<PAGE>
As filed with the Securities and Exchange Commission on September 22, 1995
Registration No. 33-62273
811-2668
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
PRE-EFFECTIVE AMENDMENT NO. 1 / X /
POST-EFFECTIVE AMENDMENT NO. / /
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)
As soon as practicable after the Registration Statement becomes effective.
(Approximate Date of Proposed Public Offering)
It is proposed that this filing will become effective on September 29,
1995, pursuant to Rule 488.
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, 1994 was filed on February 27, 1995.
Pursuant to Rule 429, this Registration Statement relates to shares
previously registered by the Registrant on Form N-1A (Reg. No. 2-57116;
811-2668).
<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 National Tax-Exempt Fund,
a series of Quest for Value Family of Funds
and
Prospectus for Oppenheimer Tax-Free Bond Fund
Part B
Statement of Additional Information
Part C
Other Information
Signatures
Exhibits
MERGE/311QVN14.A#1
<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) Comparative Fee Tables
(b) Synopsis
(c) Principal Risk Factors
4 (a) Synopsis; Approval of the Reorganization; Comparison between
TFBF and the Fund; Miscellaneous
(b) Approval of the Reorganization - Capitalization Table
5 (a) Registrant's Prospectus; Comparison Between TFBF and the Fund
(b) *
(c) *
(d) *
(e) Miscellaneous
(f) Miscellaneous
6 (a) Prospectus of National Tax-Exempt Fund; Annual Report of
National Tax-Exempt Fund; Comparison Between TFBF and the Fund
(b) Miscellaneous
(c) *
(d) *
7 (a) Synopsis; Information Concerning the Meeting
(b) *
(c) Synopsis; Information Concerning the Meeting
8 (a) Proxy Statement
(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) *
(c) *
13 (a) Statement of Additional Information about National Tax-Exempt
Fund
(b) *
(c) *
14 Registrant's Statement of Additional Information; Statement of
Additional Information about National Tax-Exempt Fund; Annual
Report of National Tax-Exempt Fund at 7/31/94; Semi-Annual
Report of National Tax-Exempt Fund at 1/31/95; Registrant's
Annual Report at 12/31/94; Semi-Annual Report of Registrant at
6/30/95
Part C of
Form N-14
Item No. Other Information Heading
--------- -------------------------
15 Indemnification
16 Exhibits
17 Undertakings
_______________
* Not Applicable or negative answer
<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant / x /
Filed by a party other than the registrant / /
Check the appropriate box:
/ X / Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Oppenheimer Tax-Free Bond Fund
------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
National Tax-Exempt Fund,
a series of Quest for Value Family of Funds
------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-
6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee Computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the
date of its filing.
(1) Amount previously paid:
------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------
(4) Date Filed:
-----------------------
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE>
Preliminary Copy
QUEST FOR VALUE FAMILY OF FUNDS
NATIONAL TAX-EXEMPT FUND
One World Financial Center, New York, New York 10281
1-800-232-FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 16, 1995
To the Shareholders of National Tax-Exempt Fund:
Notice is hereby given that a Special Meeting of the Shareholders of
National Tax-Exempt Fund (the "Fund"), a series of Quest for Value Family
of Funds (the "Trust"), an open-end, management investment company, will
be held at One World Financial Center, New York, New York 10281 on the
40th Floor, at _____ A.M., New York time, on November 16, 1995, and any
adjournments thereof (the "Meeting"), for the following purposes:
1. To consider and vote upon approval of the Agreement and Plan of
Reorganization dated as of ____, 1995 (the "Reorganization
Agreement") by and among Oppenheimer Tax-Free Bond Fund ("TFBF"), the
Trust on behalf of the Fund, and Quest for Value Advisors, investment
adviser to the Fund, and the transactions contemplated thereby (the
"Reorganization"), including (i) the transfer of substantially all
the assets of the Fund to TFBF in exchange for Class A shares of
TFBF, (ii) the distribution of such shares of TFBF to shareholders
of the Fund in liquidation of the Fund, and (iii) the cancellation
of the outstanding shares of the Fund (the "Proposal"); and
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. Shareholders of record at the close of
business on September 25, 1995 are entitled to notice of, and to vote at,
the Meeting. Please read the Proxy Statement and Prospectus carefully
before telling us, through your proxy or in person, how you wish your
shares to be voted. The Board of Trustees of the Trust 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 Trustees,
Deborah Kaback, Secretary
_________, 1995
Shareholders who do not expect to attend the Meeting are requested to
indicate voting instructions on the enclosed proxy and to date, sign and
return it in the accompanying postage-paid envelope. To avoid unnecessary
duplicate mailings, we ask your cooperation in promptly mailing your proxy
no matter how large or small your holdings may be.
<PAGE>
Preliminary Copy
QUEST FOR VALUE FAMILY OF FUNDS
NATIONAL TAX-EXEMPT FUND
One World Financial Center, New York, New York 10281
1-800-232-FUND
PROXY STATEMENT
--------------------------
OPPENHEIMER TAX-FREE BOND FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROSPECTUS
This Proxy Statement and Prospectus is being furnished to shareholders of
National Tax-Exempt Fund (the "Fund"), a series of Quest for Value Family
of Funds (the "Trust"), an open-end, management investment company, in
connection with the solicitation by the Board of Trustees of the Trust
(the "Board") of proxies to be used at the Special Meeting of Shareholders
of the Fund, to be held at One World Financial Center, New York, New York
10281 on the 40th Floor at ___ A.M., New York time, on November 16, 1995,
and any adjournments thereof (the "Meeting"). It is expected that this
Proxy Statement and Prospectus will be mailed to shareholders on or about
____, 1995.
At the Meeting, shareholders of the Fund will be asked to consider and
vote upon approval of the Agreement and Plan of Reorganization, dated as
of _____, 1995 (the "Reorganization Agreement"), by and among Oppenheimer
Tax-Free Bond Fund ("TFBF"), an open-end, management investment company,
the Trust, on behalf of the Fund, and Quest for Value Advisors ("QVA"),
investment adviser to the Fund, and the transactions contemplated by the
Reorganization Agreement (the "Reorganization"). The Reorganization
Agreement provides for the transfer of substantially all the assets of the
Fund to TFBF in exchange for Class A shares of TFBF and the assumption by
TFBF of certain liabilities of the Fund, the distribution of such shares
of TFBF to shareholders of the Fund in complete liquidation of the Fund
(excluding the Cash Reserve as defined in the Agreement and Plan of
Reorganization) and the cancellation of the outstanding shares of the
Fund. A copy of the Agreement and Plan of Reorganization is attached
hereto as Exhibit A and is incorporated by reference herein. As a result
of the proposed Reorganization, each shareholder of the Fund will receive
that number of Class A shares of TFBF having an aggregate net asset value
equal to the aggregate net asset value of such shareholder's shares of the
Fund. This transaction is being structured as a tax-free reorganization.
See "Approval of the Reorganization."
TFBF currently offers Class A, Class B and Class C shares. Class A shares
are sold with a sales charge imposed at the time of purchase (certain
purchases aggregating $1.0 million or more are not subject to a sales
charge, but may be subject to a contingent deferred sales charge ("CDSC")
if redeemed within 18 months from the end of the calendar month when
purchased); Class B shares are sold without a front-end sales charge but
may be subject to a CDSC if redeemed within six years of the date of
purchase; and Class C shares are sold without a front end sales charge but
may be subject to a CDSC if not held for one year. Shareholders of the
Fund will receive Class A shares of TFBF and no sales charge will be
imposed on the TFBF Class A shares received by the Fund's shareholders.
TFBF is a mutual fund that seeks as high a level of current interest
income exempt from Federal income taxes as is available from investing in
Municipal Obligations (as defined below), while attempting to preserve
capital. Under normal market conditions, TFBF invests at least 80% of its
assets in Municipal Obligations. However, in times of unstable economic
or market conditions, TFBF may deem it advisable to invest temporarily an
unlimited amount of its total assets in certain taxable instruments. TFBF
also uses hedging instruments to seek to reduce the risks of market
fluctuations that affect the value of the securities it holds.
TFBF has filed with the U.S. Securities and Exchange Commission (the
"SEC") a Registration Statement on Form N-14 (the "Registration
Statement") relating to the registration of shares of TFBF to be offered
to the shareholders of the Fund pursuant to the Reorganization Agreement.
This Proxy Statement and Prospectus relating to the Reorganization also
constitutes a Prospectus of TFBF filed as part of such Registration
Statement. Information contained or incorporated by reference herein
relating to TFBF has been prepared by and is the responsibility of TFBF.
Information contained or incorporated by reference herein relating to the
Fund has been prepared by and is the responsibility of the Fund.
This Proxy Statement and Prospectus sets forth concisely information
about TFBF that a prospective investor should know before voting on the
Reorganization. The following documents have been filed with the SEC and
are available without charge upon written request to Quest for Value
Distributors ("QVD"), the general distributor for the Fund, at P.O. Box
3567, Church Street Station, New York, New York 10277-1296, or by calling
the toll-free number for the Fund shown above: (i) a Prospectus for the
Fund, dated December 1, 1994; and (ii) a Statement of Additional
Information about the Fund, dated December 1, 1994 (the "Fund Additional
Statement").
The following documents have been filed with the SEC and are available
without charge upon written request to the transfer and shareholder
servicing agent for TFBF, Oppenheimer Shareholder Services ("OSS"), P.O.
Box 5270, Denver, Colorado 80217, or by calling the toll-free number for
TFBF shown above: (i) a Prospectus for TFBF dated August 29, 1995; (ii)
a Statement of Additional Information about TFBF, dated August 29, 1995
(the "TFBF Additional Statement"), which contains more detailed
information about TFBF and its management, and (iii) a Statement of
Additional Information relating to the Reorganization described in this
Proxy Statement and Prospectus (the "Additional Statement"), dated ____,
1995 filed as part of the TFBF Registration Statement on Form N-14 which
is incorporated herein by reference and includes, among other things, the
Fund's Prospectus and Additional Statement and the TFBF Additional
Statement.
Investors are advised to read and retain this Proxy Statement and
Prospectus for future reference.
Shares of TFBF or the Fund are not deposits or obligations of any bank,
are not guaranteed by any bank, are not insured by the FDIC or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
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 _______, 1995.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
COMPARATIVE FEE TABLES . . . . . . . . . . . . . . . . . . . . . . . .
SYNOPSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Parties to the Reorganization. . . . . . . . . . . . . . . . . . . .
The Reorganization . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Consequences of the Reorganization . . . . . . . . . . . . . . .
Investment Objectives and Policies . . . . . . . . . . . . . . . . .
Investment Advisory and Distribution Plan Fees . . . . . . . . . . .
Purchases, Exchanges and Redemptions . . . . . . . . . . . . . . . .
PRINCIPAL RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . .
APPROVAL OF THE REORGANIZATION (The Proposal). . . . . . . . . . . . .
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition Agreement. . . . . . . . . . . . . . . . . . . . . . . .
Board Approval of the Reorganization . . . . . . . . . . . . . . . .
The Reorganization . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Aspects of the Reorganization. . . . . . . . . . . . . . . . . .
Capitalization Table (Unaudited) . . . . . . . . . . . . . . . . . .
COMPARISON BETWEEN TFBF AND THE FUND . . . . . . . . . . . . . . . . .
Comparison of Investment Objectives, Policies and Restrictions . . .
Special Investment Methods . . . . . . . . . . . . . . . . . . . . .
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . .
Additional Comparative Information . . . . . . . . . . . . . . . . .
INFORMATION CONCERNING THE MEETING . . . . . . . . . . . . . . . . . .
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Record Date; Vote Required; Share Information. . . . . . . . . . . .
Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs of the Solicitation and the Reorganization . . . . . . . . . .
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Information. . . . . . . . . . . . . . . . . . . . . . . .
Public Information . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBIT A - Agreement and Plan of Reorganization, dated as of _____,
1995, by and among Oppenheimer Tax-Free Bond Fund, Quest for
Value Family of Funds, on behalf of National Tax-Exempt Fund,
and Quest for Value Advisors . . . . . . . . . . . . . A-1
EXHIBIT B - Purchase Price Formula Pursuant to the Acquisition
Agreement . . . . . . . . . . . . . . . . . . . . . . . B-1
<PAGE>
COMPARATIVE FEE TABLES
Shareholders pay certain expenses directly, such as sales charges and
account transaction charges. The schedule of such charges is
substantially the same for both TFBF and the Fund (collectively the
"Funds"), except as noted below. Shareholders of the Fund will receive
Class A shares of TFBF. TFBF also offers Class B and Class C shares.
<TABLE>
<CAPTION>
Oppenheimer Tax-Free
Bond Fund
Class A Class B Class C
<S> <C> <C> <C>
Transaction Charges
Maximum Sales Charge on Purchases 4.75% None None
(as a % of offering price)
Sales Charge on Reinvested Dividends None None None
Deferred Sales Charge None(1) 5.0%(2) 1.0%(3)
(as a % of the lower of the original
purchase price or redemption proceeds)
Exchange Fee None None None
National Tax-Exempt Fund
Maximum Sales Charge on Purchases 4.75%
(as a % of offering price)
Sales Charge on Reinvested Dividends None
Deferred Sales Charge None
(as a % of the lower of the original
purchase price or redemption proceeds)
Exchange Fee $5.00
</TABLE>
(1)If you invest more than $1 million in Class A shares, although you will
generally not pay an initial sales charge, you may have to pay a sales
charge of up to 1.0% if you sell your shares within 18 calendar months
from the end of the calendar month during which you purchased those
shares. This deferred sales charge will be waived for shares acquired
in the Reorganization.
(2)If you redeem Class B shares within six years of the beginning of the
month in which you purchase them, you may have to pay a contingent
deferred sales charge starting at 5.0% in the first year and declining
thereafter.
(3)If you redeem Class C shares within 12 months of the beginning of the
calendar month of buying them, you may have to pay a 1.0% contingent
deferred sales charge.
Expenses of the Fund and TFBF; Pro Forma Expenses
The funds each pay a variety of expenses directly for management of
their assets, administration, distribution of their shares and other
services, and those expenses are reflected in the net asset value per
share of each of TFBF and the Fund. The following calculations are based
on the expenses of the Fund and Class A expenses of TFBF for the 6 months
ended June 30, 1995 and the 12 months ended December 31, 1994. These
amounts are shown as a percentage of the average net assets of the Fund
and of Class A shares of TFBF for those periods (for the 6 months ended
June 30, 1995, the percentages are annualized). The pro forma fees
reflect what the fee schedule would have been at June 30, 1995 and
December 31, 1994 if the Reorganization had occurred six months or twelve
months, respectively, prior to those dates.
<TABLE>
<CAPTION>
6 Months Ended June 30, 1995(1)12 Months Ended December 31, 1994
Oppenheimer National Oppenheimer National
Tax-Free Bond Tax-Exempt Tax-Free Bond Tax-Exempt
Fund/Class A Fund(2) Fund/Class A Fund(2)
<S> <C> <C> <C> <C>
Management Fee 0.53% 0.46% 0.53% 0.46%
12b-1 Fee 0.22% 0.10% 0.20% 0.10%
Other Expenses 0.12% 0.32% 0.14% 0.32%
Total Fund Net Operating Expenses0.87% 0.88% 0.87% 0.88%
Total Fund Gross Operating Expenses0.87% 0.94% 0.87% 0.92%
Pro Forma Combined Fund
6 Months Ended 12 Months Ended
June 30, 1995(1) December 31, 1994
Management Fee 0.52% 0.52%
12b-1 Fee 0.22% 0.21%
Other Expenses 0.13% 0.14%
Total Fund Operating Expenses0.87% 0.87%
</TABLE>
(1)Annualized.
(2)"Management Fees" and "Other Expenses" have been restated to reflect
certain voluntary expense limitations and waivers in effect since April
30, 1995: (a) a voluntary expense undertaking by QVA to limit the
Fund's annualized operating expenses to no more than 0.88% of average
daily net assets, and (b) a waiver of a portion of the management fee
to effectuate such limitation. Expense limitations and waivers prior
to April 30, 1995 were higher, with actual management fees charged
representing 0.33% and 0.22%, respectively, of average daily net assets
for the six months ended June 30, 1995 and the year ended December 31,
1994, respectively. Actual "Other Expenses" represented 0.34% and
0.32%, respectively, of average daily net assets for such six month
and one-year periods, respectively. Without such voluntary expense
limitations and waivers, the Fund's management fee would have been
0.50% of average daily net assets for each such period. "12b-1 Fees"
have been restated to reflect the rate in effect since September 1,
1994. Actual 12b-1 fee payments were 0.10% and 0.03%, respectively,
of average daily net assets for the six months ended June 30, 1995 and
the year ended December 31, 1994, respectively. All percentages given
for the six months ended June 30, 1995 have been annualized. Quest for
Value Distributors, Inc. ("QVD"), the Fund's distributor, has no
present intention of charging the full service fee of 0.25% of average
annual net assets.
Hypothetical Examples
To attempt to show the effect of these expenses on an investment over
time, the hypothetical examples shown below have been created. Assume
that you make a $1,000 investment in either the Fund or TFBF or the new
combined fund and that the annual return is 5% and that the operating
expenses for each fund are the ones shown in the chart above for the 6
months ended June 30, 1995 and the 12 months ended December 31, 1994.
For the six months ended June 30, 1995, if you were to redeem your shares
at the end of each period shown below, your investment would incur the
following expenses by the end of each period shown:
<TABLE>
<CAPTION>
6 months ended June 30, 1995
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Oppenheimer Tax-Free
Bond Fund
Class A Shares $56 $74 $93 $150
National Tax-
Exempt Fund $56 $74 $94 $151
Pro Forma Combined
Fund
Class A Shares $56 $74 $ 93 $150
</TABLE>
If you did not redeem your investment, it would incur the following
expenses:
<TABLE>
<CAPTION>
6 months ended June 30, 1995
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Oppenheimer Tax-Free
Bond Fund
Class A Shares $56 $74 $93 $150
National Tax-
Exempt Fund $56 $74 $94 $151
Pro Forma Combined
Fund
Class A Shares $56 $74 $93 $150
</TABLE>
For the 12 months ended December 31, 1994, if you were to redeem your
shares at the end of each period shown below, your investment would incur
the following expenses by the end of each period shown:
<TABLE>
<CAPTION>
12 months ended December 31, 1994
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Oppenheimer Tax-Free
Bond Fund
Class A Shares $56 $74 $ 93 $150
National Tax-
Exempt Fund $56 $74 $ 94 $151
Pro Forma Combined
Fund
Class A Shares $56 $73 $ 92 $147
</TABLE>
If you did not redeem your investment, it would incur the following
expenses:
<TABLE>
<CAPTION>
12 months ended December 31, 1994
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Oppenheimer Tax-Free
Bond Fund
Class A Shares $56 $74 $93 $150
National Tax-
Exempt Fund $56 $74 $94 $151
Pro Forma Combined
Fund
Class A Shares $56 $73 $92 $147
</TABLE>
SYNOPSIS
The following is a synopsis of certain information contained or
incorporated by reference in this Proxy Statement and Prospectus and
presents key considerations for shareholders of the Fund to assist them
in determining whether to approve the Reorganization. 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 TFBF which
accompanies this Proxy Statement and Prospectus and is incorporated by
reference herein.
Parties to the Reorganization
TFBF is a diversified, open-end, management investment company organized
as a Maryland corporation in 1976 that reorganized as a Massachusetts
business trust in 1981. TFBF is located at Two World Trade Center, New
York, New York 10048-0203. Oppenheimer Management Corporation ("OMC")
acts as investment adviser to TFBF. Oppenheimer Funds Distributor, Inc.
("OFDI"), a subsidiary of OMC, acts as the distributor of TFBF's shares.
Additional information about TFBF is set forth below.
The Fund, a diversified fund, is a series of Quest for Value Family of
Funds (the "Trust"), an open-end, management investment company organized
as a Massachusetts business trust in 1987. The Fund commenced operations
on August 14, 1990. The Fund is located at One World Financial Center,
New York, New York 10281. QVA acts as investment adviser to the Fund.
QVD acts as the distributor of the Fund's shares. QVA and QVD are
majority-owned subsidiaries of Oppenheimer Capital, an institutional
investment manager. OMC is not related to Oppenheimer Capital nor its
affiliate, the brokerage firm Oppenheimer & Co., Inc. Additional
information about the Fund is set forth below.
The Reorganization
The Reorganization Agreement provides for the transfer of substantially
all the assets of the Fund to TFBF in exchange for Class A shares of TFBF
and the assumption by TFBF of certain liabilities of the Fund. The
Reorganization Agreement also provides for the distribution of TFBF Class
A shares to the Fund shareholders in complete liquidation of the Fund
(excluding the Cash Reserve). As a result of the Reorganization, each
Fund shareholder will receive that number of full and fractional TFBF
Class A shares equal in value to such shareholder's pro rata interest in
the net assets transferred to TFBF as of the Valuation Date (as
hereinafter defined). For further information about the Reorganization,
see "Approval of the Reorganization" below.
For the reasons set forth below under "Approval of the Reorganization -
Reasons for the Reorganization," the Board, including the trustees who are
not "interested persons" of the Trust (the "Independent Trustees"), as
that term is defined in the Investment Company Act of 1940, as amended
(the "1940 Act"), has concluded that the Reorganization is in the best
interests of the Fund and its shareholders and that the interests of
existing Fund shareholders will not be diluted as a result of the
Reorganization, and recommends approval of the Reorganization by Fund
shareholders. The Board of Trustees of TFBF has also approved the
Reorganization and determined that the interests of existing TFBF
shareholders will not be diluted as a result of the Reorganization. If
the Reorganization is not approved, the Fund will continue in existence
and the Board will determine whether to pursue alternative actions.
"Approval of the Reorganization" sets forth certain information with
respect to the background of the Reorganization, including other
transactions and agreements entered into, or contemplated to be entered
into, by OMC, QVA and their respective affiliates.
Approval of the Reorganization will require the affirmative vote of a
majority of the outstanding shares of the Fund represented in person or
by proxy at the Meeting and entitled to vote at the Meeting. See
"Information Concerning the Meeting - Record Date; Vote Required; Share
Information."
Tax Consequences of the Reorganization
As a condition to the closing of the Reorganization, the Fund and TFBF
will have received an opinion to the effect that the Reorganization will
qualify as a tax-free reorganization for Federal income tax purposes. As
a result of such tax-free reorganization, no gain or loss would be
recognized by the Fund, TFBF, or the shareholders of either fund for
Federal income tax purposes as a result of the Reorganization. For
further information about the tax consequences of the Reorganization, see
"Approval of the Reorganization -Tax Aspects of the Reorganization" below.
Investment Objectives and Policies
The investment objectives of TFBF and the Fund are similar. TFBF and the
Fund seek as high a level of current income exempt from Federal income
taxes as is available from investing in Municipal Obligations, consistent
with preservation of capital. The funds seek their investment objective
by investing, under normal market conditions, at least 80% of total (as
to TFBF) or net (as to the Fund) assets in Municipal Obligations.
Municipal Obligations are debt obligations issued by 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, in the opinion
of bond counsel to the issuer, exempt from Federal income tax.
The Fund invests primarily in Municipal Obligations rated investment
grade or, if unrated, determined by QVA to be of comparable quality. No
more than 25% of TFBF's total assets may be invested in Municipal
Obligations rated below investment grade (or, if unrated, judged by OMC
to be comparable to Municipal Obligations rated below investment grade).
Each of the funds may also write covered calls (and, as to the Fund,
write covered puts) to seek income and may use options and futures (and,
as to TFBF, interest rate swaps) to establish a position in the securities
market as a temporary substitute for purchasing individual securities.
Each of the funds may use hedging instruments to try to manage investments
risks. TFBF may also use certain derivative investments, such as inverse
floating rate municipal bonds, to seek income.
Although the respective investment objectives of the Fund and TFBF are
comparable, shareholders of the Fund should consider certain differences
in the policies, practices and restrictions of the funds. See "Comparison
Between TFBF and the Fund - Investment Objectives and Policies."
Investment Advisory and Distribution Plan Fees
The funds obtain investment management services from their investment
advisers pursuant to the terms of their respective investment advisory
agreements. The management fee is payable to the investment advisers
monthly and is computed on the net asset value of each fund as of the
close of business each day.
TFBF pays a management fee which declines on additional assets as TFBF
increases its assets, at the annual rate of 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. The management fee
payable by the Fund to QVA is at the annual rate of 0.50% of net assets.
TFBF, for each of its Class A, Class B and Class C shares, and the Fund
have each adopted separate service and/or distribution plans pursuant to
Rule 12b-1 under the 1940 Act. Pursuant to the plans, Class A shares of
TFBF are authorized to reimburse or, as to Class B and Class C shares of
TFBF and shares of the Fund, to compensate, OFDI and QVD, respectively,
for costs incurred in connection with the distribution of shares and the
servicing of shareholder accounts that hold the fund's shares. The
current annual fee payable by shares of TFBF and the Fund pursuant to
their service and/or distribution plans is: (i) as to Class A shares of
TFBF and shares of the Fund, a maximum annual 0.25% (as a service fee),
and (ii) as to Class B and Class C shares of TFBF, an annual 1.00%
(consisting of a 0.25% service fee and 0.75% "asset-based sales charge"),
respectively, of average annual net assets.
Prior to September 1, 1994, QVD assumed all distribution-related expenses
without compensation from the Fund. Since September 1, 1994, the Fund has
paid QVD a service fee under the 12b-1 plan at the annual rate of 0.10%
of average net assets.
Purchases, Exchanges and Redemptions
Purchases. Purchases of shares of TFBF may be made through the
distributor for TFBF or through any dealer, broker or financial
institution that has a sales agreement with OFDI. Initial purchases of
shares of the Fund must be made through a broker or dealer having a sales
agreement with QVD; subsequent purchases may also be made directly through
QVD by mailing payments to the Fund's transfer agent. In addition, a
shareholder of TFBF may purchase shares automatically from an account at
a domestic bank or other financial institution under the "OppenheimerFunds
AccountLink" service. Class A shares of TFBF and shares of the Fund are
sold subject to an initial sales charge. Class B and Class C shares of
TFBF are generally sold without a front-end sales charge but may be
subject to a CDSC upon redemption as described below. See "Comparative
Fee Tables -- Transaction Charges," above for a complete description of
such sales charges.
The Class A shares of TFBF to be issued under the Reorganization
Agreement will be issued by TFBF at net asset value without a sales
charge. The sales charge on Class A shares of TFBF will only affect
shareholders of the Fund to the extent that they desire to make additional
purchases of Class A shares of TFBF in addition to the shares which they
will receive as a result of the Reorganization. Future dividends and
capital gain distributions of TFBF, if any, may be reinvested without
sales charge into Class A shares of TFBF or of any other fund within the
OppenheimerFunds family. TFBF has undertaken that any Fund shareholders
entitled to a waiver of sales charges or an exemption from sales charges
pursuant to Fund policy as stated in its Prospectus dated December 1, 1994
shall continue to be entitled to such waiver or exemption as a shareholder
of TFBF after the Reorganization so long as they continue to meet the
applicable eligibility criteria. Each other Oppenheimer fund shall also
provide such waivers and exemptions upon implementation of appropriate
prospectus disclosure.
Exchanges. Shareholders of TFBF and the Fund may exchange their shares
at net asset value for shares of the same class of mutual funds
distributed by OFDI and QVD, respectively, subject to certain conditions.
For purposes of the exchange privilege, shares without a class designation
are considered as "Class A" shares. TFBF offers automatic exchange plans
providing for systematic exchanges from TFBF of a specified amount for
shares of the same class of other funds within the OppenheimerFunds
family.
Redemptions. Class A shares of TFBF (other than share sold subject to
the Class A CDSC) and shares of the Fund may be redeemed without charge
at their respective net asset values per share calculated after the
redemption order is received and accepted; however, certain large
investments in Class A shares of TFBF that were exempt from the front-end
sales charge upon purchase may be subject to a CDSC upon redemption. Such
CDSC will be waived for shares issued pursuant to the Reorganization. See
"Comparative Fee Tables - Transaction Charges," above. Class B shares of
TFBF may be redeemed at their net asset value per share, subject to a
maximum CDSC of 5.0% for redemptions occurring within six years of
purchase. Class C shares of TFBF may be redeemed at their net asset value
per share, subject to a CDSC of 1% if such shares are redeemed during the
first 12 months following their purchase.
Shareholders of TFBF may reinvest redemption proceeds of Class A shares
on which an initial sales charge was paid, or Class B shares that were
purchased by reinvesting dividends or distributions or that were subject
to the Class B CDSC when redeemed, within six months of a redemption at
net asset value in Class A shares of TFBF or any of numerous mutual funds
within the OppenheimerFunds family. This reinvestment privilege is not
available for Class C shares of TFBF. Shareholders of the Fund that
reinvest redemption proceeds in another fund in the Quest Funds family
within 60 days will be reinstated as a shareholder with the same
privileges regarding the non-payment of sales charges that apply to
exchanges. This reinvestment privilege may be exercised only once each
calendar year.
Shareholders of the funds may redeem their shares by written request or
by telephone request in certain stated amounts, or they may arrange to
have share redemption proceeds wired, for a fee, to a pre-designated
account at a U.S. bank or other financial institution that is an automated
clearing house ("ACH") member. Checkwriting privileges on Fund shares and
on Class A shares of TFBF are also available. Upon 30 days' notice, the
Fund may redeem accounts that, because of redemptions, are valued at less
than $500. TFBF may redeem accounts valued at less than $200 if the
account has fallen below such stated amount for reasons other than market
value fluctuations. TFBF and the Fund offer automatic withdrawal plans
providing for systematic withdrawals of a specified amount from the fund
account.
PRINCIPAL RISK FACTORS
In evaluating whether to approve the Reorganization and invest in TFBF,
shareholders should carefully consider the following summary of risk
factors relating to both TFBF and the Fund, in addition to the other
information set forth in this Proxy Statement and Prospectus. A more
complete description of risk factors for each fund is set forth in the
Prospectuses of the funds and their respective Statements of Additional
Information. As a general matter, TFBF and the Fund are intended for
investors seeking current income exempt from Federal income tax and not
for investors seeking capital appreciation. There is no assurance that
either TFBF or the Fund will achieve its investment objective and
investment in the funds is subject to investment risks, including the
possible loss of the principal amount invested.
Investments in Municipal Obligations
TFBF and the Fund seek their investment objectives by investing at
least 80% of total (as to TFBF) or net (as to the Fund) assets in
Municipal Obligations. The Fund invests primarily in Municipal
Obligations rated at the time of purchase within the four highest ratings
assigned by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Corporation ("Standard & Poor's") or Fitch Investors Service, Inc.
("Fitch"), or, if unrated, determined by QVA to be of comparable quality.
These ratings are referred to as "investment grade." The Fund expects to
maintain liquidity through the purchase of short-term Municipal
Obligations rated at the time of purchase within the two highest ratings
assigned by Moody's, Standard & Poor's or Fitch. TFBF may invest up to
25% of its total assets in Municipal Obligations rated less than
investment grade at the time of purchase, or, if unrated, determined by
OMC to be of comparable quality to securities rated below investment
grade. Municipal Obligations rated below investment grade have an
increased credit risk that the issuer may not make interest or principal
payments as they become due and are generally subject to greater
fluctuations in market value than investment grade bonds. A subsequent
downgrade in a rating to less than investment grade will not require
either the Fund or TFBF to dispose of a security.
Inverse Floaters and Other Derivative Investments. TFBF may invest in
inverse floating rate municipal bonds, a type of "derivative investment."
In general, a derivative investment is a specially-designed investment
whose performance is linked to the performance of another investment or
security, such as an option, future or index. In the broadest sense,
derivative investments include exchange-traded options and futures
contracts, which both TFBF and the Fund may use for hedging purposes.
Other derivative investments, such as inverse floaters, offer the
potential for increased income and principal value. Yields on inverse
floaters move in the opposite direction from short-term interest rates and
typically change at a multiple of changes in such rates. A risk of
inverse floaters is that their market value could be expected to vary to
a much greater extent than the market value of other Municipal Obligations
that are not derivative investments but that have similar credit quality,
redemption provisions and maturities. TFBF anticipates that under normal
circumstances it will invest no more than 10% of its total assets in
inverse floaters.
Credit Risk and Interest Rate Risk
The values of Municipal Obligations will vary as a result of changing
evaluations by rating services and investors of the ability of the issuers
of such securities to meet interest and principal payments. Such values
will also change in response to changes in prevailing interest rates.
Should interest rates rise, the values of outstanding fixed-rate Municipal
Obligations will probably decline and (if purchased at principal amount)
would sell at a discount. If interest rates fall, the values of
outstanding fixed-rate Municipal Obligations will probably increase and
(if purchased at principal amount) would sell at a premium. Changes in
the values of fixed-rate Municipal Obligations owned by the Fund or TFBF
arising from these or other factors will not affect interest income
derived from those securities but will affect the Fund's and TFBF's net
asset values per share.
Market Risk
Neither TFBF nor the Fund will invest 25% or more of its total assets
in any one industry. It is possible that the Fund from time to time will
invest more than 25% of its total assets in a particular segment of the
Municipal Obligations market, such as hospital revenue bonds, housing
agency bonds, industrial development bonds or airport bonds, or in
securities the interest on which is paid from revenues of a similar type
of project. In such circumstances, economic, business, political or other
changes affecting one bond (such as proposed legislation affecting the
financing of a project; shortages or price increases of needed materials;
or declining markets or needs for the projects) might also affect other
bonds in the same segment, thereby potentially increasing market risk.
TFBF will not invest more than 25% of its total assets in securities
paying interest from revenues of similar types of projects. Neither the
Fund nor TFBF will invest more than 25% of its respective total assets in
securities of issuers located in the same state.
Repurchase Agreements
The funds may enter into repurchase agreements of seven days or less
without limit and may invest up to 10% of their respective net assets in
repurchase agreements having a maturity beyond seven days. Repurchase
agreements must be fully collateralized. However, if the vendor fails to
pay the resale price on the delivery date, the funds may experience costs
or delays in disposing of the collateral and may experience losses if
there is any delay in doing so. The Fund has no present intention of
entering into repurchase agreements.
Options, Futures and Interest Rate Swaps
The funds may purchase and sell certain kinds of put and call options
and futures on debt securities and broadly-based municipal bond indices.
TFBF may also enter into interest rate swap agreements with respect to
securities it holds, for hedging purposes. These instruments are all
referred to as "hedging instruments". The funds may use certain of these
instruments, such as writing covered call and put options, to generate
income in the form of premiums received from the purchaser of the option.
Hedging instruments and their special risks are described below in
"Comparison Between TFBF and the Fund".
Loans of Portfolio Securities
To attempt to raise its income, TFBF may lend its portfolio securities
to certain types of eligible borrowers approved by the Board of Trustees.
Each loan must be collateralized in accordance with applicable regulatory
requirements. After any loan, the value of the securities loaned must not
exceed 25% of the value of TFBF's total assets. There are some risks in
connection with securities lending. TFBF might experience a delay in
receiving additional collateral to secure a loan, or a delay in recovery
of the loaned securities. TFBF presently does not intend to engage in
loans of securities in excess 5% of the value of its total assets. The
Fund is authorized to lend its portfolio securities, but has no present
intention of doing so.
APPROVAL OF THE REORGANIZATION
(The Proposal)
Background
Oppenheimer Capital, the parent of QVA, the current investment adviser
to the Trust, in the course of a review of its business, recently
concluded that it should concentrate on its core investment management
business and not continue in the retail distribution of mutual funds. The
retail mutual fund market requires significant assets per fund and in the
aggregate for a mutual fund family to cover normal costs, significant
capital investment in new products and services, financing for Class B and
Class C shares and sales support. Certain funds advised by QVA other than
the Fund offer Class B and Class C shares. Consequently, it has become
increasingly difficult for relatively small mutual fund operations, with
assets less than $10 billion, to compete. Sometime after this
determination was made, representatives of OMC approached Oppenheimer
Capital about acquiring certain of its mutual fund assets.
Representatives of OMC, Oppenheimer Capital, QVD and QVA held meetings
beginning in April, 1995. Following the negotiation of the terms of an
acquisition agreement and related agreements, an acquisition agreement
(the "Acquisition Agreement") was executed by OMC, Oppenheimer Capital,
QVD and QVA on August 17, 1995.
The Reorganization described in this Proxy Statement and Prospectus is one
aspect of the overall Acquisition (as hereinafter defined) contemplated
by the Acquisition Agreement described below. The consummation of the
Acquisition is one condition, among others, to the closing of the
Reorganization. Accordingly, unless the parties otherwise agree, the
Reorganization may not be effected, despite shareholder approval, if the
Acquisition does not close. In such case, the Fund will continue in
existence and the Board will take such further action as it, in its
discretion, deems necessary or advisable.
Acquisition Agreement
The Acquisition Agreement contemplates the sale to OMC of substantially
all the assets (the "Purchased Assets") of QVA, QVD and Oppenheimer
Capital (collectively, the "Companies") relating to twelve Quest For Value
mutual funds (the "Acquired Funds") and the assumption by OMC of certain
liabilities of the Companies with respect to the Acquired Funds (the
"Assumed Liabilities") (the foregoing, the "Acquisition"). The
Acquisition Agreement contemplates that six of the Acquired Funds
(including the Fund) will be reorganized with certain mutual funds
currently advised by OMC (the "Reorganized Funds") and the remaining six
Acquired Funds will enter into investment advisory agreements with OMC (or
its designee) and OMC (or its designee) will thereupon enter into
subadvisory agreements with QVA for the benefit of each such fund (the
"Continuing Funds").
The purchase price for the Purchased Assets will be calculated pursuant
to the formula set forth in Exhibit B hereto. If the Acquisition had been
consummated on July 31, 1995, QVA estimates that the purchase price (which
includes the initial purchase payment payable at closing, the amount of
certain assumed liabilities, certain commissions and deferred cash
payment) would have been approximately $50 million. The actual purchase
price may be lower depending upon changes in the net asset value of the
Acquired Funds.
A condition to OMC's obligation to close under the Acquisition
Agreement (the "Acquisition Closing") is the approval of the
reorganizations of the Reorganized Funds (including the Reorganization
described in this Proxy Statement and Prospectus) and approval of the
investment advisory agreements and subadvisory agreements with the
Continuing Funds by shareholders that have in the aggregate at least 75%
of the closing net assets of all Acquired Funds. A condition to the
obligation of the Companies to close under the Acquisition Agreement
(which condition has been satisfied) is that the directors or trustees of
the Continuing Funds and the Reorganized Funds have adopted a resolution
that for a period of three years after the Acquisition Closing, at least
75% of the members of the board of each such fund will not be "interested
persons" (as defined in the 1940 Act) of the investment adviser or sub-
adviser of such fund or "interested persons" (as defined in the 1940 Act)
of QVA, the predecessor investment adviser as to the Continuing Funds.
The Acquisition Agreement sets forth certain other closing conditions.
The Companies have each agreed pursuant to an Agreement Not To Compete
not to sponsor, manage or distribute any open-end or closed-end management
investment company registered under the 1940 Act or any similar law in
Canada (except for certain identified investment companies or types of
investment companies) and not to sell, underwrite or assist in the
distribution of shares of any such funds for a period to end on the
earlier of (i) the third anniversary of the date on which there is no
effective sub-advisory agreement between OMC and QVA or (ii) the eighth
anniversary of the Acquisition Closing. OMC and the Companies have agreed
to indemnify the other party for certain liabilities.
Board Approval of the Reorganization
At its meeting on June 22, 1995, the Board, including the Independent
Trustees, unanimously approved the Reorganization and the Reorganization
Agreement, determined that the Reorganization is in the best interests of
the Fund and its shareholders and resolved to recommend that Fund
shareholders vote for approval of the Reorganization. The Board further
determined that the Reorganization would not result in dilution of the
Fund's shareholders' interests.
In evaluating the Reorganization, the Board requested and reviewed,
with the assistance of independent legal counsel, materials furnished by
OMC and QVA. These materials included financial statements as well as
other written information regarding OMC and its personnel, operations, and
financial condition. The Board also reviewed the same type of information
about QVA. Consideration was given to comparative information concerning
other mutual funds with similar investment objectives, including
information prepared by Lipper Analytical Services, Inc. and Management
Practice, Inc. The Board also considered information with respect to the
relative performance of the funds. The Board also reviewed and discussed
the terms and provisions of the investment advisory agreement pursuant to
which OMC provides management services to TFBF and compared it to the
existing management arrangements for the Fund as well as the management
arrangements of other mutual funds, particularly with respect to the
allocation of various types of expenses, levels of fees and resulting
expense ratios.
In reaching its determination, the Board gave careful consideration to the
following factors, among others: the Reorganization would afford the
shareholders of the Fund the capabilities and resources of OMC and its
affiliates in the area of investment management, distribution, shareholder
servicing and marketing; the ability of the shareholders of the Fund to
exchange their shares for a wider variety of portfolios within the
OppenheimerFunds family with differing investment objectives than are
currently available to shareholders of the Fund; the terms and conditions
of the Reorganization (including that there would be no sales charge
imposed in effecting the Reorganization, that the Reorganization was
intended to qualify as a tax-free exchange, and that all expenses of the
Reorganization would be paid by QVA and OMC in the amounts incurred by the
respective fund); and the substantial similarity of the investment
objectives, policies and methods of the Fund and TFBF.
The Board also considered that the Class A annual operating expenses
of TFBF are slightly lower, as a percentage of assets, and would be
slightly lower on a pro forma basis after giving effect to the
Reorganization, than the operating expenses of the Fund, resulting in a
savings to Fund shareholders. See "Comparative Fee Tables - Expenses of
the Fund and TFBF; Pro Forma Expenses," above.
In addition, the Board determined that the purchase, exchange and
redemption procedures and privileges provided by TFBF are comparable to
those of the Fund and that Fund shareholders currently exempt from payment
of certain transaction-based sales charges will continue to be so exempt
as shareholders of TFBF.
The TFBF Board of Trustees, including the trustees who are not
"interested persons" of TFBF, unanimously approved the Reorganization and
the Reorganization Agreement and determined that the Reorganization is in
the best interests of TFBF and its shareholders. The TFBF Board further
determined that the Reorganization would not result in dilution of the
TFBF shareholders' interests. The TFBF Board considered, among other
things, that an increase in TFBF's asset base as a result of the
Reorganization could benefit TFBF shareholders due to the economies of
scale available to a larger fund.
The Reorganization
The following summary of the Reorganization Agreement is qualified in
its entirety by reference to the Reorganization Agreement (a copy of which
is set forth in full as Exhibit A to this Proxy Statement and Prospectus).
The Reorganization Agreement contemplates a reorganization under which (i)
substantially all of the assets of the Fund would be transferred to TFBF
in exchange for Class A shares of TFBF and the assumption by TFBF of
certain liabilities of the Fund, (ii) the Class A shares of TFBF would be
distributed among shareholders of the Fund in complete liquidation of the
Fund (excluding the Cash Reserve), and (iii) the outstanding shares of the
Fund would be cancelled. Prior to the Closing Date (as hereinafter
defined), the Fund will endeavor to discharge all of its liabilities and
obligations when and as due prior to such date. TFBF will not assume any
liabilities or obligations of the Fund other than those reflected on an
unaudited statement of assets and liabilities of the Fund prepared as of
the Valuation Date and that are agreed to by TFBF. In this regard, the
Fund will retain a cash reserve (the "Cash Reserve") in an amount which
is deemed sufficient in the discretion of the Board for the payment of (a)
the Fund's expenses of liquidation and (b) the Fund's liabilities, other
than those assumed by TFBF. The number of full and fractional Class A
shares of TFBF to be issued to the Fund will be determined on the basis
of their relative net asset values per share, computed as of the close of
business of the New York Stock Exchange, Inc. on the business day
preceding the Closing Date (the "Valuation Date"). The Closing Date for
the Reorganization will be the date of the closing of the Acquisition
under the Acquisition Agreement (or such other date as may be mutually
agreed upon in writing).
OMC will utilize the valuation procedures set forth in the Prospectus and
Statement of Additional Information of TFBF to determine the value of the
Fund's assets to be transferred to TFBF pursuant to the Reorganization,
the value of TFBF's assets and the net asset value of Class A shares of
TFBF. Such values will be computed by OMC as of the Valuation Date in a
manner consistent with its regular practice in pricing TFBF.
The Reorganization Agreement provides for coordination between the
funds as to their respective portfolios so that, on and after the Closing
Date, TFBF will be in compliance with all of its investment policies and
restrictions. The Fund will recognize capital gain or loss on any sales
made pursuant to this condition. As noted in "Tax Aspects of the
Reorganization" below, if the Fund realizes net gain from the sale of
securities, such gain, to the extent not offset by capital loss carry-
forwards, will be distributed to shareholders prior to the Closing Date
and will be taxable to shareholders as capital gain.
Contemporaneously with the closing, the Fund will be liquidated (except
for the Cash Reserve, as defined in the Agreement and Plan of
Reorganization included as Exhibit A to this proxy statement and
prospectus) and the Fund will distribute or cause to be distributed pro
rata to Fund shareholders of record as of the close of business on the
Valuation Date the full and fractional Class A shares of TFBF received by
the Fund. Upon such liquidation, all issued and outstanding shares of the
Fund will be cancelled on the Fund's books and Fund shareholders will have
no further rights as shareholders of the Fund. To assist the Fund in the
distribution of TFBF shares, TFBF will, in accordance with a shareholder
list supplied by the Fund, cause TFBF's transfer agent to credit and
confirm an appropriate number of Class A shares of TFBF to each
shareholder of the Fund. Certificates for shares of TFBF 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 TFBF. Former shareholders of the Fund who
wish certificates representing their shares of TFBF must, after receipt
of their confirmations, make a written request to Oppenheimer Shareholder
Services, P.O. Box 5270, Denver, Colorado 80217. Shareholders of the Fund
holding certificates representing their shares 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 in order to redeem,
transfer, pledge or exchange any shares of TFBF. After the closing of the
Reorganization, the Fund will not conduct any business expect in
connection with the winding up of its affairs.
Under the Reorganization Agreement, within one year after the Closing
Date, the Fund shall: either (i) transfer any remaining amount of the Cash
Reserve to TFBF, if such remaining amount is not material (as defined
below) or (ii) distribute such remaining amount to the shareholders of the
Fund who were such on the Valuation Date. Such remaining amount shall be
deemed to be material if the amount to be distributed, after deducting the
estimated expenses of the distribution, equals or exceeds one cent per
share of the number of Fund shares outstanding on the Valuation Date.
The consummation of the Reorganization is subject to the conditions set
forth in the Reorganization Agreement, including, without limitation,
approval of the Reorganization by the Fund's shareholders.
Notwithstanding approval of the Fund's shareholders, the Reorganization
may be terminated at any time at or prior to the Closing Date: (i) by
mutual written consent of the Trust, on behalf of the Fund, and TFBF, (ii)
by the Trust, on behalf of the Fund, or TFBF if the closing shall not have
occurred on or before February 29, 1996, or (iii) by the Trust, on behalf
of the Fund, or TFBF upon a material breach by the other (and, with
respect to termination by TFBF, a material breach by QVA) of any
representation, warranty, covenant or agreement contained therein to be
performed on or prior to the Closing Date, if a condition therein
expressed to be precedent to the obligations of the terminating party has
not been met and it reasonably appears that it will not or cannot be met
prior to the Closing Date, or the Acquisition is not consummated.
Termination of the Reorganization Agreement will terminate all obligations
of the parties thereto (other than a confidentiality obligation of TFBF
with respect to information relating to the Fund and the obligation of
TFBF to return certain books and records to the Fund) without liability
except, in the event of a termination pursuant to (iii) above, any party
in breach (other than a breach due to Fund shareholders not approving the
Reorganization) of the Reorganization Agreement (or the Acquisition
Agreement, if applicable) will, upon demand, reimburse the non-breaching
party for all reasonable out-of-pocket fees and expenses incurred in
connection with the transactions contemplated by the Reorganization
Agreement.
Approval of the Reorganization will require the vote specified below
in "Information Concerning the Meeting - Record Date; Vote Required; Share
Information." If the Reorganization is not approved by the shareholders
of the Fund, the Trustees of the Trust will consider other possible
courses of action.
Tax Aspects of the Reorganization
At or prior to the Closing Date, the Fund will declare a dividend in
an amount large enough so that it will have declared a dividend of all of
its investment company taxable income, net tax-exempt income and net
capital gain, if any, for the taxable period ending with its dissolution
(determined without regard to any deduction for dividends paid). Such
dividends will be included in the taxable income of the Fund's
shareholders as ordinary income and capital gain, respectively.
The exchange of the assets of the Fund for Class A shares of TFBF and
the assumption by TFBF of certain liabilities of the Fund 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 represented to Price Waterhouse LLP, tax adviser
to the Fund, that to the Fund's best knowledge, there is no plan or
intention by any Fund shareholder who owns 5% 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 TFBF shares received
in the transaction that would reduce the Fund shareholders' ownership of
Class A shares of TFBF to a number of shares having a value, as of the
Closing Date, of less than 50% of the value of all the formerly
outstanding Fund shares as of the same date. The Fund and TFBF have each
further represented to Price Waterhouse LLP the fact that, as of the
Closing Date, the Fund and TFBF will qualify as regulated investment
companies or will meet the diversification test of Section
368(a)(2)(F)(ii) of the Code.
As a condition to the closing of the Reorganization, TFBF and the Fund
will receive the opinion of Price Waterhouse LLP to the effect that,
based on the Reorganization Agreement, the above representations and such
other representations as Price Waterhouse LLP shall reasonably request,
existing provisions of the Code, Treasury Regulations issued thereunder,
current Revenue Rulings, Revenue Procedures and court decisions, for
Federal income tax purposes:
1. The transfer of substantially all of the Fund's assets in
exchange for Class A shares of TFBF and the assumption by TFBF of
certain identified liabilities of the Fund followed by the
distribution by the Fund of Class A shares of TFBF to the Fund
shareholders in exchange for their Fund shares will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the Code,
and the Fund and TFBF will each be a "party to the reorganization"
within the meaning of Section 368(b) of the Code.
2. Pursuant to Section 1032 of the Code, no gain or loss will be
recognized by TFBF upon the receipt of the assets of the Fund solely
in exchange for Class A shares of TFBF and the assumption by TFBF of
the identified liabilities of the Fund.
3. Pursuant to Section 361(a) of the Code, no gain or loss will be
recognized by the Fund upon the transfer of the assets of the Fund
to TFBF in exchange for Class A shares of TFBF and the assumption by
TFBF of the identified liabilities of the Fund or upon the
distribution of Class A shares of TFBF to the Fund shareholders in
exchange for the Fund shares.
4. Pursuant to Section 354(a) of the Code, no gain or loss will be
recognized by the Fund shareholders upon the exchange of the Fund
shares for the Class A shares of TFBF.
5. Pursuant to Section 358 of the Code, the aggregate tax basis for
Class A shares of TFBF received by each Fund shareholder pursuant to
the Reorganization will be the same as the aggregate tax basis of the
Fund shares held by each such Fund shareholder immediately prior to
the Reorganization.
6. Pursuant to Section 1223 of the Code, the holding period of Class
A shares of TFBF to be received by each Fund shareholder will include
the period during which the Fund shares surrendered in exchange
therefor were held (provided such Fund shares were held as capital
assets on the date of the Reorganization).
7. Pursuant to Section 362(b) of the Code, the tax basis of the
assets of the Fund acquired by TFBF will be the same as the tax basis
of such assets of the Fund immediately prior to the
Reorganization.
8. Pursuant to Section 1223 of the Code, the holding period of the
assets of the Fund in the hands of TFBF will include the period
during which those assets were held by the Fund.
TFBF will succeed to and take into account the items of the Fund
described in Section 381(a) of the Code, including the earnings and
profits, or deficit in earnings and profits, of the Fund as of the date
of the transaction. TFBF will take these items into account subject to
the conditions and limitations specified in Sections 381, 382, 383 and 384
of the Code and applicable regulations thereunder.
Shareholders of the Fund should consult their tax advisers regarding the
effect, if any, of the Reorganization in light of their individual
circumstances. Since the foregoing discussion only relates to the Federal
income tax consequences of the Reorganization, shareholders of the Fund
should also consult their tax advisers as to state and local tax
consequences, if any, of the Reorganization.
Capitalization Table (Unaudited)
The table below sets forth the capitalization of TFBF and the Fund and
indicates the pro forma combined capitalization as of June 30, 1995 as if
the Reorganization had occurred on that date.
<TABLE>
<CAPTION>
Net Asset
Shares Value
Net Assets Outstanding Per Share
<S> <C> <C> <C>
Oppenheimer Tax-Free
Bond Fund*
Class A Shares $564,021,382 58,807,401 $9.59
Class B Shares $ 63,605,646 6,639,809 $9.58
National Tax-Exempt
Fund $83,117,377 7,740,403 $10.74
Pro Forma Combined
Fund**
Class A Shares $647,138,759 67,474,489 $9.59
Class B Shares $ 63,605,646 6,639,809 $9.58
</TABLE>
------------------
* Class C shares of TFBF were first publicly offered August 29, 1995.
Accordingly, information with respect to Class C shares of TFBF is not
reflected in the table above.
** Reflects issuance of 8,667,088 Class A shares of TFBF in a tax-free
exchange for the net assets of the Fund, aggregating $83,117,377 for
shares of the Fund.
The pro forma ratio of expenses to average annual net assets of the
combined funds at June 30, 1995 would have been 0.87% with respect to
Class A shares and 1.65% with respect to Class B shares.
COMPARISON BETWEEN TFBF AND THE FUND
Comparative information about TFBF and the Fund is presented below.
More complete information about TFBF and the Fund is set forth in their
respective Prospectuses (which, as to TFBF, accompanies this Proxy
Statement and Prospectus and is incorporated herein by reference), and in
their Statements of Additional Information. To obtain additional copies,
see "Miscellaneous - Public Information."
Comparison of Investment Objectives, Policies and Restrictions
As their investment objective, TFBF and the Fund each seek as high a
level of current income exempt from Federal income taxes as is available
from investing in Municipal Obligations, consistent with preservation of
capital. TFBF and the Fund seek their investment objective by investing
at least 80% of total (as to TFBF) or net (as to the Fund) assets in
Municipal Obligations. Municipal Obligations are debt obligations issued
by or on behalf of the states, the District of Columbia, their political
subdivisions or any commonwealths, territories or possessions of the
United States, or their respective 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.
Dividends paid by either fund derived from interest attributable to
Municipal Obligations will be exempt from Federal individual income taxes.
Any dividends derived from short-term capital gains or net investment
income on taxable investments will be taxable as ordinary income (and any
long-term capital gains distributions will be taxable as long-term capital
gains) when distributed to shareholders.
Under normal market conditions, TFBF may invest up to 20% of its assets
in taxable investments, including certain temporary defensive investments,
hedging instruments, repurchase agreements and private activity Municipal
Obligations (the interest from which may be subject to Federal alternative
minimum tax). The Fund may invest in taxable money market instruments
pending investment in Municipal Obligations or to maintain liquidity. In
times of unstable economic or market conditions, both funds may assume a
temporary defensive position by investing some or all of their assets in
taxable money market instruments, including repurchase agreements. To the
extent either fund assumes a temporary defensive position, a portion of
its distributions may be subject to Federal and state income taxes and it
may not achieve its objective.
The Fund invests primarily in Municipal Obligations rated at the time
of purchase within the four highest ratings assigned by Moody's, Standard
& Poor's or Fitch or, if unrated, determined by QVA to be of comparable
quality. These ratings are referred to as "investment grade." The Fund
expects to maintain liquidity through the purchase of short-term Municipal
Obligations rated at the time of purchase within the two highest ratings
assigned by Moody's, Standard & Poor's or Fitch. TFBF may invest up to
25% of its total assets in Municipal Obligations rated below investment
grade at the time of purchase or, if unrated, determined by OMC to be of
comparable quality to securities rated below investment grade. Municipal
Obligations rated less than investment grade have an increased credit risk
that the issuer may not make interest or principal payments as they become
due and are generally subject to greater fluctuations in market value than
investment grade bonds. A subsequent downgrade in a rating to less than
investment grade will not require either the Fund or TFBF to dispose of
a security.
Floating Rate and Variable Rate Obligations. Some of the Municipal
Obligations both funds may purchase may have variable or floating interest
rates. Variable rates are adjustable at stated periodic intervals.
Floating rates are automatically adjusted when there is a change in a
specified market rate, such as the percentage of the prime rate of a bank,
or the 90-day U.S. Treasury Bill rate. Such obligations may be secured
by bank letters of credit or other credit support arrangements.
Inverse Floaters. TFBF may invest in inverse floating rate municipal
bonds, a type of derivative investment, because they offer the potential
for increased income and principal value. See "Principal Risk Factors -
Inverse Floaters and Other Derivative Instruments," above. TFBF
anticipates that under normal circumstances it will invest no more than
10% of its total assets in inverse floaters.
Municipal Lease Obligations. Both the Fund and TFBF may invest in
municipal lease obligations. Certain lease obligations contain "non-
appropriation" clauses. Consequently, continued lease payments on those
lease obligations are dependent on future legislative actions. Certain
of these lease obligations may be deemed to be "illiquid" securities and
their purchase would be limited as described below in "Special Investment
Methods - Illiquid and Restricted Securities."
Participation Interests. Both funds may purchase participation
interests in Municipal Obligations. Participation interests are primarily
dependent upon the creditworthiness of the borrower for payment of
interest and principal. Certain participation interests, other than those
with puts exercisable within seven days, may be illiquid. See "Special
Investment Methods - Illiquid and Restricted Securities," below.
Special Investment Methods
TFBF and the Fund may use the special investment methods summarized below.
When-Issued Securities. Both funds may purchase Municipal Obligations
at a stated price and yield on a "when-issued" basis, that is, for
delivery to the fund upon issuance, which may be later than the normal
settlement date for such securities. The funds generally would not pay
for such securities or start earning interest on them until they are
received. At time of delivery, the value of the securities may be more
or less than their value at the time of the transaction. Failure of the
issuer to deliver a security purchased by a fund on a when-issued basis
may result in the fund missing an opportunity to make an alternative
investment. The funds will maintain cash, U.S. Government securities or
other liquid high grade debt obligations in a segregated account with its
custodian bank equal in value to its respective obligation to purchase
such securities.
Stand-By Commitments and Puts. The funds may acquire "stand-by
commitments" or "puts" with respect to Municipal Obligations held in their
portfolios. Under a stand-by commitment or put option, a fund would have
the right to sell specified securities at a specified price on demand to
the issuing broker-dealer or bank. The funds will acquire stand-by
commitments or puts solely to facilitate portfolio liquidity and do not
intend to exercise their rights thereunder for trading purposes.
Illiquid and Restricted Securities. Investments may be illiquid
because of the absence of an active trading market, making it difficult
to value them or dispose of them promptly at an acceptable price. TFBF
and the Fund will not invest more than 10% of their respective net assets
in illiquid or restricted securities. Illiquid securities include
repurchase agreements maturing in more than seven days, or certain
participation interests other than those with puts exercisable within
seven days.
Hedging. As described below, both TFBF and the Fund may purchase and sell
certain kinds of futures contracts, put and call options, and options on
futures. TFBF may (but the Fund cannot) enter into interest rate swap
agreements with respect to securities held by it. These are all referred
to as "hedging instruments." The funds do not use hedging instruments for
speculative purposes. TFBF may only purchase a call or put if, after such
purchase, the value of all call and put options held by TFBF would not
exceed 5% of TFBF's total assets. Other limits on the use of hedging
instruments are described in the funds' Prospectuses and Statements of
Additional Information.
Some of these hedging strategies, such as selling futures, buying puts
and writing covered calls, hedge the funds' portfolio against price
fluctuations. Other hedging strategies, such as buying futures and call
options and writing put options, tend to increase the funds' exposure to
the securities market. Writing put options or covered call options may
also provide income to the fund for liquidity purposes or raise cash for
the fund to distribute to shareholders. TFBF may purchase interest rate
swaps where TFBF and another party exchange their right to receive or
their obligation to pay interest on a security. TFBF may not enter into
swaps with respect to more than 25% of its total assets.
The use of hedging instruments requires special skills and knowledge of
investment techniques that are different than those required for normal
portfolio management. If the investment adviser to the fund uses a
hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the fund's return. The fund
could also experience losses if the prices of its futures and options
positions were not correlated with its other investments or if it could
not close out a position because of an illiquid market for the future or
option. Options trading involves the payment of premiums and has special
tax effects on the fund. There are also special risks in particular
hedging strategies. If a covered call written by the fund is exercised
on an investment that has increased in value, the fund will be required
to sell the investment at the call price and will not be able to realize
any profit if the investment has increased in value above the call price.
Interest rate swaps are subject to credit risks (if the other party fails
to meet its obligations) and also to interest rate risks. TFBF could be
obligated to pay more under its swap agreements than it receives under
them, as a result of interest rate changes.
Investment Restrictions
Both TFBF and the Fund have certain investment restrictions that, together
with their respective investment objectives, are fundamental policies
changeable only by shareholder approval. Their investment restrictions
are substantially the same, except as follows.
TFBF cannot:
1. borrow money in excess of 10% of the value of its total assets;
2. invest more than 5% of the value of its total assets in the securities
of any one issuer nor acquire more than 10% of the total value of all
outstanding securities of any one issuer (in both cases, this restriction
does not apply to securities of the U.S. Government or its agencies or
instrumentalities);
3. pledge, mortgage or otherwise encumber any of its assets to secure
a debt (except collateral arrangements for premium and margin payments in
connection with hedging instruments);
4. invest in securities that must be registered under the Securities Act
of 1933 prior to sale; or
5. invest in securities of any other investment company, except in
connection with a merger of another investment company.
The Fund cannot:
1. borrow money in excess of 1/3 of the value of its total assets (the
Fund may borrow from banks only as a temporary measure for extraordinary
or emergency purposes and will make no additional investments while such
borrowings exceed 5% of its total assets);
2. with respect to 75% of its total assets, invest more than 5% of the
value of its total assets in the securities of any one issuer; or
3. pledge or encumber assets in excess of 10% of net assets.
Additional Comparative Information
General
For a discussion of the organization and operation of TFBF, including
brokerage practices, see "Investment Objective and Policies" and "How the
Fund is Managed" in TFBF's current prospectus and "Brokerage Policies of
the Fund" in the TFBF current Statement of Additional Information. For
a discussion of the organization and operation of the Fund, including
brokerage practices, see "Investment Objectives of the Fund," "Investment
Restrictions and Techniques," "Investment Management Agreement" and
"Additional Information" in the Fund's current prospectus.
Financial Information
For certain financial information about TFBF and the Fund, see (as to
TFBF) "Financial Highlights" and "Performance of the Fund" in the TFBF
current prospectus and (as to the Fund) "Financial Highlights" in the Fund
current prospectus.
Management of TFBF and the Fund
For information about the management of TFBF and the Fund, including
their respective Boards of Trustees, investment advisers, portfolio
managers and distributors, see (as to TFBF) "Expenses" and "How the Fund
is Managed" in the TFBF current prospectus and Statement of Additional
Information and (as to the Fund) "Investment Management Agreement,"
Distribution Plan," "Portfolio Transactions and Turnover" and "Additional
Information" in the Fund current Prospectus.
Description of Shares of TFBF and the Fund
Each share of TFBF represents an interest in the fund proportionately
equal to the interest of each other share of the same class and entitles
the holder to one vote per share (and a fractional vote for a fractional
share) on matters submitted to shareholders' vote at shareholders'
meetings. Shareholders of TFBF vote together in the aggregate on certain
matters at shareholders' meetings, such as the election of Trustees and
ratification of appointment of auditors for the fund. Shareholders of a
particular class vote separately on proposals which affect that class, and
shareholders of a class which is not affected by that matter are not
entitled to vote on the proposal. Shares do not have cumulative voting
rights or preemptive or subscription rights. Shares may be voted in
person or by proxy. TFBF is not required to hold, and does not plan to
hold, regular annual meetings of shareholders. TFBF currently has three
classes of shares, Class A, Class B and Class C. Each class invests in
the same investment portfolio. Each class has its own dividends and
distributions, and pays certain expenses which may be different for the
different classes. Shares are freely transferrable.
For further information about the classes of shares of TFBF, and a
description of shares of the Fund, including voting rights, restrictions
on disposition and potential liability associated with their ownership,
see (as to TFBF) "How the Fund is Managed" in the TFBF current prospectus
and Statement of Additional Information and (as to the Fund) "Additional
Information" in the Fund current prospectus.
Dividends, Distributions and Taxes
Both funds declare dividends from net investment income daily, distribute
dividends monthly, and distribute any net short-term or long-term capital
gains annually. For a discussion of the policies of TFBF and the Fund
with respect to dividends and distributions, and a discussion of the tax
consequences of an investment in TFBF and the Fund, see (as to TFBF)
"Dividends, Capital Gains and Taxes" in the TFBF current prospectus and
(as to the Fund) "Dividends and Distributions" and "Tax Status" in the
Fund current prospectus.
Purchases, Redemptions and Exchanges of Shares
For a discussion of how shares of TFBF and the Fund may be purchased,
redeemed and exchanged, see (as to TFBF) "How to Buy Shares," "How to Sell
Shares," "Exchanges of Shares," "Special Investor Services," "Service Plan
for Class A Shares," "Distribution and Service Plan for Class B Shares"
and "Distribution and Service Plan for Class C Shares" in the TFBF current
prospectus; and see "How to Buy Shares," "How to Redeem Shares,"
"Exchanging Shares" and "Additional Information" in the Fund current
prospectus.
Shareholder Inquiries
For a description of how shareholder inquiries should be made, see (as to
TFBF) "How the Fund is Managed" in the TFBF current prospectus and (as to
the Fund) "Additional Information" in the Fund current prospectus.
TFBF Performance
TFBF does not maintain a fixed dividend rate and there can be no assurance
as to the payment of any dividends or the realization of any capital
gains. A discussion of the performance of TFBF's Class A and Class B
shares for the fiscal year ended December 31, 1994 is set forth under
"Management's Discussion of Performance" in the TFBF prospectus that
accompanies this Proxy Statement and Prospectus. See also "Comparing the
Fund's Performance to the Market" in the TFBF prospectus for a graph of
the performance of a hypothetical $10,000 investment in Class A or Class
B shares of TFBF compared with 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. Index performance
reflects the reinvestment of dividends but does not consider the effect
of capital gains or transaction costs, and none of the data above shows
the effect of taxes. Also, TFBF's performance reflects the effect of TFBF
business and operating expenses. While index comparisons may be useful
to provide a benchmark for TFBF's performance, it should be noted that
TFBF's investments are not limited to the securities in any one index and
the index data does not reflect any assessment of the risk of the
investments included in the index.
Information regarding the Fund's performance is set forth in the Fund's
Annual Report dated July 31, 1994 and Semi-Annual Report dated January 31,
1995, copies of which may be obtained from QVD (see "Miscellaneous -
Financial Information") and which are incorporated herein by reference.
INFORMATION CONCERNING THE MEETING
The Meeting
The Meeting will be held at One World Financial Center, New York, New
York 10281 on the 40th Floor at _____ A.M., New York time, on November 16,
1995 and any adjournments thereof. At the Meeting, shareholders of the
Fund will be asked to consider and vote upon the Reorganization Agreement,
and the transactions contemplated thereby, including the transfer of
substantially all the assets of the Fund in exchange for Class A shares
of TFBF, the distribution of such shares to the shareholders of the Fund
in complete liquidation of the Fund (excluding the Cash Reserve), and
cancellation of the outstanding shares of the Fund.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on September 25, 1995 as the
record date (the "Record Date") for the determination of shareholders
entitled to notice of, and to vote at, the Meeting. The affirmative vote
of a majority of the outstanding shares of the Fund represented in person
or by proxy at the Meeting and entitled to vote at the Meeting is required
for approval of the Proposal. Each shareholder will be entitled to one
vote for each share and a fractional vote for each fractional share held
of record at the close of business on the Record Date. Only shareholders
of the Fund will vote on the Reorganization. The vote of shareholders of
TFBF is not being solicited to approve the Reorganization Agreement.
At the close of business on the Record Date, there were approximately
_____________ shares of the Fund issued and outstanding. The presence in
person or by proxy of the holders of a majority of such shares constitutes
a quorum for the transaction of business at the Meeting. As of the close
of business on the Record Date, there were approximately ____________,
__________ and ___________ Class A, B and C shares, respectively, of OTFBF
issued and outstanding. [To the knowledge of the Fund, as of the Record
Date, no person owned of record or beneficially owned 5% or more of its
outstanding shares.] [To the knowledge of TFBF, as of the Record Date,
no person owned of record or beneficially owned 5% or more of its
outstanding Class A, Class B or Class C shares or 5% or more of the
outstanding shares of TFBF.] [As of the Record Date, the officers and
Trustees of TFBF, and the officers and Trustees of the Fund, beneficially
owned as a group less than 1% of the outstanding shares of each class of
TFBF and of TFBF, and of the Fund, respectively.]
In the event a quorum does not exist as to shares of the Fund on the
date originally scheduled for the Meeting, or, subject to approval of the
Board, for other reasons, one or more adjournments of the Meeting may be
sought by the Board. Any adjournment would require a vote in favor of the
adjournment by the holders of a majority of the shares present at the
Meeting (or any adjournment thereof) in person or by proxy. The persons
named as proxies will vote all shares represented by proxies which they
are required to vote in favor of the Proposal in favor of an adjournment,
and will vote all shares which they are required to vote against the
Proposal against an adjournment.
Proxies
The enclosed form of proxy, if properly executed and returned, will be
voted (or counted as an abstention or withheld from voting) in accordance
with the choices specified thereon, and will be included in determining
whether there is quorum to conduct the Meeting. 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 Proposal.
Shares owned of record by broker-dealers for the benefit of their
customers ("street account shares") will be voted by the broker-dealer
based on instructions received from its customers. If no instructions are
received, the broker-dealer may (if permitted under applicable stock
exchange rules), as record holder, vote such shares on the Proposal in the
same proportion as that broker-dealer votes street account shares for
which voting instructions were received in time to be voted ("broker non-
votes"). Abstentions and broker non-votes will be counted as present for
purposes of determining a quorum and will have the same effect as a vote
against the Proposal. The proxy may be revoked at any time prior to the
voting thereof by: (i) writing to the Secretary of the Trust at One World
Financial Center, New York, New York 10281; (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).
Costs of the Solicitation and the Reorganization
All expenses of this solicitation, including the cost of printing and
mailing this Proxy Statement and Prospectus, will be evenly apportioned
between QVA and OMC. 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. In addition to the solicitation of proxies by
mail, proxies may be solicited by officers and employees of QVA, the
Trust's investment adviser, or QVA's affiliates, personally or by
telephone or telegraph.
In addition, QVA has retained D.F. King & Co., Inc., 77 Water Street,
New York, New York 10005 to assist in the solicitation of proxies
primarily by contacting shareholders by telephone and telegram for a fee
not to exceed $____, plus reasonable out-of-pocket expenses. D.F. King
& Co., Inc. may call shareholders to ask if they would be willing to have
their votes recorded by telephone. The telephone voting procedure is
designed to authenticate shareholders' identities, to allow shareholders
to authorize the voting of their shares in accordance with their
instructions and to confirm that their instructions have been recorded
properly. The Trust has been advised by counsel that these procedures are
consistent with the requirements of applicable law. Shareholders voting
by telephone would be asked for their social security number or other
identifying information and would be given an opportunity to authorize
proxies to vote their shares in accordance with their instructions. To
ensure that the shareholders' instructions have been recorded correctly
they will receive a confirmation of their instructions in the mail. A
special toll-free number will be available in case the information
contained in the confirmation is incorrect. Although a shareholder's vote
may be taken by telephone, each shareholder will receive a copy of this
Proxy Statement and Prospectus and may vote by mail using the enclosed
proxy card. The cost for such proxy solicitor will be shared by QVA and
OMC.
Brokerage houses, banks and other fiduciaries may be requested to forward
soliciting material to the beneficial owners of shares of the Fund and to
obtain authorization for the execution of proxies. For those services,
if any, they will be reimbursed by the Trust for their reasonable out-of-
pocket expenses.
Expenses of the Reorganization will be paid as set forth in the
Agreement and Plan of Reorganization included as Exhibit A to this Proxy
Statement and Prospectus. With respect to the Reorganization, OMC and QVA
will share the cost of the tax opinion. Any other out-of-pocket expenses
of TFBF and the Fund associated with the Reorganization, including legal,
accounting and transfer agent expenses, will be borne by OMC and QVA,
respectively, in the amounts so incurred by the respective fund.
MISCELLANEOUS
Financial Information
The Reorganization will be accounted for by TFBF in its financial
statements similar to a pooling without restatement. Further financial
information as to the Fund is contained in (i) its current Prospectus,
which is incorporated herein and is available without charge upon written
request to QVD at P.O. Box 3567, Church Street Station, New York, New York
10277-1296 or by calling the toll-free number shown on the front cover of
this Proxy Statement and Prospectus, and (ii) its audited financial
statements as of July 31, 1994 and unaudited financial statements as of
January 31, 1995, which are included in the Additional Statement.
Financial information for TFBF is contained in its current Prospectus
accompanying this Proxy Statement and Prospectus and incorporated herein,
and in its audited financial statements as of December 31, 1994 and
unaudited financial statements as of June 30, 1995 which are included in
the Additional Statement.
Public Information
Additional information about TFBF and the Fund is available, as
applicable, in the following documents: (i) TFBF's Prospectus dated August
29, 1995 accompanying this Proxy Statement and Prospectus and incorporated
herein by reference; (ii) the Fund's Prospectus dated December 1, 1994,
which may be obtained without charge by writing to QVD at the address
given in the preceding paragraph; (iii) TFBF's Annual Report as of
December 31, 1994, and Semi-Annual Report dated June 30, 1995, which may
be obtained without charge by writing to OSS at P.O. Box 5270, Denver,
Colorado 80217; and (iv) the Fund's Annual Report as of July 31, 1994, and
Semi-Annual Report as of January 31, 1995 which may be obtained without
charge by writing to QVD. All of the foregoing documents and the
Statements of Additional Information referred to below may be obtained by
calling the toll-free number for TFBF or the Fund, as applicable, on the
cover of this Proxy Statement and Prospectus.
Additional information about the following matters is contained in the
Additional Statement, which incorporates herein by reference and includes
the TFBF Additional Statement dated August 29, 1995, the Fund's Prospectus
dated December 1, 1994 and its Statement of Additional Information dated
December 1, 1994, and the Annual and Semi-Annual Reports described in the
preceding paragraph: the organization and operation of TFBF and the Fund;
more information on investment policies, practices and risks; information
about TFBF's and the Fund's respective Boards of Trustees and their
responsibilities; a further description of the services provided by TFBF's
and the Fund's investment adviser, distributor, and transfer and
shareholder servicing agent; dividend policies; tax matters; an
explanation of the method of determining the offering price of the shares
of TFBF and the Fund; purchase, redemption and exchange programs; and
distribution arrangements.
TFBF and the Fund 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 TFBF and the Fund 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 which will be presented at the Meeting. Since matters not
known at the time of the solicitation may come before the Meeting, the
proxy as solicited confers discretionary authority with respect to such
matters as properly come before the Meeting, including any adjournment or
adjournments thereof, and it is the intention of the persons named as
attorneys-in-fact in the proxy to vote this proxy in accordance with their
judgment on such matters.
By Order of the Board of Trustees
Deborah Kaback, Secretary
_______, 1995 310
MERGE\QFVF310.D1
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as
of this ____ day of September, 1995, by and among Oppenheimer Tax-Free
Bond Fund, a Massachusetts business trust ("Oppenheimer Fund"), Quest for
Value Family of Funds, a Massachusetts business trust ("Quest For Value"),
on behalf of National Tax-Exempt Fund ("Quest Portfolio"), a series of
Quest For Value, and Quest for Value Advisors ("Quest Advisors"), a
Delaware general partnership which serves as investment adviser to the
Quest Portfolio.
This Agreement is intended to be and is adopted as a "plan of
reorganization", within the meaning of Treas. Reg. Section 1.368-2(g), for a
reorganization under Section 368(a)(1) of the Internal Revenue Code of
1986, as amended ("Code"). The reorganization ("Reorganization") will
consist of the transfer to the Oppenheimer Fund of substantially all of
the assets of the Quest Portfolio in exchange for the assumption by the
Oppenheimer Fund of such stated liabilities of the Quest Portfolio as
shall be agreed to by the Oppenheimer Fund and the issuance by the
Oppenheimer Fund of shares of beneficial interest of the Oppenheimer Fund
("shares") of Class A to be distributed contemporaneously with the Closing
Date (as hereinafter defined), to the shareholders of the Quest Portfolio
in liquidation of the Quest Portfolio as provided herein, all upon the
terms and conditions hereinafter set forth in this Agreement. To the
extent necessary to effectuate the transactions contemplated by this
Agreement, or as the context of representations, warranties, covenants and
other agreements set forth in this Agreement may require, all references
in this Agreement to the Quest Portfolio shall include Quest For Value.
In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. THE REORGANIZATION AND LIQUIDATION OF THE QUEST PORTFOLIO
1.1 Subject to the terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, on the
Closing Date, the Quest Portfolio will assign, deliver and otherwise
transfer its assets as set forth in paragraph 1.2 ("Quest Portfolio
Assets") to the Oppenheimer Fund, and the Oppenheimer Fund will in
exchange therefor assume Quest Portfolio's stated liabilities on the
Closing Date as set forth in paragraph 1.3 and deliver to the Quest
Portfolio the number of Class A shares of the Oppenheimer Fund, including
fractional Oppenheimer Fund shares, determined by dividing the value of
the Quest Portfolio Assets, net of such stated liabilities, computed in
the manner and as of the time and date set forth in paragraph 2.1, by the
net asset value of Class A shares of the Oppenheimer Fund, computed in the
manner and as of the time and date set forth in paragraph 2.2. Such
transactions shall take place at the closing provided for in paragraph 3.1
("Closing").
1.2 (a) The Quest Portfolio Assets shall consist of all property
and rights, including without limitation all cash, cash equivalents,
securities and dividend and interest receivables owned by the Quest
Portfolio, and any deferred or prepaid expenses shown as an asset on the
Quest Portfolio's books on the Closing Date. Notwithstanding the
foregoing, the Quest Portfolio Assets shall exclude a cash reserve (the
"Cash Reserve") to be retained by the Quest Portfolio sufficient in its
discretion for the payment of the expenses of the Quest Portfolio's
dissolution and its liabilities, but not in excess of the amount
contemplated by paragraph 7.11.
(b) Promptly following the signing of this Agreement, the Quest
Portfolio will provide the Oppenheimer Fund with a list of its assets as
of the most reasonably practical date. On the Closing Date, the Quest
Portfolio will provide the Oppenheimer Fund with a list of the Quest
Portfolio Assets to be assigned, delivered and otherwise transferred to
the Oppenheimer Fund and of the stated liabilities to be assumed by the
Oppenheimer Fund pursuant to this Agreement.
1.3 The Quest Portfolio will endeavor to discharge all of its
liabilities and obligations when and as due prior to the Closing Date.
An unaudited Statement of Assets and Liabilities of the Quest Portfolio
will be prepared by the Treasurer of the Quest Portfolio, as of the
Valuation Date, which Statement shall be prepared in conformity with
generally accepted accounting principles consistently applied from the
prior audited period. On the Closing Date, the Oppenheimer Fund shall
assume such stated liabilities, expenses, costs, charges and reserves set
forth on such Statement as shall be agreed to by the Oppenheimer Fund.
1.4 In order for the Quest Portfolio to comply with Section
852(a)(1) of the Code and to avoid having any investment company taxable
income or net capital gain (as defined in Section 852(b)(2) and 1222(11)
of the Code, respectively) in the short taxable year ending with its
dissolution, the Quest Portfolio will on or before the Closing Date (a)
declare a dividend in an amount large enough so that it will have declared
dividends of all of its investment company taxable income, net tax-exempt
income and net capital gain, if any, for such taxable year (determined
without regard to any deduction for dividends paid) and (b) distribute
such dividend.
1.5 Contemporaneously with the Closing, the Quest Portfolio will be
liquidated (except for the Cash Reserve) and the Quest Portfolio will
distribute or cause to be distributed the Oppenheimer Fund shares received
by the Quest Portfolio pursuant to paragraph 1.1 pro rata to the
appropriate shareholders of record determined as of the close of business
on the Valuation Date as defined in paragraph 2.1. Upon such liquidation
all issued and outstanding shares of the Quest Portfolio will be cancelled
on the Quest Portfolio's books and the Quest Portfolio Shareholders will
have no further rights as such Shareholders. The Oppenheimer Fund will
not issue certificates representing the shares of the Oppenheimer Fund in
connection with such exchange.
1.6 After the Closing, the Quest Portfolio shall not conduct any
business except in connection with the winding up of its affairs and shall
file, or make provision for filing of, all reports it is required by law
to file. After the Closing, Quest For Value may be dissolved and
deregistered as an investment company under the Investment Company Act of
1940, as amended (the "1940 Act"). Within one year after the Closing, the
Quest Portfolio shall (a) either pay or make provision for payment of all
of its liabilities and taxes, and (b) either (i) transfer any remaining
amount of the Cash Reserve to the Oppenheimer Fund, if such remaining
amount (as reduced by the estimated cost of distributing it to
shareholders) is not material (as defined below) or (ii) distribute such
remaining amount to the shareholders of the Quest Portfolio on the
Valuation Date. Such remaining amount shall be deemed to be material if
the amount to be distributed, after deduction of the estimated expenses
of the distribution, equals or exceeds one cent per share of the Quest
Portfolio outstanding on the Valuation Date.
1.7 Copies of all books and records of or pertaining to the Quest
Portfolio, including those in connection with its obligations under the
1940 Act, the Code, State blue sky laws or otherwise in connection with
this Agreement, will promptly after the Closing be delivered to officers
of the Oppenheimer Fund or their designee. Quest For Value and Quest
Advisors shall have access to such books and records upon reasonable
request during normal business hours.
2. THE CALCULATION
2.1 The value of the Quest Portfolio Assets shall be the value of
such assets computed as of the close of business of the New York Stock
Exchange on the business day preceding the Closing Date (such time and
date being hereinafter called the "Valuation Date"), using the valuation
procedures set forth in the Oppenheimer Fund's then current prospectus and
statement of additional information.
2.2 The net asset value of Class A shares of the Oppenheimer Fund
shall be the net asset value per share computed on the Valuation Date,
using the valuation procedures set forth in the Oppenheimer Fund's then
current prospectus and statement of additional information.
2.3 The number of Class A Oppenheimer Fund shares (including
fractional shares, if any) to be issued hereunder shall be determined by
dividing the value of the Quest Portfolio Assets, net of the liabilities
assumed by the Oppenheimer Fund, determined in accordance with paragraph
2.1, by the net asset value of Class A Oppenheimer Fund shares determined
in accordance with paragraph 2.2.
2.4 All computations of value shall be made by Oppenheimer
Management Corporation in accordance with its regular practice in pricing
the Oppenheimer Fund. The Oppenheimer Fund shall cause Oppenheimer
Management Corporation to deliver to the Quest Portfolio a copy of its
valuation report at the Closing.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date hereunder (the "Closing Date") shall be the
date of the closing of the acquisition contemplated by that certain
Acquisition Agreement (the "Acquisition Agreement") dated August 17, 1995
between Oppenheimer Management Corporation, Quest Advisors, Quest for
Value Distributors and Oppenheimer Capital (or such other day and time as
may be mutually agreed upon in writing). The Closing shall be held in a
location mutually agreeable to all the parties hereto. All acts taking
place at the Closing shall be deemed to take place simultaneously as of
9:00 a.m. Eastern time on the Closing Date unless otherwise agreed by the
parties.
3.2 Portfolio securities held by the Quest Portfolio and represented
by a certificate or written instrument shall be presented by it or on its
behalf to Citibank, N.A. (the "Custodian"), custodian for the Oppenheimer
Fund, for examination no later than five business days preceding the
Valuation Date. Such portfolio securities (together with any cash or
other assets) shall be delivered by the Quest Portfolio to the Custodian
for the account of the Oppenheimer Fund on or before the Closing Date in
conformity with applicable custody provisions under the 1940 Act and duly
endorsed in proper form for transfer in such condition as to constitute
good delivery thereof in accordance with the custom of brokers. The
portfolio securities shall be accompanied by all necessary federal and
state stock transfer stamps or a check for the appropriate purchase price
of such stamps. Portfolio securities and instruments deposited with a
securities depository, as defined in Rule 17f-4 under the 1940 Act, or
with a qualified foreign custodian under Rule 17f-5 of the 1940 Act shall
be delivered on or before the Closing Date by book entry in accordance
with customary practices of such depositories and the Custodian. The cash
delivered shall be in the form of a Federal Funds wire, payable to the
order of "Citibank, N.A., Custodian for Oppenheimer Tax-Free Bond Fund."
3.3 In the event that on the Valuation Date (a) the New York Stock
Exchange shall be closed to trading or trading thereon shall be restricted
or (b) trading or the reporting of trading on such Exchange or elsewhere
shall be disrupted so that, in the judgment of both the Oppenheimer Fund
and the Quest Portfolio, accurate appraisal of the value of the net assets
of the Oppenheimer Fund or the Quest Portfolio Assets is impracticable,
the Valuation Date shall be postponed until the first business day after
the day when trading shall have been fully resumed without restriction or
disruption and reporting shall have been restored.
3.4 The Quest Portfolio shall deliver to the Oppenheimer Fund or its
designee (a) at the Closing a list, certified by its Secretary, of the
names, addresses and taxpayer identification numbers of the Quest
Portfolio Shareholders (as hereinafter defined) and the number of
outstanding Quest Portfolio shares owned by each such shareholder, all as
of the Valuation Date (the "Quest Portfolio Shareholders"), and (b) as
soon as practicable after the Closing all original documentation
(including Internal Revenue Service forms, certificates, certifications
and correspondence) relating to the Quest Portfolio Shareholders' taxpayer
identification numbers and their liability for or exemption from back-up
withholding. The Oppenheimer Fund shall issue and deliver to Quest
Portfolio a confirmation evidencing delivery of Oppenheimer Fund shares
to be credited on the Closing Date to the Quest Portfolio or provide
evidence reasonably satisfactory to the Quest Portfolio that such
Oppenheimer Fund shares have been credited to Quest Portfolio's account
on the books of the Oppenheimer Fund. At the Closing each party shall
deliver to the other such bills of sale, assignments, assumption
agreements, receipts or other documents as such other party or its counsel
may reasonably request to effect the consummation of the transactions
contemplated by the Agreement.
4. COVENANTS OF THE OPPENHEIMER FUND AND THE QUEST PORTFOLIO
4.1 The Oppenheimer Fund will operate its business in the ordinary
course between the date hereof and the Closing Date, it being understood
that such ordinary course of business will include customary dividends and
other distributions and such changes that have been approved by
shareholders of the Oppenheimer Fund at a shareholders meeting prior to
the Closing of which Quest Portfolio has been advised.
4.2 The Oppenheimer Fund will prepare and file with the Securities
and Exchange Commission ("Commission") a registration statement on Form
N-14 under the Securities Act of 1933, as amended ("1933 Act"), relating
to the Oppenheimer Fund shares to be issued to the Quest Portfolio
Shareholders pursuant to the Reorganization ("Registration Statement").
The Quest Portfolio will provide the Oppenheimer Fund with the Proxy
Materials as described in paragraph 4.3 below, for inclusion in the
Registration Statement. The Quest Portfolio will further provide the
Oppenheimer Fund with such other information and documents relating to the
Quest Portfolio as are reasonably necessary for the preparation of the
Registration Statement.
4.3 The Quest Portfolio will call a meeting of its shareholders to
consider and act upon the Reorganization, including this Agreement, and
take all other action necessary to obtain approval of the transactions
contemplated herein. The Quest Portfolio will prepare, with such
assistance from the Oppenheimer Fund as may be mutually agreed to, the
notice of meeting, form of proxy and proxy statement and prospectus
(collectively "Proxy Materials") to be used in connection with such
meeting provided that the Oppenheimer Fund will furnish the Quest
Portfolio with a current effective prospectus relating to the Oppenheimer
Fund shares for inclusion in the Proxy Materials and with such other
information relating to the Oppenheimer Fund as is reasonably necessary
for the preparation of the Proxy Materials.
4.4 Prior to the Closing Date, the Quest Portfolio will assist the
Oppenheimer Fund in obtaining such information as the Oppenheimer Fund
reasonably requests concerning the beneficial ownership of the shares of
the Quest Portfolio.
4.5 Subject to the provisions of this Agreement, the Oppenheimer
Fund and the Quest Portfolio will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
4.6 As promptly as practicable, but in any case within 60 days after
the Closing Date, the Quest Portfolio shall furnish or cause to be
furnished to the Oppenheimer Fund, such information as the Oppenheimer
Fund reasonably requests to enable the Oppenheimer Fund to determine the
Quest Portfolio's earnings and profits for federal income tax purposes
that will be carried over to the Oppenheimer Fund pursuant to Section 381
of the Code.
4.7 As soon after the Closing Date as is reasonably practicable,
Quest for Value shall prepare and file all federal and other tax returns
and reports of the Quest Portfolio required by law to be filed with
respect to all periods ending through and after the Closing Date but not
theretofore filed.
4.8 The Oppenheimer Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940
Act and such of the state Blue Sky and securities laws as it may deem
appropriate in order to continue its operations after the Closing Date.
4.9 Until the third anniversary of the Closing Date, the Oppenheimer
Fund will use its best efforts to assure that at least 75% of the Trustees
of the Oppenheimer Fund will not be "interested persons" of the investment
adviser for the Oppenheimer Fund or Quest Advisors, as the term
"interested person" is defined by the 1940 Act.
5. REPRESENTATIONS AND WARRANTIES
5.1 Oppenheimer Fund represents and warrants to the Quest Portfolio
as follows:
(a) The Oppenheimer Fund is an unincorporated voluntary association
validly existing and in good standing under the laws of the Commonwealth
of Massachusetts, and has the power and authority to own its properties
and to carry on its business as it is now conducted;
(b) Oppenheimer Fund is a duly registered, open-end, management
investment company, and its registration with the Commission as an
investment company under the 1940 Act and the registration of its shares
under the 1933 Act are in full force and effect;
(c) All of the issued and outstanding shares of each class of the
Oppenheimer Fund have been offered and sold in compliance in all material
respects with applicable registration requirements of the 1933 Act and
state securities laws. Shares of each class of the Oppenheimer Fund are
registered in all jurisdictions in which they are required to be
registered under state securities laws and other laws, and said
registrations, including any periodic reports or supplemental filings, are
complete and current, all fees required to be paid have been paid, and the
Oppenheimer Fund is not subject to any stop order and is fully qualified
to sell its shares in each state in which its shares have been registered;
(d) The current prospectus and statement of additional information
of the Oppenheimer Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the regulations
thereunder and do not include any untrue statement of a material fact or
omit to state any 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;
(e) At the Closing Date, the Oppenheimer Fund will have title to the
Oppenheimer Fund's assets, subject to no liens, security interests or
other encumbrances except those incurred in the ordinary course of
business.
(f) The Oppenheimer Fund is not, and the execution, delivery and
performance of this Agreement will not result, in a material violation of
any provision of the Oppenheimer Fund's Declaration of Trust or By-Laws
or of any material agreement, indenture, instrument, contract, lease or
other undertakings to which the Oppenheimer Fund is a party or by which
it is bound;
(g) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or, to its knowledge, threatened against the Oppenheimer Fund or
any of its properties or assets, except as previously disclosed in writing
to the Quest Portfolio. The Oppenheimer Fund knows of no facts that might
form the basis for the institution of such proceedings and is not a party
to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects, or is
reasonably likely to materially and adversely affect, its business or its
ability to consummate the transactions contemplated herein;
(h) The Statement of Assets and Liabilities, Statement of Operations
and Statement of Changes in Net Assets as of December 31, 1994 of the
Oppenheimer Fund examined by KPMG Peat Marwick LLP (a copy of which has
been furnished to the Quest Portfolio), fairly present, in all material
respects, the financial condition of the Oppenheimer Fund as of such date
in conformity with generally accepted accounting principles consistently
applied, and as of such date there were no known liabilities of the
Oppenheimer Fund (contingent or otherwise) not disclosed therein that
would be required in conformity with generally accepted accounting
principles to be disclosed therein;
(i) All issued and outstanding Oppenheimer Fund shares of each class
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable with no personal liability
attaching to the ownership thereof except as otherwise set forth in the
current statement of additional information for the Oppenheimer Fund under
"How the Fund is Managed - Organization and History;"
(j) Oppenheimer Fund has the power to enter into this Agreement and
carry out its obligations hereunder. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary
corporate action on the part of Oppenheimer Fund, and this Agreement
constitutes a valid and binding obligation of the Oppenheimer Fund
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating
to or affecting creditors rights and to general equity principles;
(k) The Oppenheimer Fund shares to be issued and delivered to the
Quest Portfolio, for the account of the Quest Portfolio Shareholders,
pursuant to the terms of this Agreement will at the Closing Date have been
duly authorized and, when so issued and delivered, will be duly and
validly issued Oppenheimer Fund shares, and will be fully paid and non-
assessable with no personal liability attaching to the ownership thereof
except as otherwise set forth in the current statement of additional
information for the Oppenheimer Fund under "How the Fund is Managed -
Organization and History," and no shareholder of Oppenheimer Fund will
have any preemptive right or right of subscription or purchase in respect
thereof;
(l) Since December 31, 1994, there has not been (i) any material
adverse change in the Oppenheimer Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary
course of business, or that have been approved by shareholders of the
Oppenheimer Fund or (ii) any incurrence by the Oppenheimer Fund of any
indebtedness except indebtedness incurred in the ordinary course of
business. For the purposes of this subparagraph, neither a decline in net
asset value per share of any class of the Oppenheimer Fund nor the
redemption of Oppenheimer Fund shares by Oppenheimer Fund shareholders,
shall constitute a material adverse change;
(m) All material Federal and other tax returns and reports of the
Oppenheimer Fund required by law to have been filed, have been filed, and
all Federal and other taxes shown as due or required to be shown as due
on said returns and reports have been paid or provision has been made for
the payment thereof, and to the best of the Oppenheimer Fund's knowledge
no such return is currently under audit and no assessment has been
asserted with respect to such returns;
(n) For each taxable year of its operation, the Oppenheimer Fund has
met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and neither the execution or
delivery of nor the performance of its obligations under this Agreement
will adversely affect, and no other events are reasonably likely to occur
which will adversely affect the ability of the Oppenheimer Fund to
continue to meet the requirements of Subchapter M of the Code;
(o) Since December 31, 1994, there has been no change by the
Oppenheimer Fund in accounting methods, principles, or practices,
including those required by generally accepted accounting principles,
except as disclosed in writing to the Quest Portfolio or as set forth in
the financial statements of the Oppenheimer Fund covering such period;
(p) The information furnished or to be furnished by the Oppenheimer
Fund for use in registration statements, proxy materials and other
documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material
respects and shall comply in all material respects with Federal securities
and other laws and regulations applicable thereto; and
(q) The Proxy Statement and Prospectus to be included in the
Registration Statement (only insofar as it relates to the Oppenheimer
Fund) will, on the effective date of the Registration Statement and on the
Closing Date, 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
such statements were made, not materially misleading.
5.2 Quest for Value, on behalf of the Quest Portfolio, represents and
warrants to the Oppenheimer Fund as follows:
(a) The Quest Portfolio is a series of Quest For Value, an
unincorporated voluntary association validly existing and in good standing
under the laws of the Commonwealth of Massachusetts;
(b) Quest For Value is a duly registered, open-end, management
investment company, its registration with the Commission as an investment
company under the 1940 Act is in full force and effect and its current
Prospectus and Statement of Additional Information conform in all material
respects to the requirements of the 1933 Act and the 1940 Act and the
regulations thereunder and do not include any untrue statement of a
material fact or omit to state any 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) The Quest Portfolio has issued and outstanding shares of one
class, designated "Class A". All of the issued and outstanding shares of
the Quest Portfolio have been offered and sold in compliance in all
material respects with applicable registration requirements of the 1933
Act and state securities laws. Shares of the Quest Portfolio are
registered in all jurisdictions in which they are required to be
registered under state securities laws and other laws, and said
registrations, including any periodic reports or supplemental filings, are
complete and current, all fees required to be paid have been paid, and the
Quest Portfolio is not subject to any stop order and is fully qualified
to sell its shares in each state in which its shares have been registered;
(d) The Quest Portfolio is not, and the execution, delivery and
performance of this Agreement will not result, in a violation of (i) any
provision of Quest For Value's Declaration of Trust or By-Laws or (ii) of
any agreement, indenture, instrument, contract, lease or other undertaking
to which the Quest Portfolio is a party or by which it is bound (other
than any violations that individually or in the aggregate would not have
a material adverse effect on the Quest Portfolio);
(e) The Quest Portfolio has no material contracts or other
commitments (other than this Agreement) that will be terminated with
liability to it prior to or as of the Closing Date;
(f) Except as otherwise disclosed in writing to and acknowledged by
the Oppenheimer Fund prior to the date of this Agreement, no litigation,
administrative proceeding, investigation, examination or inquiry of or
before any court or governmental body is presently pending, or to its
knowledge, threatened relating to the Quest Portfolio or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business.
The Quest Portfolio knows of no facts that might form the basis for the
institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body that materially and adversely affects, or is likely to materially and
adversely affect, its business or its ability to consummate the
transactions herein contemplated;
(g) The Statements of Assets and Liabilities, Statements of
Operations and Statements of Changes in Net Assets of the Quest Portfolio
as of July 31, 1994 (audited), examined by Price Waterhouse LLP, and
January 1, 1995 (unaudited) (copies of each of which have been furnished
to the Oppenheimer Fund) fairly present, in all material respects, the
Quest Portfolio's financial condition as of such dates, its results of
operations for such periods and changes in its net assets for such periods
in conformity with generally accepted accounting principles consistently
applied, and as of such dates there were no known liabilities of the Quest
Portfolio (contingent or otherwise) not disclosed therein that would be
required in conformity with generally accepted accounting principles to
be disclosed therein. All liabilities (contingent and otherwise) as of
the Closing Date known to the Quest Portfolio will be set forth on the
unaudited Statement of Assets and Liabilities referred to in paragraph
1.3.
(h) Since the date of the most recent audited financial statements,
there has not been any material adverse change in the Quest Portfolio's
financial condition, assets, liabilities or business, other than changes
occurring in the ordinary course of business, or any incurrence by the
Quest Portfolio of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed in writing
to and acknowledged by the Oppenheimer Fund prior to the date of this
Agreement and prior to the Closing Date. All liabilities of the Quest
Portfolio (contingent and otherwise) are reflected in the unaudited
statement described in paragraph 1.3 above. For the purpose of this
subparagraph (h), neither a decline in the Quest Portfolio's net asset
value per share nor a decrease in the Quest Portfolio's size due to
redemptions by Quest Portfolio shareholders shall constitute a material
adverse change;
(i) All federal and other tax returns and reports of the Quest
Portfolio required by law to be filed shall have been filed, there are no
claims, levies, liabilities or amounts due for corporate, excise, income
or other federal, state or local taxes outstanding or threatened against
Quest Portfolio (other than those reflected on its most recent financial
statements) and to the best of Quest For Value's knowledge there are no
facts that might form the basis for such proceedings, no such return is
currently under audit and no assessment has been asserted with respect to
any such return and to the extent such tax returns with respect to the
taxable year of the Quest Portfolio ended July 31, 1994 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;
(j) For each taxable year since its inception, the Quest Portfolio
has met all the requirements of Subchapter M of the Code for qualification
and treatment as a "regulated investment company" as defined therein and
will be in compliance with said requirements at and as of the Closing
Date;
(k) All issued and outstanding shares of the Quest Portfolio are,
and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable with no personal liability attaching to the
ownership thereof. All such shares will, at the time of Closing, be held
by the persons and in the amounts set forth in the list of shareholders
submitted to the Oppenheimer Fund pursuant to paragraph 3.4. The Quest
Portfolio does not have outstanding any options, warrants or other rights
to subscribe for or purchase any of its shares, nor is there outstanding
any security convertible into any of its shares.
(l) At the Closing Date, the Quest Portfolio will have title to the
Quest Portfolio Assets, subject to no liens, security interests or other
encumbrances, and full right, power and authority to assign, deliver and
otherwise transfer the Quest Portfolio Assets hereunder, and upon delivery
and payment for the Quest Portfolio Assets, the Oppenheimer Fund will
acquire title thereto, subject to no restrictions on the full transfer
thereof, including such restrictions as might arise under the 1933 Act;
(m) Quest For Value has the power to enter into this Agreement and
carry out its obligations hereunder. The execution, delivery and
performance of this Agreement will have been duly authorized prior to the
Closing Date by all necessary action on the part of Quest For Value, and
subject to the approval of Quest Portfolio's shareholders, this Agreement
constitutes a valid and binding obligation of Quest For Value, enforceable
in accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors rights and to general equity principles. No other
consents, authorizations or approvals are necessary in connection with the
performance of this Agreement.
(n) On the effective date of the Registration Statement, at the time
of the meeting of Quest Portfolio's shareholders and on the Closing Date,
the Proxy Materials (exclusive of the currently effective Oppenheimer Fund
prospectus and statement of additional information incorporated therein)
will (i) comply in all material respects with the provisions of the 1933
Act, the Securities Exchange Act of 1934 ("1934 Act") and the 1940 Act and
the regulations thereunder and (ii) 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 statement therein, in light of the
circumstances under which such statements were made, not misleading. Any
other information furnished or to be furnished by Quest Portfolio for use
in the Registration Statement or in any other manner that may be necessary
in connection with the transactions contemplated hereby shall be accurate
and complete and shall comply in all material respects with applicable
federal securities and other laws and all regulations thereunder;
(o) Quest Portfolio will, on or prior to the Closing Date, declare
one or more dividends or other distributions to shareholders that,
together with all previous dividends and other distributions to
shareholders, shall have the effect of distributing to the shareholders
all of its investment company taxable income, net tax-exempt income and
net capital gain, if any, through the Closing Date (computed without
regard to any deduction for dividends paid);
(p) Quest Portfolio has maintained or has caused to be maintained
on its behalf all books and accounts as required of a registered
investment company in compliance with the requirements of Section 31 of
the 1940 Act and the Rules thereunder;
(q) Quest Portfolio is not acquiring Oppenheimer Fund shares to be
issued hereunder for the purpose of making any distribution thereof other
than in accordance with the terms of this Agreement;
(r) As of the Closing Date no violation of applicable federal, state
and local statute, law or regulation, exists that individually, or in the
aggregate, would have a material adverse effect on the business or
operations of Quest Portfolio;
(s) As of the Closing Date the Quest Portfolio is in compliance with
its investment objective(s), policies and restrictions as described in its
current prospectus and statement of additional information;
(t) There are no unresolved or outstanding shareholder claims or
complaints related to Quest Portfolio and there will be no such claims or
complaints as of the Closing Date other than as disclosed by Quest
Advisors in writing to Oppenheimer Fund prior to the Closing Date;
(u) Except as previously disclosed to Oppenheimer Fund in writing,
and except as have been fully corrected, there have been no
miscalculations of the net asset value of Quest Portfolio during the
twelve-month period preceding the Closing Date and all such calculations
have been done in accordance with the provisions of Rule 2a-4 under the
1940 Act.
5.3 Quest Advisors represents and warrants to the Oppenheimer Fund
as follows:
(a) To the best knowledge of Quest Advisors after due inquiry, as
of the Closing Date no violation of applicable federal, state and local
statute, law or regulation, exists that individually, or in the aggregate,
would have a material adverse effect on the business or operations of
Quest Portfolio.
(b) To the best knowledge of Quest Advisors after due inquiry,
assuming fulfillment of the conditions precedent to the consummation of
the Reorganization, Quest Portfolio has the right, power, legal capacity
and authority to enter into the Reorganization contemplated by this
Agreement.
(c) To the best knowledge of Quest Advisors after due inquiry, as
of the Closing Date Quest Portfolio is in compliance with its investment
objective(s), policies and restrictions as described in its current
prospectus and statement of additional information.
(d) To the best knowledge of Quest Advisors after due inquiry, as
of the Closing Date there are no outstanding breaches by Quest Portfolio
of any agreement, indenture, instrument, contract, lease or other
undertaking to which it is a party, or by which it is bound (other than
any breaches that individually or in the aggregate would not have a
material adverse effect on the Quest Portfolio).
(e) To the best knowledge of Quest Advisors upon due inquiry, there
are no unresolved or outstanding shareholder claims or inquiries related
to Quest Portfolio and there will be no such claims or inquiries as of
the Closing Date other than as disclosed by Quest Advisors in writing to
Oppenheimer Fund prior to the Closing Date.
(f) Quest Advisors is not aware of any threatened or pending
litigation, administrative proceeding, investigation, examination or
inquiry of or before any court or governmental body relating to the Quest
Portfolio or any of its properties or assets which, if adversely
determined, would materially and adversely affect the Quest Portfolio's
business or its ability to consummate the transactions herein
contemplated.
(g) Quest Advisors is not aware of any outstanding or threatened
private claims or litigation relating to Quest Portfolio. Quest Advisors
knows of no facts that might form the basis for such proceedings.
(h) Except as previously disclosed to Oppenheimer Fund in writing,
and except as have been fully corrected, there have been no
miscalculations of the net asset value of Quest Portfolio during the
twelve-month period preceding the Closing Date and all such calculations
have been done in accordance with the provisions of Rule 2a-4 under the
1940 Act.
(i) There are no claims, levies or liabilities for corporate,
excise, income or other federal, state or local taxes outstanding or
threatened against Quest Portfolio, other than those reflected in its most
recent audited financial statements. Quest Advisors knows of no facts
that might form the basis for such proceedings.
(j) To the best knowledge of Quest Advisors after due inquiry, there
have been no material adverse changes in Quest Portfolio's financial
condition, assets, liabilities or business, other than those reflected in
its most recent audited financial statements and all liabilities of Quest
Portfolio (contingent and otherwise) known to Quest Advisors have been
reported in writing to the Oppenheimer Fund prior to the date of this
Agreement and prior to the Closing Date. A reduction in net assets due
to shareowner redemptions will not be deemed to be a material adverse
change.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE QUEST PORTFOLIO
The obligations of Quest Portfolio to consummate the transactions
provided for herein shall be subject, at its election, to the performance
by Oppenheimer Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
6.1 All representations and warranties of Oppenheimer Fund contained
in this Agreement shall be true and correct in all material respects as
of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
6.2 Oppenheimer Fund shall have delivered to Quest Portfolio a
certificate executed in Oppenheimer Fund's name by Oppenheimer Fund's
President, Vice President or Secretary and, Treasurer or Assistant
Treasurer, in a form reasonably satisfactory to Quest Portfolio and dated
as of the Closing Date, to the effect that the representations and
warranties of Oppenheimer Fund made in this Agreement are true and correct
at and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other matters
as Quest Portfolio shall reasonably request;
6.3 Quest Portfolio shall have received a favorable opinion from
Gordon Altman Butowsky Weitzen Shalov & Wein, counsel to the Oppenheimer
Fund, dated as of the Closing Date, in a form reasonably satisfactory to
Gordon Altman Butowsky Weitzen Shalov & Wein, counsel to Quest Portfolio,
covering the following points:
That (a) Oppenheimer Fund is an unincorporated voluntary association
duly organized, validly existing and in good standing under the laws
of the Commonwealth of Massachusetts, and has the power to own all
of its properties and assets and to carry on its business as
presently conducted (Massachusetts counsel may be relied upon in
delivering such opinion); (b) Oppenheimer Fund is a duly registered,
open-end, management investment company and its registration with the
Commission as an investment company under the 1940 Act is in full
force and effect; (c) this Agreement has been duly authorized,
executed and delivered by the Oppenheimer Fund, and assuming due
authorization, execution and delivery of this Agreement by Quest
Portfolio, is a valid and binding obligation of Oppenheimer Fund
enforceable against Oppenheimer Fund in accordance with its terms,
subject as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors rights
and to general equity principles; (d) Oppenheimer Fund shares to be
issued to Quest Portfolio shareholders as provided by this Agreement
are duly authorized and upon delivery of such shares to Quest
Portfolio will be validly issued and outstanding and fully paid and
non-assessable (except as otherwise set forth in the current
statement of additional information for the Oppenheimer Fund under
"How the Fund is Managed - Organization and History") and no
shareholder of Oppenheimer Fund has any preemptive rights to
subscription or purchase in respect thereof (Massachusetts counsel
may be relied upon in delivering such opinion); (e) the execution and
delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, violate Oppenheimer Fund's
Declaration of Trust and By-Laws or any provision of any material
agreement (known to such counsel) to which Oppenheimer Fund is a
party or by which it is bound or, to the knowledge of such counsel,
result in the acceleration of any material obligation or the
imposition of any material penalty under any agreement, judgment or
decree to which Oppenheimer Fund is a party or by which it is bound;
(f) to the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the
United States or any state is required for the consummation by
Oppenheimer Fund of the transactions contemplated herein, except such
as have been obtained under the 1933 Act , the 1934 Act and the 1940
Act and such as may be required under state securities laws; (g) only
insofar as they relate to Oppenheimer Fund, the descriptions in the
Proxy Materials of statutes, legal and governmental proceedings and
contracts and other documents, if any, are accurate and fairly
present the information required to be shown; (h) such counsel does
not know of any legal or governmental proceedings, only insofar as
they relate to Oppenheimer Fund, existing on or before the date of
mailing of the Proxy Materials or the Closing Date that are required
to be described in the Registration Statement or in any documents
that are required to be filed as exhibits to the Registration
Statement that are not described as required; and (i) to the best
knowledge of such counsel, no material litigation or administrative
proceedings or investigation of or before any court or governmental
body is presently pending or overtly threatened as to Oppenheimer
Fund or any of its properties or assets and Oppenheimer Fund is not
a party to or subject to the provisions of any order, decree or
judgment of any court or governmental body that materially and
adversely affects its business, other than as previously disclosed
in the Registration Statement.
6.4 All proceedings taken by Oppenheimer Fund in connection with the
transactions contemplated by this Agreement and all documents incidental
thereto shall be satisfactory in form and substance to Quest Portfolio and
its counsel, Gordon Altman Butowsky Weitzen Shalov & Wein.
6.5 As of the Closing Date, there shall be no material change in the
investment objective, policies and restrictions nor any increase in the
investment management fees, fees payable pursuant to Oppenheimer Fund's
12b-1 plans of distribution or sales loads of Oppenheimer Fund from those
described in the Prospectus and Statement of Additional Information of
Oppenheimer Fund dated August 29, 1995, except as may have been approved
by shareholders of the Oppenheimer Fund.
6.6 The Cash Reserve shall not exceed 10% of the value of the net
assets, nor 30% in value of the gross assets, of the Quest Portfolio at
the close of business on the Valuation Date.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF OPPENHEIMER FUND
The obligations of Oppenheimer Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance
by Quest Portfolio of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
7.1 All representations and warranties of Quest For Value, on behalf
of Quest Portfolio, and Quest Advisors contained in this Agreement shall
be true and correct in all material respects as of the date hereof and,
except as they may be affected by the transactions contemplated by this
Agreement, as of the Closing Date with the same force and effect as if
made on and as of the Closing Date;
7.2 Quest Portfolio shall have delivered to Oppenheimer Fund a
statement of Quest Portfolio Assets and its liabilities, together with a
list of Quest Portfolio's securities and other assets showing the
respective adjusted bases and holding periods thereof for income tax
purposes, as of the Closing Date, certified by the Treasurer of Quest
Portfolio;
7.3 Quest Portfolio shall have delivered to Oppenheimer Fund at the
Closing a certificate executed in Quest For Value's name by the President,
Vice President or Secretary and the Treasurer or Assistant Treasurer of
Quest For Value, in form and substance satisfactory to Oppenheimer Fund
and dated as of the Closing Date, to the effect that the representations
and warranties of Quest for Value, on behalf of Quest Portfolio, made in
this Agreement are true and correct at and as of the Closing Date, except
as they may be affected by the transactions contemplated by this
Agreement, and as to such other matters as Oppenheimer Fund shall
reasonably request. Such a certificate shall also be delivered to
Oppenheimer Fund as executed by Quest Advisors with respect to its
representations and warranties made in paragraph 5.3.
7.4 Oppenheimer Fund shall have received at the Closing a favorable
opinion dated as of the Closing Date of Gordon Altman Butowsky Weitzen
Shalov & Wein, counsel to Quest For Value, in a form satisfactory to
Gordon Altman Butowsky Weitzen Shalov & Wein, counsel to Oppenheimer Fund
covering the following points:
That (a) Quest Portfolio is a series of Quest For Value, an
unincorporated voluntary association duly organized, validly existing
and in good standing under the laws of the Commonwealth of
Massachusetts and has the power to own all of its properties and
assets and to carry on its business as presently conducted
(Massachusetts counsel may be relied upon in delivering such
opinion); (b) Quest For Value is registered as an investment company
under the 1940 Act, and its registration with the Commission as an
investment company under the 1940 Act is in full force and effect;
(c) this Agreement has been duly authorized, executed and delivered
by Quest For Value on behalf of Quest Portfolio and, assuming due
authorization, execution and delivery of this Agreement by
Oppenheimer Fund, is a valid and binding obligation of Quest For
Value enforceable against Quest For Value in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting
creditors rights and to general equity principles; (d) the execution
and delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, violate Quest For Value's
Declaration of Trust or By-Laws or any provision of any material
agreement (known to such counsel) to which Quest For Value is a party
or by which it is bound or, to the knowledge of such counsel, result
in the acceleration of any material obligation or the imposition of
any material penalty under any agreement, judgment or decree to which
Quest For Value is a party or by which it is bound; (e) to the
knowledge of such counsel, no consent, approval, authorization or
order of any court or governmental authority of the United States or
any state is required for the consummation by Quest For Value of the
transactions contemplated herein, except such as have been obtained
under the 1933 Act, the 1934 Act and the 1940 Act and such as may be
required under state securities laws; (f) only insofar as they relate
to Quest For Value, the descriptions in the Proxy Materials of
statutes, legal and governmental proceedings and contracts and other
documents, if any, are accurate and fairly present the information
required to be shown; (g) such counsel does not know of any legal or
governmental proceedings, only insofar as they relate to Quest For
Value, existing on or before the date of mailing the Proxy Materials
or the Closing Date that are required to be described in the
Registration Statement or in any documents that are required to be
filed as exhibits to the Registration Statement that are not
described as required; and (h) to the best knowledge of such counsel,
no material litigation or administrative proceedings or investigation
of or before any court or governmental body is presently pending or
overtly threatened as to Quest For Value or any of its properties or
assets and Quest Portfolio is not a party to or subject to the
provisions of any order, decree or judgment of any court or
governmental body that materially and adversely affects its business,
other than as previously disclosed in the Registration Statement.
7.5 Between the date hereof and the Closing Date, Quest For Value
shall provide Oppenheimer Fund and its representatives reasonable access
during regular business hours and upon reasonable notice to the books and
records of or relating to Quest Portfolio, including without limitation
the books and records of Quest For Value, as Oppenheimer Fund may
reasonably request. All such information obtained by Oppenheimer Fund
and its representatives shall be held in confidence and may not be used
for any purpose other than in connection with the transaction contemplated
hereby. In the event that the transaction contemplated by this Agreement
is not consummated, Oppenheimer Fund and its representatives will
promptly return to Quest For Value all documents and copies thereof with
respect to Quest Portfolio obtained from Quest For Value during the course
of such investigation.
7.6 Quest For Value, on behalf of Quest Portfolio shall have
delivered to Oppenheimer Fund, pursuant to paragraph 5.2(g), copies of the
most recent financial statements of Quest Portfolio certified by Price
Waterhouse LLP.
7.7 On the Closing Date, the Quest Portfolio Assets shall include
no assets that Oppenheimer Fund, by reason of charter limitations or
otherwise, may not properly acquire.
7.8 All proceedings taken by Quest For Value and Quest Portfolio in
connection with the transactions contemplated by the Agreement and all
documents incidental thereto shall be reasonably satisfactory in form and
substance to Oppenheimer Fund and its counsel, Gordon Altman Butowsky
Weitzen Shalov & Wein.
7.9 The stated liabilities, expenses, costs, charges and reserves
reflected on the unaudited Statement of Assets and Liabilities of the
Quest Portfolio referred to in paragraph 1.3 shall have been agreed to by
the Oppenheimer Fund.
7.10 The Registration Statement, including the Proxy Materials, but
only insofar as it relates to the Oppenheimer Fund, filed as a part
thereof, shall have been approved by the Board of Trustees of the
Oppenheimer Fund.
7.11 The Cash Reserve shall not exceed 10% of the value of the net
assets, nor 30% in value of the gross assets, of the Quest Portfolio at
the close of business on the Valuation Date.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF OPPENHEIMER FUND AND
QUEST PORTFOLIO
The obligations of Quest Portfolio and Oppenheimer Fund hereunder are
each subject to the further conditions that on or before the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall
have been approved by the requisite vote of the holders of the outstanding
shares of Quest Portfolio and certified copies of the resolutions
evidencing such approval shall have been delivered to Oppenheimer Fund;
8.2 On the Closing Date, no action, suit or other proceeding shall
be pending before any court or governmental agency in which it is sought
to restrain or prohibit, or obtain damages or other relief in connection
with, this Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including
those of the Commission and of state Blue Sky and securities authorities,
including "no-action" positions or any exemptive orders from such federal
and state authorities) deemed necessary by Oppenheimer Fund or Quest For
Value on behalf of Quest Portfolio to permit consummation, in all material
respects, of the transactions contemplated herein shall have been
obtained, except where failure to obtain any such consent, order or permit
would not involve risk of a material adverse effect on the assets or
properties of Oppenheimer Fund or Quest Portfolio.
8.4 The Registration Statement on Form N-14 shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued and, to the best knowledge of the parties
hereto, no investigation or proceeding for that purpose shall have been
instituted or be pending, threatened or contemplated under the 1933 Act;
8.5 Quest Portfolio shall have declared and paid a dividend or
dividends and/or other distributions that, together with all previous such
dividends or distributions, shall have the effect of distributing to the
Quest Portfolio Shareholders all of Quest Portfolio's investment company
taxable income (computed without regard to any deduction for dividends
paid), net tax-exempt income and all of its net capital gain (after
reduction for any capital loss carry-forward and computed without regard
to any deduction for dividends paid) for all taxable years ending on or
before the Closing Date; and
8.6 The parties shall have received a favorable opinion from Price
Waterhouse LLP (based on such representations as such firm shall
reasonably request), addressed to Oppenheimer Fund and Quest Portfolio,
which opinion may be relied upon by the shareholders of Oppenheimer Fund
and Quest Portfolio, substantially to the effect that, for federal income
tax purposes:
(a) The transfer of substantially all of Quest Portfolio's assets in
exchange for Oppenheimer Fund shares and the assumption by
Oppenheimer Fund of certain identified liabilities of Quest Portfolio
followed by the distribution by Quest Portfolio of Oppenheimer Fund
shares to the Quest Portfolio Shareholders in exchange for their
Quest Portfolio shares will constitute a "reorganization" within the
meaning of Section 368(a)(1) of the Code and Quest Portfolio and
Oppenheimer Fund will each be a "party to the reorganization" within
the meaning of Section 368(b) of the Code;
(b) Pursuant to Section 1032 of the Code, no gain or loss will be
recognized by Oppenheimer Fund upon the receipt of the assets of
Quest Portfolio solely in exchange for Oppenheimer Fund shares and
the assumption by Oppenheimer Fund of the identified liabilities of
Quest Portfolio;
(c) Pursuant to Section 361(a) of the Code, no gain or loss will be
recognized by Quest Portfolio upon the transfer of the assets of
Quest Portfolio to Oppenheimer Fund in exchange for Oppenheimer Fund
shares and the assumption by Oppenheimer Fund of the identified
liabilities of Quest Portfolio, or upon the distribution of
Oppenheimer Fund shares to the Quest Portfolio Shareholders in
exchange for the Quest Portfolio shares;
(d) Pursuant to Section 354(a) of the Code, no gain or loss will be
recognized by the Quest Portfolio Shareholders upon the exchange of
the Quest Portfolio shares for the Oppenheimer Fund shares;
(e) Pursuant to Section 358 of the Code, the aggregate tax basis for
Oppenheimer Fund shares received by each Quest Portfolio Shareholder
pursuant to the Reorganization will be the same as the aggregate tax
basis of the Quest Portfolio shares held by each such Quest Portfolio
Shareholder immediately prior to the Reorganization;
(f) Pursuant to Section 1223 of the Code, the holding period of
Oppenheimer Fund shares to be received by each Quest Portfolio
Shareholder will include the period during which the Quest Portfolio
shares surrendered in exchange therefor were held (provided such
Quest Portfolio shares were held as capital assets on the date of the
Reorganization);
(g) Pursuant to Section 362(b) of the Code, the tax basis of the
assets of Quest Portfolio acquired by Oppenheimer Fund will be the
same as the tax basis of such assets to Quest Portfolio immediately
prior to the Reorganization;
(h) Pursuant to Section 1223 of the Code, the holding period of the
assets of Quest Portfolio in the hands of Oppenheimer Fund will
include the period during which those assets were held by Quest
Portfolio; and
(i) Oppenheimer Fund will succeed to and take into account the items
of Quest Portfolio described in Section 381(c) of the Code, including
the earnings and profits, or deficit in earnings and profits, of
Quest Portfolio as of the date of the transaction. Oppenheimer Fund
will take those items into account subject to the conditions and
limitations specified in Sections 381, 382, 383 and 384 of the Code
and applicable regulations thereunder.
Notwithstanding anything herein to the contrary, neither Oppenheimer Fund
nor Quest Portfolio may waive the material conditions set forth in this
paragraph 8.6 although the actual wording of such opinion may differ to
the extent agreed to by Oppenheimer Fund and Quest Portfolio.
9. BROKERAGE FEES AND EXPENSES
9.1 Oppenheimer Fund and Quest For Value on behalf of Quest
Portfolio each represents and warrants to the other that there are no
brokers or finders entitled to receive any payments in connection with the
transactions provided for herein.
9.2 (a) Oppenheimer Management Corporation shall bear the expenses
of Oppenheimer Fund incurred in connection with entering into and carrying
out the provisions of this Agreement, including legal, accounting and
Commission registration fees and Blue Sky expenses. Quest Advisors (or
a party other than Oppenheimer Fund) shall bear Quest Portfolio's expenses
incurred in connection with entering into and carrying out the provisions
of this Agreement, including legal and accounting fees, and portfolio
transfer taxes (if any) incurred in connection with the consummation of
the transactions contemplated herein. Notwithstanding the foregoing,
expenses incurred with respect to the tax opinion referenced in paragraph
8.6 and expenses of the proxy solicitation, including the cost of printing
and mailing the Proxy Materials, will be evenly apportioned between Quest
Advisors and Oppenheimer Management Corporation.
(b) In the event the transactions contemplated herein are not
consummated by reason of Quest Portfolio's being either unwilling or
unable to go forward (other than by reason of the nonfulfillment or
failure of any condition to Quest Portfolio's obligations specified in
this Agreement), Quest Advisors' (or a party other than Oppenheimer Fund)
only obligation hereunder shall be to reimburse Oppenheimer Fund (or
Oppenheimer Management Corporation) for all reasonable out-of-pocket fees
and expenses incurred by Oppenheimer Fund (or Oppenheimer Management
Corporation) in connection with those transactions, including legal,
accounting and filing fees.
(c) In the event the transactions contemplated herein are not
consummated by reason of Oppenheimer Fund's being either unwilling or
unable to go forward (other than by reason of the nonfulfillment or
failure of any condition to Oppenheimer Fund's obligations specified in
the Agreement), Oppenheimer Fund's only obligations hereunder shall be to
reimburse Quest Portfolio (or Quest Advisors) for all reasonable out-of-
pocket fees and expenses incurred by Quest Portfolio (or Quest Advisors)
in connection with those transactions, including legal, accounting and
filing fees, and to comply with the provisions of paragraph 7.5 hereof.
10. ENTIRE AGREEMENT: SURVIVAL OF WARRANTIES
10.1 Oppenheimer Fund, Quest For Value, on behalf of Quest Portfolio
and Quest Advisors agree that no party has made any representation,
warranty or covenant not set forth herein and that this Agreement
constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection
herewith shall survive the consummation of the transactions contemplated
herein.
11. TERMINATION
11.1 This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing:
(a) by the mutual written consent of Quest For Value, on behalf of
Quest Portfolio, and Oppenheimer Fund;
(b) by either Oppenheimer Fund or Quest For Value, on behalf of
Quest Portfolio, by notice to the other, without liability to the
terminating party on account of such termination (providing the
termination party is not otherwise in default or in breach of this
Agreement) if the Closing shall not have occurred on or before February
29, 1996; or
(c) by either Oppenheimer Fund or Quest For Value, on behalf of
Quest Portfolio, in writing without liability of the terminating party on
account of such termination (provided the terminating party is not
otherwise in material default or breach of the Agreement), if (i) the
other party shall fail to perform in any material respect its agreements
contained herein required to be performed on or prior to the Closing Date,
(ii) Quest Advisors, Quest For Value or the Quest Portfolio, or the
Oppenheimer Fund, respectively, materially breaches or shall have breached
any of its representations, warranties or covenants contained herein,
(iii) the Quest Portfolio Shareholders fail to approve the Agreement, (iv)
any other condition herein expressed to be precedent to the obligations
of the terminating party has not been met and it reasonably appears that
it will not or cannot be met or (v) the acquisition contemplated by the
Acquisition Agreement is not consummated.
11.2 (a) Termination of this Agreement pursuant to paragraphs
11.1(a) or (b) shall terminate all obligations of the parties hereunder
(other than Oppenheimer Fund's obligations under paragraph 7.5) and there
shall be no liability for damages on the part of the Oppenheimer Fund,
Quest Portfolio or Quest Advisors or the trustees, directors or officers
of Oppenheimer Fund, Quest Portfolio or Quest Advisors, to any other party
or its trustees, directors or officers.
(b) Termination of this Agreement pursuant to paragraph 11.1(c)
shall terminate all obligations of the parties hereunder (other than
Oppenheimer Fund's obligations under paragraph 7.5) and there shall be no
liability for damages on the part of Oppenheimer Fund, Quest Portfolio or
Quest Advisors or the trustees, directors or officers of Oppenheimer Fund,
Quest Portfolio or Quest Advisors, to any other party or its trustees,
directors or officers, except that any party in breach of this Agreement
(or, as to a termination pursuant to paragraph 11.1(c)(v), in breach of
the Acquisition Agreement) shall, upon demand, reimburse the non-breaching
party or parties for all reasonable out-of-pocket fees and expenses
incurred in connection with the transactions contemplated by this
Agreement, including legal, accounting and filing fees. For the purposes
of this paragraph 11.2(b), the non-fulfillment of the condition set forth
in paragraph 8.1 shall not be deemed a breach entitling a party to
reimbursement of expenses and fees.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the authorized
officers of Quest For Value, Oppenheimer Fund and Quest Advisors;
provided, however, that following the meeting of Quest Portfolio's
shareholders called by Quest Portfolio pursuant to paragraph 4.2, no such
amendment may have the effect of changing the provisions for determining
the number of Oppenheimer Fund Shares to be issued to the Quest Portfolio
Shareholders under this Agreement to the detriment of such Shareholders
without their further approval.
13. INDEMNIFICATION
13.1 Oppenheimer Fund will indemnify and hold harmless, Quest For
Value, Quest Portfolio and Quest Advisors, and their respective trustees,
directors, officers and shareholders against any and all claims to the
extent such claims are based upon, arise out of or relate to any
untruthful or inaccurate representations made by Oppenheimer Fund on
behalf of Oppenheimer Fund in this Agreement or any breach by Oppenheimer
Fund of any warranty or any failure to perform or comply with any of its
obligations, covenants, conditions or agreements set forth in this
Agreement, including those set forth in paragraph 1.3.
13.2 Quest Advisors will indemnify and hold harmless Quest For Value,
Oppenheimer Fund, and their respective trustees, officers and shareholders
against any and all claims to the extent such claims are based upon, arise
out of or relate to any untruthful or inaccurate representation made by
Quest For Value on behalf of Quest Portfolio or Quest Advisors in this
Agreement or any breach by Quest Portfolio or Quest Advisors of any
warranty or any failure by Quest Portfolio to perform or comply with any
of its obligations, covenants, conditions or agreements set forth in this
Agreement.
13.3 As used in this section 13, the word "claim" means any and all
liabilities, obligations, losses, damages, deficiencies, demands, claims,
penalties, assessments, judgments, actions, proceedings and suits of
whatever kind and nature and all costs and expenses (including, without
limitation, reasonable attorneys' fees).
13.4 Promptly after the receipt by any party (the "Indemnified
Party"), of notice of any claim by a third party which may give rise to
indemnification hereunder, the Indemnified Party shall notify the party
against whom a claim for indemnification may be made hereunder (the
"Indemnifying Party"), in reasonable detail of the nature and amount of
the claim. The Indemnifying Party shall be entitled to assume, at its
sole cost and expense (unless it is subsequently determined that the
Indemnifying Party did not have the obligation to indemnify the
Indemnified Party under such circumstances), and shall have sole control
of the defense and settlement of such action or claim; provided, however,
that:
(a) the Indemnified Party shall be entitled to participate in the
defense of such claim and, in connection therewith, to employ counsel at
its own expense; and
(b) without the prior written consent of the Indemnified Party which
shall not be unreasonably withheld, the Indemnifying Party shall not
consent to the entry of any judgment or enter into any settlement that
requires any action other than the payment of money.
In the event the Indemnifying Party elects to assume control of the
defense of any such action in accordance with the foregoing provisions,
(i) the Indemnifying Party shall not be liable to Indemnified Party for
any legal fees, costs and expenses incurred by the Indemnified Party in
connection with the defense thereof arising after the date the
Indemnifying Party elects to assume control of such defense and (ii)
Indemnified Party shall fully cooperate with the Indemnifying Party in
such defense. If the Indemnifying Party does not assume control of the
defense of such claim in accordance with the foregoing provisions, the
Indemnified Party shall have the right to defend such claim, in which case
the Indemnifying Party shall pay all reasonable costs and expenses of
such defense plus interest on the cost of defense from the date paid at
a rate equal to the prime commercial rate of interest as in effect from
time to time at Citibank, N.A. The Indemnified Party shall conduct such
defense in good faith and shall have the right to settle the matter with
the prior written consent of the Indemnifying Party which shall not be
reasonably withheld.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by
prepaid telegraph, telecopy, certified mail or overnight express courier
addressed to Oppenheimer Management Corporation at Two World Trade Center,
34th Floor, New York, New York 10048-0203 Attention: Andrew J. Donohue
with a copy to Ronald Feiman, Esq. at Gordon Altman Butowsky Weitzen
Shalov & Wein, 114 West 47th Street, New York, New York 10036; to Quest
For Value at One World Financial Center, New York, New York 10281
Attention: Thomas Duggan, with a copy to Stuart Strauss, Esq. at Gordon
Altman Butowsky Weitzen Shalov & Wein, 114 West 47th Street, New York, New
York 10036.
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY
15.1 The article and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
15.2 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
15.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
15.4 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations hereunder
shall be made by any party without the written consent of the other
parties. Except as provided in the following sentence, nothing herein
expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or
by reason of this Agreement. A shareholder of Quest Portfolio who becomes
a shareholder of Oppenheimer Fund on the Closing Date and continues to be
a shareholder of Oppenheimer Fund, shall be entitled to the benefits and
may enforce the provisions of paragraph 4.9 hereof except insofar as
paragraph 4.9 relates to the election of trustees; and the persons
designated in paragraphs 13.1 and 13.2 hereof shall be entitled to the
benefits and may enforce the provisions of section 13 hereof.
15.5 The obligations and liabilities of Oppenheimer Fund hereunder
are solely those of Oppenheimer Fund. It is expressly agreed that
shareholders, trustees, nominees, officers, agents or employees of
Oppenheimer Fund shall not be personally liable hereunder. Quest For
Value and Quest Advisors acknowledge that each has notice of the
provisions of Oppenheimer Fund's Declaration of Trust disclaiming
shareholder and trustee liability for acts and obligations of the
Oppenheimer Fund. The execution and delivery of this Agreement have been
authorized by the trustees of Oppenheimer Fund and signed by the officers
of Oppenheimer Fund acting as such, and neither such authorization by such
trustees nor such execution and delivery by such officers shall be deemed
to have been made by any of the, individually or to impose any liability
on any of them personally.
15.6 The obligations and liabilities of the Quest For Value on behalf
of Quest Portfolio hereunder are solely those of the Quest Portfolio and
not of any other series of Quest For Value. It is expressly agreed that
shareholders, trustees, nominees, officers, agents, or employees of Quest
For Value and Quest Portfolio shall not be personally liable hereunder.
Oppenheimer Fund acknowledges that it has notice of the provisions of
Quest For Value's Declaration of Trust disclaiming shareholder and trustee
liability for acts and obligations of Quest For Value. The execution and
delivery of this Agreement have been authorized by the trustees of Quest
For Value and signed by officers of Quest For Value acting as such, and
neither such authorization by such trustees nor such execution and
delivery by such officers shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer.
OPPENHEIMER TAX-FREE BOND FUND
By:____________________________________
QUEST FOR VALUE FAMILY OF FUNDS
By:___________________________________
QUEST FOR VALUE ADVISORS
By:___________________________________
LEGAG\QUEST.TFB
<PAGE>
EXHIBIT B
The aggregate purchase price for the Purchased Assets and Assumed
Liabilities will be an amount equal to the sum of (i) the Initial Purchase
Payment (as hereinafter defined) payable in cash at the Acquisition
Closing, (ii) the aggregate amount of all unamortized prepaid commissions
as of the business day immediately preceding the Acquisition Closing which
relate to the Acquired Funds (excluding those with respect to Citibank,
N.A.) payable in cash at the Acquisition Closing, (iii) the amount payable
by OMC in respect of the right, title and interest of Citibank, N.A. to
certain commissions, (iv) the Deferred Purchase Payment (as hereinafter
defined) and (v) the aggregate amount of the Assumed Liabilities.
The "Initial Purchase Payment" shall be an amount equal to the sum of (x)
225% of the Annualized Fee Amount (as hereinafter defined) of each
Reorganized Fund and (y) 270% of the Annualized Fee Amount of each
Continuing Fund (excluding the Quest for Value Officers Fund). The
"Annualized Fee Amount" of an Acquired Fund shall equal the product of (i)
such Acquired Fund's Closing Net Assets (as hereinafter defined) and (ii)
the annual advisory fee payable to QVA by such Acquired Fund at the rate
indicated in the most recent prospectus for such Acquired Fund at the
Acquisition Closing (plus any applicable annual administrative fee)
"Closing Net Assets" for an Acquired Fund shall mean the aggregate net
asset value of such Acquired Fund as of the close of business on the last
business date preceding the Acquisition Closing.
The "Deferred Purchase Payment" shall be an amount equal to the aggregate
amounts determined for all Reorganized Funds pursuant to the following
formula: the Closing Payment (as hereinafter defined) times the
Applicable Percentage (as hereinafter defined). The "Closing Payment"
shall be the aggregate amount calculated for all Reorganized Funds
pursuant to clause (x) of the Initial Purchase Payment formula. The
"Applicable Percentage" shall be 100% if the Continuing Net Asset
Percentage (as hereinafter defined) is 75% or more, 0% if the Continuing
Net Asset Percentage is 50% or less and the percentage determined in
accordance with the following formula if the Continuing Net Asset
Percentage is between 75% and 50%: 100% - (4) (75% - Continuing Net
Asset Percentage). The "Continuing Net Asset Percentage" shall equal the
percentage obtained by dividing the Anniversary Net Assets (as hereinafter
defined) by the Closing Net Assets. The "Anniversary Net Assets" shall
mean the most recently determined aggregate net asset values of all
Reorganized Funds as of 8:00 p.m. on the first anniversary of the
Acquisition Closing of each account of the Reorganized Funds which are
eligible to be included in Anniversary Net Assets in accordance with the
principles set forth in the Acquisition Agreement.
<PAGE>
Preliminary Copy
QUEST FOR VALUE FAMILY OF FUNDS
NATIONAL TAX-EXEMPT FUND
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD _______, 1995
The undersigned shareholder of National Tax-Exempt Fund (the "Fund"), a
series of Quest for Value Family of Funds (the "Trust"), does hereby
appoint _____________________, and each of them, 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 _______, 1995,
at One World Financial Center, New York, New York 10281 on the 40th Floor
at ___ 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 on the Proposal specified on the reverse side. Said attorneys-in-
fact shall vote in accordance with their best judgment as to any other
matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, 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:
To approve an Agreement and Plan of Reorganization dated as of
______, 1995 by and among Oppenheimer Tax-Free Bond Fund, the Trust,
on behalf of the Fund, and Quest for Value Advisors, and the
transactions contemplated thereby, including the transfer of
substantially all the assets of the Fund in exchange for Class A
shares of Oppenheimer Tax-Free Bond Fund and the assumption by
Oppenheimer Tax-Free Bond Fund of certain liabilities of the Fund,
the distribution of such shares to the shareholders of the Fund in
liquidation of the Fund and the cancellation of the outstanding
shares of the Fund.
FOR____ AGAINST____ ABSTAIN____
Dated:________________________, 1995
(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.
MERGE\QFVF310.D1
<PAGE>
October 1995
Dear Quest for Value National Tax-Exempt Fund Shareholder:
On August 17, Oppenheimer Capital signed a definitive agreement with
Oppenheimer Management Corporation (OMC). The Agreement contemplates that
OMC would acquire, subject to certain conditions, all of the investment
advisory and other contracts and business relationships and certain assets
and liabilities of Quest for Value Advisors, Quest for Value Distributors
and Oppenheimer Capital relating to twelve Quest for Value mutual funds.
One aspect of the acquisition involves the proposed reorganization
of your fund and Oppenheimer Tax-Free Bond Fund. As discussed below and
in the accompanying proxy statement, your fund's Board of Trustees
believes that Quest for Value National Tax-Exempt Fund shareholders would
benefit from a reorganization into Oppenheimer Tax-Free Bond Fund.
A shareholder meeting has been scheduled in November and all
shareholders of record on September 25, 1995 are being asked to vote
either in person or by proxy. Enclosed you will find a proxy statement
detailing the proposals, a ballot card, an Oppenheimer Tax-Free Bond Fund
prospectus and a postage-paid return envelope for your convenience.
What is being proposed?
As stated in the proxy statement, there is one proposal to be voted on by
fund shareholders -- approval of an:
Agreement and Plan of Reorganization for Quest for Value National
Tax-Exempt Fund and the transactions contemplated by the agreement.
The proxy statement outlines the proposal to reorganize your fund
into Oppenheimer Tax-Free Bond Fund, a fund that shares a similar
investment objective as well as similar investment policies with your
fund.
As an OppenheimerFunds shareholder, you will have the ability to
exchange into any of the more than thirty Oppenheimer funds at no
charge. You will also enjoy the other benefits available to
OppenheimerFunds shareholders such as AccountLink, which links your
mutual fund and bank accounts so that you can have your money
electronically transferred to or from your bank and fund account with
none of the delays involved in writing or cashing a check. And
Oppenheimer's PhoneLink gives you access to your account 24 hours a
day to make purchasing, exchanging or redeeming shares more
convenient.
Please read the accompanying prospectus of Oppenheimer Tax-Free Bond
Fund for conditions and details.
How do you vote?
No matter how large or small your investment, your vote is important,
so please review the proxy statement carefully. To cast your vote, simply
mark, sign and date the enclosed proxy ballot and return it in the
postage-paid envelope today.
If the reorganization is approved, you would receive shares of
Oppenheimer Tax-Free Bond Fund of the same class as you presently hold,
equal in dollar value to your investment in Quest for Value National Tax-
Exempt Fund (as a result, the number of shares you receive will vary from
the number of fund shares you previously held, even though the value will
be the same). Of course, no sales charge would be paid on shares received
in the reorganization. In addition, you would receive a final dividend
distribution from the Quest for Value National Tax-Exempt Fund before the
reorganization took place.
Please contact your financial adviser or call us at 1-800-232-FUND
if you have any questions.
Thank you for your continuing trust in allowing us to manage your
investments.
Sincerely,
Joseph M. LaMotta
Chairman of the Board and President
Quest for Value Family of Funds
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE PROPOSED REORGANIZATION
1. What is the Reorganization?
The proposed Reorganization provides for the transfer of all the
assets the Quest for Value National Tax-Exempt Fund (the "Fund") to the
Oppenheimer Tax-Free Bond Fund, the issuance of shares of the Oppenheimer
Tax-Free Bond Fund to shareholders of the Fund and the cancellation of the
outstanding shares of the Fund. The number of shares of the Oppenheimer
Tax-Free Bond Fund that will be issued to shareholders of the Fund will
be determined on the basis of the relative net asset values of the
Oppenheimer Tax-Free Bond Fund and the Fund. Although the number of
shares of the Oppenheimer Tax-Free Bond Fund issued to a shareholder of
the Fund may be more or less than the shareholder's holdings of Fund
shares, the value of the shares of the Oppenheimer Tax-Free Bond Fund
issued in the Reorganization will be equal to the value of the shares
previously held in the Fund.
The Reorganization has been proposed in connection with a proposed
acquisition by Oppenheimer Management Corporation ("OMC") of the assets
of Quest for Value Advisors, Quest for Value Distributors and Oppenheimer
Capital relating to twelve Quest for Value mutual funds (including the
Fund) and the assumption by OMC of certain liabilities.
2. What are the reasons for the Reorganization?
After an intensive examination of the mutual fund industry, Quest for
Value Advisors and Distributors concluded that smaller fund distributors
would find it increasingly difficult to compete with larger distributors
with greater resources. Based on that conclusion, Quest for Value has
chosen to sell certain of its mutual fund related assets to OMC. OMC,
the purchaser, is seeking to merge certain of the Quest for Value funds
into certain of its funds.
3. What benefits to shareholders may result from this transaction?
The Board of the Fund determined that, among other things, the
Reorganization would afford the shareholders of the Quest Fund: 1) the
capabilities and resources of OMC and its affiliates in the area of fixed
income investment management, distribution, shareholder services and
marketing; 2) the ability to exchange their shares for a wider variety of
portfolios within the OppenheimerFunds family than are currently available
to the shareholders of the Fund; and 3) an investment in a fund which, on
a pro-forma basis, will have lower operating expenses as a percent of
average net assets than is currently the case.
4. Who is paying the expenses of the Reorganization?
All expenses of the Reorganization will be paid by Quest for Value
and Oppenheimer Management Corporation and not Quest Fund or Oppenheimer
Strategic Income Fund shareholders.
5. Who is Oppenheimer Management Corporation?
Oppenheimer Management Corporation and its subsidiaries are engaged
principally in the business of managing, distributing and servicing
registered investment companies. Oppenheimer Management Corporation is
indirectly controlled by Massachusetts Mutual Life Insurance Company. As
of August 31, 1995, Oppenheimer Management Corporation and its affiliates
had assets of more than $36 billion under management in more than 45
mutual funds.
6. Do the OppenheimerFunds have a sales charge?
Yes, other than their money market funds. However, there will be
no commission or salesload of any kind charged in connection with this
Reorganization. The full value of your shares in the Quest Fund will be
exchanged for shares of the Oppenheimer Tax-Free Bond Fund. Those
shareholders who, because they were shareholders of the AMA Family of
Funds or the Unified Funds who were eligible to purchase shares of any
Quest for Value fund without a sales charge, after the Reorganization will
be eligible to purchase shares of any OppenheimerFund without a sales
charge.
7. May I exchange between other OppenheimerFunds without a sales charge
or exchange fee?
Yes. As a shareholder of an OppenheimerFund, you will be able to
make exchanges into any of the other funds into any of the
OppenheimerFunds without payment of any sales charges or exchange fees.
The Quest Fund currently imposes a fee of $5 for every exchange into
another Quest for Value fund.
8. Where can I get prospectuses and other information on the
OppenheimerFunds?
Call OppenheimerFunds at 1-(800) 255-2755. They will be pleased to
supply you with all the information, including prospectuses which you will
need to make an investment decision.
9. After the Reorganization, who do I contact about my account or to
initiate a transaction in my account?
For information about your account or to initiate a transaction in
your account, you may continue to contact your registered representative
at your broker/dealer or, in the alternative, Shareholder Services, Inc.
at 1-(800) 525-7048 .
10. Will this Reorganization result in any tax liability to the Quest
Fund, Oppenheimer Trust or to me as a shareholder?
The Reorganization is intended to qualify for federal income tax
purposes as a tax-free reorganization. The aggregate tax basis of the
Oppenheimer Tax-Free Bond Fund shares received by you will be the same as
the aggregate tax basis of your Quest Fund shares prior to the
Reorganization and the holding period of the shares of the Oppenheimer
Tax-Free Bond Fund to be received by you will include the period during
which the Quest Fund shares surrendered in exchange, therefore, were held.
<PAGE>
Oppenheimer
Tax-Free Bond Fund
Prospectus dated August 29, 1995
Oppenheimer Tax-Free Bond Fund (the "Fund") is a mutual fund that seeks
as high a level of current interest income exempt from Federal income
taxes as is available from investing in Municipal Securities, while
attempting to preserve capital. Under normal market conditions, the Fund
invests at least 80% of its assets in Municipal Securities. However, in
times of unstable economic or market conditions, the Fund's investment
manager may deem it advisable to temporarily invest an unlimited amount
of the Fund's total assets in certain taxable instruments. The Fund also
uses hedging instruments to seek to reduce the risks of market
fluctuations that affect the value of the securities the Fund holds. You
should carefully review the risks associated with an investment in the
Fund. Please refer to "Investment Policies and Strategies" for more
information about the types of securities the Fund invests in and the
risks of investing in the Fund.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read it carefully and keep it for future
reference. You can find more detailed information about the Fund in the
August 29, 1995 Statement of Additional Information. For a free copy,
call Oppenheimer Shareholder Services, the Fund's Transfer Agent, at
1-800-525-7048, or write to the Transfer Agent at the address on the back
cover. The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
(logo) OppenheimerFunds
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks including the possible loss of the
principal amount invested.
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 OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
4 Expenses
6 A Brief Overview of the Fund
7 Financial Highlights
10 Investment Objective and Policies
16 How the Fund is Managed
18 Performance of the Fund
ABOUT YOUR ACCOUNT
22 How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
32 Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
33 How to Sell Shares
By Mail
By Telephone
Checkwriting
35 How to Exchange Shares
37 Shareholder Account Rules and Policies
38 Dividends, Capital Gains and Taxes
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net
asset value per share. All shareholders therefore pay those expenses
indirectly. Shareholders pay other expenses directly, such as sales
charges. The following tables are provided to help you understand your
direct expenses of investing in the Fund and your share of the Fund's
business operating expenses that you will expect to bear indirectly. The
numbers below are based on the Fund's expenses during its last fiscal year
ended December 31, 1994.
- Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account," from pages
22 through 39 for an explanation of how and when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge 4.75% None None
on Purchases (as a % of
offering price)
------------------------------------------------------------------------
Sales Charge on None None None
Reinvested Dividends
------------------------------------------------------------------------
Deferred Sales Charge None(1) 5% in the first 1% if share are
(as a % of the lower of year, declining redeemed
the original purchase to 1% in the within 12
price or redemption sixth year and months of
proceeds) if shares eliminated purchase(2)
thereafter
------------------------------------------------------------------------
Exchange Fee None None None
<FN>
1. If you invest more than $1 million in Class A shares, you may have to
pay a sales charge of up to 1% if you sell your shares within 18 calendar
months from the end of the calendar month during which you purchased those
shares. See "How to Buy Shares - Class A Shares," below.
2. See "How to Buy Shares - Class B Shares" and "How to Buy Shares - Class
C Shares," below, for information on contingent deferred sales charges.
</TABLE>
- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (referred to in this Prospectus as the "Manager").
The rates of the Manager's fees are set forth in "How the Fund Is
Managed," below. The Fund has other regular expenses for services, such
as transfer agent fees, custodial fees paid to the bank that holds its
portfolio securities, audit fees and legal expenses. These expenses are
detailed in the Fund's Financial Statements in the Statement of Additional
Information.
The numbers in the table below are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The 12b-1 Plan Fees for Class A
shares are service fees. For Class B and Class C shares the 12b-1 Plan
Fees are a service fee (0.25% of average annual net assets of that class)
and the asset-based sales charge. The service fee for each class is 0.25%
of average annual net assets of the class and the asset-based sales charge
is 0.75% of average annual net assets of the class. These plans are
described in greater detail in "How to Buy Shares."
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
-------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.53% 0.53% 0.53%
-------------------------------------------------------------------------
12b-1 Plan Fees 0.21% 1.00% 1.00%
-------------------------------------------------------------------------
Other Expenses 0.14% 0.16% 0.16%
-------------------------------------------------------------------------
Total Fund Operating Expenses 0.88% 1.69% 1.69%
</TABLE>
The actual expenses for each class of shares in future years may be
more or less than the numbers in the table, depending on a number of
factors, including the actual value of the Fund's assets represented by
each class of shares. Class C shares were not publicly offered during the
Fund's fiscal year ended December 31, 1994; therefore, the Annual Fund
Operating Expenses for Class C shares are estimates of the amounts that
would have been payable if Class C shares had been outstanding during this
period.
- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and that the Fund's annual return is 5%, and that its
operating expenses for each class are the ones shown in the Annual Fund
Operating Expenses table above. If you were to redeem your shares at the
end of each period shown below, your investment would incur the following
expenses by the end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years*
----------------------------------------------------------------------
[S] [C] [C] [C] [C]
Class A Shares $56 $74 $ 94 $151
Class B Shares $67 $83 $112 $158
Class C Shares $22 $53 $92 $200
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years*
----------------------------------------------------------------------
Class A Shares $56 $74 $94 $151
Class B Shares $17 $53 $92 $158
Class C Shares $17 $53 $92 $200
[FN]
* The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Because of the effect of the
asset-based sales charge and the contingent deferred sales charge on Class
B and Class C shares, long-term Class B and Class C shareholders could pay
the economic equivalent of more than the maximum front-end sales charge
allowed under applicable regulatory requirements. For Class B
shareholders, the automatic conversion of Class B shares to Class A shares
is designed to minimize the likelihood that this will occur. Please refer
to "Buying Class B Shares" on pages 28-31 for more information.
These examples show the effect of the current level of expenses on
the return of a hypothetical investment, but are not meant to state or
predict actual or expected expenses or investment returns of the Fund, all
of which will vary.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing in the Fund. Keep the Prospectus
for reference after you invest, particularly for information about your
account, such as how to sell or exchange shares.
- What Is The Fund's Investment Objective? The Fund's investment
objective is to seek as high a level of current interest income which is
exempt from Federal income taxes as is available from Municipal
Securities, while attempting to preserve capital.
- What Does the Fund Invest In? Under normal market conditions, the
Fund will invest at least 80% of its assets in "Municipal Securities,"
which are municipal bonds and municipal notes, 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, the interest from
which is not subject to Federal individual income tax. The Fund may
invest up to 20% of its assets in investments the income from which may
be taxable. The Fund may also use hedging instruments and some derivative
investments in an effort to protect against market risks. These
investments are more fully explained in "Investment Objective and
Policies," starting on page 9.
- Who Manages the Fund? The Fund's investment adviser (the
"Manager") is Oppenheimer Management Corporation, which (including a
subsidiary) manages investment company portfolios having over $35 billion
in assets at June 30, 1995. The Fund has a portfolio manager, Robert E.
Patterson, who is employed by the Manager. He is primarily responsible
for the selection of the Fund's securities. The Manager is paid an
advisory fee by the Fund, based on its net assets. The Fund's Board of
Trustees, elected by shareholders, oversees the investment adviser.
Please refer to "How the Fund is Managed," starting on page 16 for more
information about the Manager and its fees.
- How Risky is the Fund? All investments carry risks to some degree.
The Fund's bond investments are subject to changes in their value from a
number of factors such as changes in general bond market movements, the
change in value of particular bonds because of an event affecting the
issuer, or changes in interest rates. These changes affect the value of
the Fund's investments and its price per share. The Fund may invest in
"inverse floater" variable rate bonds, a type of derivative investment
whose yields move in the opposite direction as short-term interest rates
change. In the OppenheimerFunds spectrum, the Fund is more conservative
than high yield bond funds but more aggressive than money market funds.
While the Manager tries to reduce risks by diversifying investments
and by carefully researching securities before they are purchased for the
portfolio, and in some cases by using hedging techniques, there is no
guarantee of success in achieving the Fund's objective and your shares may
be worth more or less than their original cost when you redeem them.
Please refer to "Investment Objective and Policies" starting on page 9 for
a more complete discussion of the Fund's investment risks.
- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How To Buy Shares"
on page 21 for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund has three
classes of shares. All three classes have the same investment portfolio
but have different expenses. Class A shares are offered with a front-end
sales charge, starting at 4.75%, and reduced for larger purchases. Class
B shares and Class C shares are offered without a front-end sales charge,
but may be subject to a contingent deferred sales charge if redeemed
within 6 years or 12 months, respectively, of purchase. There are also
annual asset-based sales charges on Class B and Class C shares. Please
review "How To Buy Shares" starting on page 21 for more details, including
a discussion about factors you and your financial adviser should consider
in determining which class may be appropriate for you.
- How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through your
dealer or by using Checkwriting. Please refer to "How To Sell Shares" on
page 33. The Fund also offers exchange privileges to other
OppenheimerFunds, described in "How to Exchange Shares" on page 36.
- How Has the Fund Performed? The Fund measures its performance by
quoting its yield, tax-equivalent yield, average annual total return and
cumulative total return, which measure historical performance. Those
yields and returns can be compared to the yields and returns (over similar
periods) of other funds. Of course, other funds may have different
objectives, investments, and levels of risk. The Fund's performance can
also be compared to a broad market index, which we have done on page 20.
Please remember that past performance does not guarantee future results.
Financial Highlights
The table on the following pages presents selected financial
information about the Fund, including per share data and expense ratios
and other data based on the Fund's average net assets. This information
has been audited by KPMG Peat Marwick LLP, the Fund's independent
auditors, whose report on the Fund's financial statements for the fiscal
year ended December 31, 1994, is included in the Statement of Additional
Information. Class C shares of the Fund were not publicly offered during
the periods shown. Accordingly, no information on Class C shares is
included in the table or in the Fund's financial statements for the year
ended December 31, 1994.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Financial Highlights
------------------------------------------------------------------------------------------------------
Class A Class B
-------------------------------------------------------------------------------------- ---------------
Year Year Period
Ended Ended Ended
December 31, Dec. 31, Dec. 31,
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1994 1993(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning
of period $10.44 $ 9.94 $ 9.77 $ 9.33 $ 9.45 $ 9.27 $ 9.12 $ 9.81 $ 8.80 $ 7.87 $ 10.43 $10.22
---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .57 .59 .62 .64 .66 .65(2) .77(2) .69 .69 .70 .50 .41
Net realized and unrealized
gain (loss) on investments (1.52) .74 .25 .45 (.12) .20 .07 (.70) .99 .91 (1.52) .43
------ ------ ------ ------- ------ ------ ------- ------ ------ ------ ------- ------
Total income (loss) from
investment operations (.95) 1.33 .87 1.09 .54 .85 .84 (.01) 1.68 1.61 (1.02) .84
---------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.56) (.62) (.58) (.65) (.66) (.67) (.69) (.68) (.67) (.68) (.49) (.42)
Distributions from net
realized gain on
investments -- (.21) (.12) -- -- -- -- -- -- -- -- (.21)
Distributions in excess
of net realized gain
on investments --(3) -- -- -- -- -- -- -- -- -- --(3) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total dividends and
distributions
to shareholders (.56) (.83) (.70) (.65) (.66) (.67) (.69) (.68) (.67) (.68) (.49) (.63)
---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $ 8.93 $10.44 $ 9.94 $ 9.77 $ 9.33 $ 9.45 $ 9.27 $ 9.12 $ 9.81 $ 8.80 $ 8.92 $10.43
Total Return,
at Net Asset Value(4) (9.19)% 13.79% 9.20% 12.11% 5.93% 9.42% 10.03% .00% 19.75% 21.38%
(9.91)% 8.49%
Ratios/Supplemental Data:
Net assets,
end of period,
(in thousands) $541,161 $608,128 $496,628 $394,115 $256,542 $223,904 $172,227 $133,508 $132,234 $93,993 $53,245
$33,024
---------------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $582,038 $567,777 $438,684 $319,081 $238,224 $202,216 $150,901 $135,052 $112,189 $80,974 $46,548
$16,444
---------------------------------------------------------------------------------------------------------------------------------
Number of shares
outstanding at
end of period
(in thousands) 60,634 58,277 49,964 40,356 27,505 23,699 18,581 14,633 13,480 10,681 5,972
3,166
---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net
assets:
Net investment income 5.94% 5.71% 6.34% 6.70% 7.08% 7.18% 7.48% 7.41% 7.33% 8.36%
5.11% 4.54%(5)
Expenses .88% .88% .94% .89% .89% .82%(2) .72%(2) .78% .78% .82% 1.69%
1.74%(5)
---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 21.7% 30.2% 34.2% 23.5% 29.3% 57.2% 22.9% 29.4% 27.8% 210.7% 21.7%
30.2%
<FN>
1. For the period from March 16, 1993 (inception of offering) to December 31, 1993.
2. Net investment income would have been $.64 and $.76 absent the voluntary assumption of expenses,
resulting in an expense ratio of .84% and .80% for 1989 and 1988, respectively.
3. Less than .005 per share.
4. Assumes a hypothetical initial investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day of the fiscal period.
Sales charges are not reflected in the total returns.
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly
average of the market value of portfolio securities owned during the period. Securities with a
maturity or expiration date at the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding short-term securities) for the
year ended December 31, 1994 were $156,047,252 and $135,336,771, respectively.
</FN>
</TABLE>
<PAGE>
Investment Objective and Policies
Objective. The Fund's objective is to seek as high a level of current
interest income exempt from Federal income taxes as is available from
investment in Municipal Securities (defined below), while attempting to
preserve capital. The Fund is not intended to be a complete investment
program, and there is no assurance that it will achieve its objective.
Investment Policies and Strategies. Under normal market conditions, the
Fund attempts to invest 100% of its assets and, as a matter of fundamental
policy, to invest at least 80% of its assets, in Municipal Securities.
- Municipal Securities. Municipal Securities are municipal bonds
and municipal notes, tax-exempt commercial paper and other debt
obligations issued by or on behalf of the states, the District of
Columbia, their political subdivisions or any commonwealths, territories
or possessions of the United States, or their respective 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. No independent investigation has
been made by the Manager as to the users of proceeds of bond offerings or
the application of such proceeds.
"Municipal Bonds" are Municipal Securities that have a maturity when
issued of one year or more, and "Municipal Notes" are Municipal Securities
that have a maturity when issued of less than one year. The two principal
classifications of Municipal Securities are "general obligations" (secured
by the issuer's pledge of its full faith, credit and taxing power for the
payment of principal and interest) and "revenue obligations" (payable
only from the revenues derived from a particular facility or class of
facilities, or a specific excise tax or other revenue source). The Fund
may invest in Municipal Securities of both classifications. See
"Investment Objective and Policies" in the Statement of Additional
Information for further information about the Fund's investment policies
and about Municipal Securities.
Dividends paid by the Fund derived from interest attributable to
Municipal Securities will be exempt from Federal individual income taxes.
Any dividends derived from net interest income on taxable investments will
be taxable as ordinary income (and any capital gains distributions will
be taxable as capital gains) when distributed to shareholders (See
"Dividends, Capital Gains and Taxes," below).
- Investments in Taxable Securities and Temporary Defensive
Investment Strategy. Under normal market conditions, the Fund may invest
up to 20% of its assets in taxable investments, including (i) certain
"Temporary Investments" (described in the next paragraph); (ii) hedging
instruments (described in "Hedging" below); (iii) repurchase agreements
(explained below); and (iv) Municipal Securities issued to benefit a
private user ("Private Activity Municipal Securities"), the interest from
which may be subject to Federal alternative minimum tax (see "Taxes,"
below, and "Private Activity Municipal Securities" in the Statement of
Additional Information).
In times of unstable economic or market conditions, the Manager may
determine that it is appropriate for the Fund to assume a temporary
"defensive" position by investing some or all of its assets (there is no
limit on the amount) in short-term money market instruments. These
include the taxable obligations described above, U.S. government
securities, bank obligations, commercial paper, corporate obligations and
other instruments approved by the Fund's Board of Trustees. This strategy
would be implemented to attempt to reduce fluctuations in the value of the
Fund's assets. The Fund may hold temporary investments pending the
investment of proceeds from the sale of Fund shares or portfolio
securities, pending settlement of purchases of Municipal Securities, or
to meet anticipated redemptions. To the extent the Fund assumes a
temporary defensive position, a portion of the Fund's distributions may
be subject to Federal and state income taxes and the Fund may not achieve
its objective.
- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, described above, as well as investment
policies that it follows to try to achieve its objective. Additionally,
the Fund uses certain investment techniques and strategies in carrying out
those investment policies. The Fund's investment policies and practices
are not "fundamental" unless this Prospectus or the Statement of
Additional Information says that a particular policy is "fundamental."
The Fund's investment objective is a fundamental policy.
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The term
"majority" is defined in the Investment Company Act to be a particular
percentage of outstanding voting shares (and this term is explained in the
Statement of Additional Information). The Fund's Board of Trustees may
change non-fundamental policies without shareholder approval, although
significant changes will be described in amendments to this Prospectus.
- Credit Risk and Interest Rate Risk. The values of Municipal
Securities will vary as a result of changing evaluations by rating
services and investors of the ability of the issuers of such securities
to meet interest and principal payments. Such values will also change in
response to changes in prevailing interest rates. Should interest rates
rise, the values of outstanding Municipal Securities will probably decline
and (if purchased at principal amount) would sell at a discount. If
interest rates fall, the values of outstanding Municipal Securities will
probably increase and (if purchased at principal amount) would sell at a
premium. Changes in the values of Municipal Securities owned by the Fund
arising from these or other factors will not affect interest income
derived from those securities but will affect the Fund's net asset value
per share.
- Municipal Lease Obligations. Municipal leases may take the form
of a lease or an installment purchase contract issued by state and local
government authorities to obtain funds to acquire a wide variety of
equipment and facilities. The Fund may invest in certificates of
participation that represent a proportionate interest in or right to the
lease-purchase payment made under municipal lease obligations. Certain
of these securities may be deemed to be "illiquid" securities and the
purchase would be limited as described below in "Illiquid and Restricted
Securities." From time to time the Fund may invest more than 5% of its
net assets in municipal lease obligations that the Manager has determined
to be liquid under guidelines set by the Board of Trustees.
- Floating Rate/Variable Rate Obligations. Some of the Municipal
Securities the Fund may purchase may have variable or floating interest
rates. Variable rates are adjustable at stated periodic intervals.
Floating rates are automatically adjusted according to a specified market
rate for such investments, such as the percentage of the prime rate of a
bank, or the 91-day U.S. Treasury Bill rate. Such obligations may be
secured by bank letters of credit or other credit support arrangements.
- Inverse Floaters and Other Derivative Investments. The Fund may
invest in certain municipal "derivative investments." The Fund may use
some derivative investments for hedging purposes, and may invest in others
because they offer the potential for increased income and principal value.
In general, a "derivative investment" is a specially-designed investment
whose performance is linked to the performance of another investment or
security, such as an option, future or index. In the broadest sense,
derivative investments include exchange-traded options and futures
contracts (please refer to "Hedging," below).
The Fund may invest in "inverse floater" variable rate bonds, a type
of derivative investment whose yields move in the opposite direction as
short-term interest rates change. As interest rates rise, inverse
floaters produce less current income. Their price may be more volatile
than the price of a comparable fixed-rate security. Some inverse floaters
have a "cap" whereby if interest rates rise above the "cap," the security
pays additional interest income. If rates do not rise above the "cap,"
the Fund will have paid an additional amount for a feature that proves
worthless. The Fund may also invest in municipal securities that pay
interest that depends on an external pricing mechanism, also a type of
derivative investment. Examples of external pricing mechanisms are
interest rate swaps or caps and municipal bond or swap indices. The Fund
anticipates that under normal circumstances it will invest no more than
10% of its net assets in inverse floaters.
The risks of investing in derivative investments include not only the
ability of the issuer of the derivative investment to pay the amount due
on the maturity of the investment, but also the risk that the underlying
security or investment might not perform the way the Manager expected it
to perform. That can mean that the Fund will realize less income than
expected. Another risk of investing in derivative investments is that
their market value could be expected to vary to a much greater extent than
the market value of municipal securities that are not derivative
investments but have similar credit quality, redemption provisions and
maturities.
- Ratings of Municipal Securities. No more than 25% of the Fund's
total assets will be invested in Municipal Securities that at the time of
purchase are not "investment-grade," that is, rated below the four highest
rating categories of Moody's Investors Service, Inc. ("Moody's), Standard
& Poor's Corporation ("S&P"), or Fitch Investors Service, Inc. ("Fitch"),
or, if unrated, are not judged by the Manager to be comparable quality to
Municipal Securities rated within such grades. (See Appendix B to the
Statement of Additional Information for a description of these ratings.
A reduction in the rating of a security after its purchase by the Fund
will not require the Fund to dispose of such security.
Lower-grade Municipal Securities (sometimes called "municipal junk
bonds") may be subject to greater market fluctuations and are subject to
greater risks of loss of income and principal than higher-rated Municipal
Securities, and may be considered to have some speculative
characteristics. Securities that are or that have fallen below investment
grade entail a greater risk that the ability of the issuers of such
securities to meet their debt obligations will be impaired. There may be
less of a market for lower-grade Municipal Securities and therefore they
may be harder to sell at an acceptable price. These risks mean that the
Fund may not achieve the expected income from lower-grade Municipal
Securities, and that the Fund's income and net asset value per share may
be affected by declines in value of these securities. However, the Fund's
limitations on investment in non-investment grade Municipal Securities may
reduce some of these risks.
- Portfolio Turnover. A change in the securities held by the Fund
is known as "portfolio turnover." The Fund generally will not engage in
the trading of securities for the purpose of realizing short-term gains,
but the Fund may sell securities as the Manager deems advisable to take
advantage of differentials in yield. The "Financial Highlights," above,
show the Fund's portfolio turnover rate during past fiscal years. While
short-term trading increases portfolio turnover, the Fund incurs little
or no brokerage costs because most of the Fund's portfolio transactions
are principal trades without brokerage commissions.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below. These techniques
involve certain risks. The Statement of Additional Information contains
more information about these practices, including limitations on their use
that are designed to reduce some of the risks.
- When-Issued and Delayed Delivery Transactions. The Fund may
purchase Municipal Securities on a "when-issued" basis, and may purchase
or sell such securities on a "delayed delivery" basis. These terms refer
to securities that have been created and for which a market exists, but
which are not available for immediate delivery. The Fund does not intend
to make such purchases for speculative purposes. During the period
between the purchase and settlement, no payment is made for the security
and no interest accrues to the buyer from the investment. The commitment
to purchase a security for which payment will be made on a future date may
be deemed a separate security and involve a risk of loss if the value of
the security declines prior to the settlement date.
- Repurchase Agreements. The Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future date.
Repurchase agreements must be fully collateralized. However, if the
vendor fails to pay the resale price on the delivery date, the Fund may
incur costs in disposing of the collateral and may experience losses if
there is any delay in its ability to do so. The Fund will not enter into
a repurchase agreement that causes more than 10% of its net assets to be
subject to repurchase agreements having a maturity beyond seven days.
There is no limit on the amount of the Fund's net assets that may be
subject to repurchase agreements of seven days or less.
- Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments.
Investments may be illiquid because of the absence of an active trading
market, making it difficult to value them or dispose of them promptly at
an acceptable price. A restricted security is one that has a contractual
restriction on its resale. Over-the-counter options held by the Fund, a
portion of the assets used to cover over-the-counter options, repurchase
transactions having a maturity beyond seven days, and certain municipal
lease obligations are considered illiquid securities. The Fund will not
invest more than 10% of its net assets in illiquid or restricted
securities (that limit may increase to 15% if certain state laws are
changed or the Fund's shares are no longer sold in those states). The
Fund may not invest any portion of its assets in securities the public
sale of which would require registration under the Securities Act of 1933.
- Loans of Portfolio Securities. To raise cash for liquidity
purposes, the Fund may lend its portfolio securities to certain types of
eligible borrowers approved by the Board of Trustees. Each loan must be
collateralized in accordance with applicable regulatory requirements.
After any loan, the value of the securities loaned must not exceed 25% of
the value of the Fund's net assets. There are some risks in connection
with securities lending. The Fund might experience a delay in receiving
additional collateral to secure a loan, or a delay in recovery of the
loaned securities. The Fund presently does not intend to engage in loans
of securities that will exceed 5% of the value of the Fund's total assets
in the coming year.
- Hedging. As described below, the Fund may purchase and sell
certain kinds of futures contracts, put and call options, and options on
futures and broadly-based municipal bond indices, or enter into interest
rate swap agreements. These are all referred to as "hedging instruments."
The Fund does not use hedging instruments for speculative purposes, and
has limits on the use of them, described below. The hedging instruments
the Fund may use are described below and in greater detail in "Other
Investment Techniques and Strategies" in the Statement of Additional
Information.
The Fund may buy and sell options and futures for a number of
purposes. It may do so to try to manage its exposure to the possibility
that the prices of its portfolio securities may decline, or to establish
a position in the securities market as a temporary substitute for
purchasing individual securities. It may do so to try to manage its
exposure to changing interest rates. Some of these strategies, such as
selling futures, buying puts and writing covered calls, hedge the Fund's
portfolio against price fluctuations.
Other hedging strategies, such as buying futures and call options,
tend to increase the Fund's exposure to the securities market. Writing
covered call options may also provide income to the Fund for liquidity
purposes or to raise cash to distribute to shareholders.
- Futures. The Fund may buy and sell futures contracts that relate
to (1) broadly-based municipal bond indices (these are referred to as
Municipal Bond Index Futures) and (2) interest rates (these are referred
to as Interest Rate Futures). These types of Futures are described in
"Hedging" in the Statement of Additional Information.
- Put and Call Options. The Fund may buy and sell certain kinds of
put options (puts) and call options (calls).
The Fund may buy calls only on securities, broadly-based municipal
bond indices, Municipal Bond Index Futures or Interest Rate Futures, or
to terminate its obligation on a call the Fund previously wrote. The Fund
may write (that is, sell) covered call options. When the Fund writes a
call, it receives cash (called a premium). The call gives the buyer the
ability to buy the investment on which the call was written from the Fund
at the call price during the period in which the call may be exercised.
If the value of the investment does not rise above the call price, it is
likely that the call will lapse without being exercised, while the Fund
keeps the cash premium (and the investment).
The Fund may purchase puts. Buying a put on an investment gives the
Fund the right to sell the investment at a set price to a seller of a put
on that investment. The Fund can buy only those puts that relate to (1)
securities that the Fund owns, (2) broadly-based municipal bond indices,
(3) Municipal Bond Index Futures or (4) Interest Rate Futures. The Fund
can buy a put on a Municipal Bond Index Future or Interest Rate Future
whether or not the Fund owns the particular Future in its portfolio. The
Fund may not sell a put other than a put that it previously purchased.
The Fund may buy and sell puts and calls only if certain conditions
are met: (1) after the Fund writes a call, not more than 25% of the Fund's
total assets may be subject to calls; (2) calls the Fund buys or sells
must be listed on a securities or commodities exchange, or quoted on the
Automated Quotation System of the National Association of Securities
Dealers, Inc. (NASDAQ), or traded in the over-the-counter market; (3) each
call the Fund writes must be "covered" while it is outstanding: that means
the Fund must own the investment on which the call was written or it must
own other securities that are acceptable for the escrow arrangements
required for calls; (4) the Fund may write calls on Futures contracts it
owns, but these calls must be covered by securities or other liquid assets
the Fund owns and segregates to enable it to satisfy its obligations if
the call is exercised; (5) a call or put option may not be purchased if
the value of all of the Fund's put and call options would exceed 5% of the
Fund's total assets.
- Interest Rate Swaps. In an interest rate swap, the Fund and
another party exchange their right to receive or their obligation to pay
interest on a security. For example, they may swap a right to receive
floating rate payments for fixed rate payments. The Fund enters into
swaps only on securities it owns. The Fund may not enter into swaps with
respect to more than 25% of its total assets. Also, the Fund will
segregate liquid assets (such as cash or U.S. Government securities) to
cover any amounts it could owe under swaps that exceed the amounts it is
entitled to receive, and it will adjust that amount daily, as needed.
Income from interest rate swaps may be taxable.
- Hedging instruments can be volatile investments and may involve
special risks. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different than what is
required for normal portfolio management. If the Manager uses a hedging
instrument at the wrong time or judges market conditions incorrectly,
hedging strategies may reduce the Fund's return. The Fund could also
experience losses if the prices of its futures and options positions were
not correlated with its other investments or if it could not close out a
position because of an illiquid market for the future or option. Such
losses might cause previously distributed short-term capital gains to be
re-characterized as a non-taxable return of capital to shareholders.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. If a covered call written by the Fund is exercised on an
investment that has increased in value, the Fund will be required to sell
the investment at the call price and will not be able to realize any
profit if the investment has increased in value above the call price.
Interest rate swaps are subject to credit risks (if the other party fails
to meet its obligations) and also to interest rate risks. The Fund could
be obligated to pay more under its swap agreements than it receives under
them, as a result of interest rate changes. These risks are described in
greater detail in the Statement of Additional Information.
Other Investment Restrictions. The Fund has other investment restrictions
that are fundamental policies. Under these fundamental policies, the Fund
cannot do any of the following:
- invest in securities or any other investment other than Municipal
Securities, Temporary Investments, repurchase agreements, covered calls,
Private Activity Municipal Securities and Hedging Instruments described
in "Investment Objective and Policies," above;
- lend any of its assets (repurchase agreements or the purchase of
debt securities in accordance with the Fund's investment policies and
restrictions are permitted); the Fund may also lend its portfolio
securities as described in "Loans of Portfolio Securities";
- borrow money in excess of 10% of the value of its total assets;
the Fund may borrow only from banks as a temporary measure for
extraordinary or emergency purposes (not for the purpose of leveraging its
investments); no assets of the Fund may be pledged, mortgaged or otherwise
encumbered, transferred or assigned to secure a debt, however, escrow or
other collateral arrangements in connection with Hedging Instruments are
not prohibited;
- invest more than 5% of the value of its total assets in the
securities of any one issuer (see "Diversification" in the Statement of
Additional Information) nor acquire more than 10% of the total value of
all outstanding securities of any one issuer (in both cases, this
restriction does not apply to securities of the U.S. Government or its
agencies or instrumentalities); or
- concentrate investments to the extent of 25% of its total assets
in any industry (see "Diversification" in the Statement of Additional
Information); however, there is no limitation as to investment in
Municipal Securities or in obligations issued by the U.S. Government and
its agencies or instrumentalities.
All of the percentage limitations described above and elsewhere in
this Prospectus and in the Statement of Additional Information, apply only
at the time the Fund purchases a security, and the Fund need not dispose
of a security merely because the Fund's assets have changed or the
security has increased in value relative to the size of the Fund. There
are other fundamental policies discussed in the Statement of Additional
Information.
How the Fund is Managed
Organization and History. The Fund was originally incorporated in
Maryland in 1976 but was reorganized in 1987 as a Massachusetts business
trust. The Fund is an open-end, diversified management investment company
with an unlimited number of authorized shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The
Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Trustees and Officers of the Fund" in the Statement of Additional
Information names the Trustees and officers of the Fund and provides more
information about them. Although the Fund is not required by law to hold
annual meetings, it may hold shareholder meetings from time to time on
important matters, and shareholders have the right to call a meeting to
remove a Trustee or to take other action described in the Fund's
Declaration of Trust.
The Board of Trustees has the power, without shareholder approval,
to divide unissued shares of the Fund into two or more classes. The Board
has done so, and the Fund currently has three classes of shares, Class A,
Class B and Class C. All classes invest in the same investment portfolio.
Each class has its own dividends and distributions, and pays certain
expenses which may be different for each class. Each class may have a
different net asset value. Each share has one vote at shareholder
meetings, with fractional shares voting proportionally. Only shares of
a particular class vote together on matters that affect that class alone.
Shares are freely transferable.
The Manager and its Affiliates. The Fund is managed by the Manager,
Oppenheimer Management Corporation, which is responsible for selecting the
Fund's investments and handles its day-to-day business. The Manager
carries out its duties, subject to the policies established by the Board
of Trustees, under an Investment Advisory Agreement which states the
Manager's responsibilities. The Agreement sets forth the fees paid by the
Fund to the Manager and describes the expenses that the Fund pays to
conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $35 billion as
of June 30, 1995, and with more than 2.6 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company.
- Portfolio Manager. The Portfolio Manager of the Fund (who is also
a Vice President of the Fund), is Robert E. Patterson, a Senior Vice
President of the Manager. He has been the person principally responsible
for the day-to-day management of the Fund's portfolio since November,
1985, and is an officer and portfolio manager for other OppenheimerFunds.
- Fees and Expenses. Under the Investment Advisory Agreement, the
Fund pays the Manager the following annual fees, which decline on
additional assets as the Fund grows: 0.60% of the first $200 million of
the Fund's average annual 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 in excess of $1 billion.
The Fund's management fee for its last fiscal year ended December 31, 1994
was 0.53% of average annual net assets for Class A shares and 0.53% for
Class B shares.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustee's fees, transfer agency fees, and legal and
auditing costs. Those expenses are paid out of the Fund's assets and are
not paid directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the investment advisory
agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. Because the Fund purchases most of its portfolio
securities directly from the sellers and not through brokers, it incurs
relatively little expense for brokerage. From time to time, however, it
may use brokers when buying portfolio securities. When deciding which
brokers to use, the Manager is permitted by the Investment Advisory
Agreement to consider whether brokers have sold shares of the Fund or any
other funds for which the Manager serves as investment adviser.
- The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Distributor for the
Fund. The Distributor also distributes the shares of other mutual funds
managed by the Manager (the "OppenheimerFunds") and is sub-distributor for
funds managed by a subsidiary of the Manager.
- The Transfer Agent. The Fund's Transfer Agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
accounts to the Transfer Agent at the address and toll-free number shown
elsewhere in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total
return," "average annual total return," and "yield" to illustrate its
performance. The performance of each class of shares is shown separately,
because the performance of each class of shares will usually be different
as a result of the different kinds of expenses each class bears. This
performance information may be useful to help you see how your investment
has done and to compare it to other funds or to a market index, as we have
done below.
It is important to understand that the Fund's yields and total
returns represent past performance and should not be considered to be
predictions of future returns or performance. This performance data is
described below, but more detailed information about how total returns and
yields are calculated is contained in the Statement of Additional
Information, which also contains information about other ways to measure
and compare the Fund's performance. The Fund's investment performance will
vary over time, depending on market conditions, the composition of the
portfolio, expenses and the class of shares you purchase.
- Total Returns. There are different types of "total returns" used
to measure the Fund's performance. "Total return" is the change in value
of a hypothetical investment in the Fund over a given period, assuming
that all dividends and capital gains distributions are reinvested in
additional shares. The "cumulative total return" measures the change in
value over the entire period (for example, ten years). An average annual
total return shows the average rate of return for each year in a period
that would produce the cumulative total return over the entire period.
However, average annual total returns do not show the Fund's actual year-
by-year performance.
When total returns are quoted for Class A shares, normally they
include the payment of the current maximum initial sales charge. When
total returns are shown for Class B shares, they include the effect of the
contingent deferred sales charge that applies to the period for which
total return is shown. When total returns are shown for Class C shares,
they also include the effect of the contingent deferred sales charge.
Total returns may also be quoted "at net asset value," without considering
the effect of the sales charge, and those returns would be reduced if
sales charges were deducted. They may also be shown based on the change
in net asset value, without considering the effect of the contingent
deferred sales charge. They may also be shown based on the change in net
asset value, without considering the effect of the contingent deferred
sales charge; those returns would be reduced if sales charges were
deducted.
- Yield. Each Class of shares calculates its yield by dividing the
annualized net investment income per share from the portfolio during a
30-day period by the maximum offering price on the last day of the period.
Tax-equivalent yield is the equivalent yield that would be earned in the
absence of taxes. It is calculated by dividing that portion of the yield
that is tax-exempt by a factor equal to one minus the applicable tax rate.
The yield of each Class will differ because of the different expenses
borne by each Class of shares. The yield data represents a hypothetical
investment return on the portfolio, and does not measure an investment
return based on dividends actually paid to shareholders. To show that
return, a dividend yield may be calculated. Dividend yield is calculated
by dividing the dividends of a Class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class B and Class C
shares do not reflect the deduction of the contingent deferred sales
charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended December 31, 1994,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
- Management's Discussion of Performance. During the Fund's fiscal
year ended December 31, 1994, the Fund's performance was affected by
aggressive increases in short-term interest rates by the Federal Reserve
Board. Because the Manager kept the Fund's duration, a technical measure
of a bond portfolio's sensitivity to interest rate changes, slightly
longer than those of many other funds, the Fund's net asset value declined
more than some other funds. To position the Fund's portfolio more
defensively, the Manager reduced the Fund's average maturity which made
the Fund's portfolio less sensitive to changing interest rates than
longer-maturity bonds. The Manager reduced the Fund's exposure to issues
supported by investor-owned utilities which are sensitive to an
increasingly competitive operating environment and increased the Fund's
holdings of insured and prerefunded issues which provide high credit
quality and above-market yields.
- Comparing the Fund's Performance to the Market. The graphs below
show the performance of a hypothetical $10,000 investment in each Class
of shares of the Fund held until December 31, 1994. In the case of Class
A shares, performance is measured over a ten-year period, and in the case
of Class B shares, from the inception of the Class on March 16, 1993, with
all dividends and capital gains distributions reinvested in additional
shares. The graphs reflect the deduction of the 4.75% maximum initial
sales charge on Class A shares and the 4% contingent deferred sales charge
for Class B shares. Class C shares were not publicly offered during the
fiscal year ended December 31, 1994; accordingly, no information on Class
C shares is presented in the graphs below.
Because the Fund invests in a variety of Municipal Securities, the
Fund's performance is compared to 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.
Index performance reflects the reinvestment of income but does not
consider the effect of capital gains or transaction costs, and none of the
data below shows the effect of taxes. Also, the Fund's performance data
reflects the effect of Fund business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited
to the securities in the Lehman Brothers Municipal Bond Index. Moreover,
the index performance data does not reflect any assessment of the risk of
the investments included in the index.
Comparison of Change
In Value of $10,000
Hypothetical Investments in
Class A and Class B Shares of Oppenheimer Tax-Free Bond
Fund and Lehman Brothers Municipal Bond Index
Avg. Annual Total Return of Class A and Class B Shares of the Fund at
12/31/94(1)
A Shares 1-Year 5-Year 10-Year
--------------------------------------------------------
-13.50% 4.84% 8.28%
--------------------------------------------------------
B Shares 1-Year Life(2)
--------------------------------------------------------
-14.18% -3.25%
[FN]
(1) The inception date of the Fund (Class A shares) was 10/27/76. The
average annual total returns and the ending account value in the graph
reflect reinvestment of all dividends and capital gains distributions and
are shown net of the applicable 4.75% maximum initial sales charge.
(2) Class B shares of the Fund were first publicly offered on 3/16/93.
The average annual total returns reflect reinvestment of all dividends and
capital gains distributions and are shown net of the applicable 5%
contingent deferred sales charges, respectively, for the 1-year period and
the life of the class. The ending account value in the graph is net of
the applicable 5% contingent deferred sales charge.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
- Class A Shares. If you buy Class A shares, you pay an initial sales
charge (on investments up to $1 million). If you purchase Class A shares
as part of an investment of at least $1 million in shares of one or more
OppenheimerFunds, you will not pay an initial sales charge, but if you
sell any of those shares within 18 months after your purchase, you may pay
a contingent deferred sales charge, which will vary depending on the
amount you invested. Sales charges are described below in "Class A
Shares."
- Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but if you sell your shares within six years, you
will normally pay a contingent deferred sales charge that varies depending
on how long you own your shares, as described below.
- Class C Shares. When you buy Class C shares, you pay no sales
charges at the time of purchase, but if you sell your shares within 12
months of buying them, you will normally pay a contingent deferred sales
charge of 1%. Please refer to "Class C Shares," below.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which
you should discuss with your financial adviser. The Fund's operating
costs that apply to a class of shares and the effect of the different
types of sales charges on your investment will vary your investment
results over time. The most important factors are how much you plan to
invest, how long you plan to hold your investment, and whether you
anticipate exchanging your shares for shares of other OppenheimerFunds
(not all of which currently offer Class B shares). If your goals and
objectives change over time and you plan to purchase additional shares,
you should re-evaluate those factors to see if you should consider another
class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the
sales charge rates that apply to each class, and considered the effect of
the annual asset-based sales charge on Class B and Class C expenses
(which, like all expenses, will affect your investment return). For the
sake of comparison, we have assumed that there is a 10% rate of
appreciation in the investment each year. Of course, the actual
performance of your investment cannot be predicted and will vary, based
on the Fund's actual investment returns and the operating expenses borne
by each class of shares, and which class you invest in.
The factors discussed below are not intended to be investment advice
or recommendations, because each investor's financial considerations are
different. The assumptions we have made in assessing the factors to
consider in purchasing a particular class of shares assume that you will
purchase only one class of shares, and not a combination of shares of
different classes.
- How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you
expect to hold your investment will assist you in selecting the
appropriate class of shares. For example, the reduced sales charge
available for larger purchases of Class A shares, may, over time, offset
the effect of paying an initial sales charge on your investment (which
reduces the amount of your investment dollars used to buy shares for your
account), compared to the effect, over time of higher class-based expenses
on shares of Class B or Class C for which no initial sales charge is paid.
The effect of class-based expenses will also depend on how much you
invest.
- Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares less than six years), you
should probably consider purchasing Class C shares rather than Class A or
Class B shares. This is because there is no initial sales charge on Class
C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $250,000 for a period of
less than six years, Class C shares might not be as advantageous as Class
A shares. This is because the annual asset-based sales charge on Class
C shares (and the contingent deferred sales charge that applies if you
redeem Class C shares within a year of purchase) might have a greater
economic impact on your account during that period than the initial sales
charge that would apply if Class A shares were purchased instead at the
applicable reduced Class A sales charge rate.
And for most investors who invest $500,000 or more, in most cases
Class A shares will be the more advantageous choice than Class B shares,
no matter how long you intend to hold your shares. For that reason, the
Distributor normally will not accept purchase orders of $500,000 or more
of Class B shares or orders of $1 million or more of Class C shares from
a single investor.
- Investing for the Longer Term. If you are investing for the longer
term, for example, for retirement, and do not expect to need access to
your money for six years or more, Class A shares will likely be more
advantageous than Class B or Class C shares. This is because of the
effect of expected lower expenses for Class A shares and the reduced
initial sales charges available for larger investments in Class A shares
under the Fund's Right of Accumulation. Class B shares may be appropriate
for smaller investments held for the longer term because there is no
initial sales charge on Class B shares, and Class B shares held six years
following their purchase convert into Class A shares.
Of course all of these examples are based on approximations of the
effect of current sales charges and expenses on a hypothetical investment
over time, using the assumed annual performance return stated above, and
you should analyze your options carefully.
- Are There Differences in Account Features That Matter to You?
Because some account features such as Checkwriting may not be available
to Class B or Class C shareholders, or other features (such as Automatic
Withdrawal Plans) might not be advisable (because of the effect of the
contingent deferred sales charge for Class B and Class C shareholders),
you should carefully review how you plan to use your investment account
before deciding which class of shares is better for you. Also, because
not all OppenheimerFunds currently offer Class B and/or Class C shares,
and because exchanges are permitted only to the same class of shares in
other OppenheimerFunds, you should consider how important the exchange
privilege is likely to be for you. Share certificates are not available
for Class B and Class C shares and if you are considering using your
shares as collateral for a loan, that may be a factor to consider.
- How Does It Affect Payments to My Broker? A salesperson, such as
a broker, or any other person who is entitled to receive compensation for
selling Fund shares may receive different compensation for selling one
class rather than another class. It is important that investors
understand that the purpose of the contingent deferred sales charge and
asset-based sales charge for Class B shares and for Class C shares is the
same as the purpose of the front-end sales charge on sales of Class A
shares: to compensate the Distributor for commissions it pays to dealers
and financial institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans.
- With Asset Builder Plans, Automatic Exchange Plans and military
allotment plans, you can make initial and subsequent investments of as
little as $25; and subsequent purchases of at least $25 can be made by
telephone through AccountLink.
- There is no minimum investment requirement if you are buying shares
by reinvesting dividends from the Fund or other OppenheimerFunds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
- How Are Shares Purchased? You can buy shares several ways: through
any dealer, broker or financial institution that has a sales agreement
with the Distributor, or directly through the Distributor, or
automatically through an Asset Builder Plan under the OppenheimerFunds
AccountLink service. When you buy shares, be sure to specify Class A,
Class B or Class C shares. If you do not choose, your investment will be
made in Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "Oppenheimer Funds Distributor, Inc." Mail it to P.O. Box 5270,
Denver, Colorado 80217. If you don't list a dealer on the application,
the Distributor will act as your agent in buying the shares. However, we
recommend that you discuss your investment first with a financial advisor,
to be sure it is appropriate for you.
- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member. You can then transmit funds electronically to purchase shares,
to send redemption proceeds, and to transmit dividends and distributions.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH
transfer to buy shares. You can provide those instructions automatically,
under an Asset Builder Plan, described below, or by telephone instructions
using OppenheimerFunds PhoneLink, also described below. You should
request AccountLink privileges on the application or dealer settlement
instructions used to establish your account. Please refer to
"AccountLink," below for more details.
- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales charge
that applies) that is next determined after the Distributor receives the
purchase order in Denver. In most cases, to enable you to receive that
day's offering price, the Distributor must receive your order by the time
of day The New York Stock Exchange closes, which is normally 4:00 P.M.,
New York time, but may be earlier on some days (all references to time in
this Prospectus mean "New York time"). The net asset value of each class
of shares is determined as of that time on each day The New York Stock
Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your
order by the close of the New York Stock Exchange on a regular business
day and transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its
sole discretion.
Buying Class A Shares. Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However,
in some cases, described below, purchases are not subject to an initial
sales charge, and the offering price will be the net asset value. In some
cases, reduced sales charges may be available, as described below. Out
of the amount you invest, the Fund receives the net asset value to invest
for your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer as commission. The current sales
charge rates and commissions paid to dealers and brokers are as follows:
Front-End Front-End
Sales Charge Sales Charge Commission
as a as a as
Percentage Percentage Percentage
of Offering of Amount of Offering
Amount of Purchase Price Invested Price
-----------------------------------------------------------------------
Less than $50,000 4.75% 4.98% 4.00%
-----------------------------------------------------------------------
$50,000 or more but 4.50% 4.71% 4.00%
less than $100,000
-----------------------------------------------------------------------
$100,000 or more but 3.50% 3.63% 3.00%
less than $250,000
-----------------------------------------------------------------------
$250,000 or more but 2.50% 2.56% 2.25%
less than $500,000
-----------------------------------------------------------------------
$500,000 or more but 2.00% 2.04% 1.80%
less than $1 million
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
- Class A Contingent Deferred Sales Charge. Shares of any
OppenheimerFunds that offer only one class of shares that has no
designation are considered "Class A Shares" for this purpose. There is
no initial sales charge on purchases of Class A shares of any one or more
OppenheimerFunds aggregating $1 million or more. However, the Distributor
pays dealers of record commissions on such purchases in an amount equal
to the sum of 1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of share purchases over $5 million. That commission
will be paid only on the amount of those purchases in excess of $1 million
that were not previously subject to a front-end sales charge and dealer
commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer
on all Class A shares of all OppenheimerFunds you purchased subject to the
Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales
charge, including shares purchased by reinvestment of dividends and
capital gains, and then will redeem other shares in the order that you
purchased them. The Class A contingent deferred sales charge is waived
in certain cases described in "Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's Exchange Privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance
up to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
- Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can
add together Class A and Class B shares you purchase for your individual
accounts, or jointly, or on behalf of your children who are minors, under
trust or custodial accounts. A fiduciary can count all shares purchased
for a trust, estate or other fiduciary account (including one or more
employee benefit plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and
Class B shares of the Fund and other OppenheimerFunds to reduce the sales
charge rate that applies to current purchases of Class A shares. You can
also count Class A and Class B shares of OppenheimerFunds you previously
purchased subject to an initial or contingent deferred sales charge to
reduce the sales charge rate for current purchases of Class A shares,
provided that you still hold your investment in one of the
OppenheimerFunds. The value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Distributor. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, if you purchase Class
A or Class A and Class B shares of the Fund and other OppenheimerFunds
during a 13-month period you can reduce the Class A sales charge rate that
applies to your purchases of Class A shares. The total amount of your
intended purchases of both Class A and Class B shares will determine the
reduced sales charge for the Class A shares purchased during that period.
This can include purchases made up to 90 days before the date of the
Letter. More information is contained in the Application and in "Reduced
Sales Charges" in the Statement of Additional Information.
- Waivers of Class A Sales Charges. The Class A sales charges are
not imposed in the circumstances described below. There is an explanation
of this policy in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not
subject to any Class A sales charges:
- the Manager or its affiliates;
- present or former officers, directors, trustees and employees (and their
"immediate families" as defined in "Reduced Sales Charges" in the
Statement of Additional Information) of the Fund, the Manager and its
affiliates, and retirement plans established by them for their employees;
- registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose;
- dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for
their employees;
- employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified
to the Distributor) or with the Distributor; the purchaser must certify
to the Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or
minor children);
- dealers, brokers or registered investment advisers that have entered
into an agreement with the Distributor providing specifically for the use
of shares of the Fund in particular investment products made available to
their clients; or
- dealers, brokers or registered investment advisers that have entered
into an agreement with the Distributor to sell shares of defined
contribution employee retirement plans for which the dealer, broker, or
investment adviser provides administration services.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following
transactions are not subject to Class A sales charges:
- shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party,
- shares purchased by the reinvestment of dividends or other distributions
reinvested from the Fund or other OppenheimerFunds (other than Oppenheimer
Cash Reserves) or unit investment trusts for which reinvestment
arrangements have been made with the Distributor, or
- shares purchased and paid for with the proceeds of shares redeemed in
the prior 12 months from a mutual fund (other than a fund managed by the
Manager of any of its affiliates) on which an initial sales charge or
contingent deferred sales charge was paid; this waiver must be requested
when the purchase order is placed for your shares of the Fund, and the
Distributor may require evidence of your qualification for this waiver.
There is a further discussion of this policy in "Reduced Sales Charges"
in the Statement of Additional Information.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge does not apply
to purchases of Class A shares at net asset value without sales charge as
described in the two sections above. It is also waived if shares that
would otherwise be subject to the contingent deferred sales charge are
redeemed in the following cases:
- to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value; or
- involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account Rules
and Policies," below); or
- if, at the time a purchase order is placed for Class A shares that
would otherwise be subject to the Class A contingent deferred sales
charge, the dealer agrees to accept the dealer's portion of the commission
payable on the sale in installments of 1/18th of the commission per month
(and no further commission will be payable if the shares are redeemed
within 18 months of purchase).
- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Buying Class B Shares. Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are
redeemed within 6 years of their purchase, a contingent deferred sales
charge will be deducted from the redemption proceeds. That sales charge
will not apply to shares purchased by the reinvestment of dividends or
capital gains distributions. The charge will be assessed on the lesser of
the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price (including increases
due to the reinvestment of dividends and capital gains distributions). The
Class B contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the
Fund in connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Contingent Deferred
Sales Charge
Years Since Beginning of Month in On Redemptions in That Year
which Purchase Order Was Accepted (As % of Amount Subject to Charge)
-----------------------------------------------------------------------
0-1 5.0%
------------------------------------------------------------
1-2 4.0%
------------------------------------------------------------
2-3 3.0%
------------------------------------------------------------
3-4 3.0%
------------------------------------------------------------
4-5 2.0%
------------------------------------------------------------
5-6 1.0%
------------------------------------------------------------
6 and following None
------------------------------------------------------------
In the table, a "year" is a 12-month period. All purchases are considered
to have been made on the first regular business day of the month in which
the purchase was made.
- Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will not be applied to shares purchased in certain types of
transactions nor will it apply to Class B shares redeemed in certain
circumstances as described below. The reasons for this policy are in
"Reduced Sales Charges" in the Statement of Additional Information.
Waivers for Redemptions in Certain Cases. The Class B contingent
deferred sales charge will be waived for redemptions of shares in the
following cases:
- Following the death or disability of the last surviving shareholder
(the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a
determination of disability by the Social Security Administration);
- shares sold to the Manager or its affiliates;
- shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
- shares issued in plans of reorganization to which the Fund is a
party; and
- shares redeemed in involuntary redemptions as described below.
Further details about this policy are contained in "Reduced Sales Charges"
in the Statement of Additional Information.
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution and Service Plan, described below. The conversion is based
on the relative net asset value of the two classes, and no sales load or
other charge is imposed. When Class B shares convert, any other Class B
shares that were acquired by the reinvestment of dividends and
distributions on the converted shares will also convert to Class A shares.
The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and
Class C Shares" in the Statement of Additional Information.
- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for distributing Class B shares and servicing accounts.
Under the Plan, the Fund pays the Distributor an annual "asset-based sales
charge" of 0.75% per year on Class B shares that are outstanding for 6
years or less. The Distributor also receives a service fee of up to 0.25%
per year. Both fees are computed on the average annual net assets of
Class B shares, determined as of the close of each regular business day.
The asset-based sales charge allows investors to buy Class B shares
without a front-end sales charge while allowing the Distributor to
compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal service for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class B expenses by up to 1.00% of average net assets per year.
The Distributor pays the service fee to dealers in advance for the
first year after Class B shares have been sold by the dealer. After the
shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge to recoup the sales
commissions it pays, the advances of service fee payments it makes, and
the financing costs.
The Distributor's actual expenses in selling Class B shares may be
more than the payments it receives from contingent deferred sales charges
collected on redeemed shares and from the Fund under the Distribution and
Service Plan for Class B shares. Therefore, those expenses may be carried
over and paid in future years. At December 31, 1994, the Distributor had
incurred unreimbursed expenses under the Plan of $2,313,528 (equal to 4.9%
of the Fund's net assets represented by Class B shares on that date),
which have been carried over into the present Plan year. If the Plan is
terminated by the Fund, the Board of Trustees may allow the Fund to
continue payments of the asset-based sales charge to the Distributor for
certain expenses it incurred before the Plan was terminated.
Buying Class C Shares. Class C shares are sold at net asset value per
share without an initial sales charge. However, if Class C shares are
redeemed within 12 months of their purchase, a contingent deferred sales
charge of 1.0% will be deducted from the redemption proceeds. That sales
charge will not apply to shares purchased by the reinvestment of dividends
or capital gains distributions. The charge will be assessed on the lesser
of the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price (including increases
due to the reinvestment of dividends and capital gains distributions). The
Class C contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 12 months, and (3) shares held the longest during the
12-month period.
- Waivers of Class C Sales Charge. The Class C contingent deferred
sales charge will be waived if the shareholder requests it for any of the
redemptions or circumstances described above under "Waivers of Class B
Sales Charge."
- Distribution and Service Plan for Class C Shares. The Fund has
adopted a Distribution and Service Plan for Class C shares to compensate
the Distributor for its services and costs in distributing Class C shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class C shares.
The Distributor also receives a service fee of 0.25% per year. Both fees
are computed on the average annual net assets of Class C shares,
determined as of the close of each regular business day. The asset-based
sales charge allows investors to buy Class C shares without a front-end
sales charge while allowing the Distributor to compensate dealers that
sell Class C shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class C shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class C expenses by up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class C shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 0.75% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge during the first year
shares are outstanding to recoup the sales commissions it pays, the
advances of service fee payments it makes, and its financing costs. The
Distributor plans to pay the asset-based sales charge as an ongoing
commission to the dealer on Class C shares that have been outstanding for
a year or more.
Because the Distributor's actual expenses in selling Class C shares
may be more than the payments it receives from contingent deferred sales
charges collected on redeemed shares and from the Fund under the
Distribution and Service Plan for Class C shares, those expenses may be
carried over and paid in future years. If the Plan is terminated by the
Fund, the Board of Trustees may allow the Fund to continue payments of the
asset-based sales charge to the Distributor for certain expenses it
incurred before the plan was terminated.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions. These include purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges may be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be
used on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number,
1-800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds exchange privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
- Selling Shares. You can redeem shares by telephone automatically
by calling the PhoneLink number and the Fund will send the proceeds
directly to your AccountLink bank account. Please refer to "How to Sell
Shares," below for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is worth $5,000
or more, you can establish an Automatic Withdrawal Plan to receive
payments of at least $50 on a monthly, quarterly, semi-annual or annual
basis. The checks may be sent to you or sent automatically to your bank
account on AccountLink. You may even set up certain types of withdrawals
of up to $1,500 per month by telephone. You should consult the
Application and Statement of Additional Information for more details.
- Automatic Exchange Plans. You can authorize the Transfer Agent to
automatically exchange an amount you establish in advance for shares of
up to five other OppenheimerFunds on a monthly, quarterly, semi-annual or
annual basis under an Automatic Exchange Plan. The minimum purchase for
each other OppenheimerFunds account is $25. These exchanges are subject
to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or
Class B Fund shares, you have up to 6 months to reinvest all or part of
the redemption proceeds in Class A shares of the Fund or other
OppenheimerFunds without paying sales charge. This privilege applies only
to Class A shares that you purchased subject to an initial sales charge
and to Class B shares on which you paid a contingent deferred sales charge
when you redeemed them. It does not apply to Class C shares. You must
be sure to ask the Distributor for this privilege when you send your
payment. Please consult the Statement of Additional Information for more
details.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the net asset value next calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing, by using Checkwriting
or by telephone. You can also set up an Automatic Withdrawal Plan to
redeem shares on a regular basis, as described above. If you have
questions about any of these procedures, and especially if you are
redeeming shares in a special situation, such as due to the death of the
owner, please call the Transfer Agent first, at 1-800-525-7048, for
assistance.
- Certain Requests Require a Signature Guarantee. To protect you and
the Fund from fraud, certain redemption requests must be in writing and
must include a signature guarantee in the following situations (there may
be other situations also requiring a signature guarantee):
- you wish to redeem more than $50,000 worth of shares and receive a
check
- the redemption check is not payable to all shareholders listed on the
account statement
- the redemption check is not sent to the address of record on your
statement
- shares are being transferred to a Fund account with a different owner
or name
- shares are redeemed by someone other than the owners (such as an
Executor)
- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If
you are signing as a fiduciary or on behalf of a corporation, partnership
or other business, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- your name
- the Fund's name
- your Fund account number (from your account statement)
- the dollar amount or number of shares to be redeemed
- any special payment instructions
- any share certificates for the shares you are selling, and
- any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
Oppenheimer Shareholder Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. You may not redeem
shares held under a share certificate by telephone.
- To redeem shares through a service representative, call
1-800-852-8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds wired to that bank
account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone in any 7-day period. The check must be payable to all owners
of record of the shares and must be sent to the address on the account
statement. This service is not available within 30 days of changing the
address on an account.
- Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
Checkwriting. To be able to write checks against your Fund account, you
may request that privilege on your account Application or you can contact
the Transfer Agent for signature cards, which must be signed (with a
signature guarantee) by all owners of the account and returned to the
Transfer Agent so that checks can be sent to you to use. Shareholders with
joint accounts can elect in writing to have checks paid over the signature
of one owner. If you previously signed a signature cared to establish
Checkwriting in another OppenheimerFund, simply call 1-800-525-7048 to
request Checkwriting for an account in this Fund with the same
registration as the previous Checkwriting account.
- Checks can be written to the order of whomever you wish, but may not
be cashed at the Fund's bank or custodian.
- Checkwriting privileges are not available for accounts holding Class
B or Class C shares or Class A shares that are subject to a
contingent deferred sales charge.
- Checks must be written for at least $100.
- Checks cannot be paid if they are written for more than your account
value. Remember: your shares fluctuate in value and you should not
write a check close to the total account value.
- You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments
within the prior 10 days.
- Don't use your checks if you changed your Fund account number.
Selling Shares Through Your Dealer. The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their
customers. Brokers or dealers may charge for that service. Please refer
to "Special Arrangements for Repurchase of Shares from Dealers and
Brokers" in the Statement of Additional Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain OppenheimerFunds
at net asset value per share at the time of exchange, without sales
charge. To exchange shares, you must meet several conditions:
- Shares of the fund selected for exchange must be available for sale
in your state of residence
- The prospectuses of this Fund and the fund whose shares you want to
buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account for
at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. In some
cases, sales charges may be imposed on exchange transactions. Certain
OppenheimerFunds offer Class A, Class B and/or Class C shares, and a list
can be obtained by calling the Distributor at 1-800-525-7048. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details about this policy.
Exchanges may be requested in writing or by telephone:
- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
- Telephone Exchange Requests. Telephone exchange requests may be
made either by calling a service representative at 1-800-852-8457 or by
using PhoneLink for automated exchanges, by calling 1-800-533-3310.
Telephone exchanges may be made only between accounts that are registered
with the same name(s) and address. Shares held under certificates may not
be exchanged by telephone.
You can find a list of OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or obtain one by
calling a service representative at 1-800-525-7048. Exchanges of shares
involve a redemption of the shares of the fund you own and a purchase of
shares of the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request that is in proper
form by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. However, either fund
may delay the purchase of shares of the fund you are exchanging into up
to 7 days if it determines it would be disadvantaged by a same-day
transfer of the proceeds to buy shares. For example, the receipt of
multiple exchange requests from a dealer in a "market-timing" strategy
might require the disposition of portfolio securities at a time or price
disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege at
any time. Although the Fund will attempt to provide you notice whenever
it is reasonably able to do so, it may impose these changes at any time.
- For tax purposes, exchanges of shares involve a redemption of the
shares of the Fund you own and a purchase of shares of the other Fund,
which may result in a capital gain or loss. For more information about
taxes affecting exchanges, please refer to "How to Exchange Shares" in the
Statement of Additional Information.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
The Distributor has entered into agreements with certain dealers and
investment advisers permitting them to exchange their clients' shares by
telephone. These privileges are limited under those agreements and the
Distributor has the right to reject or suspend those privileges. As a
result, those exchanges may be subject to notice requirements, delays and
other limitations that do not apply to shareholders who exchange their
shares directly by calling or writing to the Transfer Agent.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of shares
as of the close of The New York Stock Exchange on each regular business
day by dividing the value of the Fund's net assets attributable to a class
by the number of shares of that class that are outstanding. The Fund's
Board of Trustees has established procedures to value the Fund's
securities to determine net asset value. In general, securities values
are based on market value. There are special procedures for valuing
illiquid and restricted securities and obligations for which market values
cannot be readily obtained. These procedures are described more
completely in the Statement of Additional Information.
- The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Trustees at any time the Board believes it
is in the Fund's best interest to do so.
- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither it nor the Fund will be liable for
losses or expenses arising out of telephone instructions reasonably
believed to be genuine. If you are unable to reach the Transfer Agent
during periods of unusual market activity, you may not be able to complete
a telephone transaction and should consider placing your order by mail.
- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
- Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions, and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously or improperly.
- The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A, Class B and Class C shares. Therefore, the
redemption value of your shares may be more or less than their original
cost.
- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. For accounts registered
in the name of a broker-dealer, payment will be forwarded within 3
business days. The Transfer Agent may delay forwarding a check or
processing a payment via AccountLink for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much
as 10 days from the date the shares were purchased. That delay may be
avoided if you purchase shares by certified check or arrange with your
bank provide telephone or written assurance to the Transfer Agent that
your purchase payment has cleared.
- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $200 for reasons other than the fact
that the market value of shares has dropped, and in some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
- Under unusual circumstances, shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to "How to Sell Shares"
in the Statement of Additional Information for more details.
- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from taxable dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or Employer Identification Number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of dividends.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charges when redeeming certain
Class A, Class B and Class C shares.
- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048
to ask that copies of those materials be sent personally to that
shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and
Class C shares from net tax-exempt income and/or net investment income
each regular business day and pays those dividends to shareholders
monthly. Normally, dividends are paid on the tenth business day of each
month, but the Board of Trustees can change that date. However, the
amount of dividends and distributions may vary from time to time,
depending upon market conditions, the composition of the Fund's portfolio,
and expenses borne by that Class. It is expected that distributions paid
with respect to Class A shares will generally be higher than for Class B
and Class C shares because expenses allocable to Class B and Class C
shares will generally be higher.
Capital Gains. Although the Fund does not seek capital gains, it may
realize capital gains on the sale of portfolio securities. If it does,
it may make distributions out of any net short-term or long-term capital
gains in December. The Fund may make supplemental distributions of
dividends and capital gains following the end of its fiscal year (which
ends December 31st). Long-term capital gains will be separately
identified in the tax information the Fund sends you after the end of the
year. Short-term capital gains are treated as dividends for tax purposes.
There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. You have four
options:
- Reinvest All Distributions in the Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in additional
shares of the Fund.
- Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or
sent to your bank account on AccountLink.
- Receive All Distributions in Cash. You can elect to receive a
check for all dividends and long-term capital gains distributions or have
them sent to your bank on AccountLink.
- Reinvest Your Distributions in Another OppenheimerFunds Account.
You can reinvest all distributions in another OppenheimerFunds account you
have established.
Taxes. Long-term capital gains are taxable as long-term capital gains
when distributed to shareholders for Federal income tax purposes. It does
not matter how long you hold your shares. Dividends paid from short-term
capital gains are taxable as ordinary income. Dividends paid from net
investment income earned by the Fund on Municipal Securities will be
excludable from your gross income for Federal income tax purposes. A
portion of the dividends paid by the Fund may be an item of tax preference
if you are subject to the alternative minimum tax. Certain distributions
are subject to federal income tax and may be subject to state or local
taxes. Such distributions are taxable when paid, whether you reinvest
them in additional shares or take them in cash. Every year the Fund will
send you and the IRS a statement showing the amount of any taxable
distribution you received in the previous year as well as the amount of
your tax-exempt income.
- "Buying a Dividend". When a fund goes ex-dividend, its share price
is reduced by the amount of the distribution. If you buy shares on or
just before the ex-dividend date, or just before the Fund declares a
capital gain distribution, you will pay the full price for the shares and
then receive a portion of the price back as a taxable dividend or a
taxable capital gain.
- Taxes on transactions. Even though the Fund seeks tax-exempt
income for distribution to shareholders, you may have a capital gain or
loss when you sell or exchange your shares. A capital gain or loss is the
difference between the price you paid for the shares and the price you
receive when you sell them. Any capital gain is subject to capital gains
tax.
- Returns of Capital. In certain instances, distributions made by
the Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders. A non-taxable return of capital may reduce your tax basis
in your Fund shares.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER TAX-FREE BOND FUND
Graphic material included in Prospectus of Oppenheimer Tax-Free Bond
Fund: "Comparison of Change in Value of $10,000 Hypothetical Investments
in Oppenheimer Tax-Free Bond Fund and the Lehman Bros. Municipal Bond
Index.
Linear graphs will be included in the Prospectus of Oppenheimer Tax-
Free Bond Fund (the "Fund") depicting the initial account value and
subsequent account value of a hypothetical $10,000 investment in (i) Class
A shares of the Fund for each of the Fund's ten most recently completed
fiscal years, and (ii) Class B shares of the Fund for the period March 16,
1993 (commencement of class) to December 31, 1994, and comparing such
values with the same investments over the same time periods in the Lehman
Brothers Municipal Bond Index. Since no Class C shares were outstanding
until after December 31, 1994, no figures are included for this class.
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 Prospectus under "Fund Information - Management's
Discussion of Performance."
Oppenheimer
Tax-Free Lehman
Bond Fund Brothers
Fiscal Year Class A Municipal
(Period) Ended Shares Bond Index
12/31/84 $ 9,525 $11,055
12/31/85 $11,561 $13,269
12/31/86 $13,844 $15,832
12/31/87 $13,844 $16,071
12/31/88 $15,161 $17,703
12/31/89 $16,596 $19,614
12/31/90 $17,569 $21,043
12/31/91 $19,702 $23,598
12/31/92 $21,443 $25,680
12/31/93 $24,334 $28,833
12/31/94 $22,162 $27,342
Oppenheimer
Tax-Free Lehman
Bond Fund Brothers
Fiscal Year Class B Municipal
(Period) Ended Shares Bond Index
03/16/93 $10,000 $10,000
12/31/93 $10,821 $10,826
12/31/94 $ 9,424 $10,266
<PAGE>
Oppenheimer Tax-Free Bond Fund
Two World Trade Center
New York, New York 10048-0203
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Counsel
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Statement of
Additional Information, and if given or made, such information and
representations must not be relied upon as having been authorized by the
Fund, Oppenheimer Management Corporation, Oppenheimer Funds Distributor,
Inc., or any affiliate thereof. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any of the securities
offered hereby in any state to any person to whom it is unlawful to make
such an offer in such state.
(OppenheimerFunds Logo)
PR0310.001.0595* Printed on recycled paper
<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
September 29, 1995
___________________________________
This Statement of Additional Information of Oppenheimer Tax-Free Bond
Fund consists of this cover page and the following documents:
1. Statement of Additional Information of Oppenheimer Tax-Free Bond Fund
dated August 29, 1995, previously filed with Registrant's Registration
Statement on Form N-14, August 30, 1995, and incorporated herein by
reference.
2. Oppenheimer Tax-Free Bond Fund's Annual Report as of December 31, 1994
and its Semi-Annual Report as of June 30, 1995, previously filed with
Registrant's Registration Statement on Form N-14, August 30, 1995, and
incorporated herein by reference.
3. Prospectus of National Tax-Exempt Fund dated December 1, 1994,
previously filed with Registrant's Registration Statement on Form N-14,
August 30, 1995, and incorporated herein by reference.
4. Statement of Additional Information of National Tax-Exempt Fund dated
December 1, 1994, previously filed with Registrant's Registration
Statement on Form N-14, August 30, 1995, and incorporated herein by
reference.
5. (a) National Tax-Exempt Fund's Annual Report as of July 31, 1994 and
its Semi-Annual Report as of January 1, 1995, previously filed with
Registrant's Registration Statement on Form N-14, August 30, 1995, and
incorporated herein by reference.
(b) Appendix to Annual Report as of July 31, 1994 of National Tax-
Exempt Fund containing plotting points for graphic material included
therein: Filed herewith.
6. (a) Pro Forma Combining Statement of Assets and Liabilities at June 30,
1995, Pro Forma Combining Statement of Operations for the six months ended
June 30, 1995, and Pro Forma Combining Statement of Investments at June
30, 1995, previously filed with Registrant's Registration Statement on
Form N-14, August 30, 1995, and incorporated herein by reference.
6 (b) Pro Forma Combining Statement of Operations for the year ended
December 31, 1994: Filed herewith.
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, 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.
MERGE/311PTB.#1
<PAGE>
PRO FORMA COMBINING STATEMENT OF OPERATIONS For The Year Ended December
31, 1994 (Unaudited)
Oppenheimer Tax-Free Bond Fund and Quest for Value National Tax-Exempt
Fund
<TABLE>
<CAPTION>
Quest for Value Combined
OppenheimerNational Oppenheimer
Tax-Free Tax-Exempt Pro Forma Tax-Free
Bond Fund Fund AdjustmentsBond Fund
<S> <C> <C> <C> <C>
Investment Income:
Interest $42,814,615 $5,878,409 --$48,693,024
Expenses:
Management fees 3,329,317 476,384 (48,319)(1) 3,757,382
Distribution and service plan fees:
Class A 1,185,792 29,131 209,061(2) 1,423,984
Class B 465,406 -- 465,406
Transfer agency 443,291 55,779 (28,500)(3) 470,570
Shareholder reports 187,976 18,355 (15,000)(3) 191,331
Legal and audit 54,706 21,053 (20,000)(3) 55,759
Trustees' fees 86,123 16,134 (16,134)(3) 86,123
Custodian fees 17,260 46,583 (27,650)(3) 36,193
Registration and filing fees:
Class A 6,544 31,678 38,222
Class B 9,402 -- 9,402
Other 89,927 113,036 (94,400) 108,563
Total expenses 5,875,744 808,133 (40,942) 6,642,935
Less: Investment advisory
fees waived -- (260,744) 260,744 --
Net operating expenses5,875,744 547,389 219,802 6,642,935
Net Investment Income 36,938,871 5,331,020 (219,802)42,050,089
Realized and Unrealized Gain (Loss) on
Investments:
Net realized loss on investments(507,588)(1,584,142)--(2,091,730)
Net change in unrealized appreciation
or depreciation on investments(97,929,896)(9,894,459)--(107,824,355)
Net realized and unrealized gain on
investments (98,437,484)(11,478,601) --(109,916,085)
Net Increase (Decrease) in Net Assets
Resulting from Operations$(61,498,613)$(6,147,581)$(219,802)$(67,865,996)
</TABLE>
(1) Calculated in accordance with existing investment advisory agreement
for Oppenheimer Tax-Free Bond Fund (.60% on the first $200 million of
average annual net assets, .55% on the next $100 million, .50% on the
next $200 million, .45% on the next $250 million, .40% on the next
$250 million and .35% on net assets in excess of $1 billion).
(2) Calculated in accordance with existing Distribution and Service Plan
Agreement for Oppenheimer Tax-Free Bond Fund.
(3) Estimated fee for similar size Oppenheimer Funds. Adjustments
reflect expected changes when the two Funds combine.
<PAGE>
APPENDIX TO 1994 ANNUAL REPORT OF
QUEST FOR VALUE NATIONAL TAX-EXEMPT FUND
Graphic material included in 1994 Annual Report of Quest for Value
National Tax-Exempt Fund: "Comparison of Change in Value of $10,000
Investment* in Quest for Value National Tax-Exempt Fund from August 31,
1990 through July 31, 1994 and Total Return on the Bond Buyer Muni Bond
Index."
A linear graph is included in the 1994 Annual Report of Quest for
Value National Tax-Exempt Fund (the "Fund") depicting the initial account
value and subsequent account value of a hypothetical $10,000 investment
in shares of the Fund held from 8/31/90 until 7/31/94, and comparing such
values with the same investments over the same time periods in the Bond
Buyer Muni Bond Index. Set forth below are the relevant data points that
appear on the linear graph.
National Bond Buyer
Tax-Exempt Muni Bond Index
---------- ---------------
31-Aug-90 $ 9,525 $10,000
31-Jul-91 $10,454 $11,005
31-Jul-92 $12,149 $12,676
31-Jul-93 $13,183 $13,655
31-Jul-94 $13,448 $13,342
---------------
* After taking into account maximum sales charge.
MERGE/311PLOT
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Board of Trustees of
Quest for Value Family of Funds
In our opinion, the accompanying statements of assets and
liabilities, including the schedules of investments, and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial
position of the National Tax-Exempt Fund, the California Tax-Exempt Fund,
and the New York Tax-Exempt Fund (constituting part of the Quest for Value
Family of Funds, hereafter referred to as the "Funds") at July 31, 1994,
the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for each of the three years
in the period then ended and for the period August 14, 1990 (commencement
of operations) to July 31, 1991, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility
of the Funds' management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits
of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at July 31, 1994 by correspondence with the
custodian and brokers, and the application of alternative auditing
procedures where confirmations from brokers were not received, provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
---------------------------
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
September 20, 1994
MERGE/QVREPORT
<PAGE>
Independent Auditors' Report
-----------------------------------------------------------------------
The Board of Trustees and Shareholders of Oppenheimer Tax-Free Bond Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Tax-Free Bond Fund as of December 31, 1994, and
the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in
the ten-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1994, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Oppenheimer Tax-Free Bond Fund as of December 31, 1994, the
results of its operations for the year then ended, the changes in its net
assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the ten-year period then
ended, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Denver, Colorado
January 23, 1995
<PAGE>
OPPENHEIMER TAX-FREE BOND FUND
FORM N-14
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 August 21,
1995: Filed with Registrant's Post-Effective Amendment No. 35, 8/24/95,
and incorporated herein by reference.
(2) 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,
refiled with Registrant's Post-Effective Amendment No. 33, 4/28/95,
pursuant to Item 102 of Regulation S-T, and incorporated herein by
reference.
(3) Not applicable
(4) Agreement and Plan of Reorganization: See Exhibit A to Part A
of this Registration Statement.
(5) (i) Specimen Class A Share Certificate: Filed with
Registrant's Post-Effective Amendment No. 35, 8/24/95, and incorporated
herein by reference.
(ii) Specimen Class B Share Certificate: Filed with
Registrant's Post-Effective Amendment No. 31, 3/1/94, refiled with
Registrant's Post-Effective Amendment No. 33, 4/28/95, pursuant to Item
102 of Regulation S-T, and incorporated herein by reference.
(iii) Specimen Class C Share Certificate: Filed with
Registrant's Post-Effective Amendment No. 35, 8/24/95, 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, refiled with Registrant's Post-Effective Amendment No.
33, 4/28/95, pursuant to Item 102 of Regulation S-T, 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, refiled with Registrant's Post-Effective Amendment No.
33, 4/28/95, pursuant to Item 102 of Regulation S-T, and incorporated
herein by reference.
(ii) Form of Oppenheimer Funds Distributor, Inc. Dealer
Agreement: Filed with Post-Effective Amendment No. 14 to the Registration
Statement of Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850),
9/30/94, and incorporated herein by reference.
(iii) Form of Oppenheimer Funds Distributor, Inc. Broker
Agreement: Filed with Post-Effective Amendment No. 14 to the Registration
Statement of Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850),
9/30/94, and incorporated herein by reference.
(iv) Form of Oppenheimer Funds Distributor, Inc. Agency
Agreement - Filed with Post-Effective Amendment No. 14 to the Registration
Statement of Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850),
9/30/94, and incorporated herein by reference.
(v) Broker Agreement between Oppenheimer Fund Management,
Inc. and Newbridge Securities, Inc. dated 10/1/86: Previously filed with
Post-Effective Amendment No. 25 to the Registration Statement of
Oppenheimer Special Fund (Reg. No. 2-45272), 11/1/86, refiled with Post-
Effective Amendment No. 45 of Oppenheimer Special Fund (Reg. No. 2-45272),
8/22/94, pursuant to Item 102 of Regulation S-T, 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), 8/30/90, refiled with Post-Effective
Amendment No. 45 of Oppenheimer Growth Fund (Reg. No. 2-45272), 8/22/94,
pursuant to Item 102 of Regulation S-T, 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,
5/18/77, refiled with Registrant's Post-Effective Amendment No. 33,
4/28/95, pursuant to Item 102 of Regulation S-T, 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, 5/1/87,
refiled with Registrant's Post-Effective Amendment No. 33, 4/28/95,
pursuant to Item 102 of Regulation S-T, 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, refiled
with Registrant's Post-Effective Amendment No. 33, 4/28/95, pursuant to
Item 102 of Regulation S-T, 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, refiled with Registrant's Post-Effective Amendment No. 33,
4/28/95, pursuant to Item 102 of Regulation S-T, 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, refiled
with Registrant's Post-Effective Amendment No. 33, 4/28/95, pursuant to
Item 102 of Regulation S-T, 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, refiled with
Registrant's Post-Effective Amendment No. 33, 4/28/95, pursuant to Item
102 of Regulation S-T, and incorporated herein by reference.
(10) (i) Service Plan and Agreement for Class A shares dated
6/10/93 pursuant to Rule 12b-1 under the Investment Company Act of 1940:
Filed with Post-Effective Amendment No. 31 to Registrant's Registration
Statement, 3/1/94, and incorporated herein by reference.
(ii) Distribution and Service Plan and Agreement for Class
B shares under Rule 12b-1 dated 2/10/94: Filed with Registrant's Post-
Effective Amendment No. 33, 4/28/95, and incorporated herein by reference.
(iii) Distribution and Service Plan and Agreement for Class
C shares under Rule 12b-1 dated August 29, 1995: Filed with Post-Effective
Amendment No. 34 to Registrant's Registration Statement, 6/29/95, 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, 5/1/87,
refiled with Registrant's Post-Effective Amendment No. 33, 4/28/95,
pursuant to Item 102 of Regulation S-T, and incorporated herein by
reference.
(12) Tax Opinion Relating to the Reorganization: Previously filed
with Registrant's Registration Statement on Form N-14, August 30, 1995,
and incorporated herein by reference.
(13) Not applicable.
(14) (i) Consent of KPMG Peat Marwick LLP: Filed herewith.
(ii) Consent of Price Waterhouse LLP: Filed herewith.
(15) Not applicable.
(16) Not applicable.
(17) (i) Declaration of Registrant under Rule 24f-2: Previously
filed with Registrant's Registration Statement on Form N-14, August 30,
1995, and incorporated herein by reference.
(17) (ii) Financial Data Schedules: Previously filed with
Registrant's Registration Statement on Form N-14, August 30, 1995, and
incorporated herein by reference.
ITEM 17. Undertakings
(1) Not applicable.
(2) Not applicable.
MERGE/311PTC.#1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York
on the 20th day of September, 1995.
OPPENHEIMER TAX-FREE BOND FUND
By: /s/ Donald W. Spiro
----------------------------------------
Donald W. Spiro, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities on the dates indicated:
Signatures Title Date
---------- ----- ----
/s/ Leon Levy Chairman of the
-------------- Board of Trustees September 20, 1995
Leon Levy
/s/ Donald W. Spiro Chief Executive
-------------------- Officer and
Donald W. Spiro Trustee September 20, 1995,
/s/ George Bowen Chief Financial
----------------- and Accounting
George Bowen Officer September 20, 1995
/s/ Leo Cherne Trustee September 20, 1995
---------------
Leo Cherne
/s/ Robert G. Galli Trustee September 20, 1995
-------------------
Robert G. Galli
/s/ Benjamin Lipstein Trustee September 20, 1995
----------------------
Benjamin Lipstein
/s/ Elizabeth B. Moynihan Trustee September 20, 1995
--------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall Trustee September 20, 1995
-----------------------
Kenneth A. Randall
/s/ Edward V. Regan Trustee September 20, 1995
--------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr. Trustee September 20, 1995
-----------------------------
Russell S. Reynolds, Jr.
/s/ Sidney M. Robbins Trustee September 20, 1995
----------------------
Sidney M. Robbins
/s/ Pauline Trigere Trustee September 20, 1995
--------------------
Pauline Trigere
/s/ Calyton K. Yeutter Trustee September 20, 1995
-----------------------
Clayton K. Yeutter
<PAGE>
OPPENHEIMER TAX-FREE BOND FUND
FORM N-14
EXHIBIT INDEX
Exhibit No.
Exhibit Description
------- -----------
16(14)(i) Consent of KPMG Peat Marwick
16(14)(ii) Consent of Price Waterhouse
Exhibit 16(14)(i)
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
Oppenheimer Tax-Free Bond Fund:
We consent to the incorporation by reference in the Registration Statement
on Form N-14 of Oppenheimer Tax-Free Bond Fund of our report dated January
23, 1995, appearing in the 1994 Annual Report of Oppenheimer Tax-Free Bond
Fund and to the reference to our firm under the heading "Financial
Highlights" in Part A of the Registration Statement.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG PEAT MARWICK LLP
Denver, Colorado
September 20, 1995
MERGE/311KP.CON
Exhibit 16(14)(ii)
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this registration statement on Form N-14 (the "N-14
Registration Statement") of our report dated September 20, 1994, relating
to the financial statements and financial highlights of Quest For Value
Family of Funds - National Tax-Exempt Fund (the "Fund"), which appears in
such Statement of Additional Information and to the incorporation by
reference of our report into the Proxy Statement and Prospectus which
constitutes part of this N-14 Registration Statement. We also consent to
the use of our report and to the reference to us under the heading
"Additional Information - Independent Accountants" in the Statement of
Additional Information constituting part of Post-Effective Amendment No.
33 to the registration statement on Form N-1A of the Fund (the "N-1A
Registration Statement"), which is included in the Statement of Additional
Information of such N-14 Registration Statement and incorporated by
reference in the Proxy Statement and Prospectus constituting part of such
N-14 Registration Statement. We also consent to the reference to us under
the heading "Financial Highlights" in the Prospectus of such N-1A
Registration Statement, which is incorporated by reference in the Proxy
Statement and Prospectus of the N-14 Registration Statement.
/s/ Price Waterhouse LLP
------------------------
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
September 6, 1995
MERGE/311PRICE
