Preliminary Copy
YOUR SHAREHOLDER VOTE IS IMPORTANT!
Your prompt response can save your Fund money.
Please vote, sign and mail your proxy ballot (this card) in the
enclosed postage-paid envelope today, no matter how many shares you own.
A majority of the Fund's shares must be represented in person or by proxy.
Please vote your proxy so your Fund can avoid the expense of another
mailing.
[Reverse side:]
Your prompt response can save your Fund the expense of another mailing.
Please mark your proxy on the reverse side, date and sign it, and return
it promptly in the accompanying envelope, which requires no postage if
mailed in the United States.
Preliminary Copy
OPPENHEIMER TAX-FREE BOND FUND
PROXY FOR SHAREHOLDERS MEETING TO BE HELD JUNE 20, 1994
The undersigned shareholder of Oppenheimer Tax-Free Bond Fund (the
"Fund"), does hereby appoint George C. Bowen, Andrew J. Donohue, Robert
Bishop and Scott Farrar, and each of them, as attorneys-in-fact and
proxies of the undersigned, with full power of substitution, to attend the
Meeting of Shareholders of the Fund to be held June 20, 1994, at 3410
South Galena Street, Denver, Colorado 80231 at 10:00 a.m., Denver time,
and at all adjournments thereof, and to vote the shares held in the name
of the undersigned on the record date for said meeting for the election
of Trustees and on the proposals specified on the reverse side. Said
attorneys-in-fact shall vote in accordance with their best judgment as to
any other matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHICH RECOMMENDS A
VOTE FOR THE ELECTION OF ALL NOMINEES FOR TRUSTEE AND FOR EACH PROPOSAL
ON THE REVERSE SIDE. THE SHARES REPRESENTED HEREBY WILL BE VOTED AS
INDICATED ON THE REVERSE SIDE OR FOR IF NO CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and return
it promptly in the accompanying envelope, which requires no postage if
mailed in the United States.
(over)
1. Election of Trustees
____ FOR all nominees listed ____ WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
listed
contrary below) below
L. LevyL. CherneE. DelaneyR. GalliB. LipsteinE. MoynihanK. Randall
(A) (B) (C) (D) (E) (F) (G)
E. Regan R. Reynolds S. Robbins D. Spiro P. Trigere C. Yeutter
(H) (I) (J) (K) (L) (M)
INSTRUCTION: To withhold authority to vote for any individual
nominee, line out that nominee's name above.
2. Ratification of selection of KPMG Peat Marwick as independent
auditors (Proposal
No. 1)
FOR ____ AGAINST ____ ABSTAIN ____
3. Approval of an amendment to the Fund's Class A 12b-1 Plan (Proposal
No. 2) (Class A shareholders, only, vote on this Proposal)
FOR ____ AGAINST ____ ABSTAIN ____
Dated:_______________________, 1994
(Month) (Day)
____________________________
Signature(s)
____________________________
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When signing
as custodian, attorney, executor, administrator, trustee, etc., please
give your full title as such. All joint owners should sign this proxy.
If the account is registered in the name of a corporation, partnership or
other entity, a duly authorized individual must sign on its behalf and
give title.
310
Preliminary Copy
OPPENHEIMER TAX-FREE BOND FUND
Two World Trade Center, New York, New York 10048-0203
NOTICE OF MEETING OF SHAREHOLDERS TO BE HELD
June 20, 1994
To The Class A and Class B Shareholders of
Oppenheimer Tax-Free Bond Fund
Notice is hereby given that a Meeting of the Shareholders of Oppenheimer
Tax-Free Bond Fund (the "Fund") will be held at 3410 South Galena Street,
Denver, Colorado, 80231, at 10:00 A.M., Denver time, on June 20, 1994, or
any adjournments thereof, for the following purposes:
(a) To elect thirteen Trustees to hold office until the next meeting of
shareholders called for the purpose of electing Trustees and until their
successors are elected and shall qualify;
(b) To ratify the selection of KPMG Peat Marwick as the independent
certified public accountants and auditors of the Fund for the fiscal year
beginning January 1, 1994 (Proposal No. 1);
(c) To approve an amendment to the Fund's Class A 12b-1 Plan whereby the
Plan shall apply to all Class A shares of the Fund, thereby increasing the
amount payable thereunder (Class A shareholders, only) (Proposal No. 2);
and
(d) To transact such other business as may properly come before the
meeting, or any adjournments thereof.
Shareholders of record at the close of business on April 22, 1994, are
entitled to vote at the meeting. The election of Trustees and the
Proposals are more fully discussed in the Proxy Statement. Please read
it carefully before telling us, through your proxy or in person, how you
wish your shares to be voted. The Board of Trustees of the Fund
recommends a vote to elect each of the nominees as Trustee and in favor
of each Proposal. WE URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED PROXY
PROMPTLY.
By Order of the Board of Trustees,
Andrew J. Donohue, Secretary
May 6, 1994
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Shareholders who do not expect to attend the meeting are asked to indicate
voting instructions on the enclosed proxy and to date, sign and return it
in the accompanying postage-paid envelope. To avoid unnecessary duplicate
mailings, we ask your cooperation in promptly mailing your proxy no matter
how large or small your holdings may be.
OPPENHEIMER TAX-FREE BOND FUND
Two World Trade Center, New York, New York 10048-0203
PROXY STATEMENT
MEETING OF SHAREHOLDERS
TO BE HELD JUNE 20, 1994
This statement is furnished to the Class A and Class B shareholders of
Oppenheimer Tax-Free Bond Fund (the "Fund") in connection with the
solicitation by the Fund's Board of Trustees of proxies to be used at a
meeting (the "Meeting") of shareholders to be held at 3410 South Galena
Street, Denver, Colorado, 80231, at 10:00 A.M., Denver time, on June 20,
1994, or any adjournments thereof. It is expected that the mailing of
this Proxy Statement will be made on or about May 6, 1994. Financial
statements covering the operations of the Fund for the fiscal year ended
December 31, 1993 were mailed to all persons who were shareholders of
record on that date and simultaneously with the mailing of this Proxy
Statement will be mailed to persons who became shareholders between
December 31, 1993 (the record date for the mailing of that Annual Report)
and the record date for this shareholder meeting.
The enclosed proxy, if properly executed and returned, will be voted (or
counted as an abstention) in accordance with the choices specified
thereon, and will be included in determining whether there is a quorum to
conduct the meeting. The proxy will be voted in favor of the nominees for
Trustee named in this Proxy Statement unless a choice is indicated to
withhold authority to vote for all listed nominees or any individual
nominee. The proxy will be voted in favor of each Proposal unless a
choice is indicated to vote against or to abstain from voting on that
Proposal. Shares owned of record by broker-dealers for the benefit of
their customers ("street account shares") will be voted by the broker-
dealer based on instructions received from its customers. If no
instructions are received, the broker-dealer may (if permitted under
applicable stock exchange rules) vote such shares as record holder on the
Proposals in the same proportion as that broker-dealer votes street
accounts shares for which instructions were timely received. If a
shareholder executes and returns a proxy but fails to indicate how the
votes should be cast, the proxy will be voted in favor of the election of
each of the nominees named herein for Trustee and in favor of each
Proposal.
The proxy may be revoked at any time prior to the voting by: (1) writing
to the Secretary of the Fund at Two World Trade Center, New York, New
York, 10048-0203; (2) attending the meeting and voting in person; or (3)
signing and returning a new proxy (if returned and received in time to be
voted).
The cost of printing and distributing these proxy materials is an expense
of the Fund. In addition to the solicitation of proxies by mail, proxies
may be solicited by officers or employees of the Fund's investment
adviser, Oppenheimer Management Corporation (the "Manager"), personally
or by telephone or telegraph; any expenses so incurred will also be borne
by the Fund. Brokers, banks and other fiduciaries may be required to
forward soliciting material to their principals and to obtain
authorization for the execution of proxies. For those services, they will
be reimbursed by the Fund for their out-of-pocket expenses.
Shares Outstanding and Entitled to Vote. As of April 22, 1994, the record
date, there were ____________ shares of the Fund issued and outstanding,
consisting of ____________ Class A shares and ___________ Class B shares.
All shares of the Fund have equal voting rights as to the election of
Trustees and as to Proposal No. 1. However, only Class A shareholders may
vote as to Proposal No. 2. Holders of shares are entitled to one vote for
each share (and a fractional vote for a fractional share) held of record
at the close of business on the record date. As of the record date, no
person owned of record or was known by the management of the Fund to be
the beneficial owner of 5% or more of the outstanding shares of the Fund,
except Merrill Lynch, Pierce, Fenner & Smith, Inc., which was the record
owner of ____________________________ shares of the Fund (approximately
____% of the Fund's then-outstanding shares).
ELECTION OF TRUSTEES
At the Meeting, thirteen Trustees are to be elected to hold office until
the next meeting of shareholders called for the purpose of electing
Trustees or until their successors shall be duly elected and shall have
qualified. The persons named as attorneys-in-fact in the enclosed proxy
have advised the Fund that unless a proxy instructs them to withhold
authority to vote for all listed nominees or any individual nominee, all
validly executed proxies will be voted by them for the election of the
nominees named below as Trustees of the Fund. As a Massachusetts business
trust, the Fund does not contemplate holding annual shareholder meetings
for the purpose of electing Trustees. Thus, the Trustees will be elected
for indefinite terms until a shareholders meeting is called for the
purpose of voting for Trustees and until their successors are elected and
shall qualify.
Each of the nominees is presently a Trustee and has agreed to be nominated
and, if elected, to continue to serve as a Trustee of the Fund. All
Trustees except Ms. Moynihan and Mr. Robert G. Galli, Mr. Edward V. Regan
and Mr. Clayton K. Yeutter have been elected by shareholders of the Fund.
Each of the Trustees is also a Trustee or Director of Oppenheimer Fund,
Oppenheimer Discovery Fund, Oppenheimer Global Bio-Tech Fund, Oppenheimer
Global Fund, Oppenheimer Global Growth & Income Fund, Oppenheimer Special
Fund, Oppenheimer Time Fund, Oppenheimer Target Fund, Oppenheimer Global
Environment Fund, Oppenheimer Gold & Special Minerals Fund, Oppenheimer
New York Tax-Exempt Fund, Oppenheimer California Tax-Exempt Fund,
Oppenheimer Multi-State Tax-Exempt Trust, Oppenheimer Asset Allocation
Fund, Oppenheimer Mortgage Income Fund, Oppenheimer Money Market Fund,
Inc., Oppenheimer U.S. Government Trust, Oppenheimer Multi-Government
Trust and Oppenheimer Multi-Sector Income Trust (together with the Fund,
the "New York OppenheimerFunds"). Mr. Spiro is President of the Fund and
each of the other New York OppenheimerFunds.
Each nominee indicated below by an asterisk is an "interested person" (as
that term is defined in the Investment Company Act of 1940, hereinafter
referred to as the "Investment Company Act") of the Fund due to the
connections indicated with the Manager or its affiliates. The year given
below indicates when the nominee first became a Trustee or Director of any
of the New York OppenheimerFunds without a break in service. The
beneficial ownership of shares listed below includes voting and investment
control, unless otherwise indicated below. If any of the nominees should
be unable to accept nomination or election, it is the intention of the
persons named as attorneys-in-fact in the enclosed proxy to vote such
proxy for the election of such other person or persons selected and
nominated by disinterested Trustees as the Board of Trustees may, in its
discretion, recommend. As of April 22, 1994 the Trustees and officers of
the Fund as a group owned __________ shares of the Fund in the aggregate,
which is less than 1% of the outstanding shares.
Shares Beneficially
Name And Owned as of
Other Information Business Experience During the Past Five YearsApril 22, 1994
Leon Levy General Partner of Odyssey Partners, L.P. (investment
first became a partnership); Chairman of Avatar Holdings, Inc. (real estate
Trustee in 1959 development).
Age: 68
Leo Cherne Chairman Emeritus of the International Rescue
first became a Committee (philanthropic organization); formerly Executive
Trustee in 1982 Director of the Research Institute of America.
Age: 81
Edmund T. Delaney Attorney-at-law; formerly a member of the Connecticut
first became a State Historical Commission and Counsel to Copp,
Trustee in 1959 Berall & Hempstead (a law firm).
Age: 80
Robert G. Galli* Vice Chairman of the Manager; Vice President and General
first became a Counsel of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
Trustee in 1993 Manager's parent holding company; formerly he held the
Age: 60 following positions: a director of the Manager and
Oppenheimer Funds Distributor, Inc. (the "Distributor"), Vice
President and a director of HarbourView Asset Management
Corporation ("HarbourView") and Centennial Asset Management
Corporation ("Centennial"), investment adviser subsidiaries of
the Manager, a director of Shareholder Financial Services, Inc.
("SFSI") and Shareholder Services, Inc. ("SSI"), transfer agent
subsidiaries of the Manager, an officer of other OppenheimerFunds
and Executive Vice President and General Counsel of the Manager
and the Distributor.
Benjamin Lipstein Professor Emeritus of Marketing, Stern Graduate School of
first became a Business Administration, New York University.
Trustee in 1974
Age: 71
Elizabeth B. Moynihan Author and architectural historian; a trustee of the
first became a American Schools of Oriental Research, the Institute
Trustee in 1992 of Fine Arts (New York University), the Freer Gallery
Age: 64 of Art (Smithsonian Institution) and the Preservation
League of New York State; a member of the Indo-U.S.
Sub-Commission on Education and Culture.
Kenneth A. Randall A director of Northeast Bancorp, Inc. (bank holding
first became a company), Dominion Resources, Inc. (electric utility
Trustee in 1980 holding company), and Kemper Corporation (insurance
Age: 66 and financial services company); formerly Chairman of the
Board of ICL Inc. (information systems).
Edward V. Regan President of Jerome Levy Economics Institute; a member
first became a of the U.S. Competitiveness Policy Council; a director
Trustee in 1993 of GranCare, Inc. (health care provider); formerly
Age: 63 New York State Comptroller and a trustee, New York State
and Local Retirement Fund.
Russell S. Reynolds, Jr.Founder and Chairman of Russell Reynolds Associates, Inc.
first became a (executive recruiting); a trustee of Mystic Seaport
Trustee in 1989 Museum, International House, Greenwich Historical
Age: 62 Society and Greenwich Hospital.
Sidney M. Robbins Chase Manhattan Professor Emeritus of Financial
first became a Institutions, Graduate School of Business, Columbia
Trustee in 1963 University; Visiting Professor of Finance, University
Age: 82 of Hawaii; a director of The Korea Fund, Inc. and The
Malaysia Fund, Inc. (closed-end investment companies);
member of the Board of Advisors of Olympus Private
Placement Fund, L.P.; Professor Emeritus of Finance,
Adelphi University.
Donald W. Spiro* Chairman Emeritus and a director of the Manager;
first became a formerly Chairman of the Manager and the Distributor.
Trustee in 1985
Age: 68
Pauline Trigere Chairman and Chief Executive Officer of Trigere,
first became a Inc. (design and sale of women's fashions).
Trustee in 1977
Age: 81
Clayton K. Yeutter Counsel to Hogan & Hartson (a law firm); a director
first became a of B.A.T. Industries, Ltd. (tobacco and financial
Trustee in 1993 services), Caterpillar, Inc. (machinery), ConAgra,
Age: 63 Inc. (food and agricultural products), FMC Corp.
(chemicals and machinery), Lindsay Manufacturing Co. and
Texas Instruments, Inc. (electronics); formerly (in
descending chronological order) Deputy Chairman, Bush/Quayle
Presidential Campaign, Counsellor to the President (Bush)
for Domestic Policy, Chairman of the Republican National
Committee, Secretary of the U.S. Department of Agriculture,
and U.S. Trade Representative, Executive Office of the President.
- ------------------------
* A nominee who is an "interested person" of the Fund under the Investment Company Act.
Vote Required. An affirmative vote of a plurality of the votes cast by
holders of voting securities of the Fund is required for the election of
a nominee as Trustee. The Board of Trustees recommends a vote for the
election of each nominee.
Functions of the Board of Trustees. The primary responsibility for the
management of the Fund rests with the Board of Trustees. The Trustees meet
regularly to review the activities of the Fund and of the Manager, which
is responsible for its day-to-day operations. ____ regular meetings of
the Trustees were held in the fiscal year ended December 31, 1993. Each
of the Trustees other than _______________________ was present for at
least 75% of the meetings held. The Trustees of the Fund have appointed
an Audit Committee, comprised of Messrs. Randall (Chairman), Robbins (Vice
Chairman) and Cherne, none of whom is an "interested person" (as that term
is defined in the Investment Company Act) of the Manager or the Fund. The
functions of the Committee include (i) making recommendations to the Board
concerning the selection of independent auditors for the Fund (subject to
shareholder ratification); (ii) reviewing the methods, scope and results
of audits and the fees charged; (iii) reviewing the adequacy of the Fund's
internal accounting procedures and controls; and (iv) establishing a
separate line of communication between the Fund's independent auditors and
its independent Trustees. The Committee met _____ times during the fiscal
year ended December 31, 1993, and all members other than _______________
attended at least 75% of the meetings held during that period. The Board
of Trustees does not have a standing nominating or compensation committee.
Remuneration of Trustees and Officers. The officers of the Fund listed
below are affiliated with the Manager. They and the Trustees who are
affiliated with the Manager (Messrs. Spiro and Galli) receive no salary
or fee from the Fund. The Fund currently pays each other Trustee a fee
varying from $_____ to $___________ for serving as Trustee, or as Chairman
or a member of the committees of the Board of Trustees. During the fiscal
year ended December 31, 1993, Trustees' fees and expenses aggregated
$__________. In addition, the Fund has adopted a retirement plan that
provides for payment to a retired Trustee of up to 80% of the average
compensation paid during that Trustee's five years of service in which the
highest compensation was received. A Trustee must serve in that capacity
for any of the New York OppenheimerFunds listed above for at least 15
years in order to be eligible for the maximum payment. No Trustee has
retired under this plan, and therefore no payments have been made by the
Fund. In the fiscal year ended December 31, 1993, the Fund accrued
$_____________ for retirement plan benefits for its Trustees under the
plan.
Officers of the Fund. Each officer of the Fund is elected by the Trustees
to serve an indefinite term. Information is given below about the
executive officers who are not Trustees of the Fund, including their
business experience during the past five years. Messrs. Bishop, Bowen,
Donohue, Farrar and Zack serve in a similar capacity with the other New
York OppenheimerFunds listed above.
Robert Patterson, Vice President and Portfolio Manager; Age: 50.
Senior Vice President of the Manager; an officer of other
OppenheimerFunds.
Andrew J. Donohue, Secretary; Age: 43.
Executive Vice President and General Counsel of the Manager and the
Distributor; an officer of other OppenheimerFunds; formerly Senior
Vice President and General Counsel of the Manager and the
Distributor, Partner in Kraft & McManimon (a law firm), an officer
of First Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser) and
director and an officer of First Investors Family of Funds and First
Investors Life Insurance Company.
George C. Bowen, Treasurer; Age 57.
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; Vice President, Treasurer and Secretary of SSI, SFSI, and
the OppenheimerFunds; formerly Senior Vice President/Comptroller and
Secretary of Oppenheimer Asset Management Corporation, a former
investment advisory subsidiary of the Manager.
Robert G. Zack, Assistant Secretary; Age 45.
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI, SFSI and other OppenheimerFunds.
Robert Bishop, Assistant Treasurer; Age 35.
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an Accountant for Resolution Trust
Corporation and previously an Accountant and Commissions Supervisor
for Stuart James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer; Age: 28.
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company,
before which he was a sales representative for Central Colorado
Planning.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
(Proposal No. 1)
The Investment Company Act requires that independent certified public
accountants and auditors ("auditors") be selected annually by the Board
of Trustees and that such selection be ratified by the shareholders at the
next-convened annual meeting of the Fund, if one is held. The Board of
Trustees of the Fund, including a majority of the Trustees who are not
"interested persons" (as defined in the Investment Company Act) of the
Fund or the Manager, at a meeting held December 9, 1993, selected KPMG
Peat Marwick ("KPMG") as auditors of the Fund for the fiscal year
beginning January 1, 1994. KPMG also serves as auditors for certain other
funds for which the Manager acts as investment adviser. At the Meeting,
a resolution will be presented for the shareholders' vote to ratify the
selection of KPMG as auditors. Representatives of KPMG are not expected
to be present at the Meeting but will be available should any matter arise
requiring their presence. The Board of Trustees recommends approval of
the selection of KPMG as auditors of the Fund.
APPROVAL OF AN AMENDMENT TO THE FUND'S CLASS A 12b-1 PLAN
(Proposal No. 2)
(Only Class A shareholders may vote on this Proposal)
The Fund has adopted a Service Plan for its Class A shares (the "Current
12b-1 Plan") pursuant to Rule 12b-1 of the Investment Company Act under
which the Fund may make certain payments to Oppenheimer Funds Distributor,
Inc., (the "Distributor") for all or a portion of its costs incurred in
connection with the personal service and maintenance of shareholder
accounts that hold Class A Shares of the Fund that were acquired on or
after April 1, 1991. The Distributor uses such fees received from the
Fund in their entirety: (i) to compensate brokers, dealers, banks and
other institutions ("Recipients") each quarter for providing personal
service and the maintenance of accounts that hold Fund shares, and (ii)
to reimburse itself (to the extent authorized by the Board) for its other
expenditures under the Plan and for its direct costs for personal service
and the maintenance of accounts. The Board has not authorized any
reimbursement to the Distributor under (ii) above. The services to be
provided under the Plan include, but are not limited to, the following:
answering routine inquiries from the Recipient's customers concerning the
Fund, providing such customers with information on their investment in
Fund shares, assisting in the establishment and maintenance of accounts
or sub-accounts in the Fund, making the Fund's investment plans and
dividend payment options available, and providing such other information
and customer liaison services and the maintenance of accounts as the
Distributor or the Fund may reasonably request.
The Current 12b-1 Plan has the effect of increasing Class A expenses of
the Fund by up to 0.25% of its average annual net assets from what its
expenses would otherwise be. During the fiscal year ended December 31,
1993, payments under the Current 12b-1 Plan totaled $______________ (____%
of the Fund's average net assets), all of which was paid by the
Distributor to Recipients, including $_____________ paid to an affiliate
of the Distributor.
At a meeting held February 10, 1994, the Fund's Board of Trustees,
including a majority of the Trustees who are not "interested persons" (as
defined in the Investment Company Act) of the Fund and who have no direct
or indirect financial interest in the operation of the Current 12b-1 Plan
or any agreement related to the Current 12b-1 Plan ("Independent
Trustees"), adopted an amendment to the Fund's Current 12b-1 Plan to allow
payments to be made with respect to all Fund shares, including those
acquired prior to April 1, 1991 (the "Proposed 12b-1 Plan"). In all other
material respects, the Current 12b-1 Plan and the Proposed 12b-1 Plan are
the same.
The Board determined to recommend the Proposed 12b-1 Plan for approval by
the Class A shareholders. A copy of the Proposed 12b-1 Plan is attached
as Exhibit A to this proxy statement.
If approved at this meeting and implemented, the Proposed 12b-1 Plan would
have the effect of increasing the Fund's Class A expenses from what they
otherwise would be under the Current 12b-1 Plan, but by no more than .25%
of the average annual Class A net assets. Both the Current and Proposed
12b-1 Plans have the potential effect of increasing the Fund's Class A
expenses by up to 0.25% of the Fund's average annual net assets. It is
estimated that the Fund's total expense ratio would have increased from
____% of average annual net assets to ____% of average annual net assets
based on the Fund's actual annualized expenses for the period January 1,
1993 through December 31, 1993 had the Proposed 12b-1 Plan been in effect.
As the proportion of Fund shares purchased before April 1, 1991 to total
outstanding Fund shares decreases, the actual incremental expenses, on a
percentage basis, created by the Proposed 12b-1 Plan payments over Current
12b-1 Plan payments will decrease.
If approved, the Proposed 12b-1 Plan shall take effect as of the date of
shareholder approval, replacing the Fund's Current 12b-1 Plan and shall
continue in effect through December 31, 1994 and from year to year
thereafter (unless terminated as described below) only as long as such
continuance is specifically approved at least annually by the Fund's Board
of Trustees (and its Independent Trustees) by a vote cast in person at a
meeting called for the purpose of voting on such continuance. The
Proposed 12b-1 Plan may be terminated at any time by the vote of a
majority of the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the Act) of the outstanding Class A shares of
the Fund. If the Proposed 12b-1 Plan is approved by Class A shareholders,
the Board of Trustees will determine the rate of payment for assets
representing shares sold prior to April 1, 1991.
Analysis of the Proposed Class A Service Plan by the Board of Trustees.
In considering whether to recommend the Proposed 12b-1 Plan for approval,
the Board requested and evaluated information it deemed necessary to make
an informed determination. The Manager represented to the Board that, in
its opinion, if the Current 12b-1 Plan is not amended, the result will be
increased redemptions of Class A shares thereby harming the Fund. The
Manager believes that providing continuing payments to dealers for
services provided to Class A shareholders in connection with all Class A
shares could help reduce redemptions of Class A shares by giving dealers
a financial incentive in having Class A shares remain outstanding.
Stabilizing or increasing Class A assets by encouraging Recipients to
maintain Class A accounts in the Fund can benefit the Fund and its
shareholders by maintaining or reducing per share operating expenses and
providing a more stable cash flow for investment management purposes.
The Board therefore deemed it in the best interest of the Fund and its
Class A shareholders to amend the Current 12b-1 Plan as described. The
Board was advised that many Recipients currently provide services to
customers who own Class A shares acquired before April 1, 1991 for which
they receive no compensation from the Fund. The Manager further advised
the Board that Recipients have complained that it is inequitable to
compensate Recipients for providing services for some Class A shares of
the Fund (i.e., those sold on or after April 1, 1991) but not for others.
Votes Required. Under the Investment Company Act, an affirmative vote of
the holders of a "majority," as defined in the Investment Company Act, of
the outstanding Class A shares of the Fund is required for approval of
this Proposal. Such "majority" vote is defined in the Investment Company
Act as the vote of the holders of the lesser of (i) 67% or more of the
Class A shares present or represented by proxy at the shareholders
meeting, if the holders of more than 50% of such outstanding voting
securities are present or represented by proxy, or (ii) more than 50% of
the outstanding Class A shares. If the proposal is not approved, the
Fund's current 12b-1 Plan will remain unchanged. The Board of Trustees
recommends a vote in favor of approving this Proposal.
ADDITIONAL INFORMATION
The Manager. Subject to the authority of the Board of Trustees, the
Manager is responsible for the day-to-day management of the Fund's
business. The Manager is a wholly-owned subsidiary of OAC, a holding
company controlled by Massachusetts Mutual Life Insurance Company
("MassMutual"). MassMutual is located at 1295 State Street, Springfield,
Massachusetts 01111. OAC acquired the Manager on October 22, 1990 (the
"Acquisition Date"). As indicated below, the common stock of OAC is owned
by (i) certain officers and/or directors of the Manager, (ii) MassMutual
and (iii) another investor. No institution or person holds 5% or more of
OAC's outstanding common stock except Donald W. Spiro (5.24%) and
MassMutual. MassMutual has engaged in the life insurance business since
1851. It is the nation's twelfth largest life insurance company by assets
and has an A.M. Best Co. rating of "A+".
The common stock of OAC is divided into three classes. At December 31,
1993, MassMutual held (i) all of the 2,160,000 shares of Class A voting
stock, (ii) 317,854 shares of Class B voting stock, and (iii) 350,063
shares of Class C non-voting stock. This collectively represented 74.1%
of the outstanding common stock and 84.9% of the voting power of OAC as
of December 31, 1993. Certain officers and/or directors of the Manager
as a group held (i) 821,455 shares of the Class B voting stock,
representing 21.5% of the outstanding common stock and 12.6% of the voting
power, and (ii) options acquired without cash payment which, when they
become exercisable, allow the holders to purchase up to 706,150 shares of
Class C non-voting stock. That group includes persons who serve as
officers of the Fund and two of whom (Messrs. Donald W. Spiro and Robert
G. Galli) serve as Trustees of the Fund. Holders of OAC Class B and Class
C common stock may put (sell) their shares and vested options to OAC or
MassMutual at a formula price (based on earnings of the Manager).
MassMutual may exercise call (purchase) options on all outstanding shares
of both such classes of common stock and vested options at the same
formula price, according to a schedule that will commence on September 30,
1995. Since October 1, 1992, certain officers and/or directors of the
Manager (i) sold 295,354 shares of Class B OAC common stock to MassMutual
at the formula price, and (ii) surrendered to OAC 436,053 stock
appreciation rights issued in tandem with the Class C OAC options. Cash
payments aggregating $32,729,119 have or will be made by OAC or
MassMutual to such persons (including Messrs. Spiro and Galli, identified
above) as follows: one-third of the amount due (i) within 30 days of the
transaction, (ii) by the first anniversary following the transaction (with
interest), and (iii) by the second anniversary following the transaction
(with interest). On December 15, 1993, MassMutual purchased its 350,063
shares of Class C OAC stock from OAC for $17,751,718.
As part of the acquisition of the common stock of OAC, MassMutual also
purchased approximately $45 million of subordinated notes of a subsidiary
of OAC; the notes are now an obligation of the Manager. In addition to
the purchase of such notes, MassMutual holds warrants issued by OAC
exercisable over the life of the notes which will allow it to purchase
shares of Class C common stock representing approximately 15.4% of the
common stock of OAC on a fully diluted basis.
The Manager and its affiliates act as investment advisers to investment
companies having combined net assets of more than $27 billion as of
December 31, 1993, and having more than 1.8 million shareholder accounts.
A consolidated statement of financial condition of the Manager as of
December 31, 1993, is included in this Proxy Statement as Exhibit B.
The names and principal occupations of the executive officers and
directors of the Manager are as follows: Jon S. Fossel, Chairman, Chief
Executive Officer and Director; Bridget A. Macaskill, President and
Director; Donald W. Spiro, Chairman Emeritus and a Director; Robert G.
Galli and James C. Swain, Vice Chairmen of the Manager; Samuel Freedman,
Jr., Director; Robert Doll, Jr., and O. Leonard Darling, Executive Vice
Presidents; Tilghman G. Pitts, Executive Vice President and Director;
Andrew J. Donohue, Executive Vice President and General Counsel; Kenneth
Eich, Executive Vice President and Chief Financial Officer; George C.
Bowen, Senior Vice President and Treasurer; Victor Babin, Loretta
McCarthy, Robert Patterson, Arthur Steinmetz, Ralph Stellmacher, Nancy
Sperte and Robert G. Zack, Senior Vice Presidents. The address of Messrs.
Bowen, Eich, Freedman and Swain is 3410 South Galena Street, Denver,
Colorado 80231. The address of all other officers is Two World Trade
Center, New York, New York 10048-0203, which is also the address of the
Manager and OAC.
Investment Advisory Agreement. The Fund has an Investment Advisory
Agreement with the Manager dated October 22, 1990 (the "Agreement"). The
Agreement was submitted to and approved by the shareholders of the Fund
at a meeting held October 1, 1990, because the acquisition of the Manager
by OAC on October 22, 1990, terminated the previous investment advisory
agreement. The Agreement continues in effect from year to year unless
terminated, but only so long as such continuance is approved annually in
accordance with the Investment Company Act. At a meeting held on December
9, 1993, the Fund's Board of Trustees, including a majority of the
Independent Trustees, approved the renewal of the Agreement between the
Manager and the Fund until December 31, 1994. At the time of such
approval, Messrs. Spiro and Galli were shareholders of OAC, the parent of
the Manager. Under the Agreement, the Manager supervises the investment
operations of the Fund and the composition of its portfolio and furnishes
advice and recommendations with respect to investments, investment
policies and the purchase and sale of securities. The management fee
payable monthly to the Manager under the terms of the Agreement is
computed on the assets of the Fund as of the close of business each day.
The annual rates of the fee paid by the Fund are .60% of the first $200
million of net assets; .55% of the next $100 million; .50% of the next
$200 million; .45% of the next $250 million; .40% of the next $250
million; and .35% of net assets over $1 billion. During the fiscal year
ended December 31, 1993, the Fund's fees payable under its Agreement with
the Manager were $________.
The Agreement requires the Manager, at its expense, to provide the Fund
with adequate office space, facilities and equipment as well as to
provide, and supervise the activities of, all administrative and clerical
personnel required to provide effective administration for the Fund,
including the compilation and maintenance of records with respect to
operations, the preparation and filing of specified reports, and
composition of proxy materials and registration statements for continuous
public sale of shares of the Fund. Expenses not expressly assumed by the
Manager under the Agreement or by the Distributor under the General
Distributor's Agreement are paid by the Fund. The Agreement lists
examples of expenses paid by the Fund, the major categories of which
relate to interest, taxes, brokerage commissions, fees to certain
Trustees, legal, bookkeeping and audit expenses, custodian and transfer
agent expenses, stock certificate issuance costs, certain printing and
registration costs, and non-recurring expenses, including litigation
costs.
Independently of the Agreement, the Manager has voluntarily undertaken
that the total expenses of the Fund in any year (including the management
fee but excluding taxes, interest, brokerage commissions, distribution
plan payments and extraordinary non-recurring expenses such as litigation
costs) shall not exceed (and the Manager undertakes to pay or refund to
the Fund any amount by which such expenses shall exceed) the most
stringent state regulatory limitation on fund expenses applicable to the
Fund. At present, that limitation is imposed by California and limits
expenses (with specified exclusions) to 2.5% of the first $30 million of
average annual net assets, 2% of the next $70 million, and 1.5% of average
annual net assets in excess of $100 million. The payment of the
management fee at the end of any month will be reduced so that there will
not be any accrued but unpaid liability under this expense limitation.
The Manager reserves the right to amend or terminate the expense
assumption undertaking at any time.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard for its obligations
thereunder, the Manager is not liable for any loss sustained by reason of
any good faith error or omission on its part in connection with any matter
to which the Agreement relates. The Agreement permits the Manager to act
as investment adviser for any other person, firm or corporation. Pursuant
to a license from the Manager, the Fund may use the name "Oppenheimer" in
connection with its business. If the Manager shall no longer act as
investment adviser to the Fund, the right of the Fund to use the name
"Oppenheimer" as part of its name may be withdrawn.
Provisions of the Investment Advisory Agreement. One of the duties of the
Manager under the Agreement is to arrange the portfolio transactions for
the Fund. In doing so, the Manager is authorized by the Agreement to
employ broker-dealers ("brokers"), including "affiliated" brokers, as that
term is defined in the Investment Company Act, as may, in its best
judgment based on all relevant factors, implement the policy of the Fund
to obtain, at reasonable expense, the "best execution" (prompt and
reliable execution at the most favorable price obtainable) of such
transactions. The Manager need not seek competitive commission bidding
or base its selection on "posted" rates, but is expected to be aware of
the current rates of eligible brokers and to minimize the commissions paid
to the extent consistent with the provisions of the Agreement and the
interests and policies of the Fund as established by its Board of
Trustees.
Under the Agreement, the Manager is authorized to select brokers that
provide brokerage and/or research services for the Fund and/or the other
accounts over which the Manager or its affiliates have investment
discretion. The commissions paid to such brokers may be higher than
another qualified broker would have charged, if a good faith determination
is made by the Manager that the commission is fair and reasonable in
relation to the services provided. There is no formula under which any
of the brokers selected for the Fund's portfolio transactions are entitled
to the allocation of a particular amount of commissions. The Manager may
also consider sales of shares of the Fund and of other investment
companies managed by the Manager or its affiliates as a factor in the
selection of brokers for the Fund's portfolio transactions.
Description of Brokerage Practices. Subject to the provisions of the
Agreement, when brokers are used for the Fund's portfolio transactions,
allocations of brokerage are made by portfolio managers under the
supervision of executive officers of the Manager. As most purchases made
by the Fund are principal transactions, the Fund incurs little or no
brokerage costs. For those transactions, instead of using a broker the
Fund normally deals directly with the selling or purchasing principal or
market maker unless it is determined that a better price or execution can
be obtained by using a broker. Purchases of these securities from
underwriters include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers include a spread between the bid
and asked price. The Fund seeks to obtain prompt execution of such orders
at the most favorable net price.
When the Fund engages in an option transaction, ordinarily the same broker
will be used for the purchase or sale of the option and any transactions
in the securities to which the option relates. When possible, concurrent
orders to purchase or sell the same security by more than one of the
accounts managed by the Manager or its affiliates are combined.
Transactions effected pursuant to such combined orders are averaged as to
price and allocated in accordance with the purchase or sale orders
actually placed for each account. Option commissions may be relatively
higher than those which would apply to direct purchases and sales of
portfolio securities.
The research services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and its affiliates,
and investment research received for the commissions of those other
accounts may be useful both to the Fund and one or more of such other
accounts. Such research, which may be supplied by a third party at the
instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid for in
commission dollars. The research services provided by brokers broaden the
scope and supplement the research activities of the Manager, by making
available additional views for consideration and comparisons, and enabling
the Manager to obtain market information for the valuation of securities
held in the Fund's portfolio or being considered for purchase. The Board
of Trustees, including the Independent Trustees of the Fund, annually
reviews information furnished by the Manager as to the commissions paid
to brokers furnishing such services in an effort to ascertain that the
amount of such commissions was reasonably related to the value or benefit
of such services. The Board of Trustees has permitted the Manager to use
concessions on fixed-price offerings to obtain research, in the same
manner as is permitted for agency transactions.
During the fiscal year ended December 31, 1993, total brokerage
commissions paid by the Fund (not including spreads or concessions on
principal transactions on a net trade basis) amounted to $_______. During
the fiscal year ended December 31, 1993, $ ____________________ was paid
to brokers as commissions in return for research services (including
special research, statistical information and execution); the aggregate
dollar amount of those transactions was $_________________. The
transactions giving rise to those commissions were allocated in accordance
with the internal allocation procedures described above.
General Distributor's Agreement. Oppenheimer Funds Distributor, Inc., a
wholly-owned subsidiary of the Manager, is the general distributor of the
Fund's shares under a General Distributor's Agreement dated October 22,
1990. The General Distributor's Agreement is subject to the same annual
renewal requirements and termination provisions as the Agreement. For the
fiscal year ended December 31, 1993, selling charges on the Fund's shares
amounted to $_________________, of which the Distributor and an affiliated
broker-dealer retained $_______________ in the aggregate.
Service Contract. Oppenheimer Shareholder Services ("OSS"), a division
of the Manager, serves as the Fund's transfer agent and registrar pursuant
to a Service Contract under which it is reimbursed by the Fund for its
costs in providing those services to the Fund, including the cost of
rental of office space. Similar services are provided by OSS to certain
other mutual funds advised by the Manager. OSS received $________ from
the Fund during the fiscal year ended December 31, 1993. The costs
described for these services are charged to the Fund as operating expenses
and are borne ratably by all shareholders in proportion to their holdings
of shares of the Fund.
RECEIPT OF SHAREHOLDER PROPOSALS
The Fund is not required to hold shareholder meetings on a regular basis.
Special meetings of shareholders may be called from time to time by either
the Fund or the Shareholders (under special conditions described in the
Fund's Statement of Additional Information). Under the Commission's proxy
rules, shareholder proposals which meet certain conditions may be included
in the Fund's proxy statement and proxy for a particular meeting. Those
rules require that for future meetings the shareholder must be a record
or beneficial owner of Fund shares with a value of at least $1,000 at the
time the proposal is submitted and for one year prior thereto, and must
continue to own such shares through the date on which the meeting is held.
Another requirement relates to the timely receipt by the Fund of any such
proposal. Under those rules, a proposal submitted for inclusion in the
Fund's proxy material for the next meeting after the meeting to which this
proxy statement relates must be received by the Fund a reasonable time
before the solicitation is made. The fact that the Fund receives a
proposal from a qualified shareholder in a timely manner does not ensure
its inclusion in the proxy material, since there are other requirements
under the proxy rules for such inclusion.
OTHER BUSINESS
Management of the Fund knows of no business other than the matters
specified above that will be presented at the Meeting. Since matters not
known at the time of the solicitation may come before the Meeting, the
proxy as solicited confers discretionary authority with respect to such
matters as properly come before the Meeting, including any adjournment or
adjournments thereof, and it is the intention of the persons named as
attorneys-in-fact in the proxy to vote the proxy in accordance with their
judgment on such matters.
By Order of the Board of Trustees,
Andrew J. Donohue, Secretary
May 6, 1994
Exhibit A
SERVICE PLAN AND AGREEMENT
BETWEEN
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
AND
OPPENHEIMER TAX-FREE BOND FUND
FOR CLASS A SHARES
SERVICE PLAN AND AGREEMENT (the "Plan") dated the ___ day of June_____,
1994, by and between OPPENHEIMER TAX-FREE BOND FUND (the "Fund") and
OPPENHEIMER FUNDS DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class
A Shares described in the Fund's registration statement as of the date
this Plan takes effect, contemplated by and to comply with Article III,
Section 26 of the Rules of Fair Practice of the National Association of
Securities Dealers, pursuant to which the Fund will reimburse the
Distributor for a portion of its costs incurred in connection with the
personal service and the maintenance of shareholder accounts ("Accounts")
that hold Class A Shares (the "Shares") of such series and class of the
Fund. The Fund may be deemed to be acting as distributor of securities
of which it is the issuer, pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act"), according to the terms of this Plan.
The Distributor is authorized under the Plan to pay "Recipients," as
hereinafter defined, for rendering services and for the maintenance of
Accounts. Such Recipients are intended to have certain rights as third-
party beneficiaries under this Plan.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
(a)"Recipient" shall mean any broker, dealer, bank or other
institution which: (i) has rendered services in connection with the
personal service and maintenance of Accounts; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may
arise concerning such service; and (iii) has been selected by the
Distributor to receive payments under the Plan. Notwithstanding the
foregoing, a majority of the Fund's Board of Trustees (the "Board")
who are not "interested persons" (as defined in the 1940 Act) and who
have no direct or indirect financial interest in the operation of this
Plan or in any agreements relating to this Plan (the "Independent
Trustees") may remove any broker, dealer, bank or other institution
as a Recipient, whereupon such entity's rights as a third-party
beneficiary hereof shall terminate.
(b)"Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such
customers, clients and/or accounts as to which such Recipient is a
fiduciary or custodian or co-fiduciary or co-custodian (collectively,
the "Customers"), but in no event shall any such Shares be deemed
owned by more than one Recipient for purposes of this Plan. In the
event that two entities would otherwise qualify as Recipients as to
the same Shares, the Recipient which is the dealer of record on the
Fund's books shall be deemed the Recipient as to such Shares for
purposes of this Plan.
3. Payments.
(a) Under the Plan, the Fund will make payments to the Distributor,
within forty-five (45) days of the end of each calendar quarter, in
the amount of the lesser of: (i) .0625% (.25% on an annual basis) of
the average during the calendar quarter of the aggregate net asset
value of the Shares computed as of the close of each business day of
Qualified Holdings, or (ii) the Distributor's actual expenses under
the Plan for that quarter of the type approved by the Board. The
Distributor will use such fee received from the Fund in its entirety
to reimburse itself for payments to Recipients and for its other
expenditures and costs of the type approved by the Board incurred in
connection with the personal service and maintenance of Accounts
including, but not limited to, the services described in the following
paragraph. The Distributor may make Plan payments to any "affiliated
person" (as defined in the 1940 Act) of the Distributor if such
affiliated person qualifies as a Recipient.
The services to be rendered by the Distributor and Recipients in
connection with the personal service and the maintenance of Accounts
may include, but shall not be limited to, the following: answering
routine inquiries from the Recipient's customers concerning the Fund,
providing such customers with information on their investment in
shares, assisting in the establishment and maintenance of accounts or
sub-accounts in the Fund, making the Fund's investment plans and
dividend payment options available, and providing such other
information and customer liaison services and the maintenance of
Accounts as the Distributor or the Fund may reasonably request. It
may be presumed that a Recipient has provided services qualifying for
compensation under the Plan if it has Qualified Holdings of Shares to
entitle it to payments under the Plan. In the event that either the
Distributor or the Board should have reason to believe that,
notwithstanding the level of Qualified Holdings, a Recipient may not
be rendering appropriate services, then the Distributor, at the
request of the Board, shall require the Recipient to provide a written
report or other information to verify that said Recipient is providing
appropriate services in this regard. If the Distributor still is not
satisfied, it may take appropriate steps to terminate the Recipient's
status as such under the Plan, whereupon such entity's rights as a
third-party beneficiary hereunder shall terminate.
Payments received by the Distributor from the Fund under the Plan
will not be used to pay any interest expense, carrying charges or
other financial costs, or allocation of overhead by the Distributor,
or for any other purpose other than for the payments described in this
Section 3. The amount payable to the Distributor each quarter will
be reduced to the extent that reimbursement payments otherwise
permissible under the Plan have not been authorized by the Board of
Trustees for that quarter. Any unreimbursed expenses incurred for any
quarter by the Distributor may not be recovered in later periods.
(b)The Distributor shall make payments to any Recipient quarterly,
within forty-five (45) days of the end of each calendar quarter, at
a rate not to exceed .0625% (.25% on an annual basis) of the average
during the calendar quarter of the aggregate net asset value of the
Shares computed as of the close of each business day of Qualified
Holdings owned beneficially or of record by the Recipient or by its
Customers (excluding Shares acquired in reorganizations with
investment companies for which Oppenheimer Management Corporation or
an affiliate acts as investment adviser and which have not adopted a
distribution plan at the time of the reorganization with the Fund).
However, no such payments shall be made to any Recipient for any such
quarter in which its Qualified Holdings do not equal or exceed, at the
end of such quarter, the minimum amount ("Minimum Qualified
Holdings"), if any, to be set from time to time by a majority of the
Independent Trustees. A majority of the Independent Trustees may at
any time or from time to time increase or decrease and thereafter
adjust the rate of fees to be paid to the Distributor or to any
Recipient, but not to exceed the rate set forth above, and/or increase
or decrease the number of shares constituting Minimum Qualified
Holdings. The Distributor shall notify all Recipients of the Minimum
Qualified Holdings and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice
within thirty (30) days after any change in these provisions.
Inclusion of such provisions or a change in such provisions in a
revised current prospectus shall constitute sufficient notice.
(c)Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own resources
(which may include profits derived from the advisory fee it receives
from the Fund), or (ii) by the Distributor (a subsidiary of OMC), from
its own resources.
4. Selection and Nomination of Trustees. While this Plan is in effect,
the selection or replacement of Independent Trustees and the nomination
of those persons to be Trustees of the Fund who are not "interested
persons" of the Fund shall be committed to the discretion of the
Independent Trustees. Nothing herein shall prevent the Independent
Trustees from soliciting the views or the involvement of others in such
selection or nomination if the final decision on any such selection and
nomination is approved by a majority of the incumbent Independent
Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund
shall provide at least quarterly a written report to the Fund's Board for
its review, detailing the amount of all payments made pursuant to this
Plan, the identity of the Recipient of each such payment, and the purposes
for which the payments were made. The report shall state whether all
provisions of Section 3 of this Plan have been complied with. The
Distributor shall annually certify to the Board the amount of its total
expenses incurred that year with respect to the personal service and
maintenance of Accounts in conjunction with the Board's annual review of
the continuation of the Plan.
6. Related Agreements. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at
any time, without payment of any penalty, by vote of a majority of the
Independent Trustees or by a vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class, on not more than sixty days written notice to any other party
to the agreement; (ii) such agreement shall automatically terminate in the
event of its "assignment" (as defined in the 1940 Act); (iii) it shall
go into effect when approved by a vote of the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on
such agreement; and (iv) it shall, unless terminated as herein provided,
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on
such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has
been approved by a vote of the Independent Trustees cast in person at a
meeting called on February 10, 1994 for the purpose of voting on this
Plan, has been approved by a "majority" (as defined in the 1940 Act) of
the Fund's outstanding Class A shares at a meeting held for the purpose
of approving such Plan, and takes effect as of June ___, 1994. Unless
terminated as hereinafter provided, it shall continue in effect until
December 31, 1994 and from year to year thereafter or as the Board may
otherwise determine only so long as such continuance is specifically
approved at least annually by the Board and its Independent Trustees cast
in person at a meeting called for the purpose of voting on such
continuance. This Plan may be terminated at any time by vote of a
majority of the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the 1940 Act) of the Fund's outstanding voting
securities of the Class. This Plan may not be amended to increase
materially the amount of payments to be made without approval of the Class
A Shareholders, in the manner described above, and all material amendments
must be approved by a vote of the Board and of the Independent Trustees.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor
understands that the obligations of the Fund under this Plan are not
binding upon any Trustee or shareholder of the Fund personally, but bind
only the Fund and the Fund's property. The Distributor represents that
it has notice of the provisions of the Declaration of Trust of the Fund
disclaiming shareholder and Trustee liability for acts or obligations of
the Fund.
OPPENHEIMER TAX-FREE BOND FUND
By: _________________________________________
Robert G. Zack, Assistant Secretary
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: __________________________________________
Katherine P. Feld
Vice President & Secretary
Exhibit B
INDEPENDENT AUDITORS' REPORT
Oppenheimer Management Corporation:
We have audited the accompanying consolidated statement of financial
condition of Oppenheimer Management Corporation and subsidiaries as of
December 31, 1993. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of financial
condition is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
statement of financial condition. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall statement of financial condition
presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, such consolidated statement of financial condition
presents fairly, in all material respects, the financial position of
Oppenheimer Management Corporation and subsidiaries at December 31, 1993
in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the Company changed
its method of accounting for income taxes to conform with Statement of
Financial Accounting Standards No. 109.
DELOITTE & TOUCHE
Denver, Colorado
February 16, 1994
OPPENHEIMER MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1993
ASSETS NOTES
CURRENT ASSETS:
Cash $ 31,940,116
Investments in money market
mutual funds 26,850,605
Investments in managed mutual funds 4,981,458
Investments in Zero Coupon U.S.
Treasuries Trust, at market 3,897,237
Accounts receivable:
Brokers and dealers 2 49,538,320
Managed mutual funds 2,3 11,433,524
Affiliated companies 100,495
Income taxes 13,902,237
Other 4,471,131
Other current assets 2,124,857
-----------
Total current assets 149,239,980
-------------
PROPERTY AND EQUIPMENT - Less
accumulated depreciation and
amortization of $8,169,031 8,896,837
-----------
OTHER ASSETS:
Intangible assets, net 1 113,445,572
Deferred sales commissions 54,452,051
Deferred charges 1,550,484
Other 1,607,387
----------
Total other assets 171,055,494
------------
TOTAL $329,192,311
LIABILITIES AND SHAREHOLDER'S EQUITY
NOTES
CURRENT LIABILITIES:
Accounts payable and accrued
expenses $ 33,866,353
Subscriptions payable to managed
mutual funds 2 71,371,285
Payable to brokers and dealers 2 9,483,935
Current portion of long-term debt 5,6 17,463,094
------------
Total current liabilities 132,184,667
--------------
LONG-TERM LIABILITIES:
Deferred income taxes4 4 15,447,486
Senior debt 5 59,781,186
Subordinated notes 6 44,450,000
-----------
Total liabilities 251,863,339
-----------
COMMITMENTS 1,8
SHAREHOLDER'S EQUITY: 5,7
Preferred stock - nonvoting;
$10 par value; 392,461 shares
authorized; 25,141 shares
issued and outstanding 251,410
Common Stock - voting; $.10 par
value; 229,246 shares authorized;
179,658 shares issued and
outstanding 17,966
Additional paid-in capital 49,241,234
Retained earnings 27,818,362
------------
Total shareholder's equity 77,328,972
--------------
TOTAL $329,192,311
See notes to consolidated statement of financial condition.
OPPENHEIMER MANAGEMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1993
1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Management Corporation (OMC) and its subsidiaries
(collectively, the "Company") are engaged in the business of
organizing, promoting, and managing registered investment
companies (hereafter referred to as "mutual funds").
OMC owns all the outstanding stock of Oppenheimer Funds
Distributor, Inc., Shareholder Services, Inc. (SSI), HarbourView
Asset Management Corporation, Centennial Asset Management
Corporation, Oppenheimer Partnership Holdings, Inc., and
Shareholder Financial Services, Inc. OMC is a wholly-owned
subsidiary of Oppenheimer Acquisition Corporation (OAC), which is
controlled by Massachusetts Mutual Life Insurance Company and
senior management of OMC.
Principles of Consolidation - The accompanying consolidated
statement of financial condition includes the accounts of OMC and
its subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
Investments in Money Market Mutual Funds - The Company invests
available cash in money market mutual funds managed by the
Company. The investments are recorded at cost which equals
market.
Investments in Managed Mutual Funds - The Company owns shares of
stock in several of the mutual funds it manages. The shares are
purchased at their respective net asset values. The resulting
investments are recorded at cost which approximates market.
Investments in Zero Coupon U.S. Treasuries Trust - The Company is
the Sponsor for the Oppenheimer Zero Coupon U.S. Treasuries Trust
and has undertaken to maintain a secondary market for units in the
Trust. The investments are carried at market.
Property and Equipment - Property and equipment is recorded at
cost. Equipment depreciation expense is provided over the assets'
estimated useful lives on the straight-line method. Leasehold
improvements are amortized on the straight-line method over the
remaining terms of the lease agreements.
Intangible Assets - Intangible assets at December 31, 1993, are as
follows:
Less
Useful Accumulated Net
Lives Cost Amortization Book Value
----------- ----------- ------------ -----------
Debt Issuance Costs 7 years $ 5,535,450$ (2,999,400) $ 2,536,050
Management Contracts 7 years 38,600,000 (18,840,667) 19,759,333
Goodwill 25 years 100,766,565 (11,671,455) 89,095,110
Other 4-10 years 4,385,906 (2,330,827) 2,055,079
----------- ------------ ----------
$149,287,921$(35,842,349) $113,445,572
Deferred Sales Commissions - Sales commissions paid to brokers and
dealers in connection with sales of shares of certain mutual funds
are charged to deferred sales commissions and amortized over six
years. Early withdrawal charges received by the Company from
redeeming shareholders reduce unamortized deferred sales
commissions.
Stock Appreciation Rights - OAC has granted certain stock
appreciation rights relating to OAC's stock to certain employees of
OMC. During 1993, OMC recorded $21,603,294 relating to these stock
appreciation rights as a credit to additional paid-in capital.
Income Taxes - OAC files a consolidated federal income tax return
which includes the Company. Income taxes are recorded as if the
Company files on a separate return basis. During 1993 the Company
was required to adopt Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes. Statement 109 requires a
change from the deferred method of accounting for income taxes of
APB Opinion 11 to the asset and liability method of accounting for
income taxes. The asset and liability method prescribed by
Statement 109 results in deferred tax assets and liabilities being
recorded for the differences between the book and tax basis relating
to the Company's assets and liabilities.
The Company adopted Statement 109 in 1993 and has elected to restate
prior years beginning with the 1990 period. The effect of this
restatement on prior years has been reflected in retained earnings
as of December 31, 1992.
2. TRANSACTIONS WITH BROKERS AND DEALERS
The Company acts as general distributor for the sale and
distribution of shares of several mutual funds. In this capacity,
the Company records a receivable when it issues confirmations of all
accepted purchase orders to the originating brokers and dealers; at
the same time, the Company records a liability to the mutual funds
equal to the net asset value of all shares subject to such
confirmations. This liability must be paid to the mutual funds
within 11 business days unless the trade is canceled. If the
originating broker or dealer fails to make timely settlement of its
purchase order under the terms of its dealer agreement with the
Company, the Company may cancel the purchase order and, at the
Company's risk, hold responsible the originating broker or dealer.
When brokers and dealers place share redemption orders with a fund's
distributor, the Company records a receivable from the mutual funds
equal to the net asset value of all shares redeemed; at the same
time the Company records a corresponding liability payable to the
originating brokers.
3. RELATED PARTIES
The following is a summary of the significant balances, transactions
and relationships with affiliated companies and other related
parties as of December 31, 1993:
Officers and Directors of the Company; Shareholders of OAC - Several
officers and directors of the Company and shareholders of OAC are
also officers and directors or trustees of the mutual funds managed
and distributed by the Company.
Transfer Agents - SSI and Oppenheimer Shareholder Services (OSS), a
division of OMC, act as transfer and shareholder servicing agents
for the mutual funds managed by the Company and others. Amounts
charged to managed mutual funds are based on costs incurred on
behalf of the mutual funds pursuant to service agreements between
SSI or OSS and the mutual funds. SSI also acts as transfer agent
for certain mutual funds not managed by the Company, and amounts
charged to those funds are based on fees set by contracts with the
respective mutual funds.
The receivable from managed mutual funds includes $2,466,000
resulting from transfer agency fees and expenditures made on behalf
of the mutual funds at December 31, 1993.
4. INCOME TAXES
As discussed in note 1, the Company adopted Statement 109 in 1993
and has applied the provisions of the Statement retroactively to
1990. The principal effect of this change in accounting for income
taxes related to the remeasurement of the 1990 acquisition of
Maximum Holdings, Inc. and resulted in the recording of goodwill in
the amount of $13,800,000 and deferred taxes payable in the same
amount. In addition, retained earnings at December 31, 1992 was
increased by $2,001,702 to reflect the effects of the restatement as
of that date.
Deferred tax assets of $20,165,000 have been recorded in the
accompanying financial statements. These amounts primarily relate
to the benefit associated with certain state tax loss carryforwards
and compensation not deductible for tax purposes until paid. A
valuation allowance has not been recorded with respect to this
deferred tax asset. Deferred tax liabilities of $35,612,000 have
also been recorded. These amounts relate primarily to the current
deduction, for tax purposes, of deferred sales commissions which are
amortized over six years for book purposes and the difference in
book and tax basis relating to certain management contracts.
The Company has certain net operating loss carryforwards relating to
various states. If not used in the interim, these losses will
generally expire on December 31, 2008.
5. SENIOR DEBT
At December 31, 1993, the Company has outstanding $77.2 million of
Senior Debt borrowed from five banks. This amount is comprised of a
term loan of $23.7 million due September 30, 1997 and $53.5 million
outstanding on a $75 million revolving credit. The revolving credit
is subject to annual renewal, and, if not renewed, is repayable in
four annual installments. The debt bears interest at the Company's
election at the rate for Eurodollar deposits plus 1 1/2% or the
higher of the prime rate, plus 1/2% or the federal funds rate plus
1/2%. The credit agreement contains covenants requiring certain
minimum financial tests and restrictions on capital expenditures,
investments, indebtedness and dividends. At December 31, 1993, the
Company was in compliance with the terms of the credit agreement.
In addition, the banks have also received a pledge of the shares of
the Company's subsidiaries and guarantees of certain subsidiaries.
Borrowings under the credit agreement are collateralized by certain
assets of the Company.
The mandatory principal repayment schedule for the term loan is as
follows (000's):
1994 $ 10,000
1995 12,000
1996 1,700
--------
$ 23,700
========
The credit agreement has certain provisions whereby specified
amounts of excess cash flow on a semi-annual basis, as defined in
the agreement, must be applied to reduce the outstanding loan
balance. There are no prepayment penalties.
The Company has entered into interest rate swap agreements whereby
certain banks have agreed to pay the Company interest on a floating
rate (Eurodollar) basis and the Company has agreed to pay the banks
interest on a fixed rate basis. At December 31, 1993, the Company
has fixed an interest rate of 10.00% on $29,000,000 of the Senior
Debt. The interest rate swap agreements mature December 31, 1994.
The Company is exposed to credit loss in the event of non-
performance by the other parties to the interest rate swap
agreements; however, the Company does not anticipate non-performance
by the counterparties. Based on borrowing rates currently available
to the Company for senior and subordinated loans with similar terms,
maturities and prepayment options, the Company estimates that the
fair value of its interest bearing debt and the related interest
rate swap agreements is $124.6 million as compared to the carrying
amount shown on the balance sheet of $121.7 million.
6. SUBORDINATED NOTES
Pursuant to a Note Agreement as amended and restated as of November
24, 1992 (the Note Agreement), the Company issued to a group of
insurance companies owned by Massachusetts Mutual Life Insurance
Company, $44,450,000 face amount of Subordinated Notes (Notes) due
October 31, 2000. The Notes are subordinated to the Senior Debt
obligations, (see Note 5). The Notes require semi-annual interest
payments at a rate of 14% on October 31 and April 30 of each year.
The Company may make optional prepayments of Notes, with a penalty,
beginning November 1, 1995. The Note Agreement contains covenants
requiring certain minimum financial tests and restrictions on
capital expenditures, investments, indebtedness and dividends. At
December 31, 1993, the Company was in compliance with the terms of
the Note Agreement.
The mandatory principal repayment schedule for the Notes is as
follows (000's):
1998 $14,800
1999 14,825
2000 14,825
-------
$44,450
=======
7. SHAREHOLDER'S EQUITY
The following table summarizes the various series and classes of
preferred and common stocks that are authorized, issued and
outstanding as of December 31, 1993:
Shares
Issued and
Authorized Outstanding Amount
Preferred stock - non-voting;
$10 par value:
Series A - $15.00 non-cumulative,
non-convertible 1,350
Series B - $1.50 non-cumulative,
non-convertible 186,500
Series C - $1.00 cumulative,
non-convertible 12,150 12,150 $121,500
Series D - $.60 cumulative,
convertible:
Class A 161,523
Class B 30,938 12,991 129,910
--------- --------- ---------
Total 392,461 25,141 $251,410
======= ====== ========
Common stock - voting; $.10
par value:
Common shares 212,461 162,873 $ 16,287
Class A common shares 16,785 16,785 1,679
------------ ---------- -------
Total 229,246 179,658 $ 17,966
======= ======= ========
The outstanding preferred shares are redeemable, at the option of
the Company, at $10 per share plus all accrued and unpaid dividends.
In the event of dissolution or liquidation, the preferred
shareholders are entitled to receive these same amounts before any
distributions are made to the common shareholder. The Series D
Preferred Shares are convertible, at the option of the shareholder,
into common shares on a one-for-one basis.
8. COMMITMENTS
Leases - The Company rents office space and certain computer and
other equipment under leases expiring during the next 15 years. At
December 31, 1993, the aggregate minimum annual rentals under
noncancelable operating leases were as follows:
Years Ending
December 31
------------
1994 $ 6,237,568
1995 4,406,666
1996 3,513,503
1997 2,573,471
1998 2,223,802
Thereafter 10,660,288
-----------
$29,615,298
===========