favor of the Reorganization and who have elected to
receive payment with respect thereto pursuant to Sections 623 and
910 of the New York Business Corporation Law (the "NYBCL") will not
be entitled to receive OTFBF shares as provided above but will only
be entitled to receive payment of the "fair value" of Common Shares
as to which they have dissented. See "The Reorganization -
Statutory Rights to Receive Payment for Shares."
OTFBF has filed with the SEC a Registration Statement on Form N-
14 (the "Registration Statement") relating to the registration of
shares of OTFBF to be offered to the shareholders of the Fund
pursuant to the Reorganization. This Proxy Statement and
Prospectus relating to the Reorganization also constitutes a
Prospectus of OTFBF filed as part of the Registration Statement.
Information contained or incorporated by reference herein relating
to the Fund has been prepared by and is the responsibility of the
Fund. Information contained or incorporated by reference herein
relating to OTFBF has been prepared by and is the responsibility of
OTFBF.
This Proxy Statement and Prospectus sets forth concisely
information about OTFBF that shareholders of the Fund should know
before voting on the Reorganization. Shareholders are urged to
read and carefully consider the information contained in this Proxy
Statement and Prospectus and the Exhibits attached hereto. A copy
of the Prospectus for OTFBF dated March 15, 1993, as supplemented
May 1, 1993 and as further supplemented September 16, 1993 (the
"OTFBF Prospectus"), is enclosed, and is incorporated herein by
reference. A Statement of Additional Information of OTFBF dated
March 16, 1993 that contains more detailed information about OTFBF
and its management and a Statement of Additional Information
relating to the Reorganization, described in this Proxy Statement
and Prospectus (the "Additional Statement"), dated February 15,
1994, have each been filed with the SEC and are incorporated by
reference herein. Such Statements are available without charge
upon written request to the transfer and shareholder servicing
agent for OTFBF, Oppenheimer Shareholder Services ("OSS"), P.O. Box
5270, Denver, Colorado 80217 or by calling the toll-free number
shown above.
Investors are advised to read and retain this Proxy Statement and
Prospectus for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Proxy Statement and Prospectus is dated February 15, 1994.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
Page
Synopsis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Parties to the Reorganization . . . . . . . . . . . . . . . . . . 1
The Reorganization. . . . . . . . . . . . . . . . . . . . . . . . 2
Tax Consequences of the Reorganization. . . . . . . . . . . . . . 2
Investment Objectives and Policies . . . . . . . . . . . . . . . 2
Investment Advisory and Distribution Plan Fees. . . . . . . . . . 3
Purchases, Exchanges and Redemptions. . . . . . . . . . . . . . . 4
Principal Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . 5
The Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . 5
Reasons for the Reorganization. . . . . . . . . . . . . . . . . . 5
The Reorganization Agreement. . . . . . . . . . . . . . . . . . . 6
Tax Aspects of the Reorganization . . . . . . . . . . . . . . . . 8
Statutory Rights to Receive Payment for Shares. . . . . . . . . . 9
Description of Securities to be Issued;
Comparison of Stockholder Rights . . . . . . . . . . . . . . . . . 11
Capitalization Table (Unaudited). . . . . . . . . . . . . . . . 13
Comparison of Investment Objectives and Policies. . . . . . . . . . 13
Investment Objectives and Policies. . . . . . . . . . . . . . . 13
Special Investment Methods. . . . . . . . . . . . . . . . . . . 14
Investment Restrictions . . . . . . . . . . . . . . . . . . . . 14
Additional Information . . . . . . . . . . . . . . . . . . . . . . 15
OTFBF Performance . . . . . . . . . . . . . . . . . . . . . . . 15
Portfolio Transactions and Turnover . . . . . . . . . . . . . . 16
Expense Ratios and Performance. . . . . . . . . . . . . . . . . 16
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . 16
Management and Distribution Arrangements. . . . . . . . . . . . 17
Information Concerning the Meeting. . . . . . . . . . . . . . . . . 18
The Special Meeting . . . . . . . . . . . . . . . . . . . . . . 18
Record Date; Vote Required; Share Information . . . . . . . . . 18
Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Expenses of Solicitation. . . . . . . . . . . . . . . . . . . . 19
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Financial Information . . . . . . . . . . . . . . . . . . . . . 20
Public Information . . . . . . . . . . . . . . . . . . . . . . 20
Other Business. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Exhibit A - Agreement and Plan of Reorganization,
dated October 22, 1993, by
and between M I Fund, Inc. and Oppenheimer Tax-
Free Bond Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Exhibit B - Section 623 of the New York Business
Corporation Law . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Exhibit C - Investment Restrictions of M I Fund,
Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
Exhibit D - Performance Graph . . . . . . . . . . . . . . . . . . D-1
<PAGE>
SYNOPSIS
The following is a synopsis of certain information contained in
or incorporated by reference in this Proxy Statement and
Prospectus. This synopsis is only a summary and is qualified in
its entirety by the more detailed information contained or
incorporated by reference in this Proxy Statement and Prospectus
and the Exhibits hereto. Shareholders should carefully review this
Proxy Statement and Prospectus and the Exhibits hereto in their
entirety and, in particular, the current Prospectus of OTFBF which
accompanies this Proxy Statement and Prospectus and is incorporated
herein.
The Meeting
This Proxy Statement and Prospectus is being furnished to the
shareholders of the Fund in connection with the solicitation by the
Board of proxies to be used at the Special Meeting of Shareholders
of the Fund to be held at 1384 Broadway, New York, New York, at
11:00 A.M., New York time, on March 18, 1994, and any adjournments
thereof. At the Meeting, Fund shareholders will consider and vote
upon the Reorganization Agreement, and the transactions
contemplated thereby, including the transfer of substantially all
of the assets of the Fund to OTFBF in exchange for shares of OTFBF,
the distribution of such OTFBF shares to the shareholders of the
Fund (other than shareholders who have properly exercised their
dissenters' rights under New York law) in complete liquidation of
the Fund, the deregistration of the Fund as an investment company
under the 1940 Act, the dissolution of the Fund as a corporation
and the cancellation of the Common Shares.
The Board has fixed the close of business on February 15, 1994
as the record date (the "Record Date") for the determination of the
holders of Common Shares entitled to notice of, and to vote at, the
Meeting. As of the Record Date, there were 1,626,594 Common Shares
issued and outstanding; the Common Shares are the only authorized
shares of capital stock of the Fund. The holders of record of
Common Shares on the Record Date are entitled to one vote per share
on each matter submitted to a vote at the Meeting. Under the
NYBCL, two-thirds of the outstanding Common Shares entitled to
vote, represented in person or by proxy, will constitute a quorum
for the transaction of business at the Meeting and the affirmative
vote of such holders is required for approval of the
Reorganization. Shareholders owning an aggregate of 1,590,500
Common Shares, or approximately 97.8% of the issued and outstanding
Common Shares as of the Record Date, have informed the Fund that
they intend to vote all of these shares in favor of the
Reorganization, which will assure approval of the Reorganization.
Parties to the Reorganization
The Fund was incorporated in 1947 as a New York corporation and
since 1980 has operated as a closed-end investment company
registered with the SEC. Prior to October 31, 1979, the Fund
(formerly, Marlene Industries Corporation) was principally engaged
through its subsidiaries in the manufacture and sale of a
diversified line of women's apparel and children's sleepwear. As
of October 31, 1979, Marlene Industries Corporation sold
substantially all of its assets (including the stock of its active
subsidiaries and its name) subject to substantially all of its
liabilities, and changed its name to M I Fund, Inc. and the purpose
for which it was organized. The Fund is managed by a four-person
Board of Directors, who are elected annually by the shareholders of
the Fund. The Fund is located at 1384 Broadway, New York, New York
10018.
OTFBF is registered with the SEC as an open-end management
investment company and is presently organized as a Massachusetts
business trust. OTFBF was initially organized in 1976 as a
Maryland corporation. OTFBF's 13-person Board of Trustees has
overall responsibility for the management of OTFBF. OTFBF is not
required to hold annual shareholder meetings. OTFBF is located at
Two World Trade Center, New York, New York 10048-0203.
There are certain differences between open-end and closed-end
investment companies and between New York corporations and
Massachusetts business trusts. Such differences, as well as
additional information about the parties, is set forth below. See
"Description of Securities to be Issued; Comparison of Stockholder
Rights," "Comparison of Investment Objectives and Policies,"
"Additional Information" and "Miscellaneous."
The Reorganization
The Reorganization Agreement provides for the transfer of
substantially all the assets of the Fund to OTFBF in exchange for
shares of OTFBF. The net asset value of OTFBF shares issued in the
exchange will equal the value of the assets of the Fund received by
OTFBF. Following the Closing Date, the Fund will distribute the
shares of OTFBF received by the Fund on the Closing Date to holders
of Common Shares issued and outstanding as of the Valuation Time
(other than those holders that have properly exercised dissenter's
rights under New York law) in complete liquidation of the Fund and
the Fund will thereafter be dissolved and deregistered under the
1940 Act. As a result of the Reorganization, each Fund shareholder
will receive that number of full and fractional OTFBF shares equal
in value to such shareholder's pro rata interest in the assets
transferred to OTFBF as of the Valuation Time. The Board has
determined that the interests of existing Fund shareholders will
not be diluted as a result of the Reorganization. For the reasons
set forth below under "The Reorganization - Reasons for the
Reorganization," the Board, including the directors ("Independent
Directors") who are not "interested persons" of the Fund, as that
term is defined in the 1940 Act, has concluded that the
Reorganization is in the best interests of the Fund and its
shareholders and recommends approval of the Reorganization by Fund
shareholders. If the Reorganization is not approved, the Fund will
continue in existence and the Board will determine whether to
pursue alternative actions.
Tax Consequences of the Reorganization
The Fund has received a ruling of the Internal Revenue Service
that, among other things, the Reorganization will constitute a tax-
free reorganization for Federal income tax purposes so that no gain
or loss will be recognized for those purposes by the Fund, OTFBF,
or the non-dissenting shareholders of the Fund as a result of the
Reorganization. For further information about the tax consequences
of the Reorganization, see "The Reorganization - Tax Aspects of the
Reorganization" below.
Investment Objectives and Policies
While the investment objectives and restrictions of the Fund and
OTFBF are similar, there are differences that should be considered
by Fund shareholders.
As its investment objective, the Fund seeks as high a level of
current interest income exempt from Federal income taxes as is
consistent with preserving its capital. The Fund seeks to achieve
its objective by investing substantially all of its assets in
Municipal Bonds (as defined in "Comparison of Investment Objectives
and Policies"). The Fund invests all of its assets in a
diversified portfolio of Municipal Bonds rated within the four
highest rating categories of Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P"), provided
however that not more than 20% of its assets may be invested in
Municipal Bonds rated "A" by Moody's or S&P and not more than 10%
of its assets may be invested in Municipal Bonds rated "Baa" by
Moody's or "BBB" by S&P. The Fund may invest in short-term tax-
exempt notes on a temporary basis.
The investment objective of OTFBF is to seek as high a level of
current income which is exempt from Federal income taxes as is
available from investing in Municipal Securities (as defined in
"Comparison of Investment Objectives and Policies"), while
attempting to preserve capital. As a matter of fundamental policy,
under normal market conditions OTFBF attempts to invest at least
80% of its assets in Municipal Securities. Municipal Securities
purchased by OTFBF will not be rated lower than "Baa" by Moody's or
"BBB" by S&P or, if unrated, judged to be of comparable quality by
Oppenheimer Management Corporation ("OMC"), the investment adviser
to OTFBF. Investment in unrated Municipal Securities will not
exceed 20% of OTFBF's total assets. Not more than 25% of OTFBF's
total assets will be invested in Municipal Securities that are
rated "Baa" or "MIG-2" by Moody's or "BBB" or "SP-2" by S&P or, if
unrated, judged by OMC to be of comparable quality to Municipal
Securities in those categories. In times of unstable market or
economic conditions, when OMC deems it appropriate to do so, OTFBF
may assume a temporary defensive position and invest an unlimited
amount of its assets in certain taxable obligations. To the extent
OTFBF assumes a temporary defensive position, a significant portion
of its distributions may be subject to federal and state income
taxes. OTFBF uses certain special investment methods not employed
by the Fund. For further discussion, see "Comparison of Investment
Objectives and Policies."
Investment Advisory and Distribution Plan Fees
The Fund receives investment advisory services from Citibank,
N.A. ("Citibank") pursuant to a management-custodian agreement
dated June 1, 1988. Under that agreement, Citibank reviews the
Fund's portfolio and recommends to Fund management any changes
Citibank deems desirable. Securities transactions may also be
initiated by Fund management. Upon approval of any security
transaction by Fund management, Citibank selects brokers, dealers
or agents to effect that transaction. Citibank also serves as
custodian of the Fund's securities. For its activities as
custodian and investment adviser, Citibank receives a monthly fee
calculated at the annual rate of two-tenths of 1% of the market
value of the securities held by Citibank on behalf of the Fund.
OTFBF obtains investment management services from OMC. OTFBF
pays a management fee monthly to OMC computed on the net assets of
OTFBF as of the close of business each day at the following annual
rate: 0.60% of the first $200 million of net assets; 0.55% of the
next $100 million; 0.50% of the next $200 million; 0.45% of the
next $250 million; 0.40% of the next $250 million and 0.35% of net
assets over $1 billion.
OTFBF has adopted separate distribution plans pursuant to Rule
12b-1 under the 1940 Act for its Class A and Class B shares,
pursuant to which OTFBF will reimburse or compensate Oppenheimer
Funds Distributor, Inc. (the "Distributor"), the distributor of
OTFBF's shares, quarterly for all or a portion of the Distributor's
costs incurred in connection with the distribution of the shares of
that class and distribution-related services. The Distributor will
use the fees received from OTFBF (i) to compensate dealers,
brokers, banks or other institutions ("Recipients") each quarter
for providing personal service and maintenance of accounts that
hold Class A shares purchased on or after April 1, 1988 and Class
B shares and (ii) as to Class A shares to reimburse itself (to the
extent authorized by OTFBF's Board of Trustees) for its other
expenditures under the plan and for its direct service costs. The
services to be provided under both plans include, but are not
limited to, the following: answering routine inquiries from the
Recipient's customers concerning OTFBF, providing such customers
with information on their investment in shares, assisting in the
establishment and maintenance of accounts or sub-accounts in OTFBF,
making OTFBF's investment plans and dividend payment options
available, and providing such other information and customer
liaison services and maintenance of accounts as the Distributor or
OTFBF may reasonably request. The current maximum annual fee
payable by OTFBF pursuant to its distribution plans for Class A
shares and Class B shares is 0.25% and 1.00%, respectively, of
average annual net assets. The Fund does not have a distribution
plan. See "Additional Information - Expense Ratios and
Performance" for additional information.
Purchases, Exchanges and Redemptions
OTFBF, through the Distributor, continuously offers redeemable
securities to investors at a price based on OTFBF's net asset value
at the time of issuance plus a sales charge as described in the
OTFBF Prospectus. Pursuant to the Reorganization, however, shares
of OTFBF issued to shareholders of the Fund will be issued at net
asset value and sold without a sales charge. In addition, such
shareholders will be entitled to purchase additional shares of
OTFBF at net asset value without a sales charge (the Prospectus of
OTFBF in effect at the Closing Date will be supplemented to reflect
this entitlement). The holders of redeemable securities have the
right to surrender those securities to OTFBF and obtain in return
an amount based on their proportionate share of the value of
OTFBF's net assets. OTFBF's net asset value per share is
calculated by dividing the value of OTFBF's portfolio securities
plus all cash and other assets (including accrued interest and
dividends received) less all liabilities (including accrued
expenses) by the number of shares of OTFBF outstanding. OTFBF's
net asset value is published daily by leading financial
publications.
Shareholders of OTFBF may exchange their shares of OTFBF for
shares of any of over 30 equity, fixed-income and money market
funds for which the Distributor or an affiliate acts as the
distributor. Shares of OTFBF received by Fund shareholders
pursuant to the Reorganization, and additional shares of OTFBF
purchased by such shareholders subsequent to the Reorganization,
will not be eligible for exchanges at net asset value, without
sales charge, pursuant to the OTFBF "Exchange Privilege" as
described in the OTFBF Prospectus. Upon any exchange of such OTFBF
shares for shares of an "Eligible Fund" within the OppenheimerFunds
complex, such shareholder will be required to pay any applicable
sales charge imposed by the "Eligible Fund". Exchanges are subject
to a $5 fee.
Shareholders of OTFBF may redeem their shares through check
writing privileges, by written request, or by telephone request in
an amount up to $50,000 in any seven-day period, or they may
arrange to have share redemption proceeds wired to a pre-designated
account at another financial institution that is an Automated
Clearing House member ("AccountLink redemption") or through Federal
Funds wire. Shareholders of OTFBF may reinvest redemption proceeds
within six months of a redemption at net asset value in shares of
OTFBF or any of numerous "Eligible Funds" within the
OppenheimerFunds complex. OTFBF may redeem accounts valued at less
than $200 if the account has fallen below such stated amount for
reasons other than market value fluctuations and may redeem shares
in amounts sufficient to compensate the Distributor for any loss
due to cancellation of a share purchase order. Generally, payment
for redeemed shares is made in cash; however, under certain unusual
circumstances, shares may be redeemed in kind. Pursuant to the
notification of election filed by OTFBF with the SEC pursuant to
Rule 18f-1 under the 1940 Act, cash payment for redeemed shares
made to any one shareholder during any 90-day period may be limited
to the lesser of $250,000 or 1% of the net asset value of OTFBF at
the beginning of the 90-day period; all excess amounts may be paid
by OTFBF in assets other than cash. OTFBF also offers an Automatic
Withdrawal Plan.
Unlike OTFBF, the Fund is a closed-end investment company which
does not redeem its shares or offer to exchange them for shares of
any other investment company, and does not engage in the continuous
offering of new shares. Although shares of the Fund may be traded
in the over-the-counter market, there is virtually no market for
the purchase or sale of Common Shares.
PRINCIPAL RISK FACTORS
The values of the debt securities in which the Fund and OTFBF
may invest (i.e., Municipal Bonds and Municipal Securities,
respectively) will vary as a result of changing evaluations by
rating services and investors of the ability of issuers of such
securities to meet interest and principal payments. Such values
will also change in response to changes in interest rates. If
interest rates rise, the values of such outstanding debt securities
generally will decline. Changes in the value of such debt
securities held in either fund's portfolio arising from these or
other factors will not affect income derived from those securities
but will cause changes in the asset value per share of the fund.
There can be no assurance that either the Fund or OTFBF will
achieve its investment objective, and the value of a share of the
Fund or OTFBF upon sale or redemption could be more or less than
the investor's cost. Since the Fund and OTFBF invest in similar
types of securities and have substantially similar investment
objectives, the Board believes that the investment risks in the
Fund and OTFBF are substantially similar. However, OTFBF has the
ability to invest a greater percentage of its assets in Municipal
Securities of the lower grades of investment grade than the Fund.
Such flexibility creates both greater investment opportunity and
greater risk. Bonds rated "Baa" or "BBB" may have speculative
characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity of the
issuer to make principal and interest payments than is the case
with higher grade bonds. OTFBF is permitted to invest in certain
taxable securities; distributions derived from net interest income
on such taxable investments will be taxable when distributed to
OTFBF shareholders. The Fund does not invest in taxable securities
(although it may do so on a temporary basis). OTFBF may also
engage in various investment activities in which the Fund does not,
such as hedging techniques. Hedging techniques may reduce
investment risks but entail transaction costs and provide no
benefit if securities prices or interest rates move in an
unanticipated manner. OTFBF is organized as a Massachusetts
business trust and, pursuant to Massachusetts law, beneficial
owners of the business trust could be held personally liable as
partners for OTFBF's obligations; however, the risk of an OTFBF
shareholder incurring any financial loss is limited to the
relatively remote circumstances in which the Fund is unable to meet
its obligations. See "The Reorganization - Description of
Securities to be Issued; Comparison of Stockholder Rights."
THE REORGANIZATION
Reasons for the Reorganization
The Board, including the Independent Directors, has determined
that the Reorganization is in the best interests of the Fund and
its shareholders. In recommending the Reorganization to the
shareholders of the Fund, the Board considered that the
Reorganization would have the following potential benefits for
shareholders of the Fund:
1. Shareholders of the Fund would, without recognizing a taxable
capital gain, have a continued participation in the tax-free bond
markets through investment in OTFBF which, like the Fund, is
permitted to invest in debt obligations of states, the District of
Columbia, commonwealths, territories or possessions of the United
States and their respective political subdivisions, agencies,
instrumentalities or authorities and the interest from which is not
subject to Federal individual income tax, and which has a
substantially similar investment objective to that of the Fund. If
the Fund were liquidated, shareholders could recognize gains for
tax purposes.
2. Due to the open-end structure of OTFBF, shareholders will
have the option of redeeming their OTFBF shares at net asset value
on any business day, without brokerage commissions, as provided in
the OTFBF Prospectus.
3. Shareholders of the Fund will be able to purchase shares of
OTFBF at net asset value, without a sales charge, and pursue
substantially similar investment objectives in a larger fund.
4. The Reorganization would secure for shareholders of the Fund
the capabilities and resources of OMC and its affiliates in the
areas of investment management, distribution, shareholder servicing
and marketing.
5. While the aggregate of the investment management fee and the
distribution fee payable by OTFBF would be greater, on a percentage
basis, than the investment management fee currently paid by the
Fund (see "Advisory and Distribution Fees and Expense Ratios"
above), it could reasonably be anticipated that the Reorganization
would not result in a material increase, and may result in a
decrease, of the total expenses borne on a percentage basis by the
Fund's shareholders, although there can be no assurance that this
will be the case. In this connection, the Board further concluded
that the Reorganization of the Fund with OTFBF, a fund having a
distribution plan as permitted by Rule 12b-1 under the Investment
Company Act (see "Advisory and Distribution Fees and Expense
Ratios" above), will be of benefit to the shareholders of the
combined funds, because such plan will permit sufficient funding of
ongoing distribution expenses so as to permit net assets to remain
at a level which will permit the combined fund to be operated at a
competitively low expense ratio.
The Reorganization Agreement
At a meeting held on September 14, 1993, the Board adopted and
recommended to the shareholders of the Fund that they approve the
Reorganization, including the Reorganization Agreement. The terms
and conditions under which the Reorganization would be consummated
are set forth in the Reorganization Agreement and are summarized
below. This summary is qualified in its entirety by reference to
the Reorganization Agreement, a copy of which is attached as
Exhibit B to this Proxy Statement and Prospectus.
The Reorganization Agreement contemplates a reorganization under
which (i) the assets of the Fund consisting of portfolio
securities, cash (other than cash amounts retained by the Fund as
a "Cash Reserve" in the amount estimated by the Fund as sufficient
to discharge its liabilities and the payment by the Fund, if any,
in respect of dissenting shares), and receivables (other than any
unpaid portion of the $35,000 validly due and owing to the Fund as
Reorganization expense reimbursement) would be transferred, free
and clear of all liens (other than the obligation, if any, to pay
the purchase price of portfolio securities purchased by the Fund
which have not settled (the "Permitted Liens")) to OTFBF on the
Closing Date in exchange for shares of OTFBF, (ii) such OTFBF
shares would be distributed to the shareholders of the Fund at the
Valuation Time (other than those shareholders who have properly
exercised dissenters' rights under New York law), (iii) the Fund
would be liquidated and (iv) the outstanding shares of the Fund
would be cancelled. OTFBF will not assume and will not otherwise
be responsible for any of the Fund's liabilities except for the
Permitted Liens, if any.
The number of OTFBF shares to be delivered to the Fund will be
determined by dividing the value of the Fund assets acquired by
OTFBF by the net asset value of an OTFBF share; these values will
be calculated as of the Valuation Time after the Fund's declaration
and payment of any distribution by such date, using the valuation
procedures consistently used by OTFBF in the ordinary course and
based on information extracted from an independent portfolio
pricing service. As an illustration, if at the Valuation Time the
Fund were to have securities with a market value of $95,000 and
cash in the amount of $10,000 (of which $5,000 was to be retained
by it as the Cash Reserve), the value of the assets which would be
transferred to OTFBF would be $100,000. If the net asset value per
share of OTFBF were $10 per share at the close of business at the
Valuation Time, the number of shares to be issued to the Fund would
be 10,000 ($100,000 divided by $10). These 10,000 shares of OTFBF would be
distributed by the Fund to its shareholders. This illustration
does not necessarily bear any relationship to the dollar amounts or
shares expected to be involved in the Reorganization.
As soon as practicable after the Closing Date, the Fund will
distribute pro rata to its shareholders of record, except as
hereinafter discussed, the OTFBF shares it receives. OTFBF will,
in accordance with a shareholder list supplied by the Fund, cause
its transfer agent to credit and confirm an appropriate number of
shares of OTFBF to shareholders of the Fund who have not elected to
receive payment in accordance with Section 623 of the NYBCL.
Certificates for shares of OTFBF will be issued upon written
request of a former shareholder of the Fund but only for whole
shares with fractional shares credited to the name of the
shareholder on the books of OTFBF. Shareholders of the Fund who
wish certificates representing their shares of OTFBF must, after
receipt of their confirmations, make a written request to OSS, P.O.
Box 5270, Denver, Colorado 80217. Shareholders of the Fund holding
certificates representing their shares of the Fund will not be
required to surrender their certificates to anyone in connection
with the Reorganization. After the Reorganization, however, it
will be necessary for such shareholders to surrender such
certificates (or provide indemnities reasonably acceptable to OTFBF
in respect of lost certificates) in order to receive certificates
representing shares of OTFBF or to redeem, transfer or exchange the
shares of OTFBF received.
Holders of Common Shares outstanding at the Valuation Time who
have not voted in favor of the Reorganization and who have elected
to receive payment with respect thereto pursuant to Sections 623
and 910 of the NYBCL will not be entitled to receive OTFBF shares
as provided above but will only be entitled to receive payment of
the "fair value" of Common Shares as to which they have dissented.
See "Statutory Rights to Receive Payment for Shares" below.
The Closing Date will be the 20th business day following the
later to occur of (i) approval of the Reorganization by the
shareholders of the Fund or (ii) receipt of favorable rulings from
the Internal Revenue Service as to, among other things, the tax-
free nature of the Reorganization (which condition has been
satisfied), or at such other time as the Fund and OTFBF may agree;
provided, however, that the Reorganization Agreement may be
terminated by either party if, among other things, the Closing Date
shall not have occurred by March 31, 1994. The consummation of the
Reorganization is contingent upon the approval of the
Reorganization by the shareholders of the Fund, the receipt of the
above-mentioned Internal Revenue Service rulings (which condition
has been satisfied), the receipt of the opinions and certificates
set forth in Sections 10 and 11 of the Reorganization Agreement and
the occurrence of the other events described in those Sections,
certain of which may be waived by the Fund or OTFBF.
The costs of printing and mailing the proxies and proxy
statements associated with the Reorganization will be paid by the
Fund. Any documents such as existing prospectuses, annual reports
or semi-annual reports that are included in that mailing will be a
cost of the fund issuing the document. Any other out-of-pocket
expenses of the Fund and OTFBF associated with the Reorganization,
including legal, accounting, tax and transfer agent expenses, will
be borne by the Fund and OTFBF, respectively. Notwithstanding the
foregoing, provided the Reorganization is consummated, OTFBF will
cause one of its affiliates to reimburse the Fund those of its
expenses solely and directly related to the Reorganization in an
amount not to exceed $35,000. Management estimates that such
expenses associated with the Reorganization to be borne by the Fund
will not exceed $100,000.
Under the Reorganization Agreement, within one year after the
Closing Date, the Fund shall: (a) either pay or make provision for
all of its liabilities; and (b) distribute any remaining amount of
the Cash Reserve (after paying or making provision for such
liabilities and the estimated cost of making the distribution) to
shareholders of the Fund who received OTFBF shares. If the
foregoing cannot be effectuated within such one-year period, the
Fund will, at the end of such period, transfer the remaining amount
of the Cash Reserve to a liquidating trust upon terms reasonably
acceptable to OTFBF. Within one year after the Closing Date, the
Fund expects to complete its liquidation and will thereupon
dissolve as a corporation and deregister as an investment company
under the 1940 Act.
The effect of the Reorganization will be that shareholders of
the Fund who vote their shares in favor of the Reorganization will
be electing to exchange their interests in the Fund for shares of
OTFBF having a net asset value equal to the net asset value of
their Common Shares at the Valuation Time calculated after
subtracting the Cash Reserve. This exchange would be effected
without a sales charge and, it is expected, without recognition of
taxable gain or loss for Federal income tax purposes. See "Tax
Aspects of the Reorganization" below. The Reorganization Agreement
provides that on the Closing Date the Fund will transfer to OTFBF
only those assets the acquisition of which will permit OTFBF to be
in compliance with all of its investment policies and restrictions.
The Fund will recognize capital gain or loss on any sales of
securities made prior to the Closing Date in order to comply with
the foregoing. As noted in "Tax Aspects of the Reorganization"
below, if the Fund realizes net capital gain from the sale of
securities prior to the Closing Date, such gain, to the extent not
offset by capital loss carryforwards, will be distributed to
shareholders prior to the Closing Date and will be taxable to
shareholders as capital gain.
Tax Aspects of the Reorganization
The Reorganization is intended to qualify for Federal income tax
purposes as a tax-free reorganization under Section 368(a)(1) of
the Internal Revenue Code of 1986, as amended (the "Code"). The
Fund has received a private letter ruling from the Internal Revenue
Service relating to the tax-free nature of the Reorganization,
which letter included the following rulings:
1. The acquisition by OTFBF of substantially all of the assets of
the Fund to OTFBF solely in exchange for shares of OTFBF followed
by the distribution of the shares to shareholders of the Fund in
complete liquidation and dissolution of the Fund, as set forth in
the Reorganization Agreement, will constitute a reorganization
within the meaning of Section 368(a)(1)(C) of the Code;
2. Under Section 361(a) of the Code, no gain or loss will be
recognized by the Fund by reason of the transfer of substantially
all of its assets to OTFBF solely in exchange for shares of OTFBF;
in addition, no gain or loss will be recognized by the Fund on the
distribution by it to its shareholders of the shares of OTFBF
(including fractional shares) received pursuant to the
Reorganization (Section 361(c)(1)) of the Code;
3. Under Section 1032(a) of the Code, no gain or loss will be
recognized by OTFBF upon receipt of substantially all the assets of
the Fund solely in exchange for shares of OTFBF (including
fractional shares) as set forth in the Reorganization Agreement;
4. Under Section 354(a)(1) of the Code, no gain or loss will be
recognized by any shareholder of the Fund upon the exchange of such
shareholder's Common Shares solely for shares of OTFBF, including
any fractional share to which such shareholder may be entitled;
provided, however, that if a shareholder of the Fund receives cash
in addition to shares of OTFBF, the shareholder will recognize
gain, but not in excess of the cash received (Section 356(a)(1) of
the Code); if the exchange has the effect of the distribution of a
dividend (determined with the application of the rules relating to
constructive ownership under the Code), then the amount of gain
recognized that is not in excess of the shareholder's ratable share
of undistributed earnings and profits will be treated as a dividend
(Section 356(a)(2) of the Code);
5. The basis of the shares of OTFBF received by each shareholder
of the Fund (including any fractional shares to which such
shareholder may be entitled) will be the same as such shareholder's
basis of the Common Shares exchanged therefore, decreased by the
amount of any cash received by such shareholder and increased by
the amount treated as a dividend and the amount of gain required to
be recognized by the shareholder on the exchange (not including any
portion of such gain that is treated as a dividend) (Section
358(a)(1) of the Code);
6. The holding period of shares of OTFBF received by each Fund
shareholder (including any fractional shares to which such
shareholder may be entitled) will include the period during which
the stock surrendered in exchange therefor was held by the Fund
shareholder, provided the Common Shares surrendered were held by
such shareholder as a capital asset at the time of the exchange
(Section 1223(1) of the Code); and
7. Cash received by a dissenting shareholder of the Fund in
exchange for such shareholder's Common Shares will be treated as
having been received by such shareholder as a distribution in
redemption of such shareholder's Common Shares, subject to the
provisions and limitations of Section 302 of the Code.
At least one but not more than 20 business days prior to the
Valuation Date, the Fund will declare and pay a dividend or
dividends which, together with all previous such dividends, will
have the effect of distributing to the Fund's shareholders all of
the Fund's investment company taxable income for all periods since
1979 through and including the Closing Date (computed without
regard to any dividends paid deduction), all of the Fund's net
capital gain, if any, realized in such periods (after reduction for
any capital loss carryforward) and at least 90% of the excess, if
any, of the Fund's interest income excludable from gross income
under Section 103(a) of the Code, over its deductions disallowed
under Section 265 or Section 171(a)(2) of the Code for the period
from January 1, 1993 through the Closing Date. Such dividends will
be treated as ordinary income, capital gain and exempt income,
respectively, to the Fund's shareholders.
Shareholders of the Fund should consult their tax advisers
regarding the effect, if any, of the proposed transaction in light
of their individual circumstances. Since the foregoing discussion
only relates to the Federal income tax consequences of the proposed
transaction, shareholders of the Fund should also consult their tax
advisers as to state and local tax consequences, if any, of the
proposed transaction.
Statutory Rights to Receive Payment for Shares
Under Section 623 of the NYBCL ("Section 623") and Section 910
of the NYBCL, if the Reorganization is consummated, holders of
record of Common Shares outstanding at the Valuation Time who make
an election in accordance with Section 623 may be entitled to be
paid the "fair value" of their Common Shares. The following
summary of Section 623 sets forth the procedures for demanding
these statutory rights. This summary is qualified in its entirety
by reference to Section 623, the text of which is attached to this
Proxy Statement and Prospectus as Exhibit B.
Filing Written Objection. Prior to the Fund shareholder vote
with respect to the Reorganization, a holder of Common Shares who
intends to enforce his or her rights under the NYBCL to receive
payment of the "fair value" of such shares if the Reorganization is
consummated must file with the Fund a written objection to the
proposed Reorganization. The written objection must include a
notice of such shareholder's election to dissent, his or her name
and residence address, the number of shares as to which he or she
dissents and a demand for payment of the "fair value" of his or her
shares if the Reorganization is consummated. Such written
objection may be sent to the Fund at 1384 Broadway, New York, New
York 10018, Attention: Secretary. The return of a proxy or
proxies by a Fund shareholder with instructions to vote the shares
represented thereby against the Reorganization (or an abstention
from voting) is not sufficient to satisfy the requirement of
delivering written objection to the Fund. At the time of filing
the notice of election to dissent or within one month thereafter,
a Fund shareholder whose shares are represented by certificates
shall submit such certificates to the Fund, or to its transfer
agent, which shall forthwith note conspicuously thereon that a
notice of election has been filed and shall return the certificates
to the shareholder or other person who submitted them on behalf of
such shareholder.
No Vote in Favor of the Reorganization. Shares for which
dissenters' rights are sought must not be voted in favor of the
proposal to approve the Reorganization. The submission of a signed
blank proxy card will be counted as a vote in favor of the
Reorganization and, therefore, will serve to waive dissenters'
rights. Failure to return a proxy card or to vote or an abstention
from voting, however, will not waive dissenters' rights.
Notice by the Fund. Within fifteen days after the consummation
of the Reorganization, the Fund is required to make a written offer
(the "Offer") by registered mail to each shareholder of the Fund
who has filed a notice of election to dissent and whose Common
Shares were not voted in favor of the Reorganization to pay for his
or her shares at a specified price which the Fund considers to be
their "fair value". The Offer must be accompanied by (i) advance
payment to each such shareholder who has submitted share
certificates to the Fund of an amount equal to 80% of the amount of
the Offer or (ii) as to each shareholder who has not submitted
share certificates a statement that advance payment of an amount
equal to 80% of the amount of the Offer will be made by the Fund
promptly upon submission of such certificates.
Payment for Common Shares. If within 30 days after the making
of the Offer the Fund and the shareholder agree upon the price to
be paid for such shareholder's Common Shares (which agreement shall
be evidenced by the shareholder sending to the Fund written notice
of acceptance of the Offer), payment therefor shall be made by the
Fund within 60 days after the later of the making of the Offer or
the consummation of the Reorganization, upon the surrender of share
certificates for any such shares represented by certificates.
Loss of Dissenter's Rights. Any dissenting shareholder of the
Fund will have the right to withdraw his or her notice of election
of dissenters' rights at any time prior to his or her acceptance in
writing of the Offer (but in no case later than 60 days from the
date of consummation of the Reorganization) and to accept the terms
offered in the Reorganization Agreement, including the exchange of
Common Shares for shares of OTFBF. Upon expiration of such time,
withdrawal of a notice of election will require the written consent
of the Fund. For the withdrawal of the notice of election to be
effective, it must be accompanied by the return to the Fund of any
advance payment previously made. In addition to withdrawal of a
notice of election, a dissenting shareholder will not have the
right to receive payment of the "fair value" of his or her shares
if the Reorganization is not consummated, if a court determines
that the shareholder is not entitled to receive payment for his or
her shares, if the shareholder fails to submit his share
certificates to the Fund in accordance with Section 623 or if the
shareholder otherwise loses his or her dissenters' rights. In the
event of a loss of dissenters' rights, the shareholder will be
reinstated to all rights as a shareholder of the Fund as of the
date of consummation of the Reorganization, including any
intervening preemptive rights and the right to payment of any
intervening dividend or other distribution, and will be obligated
to exchange his or her Common Shares for OTFBF shares based on the
net asset value of an OTFBF share at the close of business on the
effective day of the loss of dissenters' rights, or if such day is
not a business day, the next succeeding business day.
Judicial Settlement of Dissenters' Rights. In the event the
Fund fails to make the Offer within the aforementioned 15-day
period, or if during the 30-day period discussed in "Payment for
Shares" the Fund and any Fund shareholder seeking dissenters'
rights have not agreed upon the fair value of such shareholder's
shares, the Fund is required, within 20 days after the expiration
of the applicable time period, to institute a special proceeding in
the Supreme Court, New York County, New York, to determine the
rights of dissenting shareholders and to fix the "fair value" of
their shares. Should the Fund fail to institute such proceeding
within the 20-day period, any dissenting shareholder may institute
such proceeding for the same purpose within 30 days after the
expiration of the 20-day period. If such proceeding is not
instituted by a dissenting shareholder during such time, all
dissenter's rights shall be lost unless otherwise directed by the
Court. All dissenting shareholders that have not accepted the
Offer will be made parties to the judicial proceeding. The Fund is
required to serve a copy of the petition in such proceeding upon
each such dissenting shareholder. The Court shall determine
whether each dissenting shareholder, as to whom the Fund requested
the Court to make such determination, is entitled to receive
payment for his or her shares. If the Fund does not request any
such determination or if the Court finds that any dissenting
shareholder is so entitled, it shall proceed to fix the value of
the shares which shall be the "fair value" as of the close of
business on the day prior to the Meeting. Such determination will
be binding on all dissenting shareholders. Within 60 days after
the final determination of the proceeding, the Fund will pay to
each dissenting shareholder the amount found to be due him or her,
including interest as the Court determines, upon surrender of the
certificates for any such shares represented by certificates. Each
party to the proceeding shall bear its own costs and expenses,
provided, however, that the Court may, in its discretion, apportion
and assess the costs, expenses and fees incurred by the Fund and
any or all dissenting shareholders against the other party.
Insolvency. No payment will be made to a dissenting shareholder
pursuant to Section 623 at a time when the Fund is insolvent or
when such payment would render it insolvent. In such case, the
dissenting shareholder shall, at his or her option, withdraw his or
her notice of election or retain his or her status as an unsecured
claimant against the Fund.
Exclusive Remedy. The enforcement by a shareholder of his or
her right to receive payment for his or her shares in the manner
provided by Section 623 shall exclude the enforcement by such
shareholder of any other right to which he or she might otherwise
be entitled by virtue of share ownership, except as provided in
"Loss of Dissenters' Rights" above and except that Section 623
shall not exclude the right of such shareholder to bring or
maintain an appropriate action to obtain relief on the ground that
such corporate action will be or is unlawful or fraudulent as to
him or her.
Loss of Rights as Shareholder. Any shareholder who has elected
to dissent pursuant to Section 623 shall not thereafter be entitled
to notice of any meeting of shareholders of the Fund or to vote his
or her Common Shares for any purpose and shall not be entitled to
the payment of dividends or other distributions on the Common
Shares.
The receipt of cash pursuant to the enforcement of dissenters'
rights will be a taxable event for federal income tax purposes.
See "Tax Aspects of the Reorganization" above. Any Fund
shareholder who desires to enforce dissenters' rights should
carefully review the NYBCL and is urged to consult his or her legal
advisor before electing or attempting to exercise such rights.
Description of Securities to be Issued; Comparison of Stockholder
Rights
The Fund is a corporation incorporated under the laws of the
State of New York. The Fund's certificate of incorporation
authorizes 5,000,000 shares of capital stock, designated as common
stock, par value $.10 per share. There were 1,626,594 Common
Shares issued and outstanding as of the Record Date.
Each Common Share is entitled to one vote on all matters
submitted to the vote of shareholders, and the Fund's bylaws
provide that at all meetings at which a quorum is present, a
majority vote of the shares present shall constitute the act of the
shareholders unless a greater number is required under the Fund's
certificate of incorporation or applicable law. Under New York
law, a majority vote of the Fund's shareholders is required for the
corporation to amend its certificate of incorporation, and a two-
thirds vote of the Fund's shareholders is required for the Fund to
merge or consolidate, to sell all or substantially all of its
assets or to dissolve.
Under New York law, a meeting of the Fund's shareholders is held
annually to elect directors and to conduct any other business of
the Fund. For this purpose, directors are elected by the vote of
a plurality of Common Shares represented at the meeting. In
addition, under the Fund's by-laws, a special meeting of the
shareholders will be called whenever so requested in writing by
shareholders holding not less than one-half of the outstanding
Common Shares.
OTFBF is a Massachusetts business trust established in 1987
pursuant to a Declaration of Trust. It was initially organized in
1976 as a Maryland corporation. OTFBF's authorized capital
consists of an unlimited number of shares of beneficial interest
without par value. The Board of Trustees of OTFBF is empowered to
issue full and fractional shares of one or more series and classes
of series. Series have separate assets and liabilities. Classes
of a series represent an identical interest in a particular series
but each class has different dividends, distributions and expenses,
and may have different net asset values. Shares of one series
having two classes (Class A and Class B) have been authorized.
Shares of OTFBF represent an interest in OTFBF proportionately
equal to the interest of each other share of the same class and
entitle their holders to one vote per share (and a fractional vote
for a fractional share) on matters submitted to their vote. Only
shareholders of a particular class vote on matters affecting only
that class. The Trustees may divide or combine the shares into a
greater or lesser number of shares without thereby changing the
proportionate beneficial interest in OTFBF. Shares do not have
cumulative voting rights or preemptive or subscription rights.
OTFBF's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for OTFBF's obligations, and
provides for indemnification and reimbursement of expenses out of
its property for any shareholder held personally liable for its
obligations. The Declaration of Trust also provides that OTFBF
shall, upon request, assume a defense of any claim made against any
shareholder for any act or obligation of OTFBF and shall satisfy
any judgment thereon. Thus, while Massachusetts law permits a
shareholder of a trust (such as OTFBF) to be held personally liable
as a "partner" under certain circumstances, the risk of an OTFBF
shareholder incurring financial loss on account of shareholder
liability is highly unlikely and is limited to the relatively
remote circumstances in which OTFBF would be unable to meet the
obligations described above. Any person doing business with OTFBF
and any shareholder of OTFBF agrees under OTFBF's Declaration of
Trust to look solely to the assets of OTFBF for satisfaction of any
claim or demand which may arise out of any dealings with OTFBF, and
the Trustees shall have no personal liability to any such person,
to the extent permitted by law.
It is not contemplated that regular annual meetings of OTFBF
shareholders will be held. OTFBF will hold meetings when required
to do so by the 1940 Act or other applicable law, or when a
shareholder meeting is called by the Trustees or upon proper
request of the shareholders. Shareholders have the right, upon the
declaration in writing or vote of two-thirds of the outstanding
shares of OTFBF, to remove a Trustee. The Trustees will call a
meeting of shareholders to vote on the removal of a Trustee upon
the written request of the shareholders of 10% of its outstanding
shares. In addition, if the Trustees receive a request from at
least 10 shareholders (who have been shareholders for at least six
months) holding in the aggregate shares of OTFBF valued at $25,000
or more or holding 1% or more of OTFBF's outstanding shares,
whichever is less, that they wish to communicate with other
shareholders to request a meeting to remove a Trustee, the Trustees
will then either give the applicants access to OTFBF's shareholder
list, mail their communication to all other shareholders at the
applicants' expense, or take alternative action as set forth in
Section 16(c) of the 1940 Act.
OTFBF shareholders are entitled to various services that,
although currently not available to Fund shareholders, will become
available to Fund shareholders if the Reorganization is effected
and they become shareholders of OTFBF. These services include the
right to redeem OTFBF shares for cash at any time at the net asset
value per share calculated and reported daily; the option to
exchange shares, subject to payment of any applicable sales charge,
between OTFBF and other funds in the "OppenheimerFunds" complex
consisting of more than 30 open-end equity and fixed-income funds
having different investment guidelines and objectives; availability
of tax-advantaged retirement plans; toll-free access to
knowledgeable investor information and service representatives; low
minimum investment requirements; and the ability to effect some or
all of the above transactions by telephone and other expedited
means. The cost of such services is normally borne by OTFBF rather
than by individual shareholders.
Because the Fund is a closed-end investment company its shares,
unlike OTFBF's shares, do not have redemption and exchange rights.
The net asset value of the Fund's shares is determined and reported
weekly; the net asset value of OTFBF's shares is determined and
reported daily.
<PAGE>
Capitalization Table (Unaudited)
The following table sets forth the capitalization of the Fund
and OTFBF as of December 31, 1992 and on a pro forma combined basis
as if the Reorganization had occurred on that date.
Net Asset
Shares Value
Net Assets Outstanding Per Share
Oppenheimer Tax-Free
Bond Fund $496,628,478 49,964,400 $9.94
M I Fund, Inc. $30,481,665 1,626,594 $18.74
Oppenheimer Tax-Free Bond
Fund as the Surviving Fund
(Pro Forma Combined) $527,110,143 53,031,037 $9.94
The pro forma ratio of expenses to average annual net assets of the
combined funds at December 31, 1992 would have been 0.94%.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
Investment Objectives and Policies
As its investment objective, each of the Fund and OTFBF seeks as
high a level of current income which is exempt from Federal income
taxes as is available from investing in Municipal Bonds and
Municipal Securities, respectively, while attempting to preserve
capital. The Fund will invest substantially all of its assets in
a diversified portfolio of municipal bonds issued by or on behalf
of states, the District of Columbia, any commonwealths, territories
or possessions of the United States, or their respective political
subdivisions, agencies, instrumentalities or authorities, the
interest from which is not subject to Federal individual income tax
in the opinion of bond counsel to the respective issuer at the time
of issue ("Municipal Bonds"). The Fund invests all of its assets
in Municipal Bonds that are rated within the four highest rating
categories of Moody's or S&P, provided however that not more than
20% of its assets may be invested in Municipal Bonds rated "A" by
Moody's or S&P and not more than 10% of its assets may be invested
in Municipal Bonds rated "Baa" by Moody's or "BBB" by S&P. The
Fund may invest in short-term tax-exempt notes on a temporary
basis.
As a matter of fundamental policy, under normal market
conditions OTFBF attempts to invest at least 80% of its assets in
municipal bonds and municipal notes (including tax anticipation
notes, construction loan notes, revenue anticipation notes, bond
anticipation notes and other short-term loans), tax-exempt
commercial paper and other debt obligations issued by or on behalf
of states, the District of Columbia, any commonwealths, territories
or possessions of the United States, or their respective political
subdivisions, agencies, instrumentalities or authorities, the
interest from which is not subject to Federal individual income tax
in the opinion of bond counsel to the respective issuer at the time
of issue (collectively "Municipal Securities"). Municipal
Securities purchased by OTFBF will not be rated lower than "Baa" by
Moody's or "BBB" by S&P or, if unrated, judged to be of comparable
quality by OMC. Investment in unrated Municipal Securities will
not exceed 20% of OTFBF's total assets. Not more than 25% of
OTFBF's total assets will be invested in Municipal Securities that
are rated "Baa" or "MIG-2" by Moody's or "BBB" or "SP-2" by S&P or,
if unrated, judged by OMC to be of comparable quality to Municipal
Securities in those categories. In times of unstable market or
economic conditions, when OMC deems it appropriate to do so, OTFBF
may assume a temporary defensive position and invest an unlimited
amount of its assets in certain taxable obligations. To the extent
OTFBF assumes a temporary defensive position, a significant portion
of its distributions may be subject to federal and state income
taxes.
Special Investment Methods
OTFBF uses the special investment methods summarized below. The
Fund does not engage in any special investment methods.
When-Issued Securities. OTFBF may invest in securities offered on
a "when-issued" or "delayed delivery" basis. The price, which on
debt securities is generally expressed in yield terms, is fixed at
the time the commitment is made, but delivery and payment for when-
issued securities take place at a later date (normally within 45
days of purchase). No income accrues to OTFBF until it takes
delivery of when-issued securities. OTFBF is subject to the risk
of adverse market fluctuations between purchase and settlement.
OMC does not believe that OTFBF's net asset value or income will be
significantly adversely affected by its purchase of securities on
a "when-issued" or "delayed delivery" basis.
Covered Calls and Hedging. OTFBF may write (i.e., sell) covered
call options ("covered calls") on up to 25% of its total assets to
generate income for liquidity purposes provided the calls are
listed on a domestic securities exchange or quoted on the automated
quotation system of the National Association of Securities Dealers,
Inc. For hedging purposes as a temporary defensive maneuver, OTFBF
may purchase put options on debt securities, Interest Rate Futures
or Municipal Bond Index Futures (both as hereinafter defined) held
by it or municipal bond indices; OTFBF may purchase calls only as
to debt securities, Interest Rate Futures, Municipal Bond Index
Futures or to effect a closing purchase transaction if, after such
purchase, the value of all put and call options held by OTFBF would
not exceed 5% of the fund's total assets. OTFBF may buy and sell
futures contracts on debt securities ("Interest Rate Futures") and
municipal bond indices ("Municipal Bond Index Futures").
Loans of Portfolio Securities. To attempt to increase income,
OTFBF may lend its portfolio securities (other than in repurchase
transactions) to brokers, dealers and other financial institutions
meeting specified credit conditions if the loan is collateralized
in accordance with applicable regulatory requirements and if, after
any loan, the value of the securities loaned does not exceed 25% of
the value of OTFBF's total assets. OTFBF presently does not intend
that the value of securities loaned in the current fiscal year will
exceed 5% of the value of its total assets.
Repurchase Agreements. OTFBF may acquire securities subject to
repurchase agreements to generate income while providing liquidity.
If the vendor fails to pay the agreed-upon resale price on the
delivery date, OTFBF's risks may include any costs of disposing of
such collateral, and any loss from any delay in foreclosing on the
collateral. OTFBF's repurchase agreements will be fully
collateralized. There is no limit on the amount of OTFBF's net
assets that may be subject to repurchase agreements having a
maturity of seven days or less. OTFBF will not enter into a
repurchase agreement which will cause more than 15% of its net
assets to be subject to repurchase agreements having a maturity
beyond seven days.
Investment Restrictions
Each of the Fund and OTFBF has certain investment restrictions
that, together with its respective investment objectives, are
fundamental policies changeable only by shareholder approval. Set
forth below is a summary of these investment restrictions, which
summary as to the Fund is qualified in its entirety by the
investment policies and restrictions of the Fund contained in
Exhibit C attached hereto and as to OTFBF is qualified in its
entirety by the investment policies and restrictions contained in
the OTFBF Prospectus and its Statement of Additional Information.
Each of the Fund and OTFBF cannot: invest in any securities
other than Municipal Bonds (as to the Fund) or Municipal Securities
(as to OTFBF), provided that, on a temporary basis, the Fund may
also invest in certain municipal notes and OTFBF may also invest in
certain taxable obligations, repurchase agreements, covered calls,
private activity municipal securities and hedging instruments; make
loans, except through the purchase of debt securities in accordance
with its investment policies and restrictions and, as to OTFBF,
through investment in repurchase agreements and loans of portfolio
securities; borrow money in excess of 5% (as to the Fund) or 10% of
the value of its total assets and then only from banks as a
temporary or emergency measure and not for investment purposes;
pledge, mortgage or otherwise encumber its assets, provided that,
as to OTFBF, escrow or other collateral arrangements in connection
with hedging instruments are permitted and, as to the Fund, a
pledge of securities having a market value not exceeding 15% of its
total assets is permitted; invest more than 5% of the value of its
total assets in the securities of any one issuer nor acquire more
than 5% of any class of securities (as to the Fund) or 10% of the
total value of all outstanding securities (as to OTFBF) of any one
issuer (in both cases, the restriction does not apply to securities
of the U.S. Government or its agencies or instrumentalities);
concentrate investments to the extent of 10% (as to the Fund) or
25% (as to OTFBF) of its total assets in any industry, provided,
that, there is no limitation as to investment in Municipal Bonds
(as to the Fund) or Municipal Securities (as to OTFBF) or in
obligations issued by the U.S. Government and its agencies or
instrumentalities; invest in real estate, but this will not prevent
the Fund and OTFBF from investing in Municipal Bonds and Municipal
Securities, respectively, or other permitted securities secured by
real estate or interests therein; make short sales of securities or
purchase securities on margin, provided that, OTFBF may obtain such
short-term credits as may be necessary for the clearance of
purchases and sales of securities and, in addition, OTFBF may make
margin deposits in connection with the use of hedging instruments
as permitted by any of its other fundamental policies; invest in
securities subject to restrictions on resale; or underwrite
securities.
In addition, the Fund cannot: purchase or sell commodities or
commodity contracts or invest in oil, gas, or other mineral
exploration or development programs; and purchase an industrial
revenue bond if as a result of such purchase more than 5% of the
Fund's total assets would be invested in industrial revenue bonds
where the payment of principal and interest are the responsibility
of a company with less than five years of operating history.
In addition, OTFBF cannot: invest in or hold securities of any
issuer if those officers and trustees of OTFBF or OMC beneficially
owning individually more than 1/2 of 1% of the securities of such
issuer together own more than 5% of the securities of such issuer;
invest in securities of any other investment company, except in
connection with a merger with another investment company; or issue
any bonds, debentures or senior equity securities.
ADDITIONAL INFORMATION
OTFBF Performance
During OTFBF's fiscal year ended December 31, 1992, OTFBF
maintained the practice, to the extent consistent with the amount
of OTFBF's net investment income and other distributable income, of
attempting to pay dividends on Class A shares at a constant level,
although the amount of such dividends was subject to change from
time to time depending on market conditions, the composition of
OTFBF's portfolio and expenses borne by it. The practice of
attempting to pay dividends on Class A shares at a constant level
required OMC, consistent with OTFBF's investment objective and
investment restrictions, to monitor OTFBF's portfolio and select
higher yielding securities when deemed appropriate to maintain
necessary net investment income levels. This practice did not
affect the net asset value of OTFBF's Class A shares. The Board of
Trustees may change OTFBF's targeted dividend level at any time,
without prior notice to shareholders; OTFBF does not otherwise have
a fixed dividend rate and there can be no assurance as to the
payment of any dividends or the realization of any capital gains.
The general municipal bond market during OTFBF's fiscal year
ended December 31, 1992 turned in a strong performance, benefitting
from the expectation of low inflation and stable interest rates, as
well as heightened investor demand for tax-exempt securities
offering after-tax yields higher than those offered by other fixed-
income alternatives. During the fiscal year, the Fund remained
fully invested in a diversified portfolio concentrating on higher
quality municipal bonds, predominantly in the essential service
sectors (utilities, water and electric).
Set forth on Exhibit D hereto is a performance graph that
compares OTFBF's total return at the end of each of its most
recently completed 10 fiscal years against the performance of the
Lehman Brothers Municipal Bond Index, an unmanaged index of a broad
range of investment grade municipal bonds that is widely regarded
as a measure of the performance of the general municipal bond
market. The Index includes a factor for the reinvestment of
interest but does not reflect expenses or taxes. OTFBF's return
reflects the deduction of the current maximum sales charge of 4.75%
and includes reinvestment of all dividends and capital gains
distributions, but does not consider taxes. Fund shareholders
receiving OTFBF shares in the Reorganization will not pay a sales
charge on OTFBF shares. OTFBF's Class B shares were not publicly
sold during OTFBF's fiscal year ended December 31, 1992 and,
accordingly, average annual total return information for such
shares is not included in the performance graph.
Portfolio Transactions and Turnover
Brokerage practices are the same for the Fund and OTFBF. As
most purchases made by the Fund and OTFBF are principal
transactions at net prices, both funds incur little or no brokerage
costs. For the fiscal year ended December 31, 1992 and the six
months ended June 30, 1993 (unaudited), the Fund's portfolio
turnover rates were 51.7% and 9.5%, respectively, and OTFBF's
portfolio turnover rates were 34.2% and 24.6%, respectively.
Expense Ratios and Performance
The ratios of expenses to average net assets for the Fund for
the fiscal year ended December 31, 1992 and the six months ended
June 30, 1993 (unaudited) were 0.49% and 0.50% (annualized),
respectively. The ratios of expenses to average net assets for
OTFBF for the fiscal year ended December 31, 1992 and the six
months ended June 30, 1993 (unaudited) were 0.94% and 0.87%
(annualized), respectively. Further details are set forth under
"Fund Expenses" and "Condensed Financial Information" in the OTFBF
Prospectus accompanying this Proxy Statement and Prospectus, and in
the Fund's and OTFBF's respective Annual Report as of December 31,
1992 and Semi-Annual Report as of June 30, 1993, which are included
in the Additional Statement. The Fund's average annual total
return at net asset value for the ten-year period ended December
31, 1992, the year ended December 31, 1992 and year-to-date 1993
(at June 30, 1993) was 10.2%, 8.5% and 6.7%, respectively. OTFBF's
average annual total return at net asset value for the ten-year
period ended December 31, 1992, the year ended December 31, 1992
and year-to-date (at June 30, 1993) was 10.8%, 9.2% and 7.6%,
respectively.
Shareholder Services
Generally, the minimum initial investment in OTFBF is $1,000
($25 if made pursuant to an Asset Builder Plan or military
allotment plan), with subsequent purchases in a minimum amount of
$25. The minimum initial and subsequent purchase requirements are
waived on purchases made by reinvesting dividends from any of the
other OppenheimerFunds listed in the OTFBF prospectus as "Eligible
Funds" or by reinvesting distributions from unit investment trusts
for which reinvestment arrangements have been made with the
Distributor. Pursuant to the Reorganization, shareholders of the
Fund will be deemed to have met the minimum investment requirement
upon the exchange of their shares for shares of OTFBF. OTFBF
offers the following privileges: (i) Rights of Accumulation, (ii)
Letters of Intent, (iii) reinvestment of dividends and
distributions at net asset value, (iv) net asset value purchases by
certain individuals and entities, (v) Asset Builder (Automatic
Investment) Plans, (vi) Automatic Withdrawal Plans for shareholders
who own shares of the fund valued at $5,000 or more, (vii)
reinvestment of net redemption proceeds at net asset value within
six months of a redemption, (viii) AccountLink (TeleTransfer)
Arrangements, (ix) exchanges of shares for shares of certain other
funds which, as to shareholders of the Fund receiving OTFBF shares,
must be accompanied by the sales charge applicable to the fund for
which OTFBF shares are to be exchanged, (x) checkwriting ($100
minimum check amount), and (xi) telephone exchange privileges.
Management and Distribution Arrangements
The Fund receives investment advisory services from Citibank
pursuant to a management-custodian agreement dated June 1, 1988.
Under that agreement, Citibank reviews the Fund's portfolio and
recommends to Fund management any changes Citibank deems desirable.
Securities transactions may also be initiated by Fund management.
Upon approval of any security transaction by Fund management,
Citibank selects brokers, dealers or agents to effect that
transaction. Citibank also serves as custodian of the Fund's
securities. For its activities as custodian and investment
advisor, Citibank receives a monthly fee calculated at the annual
rate of two-tenths of 1% of the market value of the securities held
by Citibank on behalf of the Fund. For the fiscal year ended
December 31, 1992 and the six months ended June 30, 1993
(unaudited), the fees paid by the Fund to Citibank pursuant to this
agreement were $59,076 and $30,357, respectively.
OMC, located at Two World Trade Center, New York, New York
10048-0203, acts as the investment adviser for OTFBF pursuant to an
investment advisory agreement. The monthly management fee payable
to OMC by OTFBF and the 12b-1 distribution fees paid by OTFBF to
the Distributor are set forth above under "Synopsis - Investment
Advisory and Distribution Plan Fees."
Under the investment advisory agreement, OMC provides investment
management services, including the making of investment decisions
and the placing of purchase and sale orders for portfolio
transactions. OMC also provides OTFBF with adequate office space,
facilities and equipment and provides, and supervises the
activities of, all administrative and clerical personnel required
to provide effective administration, 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 OTFBF.
For the fiscal year ended December 31, 1992 and the six months
ended June 30, 1993 (unaudited), the management fees paid by OTFBF
were $2,443,445 and $1,466,304, respectively. The investment
advisory agreement contains no expense limitation. However,
independently of the agreement, OMC has undertaken that the total
expenses of the Fund in any fiscal year (exclusive of taxes,
interest, brokerage commissions, distribution plan payments and any
extraordinary non-recurring expenses, including litigation) shall
not exceed the most stringent applicable state regulatory
limitation. At present, those limitations are imposed by
California.
OMC is controlled by a holding company owned in part by senior
management of OMC and ultimately controlled by Massachusetts Mutual
Life Insurance Company ("MassMutual"), a mutual life insurance
company that also advises pension plans and investment companies.
MassMutual is located at 1295 State Street, Springfield,
Massachusetts 01111. OMC has operated as an investment company
adviser since 1959. OMC and its affiliates currently advise
investment companies with combined net assets aggregating over $25
billion as of September 30, 1993, with more than 1.8 million
shareholder accounts. OSS, a division of OMC, acts as transfer and
shareholder servicing agent on an at-cost basis for OTFBF and for
certain other open-end funds managed by OMC and its affiliates.
The Distributor, a wholly-owned subsidiary of OMC, acts as the
general distributor of OTFBF's shares under a General Distributor's
Agreement dated October 13, 1992. The General Distributor's
Agreement is subject to the same annual renewal requirements and
termination provisions as in the investment advisory agreement.
For the fiscal year ended December 31, 1992, selling charges paid
by investors on shares of OTFBF amounted to $3,542,900, of which
$1,077,669 was retained by the Distributor and an affiliated
broker-dealer.
INFORMATION CONCERNING THE MEETING
The Special Meeting
The Meeting will be held at 1384 Broadway, New York, New York,
at 11:00 A.M., New York time, on March 18, 1994, and any
adjournments thereof. At the Meeting, Fund shareholders will
consider and vote upon the Reorganization Agreement, and the
transactions contemplated thereby, including the transfer of
substantially all of the assets of the Fund to OTFBF in exchange
for shares of OTFBF, the distribution of such OTFBF shares to the
shareholders of the Fund (other than shareholders who have properly
exercised their dissenters' rights under New York law) in complete
liquidation of the Fund, the deregistration of the Fund as an
investment company under the 1940 Act, the dissolution of the Fund
as a corporation and the cancellation of the Common Shares.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on February 15, 1994
as the record date (the "Record Date") for the determination of the
holders of Common Shares entitled to notice of, and to vote at, the
Meeting. As of the Record Date, there were 1,626,594 Common Shares
issued and outstanding; the Common Shares are the only authorized
shares of capital stock of the Fund. The holders of record of
Common Shares on the Record Date are entitled to one vote per share
on each matter submitted to a vote at the Meeting. A majority of
the outstanding Common Shares entitled to vote, represented in
person or by proxy, will constitute a quorum for the transaction of
business at the Meeting. Under the NYBCL, the affirmative vote of
the holders of two-thirds of the outstanding Common Shares is
required for approval of the Reorganization. On the Record Date,
the Estate of Charles Meltzer (the "Estate"), the testamentary
trust created under the last will and testament of Samuel Meltzer
(the "Trust") and Steven Meltzer, President of the Fund,
beneficially owned an aggregate of 1,590,500 Common Shares (55,100
Common Shares as to Mr. Meltzer), representing approximately 97.7%
of the issued and outstanding Common Shares. Pursuant to such
Common Share ownership, each of the Estate and the Trust could be
deemed to "control" the Fund. The personal representative of the
Estate, the trustees of the Trust and Mr. Meltzer have informed the
Fund that they intend to vote all of these shares in favor of the
Reorganization. If those shares are so voted at the Meeting,
approval of the Reorganization will be assured.
To the knowledge of the Fund, as of the Record Date, no person
owned of record or beneficially 5% or more of the outstanding
Common Shares except as follows: Ronald Meltzer, as personal
representative of the Estate of Charles Meltzer, c/o Pressly &
Pressly, P.A., 222 Lakeview Avenue, Suite 910, West Palm Beach,
Florida 33401, who beneficially owned 774,000 Common Shares
(approximately 47.6% of the Common Shares outstanding on the Record
Date); and Juliette Meltzer and Theodore Rosenberg, as co-trustees
of the testamentary trust under the Last Will and Testament of
Samuel Meltzer, c/o Meltzer Industries Corp., 1384 Broadway, New
York, New York 10018, who beneficially owned 760,400 Common Shares
(approximately 46.8% of the Common Shares outstanding on the Record
Date). Such shareholders have indicated that they intend to vote
all such Common Shares in favor of the Reorganization. The Fund
anticipates that, based on the pro forma number of OTFBF shares to
be outstanding after the Reorganization (see "Capitalization Table
(Unaudited)"), the aforementioned Estate of Charles Meltzer will
own approximately 2.75% of the shares of OTFBF; the aforementioned
Trust of Samuel Meltzer will own approximately 2.70% of the shares
of OTFBF; Mr. Steven Meltzer will own approximately 0.20% of the
shares of OTFBF; all other shareholders of the Fund will own an
aggregate of approximately 0.13% of the shares of OTFBF; and all of
the shareholders of the Fund, as mentioned above, will own an
aggregate of approximately 5.78% of the shares of OTFBF.
To the knowledge of OTFBF, as of the Record Date, no person
owned of record or beneficially 5% or more of the outstanding Class
A and Class B OTFBF shares. As of the Record Date, the Trustees
and officers of OTFBF, as a group, owned less than 1% of the
outstanding Class A and Class B shares of OTFBF.
Proxies
The enclosed form of proxy, if properly executed and returned,
will be voted (or counted as an abstention) in accordance with the
choice specified thereon. The proxy will be voted in favor of the
Reorganization unless a choice is indicated to vote against or to
abstain from voting on the Reorganization. Shareholders who return
executed proxies with abstentions marked thereon will have their
shares counted in determining whether a quorum is present, but
their shares will not be counted either for or against the
Reorganization.
Shares owned of record by broker-dealers for the benefit of
their customers ("street account shares") will be voted by the
broker-dealer based on instructions received from its customers.
If no instructions are received, the broker-dealer may (if
permitted under applicable stock exchange rules), as record holder,
vote such shares on certain 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
Reorganization. The proxy may be revoked at any time prior to the
voting thereof by: (i) delivering written notice of revocation to
the Secretary of the Fund at 1384 Broadway, New York, New York
10018; (ii) attending the Meeting and voting in person; or (iii)
signing and returning a new proxy (if returned and received in time
to be voted). Mere attendance at the Meeting will not in and of
itself revoke a proxy.
Expenses of Solicitation
All expenses of this solicitation, including the cost of
preparing and mailing this Proxy Statement and Prospectus, will be
borne by the Fund subject to the reimbursement described under "The
Reorganization" of Fund expenses solely and directly related to the
Reorganization in an amount not to exceed $35,000 providing the
Reorganization is consummated. In addition to the solicitation of
proxies by mail, proxies may be solicited by officers and regular
employees of the Fund, without compensation other than regular
compensation, personally or by mail, telephone, telegraph or
otherwise. Brokerage houses, banks and other fiduciaries may be
requested to forward soliciting material to the beneficial owners
of Common Shares and to obtain authorization for the execution of
proxies. For those services, if any, they will be reimbursed by
the Fund for their reasonable out-of-pocket expenses.
MISCELLANEOUS
Financial Information
The transaction will be accounted for by OTFBF as the surviving
fund in its financial statements similar to a pooling. Further
financial information as to the Fund is contained in its
Registration Statement on Form N-2, as amended by amendment no. 12
thereto, dated March 18, 1992 (the "Form N-2") which is available
without charge from Harvey Silverman, c/o M I Fund, Inc., 1384
Broadway, New York, New York 10018 and is incorporated herein, and
in its audited financial statements as of December 31, 1992, and
unaudited financial statements as of June 30, 1993, which are
included in the Additional Statement. Financial information for
OTFBF is contained in the OTFBF Prospectus accompanying this Proxy
Statement and Prospectus and incorporated herein, and in its
audited financial statements as of December 31, 1992 and unaudited
financial statements as of June 30, 1993, which are included in the
Additional Statement.
Public Information
Additional information about the Fund and OTFBF is available, as
applicable, in the following documents which are incorporated
herein by reference: (i) the OTFBF Prospectus, accompanying this
Proxy Statement and Prospectus and incorporated herein; (ii) the
Form N-2 which may be obtained without charge by writing to Harvey
Silverman, c/o M I Fund, Inc., 1384 Broadway, New York, New York
10018; (iii) OTFBF's Annual Report as of December 31, 1992 and
Semi-Annual Report as of June 30, 1993, which may be obtained
without charge by writing to Oppenheimer Shareholder Services, P.O.
Box 5270, Denver, Colorado 80217; and (iv) the Fund's Annual Report
as of December 31, 1992 and Semi-Annual Report as of June 30, 1993,
which may be obtained without charge by writing to Harvey
Silverman, c/o M I Fund, Inc., 1384 Broadway, New York, New York
10018. The foregoing documents with respect to OTFBF may also be
obtained by calling, toll-free, 1-800-525-7048 and with respect to
the Fund may be obtained by calling, collect, 212-398-1066.
Additional information about the following matters is contained
in the Additional Statement, which incorporates by reference
OTFBF's Statement of Additional Information dated March 16, 1993
and the Fund's Form N-2: the organization and operation of OTFBF
and the Fund; more information on investment policies and
practices; information about the Fund's and OTFBF's respective
Boards of Directors and Trustees and their responsibilities; a
further description of the services provided by OTFBF's and the
Fund's investment adviser, distributor (as to OTFBF), and transfer
and shareholder servicing agent; dividend policies; tax matters; an
explanation of the method of determining the offering price of the
shares of OTFBF and the Fund; purchase, redemption and exchange
programs; and distribution arrangements.
The Fund and OTFBF are subject to the informational requirements
of the Securities Exchange Act of 1934, as amended, and in
accordance therewith, file reports and other information with the
SEC. Proxy material, reports and other information about the Fund
and OTFBF which are of public record can be inspected and copied at
public reference facilities maintained by the SEC in Washington,
D.C. and certain of its regional offices, and copies of such
materials can be obtained at prescribed rates from the Public
Reference Branch, Office of Consumer Affairs and Information
Services, SEC, Washington, D.C. 20549.
OTHER BUSINESS
Management of the Fund knows of no business other than the
matters specified above and in the Notice of Special Meeting
accompanying this Proxy Statement and Prospectus which will be
presented at the Meeting. Matters to be considered at the Meeting
are limited to those specified in, or related to, the matters set
forth in the Notice of Special 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 this proxy in accordance
with their judgment on such matters.
By Order of the Board of Directors,
Harvey Silverman,
Secretary
February 15, 1994
<PAGE>
APPENDIX TO PROXY STATEMENT OF M I FUND, INC. AND
PROSPECTUS OF OPPENHEIMER TAX-EXEMPT BOND FUND
Graphic material to be included in Exhibit D to the Proxy
Statement of M I Fund, Inc. and Prospectus of Oppenheimer Tax-
Exempt Bond Fund: "Comparison of Total Return of Oppenheimer Tax-
Exempt Bond Fund and the Lehman Brothers Municipal Bond Index -
Change in Value of a $10,000 Hypothetical Investment"
A linear graph will be included in Exhibit D to the Proxy
Statement of M I Fund, Inc. and Prospectus of Oppenheimer Tax-
Exempt Bond Fund ("OTFBF") depicting the initial account value and
subsequent account value of a hypothetical $10,000 investment in
Class A shares of OTFBF at the end of each of its most recently
completed 10 fiscal years and comparing such values with the same
investments over the same time periods in the Lehman Brothers
Municipal Bond Index. Set forth below are the relevant data points
that will appear on the linear graph. Additional information with
respect to the foregoing, including a description of the Lehman
Brothers Municipal Bond Index, is set forth in the Proxy Statement
and Prospectus under "Additional Information - OTFBF Performance."
Oppenheimer
Tax-Free Bond Fund Lehman Bros.
Fiscal Class A Municipal
Year Ended Shares Bond Index
12/31/82 $9,525 (1) $10,000
12/31/83 $11,136 $10,996
12/31/84 $12,317 $12,156
12/31/85 $14,949 $14,591
12/31/86 $17,902 $17,408
12/31/87 $17,902 $17,671
12/31/88 $19,605 $19,467
12/31/89 $21,460 $21,567
12/31/90 $22,719 $23,139
12/31/91 $25,476 $25,949
12/31/92 $27,951 $28,237
(1) Reflects payment of the maximum sales load of 4.75% applicable
to Class A shares of OTFBF.
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated this 22nd day of
October, 1993, by and between M I Fund, Inc. (the "Fund"), a New
York corporation, and Oppenheimer Tax-Free Bond Fund ("OTFBF"), a
Massachusetts business trust.
W I T N E S S E T H:
WHEREAS, the Fund is a closed-end investment company and OTFBF is
an open-end investment company, each of the management type and
registered under the Investment Company Act of 1940, as amended
(the "1940 Act"); and
WHEREAS, the parties hereto desire to provide for the
reorganization pursuant to Section 368(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"), of the Fund through
the acquisition by OTFBF of substantially all of the assets of the
Fund solely in exchange for Class A shares of beneficial interest
of OTFBF ("Class A Shares"), and the subsequent distribution by the
Fund of those Class A Shares pro rata to its shareholders in
complete liquidation of the Fund;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. The parties hereto hereby adopt a Plan of Reorganization
pursuant to Section 368(a)(1)(C) of the Code as follows: The
reorganization will be comprised of the acquisition of
substantially all of the assets (as hereinafter described) of the
Fund solely in exchange for a certain number (to be determined in
accordance with Section 2, Section 3 and Section 5 hereof) of Class
A Shares (the number of Class A Shares so determined, the
"Consideration Shares") followed by the distribution of the
Consideration Shares to the shareholders of the Fund at the
Valuation Time (as defined in Section 3 hereof) who have not
elected dissenter's rights as set forth in Section 5 hereof (the
"Shareholders") in complete liquidation of the Fund, all upon and
subject to the terms of this agreement and plan of reorganization
(the "Agreement") hereinafter set forth.
2. On the Closing Date (as hereinafter defined), (i) the Fund
shall transfer and deliver (or cause to be so transferred and
delivered) to OTFBF, free and clear of all liens, encumbrances,
restrictions and claims (other than Permitted Liens (defined in
Section 8 hereof)), the assets of the Fund consisting of portfolio
securities, cash (excluding the Cash Reserve as defined below) and
receivables (other than any unpaid portion of the $35,000 referred
to in Section 8 hereof validly due and owing to the Fund) as the
same shall exist on that date (the "Assets") and (ii) OTFBF shall
deliver to the Fund (in accordance with Section 5 hereof) in
exchange therefor, the Consideration Shares. The Assets shall
exclude a cash reserve (the "Cash Reserve") which shall be retained
by the Fund for the payment by it in respect of Dissenting Shares
(as discussed in Section 5 hereof), and the Liabilities (as
hereinafter defined) of the Fund, if any, and which Cash Reserve
shall not exceed the amount contemplated by Section 10E. The
aggregate number of Consideration Shares to be delivered by OTFBF
at the closing shall be such number as shall have, as of the
Valuation Time, an aggregate net asset value equal to the value of
the Assets so transferred and delivered. The issuance of
Consideration Shares to the Fund pursuant to this Agreement shall
be without any sales charge or sales load.
3. The net asset value of the Consideration Shares of OTFBF
and the value of the Assets shall in each case be determined as of
the close of business of the New York Stock Exchange on the
business day immediately preceding the Closing Date (the "Valuation
Time"). The foregoing valuation shall be prepared using the method
consistently used by OTFBF in the ordinary course prior to the date
of this Agreement to compute the net asset value of its shares and
shall be based on information extracted from Interactive Data, an
independent portfolio pricing service ("Interactive"). OTFBF
agrees that, promptly after receipt of a listing of the Fund's
portfolio securities and cusip or ticket numbers therefor, which
listing shall be delivered by the Fund at the Valuation Time and
contain information as of such time, OTFBF shall obtain from
Interactive the market value for each such portfolio security; the
Fund acknowledges that OTFBF shall take such action as a
convenience to the Fund only at the Fund's request, and that OTFBF
makes no representation or warranty as to the accuracy or
completeness of any such information. In accordance with the
foregoing, OTFBF and the Fund shall each respectively prepare a
report setting forth, as of the Valuation Time, its respective
total net assets, the number of its shares outstanding, the net
asset value of the Class A shares or the net asset value of the
Fund's shares, respectively, and as to each of its portfolio
securities, the cusip or ticket number, description thereof, units
held and market value determined as aforesaid (the "Valuation
Report"). A Valuation Report shall be delivered by each of OTFBF
and the Fund to the other on the Closing Date.
The Fund shall declare and pay, at least one but not more
than 20 business days prior to the Closing Date, a dividend or
dividends which, together with all previous such dividends, shall
have the effect of distributing to the Fund's shareholders all of
the Fund's investment company taxable income for all periods since
1979 through and including the Closing Date (computed without
regard to any dividends paid deduction), all of the Fund's net
capital gain, if any, realized in such periods (after reduction for
any capital loss carry-forward) and at least 90% of the excess, if
any, of the Fund's interest income excludable from gross income
under Section 103(a) of the Code over its deductions disallowed
under Section 265 or Section 171(a)(2) of the Code for the period
from January 1, 1993 through the Closing Date.
4. The closing shall be held at the offices of Oppenheimer
Management Corporation, Two World Trade Center, Suite 3400, New
York, New York 10048, at 2:00 P.M. (New York time) on the 20th
business day following the later to occur of: (i) the receipt of
favorable rulings from the Internal Revenue Service as to the
matters set forth in Items 1 through 10 under "Rulings Requested"
in the private letter ruling request by the Fund, a copy of which
is attached hereto as Exhibit 4 (the "IRS Rulings"); and (ii) the
receipt of the requisite approval by the shareholders of the Fund
of the Agreement and the transactions contemplated hereby, or at
such other time or place as the parties may designate (the "Closing
Date").
In the event that, as of the Valuation Time scheduled
pursuant to the prior paragraph, the valuation referred to in
Section 3 cannot be effected for any reason beyond the control of
the affected party, including, but not limited to, a suspension in
trading or if OTFBF has, pursuant to the 1940 Act or any rule,
regulation or order thereunder, suspended the redemption of its
shares or postponed payment therefor, the Closing Date shall be
postponed until the third business day after the date when the
affected party shall have notified the other that a valuation can
be effected or that, as to OTFBF, it has ceased such suspension or
postponement; provided, however, that if such condition preventing
the valuation, or such suspension, shall continue for a period of
60 days beyond the Valuation Time, then the non-affected party
shall be permitted to terminate this Agreement without liability to
the other for such termination.
5. As soon as practicable after the closing, the Fund shall
distribute on a pro rata basis to its Shareholders the
Consideration Shares in liquidation of the Fund. For the purpose
of the distribution by the Fund of the Consideration Shares to the
Shareholders, OTFBF will promptly cause its transfer and
shareholder servicing agent (the "Agent") to: (a) credit an
appropriate number of shares of OTFBF on the books of OTFBF to each
Shareholder of the Fund in accordance with a list (the "Shareholder
List") of the Shareholders received at or prior to closing from the
Fund; and (b) confirm the issuance of an appropriate number of
shares of OTFBF to each Shareholder; certificates for shares of
OTFBF will be issued only upon written request of a Shareholder but
only for whole shares with fractional shares credited to the name
of the Shareholder on the books of OTFBF.
The Shareholder List shall indicate, as of the Valuation
Time, the name, address and taxpayer I.D. number of each
Shareholder, indicating his or her share balance and whether such
shares are represented by certificates and, if so, the certificate
numbers thereof and such other information as the Agent may
reasonably request. The Fund agrees to supply the Shareholder List
to OTFBF not later than the Closing Date. The Fund further agrees
to deliver to OTFBF on or before the Closing Date all such other
information and documents available to the Fund relating to
Shareholders as may be necessary for OTFBF and the Agent to perform
all necessary shareholder accounting, communication and related
services subsequent to the reorganization. No Shareholder holding
certificates representing shares in the Fund shall be required to
surrender his, her or its certificates to anyone in connection with
the reorganization. After the reorganization, however, it will be
necessary for such Shareholders to surrender such certificates (or
provide indemnities reasonably acceptable to OTFBF in respect of
lost certificates) in order to receive certificates representing
Class A Shares or to redeem, transfer or exchange the Class A
Shares which they received.
Notwithstanding anything in this Agreement to the contrary,
holders of shares of the Fund outstanding at the Valuation Time who
have not voted in favor of this Agreement and the transactions
contemplated hereby, including the reorganization, and who have
elected to receive payment with respect thereto under Section 910
and in accordance with Section 623 of the New York Business
Corporation Law (the "NYBCL") shall not be considered Shareholders
and shall not be entitled to receive shares of OTFBF as provided
above, but shall only be entitled to receive from the Fund payment
of the "fair value" of the shares of the Fund held on the Valuation
Date as to which they have dissented (the "Dissenting Shares") in
accordance with the provisions of such Section 623; except that
each Dissenting Share held by a shareholder who shall thereafter
withdraw such election to receive payment or otherwise lose the
right to receive payment (such event, the "Loss of Payment Right")
as provided in Section 623, shall thereupon be deemed to have been
converted into the right to receive (promptly following receipt of
the payment referred to in the second following sentence) and OTFBF
shall thereupon issue the number of Class A Shares determined by
dividing the Deemed Value of a Dissenting Share (as defined below)
by the net asset value of one Class A Share at the close of
business on the day of the Loss of Payment Right (or, if such day
shall not be a business day, the next succeeding business day) and
such shareholder shall thereafter have the rights of a
"Shareholder" for the purposes of this Agreement. The term "Deemed
Value of a Dissenting Share" means the quotient determined by
dividing the value of the Assets transferred at the Closing by the
number of outstanding shares of the Fund (excluding the number of
Dissenting Shares) on the Valuation Date. A portion of the Cash
Reserve equal to the Deemed Value of a Dissenting Share shall be
paid by the Fund to OTFBF in consideration of the issuance of such
shares for each share of the Fund subject to a Loss of Payment
Right. Any amounts determined to be payable for Dissenting Shares
shall be paid by the Fund out of the Cash Reserve. Except for any
issuance of additional Class A Shares in respect of Dissenting
Shares subject to a Loss of Payment Right, OTFBF shall not be
liable for any obligations, claims or liabilities incurred in
connection with the subject matter of this paragraph. The Fund
shall give OTFBF prompt notice of any elections to receive payment,
withdrawals or attempted withdrawals of such elections, of amounts
determined to be payable for Dissenting Shares subject to a Loss of
Payment Right and the bases therefor and any other instruments
served pursuant to the NYBCL or otherwise received by the Fund
relating to shareholders' rights under Sections 910 and 623 of the
NYBCL.
6. Within one year after the closing, the Fund shall (a) pay
or make provision for payment of all of its Liabilities and (b)
distribute any remaining amount of the Cash Reserve (after paying
or making provisions for such Liabilities and the estimated cost of
making the distribution) to the Shareholders. If the foregoing
cannot be effectuated within one year after the closing, despite
good faith efforts of the Fund, the Fund will, at the end of such
one-year period, transfer the remaining amount of the Cash Reserve
to a liquidating trust upon terms reasonably acceptable to OTFBF.
7. Portfolio securities or written evidence acceptable to
OTFBF of record ownership thereof by The Depository Trust Company
or through the Federal Reserve Book Entry System or any other
depository approved by the Fund pursuant to Rule 17f-4 under the
1940 Act shall be endorsed and delivered, or transferred by
appropriate transfer or assignment documents, by the Fund on the
Closing Date to OTFBF, or at its direction, to OTFBF's custodian
bank, in proper form for transfer and in such condition as to
constitute good delivery thereof in accordance with the custom of
brokers and shall be accompanied by all necessary state transfer
stamps, if any, or funds for the appropriate purchase price
thereof. Prior to the Closing Date, the Fund shall make the
portfolio securities available for inspection by the custodian.
Any cash included in the Assets shall, at the Fund's option, be
delivered in the form of certified or bank cashiers' checks, by
bank wire or other method of transfer acceptable to OTFBF payable
to the order of OTFBF for the account of OTFBF. The Consideration
Shares registered in the name of the Fund, shall be transferred to
the Fund on the Closing Date and shall thereupon be assigned and
distributed by the Fund to its shareholders as provided in Section
5 hereof.
If, at the Closing Date, the Fund is unable to make
delivery under this Section 7 to OTFBF of any of its portfolio
securities or cash for the reason that any of such securities
purchased by the Fund, or the cash proceeds of a sale of portfolio
securities, prior to the Closing Date have not yet been delivered
to it or the Fund's custodian, then the delivery requirements of
this Section 7 with respect to said undelivered securities or cash
will be waived and the Fund will deliver to OTFBF by or on the
Closing Date and with respect to said undelivered securities or
cash executed copies of an agreement or agreements of assignment of
such securities or cash to OTFBF in a form satisfactory to OTFBF,
together with such other documents, including a due bill or due
bills and brokers' confirmation slips as may reasonably be required
by OTFBF.
8. OTFBF shall not assume and shall not otherwise be
responsible for any liabilities (except the obligations, if any, to
pay the purchase price of portfolio securities purchased by the
Fund which have not settled ("Permitted Liens")), taxes,
obligations, expenses, contracts, commitments, agreements and
arrangements relating to (i) the Assets or (ii) the Fund, the
Fund's predecessors and the Fund's affiliates, directors, officers,
employees and agents, in each case, whether fixed, contingent,
accrued or otherwise ("Liabilities"). The Fund expressly agrees to
remain liable for and discharge all its Liabilities whether
incurred prior to or subsequent to the Closing Date. The cost of
filing, printing and mailing the Proxy Statement and Prospectus (as
defined in Section 14) and related solicitation material associated
with this reorganization will be paid by the Fund. Any documents
such as existing prospectuses or annual reports that are included
in that mailing will be a cost of the fund issuing the document.
Any other out-of-pocket expenses associated with this
reorganization, including legal, accounting and tax, and transfer
agent expenses, will be borne by the party that incurred such
expense. Notwithstanding the foregoing, at the closing OTFBF shall
cause one of its affiliates to pay to the Fund on behalf of OTFBF,
promptly after receipt by OTFBF of reasonably detailed vouchers
therefor, the Fund's reasonable and necessary expenses which are
solely and directly related to this reorganization in an aggregate
amount not to exceed $35,000; provided, that, if for any reason the
reorganization shall not be consummated, any of such expenses
previously reimbursed to the Fund shall be repaid to OTFBF on
behalf of its affiliate and any further right of the Fund to
reimbursement under this Section 8 shall cease.
9. The obligations of OTFBF hereunder shall be subject to the
following conditions, unless waived in writing by OTFBF, and the
Fund shall use its best efforts to cause the following conditions
to be satisfied in a timely manner:
A. The Board of Directors of the Fund shall have authorized
the execution of this Agreement and the transactions contemplated
hereby, and the shareholders of the Fund shall have approved the
Agreement and the transactions contemplated herein; such
shareholder approval shall have been by the vote of the holders of
two-thirds of the outstanding shares of the Fund in conformity with
the provisions of the NYBCL at a meeting for which proxies have
been solicited by the Proxy Statement and Prospectus; and the Fund
shall have furnished to OTFBF copies of resolutions with respect to
each of the foregoing certified by the Secretary or an Assistant
Secretary of the Fund.
B. OTFBF shall have received an opinion dated the Closing
Date of counsel to the Fund, to the effect that: (i) the Fund is
a corporation duly organized, validly existing and in good standing
under the laws of the State of New York with full corporate power
to enter into and perform this Agreement; (ii) all corporate action
necessary to make this Agreement, according to its terms, valid,
binding and enforceable on the Fund and to authorize the
transactions contemplated by this Agreement have been taken by the
Fund; (iii) the Agreement has been duly executed and delivered by
the Fund and constitutes a valid and binding obligation of the
Fund, enforceable against the Fund in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and similar laws affecting
creditors rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity
(the "Bankruptcy Exception")); and (iv) the execution and delivery
of this Agreement does not, and the consummation of the
transactions contemplated by the Agreement will not, conflict with,
or result in any violation of, or constitute a default (with or
without notice or lapse of time, or both) under (a) the Certificate
of Incorporation or By-Laws of the Fund, or (b) any loan, credit
agreement, note, bond, mortgage, indenture, lease or contract
applicable to the Fund, its assets and properties as identified to
such counsel by the Fund (other than any such conflicts, violations
or defaults that individually or in the aggregate would not have a
material adverse effect on the Fund or prevent consummation of the
transactions contemplated hereby), or (c) any judgment, order or
decree known to such counsel to which the Fund is subject or any
state or federal law or regulation applicable to the Fund or its
assets and properties.
C. The representations and warranties of the Fund contained
herein shall be true and correct in all material respects at and as
of the Closing Date and the Fund shall have performed, in all
material respects, each of the covenants required to be performed
by the Fund at or prior to closing, and OTFBF shall have been
furnished with a certificate of the President or the Vice President
of the Fund, dated the Closing Date, to that effect.
D. On the Closing Date, the Fund shall have furnished to
OTFBF a certificate of the Treasurer or Assistant Treasurer of the
Fund as to the amount of the capital loss carry-over and net
unrealized appreciation or depreciation, if any, with respect to
the Fund as of the Closing Date.
E. The Cash Reserve shall not exceed 5% of the value of the
net assets, nor 5% in value of the gross assets, of the Fund at the
Valuation Time.
F. A Registration Statement filed by OTFBF under the
Securities Act of 1933, as amended (the "Securities Act"), on Form
N-14 and containing a preliminary form of the Proxy Statement and
Prospectus shall have become effective under the Securities Act not
later than December 31, 1993 and shall remain in effect through to
the Closing Date with no stop order being issued thereon.
G. OTFBF shall have received a letter of an executive
officer of the Fund in form reasonably acceptable to OTFBF stating
that between the date hereof and the Closing Date there has been no
material adverse change in the Assets, the operations or the
financial condition of the Fund (it being understood that a
decrease in the size of the Fund due to a diminution in the value
of its portfolio shall not be considered a material adverse change)
and that nothing has come to his attention which would indicate
that as of the Closing Date there were any Liabilities of the Fund
not fully covered by the Cash Reserve or expected not to be so
covered or litigation with respect to the Fund not set forth on
Exhibit 11.M.
H. OTFBF shall have received a copy of the IRS Rulings.
I. OTFBF shall have received at the closing all of the
Assets to be conveyed hereunder, free and clear of all liens,
encumbrances, security interests, restrictions and limitations
whatsoever except the Permitted Liens.
J. No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the reorganization shall be in effect.
K. At or prior to the Closing Date, the Fund shall have
delivered to OTFBF two copies of a list setting forth the
securities then owned by the Fund and the respective federal income
tax bases thereof.
10. The obligations of the Fund hereunder shall be subject to
the following conditions, unless waived in writing by the Fund, and
OTFBF shall use its best efforts to cause the following conditions
(excluding Section 11B, 11E and 11F) to be satisfied in a timely
manner:
A. The Board of Trustees of OTFBF shall have authorized
the execution of this Agreement, and the transactions contemplated
hereby, and OTFBF shall have furnished to the Fund copies of
resolutions to that effect certified by the Secretary or an
Assistant Secretary of OTFBF.
B. The Fund's shareholders shall have approved this
Agreement and the transactions contemplated hereby, by an
affirmative vote of the holders of two-thirds of the outstanding
voting shares of the Fund.
C. The Fund shall have received an opinion dated the
Closing Date of counsel to OTFBF, to the effect that: (i) OTFBF is
a Massachusetts business trust duly organized, validly existing and
in good standing under the laws of the Commonwealth of
Massachusetts; (ii) all action necessary to make this Agreement,
according to its terms, valid, binding and enforceable upon OTFBF
and to authorize effectively the transactions contemplated thereby
have been taken by OTFBF; (iii) except as otherwise set forth in
the Proxy Statement and Prospectus under "Additional Information -
Description of the Fund and its Shares" and the Statement of
Additional Information under "Additional Information" for OTFBF,
the Consideration Shares to be issued hereunder are duly authorized
and when issued will be validly issued, fully-paid and non-
assessable; and (iv) the Agreement has been duly executed and
delivered by OTFBF and constitutes a valid and binding obligation
of OTFBF, enforceable against OTFBF in accordance with its terms,
subject to the Bankruptcy Exception.
D. The representations and warranties of OTFBF contained
herein shall be true and correct in all material respects at and as
of the Closing Date and OTFBF shall have performed, in all material
respects, each of the covenants required to be performed by OTFBF
at or prior to the closing, and the Fund shall have been furnished
with a certificate of the President or the Vice President of OTFBF
to that effect dated the Closing Date.
E. The Fund shall have received the IRS Rulings.
F. The Cash Reserve shall not exceed 5% of the value of
the net assets, nor 5% in value of the gross assets, of the Fund at
the Valuation Time.
G. A Registration Statement filed by OTFBF under the
Securities Act on Form N-14, containing a preliminary form of the
Proxy Statement and Prospectus shall have become effective under
the Securities Act not later than December 31, 1993 and shall
remain in effect through to the Closing Date with no stop order
being issued thereon.
H. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the reorganization shall be in
effect.
11. The Fund hereby represents and warrants that:
A. The financial statements of the Fund as at December 31,
1992 (audited), March 31, 1993 (unaudited) and June 30, 1993
(unaudited) heretofore furnished to OTFBF, present fairly the
financial position, results of operations, and changes in net
assets of the Fund as of their respective dates and for their
respective periods, as applicable, in conformity with generally
accepted accounting principles applied on a basis consistent with
the preceding year; and from December 31, 1992 through the date
hereof there has not been, and through the Closing Date there will
not be, any material adverse change in the business or financial
condition of the Fund, it being agreed that a decrease in the size
of the Fund due to a diminution in the value of its portfolio shall
not be considered a material adverse change.
B. Exhibit 11.B. sets forth the assets of the Fund as of
the date hereof including, with respect to the Fund's portfolio
securities, a description thereof, the number of units held and the
corresponding cusip or ticket number. Contingent upon approval of
this Agreement by the Fund's shareholders, the Fund has authority
to transfer all of the assets of the Fund to be conveyed hereunder
free and clear of all liens, encumbrances, security interests,
restrictions and limitations whatsoever excluding the Permitted
Liens.
C. The Registration Statement of the Fund on Form N-2, as
amended, was, as of the date of the filing of the last Post-
Effective Amendment, true, correct and complete, conformed to the
requirements of the Securities Act and the 1940 Act and did not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading.
D. Except as set forth on Exhibit 11.D., there are no
Liabilities in existence as of the date hereof.
E. Except as set forth on Exhibit 11.E., there are no
contracts, agreements or commitments in existence, whether written
or oral, to which the Fund (or a predecessor) is a party or has
succeeded to a party by assumption or assignment or in which it has
a beneficial interest other than those entered into by the Fund in
the ordinary conduct of its business and the Fund has delivered or
made available to OTFBF, as to each such contract, agreement or
other commitment, a true and complete copy or description thereof
and as to any oral contract, agreement or other commitment, a true
and complete description thereof.
F. The Fund is a corporation duly organized, validly
existing and in good standing under the laws of the State of New
York, with the requisite corporate power and authority to enter
into and perform this Agreement and, subject to approval of its
shareholders, to consummate the transactions contemplated hereby;
all corporate action necessary to make this Agreement, according to
its terms, valid, binding and enforceable on the Fund and to
authorize the transactions contemplated by this Agreement have been
taken by the Fund subject to approval of this Agreement by the
shareholders of the Fund; the Agreement has been duly executed and
delivered by the Fund and constitutes a valid and binding
obligation of the Fund, enforceable against the Fund in accordance
with its terms, subject to the approval of its shareholders and the
Bankruptcy Exception; the execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated by
the Agreement will not, conflict with, or result in any violation
of, or constitute a default (with or without notice or lapse of
time, or both) under (a) the Certificate of Incorporation or By-
Laws of the Fund, or (b) any loan, credit agreement, note, bond,
mortgage, indenture, lease or contract applicable to the Fund, its
assets and properties (other than any such conflicts, violations or
defaults that individually or in the aggregate would not have a
material adverse effect on the Fund or prevent consummation of the
transactions contemplated hereby), or (c) any judgment, order or
decree to which the Fund is subject or any state or federal law or
regulation applicable to the Fund or its assets and properties; and
the Fund is duly registered under the 1940 Act (and such
registration has not been revoked or rescinded and is in full force
and effect).
G. All Federal and other tax returns and reports of the
Fund required by law to be filed have been filed, and all Federal
and other taxes shown to be due on said returns and reports have
been paid or provision shall have been made for the payment thereof
and to the best of the knowledge of the Fund no such return is
currently under audit and no assessment has been asserted with
respect to such returns and to the extent such tax returns with
respect to the taxable year of the Fund ended December 31, 1992
have not been filed, such returns will be filed when required and
the amount of tax shown as due thereon shall be paid when due.
H. The Fund has elected to be treated as a regulated
investment company and, since its election in 1980 to the present,
the Fund has met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company and
the Fund intends to meet such requirements with respect to its
current taxable year.
I. There are 1,626,594 shares of common stock of the Fund,
par value $.10 per share, issued and outstanding, which shares
constitute the only outstanding shares of the Fund. There are no
outstanding rights, options, warrants, conversion rights,
preemptive rights or agreements with respect to shares of the Fund.
Set forth on Exhibit 11.I. hereto are the names, addresses and
share ownership amounts of each shareholder of the Fund that
beneficially (as that term is defined under the federal securities
laws) owns 1% or more of the Fund's outstanding shares.
J. The copies of the Certificate of Incorporation and By-
laws of the Fund, and all amendments thereto, previously delivered
to OTFBF are true, complete and correct.
K. There is no plan or intention by any Fund shareholder
who owns 1% or more of the Fund's outstanding shares, and, to the
Fund's best knowledge, there is no plan or intention on the part of
the remaining Fund shareholders, to redeem, sell, exchange or
otherwise dispose of a number of Consideration Shares received in
the transaction that would reduce the Fund shareholders' ownership
of OTFBF shares to a number of shares having a value, as of the
Closing Date, of less than 50% of the value of all of the formerly
outstanding Fund shares as of the same date. With respect to the
foregoing representation, attached hereto as Exhibit 11.K. are true
and complete copies of representation letters signed by each such
1% or greater shareholder.
L. No consent, approval, governmental filing,
authorization or permit from any person or entity is necessary for
the execution and delivery of this Agreement and the consummation
of the transactions contemplated by this Agreement.
M. Except as set forth on Exhibit 11.M., there are no
claims, actions, suits, proceedings or investigations pending, or,
to the best of the Fund's knowledge, threatened, by or against or
involving the Fund or any predecessor or affiliate of the Fund, or
any director, officer, employee or agent of the Fund.
12. OTFBF hereby represents and warrants that:
A. The financial statements of OTFBF as at December 31,
1992 (audited) and June 30, 1993 (unaudited) heretofore furnished
to the Fund, present fairly the financial position, results of
operations, and changes in net assets of OTFBF, as of their
respective dates and for their respective periods, as applicable,
in conformity with generally accepted accounting principles applied
on a basis consistent with the preceding year; and from December
31, 1992 through the date hereof there have not been, and through
the Closing Date there will not be, any material adverse changes in
the business or financial condition of OTFBF, it being understood
that a decrease in the size of OTFBF due to a diminution in the
value of its portfolio and/or redemption of its shares shall not be
considered a material or adverse change.
B. The prospectus of OTFBF contained in the most recent
Post-Effective Amendment to its Registration Statement on Form N-1A
under the Securities Act, as subsequently amended or supplemented,
is true, correct and complete, conforms to the requirements of the
Securities Act and does not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading. The Registration Statement of OTFBF under the
Securities Act was, as of the date of the filing of the last Post-
Effective Amendment, true, correct and complete, conformed to the
requirements of the Securities Act and did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
C. OTFBF is a Massachusetts business trust duly organized,
validly existing and in good standing under the laws governing
Massachusetts business trusts with the requisite power and
authority granted to business trusts to enter into and perform this
Agreement and consummate the transactions contemplated hereby; all
necessary action necessary to make this Agreement, according to its
terms, valid, binding and enforceable on OTFBF and to authorize the
transactions contemplated by this Agreement have been taken by
OTFBF; the Agreement has been duly executed and delivered by OTFBF
and constitutes a valid and binding obligation of OTFBF,
enforceable against OTFBF in accordance with its terms, subject to
the Bankruptcy Exception; the execution and delivery of this
Agreement does not, and the consummation of the transactions
contemplated by the Agreement will not, conflict with, or result in
any violation of, or constitute a default (with or without notice
or lapse of time, or both) under (a) the Declaration of Trust or
By-Laws of OTFBF, or (b) any loan, credit agreement, note, bond,
mortgage, indenture, lease or contract applicable to OTFBF, its
assets and properties (other than any such conflicts, violations or
defaults that individually or in the aggregate would not have a
material adverse effect on the Fund or prevent consummation of the
transactions contemplated hereby), or (c) any judgment, order or
decree to which OTFBF is subject or any state or federal law or
regulation applicable to OTFBF or its assets and properties; the
Consideration Shares which it issues to the Fund pursuant to this
Agreement will be duly authorized, validly issued, fully-paid and
non-assessable, except as otherwise set forth in the Prospectus of
OTFBF dated March 16, 1993, supplemented May 1, 1993, under
"Additional Information - Description of the Fund and its Shares"
and the Statement of Additional Information of OTFBF dated March
16, 1993 under "Additional Information"; will conform to the
description thereof contained in OTFBF's Registration Statement on
Form N-1A (except that the Consideration Shares will be issued
pursuant to this Agreement without any sales load or sales charge),
and will be duly registered under the Securities Act and in the
states where registration is required; and OTFBF is duly registered
under the 1940 Act (and such registration has not been revoked or
rescinded and is in full force and effect).
D. All Federal and other tax returns and reports of OTFBF
required by law to be filed have been filed, and all Federal and
other taxes shown due on said returns and reports have been paid or
provision shall have been made for the payment thereof and to the
best of the knowledge of OTFBF no such return is currently under
audit and no assessment has been asserted with respect to such
returns and to the extent such tax returns with respect to the
taxable year of OTFBF ended December 31, 1992 have not been filed,
such returns will be filed when required and the amount of tax
shown as due thereon shall be paid when due.
E. OTFBF has elected to be treated as a regulated
investment company and, for each fiscal year of its operations,
OTFBF has met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company and
OTFBF intends to meet such requirements with respect to its current
taxable year.
F. OTFBF has no plan or intention to reacquire any shares
of its capital stock issued in the transaction, other than pursuant
to a valid request of a shareholder in accordance with OTFBF's
normal redemption policy.
G. OTFBF has no plan or intention to sell or otherwise
dispose of any of the Assets acquired in the reorganization
contemplated by this Agreement, except for dispositions made in the
ordinary course of business.
H. Following the transactions contemplated by this
Agreement, OTFBF will continue the historic business of the Fund or
use a significant portion of the Fund's historic business assets in
a business.
I. There is no intercorporate indebtedness existing
between OTFBF and the Fund that was issued or acquired, or will be
settled, at a discount.
J. OTFBF does not own, directly or indirectly, nor has it
owned during the past five years, directly or indirectly, any
shares of the capital stock of the Fund.
13. Each party hereby represents and warrants to the other
that the information concerning it in the Proxy Statement and
Prospectus will not as of its date or at any time thereafter and
through the Closing Date contain any untrue statement of a material
fact or omit to state a fact necessary to make the statements
concerning it therein not misleading and that the financial
statements concerning it will present the information shown fairly
in accordance with generally accepted accounting principles applied
on a basis consistent with the preceding year. OTFBF hereby
represents to and covenants with the Fund that, if the
reorganization becomes effective, OTFBF will treat each shareholder
of the Fund who received any of its shares as a result of the
reorganization as having made the minimum initial investment of
shares of OTFBF for the purpose of making additional investments in
shares of OTFBF, regardless of the value of the shares of OTFBF
received.
14. OTFBF agrees that it will prepare and file a Registration
Statement under the Securities Act on Form N-14 and which shall
contain a preliminary form of proxy statement and prospectus
contemplated by Rule 145 under the Securities Act. The final form
of such proxy statement and prospectus is referred to in this
Agreement as the "Proxy Statement and Prospectus" and that term
shall include any prospectus to shareholders of OTFBF which is
included in the material mailed to the shareholders of the Fund.
Each party agrees that it will use its best efforts to have such
Registration Statement declared effective and to supply such
information concerning itself for inclusion in the Proxy Statement
and Prospectus as may be necessary or desirable in this connection.
15. (a) The Fund covenants and agrees to afford to OTFBF,
its counsel, accountants and other representatives reasonable
access, during normal business hours throughout the period prior to
the Closing Date, to the books, records, employees and
representatives of the Fund. Simultaneously with the execution of
this Agreement, the parties shall execute a confidentiality
agreement in the form of Exhibit 15(a) hereto.
(b) The Fund represents and warrants that set forth on
Exhibit 15(b) hereto is a true and complete description of its
investment objectives, investment policies and investment
restrictions, all of which are in full force and effect as of the
date hereof, and the Fund covenants and agrees that during the
period from the date hereof until the Closing Date such investment
objectives, investment policies and investment restrictions will
not be changed in any manner whatsoever except pursuant to a
statutory amendment or regulatory requirement during such time.
(c) The Fund covenants that during the period from the
date hereof until the Closing Date, except as otherwise consented
to, or approved in writing by OTFBF or expressly provided for in
this Agreement, the Fund (i) will not conduct its business other
than in the ordinary course substantially in the manner heretofore
conducted and consistent with the Fund's investment objectives,
policies and restrictions as set forth on Exhibit 15(b) hereto,
(ii) will not permit or allow any of the Assets to be subjected to
any encumbrance other than Permitted Liens, (iii) will not enter
into any material transaction or otherwise incur any material
Liability other than in the normal course of business consistent
with past practice, (iv) will not declare, set aside or pay any
dividend or make any other distribution except for payment of its
regular quarterly dividends consistent with past practice, and (v)
will not agree, whether in writing or otherwise, to do any of the
foregoing. Notwithstanding the foregoing, the Fund covenants that
(x) between the date of this Agreement and the Closing Date,
promptly following any transaction involving an acquisition or
disposition by the Fund of portfolio securities, the Fund shall
provide to OTFBF a written report detailing such transaction and
(y) upon the request of OTFBF, to promptly sell one or more
portfolio securities acquired by the Fund between the date of this
Agreement and the Closing Date and (z) to transfer to OTFBF on the
Closing Date only those Assets the acquisition of which will permit
OTFBF to be in compliance with all of its investment policies and
restrictions.
(d) Each of the parties covenants and agrees to use its
best efforts (which will not include the payment of money or
expenditures in excess of nominal amounts) to obtain at the
earliest practicable date and prior to the closing all notices,
consents, approvals, governmental filings, authorizations and
permits and to take all other action necessary to the consummation
of the transactions contemplated by this Agreement; the Fund
covenants and agrees to use its best efforts to cause as of the
Closing Date the discharge and satisfaction of such Liabilities and
other obligations as may reasonably be discharged as of such date.
(e) The Fund covenants and agrees to comply with the
provisions of Sections 910 and 623 of the NYBCL.
(f) The Fund covenants and agrees to maintain in the
ordinary course consistent with past practice its books and records
through to the date of its dissolution and liquidation and to
prepare and file all documents, reports and instruments and take
such action, including, without limitation, under the federal
securities laws and state laws, that is required or appropriate to
be filed or taken by it prior to, and/or in connection with, its
dissolution and liquidation.
16. The obligations of the parties under this Agreement shall
be subject to the right of either party to abandon and terminate
this Agreement without liability, including pursuant to Section 8
hereof, if (i) the other party breaches any material provision of
this Agreement and fails to cure such breach within a reasonable
period of time after reasonable notice, (ii) if any legal,
administrative or other proceeding shall be instituted or
threatened between the date of this Agreement and the Closing Date
(a) seeking to restrain or otherwise prohibit the transactions
contemplated hereby and/or (b) asserting a material liability of
either party, which proceeding or liability has not been terminated
or the threat thereof removed prior to the Closing Date or (c) the
Closing Date shall not have occurred by March 31, 1994 as a result
of a failure to obtain requisite shareholder approval or a
favorable IRS Ruling.
17. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all taken together
shall constitute one Agreement. The rights and obligations of each
party pursuant to this Agreement shall not be assignable.
18. All prior or contemporaneous agreements and
representations are merged into this Agreement, which constitutes
the entire contract between the parties hereto. No amendment or
modification hereof shall be of any force and effect unless in
writing and signed by the parties and no party shall be deemed to
have waived any provision herein for its benefit unless it executes
a written acknowledgement of such waiver.
19. The Fund understands that the obligations of OTFBF under
this Agreement are not binding upon any Trustee or shareholder of
OTFBF personally, but bind only OTFBF and OTFBF's property. The
Fund represents that it has notice of the provisions of the
Declaration of Trust of OTFBF disclaiming shareholder and Trustee
liability for acts or obligations of OTFBF.
20. Neither of the parties shall make any press release of the
transactions contemplated by this Agreement, or any discussion in
connection therewith, without the prior written consent of the
other party. The preceding sentence shall not apply to any
disclosures required to be made by applicable laws, as determined
by counsel; however, the applicable party shall consult with the
other party concerning the timing and content of such disclosure
before making it.
21. The representations, warranties and covenants set forth
in this Agreement shall survive the closing.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed and attested by its officers thereunto
duly authorized on the date first set forth above.
M I FUND, INC.
Attest:________________________ By: _____________________
Name: Harvey Silverman Name: Steven Meltzer
Title: Secretary Title: President
OPPENHEIMER TAX-FREE
BOND FUND
Attest:________________________ By: ______________________
Name: Andrew J. Donohue Name: Robert E. Patterson
Title: Secretary Title: Vice President
<PAGE>
EXHIBIT B
Section 623. Procedure to enforce shareholder's right to
receive payment for shares. (a) A shareholder intending to
enforce his right under a section of this chapter to receive
payment for his shares if the proposed corporate action referred to
therein is taken shall file with the corporation, before the
meeting of shareholders at which the action is submitted to a vote,
or at such meeting but before the vote, written objective to the
action. The objection shall include a notice of his election to
dissent, his name and residence address, the number and classes of
shares as to which he dissents and a demand for payment of the fair
value of his shares if the action is taken. Such objection is not
required from any shareholder to whom the corporation did not give
notice of such meeting in accordance with this chapter or where the
proposed action is authorized by written consent of shareholders
without a meeting.
(b) Within ten days after the shareholders' authorization
date, which term as used in this section means the date on which
the shareholders' vote authorizing such action was taken, or the
date on which such consent without a meeting was obtained from the
requisite shareholders, the corporation shall give written notice
of such authorization or consent by registered mail to each
shareholder who filed written objection or from whom written
objection was not required, excepting any shareholder who voted for
or consented in writing to the proposed action and who thereby is
deemed to have elected not to enforce his right to receive payment
for his shares.
(c) Within twenty days after the giving of notice to him, any
shareholder from whom written objection was not required and who
elects to dissent shall file with the corporation a written notice
of such election, stating his name and residence address, the
number and classes of shares as to which he dissents and a demand
for payment of the fair value of his shares. Any shareholder who
elects to dissent from a merger under section 905 (Merger of
subsidiary corporation) or paragraph (c) of section 907 (Merger or
consolidation of domestic and foreign corporations) or from a share
exchange under paragraph (g) of Section 913 (Share exchanges) shall
file a written notice of such election to dissent within twenty
days after the giving to him of a copy of the plan of merger or
exchange or an outline of the material features thereof under
section 905 or 913.
(d) A shareholder may not dissent as to less than all of the
shares, as to which he has a right to dissent, held by him of
record, that he owns beneficially. A nominee or fiduciary may not
dissent on behalf of any beneficial owner as to less than all of
the shares of such owner, as to which such nominee or fiduciary has
a right to dissent, held of record by such nominee or fiduciary.
(e) Upon consummation of the corporate action, the shareholder
shall cease to have any of the rights of a shareholder except the
right to be paid the fair value of his shares and any other rights
under this section. A notice of election may be withdrawn by the
shareholder at any time prior to his acceptance in writing of an
offer made by the corporation, as provided in paragraph (g), but in
no case later than sixty days from the date of consummation of the
corporate action except that if the corporation fails to make a
timely offer, as provided in paragraph (g), the time for
withdrawing a notice of election shall be extended until sixty days
from the date an offer is made. Upon expiration of such time,
withdrawal of a notice of election shall require the written
consent of the corporation. In order to be effective, withdrawal
of a notice of election must be accompanied by the return to the
corporation of any advance payment made to the shareholder as
provided in paragraph (g). If a notice of election is withdrawn,
or the corporate action is rescinded, or a court shall determine
that the shareholder is not entitled to receive payment for his
shares, or the shareholder shall otherwise lose his dissenters'
rights, he shall not have the right to receive payment for his
shares and he shall be reinstated to all his rights as a
shareholder as of the consummation of the corporation action,
including any intervening preemptive rights and the right to
payment of any intervening dividend or other distribution or, if
any such rights have expired or any such dividend or distribution
other than in cash has been completed, in lieu thereof, at the
election of the corporation, the fair value thereof in cash as
determined by the board as of the time of such expiration or
completion, but without prejudice otherwise to any corporate
proceedings that may have been taken in the interim.
(f) At the time of filing the notice of election to dissent
or within one month thereafter the shareholder of shares
represented by certificates shall submit the certificates
representing his shares to the corporation, or to its transfer
agent, which shall forthwith note conspicuously thereon that a
notice of election has been filed and shall return the certificates
to the shareholder or other person who submitted them on his
behalf. Any shareholder of shares represented by certificates who
fails to submit his certificates for such notation as herein
specified shall, at the option of the corporation exercised by
written notice to him within forty-five days from the date of
filing of such notice of election to dissent, lose his dissenter's
rights unless a court, for good cause shown, shall otherwise
direct. Upon transfer of a certificate bearing such notation, each
new certificate issued therefor shall bear a similar notation
together with the name of the original dissenting holder of the
shares and a transferee shall acquire no rights in the corporation
except those which the original dissenting shareholder had at the
time of transfer.
(g) Within fifteen days after the expiration of the period
within which shareholders may file their notices of election to
dissent, or within fifteen days after the proposed corporate action
is consummated, whichever is later (but in no case later than
ninety days from the shareholders' authorization date), the
corporation or, in the case of a merger or consolidation, the
surviving or new corporation, shall make a written offer by
registered mail to each shareholder who has filed such notice of
election to pay for his shares at a specified price which the
corporation considers to be their fair value. Such offer shall be
accompanied by a statement setting forth the aggregate number of
shares with respect to which notices of election to dissent have
been received and the aggregate number of holders of such shares.
If the corporate action has been consummated, such offer shall also
be accompanied by (1) advance payment to each such shareholder who
has submitted the certificates representing his shares to the
corporation, as provided in paragraph (f), of an amount equal to
eighty percent of the amount of such offer, or (2) as to each
shareholder who has not yet submitted his certificates a statement
that advance payment to him of an amount equal to eighty percent of
the amount of such offer will be made by the corporation promptly
upon submission of his certificates. If the corporate action has
not been consummated at the time of the making of the offer, such
advance payment or statement as to advance payment shall be sent to
each shareholder entitled thereto forthwith upon consummation of
the corporate action. Every advance payment or statement as to
advance payment shall include advice to the shareholder to the
effect that acceptance of such payment does not constitute a waiver
of any dissenters' rights. If the corporate action has not been
consummated upon the expiration of the ninety day period after the
shareholders' authorization date, the offer may be conditioned upon
the consummation of such action. Such offer shall be made at the
same price per share to all dissenting shareholders of the same
class, or if divided into series, of the same series and shall be
accompanied by a balance sheet of the corporation whose shares the
dissenting shareholder holds as of the latest available date, which
shall not be earlier than twelve months before the making of such
offer, and a profit and loss statement or statements for not less
than a twelve-month period ended on the date of such balance sheet
or, if the corporation was not in existence throughout such twelve
month period, for the portion thereof during which it was in
existence. Notwithstanding the foregoing, the corporation shall
not be required to furnish a balance sheet or profit and loss
statement or statements to any shareholder to whom such balance
sheet or profit and loss statement or statements were previously
furnished, nor if in connection with obtaining the shareholders'
authorization for or consent to the proposed corporate action the
shareholders were furnished with a proxy or information statement,
which included financial statements, pursuant to Regulation 14A or
Regulation 14C of the United States Securities and Exchange
Commission. If within thirty days after the making of such offer,
the corporation making the offer and any shareholder agree upon the
price to be paid for his shares, payment therefor shall be made
within sixty days after the making of such offer or the
consummation of the proposed corporate action, whichever is later,
upon the surrender of the certificates for any such shares
represented by certificates.
(h) The following procedure shall apply if the corporation
fails to make such offer within such period of fifteen days, or if
it makes the offer and any dissenting shareholder or shareholders
fail to agree with it within the period of thirty days thereafter
upon the price to be paid for their shares:
(1) The corporation shall, within twenty days after the
expiration of whichever is applicable of the two periods last
mentioned, institute a special proceeding in the supreme court in
the judicial district in which the office of the corporation is
located to determine the rights of dissenting shareholders and to
fix the fair value of their shares. If, in the case of merger or
consolidation, the surviving or new corporation is a foreign
corporation without an office in this state, such proceeding shall
be brought in the county where the office of the domestic
corporation, whose shares are to be valued, was located.
(2) If the corporation fails to institute such proceeding
within such period of twenty days, any dissenting shareholder may
institute such proceeding for the same purpose not later than
thirty days after the expiration of such twenty day period. If
such proceeding is not instituted within such thirty day period,
all dissenter's rights shall be lost unless the supreme court, for
good cause shown, shall otherwise direct.
(3) All dissenting shareholders, excepting those who, as
provided in paragraph (g), have agreed with the corporation upon
the price to be paid for their shares, shall be made parties to
such proceeding, which shall have the effect of an action quasi in
rem against their shares. The corporation shall serve a copy of
the petition in such proceeding upon each dissenting shareholder
who is a resident of this state in the manner provided by law for
the service of a summons, and upon each nonresident dissenting
shareholder either by registered mail and publication, or in such
other manner as is permitted by law. The jurisdiction of the court
shall be plenary and exclusive.
(4) The court shall determine whether each dissenting
shareholder, as to whom the corporation requests the court to make
such determination, is entitled to receive payment for his shares.
If the corporation does not request any such determination or if
the court finds that any dissenting shareholder is so entitled, it
shall proceed to fix the value of the shares, which, for the
purposes of this section, shall be the fair value as of the close
of business on the day prior to the shareholders' authorization
date. In fixing the fair value of the shares, the court shall
consider the nature of the transaction giving rise to the
shareholder's right to receive payment for shares and its effects
on the corporation and its shareholders, the concepts and methods
then customary in the relevant securities and financial markets for
determining fair value of shares of a corporation engaging in a
similar transaction under comparable circumstances and all other
relevant factors. The court shall determine the fair value of the
shares without a jury and without referral to an appraiser or
referee. Upon application by the corporation or by any shareholder
who is a party to the proceeding, the court may, in its discretion,
permit pretrial disclosure, including, but not limited to,
disclosure of any expert's reports relating to the fair value of
the shares whether or not intended for use at the trial in the
proceeding and notwithstanding subdivision (d) of section 3101 of
the civil practice laws and rules.
(5) The final order in the proceeding shall be entered
against the corporation in favor of each dissenting shareholder who
is a party to the proceeding and is entitled thereto for the value
of his shares so determined.
(6) The final order shall include an allowance for
interest at such rate as the court finds to be equitable, from the
date the corporate action was consummated to the date of payment.
In determining the rate of interest, the court shall consider all
relevant factors, including the rate of interest which the
corporation would have had to pay to borrow money during the
pendency of the proceeding. If the court finds that the refusal of
any shareholder to accept the corporate offer of payment for his
shares was arbitrary, vexatious or otherwise not in good faith, no
interest shall be allowed to him.
(7) Each party to such proceeding shall bear its own costs
and expenses, including the fees and expenses of its counsel and of
any experts employed by it. Notwithstanding the foregoing, the
court may, in its discretion, apportion and assess all or any part
of the costs, expenses and fees incurred by the corporation against
any or all of the dissenting shareholders who are parties to the
proceeding, including any who have withdrawn their notices of
election as provided in paragraph (e), if the court finds that
their refusal to accept the corporate offer was arbitrary,
vexatious or otherwise not in good faith. The court may, in its
discretion, apportion and assess all or any part of the costs,
expenses and fees incurred by any or all of the dissenting
shareholders who are parties to the proceeding against the
corporation if the court finds any of the following: (A) that the
fair value of the shares as determined materially exceeds the
amount which the corporation offered to pay; (B) that no offer or
required advance payment was made by the corporation; (C) that the
corporation failed to institute the special proceeding within the
period specified therefor; or (D) that the action of the
corporation in complying with its obligations as provided in this
section was arbitrary, vexatious or otherwise not in good faith.
In making any determination as provided in clause (A), the court
may consider the dollar amount or the percentage, or both, by which
the fair value of the shares as determined exceeds the corporate
offer.
(8) Within sixty days after final determination of the
proceeding, the corporation shall pay to each dissenting
shareholder the amount found to be due him, upon surrender of the
certificates for any such shares represented by certificates.
(i) Shares acquired by the corporation upon the payment of
the agreed value therefor or of the amount due under the final
order, as provided in this section, shall become treasury shares or
be cancelled as provided in section 515 (Reacquired shares), except
that, in the case of a merger or consolidation, they may be held
and disposed of as the plan of merger or consolidation may
otherwise provide.
(j) No payment shall be made to a dissenting shareholder
under this section at a time when the corporation is insolvent or
when such payment would make it insolvent. In such event, the
dissenting shareholder shall, at his option:
(1) Withdraw his notice of election, which shall in such
event be deemed withdrawn with the written consent of the
corporation; or
(2) Retain his status as a claimant against the
corporation and, if it is liquidated, be subordinated to the rights
of creditors of the corporation, but have rights superior to the
non-dissenting shareholders, and if it is not liquidated, retain
his right to be paid for his shares, which right the corporation
shall be obliged to satisfy when the restrictions of this paragraph
do not apply.
(3) The dissenting shareholder shall exercise such option
under subparagraph (1) or (2) by written notice filed with the
corporation within thirty days after the corporation has given him
written notice that payment for his shares cannot be made because
of the restrictions of this paragraph. If the dissenting
shareholder fails to exercise such option as provided, the
corporation shall exercise the option by written notice given to
him within twenty days after the expiration of such period of
thirty days.
(k) The enforcement by a shareholder of his right to
receive payment for his shares in the manner provided herein shall
exclude the enforcement by such shareholder of any other right to
which he might otherwise be entitled by virtue of share ownership,
except as provided in paragraph (e), and except that this section
shall not exclude the right of such shareholder to bring or
maintain an appropriate action to obtain relief on the ground that
such corporate action will be or is unlawful or fraudulent as to
him.
(l) Except as otherwise expressly provided in this section,
any notice to be given by a corporation to a shareholder under this
section shall be given in the manner provided in section 605
(Notice of meetings of shareholders).
(m) This section shall not apply to foreign corporations
except as provided in subparagraph (e)(2) of section 907 (Merger or
consolidation of domestic and foreign corporations). (Amended by
L. 1962, Ch. 834, Section 40; L. 1963, Ch. 746, Section 15; L.
1965, Ch. 803, Sections 20-22; L. 1982, Ch. 202, Sections 3-9; L.
1982, Ch. 928, Sections 38-40; L. 1986, Ch. 117, Section 3.)
<PAGE>
EXHIBIT C
M I FUND, INC. INVESTMENT OBJECTIVE AND POLICIES
The objective of M I Fund, Inc. (the "Company") is to seek as high
a level of current interest income exempt from federal income taxes
as is consistent with preserving its capital. This objective is a
fundamental policy which is changeable only by shareholder vote.
There is no assurance that this objective will be achieved.
The Company will seek to achieve its objective by investing
substantially all of its assets in a diversified portfolio of debt
obligations issued by or on behalf of states, territories and
possessions of the United States and the District of Columbia and
their political subdivisions, agencies and instrumentalities, or
multi-state agencies or authorities, the interest from which is
exempt from federal income tax in the opinion of bond counsel to
the issuers. These securities are generally known as "Municipal
Bonds." The Company will invest substantially all of its net
assets (not including assets invested in Temporary Investments) in
Municipal Bonds. No debt obligations rated lower than Aa by
Moody's Investors Services, Inc. ("Moody's") or AA by Standard &
Poor's Corporation ("S&P") may be purchased unless, immediately
after such a purchase, at least 85% of the portfolio consists of
debt obligations of at least such grade ratings, or of Temporary
Investments of the quality described below. However, the Company
may invest up to 20% of its assets in Municipal Bonds which are
rated A by Moody's or S&P and may invest up to 10% of its assets in
Municipal Bonds rated either Baa by Moody's or BBB by S&P. The
Company will not invest more than 15% of its assets in industrial
development bonds (described below) which relate to similar
projects such as hospitals or shopping centers or more than 30% of
its assets in Municipal Bonds whose issuers are located in a single
state. Except as otherwise noted herein, the identification of an
"issuer" for purposes of the Company's investment objective and
policies will be based upon a determination of the source of the
assets and revenues committed to meeting interest and principal
payments on each security. Any bonds guaranteed by the United
States government shall not be included in any computations of the
aforesaid limitations.
From time to time on a temporary basis the Company may invest in
short-term Temporary Investments the interest on which is exempt
from federal income tax in the opinion of bond counsel. Generally,
Temporary Investments will consist of notes backed by the federal
government and issued by or on behalf of municipal issuers, notes
of issuers having, at the time of purchase, a rating within the two
highest grades of Moody's or S&P or, if not rated, having an issue
of outstanding Municipal Bonds rated within the two highest grades
by Moody's or S&P, or notes guaranteed by the federal government
for interim financing of public housing projects (commonly known as
"project notes"). The Company will not invest in any short-term
investments which would result in income to the Company subject to
federal income tax (e.g., obligations of the U.S. Government, its
agencies or instrumentalities, commercial paper, or certificates of
deposit issued by banks) and all cash will be kept in a non-
interest bearing account.
Subsequent to its purchase by the Company, an issue of Municipal
Bonds may cease to be rated or its rating may be reduced below the
minimum required for purchase by the Company. Neither event will
require the elimination of such obligation from the Company's
portfolio, but the Company will consider such an event in its
determination of whether the Company should continue to hold such
obligation in its portfolio. To the extent that the ratings given
by Moody's or S&P for Municipal Bonds or Temporary Investments may
change as a result of changes in such organizations, or to use
comparable ratings as standards for its investments in Municipal
Bonds or Temporary Investments in accordance with the investment
policies contained herein. If a percentage restriction is adhered
to at the time an investment is made, a later increase or decrease
in percentage resulting from a change in market value of an issue,
or of net assets, or in any ratings, will not be deemed to result
in a violation of this restriction.
The investment restrictions described below are fundamental
policies of the Company and may not be changed without the
affirmative vote of the holders of a majority (as defined in the
Investment Company Act of 1940, as amended) of the outstanding
shares of common stock of the Company. The Company may not:
1. Invest in any securities other than the Municipal Bonds and
Temporary Investments described above and subject to the percentage
limitations there stated.
2. Purchase the securities of any issuer (except securities
guaranteed by the United States government, its agencies or
instrumentalities) if as a result thereof more than 5% of its total
assets would be invested in the securities of such issuer or if the
Company would own more than 5% of any class of its outstanding
securities. For purposes of this limitation, the Company will
regard the entity which has the ultimate responsibility for the
payment of interest and principal as the issuer.
3. Borrow money, except from a bank for temporary or emergency
purposes and not for investment purposes, and then only in an
amount not exceeding 5% of the current value of its total assets
(including the amount borrowed) less liabilities (not including the
amount borrowed) at the time the borrowing is made. The payment of
interest on such borrowings will reduce the Company's net income
during the period of such borrowings.
4. Pledge, mortgage or hypothecate its assets, except that, to
secure borrowings permitted by subparagraph (3) above, it may
pledge securities having a market value at the time of pledge not
exceeding 15% of the value of the Company's total assets.
5. Knowingly purchase or otherwise acquire any securities which
are subject to legal or contractual restrictions on resale or for
which there is no readily available market.
6. Underwrite any issue of securities, except to the extent that
the purchase of Municipal Bonds directly from the issuer thereof in
accordance with the Company's investment objective, policies and
limitations may be deemed to be underwriting.
7. Purchase or sell real estate, but this shall not prevent the
Company from investing in Municipal Bonds or other permitted
investments secured by real estate or interests therein.
8. Purchase or sell commodities or commodity contracts or invest
in oil, gas or other mineral exploration or development programs.
9. Make loans, except through the purchase of a portion of an
issue of debt securities in accordance with its investment
objective, policies and limitations.
10. Make short sales of securities or purchase any securities on
margin.
In addition to the foregoing restrictions, the Company will not (i)
purchase securities (other than Municipal Bonds and obligations
issued or guaranteed by the United States government, its agencies
or instrumentalities) if as a result thereof more than 10% of total
Company assets would be invested in any one industry or (ii)
purchase an industrial revenue bond if as a result of such purchase
more than 5% of total Company's assets would be invested in
industrial revenue bonds where the payment of principal and
interest are the responsibility of a company with less than five
years of operating history.
<PAGE>
EXHIBIT D
Comparison of Total Return of Oppenheimer Tax-Free Bond Fund
with the Lehman Brothers Municipal Bond Index - Change in Value
of a $10,000 Hypothetical Investment
Past performance is not predictive of future performance.
Oppenheimer Tax-Free Bond Fund
Average Annual Total Returns
at 12/31/92 at Maximum Offering Price
1 Year 5 Years 10 Years
Class A shares 4.0% 7.83% 10.83%
<PAGE>
M I FUND, INC.
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD MARCH 18, 1994
The undersigned shareholder of M I Fund, Inc. (the "Fund"),
does hereby appoint STEVEN MELTZER and HARVEY SILVERMAN, and each
of them acting individually, as attorneys-in-fact and proxies of
the undersigned, with full power of substitution, to attend the
Special Meeting of Shareholders of the Fund to be held on Friday,
March 18, 1994, at the offices of the Fund at 1384 Broadway, 20th
Floor, New York, New York, at 11 A.M., New York 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
Proposal specified on the reverse side. Said attorneys-in-fact
shall vote in accordance with their best judgment as to any other
matter.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, WHO
RECOMMENDS A VOTE FOR THE 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.
Please mark your proxy, date and sign it on the reverse side and
return it promptly in the accompanying envelope, which requires no
postage if mailed in the United States.
The Proposal:
Approval of the Reorganization, including the Reorganization
Agreement, which contemplates the transfer of substantially
all the assets of the Fund to Oppenheimer Tax-Free Bond Fund
("OTFBF") in exchange for Class A shares of OTFBF and the
distribution of such shares of OTFBF to the shareholders of
the Fund (other than those that have properly exercised
dissenter's rights under New York law) in complete liquidation
of the Fund, the dissolution of the Fund as a corporation, the
deregistration of the Fund as an investment company under the
Investment Company Act of 1940, as amended, and the
cancellation of the outstanding shares of the Fund.
FOR____ AGAINST____ ABSTAIN____
Dated: ___________________________, 1994
(Month) (Day)
___________________________________
Signature(s)
___________________________________
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When
signing as custodian, attorney, executor, administrator, trustee,
etc., please give your full title as such. All joint owners should
sign this proxy. If the account is registered in the name of a
corporation, partnership or other entity, a duly authorized
individual must sign on its behalf and give his or her title.
<PAGE>
OPPENHEIMER TAX-FREE BOND FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PART B
STATEMENT OF ADDITIONAL INFORMATION
February 15, 1994
___________________________________
This Statement of Additional Information of Oppenheimer Tax-
Free Bond Fund ("OTFBF") consists of this cover page and the
following documents:
1. OTFBF's Statement of Additional Information dated
March 16, 1993, which has been previously filed and is
incorporated herein by reference.
2. OTFBF's Annual Report as of December 31, 1992, which
has been previously filed and is incorporated herein by
reference.
3. OTFBF's Semi-Annual Report as of June 30, 1993,
which has been previously filed and is incorporated
herein by reference.
4. Amendment No. 12 to the Registration Statement on
Form N-2 of M I Fund, Inc. ("M I") dated March 18, 1992,
which has been previously filed and is incorporated
herein by reference.
5. Annual Report as of December 31, 1992 of M I, which
has been previously filed and is incorporated herein by
reference.
6. Semi-Annual Report as of June 30, 1993 of M I, which
has been previously filed and is incorporated herein by
reference.
This Statement of Additional Information (the "Additional
Statement") is not a Prospectus. This Additional Statement should
be read in conjunction with the Proxy Statement and Prospectus of
OTFBF dated February 15, 1994, which may be obtained by written
request to Oppenheimer Shareholder Services ("OSS"), P.O. Box 5270,
Denver, Colorado 80217, or by calling OSS at the toll-free number
shown above.
<PAGE>
OPPENHEIMER TAX-FREE BOND FUND
PART C
OTHER INFORMATION
ITEM 15. Indemnification
Reference is made to Article VIII of Registrant's Amended and
Restated Declaration of Trust filed as Exhibit 24(b)(1) to
Registrant's Registration Statement and incorporated herein by
reference.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid
by a trustee, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted
by such trustee, officer or controlling person, Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
ITEM 16. Exhibits
(1) Amended and Restated Declaration of Trust dated March 12,
1993: Filed with Post-Effective Amendment No. 30 to
Registrant's Registration Statement, 3/16/93, and incorporated
herein by reference.
(2) (i) Amended By-Laws of Registrant as of May 1, 1987: Filed
with Post-Effective Amendment No. 22 to its
Registrant's Registration Statement and incorporated
herein by reference.
(ii) Amended By-Laws of Registrant as of August 6, 1987:
Filed with Form SE to Registrant's Form N-SAR for the
fiscal year ended 12/31/87 and incorporated herein by
reference.
(3) Not applicable
(4) Agreement and Plan of Reorganization dated October 22, 1993
between the Registrant and M I Fund, Inc.: See Exhibit A to
Part A of this Registration Statement.
(5) Specimen Class A Share Certificate: Filed with Post-Effective
Amendment No. 22 to Registrant's Registration Statement and
incorporated herein by reference.
(6) Investment Advisory Agreement dated October 22, 1990: Filed
with Post-Effective Amendment No. 27 to Registrant's
Registration Statement, 3/1/91, and incorporated herein by
reference.
(7) (i) General Distributor's Agreement dated December 10,
1992: Filed with Post-Effective Amendment No. 30 to
Registrant's Registration Statement, 3/16/93, and
incorporated herein by reference.
(ii) Form of Oppenheimer Fund Management, Inc. Dealer
Agreement: Filed with Post-Effective Amendment No. 12
to the Registration Statement of Oppenheimer Government
Securities Fund (Reg. No. 33-02769), 12/2/92, and
incorporated herein by reference.
(iii) Form of Oppenheimer Fund Management, Inc. Broker
Agreement: Filed with Post-Effective Amendment No. 12
to the Registration Statement of Oppenheimer Government
Securities Fund (Reg. No. 33-02769), 12/2/92, and
incorporated herein by reference.
(iv) Form of Oppenheimer Fund Management, Inc. Agency
Agreement: Filed with Post-Effective Amendment No. 12
to the Registration Statement of Oppenheimer Government
Securities Fund (Reg. No. 33-02769), 12/2/92, and
incorporated herein by reference.
(v) Broker Agreement between Oppenheimer Fund Management,
Inc. and Newbridge Securities, Inc. dated October 1,
1986: Previously filed with Post-Effective Amendment
No. 25 to the Registration Statement of Oppenheimer
Special Fund (File No. 2-45272), 11/1/86, and
incorporated herein by reference.
(8) Retirement Plan for Non-Interested Trustees or Directors
(adopted 6/7/90): Filed with Post-Effective Amendment No. 97
of Oppenheimer Fund (Reg. No. 2-14586), and incorporated
herein by reference.
(9) (i) Custodian Agreement dated October 7, 1976: Filed with
Post-Effective Amendment No.2 to Registrant's
Registration Statement and incorporated herein by
reference.
(ii) Assignment and Amendment dated May 1, 1987 of Custody
Agreement dated October 7, 1976 among Oppenheimer Tax-
Free Bond Fund, Inc., Citibank, N.A., and Oppenheimer
Tax-Free Bond Fund: Filed with Post-Effective Amendment
No. 22 to Registrant's Registration Statement and
incorporated herein by reference.
(iii) Amendment dated as of March, 1978 to Custody Agreement
of Oppenheimer Tax-Free Bond Fund, Inc.: Filed with
Post-Effective Amendment No. 24 to Registrant's
Registration Statement, 4/29/88, and incorporated
herein by reference.
(iv) Amendment dated as of August 13, 1980 to Custody
Agreement of Oppenheimer Tax-Free Bond Fund, Inc.:
Filed with Post-Effective Amendment No. 24 to
Registrant's Registration Statement, 4/29/88, and
incorporated herein by reference.
(v) Amendment dated September 28, 1984 to Custody Agreement
of Oppenheimer Tax-Free Bond Fund, Inc.: Filed with
Post-Effective Amendment No. 24 to Registrant's
Registration Statement, 4/29/88, and incorporated
herein by reference.
(vi) Amendment dated June 16, 1986 to Custody Agreement of
Oppenheimer Tax-Free Bond Fund, Inc.: Filed with Post-
Effective Amendment No. 24 to Registrant's Registration
Statement, 4/29/88, and incorporated herein by
reference.
(10) (i) Agreement and Plan of Reorganization and Liquidation
dated 2/12/87 by and between Registrant and Oppenheimer
Tax-Free Bond Fund, Inc.: Filed with Post-Effective
Amendment No. 24 to Registrant's Registration
Statement, 4/29/88, and incorporated herein by
reference.
(ii) Articles of Transfer dated 4/30/87 of the Registrant
and Oppenheimer Tax-Free Bond Fund, Inc.: Filed with
Post-Effective Amendment No. 24 to Registrant's
Registration Statement, 4/29/88, and incorporated
herein by reference.
(iii) Agreement and Plan of Reorganization dated 2/28/91
between Registrant and MassMutual Tax-Exempt Bond Fund:
Filed with Post-Effective Amendment No. 30 to
Registrant's Registration Statement, 3/16/93, and
incorporated herein by reference.
(iv) Agreement and Plan of Reorganization dated 8/5/91
between Registrant and Advance America Funds, Inc. on
behalf of Tax-Free Income Fund: Filed with Post-
Effective Amendment No. 30 to Registrant's Registration
Statement, 3/16/93, and incorporated herein by
reference.
(11) Opinion and Consent of Counsel dated 5/1/87: Filed with Post-
Effective Amendment No. 22 to Registrant's Registration
Statement and incorporated herein by reference.
(12) Revenue Ruling from the Internal Revenue Service re: tax-free
nature of the Reorganization: Filed herewith.
(13) Not applicable.
(14) (i) Consent of KPMG Peat Marwick: Filed herewith.
(ii) Consent of Albinder, Altman & Block, P.C.: Filed
herewith.
(15) Not applicable.
(16) Not applicable.
(17) (i) Restated Distribution Plan and Agreement for Class A
shares dated 10/13/88 pursuant to Rule 12b-1 under the
Investment Company Act of 1940: Filed with Post-
Effective Amendment No. 26 to Registrant's Registration
Statement, 5/1/90, and incorporated herein by
reference.
(ii) Distribution Plan and Agreement for Class B shares
under Rule 12b-1 dated February 11, 1993: Filed with
Post-Effective Amendment No. 30 to Registrant's
Registration Statement, 3/16/93, and incorporated
herein by reference.
ITEM 17. Undertakings
(1) Not applicable.
(2) Not applicable.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration
Statement has been signed on behalf of the registrant, in the City
of New York and State of New York, on the 14th day of February,
1994.
OPPENHEIMER TAX-FREE BOND FUND
/s/ Donald W. Spiro
by: --------------------------
Donald W. Spiro, President
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signatures: Title Date
- ----------- ----------------- --------------
/s/ Leon Levy Chairman of the Board February 14, 1994
- ---------------------- of Trustees
Leon Levy
/s/ Donald W. Spiro President, Principal February 14, 1994
- ---------------------- Executive Officer and
Donald W. Spiro Trustee
/s/ George Bowen Treasurer and February 14, 1994
- ---------------------- Principal Financial
George Bowen and Accounting Officer
/s/ Leo Cherne Trustee February 14, 1994
- ----------------------
Leo Cherne
/s/ Edmund T. Delaney Trustee February 14, 1994
- ----------------------
Edmund T. Delaney
Trustee
- ----------------------
Robert G. Galli
/s/ Benjamin Lipstein Trustee February 14, 1994
- ----------------------
Benjamin Lipstein
/s/ Kenneth A. Randall Trustee February 14, 1994
- ----------------------
Kenneth A. Randall
Trustee
- ----------------------
Sidney M. Robbins
/s/ Russell S. Reynolds Jr. Trustee February 14, 1994
- ---------------------------
Russell S. Reynolds, Jr.
/s/ Pauline Trigere Trustee February 14, 1994
- -----------------------
Pauline Trigere
/s/ Elizabeth B. Moynihan Trustee February 14, 1994
- ----------------------
Elizabeth B. Moynihan
/s/ Clayton K. Yeutter Trustee February 14, 1994
- -----------------------
Clayton K. Yeutter
Trustee
- ----------------------
Edward V. Regan
<PAGE>
OPPENHEIMER TAX-FREE BOND FUND
Exhibit Index
- -------------
Form N-14
Item No. Description
- --------- -----------
16(12) Internal Revenue Service Revenue Ruling
16(14)(i) Consent of KPMG Peat Marwick
16(14)(ii) Consent of Albinder, Altman & Block, P.C.
Internal Revenue Service Department of the Treasury
Index Numbers: 0368.03-00 Washington, D.C. 20224
Person to Contact:
Laura E. Watts
Telephone Number:
(202) 622-7750
Refer Reply to:
CC:DOM:CORP:BR1-TR-31-1988-93
Date: February 7, 1994
In re: MI Fund, Inc.
Target = MI Fund, Inc.
a regulated investment company
a New York corporation
EIN: 13-1557199
Acquiring = Oppenheimer Tax-Free Bond Fund
a Massachusetts business trust
a Maryland corporation
EIN: 13-2882747
Manager = Oppenheimer Management Corporation
State A = New York
State B = Maryland
Estate A = Estate of Charles Meltzer
Personal = Ronald Meltzer
Representative
of the Estate
Testamentary Trust = Testamentary Trust created under the Last Will
and Testament of Samuel Meltzer
Co-Trustees = Juliette Meltzer and Theodore Rosenberg
Shareholder A = Steven Meltzer
This letter in is response to your letter dated August 5, 1993,
requesting rulings on the federal income tax consequences of a proposed
transaction. The information submitted for consideration is substantially
as set forth below.
The rulings contained in this letter are predicated upon facts and
representations submitted by the taxpayer and accompanied by a penalty of
perjury statement executed by the appropriate party. This office has not
verified any of the following material submitted in support of the request
for a ruling. Verification of the factual information, representations,
and other data may be required as a part of the examination process.
Target, a State A corporation, has operated as a registered closed-
end management investment company under the Investment Company Act of
1940, as amended. Target made a timely election to be taxed as a
regulated investment company, within the meaning of section 851 of the
Internal Revenue Code, effective for the calendar year beginning January
1, 1980, and has continued to qualify as a regulated investment company
at all times thereafter. Target pays regular quarterly dividends aimed
at distributing all of its regulated investment company income (including
tax-exempt income).
The investment objective of Target is to earn as high a level of
current interest which is exempt from Federal income tax as is consistent
with preserving its capital. Target seeks to achieve this objective by
investing substantially all of its assets in a diversified portfolio of
debt obligations issued by or on behalf of states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, or multi-state
agencies or authorities, the interest from which is exempt from federal
income tax.
Target has authorized 5,000,000 shares of common stock, $.10 par
value per share. On March 19, 1993, there were 1,626,594 shares issued
and outstanding. Of such shares 774,000 shares (47.6%) are owned, both
beneficially and of record, by Estate A (which may be voted by Personal
Representative of Estate); 760,400 shares (47.6%) are owned, both
beneficially and of record, by Testamentary Trust (which may be voted and
disposed of by Co-Trustees); and 55,100 (3.4%) are owned, both
beneficially and of record, by Shareholder A the balance of the shares are
owned by the public, no one public shareholder owns more than 1% of the
outstanding shares. The shares of Target stock held by the public are
traded in the over-the-counter market.
Acquiring is an open-end diversified investment company registered
under the 1940 Act. It is qualified as a regulated investment company
under section 851 of the Code. Acquiring's investment objective is to
seek as high a level of current interest income exempt from Federal income
taxes as is available from investments in Municipal Securities while
attempting to preserve capital. Under normal market conditions, Acquiring
attempts to invest 100% of its assets and, as a matter of fundamental
policy, to invest at least 80% of its assets, in municipal bonds,
municipal notes (including tax anticipation notes, construction loan notes
revenue anticipation notes, bond anticipation notes and other short-term
loans), tax-exempt commercial paper and other debt obligations issued by
or on behalf of states, the District of Columbia, any commonwealths,
territories or possessions of the United States or their respective
political subdivisions, agencies, instrumentalities or authorities, the
interest from which is not subject to Federal income tax in the opinion
of bond counsel to the respective issuer at the time of issue. Manager
acts as the investment adviser to Acquiring.
Acquiring is authorized to issue an unlimited number of shares of
beneficial interest, consisting of Class A shares (of which 52,371,756.506
shares were issued and outstanding) and Class B shares (of which
1,192,825.612 shares were issued and outstanding) (in each case, as of
July 19, 1993). Class A shares and Class B shares each are voting shares
and represent an identical interest in Acquiring, but each class has
different dividends, distributions and expenses, and may have different
net asset values. Class A shares are sold with a sales charge imposed at
the time of purchase (although Class A shares purchased in amounts
aggregating $1,000,000 or more are sold without a sales charge), while
Class B shares are sold with a sales charge imposed on a contingent
deferred basis on most redemptions of such shares within six years of
their purchase. Class B shares are also subject to an asset-based sales
charge.
For what are represented to be valid business purposes, it is
proposed that Acquiring acquire substantially all of the assets of Target
through the following transaction:
(i) All of the assets of Target, consisting of cash (except an amount
of cash to be retained by Target for the unpaid portion of the
expenses of the transaction, payments if any to dissenting
shareholders and the satisfaction of any other liabilities of
Acquiring, including those associated with Target's dissolution,
the "Cash Reserve"), portfolio securities and receivables are to
be acquired by Acquiring solely in exchange for Class A shares of
Acquiring. No liabilities of Target will be assumed by Acquiring
(except for the purchase price of portfolio securities purchased
by Target which have not settled as of the closing).
(ii) The aggregate number of Class A shares of Acquiring to be issued
in the transaction will be determined by dividing the value (on
the date preceding the closing date) of Target's net assets
(excluding the Cash Reserve) by the net asset value of one Class
A share of Acquiring on the same date.
(iii) As soon as practicable after the closing, Target will distribute
the Class A shares received by it to the Target shareholders who
have not elected dissenters rights in complete liquidation of
Target. Upon such transfer, the ownership of such Class A shares
will be reflected on the books of the transfer agent for Acquiring
in the names of the Target shareholders previously supplied by
Target to Acquiring. Pursuant to the Plan, the Target
shareholders may request stock certificates representing their
Class A shares of Acquiring in accordance with Acquiring normal
procedures. Fractional shares will be credited to the
shareholders but no certificates will be issued therefor.
(iv) Prior to the closing, Target will declare and pay a dividend or
dividends in an amount which, together with all previous
distributions, will have the effect of distributing to its
shareholders all of Target's investment company taxable income for
all taxable periods from the time it became a regulated investment
company through and including the closing date (computed without
regard to the dividends paid deduction), and all of Target's net
capital gain, if any, realized during such periods (after
reduction for any net capital loss carryforward). In addition,
Target will pay dividends for 1993 in an amount which (together
with prior tax-exempt interest income from January 1, 1993 through
the closing. This is consistent with Target's dividend practices.
Except as provided above or other regular quarterly dividends
(consistent with prior dividend practice) by Target, no dividends
will be paid on Target shares prior to the closing.
(v) Prior to the closing, Target may purchase and sell securities in
a manner which is consistent with its current investment policies.
(vi) Within 12 months after the closing, Target will pay or make
provisions for payment of all its liabilities (including amounts,
if any, payable by it to dissenting shareholders) and will
distribute its remaining assets, if any, to its former
shareholders in complete liquidation. If such payments cannot be
completed within a reasonable time (not to exceed 12 months) after
the closing date, Target will transfer any remaining assets to a
liquidating trust and Target will liquidate.
(vii) The Cash Reserve retained by Target will not exceed 5 percent of
the value of its net assets or 5 percent of the value of its gross
assets. The major shareholders of Target, owning in the aggregate
stock representing approximately 98 percent of the value of the
company, will not dissent from the transaction.
(viii) If the transaction contemplated by the Plan is consummated, Target
and Acquiring will each bear its own expenses. However, the
Manager on behalf of Acquiring will pay (or reimburse) a portion
of Target's reasonable and necessary expenses which are solely and
directly related to the reorganization in an amount up to $35,000.
It is not anticipated that Target's shareholders will incur any
expenses in connection with the transaction, but if any such
expenses should arise, they will be borne by such shareholders.
In connection with the proposed transaction, the following
representations are made:
(a) The net asset value of the Class A shares of Acquiring to be
received by each Target shareholder will be approximately equal to
the net asset value of the Target stock surrendered by such
shareholder in the exchange.
(b) There is no plan or intention on the part of any shareholder who
owns one percent or more of Target's stock, and to the best of the
knowledge of the management of Target, there is no plan or
intention on the part of the remaining Target shareholders, to
sell, exchange or otherwise dispose of a number of Class A shares
of Target received in the transaction that would reduce the Target
shareholders' ownership of the Acquiring common stock to a number
of shares having a value, as of the date of the transaction, of
less than 50 percent of the value of all the formerly outstanding
stock of Target as of the same date. For purposes of this
representation, shares of Target stock exchanged for cash or other
property, or surrendered by dissenters will be treated as
outstanding Target stock on the date of the transaction.
Moreover, shares of Target and Class A shares of Acquiring held by
Target shareholders and otherwise sold, redeemed or disposed of
prior or subsequent to the transaction will be considered in
making this representation.
(c) Acquiring will acquire at least 90 percent of the fair market
value of the net assets and at least 70 percent of the fair market
value of the gross assets held by Target immediately prior to the
transaction. For purposes of this representation, amounts paid by
Target to dissenters, amounts used by Target to pay its
reorganization expenses, amounts paid by Target to shareholders
who receive cash or other property, and all redemptions and
distributions (except for regular, normal dividends) made by
Target immediately preceding the transfer will be included as
assets of Target held immediately prior to the transaction.
(d) Acquiring has no plan or intention to reacquire any of its stock
issued in the transaction, other than pursuant to a valid request
of the shareholder in accordance with Acquiring's normal
redemption policy.
(e) Acquiring has no plan or intention to sell or otherwise dispose of
any of the assets of Target acquired in the transaction, except
for dispositions made in the ordinary course of business.
(f) Target will distribute the Class A shares of Acquiring it receives
in the transaction and any remaining Cash Reserve (after payment
of liabilities) to its shareholders in pursuance of the plan or
reorganization.
(g) Acquiring will assume only Target's Liability for the purchase
price of portfolio securities purchased which have not settled;
such Liabilities were or will have been incurred by Target in the
ordinary course of its business. Except for the immediately
preceding sentence, Acquiring will not assume any of Target's
Liabilities nor will any of Target's assets transferred to
Acquiring be subject to any Liabilities.
(h) Following the transaction, Acquiring will continue the historic
business of Target or use a significant portion of Target's
historic business assets in a business.
(i) Except for certain expenses of Target not to exceed $35,000, which
will be paid on behalf of Acquiring by the Manager, Target (and
the shareholders of Target) and Acquiring will pay their own
respective expenses, if any, incurred in connection with the
transaction. The Target expenses payable by the Manager will
consist only of those expenses of Target that are solely and
directly related to the transaction in accordance with the
guidelines established in Rev. Rul. 73-54, 1973-1 C.B. 187.
(j) There is no intercorporate indebtedness existing between Acquiring
and Target that was issued, acquired or will be settled, at a
discount.
(k) Acquiring and Target are regulated investment companies within the
meaning of section 851 of the Code and will meet the
diversification tests set forth under section 368(a)(2)(F)(i) and
(iii) of the Code immediately prior to the proposed transaction.
(l) Acquiring does not own, directly or indirectly, nor has it owned
during the past five years, directly or indirectly, any stock of
Target.
(m) The fair market value of the assets of Target transferred to
Acquiring will equal or exceed the sum of the Liabilities, if any,
assumed by Acquiring.
(n) Target is not under the jurisdiction of a court in a Title 11 or
similar case, within the meaning of section 368(a)(3)(A) of the
Code.
(o) No cash will be paid in lieu of fractional Class A shares of
Acquiring; fractional shares will be credited to the shareholders.
(p) No compensation received by any shareholder-employee of Target
will be separate consideration for, or allocable to, any of their
shares of Target stock; none of the Class A shares of Acquiring
received by any shareholder-employee will be separate
consideration for, or allocable to any employment agreement; and
the compensation paid to any shareholder-employees will be for
services actually rendered and will be commensurate with amounts
paid to third parties bargaining at arm's-length for similar
services.
Based solely on the information submitted an on the
representations set forth above, it is held as follows:
(1) The acquisition by Acquiring of substantially all of the assets of
Target solely in exchange for Class A shares of Acquiring followed
by the distribution of the Class A shares to shareholders of
Target in complete liquidation and dissolution of Target, as
described above, will constitute a reorganization within the
meaning of section 368(a)(1)(C) of the Code. Target and Acquiring
will each be a "party to a reorganization" within the meaning of
section 368(b).
(2) No gain or loss will be recognized by Target by reason of the
transfer of substantially all of its assets to Acquiring solely in
exchange for Class A shares of Acquiring (section 361(a)).
(3) No gain or loss will be recognized by Target on the distribution
by it to its shareholders of cash, if any, and the Class A shares
of Acquiring (including fractional shares) received pursuant to
the Plan (section 361(c)(1)).
(4) No gain or loss will be recognized by Acquiring upon receipt of
substantially all of the assets of Target solely in exchange for
Class A shares of Acquiring (including fractional shares) as
described above (section 1032(a)).
(5) The basis of each asset of Target in the hands of Acquiring will
be the same as the basis of such asset in the hands of Target
immediately prior to the exchange (section 362(b)).
(6) The holding period of each of Target's assets in the hands of
Acquiring will include the period during which such asset was held
by Target (section 1223(2)).
(7) No gain or loss will be recognized by any shareholder of Target
upon the exchange of the common stock of Target solely for Class
A shares of Acquiring stock (including any fractional share to
which the shareholder may be entitled), as described above
(section 354(a)(1)). However, if a shareholder of Target receives
cash in addition to Class A shares of Acquiring, the shareholder
will recognize gain, but not in excess of the cash received
(section 356(a)(1)). The determination of whether the exchange
has the effect of the distribution of a dividend will be
determined as if the shareholder had received additional Class A
shares in the exchange which were then redeemed by Acquiring for
the cash in accordance with Comm'r v. Clark, 489 U.S. 726 (1989).
No loss will be recognized by the shareholder (section 356(c)).
(8) The basis of the Class A shares of Acquiring received by each
shareholder of Target (including any fractional shares to which
the shareholder may be entitled) will be the same as the basis of
the shares of Target common stock exchanged therefor, decreased by
the amount of any cash received by such shareholder and increased
by the amount treated as a dividend and the amount of gain
required to be recognized by the shareholder on the exchange (not
including any portion of such gain that is treated as a dividend)
(section 358(a)(1)).
(9) The holding period of the Class A shares of Acquiring received by
each Target shareholder (including any fractional shares to which
he may be entitled) will include the period during which the stock
surrendered in exchange therefor was held by the Target
shareholder, provided the Target stock surrendered was held by
such shareholder as a capital asset at the time of the exchange
(section 1223(1)).
(10) Cash received by a dissenting shareholder of Target in exchange
for such shareholder's stock in Target will be treated as having
been received by such shareholder as a distribution in redemption
of his Target stock, subject to the provisions and limitations of
section 302 of the Code. If, as a result of such distribution,
the dissenting shareholder owns no beneficial interest in
Acquiring either directly or through the application of the
constructive ownership rules of section 318(a) of the Code, the
redemption will be a complete termination of interest within the
meaning of section 302(b)(3) of the Code and such cash will be
treated as a distribution in full payment in exchange for the
shareholder's Target stock, as provided in section 302(a) of the
Code.
(11) As provided by section 381(a) and Treas. Reg. section 1.381(a)-1,
Acquiring will succeed to and take into account the items of
Target described in section 381(c) of the Code, subject to the
provisions and limitations specified in sections 381-384.
(12) Pursuant to section 381(c)(2) and Treas. Reg. section 1.381(c)(2)-
1, Acquiring will succeed to and take into account the earnings
and profits or deficit in earnings and profits of Target as of the
date of the transfer. Any deficit in earnings and profits of
Target may be used only to offset earnings and profits accumulated
after the date of such transfer.
No opinion is expressed about the tax treatment of the transaction
under other provisions of the code and regulations or about the tax
treatment of any conditions existing a the time of, or effects resulting
from, the transaction that are not specifically covered by the above
rulings.
The above rulings are directed only to the taxpayers who requested
them. Section 6110(j)(3) of the Code provides that these rulings may not
be used or cited as precedent.
A copy of this letter should be attached to the federal income tax
returns of the taxpayers involved for the taxable year in which the
transaction covered by this ruling letter is consummated.
Sincerely,
Assistant Chief Counsel (Corporate)
By /s/ Nelson F. Crouch
-----------------------------------
Nelson F. Crouch
Chief, Branch 1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Oppenheimer Tax-Free Bond on Form N-14 of our report dated
January 22, 1993 appearing in the 1992 Annual Report of Oppenheimer Tax-
Free Bond Fund.
/s/KPMG Peat Marwick
KPMG Peat Marwick
Denver, Colorado
February 14, 1994
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Oppenheimer Tax-Free Bond on Form N-14 of our report dated
January 27, 1993 appearing in the 1992 Annual Report of M. I. Fund, Inc.
ALBINDER, ALTMAN & BLOCK, P.C.
/s/Albinder, Altman & Block, P.C.
New York, New York
February 14, 1994
