<PAGE>
Per Rule 497(c)
File No. 33-62273
QUEST FOR VALUE Joseph M. LaMotta
FAMILY OF FUNDS Chairman and
Two world Financial Center President
New York, NY 10281-1698
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.
(over, please)
<PAGE>
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,
/s/ Joseph M. LaMotta
----------------------------------------
Joseph M. LaMotta
Chairman of the Board and President
Quest for Value Family of Funds
<PAGE>
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 9:00 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 September 26, 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
and the assumption by TFBF of certain liabilities of the Fund, (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
September 29, 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>
QUESTIONS AND ANSWERS ABOUT THE PROPOSED REORGANIZATION
1. What is the Reorganization?
The proposed Reorganization provides for the transfer of
substantially all the assets of the Quest for Value National Tax-Exempt
Fund (the "Fund") to the Oppenheimer Tax-Free Bond Fund ("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 liquidation of the Fund, and the cancellation
of the outstanding shares of the Fund.
The number of shares of TFBF that will be issued to shareholders of
the Fund will be determined on the basis of the relative net asset values
of TFBF and the Fund. Although the number of shares of TFBF 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 TFBF 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. OMC is discussed
in greater detail below.
Shareholders are directed to read the accompanying Proxy Statement
and Prospectus for further information about the Reorganization and
related matters. Additional information about TFBF is set forth in its
accompanying Prospectus.
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 Trustees of the Fund determined that, among other
things, the Reorganization would afford the shareholders of the Fund: 1)
the capabilities and resources of OMC and its affiliates in the area of
fixed income investment management, distribution, shareholder services and
marketing; and 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.
4. Who is paying the expenses of the Reorganization?
All expenses of the Reorganization will be paid by Quest for Value
Advisors and OMC and not the Fund or TFBF shareholders.
5. Who is Oppenheimer Management Corporation?
OMC and its subsidiaries are engaged principally in the business of
managing, distributing and servicing registered investment companies. OMC
has operated as an investment adviser since 1959. Oppenheimer Management
Corporation is indirectly controlled by Massachusetts Mutual Life
Insurance Company. As of August 31, 1995, OMC and its affiliates had
assets of more than $38 billion under management in more than 45 mutual
funds.
6. Do the Oppenheimer funds have a sales charge?
Yes, other than their money market funds. However, there will be
no commission or initial sales charge of any kind charged on TFBF shares
received in the Reorganization. The full value of your shares in the Fund
will be exchanged for shares of TFBF. However, purchases of Class A
shares of TFBF in addition to those received in the Reorganization will
be assessed any applicable sales charge. See the accompanying documents
for further details.
TFBF has undertaken that any Fund shareholders entitled to a waiver
of or exemption from sales charges pursuant to the policy stated in the
Fund's current prospectus will 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. Other
Oppenheimer funds will also provide such waivers and exemptions upon
implementation of appropriate prospectus disclosure. For example, those
shareholders who, because they were shareholders of the AMA Family of
Funds or the Unified Funds 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 such Oppenheimer funds without a sales
charge.
7. May I exchange between other Oppenheimer funds without charge?
Yes. As a shareholder of an Oppenheimer fund, you will be able to
make exchanges into any of the other Oppenheimer fund without charge. 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 Oppenheimer
funds?
Call OppenheimerFunds at 1-(800) 255-2755. They will be pleased to
supply you with additional information, including other prospectuses.
9. After the Reorganization, who do I contact about my new TFBF account
or to initiate a transaction in that account?
Once the Reorganization is approved and effected, you will become a
shareholder of TFBF. For information about your new TFBF account or to
initiate a transaction in that 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 Fund,
TFBF or to me as a shareholder?
The Reorganization is intended to qualify for Federal income tax
purposes as a tax-free reorganization. Accordingly, no gain or loss will
be recognized by Fund shareholders upon the exchange of Fund shares for
shares of TFBF. The aggregate tax basis of the TFBF shares received by
you will be the same as the aggregate tax basis of your Fund shares
immediately prior to the Reorganization. The holding period of the shares
of the TFBF to be received by you will include the period during which the
Fund shares surrendered in exchange therefore were held.
Shareholders of the Fund should consult their tax advisors regarding
the effect, if any, of the Reorganization in light of their individual
circumstances. Since the foregoing only relates to the Federal income tax
consequences of the Reorganization, shareholders of the Fund should also
consult their tax advisors as to state and local tax consequences, if any,
of the Reorganization.
<PAGE>
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 9:00 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
October 5, 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 September 26, 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 Reorganization Agreement) and the cancellation of the outstanding
shares of the Fund. A copy of the Reorganization Agreement 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 initial 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 (information about the Fund is incorporated
herein from the Fund's Prospectus); 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 which
is incorporated herein by reference; (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 September 29, 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 either 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 September 29, 1995.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
<TABLE>
<S> <C>
COMPARATIVE FEE TABLES . . . . . . . . . . . . . . . . . . . . . . . 5
SYNOPSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Parties to the Reorganization. . . . . . . . . . . . . . . . . . . 9
The Reorganization . . . . . . . . . . . . . . . . . . . . . . . . 9
Tax Consequences of the Reorganization . . . . . . . . . . . . . .10
Investment Objectives and Policies . . . . . . . . . . . . . . . .10
Investment Advisory and Distribution Plan Fees . . . . . . . . . .11
Purchases, Exchanges and Redemptions . . . . . . . . . . . . . . .12
PRINCIPAL RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . .14
APPROVAL OF THE REORGANIZATION (The Proposal). . . . . . . . . . . .17
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Acquisition Agreement. . . . . . . . . . . . . . . . . . . . . . .17
Board Approval of the Reorganization . . . . . . . . . . . . . . .19
The Reorganization . . . . . . . . . . . . . . . . . . . . . . . .20
Tax Aspects of the Reorganization. . . . . . . . . . . . . . . . .23
Capitalization Table (Unaudited) . . . . . . . . . . . . . . . . .25
COMPARISON BETWEEN TFBF AND THE FUND . . . . . . . . . . . . . . . .25
Comparison of Investment Objectives, Policies and Restrictions . .26
Special Investment Methods . . . . . . . . . . . . . . . . . . . .28
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . .29
Additional Comparative Information . . . . . . . . . . . . . . . .30
TFBF Performance . . . . . . . . . . . . . . . . . . . . . . . . .32
INFORMATION CONCERNING THE MEETING . . . . . . . . . . . . . . . . .33
The Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Record Date; Vote Required; Share Information. . . . . . . . . . .33
Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Costs of the Solicitation and the Reorganization . . . . . . . . .35
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Financial Information. . . . . . . . . . . . . . . . . . . . . . .36
Public Information . . . . . . . . . . . . . . . . . . . . . . . .36
OTHER BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . .37
EXHIBIT A - Agreement and Plan of Reorganization, dated as of September
26, 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
</TABLE>
<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.
Oppenheimer Tax-Free
Bond Fund
Class A Class B Class 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
[FN]
(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
restated 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 Operating Expenses0.87% 0.88% 0.87% 0.88%
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>
[FN]
(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: (i) 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 (ii) a waiver of a portion of the management fee
to effectuate such limitation. Without such limitations and waivers,
"Total Fund Operating Expenses" would have been 0.94% and 0.92% of
average daily net assets for the six months ended June 30, 1995 and the
year ended December 31, 1994, respectively. Expense limitations and
waivers prior to April 30, 1995 were higher, with actual management
fees charged representing 0.33% and 0.22% 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% 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% 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.
Examples
To attempt to show the effect of these expenses on an investment over
time, the 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.
Based on the rate of "Total Fund Operating Expenses" shown above 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:
1 year 3 years 5 years 10 years
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
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years
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
Based on the rate of "Total Fund Operating Expenses" shown above 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:
1 year 3 years 5 years 10 years
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
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years
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
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 defined in the Reorganization Agreement).
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 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. 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 investment, 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, Class B
and Class C shares of TFBF and shares of the Fund are authorized to pay
OFDI and QVD, respectively, in connection with the distribution of shares
and the servicing of shareholder accounts that hold the fund's shares.
The plans for TFBF and the Fund provide for payments at a fixed rate to
compensate OFDI and QVD, respectively, except for TFBF's Class A service
plan, which provides for reimbursement of OFDI's expenses at a rate not
to exceed a fixed rate. 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 shares 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
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 TFBF nor the Fund
will invest 25% or more of its total assets in any one industry. 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. In a
repurchase agreement, a 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 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 increase its income or to raise cash for liquidity purposes,
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 Fund, 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. The description of the
Acquisition Agreement set forth below is a summary only.
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
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, 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 other conditions to each party's obligation to close.
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 to the Fund and
TFBF, including information prepared by Lipper Analytical Services, Inc.
and Management Practice, Inc. The Board also considered information with
respect to the relative historical performance of the funds. The Board
also reviewed and discussed the terms and provisions of the investment
advisory agreement pursuant to which OMC provides investment management
services to TFBF and compared them 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
them and 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 TFBF Prospectus
and TFBF Statement of Additional Information 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) 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 advisors 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.
Net Asset
Shares Value
Net Assets Outstanding Per Share
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
- ------------------
* 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
securities (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.
Private activity municipal securities, if subject to Federal alternative
minimum tax, will not count towards the 80% of total (as to TFBF) or net
(as to the Fund) assets that each fund shall invest in Municipal
Obligations. 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 Investments," 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
as well as repurchase agreements and loans of portfolio securities
described above under "Principal Risk Factors."
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. TFBF does not intend to make
such purchases for speculative purposes. 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. TFBF
will enter into these transactions only with banks and dealers that, in
OMC's opinion present minimal credit risks.
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"). Such information is 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 9:00 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 and the assumption by TFBF of certain liabilities of the Fund, 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 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 7,034,580.294
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 58,270,421.932, 6,656,848.030 and
131,668.770 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, except Unified Management Corp. Omnibus Account, 420 N.
Pennsylvania Street, Indianapolis, IN 46204-1873, which was the record
owner of 965,379.768 shares, representing approximately 13.72% of the
Fund's outstanding shares on the Record Date, held for the benefit of its
clients, none of whom owned 5% or more of the Fund's 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, except for
Merrill Lynch Pierce Fenner & Smith, Inc., 4800 Deer Lake Drive,
Jacksonville, FL 32246-6484, which was the record owner of 129,882.00
Class C shares of TFBF (representing approximately 98.6% of the
outstanding shares of that class on the Record Date) held for the benefit
of certain brokerage clients as the beneficial owners, none of whom owned
5% or more of the outstanding Class C 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 for the
Meeting and the other shareholder meetings contemplated by the Acquisition
primarily by contacting shareholders by telephone and telegram for a fee
not to exceed $25,000, plus reasonable out-of-pocket expenses. With
respect to a telephone solicitation by such firm, additional expenses
would include the following: $5.00 per telephone vote transacted, $2.75
per outbound telephone contact, and costs relating to obtaining
shareholder telephone numbers. The cost for such proxy solicitor will be
shares by QVA and OMC. 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.
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
Reorganization Agreement 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 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, al of 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
September 29, 1995
MERGE\QFVF310.D1
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as
of this 26th 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 defined in Section 3.1 below), 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 (as defined in Section 2.1 below), 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 Valuation 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 has prepared and filed with the Securities
and Exchange Commission ("Commission") a registration statement on Form
N-14 under the Securities Act of 1933, as amended ("1933 Act"), and will
prepare and file any amendments thereto, 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 (audited)
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 31, 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, 1995 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 good and
valid 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, to the knowledge of such
counsel, 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 in all material respects 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 actions 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, to the knowledge of such counsel, 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 in all material respects 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 actions 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 filing of the Registration Statement 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 Management Corporation 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 Fund 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: /s/ Andrew J. Donohue
----------------------------------------
Andrew J. Donohue, Secretary
QUEST FOR VALUE FAMILY OF FUNDS
By: /s/ Bernard H. Garil
----------------------------------------
Bernard H. Garil, Vice President
QUEST FOR VALUE ADVISORS
By: /s/ Bernard H. Garil
----------------------------------------
Bernard H. Garil, President
LEGAG\QUEST.TFB
<PAGE>
EXHIBIT B
The aggregate purchase price for the Purchased Assets and 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).
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>
QUEST FOR VALUE FAMILY OF FUNDS
NATIONAL TAX-EXEMPT FUND
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD NOVEMBER 16, 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 Thomas E. Duggan and Maria Camacho 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
November 16, 1995, at One World Financial Center, New York, New York 10281
on the 40th Floor at 10:00 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.
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.
1. To approve an Agreement and Plan of Reorganization dated as of
September 26, 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.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHO RECOMMENDS A VOTE
FOR THE PROPOSAL ABOVE. THE SHARES REPRESENTED HEREBY WILL BE VOTED AS
INDICATED ON ABOVE OR FOR IF NO CHOICE IS INDICATED.
Please mark your proxy, date and sign it below and return it promptly in
the accompanying envelope, which requires no postage if mailed in the
United States.
FOR____ AGAINST____ ABSTAIN____
Dated:________________________, 1995
(Month) (Day)
______________________________
Signature(s)
______________________________
Signature(s)
MERGE\QFVF310.D2
