OPPENHEIMER SERIES FUND, INC.
CONNECTICUT MUTUAL INCOME ACCOUNT
2 World Trade Center, New York, New York 10048
1-800-525-7048
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held April 24, 1996
To the Shareholders:
Notice is hereby given that a Special Meeting of the Shareholders of
Connecticut Mutual Income Account ("Income Fund" or the "Fund"), a series
of Oppenheimer Series Fund, Inc. (the "Company"), an open-end, management
investment company (formerly named Connecticut Mutual Investment Accounts,
Inc.), will be held at OppenheimerFunds, Inc., 3410 South Galena Street,
Denver, Colorado 80231, at 10:00 A.M., Denver time, on April 24, 1996, 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 March 18, 1996 (the "Reorganization
Agreement") by and among Income Fund and Oppenheimer Bond Fund ("Bond
Fund"), a series of Oppenheimer Integrity Funds (the "Trust"), and
the transactions contemplated thereby (the "Reorganization"),
including (i) the transfer of substantially all the assets of Income
Fund to Bond Fund in exchange solely for the issuance of Class A and
Class B shares of Bond Fund, (ii) the distribution of such shares of
Bond Fund to shareholders of Income Fund in liquidation of Income
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. Income Fund's Class A and Class B
shareholders of record at the close of business on March 18, 1996 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
Directors of the Company recommends a vote in favor of the Reorganization.
WE URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Directors,
Andrew J. Donohue, Secretary
March 18, 1996
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 Connecticut Mutual Income Account ("Income Fund" or the
"Fund") to Oppenheimer Bond Fund ("Bond Fund"), the issuance of shares of
Bond Fund to Income Fund for distribution to its shareholders and the
cancellation of the outstanding shares of Income Fund. The number of
shares of Bond Fund that will be received by shareholders of Income Fund
will be determined on the basis of the relative net asset values of Bond
Fund and Income Fund. Although the number of shares of Bond Fund received
by a shareholder of Income Fund may be more or less than the shareholder's
holdings of Income Fund shares, the value of the shares of Bond Fund
issued in the Reorganization will be equal to the value of the shares
previously held in Income Fund.
2. What are the reasons for the Reorganization?
On February 14, 1996, at a meeting of Income Fund's shareholders, the
Fund's shareholders voted to approve the appointment of OppenheimerFunds,
Inc. ("OFI") as the Fund's investment adviser. In the proxy statement
dated December 18, 1995 and the supplement dated January 19, 1996 (the
"1995 Proxy Statement") relating to that meeting, the Fund's shareholders
were advised that at a later date they would vote on the merger of the
Fund into a comparable Oppenheimer mutual fund.
3. What benefits to shareholders may result from this transaction?
The Directors of Income Fund believe that combining these two funds may
benefit shareholders of Income Fund by allowing the Fund to capitalize on
expected economies of scale in the provision of the following services:
accounting, legal, transfer agency, insurance, custody and administration.
4. Who is paying the expenses of the Reorganization?
All expenses of the Reorganization will be paid by Massachusetts Mutual
Life Insurance Company [which is the indirect parent of G.R. Phelps & Co.,
Inc., ("Phelps")], the administrator and previous investment manager of
the Fund and of OFI, the Fund's new investment manager.
5. Who is OppenheimerFunds, Inc.?
OppenheimerFunds, Inc. and its subsidiaries are engaged principally in the
business of managing, distributing and servicing registered investment
companies. OFI is indirectly controlled by Massachusetts Mutual Life
Insurance Company ("MassMutual") which controls Phelps as a result of the
merger of MassMutual and Connecticut Mutual Life Insurance Company on
February 29, 1996, as described in the 1995 Proxy Statement. As of March
1, 1996, OppenheimerFunds, Inc. and a subsidiary had assets of more than
$50 billion under management in more than 40 mutual funds.
6. Do the Oppenheimer funds have a sales charge?
Yes, the Oppenheimer funds impose a sales charge, other than their money
market funds (certain of which have an asset-based sales charge on certain
classes of shares). However, there will be no commission or sales load
of any kind charged in connection with this Reorganization.
7. May I exchange between other Oppenheimer funds without a sales charge
or exchange fee?
Yes. As a shareholder of an Oppenheimer fund after this Reorganization,
you will be able to make exchanges into the same class of shares of other
Oppenheimer funds without payment of any sales charges or exchange fees.
Exchange privileges may be modified or discontinued at any time.
8. Where can I get prospectuses and other information on the Oppenheimer
funds?
Call OppenheimerFunds Distributor, Inc. at 1-(800) 255-2755. They will
be pleased to supply you with all the information, including prospectuses,
which you will need to make an investment decision.
9. Whom do I contact about my account or to initiate a transaction in my
account?
For information about your account or to initiate a transaction in your
account, you may continue to contact your registered representative at
your broker/dealer or, in the alternative, OppenheimerFunds Services at
1-(800) 525-7048.
10. Will this Reorganization result in any tax liability to Income Fund,
Bond Fund or to me as a shareholder?
The Reorganization is intended to qualify for federal income tax purposes
as a tax-free reorganization. The aggregate tax basis of Bond Fund shares
received by you will be the same as the aggregate tax basis of your Income
Fund shares prior to the Reorganization and the holding period of the
shares of Bond Fund to be received by you will include the period during
which Income Fund shares surrendered in exchange therefore were held,
provided that those Income Fund shares were held as capital assets.
<PAGE>
OPPENHEIMER SERIES FUND, INC.
CONNECTICUT MUTUAL INCOME ACCOUNT
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROXY STATEMENT AND PROSPECTUS
OPPENHEIMER BOND FUND
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
This Proxy Statement and Prospectus is being furnished to shareholders of
Connecticut Mutual Income Account ("Income Fund" or the "Fund"), a series
of Oppenheimer Series Fund, Inc. (the "Company"), an open-end, management
investment company, in connection with the solicitation by the Board of
Directors of the Company (the "Board") of proxies to be used at the
Special Meeting of Shareholders of Income Fund, to be held at
OppenheimerFunds, Inc., 3410 South Galena Street, Denver, Colorado 80231,
at 10:00 A.M., Denver time, on April 24, 1996, and any adjournments
thereof (the "Meeting"). It is expected that this Proxy Statement and
Prospectus will be mailed to shareholders on or about March 22, 1996.
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 March 18, 1996 (the "Reorganization Agreement"), by and among Income
Fund and Oppenheimer Bond Fund ("Bond Fund"), a series of Oppenheimer
Integrity Funds (the "Trust"), and the transactions contemplated by the
Reorganization Agreement (the "Reorganization"). The Reorganization
Agreement provides for the transfer of substantially all the assets of
Income Fund to Bond Fund in exchange for the issuance of Class A and Class
B shares of Bond Fund, the distribution of such shares of Bond Fund to the
respective Class A and Class B shareholders of Income Fund in liquidation
of Income Fund 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 Class A and Class B shareholder of Income Fund will
receive that number of Class A and Class B shares, respectively, of Bond
Fund having an aggregate net asset value equal to the net asset value of
such shareholder's shares of Income Fund of that class. This transaction
is being structured as a tax-free reorganization. See "Approval of the
Reorganization."
Bond Fund 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 ($500,000 as to
purchases by OppenheimerFunds prototype 401(k) plans) are not subject to
a sales charge, but may be subject to a contingent deferred sales charge
("CDSC") if redeemed within 18 months of the date of purchase). 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. Class C shares
are sold without a front-end sales charge but may be subject to a CDSC if
not held for one year. As a result of the transaction, holders of Income
Fund Class A shares will receive Class A shares of Bond Fund and no sales
charge will be imposed on the Class A shares received by the Fund's Class
A shareholders. Holders of Income Fund Class B shares will receive Class
B shares of Bond Fund; any CDSC which is applicable to a shareholder's
investment will continue to apply, and, in calculating the applicable CDSC
payable upon the subsequent redemption of shares of Bond Fund, the period
during which an Income Fund shareholder held shares of the Fund will be
counted. Because Income Fund has no Class C shares outstanding, Bond Fund
will not issue Class C shares in the Reorganization. Accordingly, complete
information on Class C shares of Bond Fund is not included in this Proxy
Statement and Prospectus, and no offering of Class C shares is made
hereby.
Bond Fund, formerly named "Oppenheimer Investment Grade Bond Fund," is a
mutual fund that seeks a high level of current income by investing mainly
in debt instruments. Income Fund seeks high current income consistent
with prudent investment risk and preservation of capital. Income Fund
invests primarily in corporate debt securities with remaining maturities
of five years or less or mortgage debt securities with prepayment features
which, in the judgment of OFI, will result in payment of interest and
principal such that the effective maturity of the security is five years
or less. While both Income Fund and Bond Fund (collectively referred to
as the "funds") may invest assets in lower quality higher risk debt
securities (commonly referred to as "junk bonds"), and preferred stocks,
shareholders of Income Fund should consider the differences in investment
objectives and policies of Bond Fund and the Fund, including Bond Fund's
ability to invest a greater percentage of its assets in junk bonds. See
"Comparison Between Bond Fund and Income Fund - Comparison of Investment
Objectives, Policies and Restrictions."
Bond Fund has filed with the Securities and Exchange Commission (the
"SEC") a Registration Statement on Form N-14 (the "Registration
Statement") relating to the registration of Class A and Class B shares of
Bond Fund to be offered to the respective Class A and Class B shareholders
of Income Fund pursuant to the Reorganization Agreement. This Proxy
Statement and Prospectus relating to the Reorganization also constitutes
a Prospectus of Bond Fund filed as part of such Registration Statement.
Information contained or incorporated by reference herein relating to Bond
Fund has been prepared by and is the responsibility of Bond Fund.
Information contained or incorporated by reference herein relating to
Income Fund has been prepared by and is the responsibility of Income Fund.
This Proxy Statement and Prospectus sets forth concisely information about
Bond Fund 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 the transfer and
shareholder servicing agent for the funds, OppenheimerFunds Services
("OFS"), at P.O. Box 5270, Denver, Colorado 80217, or by calling 1-800-
525-7048 (a toll-free number) and are incorporated herein by reference:
(i) a Prospectus for the Company, dated October 1, 1995, together with the
supplement to that Prospectus dated March 1, 1996; (ii) a Statement of
Additional Information about the Company, dated October 1, 1995 (the
"Fund's Statement of Additional Information"), together with a supplement
to that Statement of Additional Information dated March 18, 1996; (iii)
a Prospectus for Bond Fund, dated July 10, 1995, as supplemented November
22, 1995, January 1, 1996 and January 5, 1996; (iv) a Statement of
Additional Information for Bond Fund, dated July 10, 1995, together with
a supplement dated July 14, 1995 (the "Bond Fund Statement of Additional
Information"); and (v) a Statement of Additional Information relating to
the Reorganization described in this Proxy Statement and Prospectus (the
"Statement of Additional Information"), dated March 18, 1996 and filed as
part of the Registration Statement, which Statement of Additional
Information includes, among other things, the Company's Prospectus, the
Company's Statement of Additional Information and the Bond Fund Statement
of Additional Information, which contains more detailed information about
Bond Fund and its management.
Investors are advised to read and retain this Proxy Statement and
Prospectus for future reference.
Shares of Bond Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement and Prospectus is dated March 18, 1996.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
COMPARATIVE FEE TABLES
SYNOPSIS
Parties to the Reorganization
The Reorganization
Tax Consequences of the Reorganization
Investment Objectives and Policies
Investment Advisory and Distribution Plan Fees
Purchases, Exchanges and Redemptions
PRINCIPAL RISK FACTORS
APPROVAL OF THE REORGANIZATION (The Proposal)
Background
Board Approval of the Reorganization
The Reorganization
Tax Aspects of the Reorganization
Capitalization Table (Unaudited)
COMPARISON BETWEEN BOND FUND AND INCOME FUND
Comparison of Investment Objectives, Policies and Restrictions
Special Investment Methods
Investment Restrictions
Bond Fund Performance
Additional Comparative Information
INFORMATION CONCERNING THE MEETING
The Meeting
Record Date; Vote Required; Share Information
Proxies
Costs of the Solicitation and the Reorganization
MISCELLANEOUS
Financial Information
Public Information
OTHER BUSINESS
EXHIBIT A - Agreement and Plan of Reorganization, dated as of March 18,
1996, by and between Oppenheimer Series Fund, Inc. and
Oppenheimer Integrity Funds
<PAGE>
COMPARATIVE FEE TABLES
Transaction Charges
Shareholders pay certain expenses directly, such as sales charges and
account transaction charges. The schedule of such charges for both Income
Fund and Bond Fund is noted below.
<TABLE>
<CAPTION>
Income Fund Bond Fund
Class of Shares: A B A B C
<S> <C> <C> <C> <C> <C>
Maximum Initial Sales Load
Imposed on Purchases (as a %
of offering price) 4.00% None 4.75% None None
Maximum Deferred Sales
Load None(1) 5.00%(2) None(1) 5.00%(2) 1.00%(3)
Maximum Sales Load Imposed on
Reinvested Dividends None None None None None
Redemption Fee None None None None None
Exchange Fee None None None None None
</TABLE>
(1) For Income Fund, certain purchases of Class A shares of $500,000 or
more are not subject to front-end sales charges, but a contingent
deferred sales charge ("CDSC") is imposed on the proceeds of such
shares equal to 1% if the shares are redeemed within 12 months after
the calendar month of purchase. For Bond Fund, a CDSC of up to 1%
is imposed on purchases of Class A shares of more than $1 million
(more than $500,000 for purchases by OppenheimerFunds prototype
401(k) plans), if the shares are redeemed within 18 months.
(2) The CDSC schedules are 5%/5%/4%/4%/2%/1% for Income Fund and
5%/4%/3%/3%/2%/1% for Bond Fund, and eliminated thereafter. After
eight years, Income Fund Class B shares automatically convert to
Class A shares. After six years, Bond Fund Class B shares
automatically convert to Class A shares.
(3) A CDSC of 1% may be imposed upon a redemption of Bond Fund Class C
shares made within 12 months of purchase.
Expenses of Bond Fund and Income Fund; Pro Forma Expenses
Each fund pays a variety of expenses directly for management of its
assets, administration, distribution of shares and other services, and
those expenses are reflected in the net asset value per share of each of
Bond Fund and Income Fund. The following calculations are based on the
expenses of Bond Fund and Income Fund for the 12 months ended December 31,
1995. The inception dates for Class C shares of Bond Fund and for Class
B shares of Income Fund were July 11, 1995 and October 1, 1995,
respectively. Total Fund Operating Expenses for Class C shares of Bond
Fund and for Class B shares of Income Fund are based on estimated expenses
that would have been incurred during the 12 months ended December 31, 1995
had such respective shares been outstanding during that entire period.
These amounts are shown as a percentage of the average net assets of each
class of shares of Income Fund and of Bond Fund for those periods. The
pro forma fees reflect what the fee schedules would have been at December
31, 1995 if the Reorganization had occurred 12 months prior to that date.
<TABLE>
<CAPTION>
Connecticut Mutual
Income Account Oppenheimer Bond Fund
Class A Class B Class A Class B Class C
<S> <C> <C> <C> <C> <C>
Management Fees(1) .625% .625% 0.75% 0.75% 0.75%
12b-1 Fees 0.25% .25% 1.00% 1.00% 1.00%
Other Expenses .315% .315% 0.38% 0.40% 0.40%
Total Fund Operating
Expenses(1) 1.19% 1.94% 1.38% 2.15% 2.15%
</TABLE>
Pro Forma Combined Fund
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Management Fees(1) .75% .75% .75%
12b-1 Fees .25% 1.00% 1.00%
Other Expenses .38% .40% .40%
Total Fund Operating
Expenses(1) 1.38% 2.15% 2.15%
</TABLE>
(1) Management fees for Bond Fund and the pro forma combined Fund have
been restated in the fee table above to reflect the increased management
fee rates paid by Bond Fund to its investment adviser, pursuant to a new
Investment Advisory Agreement approved by shareholders of Bond Fund at a
meeting held July 10, 1995. Had this management fee not changed,
"Management Fees" for the twelve months ended December 31, 1995 would have
been 0.50%, 0.50% and 0.50% of Class A, Class B and Class C average annual
net assets, and "Total Fund Operating Expenses" would have been 1.13%,
1.90% and 1.90% of Class A, Class B and Class C average annual net assets.
See "Investment Advisory and Distribution Plan Fees" below.
(2) 12b-1 fees and other expenses for Income Fund have been restated to
reflect the fees that would have been paid in the absence of a temporary
agreement by Connecticut Mutual Financial Services, L.L.C. ("CMFS"),
formerly the distributor of Income Fund shares, not to impose such fees
and to assume such expenses during the fiscal year ended December 31,
1995. That expense limitation has been terminated.
Hypothetical Examples
To attempt to show these expenses over time, the examples shown below have
been created. Assume that you make a $1,000 investment in either Income
Fund or Bond Fund 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. If you were to redeem your shares at the end of each period
shown below, your investment would incur the following expenses by the end
of each period shown:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Oppenheimer Bond Fund
Class A Shares $61 $89 $119 $205
Class B Shares $72 $97 $135 $211(1)
Class C Shares $32 $67 $115 $248
Connecticut Mutual
Income Account
Class A Shares $52 $76 $103 $179
Class B Shares $70 $101 $125 $207(1)
Pro Forma Combined
Fund
Class A Shares $61 $89 $119 $205
Class B Shares $72 $97 $135 $211(1)
Class C Shares $32 $67 $115 $248
</TABLE>
If you did not redeem your investment, it would incur the following
expenses:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Oppenheimer Bond Fund
Class A Shares $61 $89 $119 $205
Class B Shares $22 $67 $115 $211(1)
Class C Shares $22 $67 $115 $248
Connecticut Mutual
Income Account
Class A Shares $59 $83 $110 $185
Class B Shares $20 $61 $105 $207(1)
Pro Forma Combined
Fund
Class A Shares $61 $89 $119 $205
Class B Shares $22 $67 $115 $211(1)
Class C Shares $22 $115 $115 $248
</TABLE>
(1) The Class B expenses (a) in years seven through ten for Bond Fund and
the Pro Forma Combined Fund and (b) in years none and ten for Income Fund,
are based on the Class A expenses shown above, because Bond Fund and
Income Fund automatically convert Class B shares into Class A shares after
six years and eight years, respectively. Long-term Class B shareholders
could pay the economic equivalent of more than the maximum front-end sales
charge allowed under applicable regulatory requirements, because of the
effect of the asset-based sales charge and CDSC. For Class B shareholders
of both funds, the automatic conversion of Class B shares to Class A
shares is designed to minimize the likelihood that this will occur.
SYNOPSIS
The following is a synopsis of certain information contained in 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 in or incorporated by reference in this Proxy
Statement and Prospectus and the Exhibit hereto. Shareholders should
carefully review this Proxy Statement and Prospectus and the Agreement and
Plan of Reorganization which is an Exhibit hereto in their entirety and,
in particular, the current Prospectus of Bond Fund which accompanies this
Proxy Statement and Prospectus and is incorporated by reference herein.
Parties to the Reorganization
Bond Fund is a series of Oppenheimer Integrity Funds (the "Trust") a
diversified, open-end, management investment company organized in 1982 as
a multi-series Massachusetts business trust. Bond Fund is located at 3410
South Galena Street, Denver, Colorado 80231. OppenheimerFunds, Inc.
("OFI") acts as investment adviser to Bond Fund. OppenheimerFunds
Distributor, Inc. ("OFDI"), a subsidiary of OFI, acts as the distributor
of Bond Fund's shares. Additional information about Bond Fund is set
forth below.
Income Fund is a series of Oppenheimer Series Fund, Inc. (the "Company"),
an open-end, management investment company organized as a multi-series
Maryland corporation on December 9, 1981 that changed its name from
Connecticut Mutual Investment Accounts, Inc. on March 18, 1996. The
following changes took effect March 1, 1996: the Fund's address changed
to Two World Trade Center, New York, NY 10048-0203 and OFI become the
Fund's investment adviser. On March 18, 1996, OFS became Income Fund's
transfer agent and shareholder servicing agent and OFDI became the
distributor of Income Fund's shares. Additional information about Income
Fund is set forth below.
The Reorganization
The Reorganization Agreement provides for the transfer of substantially
all the assets of Income Fund to Bond Fund in exchange for the issuance
of Class A and Class B shares of Bond Fund to the respective Class A and
Class B shareholders of Income Fund, in liquidation of Income Fund. The
Reorganization Agreement also provides for the distribution by Income Fund
of these shares of Bond Fund to the Fund shareholders in liquidation of
the Fund. As a result of the Reorganization, each Fund shareholder will
receive that number of full and fractional Bond Fund shares equal in value
to such shareholder's pro rata interest in the net assets transferred to
Bond Fund as of the Valuation Date (as hereinafter defined). Holders of
Class A and Class B shares of the Fund will receive Class A and Class B
shares, respectively, of Bond Fund. For further information about the
Reorganization see "Approval of the Reorganization" below.
For the reasons set forth below under "Approval of the Reorganization -
Board Approval of the Reorganization," the Board, including the Directors
who are not "interested persons" of the Company (the "Independent
Directors"), 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 the Trust has also approved
the Reorganization and determined that the interests of existing Bond Fund
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 OFI, Phelps and their respective affiliates.
Approval of the Reorganization will require the affirmative vote of the
holders of a majority of Income Fund's Class A and Class B shares
outstanding and entitled to vote, voting together as a series.
Tax Consequences of the Reorganization
As a condition to the closing of the Reorganization, Income Fund and Bond
Fund will have received an opinion from Arthur Andersen LLP, tax adviser
to the Fund, 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 Income
Fund, Bond Fund, or the shareholders of either Fund for Federal income tax
purposes, except to the extent the shareholders of Income Fund may realize
taxable income or gain if a distribution is made to them of any portion
of the "Cash Reserve," as defined below. 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
Investment Objective and Policies
The investment policies described below are not "fundamental" unless this
Proxy Statement and Prospectus say that a particular policy is
"fundamental." Bond Fund's investment objective is fundamental, whereas
Income Fund's investment objective is non-fundamental. Fundamental
policies are those that cannot be changed without the approval of
shareholders of that Fund.
As its investment objective, Bond Fund seeks a high level of current
income by investing mainly in debt instruments. Under normal market
conditions, Bond Fund invests at least 65% of its total assets in
investment grade debt securities, U.S. Government securities, and money
market instruments and may invest up to 35% of its total assets in debt
securities rated less than investment grade. Investment grade debt
securities are those rated in one of the four highest categories by
Standard & Poor's Corporation ("S&P"), Moody's Investors Service, Inc.
("Moody's"), or another nationally-recognized rating organization. Such
categories are, from highest to lowest ratings, AAA, AA, A and BBB as to
S&P and Aaa, Aa, A and Baa as to Moody's. See "Comparison Between Bond
Fund and the Fund" for a discussion of certain of these ratings.
Securities rated less than investment grade (often called "junk bonds")
are considered speculative. Although non-investment grade securities
generally offer the potential for higher income than investment grade debt
securities, they may be subject to greater market fluctuations, greater
difficulty in selling them and a greater risk of default because of the
issuer's low creditworthiness. Prior to July 10, 1995, Bond Fund was
named "Oppenheimer Investment Grade Bond Fund" and its investments were
limited to investment grade bonds, U.S. Government securities and money
market instruments. Bond Fund's shareholders approved the changes in Bond
Fund's investment policies at a meeting held July 10, 1995 and these new
investment policies are described herein and in more detail in Bond Fund's
current Prospectus and the Bond Fund Statement of Additional Information.
OFI anticipates that Bond Fund would generally invest at least 75% of its
total assets in: (i) U.S. corporate bonds rated "A" or better and (ii)
U.S. government and agency bonds. OFI further anticipates that Bond Fund
would invest an additional 15% of its total assets in non-investment grade
domestic corporate bonds and 10% of its total assets in non-investment
grade foreign bonds. These anticipated investment targets, including the
allocation between domestic and foreign lower-grade debt securities, are
not fundamental policies, and they are subject to fluctuation and may be
changed by OFI without further notice to shareholders or amended
prospectus disclosure.
Bond Fund's investments may also include securities of foreign governments
and companies, mortgage-backed securities, collateralized mortgage-backed
obligations (CMOs), asset-backed securities, zero coupon securities,
preferred stock and municipal securities. Bond Fund may also write
covered calls and use certain derivative investments, including options
and futures, to enhance income and may use hedging instruments to try to
manage investment risks.
As its investment objective, Income Fund seeks high current income
consistent with prudent investment risk and preservation of capital.
Income Fund seeks to achieve its objective by investing primarily in
corporate debt securities with remaining maturities of five years or less
of mortgage debt securities with prepayment features which in the judgment
of OFI will result in the payment of interest and principal such that the
effective maturity is five years or less. Income Fund invests at least
75% of its total assets in: U.S. Government and U.S. Government-related
securities, dollar-denominated foreign government and corporate securities
and short-term investments. These investments must be rated at least
investment grade by a major rating agency at the time of purchase or if
unrated, be judged by OFI to be of comparable credit quality, except that
Income Fund's investment in short-term investments must be rated, or
judged to be the equivalent of "Prime". Income Fund's investments may
include municipal obligations, mortgage-backed and asset-backed
securities, adjustable rate securities and stripped securities. Income
Fund may invest the remainder of its total assets (up to 25% under normal
circumstances) in debt securities and preferred stocks rated below
investment grade and unrated debt securities determined by OFI to be of
comparable credit quality. Unrated debt securities will not exceed 10%
of Income Fund's total assets. Income Fund may also invest up to 20% of
its total assets in mortgage dollar rolls and up to 5% of its total assets
in inverse floating rate instruments. Income Fund's investments may also
include foreign securities, including debt and equity securities of
corporate and governmental issuers of countries with emerging economies
or securities markets and foreign currency exchange contracts. Income
Fund may invest up to 5% of its total assets in non-dollar denominated
securities of foreign issuers, including issuers in developing countries.
Income Fund may invest in structured notes and inverse floating rate
notes. Income Fund may also write covered call options that relate to
particular U.S. or non-U.S. securities, to various U.S. or non-U.S. stock
indices or to U.S. or non-U.S. currencies. As with Bond Fund, Income Fund
may use certain derivative investments, including options and futures and
may use hedging instruments to try to manage investment risks.
Shareholders of the Fund should consider the differences in investment
objectives and policies of the funds, including the ability, but not the
current investment policy, of Bond Fund to invest up to 100% of its assets
in securities rated lower than investment grade. See "Comparison Between
Bond Fund and Income Fund - Comparison of Investment Objectives, Policies
and Restrictions."
Investment Advisory and Distribution Plan Fees
The funds obtain investment management services from OFI pursuant to the
terms of their respective investment advisory agreements. Each Fund's
management fee is payable to OFI monthly and is computed on the net asset
value of the respective Fund as of the close of business each day. Bond
Fund pays a management fee which declines on additional assets as Bond
Fund increases its asset base, at the annual rate of 0.75% of the first
$200 million of net assets, 0.72% of the next $200 million, 0.69% of the
next $200 million, 0.66% of the next $200 million, 0.60% of the next $200
million and 0.50% of net assets over $1 billion. Income Fund pays a
management fee which similarly declines, at an annual rate of 0.625% of
the first $300 million of net assets, 0.500% of the next $100 million and
0.450% of net assets over $400 million.
Each fund has adopted separate service and/or distribution plans pursuant
to Rule 12b-1 under the 1940 Act for their respective Class A and Class
B shares. Pursuant to the plans, Class A and Class B shares of Bond Fund
and the Fund are authorized to pay OFDI in connection with the
distribution of shares and the servicing of shareholder accounts that hold
the Fund's shares. The plans for Bond Fund and the Fund provide for
payments at a fixed rate to compensate OFDI, except for each Fund's Class
A service plan, which provides for reimbursement of OFDI's expenses. The
current maximum annual fee payable by shares of Bond Fund and the Fund
pursuant to their service and/or distribution plans is (i) as to Class A
shares, 0.25% (as a service fee) and (ii) as to Class B shares, 1.00%
(consisting of a 0.25% service fee and a 0.75% "asset-based sales
charge"). Class B shares of Bond Fund automatically convert to Class A
shares of Bond Fund six years after purchase. Class B shares of Income
Fund automatically convert to Class A shares of Income Fund eight years
after purchase. Accordingly, Class B shareholders of the Fund may pay the
asset-based sales charge on their shares for a longer period than Bond
Fund Class B shareholders.
Purchases, Exchanges and Redemptions
Purchases. Purchases of shares of Bond Fund and the Fund may be made
directly through OFDI, or through any dealer, broker or financial
institution that has a sales agreement with OFDI. In addition, a
shareholder of Bond Fund may purchase shares automatically from an account
at a domestic bank or other financial institution under the
"OppenheimerFunds AccountLink" service. Class A shares of both Bond Fund
and the Fund generally are sold subject to the same initial sales charge;
the maximum sales charge rate is 0.75% higher for Bond Fund Class A shares
than for Income Fund Class A shares. Class B shares of both funds
generally are sold without a front-end sales charge but may be subject to
a CDSC upon redemption. See "Comparative Fee Tables -- Transaction
Charges" above for a complete description of such sales charges.
Class A shares of each fund may be purchased at reduced sales charges, and
the Class B CDSC of each fund may be waived in certain circumstances, as
described in that fund's Prospectus. Bond Fund has agreed that each
shareholder holding Income Fund shares as of the reorganization date who
is presently eligible (i) to purchase Class A shares of Income Fund at net
asset value or (ii) for a waiver from the CDSC applicable to either Class
A or Class B shares of Income Fund, in accordance with the Company's
current prospectus, will retain these privileges with respect to Bond Fund
shares, commencing as of the date Bond Fund's prospectus is appropriately
revised. These privileges apply only to accounts holding Bond Fund shares
received in the Reorganization, and terminates once all shares held in
such an account are redeemed or exchanged.
Effective March 18, 1996, Income Fund shares are no longer available for
purchase by new investors, including shares purchased by exchange from any
other mutual fund. Existing Income Fund shareholders may purchase
additional shares through subsequent investment, investment of dividends
and distributions or exchange.
The Class A Bond Fund shares to be issued under the Reorganization
Agreement will be issued by Bond Fund at net asset value without a sales
charge. The sales charge on Class A shares of Bond Fund will only affect
shareholders of the Fund to the extent that they desire to make additional
purchases of Class A shares of Bond Fund in addition to the shares which
they will receive as a result of the Reorganization. Future dividends and
capital gain distributions of Bond Fund, if any, may be reinvested without
sales charge. The Class B shares of Bond Fund to be issued under the
Reorganization Agreement will be issued at net asset value and, along with
Class A shares of Bond Fund to be issued under the Reorganization
Agreement, will be deemed aged to the same level as the shareholder's
existing Fund Class A and Class B shares, for purposes of imposing the
CDSC of that class at redemption and for converting Class B into Class A
shares.
Exchanges. Shareholders of Bond Fund may exchange their shares at net
asset value for shares of the same class of mutual funds within the
Oppenheimer funds family (46 other portfolios), subject to certain
conditions. Shares of Income Fund may only be exchanged for shares of the
same class of another series of the Company (7 other portfolios). Bond
Fund offers an automatic exchange plan providing for systematic exchanges
from Bond Fund of a specified amount for shares of the same class of other
funds within the Oppenheimer funds family.
Redemptions. Class A shares of the funds may be redeemed without charge
at their respective net asset values per share calculated after the
redemption order is received and accepted; however, Class A Bond Fund
shares that were exempt from the front-end sales charge upon purchase in
amounts of more than $1 million (more than $500,000 for Income Fund
purchases and purchases by OppenheimerFunds prototype 401(k) plans) may
be subject to a CDSC of up to 1.0% upon redemption. See "Comparative Fee
Tables -- Transaction Charges" above. Class B shares of the funds 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. However, the
Class B CDSC is 1% lower for Bond Fund shares during the second, third and
fourth year after purchase.
Shareholders of Bond Fund may reinvest redemption proceeds of Class A
shares on which an initial sales charge was paid, or the redemption
proceeds of Class A or Class B shares on which a CDSC was paid, within six
months of a redemption at net asset value in Class A shares of Bond Fund
or any of numerous mutual funds within the Oppenheimer funds family.
Shareholders of Income Fund may reinvest all or part of the redemption
proceeds of Class A shares in Class A shares of Income Fund within 60 days
after the date of the redemption without the imposition of a sales charge.
Shareholders of both 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 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 Class A shares of Bond Fund
are also available. Bond Fund may redeem accounts valued at less than
$1,000 if the account has fallen below such stated amount for reasons
other than market value fluctuations. For Income Fund, the corresponding
minimum is 100 shares once the account has been open at least 24 months.
The funds 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 Bond
Fund, shareholders should carefully consider the following summary of risk
factors, relating to both Bond Fund and the Fund, in addition to the other
information set forth in this Proxy Statement and Prospectus. A 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, Bond Fund and the Fund are intended for investors
seeking high current income and not for investors seeking capital
appreciation. There is no assurance that either Bond Fund 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
invested. As described below, each fund generally invests a certain
percentage of its assets in high-yield, lower-rated securities.
Investment in Debt Securities
The funds both seek their investment objective through investments
primarily in debt securities. Debt securities are subject to interest
rate risk and credit risk. Interest rate risk relates to fluctuations in
market value due to changes in prevailing interest rates. When prevailing
interest rates fall, the values of already-issued debt securities
generally rise. When interest rates rise, the values of already-issued
debt securities generally decline. The magnitude of these fluctuations
will often be greater for longer-term debt securities than shorter-term
debt securities. Changes in the value of securities held by a fund mean
that the fund's share prices can go up or down when interest rates change,
because of the effect of the change on the value of the fund's portfolio
of debt securities.
Credit risk relates to the ability of the issuer of a debt security to
make interest or principal payments on the security as they become due.
Generally, higher-yielding, lower-rated bonds are subject to greater
credit risk than higher-rated bonds. Securities issued or guaranteed by
the U.S. government are subject to little, if any, credit risk. Bond Fund
is currently permitted to invest up to 35% of its total assets in debt
securities rated less than investment grade or, if unrated, judged by OFI
to be of comparable quality to such lower-rated debt securities (often
called "junk bonds"). However, OFI anticipates that Bond Fund would
generally invest no more than 25% of its total assets in non-investment
grade debt securities. Such securities are speculative and involve
greater risk than investment grade debt securities. They may be less
liquid than higher-rated securities. If Bond Fund were forced to sell a
lower-grade debt security during a period of rapidly declining prices, it
might experience significant losses especially if a substantial number
of other holders decide to sell at the same time. Other risks may involve
the default of the issuer or price changes in the issuer's securities due
to change in the issuer's financial strength or economic conditions.
Income Fund may invest up to 25% of its total assets in non-investment
grade debt, but will not purchase securities rated below "B" by Moody's
or S&P. Up to 10% of Income Fund's assets may be invested in unrated debt
securities.
The funds may invest in mortgage-backed securities which securities are
subject to prepayment risks. The effective maturity of a mortgage-backed
security may be shortened by unscheduled or early payment of principal and
interest on the underlying mortgages. This may result in greater price
and yield volatility than traditional fixed-income securities that have
a fixed maturity and interest rate. The principal that is returned may
be invested in instruments having a higher or lower yield than the prepaid
instruments depending on then-current market conditions. Such securities
therefore may be less effective as a means of "locking in" attractive
long-term interest rates and may have less potential for appreciation
during periods of declining interest rates than conventional bonds with
comparable stated maturities. If the funds buy mortgage-backed securities
at a premium, prepayments of principal and foreclosures of mortgages may
result in some loss of the fund's principal investment to the extent of
the premium paid. The value of mortgage-backed securities may also be
affected by changes in the market's perception of the creditworthiness of
the entity issuing or guaranteeing them or by changes in government
regulations and tax policies.
The funds may invest in collateralized mortgage obligations ("CMOs"). CMOs
may be issued in a variety of classes or series ("tranches"). The
principal value of certain CMO tranches may be more volatile and less
liquid than other types of mortgage-related securities, because of the
possibility that the principal value of the CMOs may be prepaid earlier
than the maturity of the CMOs as a result of prepayments of the underlying
mortgage loans by the borrowers.
Each fund may also invest in CMOs that are "stripped." Stripped mortgage-
backed securities usually have two classes. The classes receive different
proportions of the interest and principal distributions on the pool of
mortgage assets that act as collateral for the security. In certain
cases, one class will receive all of the interest payments (and is known
as an "I/O"), while the other class will receive all of the principal
payments (and is known as a "P/O"). The yield to maturity on the class
that receives only interest is extremely sensitive to the rate of payment
of the principal on the underlying mortgages. Principal prepayments
increase that sensitivity. Stripped securities that pay "interest only"
are therefore subject to greater price volatility when interest rates
change, and they have the additional risk that if the underlying mortgages
are prepaid, the fund will lose the anticipated cash flow from the
interest on the prepaid mortgages. That risk is increased when general
interest rates fall, and in times of rapidly falling interest rates, the
fund might receive back less than its investment in such I/Os. The value
of "principal only" securities generally increases as interest rates
decline and prepayment rates rise. The price of these securities is
typically more volatile than that of coupon-bearing bonds of the same
maturity.
Each fund may invest in "asset-backed" securities. These represent
interests in pools of consumer loans and other trade receivables, similar
to mortgage-backed securities. They are issued by trusts and "special
purpose corporations." They are backed by a pool of assets, such as credit
card or auto loan receivables, which are the obligations of a number of
different parties. The income from the underlying pool is passed through
to holders, such as Bond Fund. These securities may be supported by a
credit enhancement, such as a letter of credit, a guarantee or a
preference right. However, the extent of the credit enhancement may be
different for different securities and generally applies to only a
fraction of the security's value. These securities present special risks.
For example, in the case of credit card receivables, the issuer of the
security may have no security interest in the related collateral.
Foreign Securities
The funds may invest in debt securities of foreign governments and foreign
companies, subject to the following limits. Investments in foreign
securities by Bond Fund are limited by the expectation that generally at
least 75% of its total assets will be invested in U.S. corporate bonds
rated "A" or better and U.S. government and agency bonds. Income Fund may
invest up to 10% of its assets in foreign securities, except the Fund may
invest up to 25% of its assets in foreign equity and debt securities (i)
issued, assumed or guaranteed by foreign governments or their political
subdivisions or instrumentalities, (ii) assumed or guaranteed by domestic
issuers, including Eurodollar securities and (iii) issued, assumed or
guaranteed by foreign issuers having a class of securities listed for
trading on The New York Stock Exchange. Some of the foreign debt
securities each fund may invest in, such as emerging market debt, have
speculative characteristics. There are certain risks of foreign
investing. For example, foreign issuers are not required to use
generally-accepted accounting principles. If foreign securities are not
registered for sale in the U.S. under U.S. securities laws, the issuer
does not have to comply with the disclosure requirements of our laws,
which are generally more stringent than foreign laws. The values of
foreign securities investments will be affected by other factors,
including exchange control regulations or currency blockage and possible
expropriation or nationalization of assets. There are risks of changes
in foreign currency values. The funds may purchase securities denominated
in foreign currencies, but Income Fund is required to limit its
investments in non-dollar denominated foreign issues to 5% of its total
assets. A change in value of a foreign currency against the U.S. dollar
will result in a change in the U.S. dollar value of a fund's securities
denominated in a foreign currency. The currency rate change will also
affect its income available for distribution. Although the funds'
investment income from foreign securities may be received in foreign
currencies, the funds will be required to absorb the cost of currency
fluctuations. If a fund suffers a loss on foreign currencies after it has
distributed its income during the year, the fund may find that it has
distributed more income than was available from actual investment income.
There may also be changes in governmental administration or economic or
monetary policy in the U.S. or abroad that can affect foreign investing.
In addition, it is generally more difficult to obtain court judgments
outside the United States if the fund has to sue a foreign broker or
issuer. Additional costs may be incurred because foreign broker
commissions are generally higher than U.S. rates, and there are additional
custodial costs associated with holding securities abroad.
Repurchase Agreements
The funds may enter into repurchase agreements of seven days or less
without limit and may cause up to 10% of their respective net assets to
be subject to repurchase agreements having a maturity beyond seven days.
Repurchase agreements must be fully collateralized. However, if the
vendor fails to pay the resale price on the delivery date, the funds may
experience costs or delays in disposing of the collateral and may
experience losses to the extent that the proceeds from the sale of the
collateral is less than the repurchase price.
Options, Futures and Interest Rate Swaps; Derivatives
Both funds may purchase and sell certain kinds of futures contracts and
options on such contracts for hedging purposes. Bond Fund may also
purchase and sell put and call options, options on broadly-based stock or
bond indices and foreign currency and forward contracts. Income Fund may
write covered call options on securities, securities indexes and foreign
currency to hedge against decreased prices of existing portfolio
securities or increases in prices of portfolio securities that Fund may
acquire. Both funds may enter into interest rate swap agreements. The
foregoing instruments, referred to as "hedging instruments," may be
considered derivative investments. Both funds may also invest in certain
derivative investments to seek to enhance income. Hedging instruments and
derivative investments and their special risks are described below in
"Comparison Between Bond Fund and the Fund."
APPROVAL OF THE REORGANIZATION
(The Proposal)
Background
On February 29, 1996, the indirect parent company of Phelps, Connecticut
Mutual Life Insurance Company ("Connecticut Mutual") merged with and into
Massachusetts Mutual Life Insurance Company ("MassMutual"). On that date,
Connecticut Mutual ceased to exist and MassMutual became the surviving
company. Immediately subsequent to the merger, MassMutual became the
nation's fifth largest life insurance company.
MassMutual is the ultimate parent company of OppenheimerFunds, Inc.
("OFI"), which is engaged (directly and through subsidiaries) in the
business of managing, distributing and servicing registered investment
companies. As of March 1, 1996, OFI (including a subsidiary) had more
than $50 billion in assets under management, the majority of which is
represented by the Oppenheimer funds.
Board Approval of the Reorganization
At its meeting on November 17, 1995, the Company's Board, including the
Independent Directors, unanimously approved the Reorganization and the
Reorganization Agreement, determined that the Reorganization is in the
best interests of Income 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.
The Company's Board of Directors, on behalf of Income Fund, believes that
the proposed Reorganization will be advantageous to the shareholders of
Income Fund in several respects. The Board considered the following
matters, among others, in approving the Proposal.
First, the Board believes that it is not advantageous to operate and
market Income Fund separately from Bond Fund because their investment
objectives and policies are substantially similar. By being offered
simultaneously, each fund hinders the other fund's potential for asset
growth. For a complete description of Bond Fund's investment objectives
and policies, see Bond Fund's Prospectus included with this Proxy
Statement.
Second, the Board considered that shareholders may be better served by a
fund offering greater diversification. To the extent that the funds'
assets are combined into a single portfolio and a larger asset base is
created as a result of the Reorganization, greater diversification of Bond
Fund's investment portfolio can be achieved than is currently possible in
either fund, especially Income Fund. Greater diversification is expected
to be beneficial to shareholders of both funds because it may reduce the
negative effect which the adverse performance of any one security may have
on the performance of the entire portfolio.
Third, the Board considered the fact that Bond Fund is subject to a higher
management fee rate than Income Fund. The Board believes that the assets
of Bond Fund attributable to Income Fund will receive the benefit of OFI's
capabilities and resources in investment management and that the payment
by the assets of Income Fund of a higher management fee rate for these
services and resources is reasonable and in the best interests of Income
Fund's shareholders.
Fourth, the Board believes that the Bond Fund shares received in the
Reorganization will provide existing Income Fund shareholders with
substantially the same investment advantages that they currently enjoy.
The Board also considered the performance history of each fund.
Fifth, a combined fund offers economies of scale that may have a positive
effect on the expenses currently borne by Income Fund, and hence,
indirectly, its shareholders. Both funds incur substantial costs for
accounting, legal, transfer agency services, insurance, and custodial and
administrative services. The Board expects that the Reorganization may
result over time in a decrease in the expenses currently borne indirectly
by Income Fund's shareholders. See expense information in "Comparative
Fee Tables."
Finally, The Board considered the fact that, from the perspective of Bond
Fund, the Reorganization presents an opportunity to acquire assets without
the obligation to pay commissions or other similar costs that are normally
associated with the purchase of securities. This opportunity provides an
economic benefit to Bond Fund and its shareholders.
The Board also considered the fact that OFI and OFDI will receive certain
benefits from the Reorganization. The consolidated portfolio management
effort might result in time savings for OFI and the preparation of fewer
prospectuses, reports and regulatory filings. The Board, however,
believes that this consideration will not amount to a significant economic
benefit.
The Trust's Board of Trustees, on behalf of Bond Fund, including the
trustees who are not "interested persons" of Bond Fund, unanimously
approved the Reorganization and the Reorganization Agreement and
determined that the Reorganization is in the best interests of Bond Fund
and its shareholders. The Board further determined that the
Reorganization would not result in dilution of the Bond Fund shareholders'
interests. The Bond Fund Board considered, among other things, that an
increase in Bond Fund's asset base as a result of the Reorganization could
benefit Bond Fund shareholders due to the economies of scale available to
a larger fund. Over time, these economies of scale should result in
slightly lower costs per account for each Bond Fund shareholder through
lower operating expenses and transfer agency expenses.
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 Bond
Fund in exchange for Class A and Class B shares of Bond Fund, (ii) these
Class A and Class B shares would be distributed to the respective Class
A and Class B shareholders of the Fund in liquidation of the Fund and
(iii) the outstanding shares of the Fund would be cancelled. Prior to the
closing date (April 26, 1996, or such other date as the funds may
designate; the "Closing Date"), the Fund will endeavor to discharge all
of its liabilities and obligations when and as due prior to such date.
Bond Fund will not assume any liabilities or obligations of Income Fund
except for portfolio securities purchased which have not settled and
outstanding shareholder redemptions and dividend checks. 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 (if any) and (b) the Fund's
liabilities, other than those assumed by Bond Fund. The Cash Reserve will
be accounted for as a liability of Income Fund prior to the determination
of its net asset value. The number of full and fractional Class A and
Class B shares of Bond Fund to be issued to the Fund will be determined
on the basis of Bond Fund's and the Fund's relative net asset values per
Class A and Class B shares, respectively, computed as of the close of
business of The New York Stock Exchange on the business day preceding the
Closing Date (the "Valuation Date").
OFI will utilize the valuation procedures set forth in the Prospectus and
Statement of Additional Information of Bond Fund to determine the value
of the Fund's assets to be transferred to Bond Fund pursuant to the
Reorganization, the value of Bond Fund's assets and the net asset value
of each class of shares of Bond Fund. Such values will be computed by OFI
as of the Valuation Date in a manner consistent with its regular practice
in pricing Bond Fund.
The Reorganization Agreement provides for coordination between the funds
as to their respective portfolios so that, on and after the Closing Date,
Bond Fund 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 long-term capital gain or, if the
assets disposed of had not been held for more than one year, as ordinary
income.
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 Bond Fund shares
of each class 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 Bond Fund shares, Bond Fund
will, in accordance with a shareholder list supplied by the Fund, cause
Bond Fund's transfer agent to credit and confirm an appropriate number of
shares of Bond Fund to each shareholder of the Fund. Certificates for
shares of Bond Fund 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 Bond Fund. Former
shareholders of the Fund who wish certificates representing their shares
of Bond Fund must, after receipt of their confirmations, make a written
request to OppenheimerFunds 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 Bond Fund.
After the closing of the Reorganization, the Fund will not conduct any
business except 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 Bond 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 Fund who
were such on the Valuation Date. After this transfer or distribution, the
Fund's existence will be terminated. 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 Company, on behalf of Income Fund, and the
Trust, on behalf of Bond Fund, (ii) by the Company, on behalf of Income
Fund, or the Trust, on behalf of Bond Fund upon a breach by the other of
any material provision of the Reorganization Agreement. Termination of the
Reorganization Agreement will terminate all obligations of the parties
thereto without liability except, in the event of a termination pursuant
to (ii) above, any party in breach of the Reorganization Agreement will,
upon demand, reimburse the non-breaching party for all reasonable out-of-
pocket fees and expenses (if any) 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 Directors of the Company will consider other possible
courses of action.
Tax Aspects of the Reorganization
At or prior to the Closing Date, Income 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 and net capital gain, if any, for
the taxable period ending on the Closing Date (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 long-
term capital gain, respectively.
The exchange of the assets of the Fund for Class A and Class B shares of
Bond Fund and the assumption by Bond Fund of certain liabilities of the
Fund is intended to qualify for Federal income tax purposes as a
reorganization under Section 368(a)(1) of the Internal Revenue Code of
1986, as amended (the "Code"). The Fund has represented to Arthur
Andersen LLP, tax adviser to the Fund, that 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 Bond Fund shares received in the
transaction that would reduce the Fund shareholders' ownership of Bond
Fund Class A and Class B shares 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 Bond Fund have
each further represented to Arthur Andersen LLP the fact that, as of the
Closing Date, the Fund and Bond Fund 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, Bond Fund and the
Fund will receive the opinion of Arthur Andersen LLP to the effect that,
based on the Reorganization Agreement, the above representations and other
representations as such firm 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 Income Fund's assets in
exchange for Class A and Class B shares of Bond Fund and the
assumption by Bond Fund of certain identified liabilities of the Fund
followed by the distribution by the Fund of Class A and Class B
shares of Bond Fund 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 Bond Fund will each
be a "party to a 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 Bond Fund upon the receipt of the assets of the Fund
solely in exchange for Class A and Class B shares of Bond Fund and
the assumption by Bond Fund of certain identified liabilities of the
Fund.
3. Pursuant to Sections 361(a) and 361(c) of the Code, no gain or
loss will be recognized by the Fund upon the transfer of the assets
of the Fund to Bond Fund in exchange for Class A and Class B shares
of Bond Fund and the assumption by Bond Fund of certain identified
liabilities of the Fund or upon the distribution of Class A and Class
B shares of Bond Fund 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 and Class B shares of Bond Fund. However,
Income Fund shareholders may recognize taxable income or gain to the
extent they receive any portion of the Cash Reserve, as defined
above.
5. Pursuant to Section 358 of the Code, the aggregate tax basis for
Class A and Class B shares of Bond Fund 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 and Class B shares of Bond Fund 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 Bond Fund 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 Bond Fund will include the period
during which those assets were held by the Fund.
9. Bond Fund will succeed to and take into account the items of the
Fund described in Section 381(c) of the Code, including the earnings
and profits, or deficit in earnings and profits, of the Fund as of
the date of the transactions. Bond Fund 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 advisors 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 Bond Fund and Income Fund
and indicates the pro forma combined capitalization as of December 31,
1995 as if the Reorganization had occurred on that date.
<TABLE>
<CAPTION>
Net Asset
Shares Value
Net Assets Outstanding Per Share
Bond Fund
<S> <C> <C> <C>
Class A Shares $169,059,333 15,399,839 $10.98
Class B Shares 39,187,315 3,570,470 10.98
Class C Shares* 3,970,646 361,451 10.99
Income Fund
Class A Shares $ 22,127,594 3,478,038 9.52
Class B Shares 58,767 6,150 9.56
Pro Forma Combined
Fund**
Class A Shares $202,186,927 18,416,927 $10.98
Class B Shares 39,246,082 3,575,822 10.98
Class C Shares* 3,970,646 361,451 10.99
</TABLE>
- ------------------
* No Bond Fund Class C shares are being issued in the Reorganization
because there are no outstanding Income Fund Class C shares.
**Reflects issuance of 3,017,085 Class A shares and 5,352 Class B shares
of Bond Fund in a tax-free exchange for the net assets of the Fund,
aggregating $33,127,594 and $58,767 for Class A and Class B shares,
respectively, of the Fund.
The pro forma ratio of expenses to average annual net assets of the
combined funds at December 31, 1995 would have been 1.38% with respect to
Class A shares and 2.15% with respect to Class B shares.
COMPARISON BETWEEN BOND FUND AND INCOME FUND
Comparative information about Bond Fund and the Fund is presented below.
More complete information about Bond Fund and the Fund is set forth in
their respective Prospectuses (which, as to Bond Fund, accompanies this
Proxy Statement and Prospectus and is incorporated herein by reference)
and Statements of Additional Information. To obtain copies of either
Prospectus, see "Miscellaneous - Public Information."
Comparison of Investment Objectives, Policies and Restrictions
As its investment objective, Bond Fund seeks a high level of current
income by investing mainly in debt instruments. As its investment
objective, Income Fund seeks high current income consistent with prudent
investment risk and preservation of capital. Income Fund seeks to achieve
its objective by investing in a portfolio consisting primarily of fixed
income obligations. In seeking their investment objectives, Bond Fund and
the Fund employ the investment policies as described in detail below.
Bond Fund. Under normal market conditions, Bond Fund invests at least 65%
of its total assets in a diversified portfolio of investment grade fixed-
income securities. These include (i) investment-grade debt securities
rated BBB or above by S&P, Baa or above by Moody's or an equivalent rating
category of another nationally-recognized rating organization or, if
unrated, are of comparable quality as determined by OFI; (ii) securities
issued or guaranteed as to principal and interest by the U.S. Government,
its agencies or instrumentalities or obligations secured by such
securities ("U.S. Government Securities"); and (iii) high-quality, short-
term money market instruments.
Currently, Bond Fund may invest up to 35% of its total assets in debt
securities rated less than investment grade or, if unrated, judged by OFI
to be of comparable quality to such lower-rated securities (collectively,
"lower-grade securities"). Lower-grade securities (often called "junk
bonds") are considered speculative and involve greater risk than
investment grade debt securities. Lower-grade securities include
securities rated BB, B, CCC, CC and D by S&P or Ba, B, Caa, Ca and C by
Moody's. Bonds rated BB, B, CCC and CC by S&P are regarded, on balance,
as predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the
obligation. Bonds on which no interest is paid are rated C by S&P. Bonds
rated D by S&P are in default and payment of interest and/or repayment of
principal is in arrears. Bonds rated Ba or B by Moody's are judged to
have speculative elements; their future is not well-assured. Bonds rated
Caa by Moody's are of poor standing and may be in default; bonds rated Ca
are speculative in a high degree and are often in default; bonds rated C
are regarded as having extremely poor prospects of attaining any real
investment standing. Prior to July 10, 1995, Bond Fund's investments were
limited to investment grade bonds, U.S. Government Securities and money
market instruments. Such investment policies were changed pursuant to
shareholder approval on July 10, 1995.
OFI anticipates that Bond Fund would generally invest at least 75% of its
total assets in: (i) U.S. corporate bonds rated "A" or better and (ii)
U.S. government and agency bonds. OFI further anticipates that Bond Fund
would invest an additional 15% of its total assets in non-investment grade
domestic corporate bonds and 10% of total assets in non-investment grade
foreign bonds. These anticipated investment targets, including the
allocation between domestic and foreign lower-grade debt securities, are
not fundamental investment policies, and they are subject to fluctuation
and may be changed by OFI without further notice to shareholders or
amended prospectus disclosure. When investing Bond Fund's assets, OFI
considers many factors, including current developments and trends in both
the economy and the financial markets. Under normal market conditions,
Bond Fund's target duration will be approximately five. Duration is a
measure of the anticipated rise or decline in value for a 1% change in
interest rates. For example, a duration of 2 in a portfolio indicates
that for every 1% rise in general interest rates, the portfolio's value
would be expected to fall 2%, and vice versa.
Bond Fund may invest in debt securities issued or guaranteed by foreign
companies and debt securities of foreign governments or their agencies.
Bond Fund is not restricted in the amount of assets that it may invest in
foreign countries or in which countries. However, if Bond Fund's assets
are held abroad, the countries in which they are held and the sub-
custodians holding then must be approved by the Trust's Board of Trustees
when required to do so under applicable regulations.
Bond Fund may also invest in U.S. Government Securities (including
mortgage-related U.S. Government Securities that are issued or guaranteed
by federal agencies or government-sponsored entities but are not supported
by the full faith and credit of the U.S. Government), mortgage-backed
securities, whether issued by the U.S. government or private issuers,
CMOs, stripped CMOs and asset-backed securities. In addition to the
foregoing, Bond Fund may invest in zero coupon securities and illiquid
securities.
Income Fund. Under normal conditions, at least 75% of the Fund's assets
will be invested in U.S. Government securities, U.S. Government-related
securities (obligations that are fully collateralized or otherwise secured
by U.S. Government securities), dollar-denominated foreign government and
corporate securities rated at least investment grade or if unrated
determined by OFI to be of comparable quality, and short-term investments
rated Prime or the equivalent. The Fund may invest up to 25% of its total
assets in lower-grade securities (described above); however, Income Fund
will not invest in lower-grade securities rated below B by Moody's or S&P
or, if unrated, determined by OFI to be of comparable quality. Income Fund
may not invest more than 10% of its assets in unrated debt securities.
Income Fund's investment in privately issued CMOs are limited to those
rated in the two highest rating categories. Income Fund may invest up to
10% of its assets in foreign securities, except the Fund may invest up to
25% of its assets in foreign equity and debt securities (i) issued,
assumed or guaranteed by foreign governments or their political
subdivisions or instrumentalities, (ii) assumed or guaranteed by domestic
issuers, including Eurodollar securities and (iii) issued, assumed or
guaranteed by foreign issuers having a class of securities listed for
trading on The New York Stock Exchange. The average maturity of the
Fund's investments will vary based on market conditions. It is
anticipated, however, that the average dollar weighted maturity of the
Fund will generally be between 2-3 years. Income Fund may invest up to
20% of its total assets in mortgage dollar rolls (in these transactions,
it sells mortgage backed securities for delivery in the current month and
simultaneously contracts to purchase similar securities on a specified
future date) and up to 5% of its total assets in inverse floating rate
instruments. For temporary defensive purposes the Fund may invest up to
100% of its assets in various types of U.S. Government securities and high
quality money market instruments.
Special Investment Methods
Bond Fund and the Fund may use the special investment methods summarized
below.
Loans of Portfolio Securities. Both Bond Fund and the Fund may lend their
portfolio securities to brokers, dealers and other financial institutions,
subject to certain conditions. The funds must receive collateral for the
loans. Bond Fund presently does not intend to lend its portfolio
securities but, if it does, the value of securities loaned is not expected
to exceed 5% of the value of the total assets of Bond Fund in the coming
year. Income Fund may commit up to 33-1/3% of the value of its total
assets to such loans.
Repurchase Agreements. Both Bond Fund and the Fund may enter into
repurchase agreements. There is no limit on the amount of either fund's
net assets that may be subject to repurchase agreements of seven days or
less. Neither fund will enter into a repurchase agreement that will cause
more than 10% of its net assets to be subject to repurchase agreements
having a maturity beyond seven days; as to Bond Fund this percentage limit
may increase to 15% with respect to all illiquid or restricted securities
held by Bond Fund if certain state laws are changed or Bond Fund's shares
are no longer sold in those states. Certain restricted securities,
eligible for resale to qualified institutional purchasers, are not subject
to that limit. However, investing in such exempt securities could have
the effect of increasing the level of fund illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in
purchasing these securities.
Hedging. Bond Fund may purchase and sell: futures contracts that relate
to foreign currencies, financial indices and interest rates; certain put
and call options; and options on futures, broadly-based stock indices,
bond indices and foreign currency. Bond Fund may also enter into interest
rate swap agreements. The Fund may purchase or sell financial futures
contracts and purchase options on such contracts. These are all referred
to as "hedging instruments." The funds do not use hedging instruments for
speculative purposes. Up to 50% of Bond Fund's total assets may be
subject to covered calls; the corresponding limit for Income Fund is 20%.
Bond Fund will not write puts if more than 50% of its net assets would
have to be segregated to cover put obligations. Bond Fund may only
purchase a call or put if, after such purchase, the value of all call and
put options held by Bond Fund would not exceed 5% of Bond Fund's total
assets. Other limits on the use of hedging instruments are described in
the funds' respective Prospectuses and Statements of Additional
Information.
Hedging instruments may be used to manage a fund's exposure to the
possibility that the prices of its portfolio securities may decline, or
to establish a position in the securities market as a temporary substitute
for purchasing individual securities; to try to manage its exposure to
changing interest rates; to hedge the fund's portfolio against price
fluctuations; and to increase the fund's exposure to the securities
market. Forward contracts are used to try to manage foreign currency
risks on a fund's foreign investments. Both funds' foreign currency or
options are used to try to protect against declines in the dollar value
of foreign securities Bond Fund owns, or to protect against an increase
in the dollar cost of buying foreign securities. Both funds may write
covered call options to provide income for liquidity purposes, defensive
reasons, or to raise cash to distribute to shareholders.
The use of hedging instruments requires special skills and knowledge of
investment techniques that are different than those required for normal
portfolio management. If a fund uses a hedging instrument at the wrong
time or judges market conditions incorrectly, hedging strategies may
reduce the Fund's return. A 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 options, futures and forward contracts are
subject to special tax rules that may affect the amount, timing and
character of a fund's distributions to its shareholders. There are also
special risks in particular hedging strategies. If a covered call written
by Bond Fund is exercised on an investment that has increased in value,
Bond 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. A fund could be obligated to pay more under its swap
agreements than it receives under them, as a result of interest rate
changes.
Derivative Investments. Each Fund can invest in a number of different
kinds of "derivative investments." Some types of derivatives may be used
for hedging purposes, as described above. Bond Fund may invest in others
because they offer the potential for increased income and principal value.
In general, a "derivative investment" is a specially-designed investment
the performance of which is linked to the performance of another
investment or security, such as an option, future, index, currency or
commodity. In the broadest sense, derivative investments include the
hedging instruments, mortgage-backed and asset-backed securities and CMOs
in which the funds may invest. Other types of derivatives in which Bond
Fund may invest include index-linked or commodity-linked notes, debt
exchangeable for common stock, equity-linked debt securities and currency
indexed securities. Other types of derivatives in which Income Fund may
invest include inverse floating rate instruments and structured notes.
One risk of investing in derivative investments is that the company
issuing the instrument might not pay the amount due on the maturity of the
instrument. There is also the risk that the underlying investment or
security might not perform the way the investment adviser expected it to
perform. The performance of derivative investments may also be influenced
by interest rate changes in the U.S. and abroad. All of these risks can
mean that a fund will realize less income than expected from its
investments, or that it can lose part or all of the value of its
investments, which will affect its share price.
When-Issued and Delayed Delivery Transactions. The funds may purchase
securities on a "when-issued" basis and may purchase or sell such
securities on a "delayed delivery" basis. These terms refer to securities
that have been created and for which a market exists, but which are not
available for immediate delivery or are to be delivered at a later date.
There may be a risk of loss to the funds if the value of the security
changes prior to the settlement date.
Investment Restrictions
Both Bond Fund and Fund have certain investment restrictions that,
together with the investment objective of Bond Fund, are fundamental
policies changeable only by shareholder approval. The investment
restrictions of Bond Fund and the Fund are set forth below.
Bond Fund cannot (1) make short sales except for sales "against the box";
(2) borrow money or enter into reverse repurchase agreements, except that
Bond Fund may borrow money from banks and enter into reverse repurchase
agreements as a temporary measure for extraordinary or emergency purposes
(but not for the purpose of making investments), provided that the
aggregate amount of all such borrowings and commitments under such
agreements does not, at the time of borrowing or of entering into such an
agreement, exceed 10% of Bond Fund's total assets taken at current market
value; Bond Fund will not purchase additional portfolio securities at any
time that the aggregate amount of its borrowings and its commitments under
reverse repurchase agreements exceeds 5% of Bond Fund's net assets (for
purposes of this restriction, entering into portfolio lending agreements
shall not be deemed to constitute borrowing money); (3) concentrate its
investments in any particular industry except that it may invest up to 25%
of the value of its total assets in the securities of issuers in any one
industry (of the utility companies, gas, electric, water and telephone
will each be considered as a separate industry); and (4) buy securities
issued or guaranteed by any one issuer (except the U.S. Government or any
of its agencies or instrumentalities) if with respect to 75% of its total
assets (a) more than 5% of Bond Fund's total assets would be invested in
the securities of that issuer, or (b) Bond Fund would own more than 10%
of that issuer's voting securities; (5) act as an underwriter, except to
the extent that, in connection with the disposition of portfolio
securities, Bond Fund may be deemed an underwriter under applicable laws;
(6) invest in oil, gas or other mineral leases, rights, royalty contracts
or exploration or development programs, real estate or real estate
mortgage loans (this restriction does not prevent Bond Fund from
purchasing securities secured or issued by companies investing or dealing
in real estate and by companies that are not principally engaged in the
business of buying and selling such leases, rights, contracts or
programs); (7) make loans other than by investing in obligations in which
Bond Fund may invest consistent with its investment objective and policies
and other than repurchase agreements and loans of portfolio securities;
(8) pledge, mortgage or hypothecate its assets, except that, to secure
permitted borrowings, it may pledge securities having a market value at
the time of the pledge not exceeding 15% of the cost of Bond Fund's total
assets and except in connection with permitted transactions in options,
futures contracts and options on futures contracts, and except for reverse
repurchase agreements and securities lending; (9) purchase or retain
securities of any issuer if, to the knowledge of the Trust, more than 5%
of such issuer's securities are beneficially owned by officers and
trustees of the Trust or officers and directors of MassMutual who
individually beneficially own more than 1/2 of 1% of the securities of
such issuer; and (10) make loans to an officer, trustee or employee of the
Trust or to any officer, director or employee of MassMutual, or to
MassMutual.
In accordance with certain non-fundamental policies and guidelines
changeable without shareholder approval, Bond Fund may not: (a)invest for
the purpose of exercising control over, or management of, any company; (b)
purchase any security of a company which (including any predecessor,
controlling person, general partner and guarantor) has a record of less
than three years of continuous operations or relevant business experience,
if such purchase would cause more than 5% of the current value of Bond
Fund's assets to be invested in such companies; and (c) invest in
securities of other investment companies except by purchase in the open
market where no commission or profit to a sponsor or dealer results from
such purchase other than the customary broker's commission, except when
such purchase is a part of a plan of merger, consolidation, reorganization
or acquisition.
Income Fund cannot: (1) issue senior securities, except as permitted by
paragraphs 7, 8, 9 and 11 below. For purposes of this restriction, the
issuance of shares of common stock in multiple classes or series, the
purchase or sale of options, futures contracts and options on futures
contracts, forward commitments, and repurchase agreements entered into in
accordance with the Fund's investment policies, and the pledge, mortgage
or hypothecation of Income Fund's assets are not deemed to be senior
securities; (2) (a) invest more than 5% of its total assets (taken at
market value at the time of each investment) in the securities (other than
United States Government or Government agency securities) of any one
issuer (including repurchase agreements with any one bank or dealer) or
more than 15% of its total assets in the obligations of any one bank; and
(b) purchase more than either (i) 10% in principal amount of the
outstanding debt securities of an issuer, or (ii) 10% of the outstanding
voting securities of an issuer, except that such restrictions shall not
apply to securities issued or guaranteed by the United States Government
or its agencies, bank money instruments or bank repurchase agreements; (3)
invest more than 25% of the value of its total assets in the securities
of issuers in any single industry, provided that this limitation shall not
apply to the purchase of obligations issued or guaranteed by the United
States Government, its agencies or instrumentalities. For the purpose of
this restriction, each utility that provides a separate service (e.g.,
gas, gas transmission, electric or telephone) shall be considered to be
a separate industry. This test shall be applied on a proforma basis using
the market value of all assets immediately prior to making any investment;
(4) alone, or together with any other portfolio or portfolios, make
investments for the purpose of exercising control over, or management of,
any issuer; (5) purchase securities of other investment companies, except
in connection with a merger, consolidation, acquisition or reorganization,
or by purchase in the open market of securities of closed-end investment
companies where no underwriter or dealer's commission or profit, other
than the customary broker's commission is involved and only if immediately
thereafter not more than 10% of such portfolio's total assets, taken at
market value, would be invested in such securities; (6) purchase or sell
interests in oil, gas or other mineral exploration or development
programs, commodities, commodity contracts or real estate, except that the
Fund may: (1) purchase securities of issuers which invest or deal on any
of the above and (2) invest for hedging purposes in futures contracts on
securities, financial instruments and indices, and foreign currency, as
are approved for trading on a registered exchange; (7) purchase any
securities on margin (except that the Company may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
portfolio securities) or make short sales of securities or maintain a
short position. The deposit or payment by Income Fund of initial or
maintenance margin in connection with futures contracts or related options
transactions is not considered the purchase of a security on margin; (8)
make loans, except that Income Fund (1) may lend portfolio securities in
accordance with Income Fund's investment policies up to 33-1/3% of Income
Fund's total assets taken at market value, (2) enter into repurchase
agreements, and (3) purchase all or a portion of an issue of publicly
distributed debt securities, bank loan participation interests, bank
certificates of deposit, bankers' acceptances, debentures or other
securities, whether or not the purchase is made upon the original issuance
of the securities; (9) borrow amounts in excess of 10% of its total
assets, taken at market value at the time of the borrowing, and then only
from banks as a temporary measure for extraordinary or emergency purposes,
or make investments in portfolio securities while such outstanding
borrowings exceed 5% of its total assets; (10) allow its current
obligations under reverse repurchase agreements, together with borrowings,
to exceed 1/3 of the value of its total assets (less all its liabilities
other than the obligations under borrowings and such agreements); (11)
mortgage, pledge, hypothecate or in any manner transfer, as security for
indebtedness, any securities owned or held by the Fund except as may be
necessary in connection with borrowings as mentioned in investment
restriction (9) above, and then such mortgaging, pledging or hypothecating
may not exceed 10% of Income Fund's total assets, taken at market value
at the time thereof. In order to comply with certain state statues, the
Fund will not, as a matter of operating policy, mortgage, pledge or
hypothecate its portfolio securities to the extent that at any time the
percentage of the value of pledged securities plus the maximum sales
charge will exceed 10% of the value of Income Fund's shares at the maximum
offering price. The deposit of cash, cash equivalents and liquid debt
securities in a segregated account with the custodian and/or with a broker
in connection with futures contracts or related options transactions and
the purchase of securities on a "when-issued" basis is not deemed to be
a pledge; (12) underwrite securities of other issuers except insofar as
the Company may be deemed an underwriter under the 1933 Act in selling
portfolio securities; (13) write, purchase or sell puts, calls or
combinations thereof, except that covered call options may be written;
(14) invest in securities of foreign issuers if at the time of acquisition
more than 10% of its total assets, taken at market value at the time of
the investment, would be invested in such securities. However, up to 25%
of Income Fund's total assets may be invested in the aggregate in such
securities (i) issued, assumed or guaranteed by foreign governments, or
political subdivisions or instrumentalities thereof, (ii) assumed or
guaranteed by domestic issuers, including Eurodollar securities, or (iii)
issued, assumed or guaranteed by foreign issuers having a class of
securities listed for trading on The New York Stock Exchange; and (15)
invest more than 10% in the aggregate of the value of its total assets in
repurchase agreements maturing in more than seven days, time deposits
maturing in more than 2 days, portfolio securities which do not have
readily available market quotations and all other illiquid assets.
Bond Fund Performance
Bond Fund 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.
During Bond Fund's fiscal year ended December 31, 1995, declines in
interest rates lead to a strong rally in Treasury securities, which
contributed to that Fund's positive overall performance. In the third and
fourth quarters of 1995, Bond Fund reduced its allocation to Treasury
securities, in order to realize profits and to emphasize investments in
different categories of U.S. Government and corporate bonds. During that
period, Bond Fund added to its holdings in the corporate bond sector,
favoring companies in industries expected to experience earnings growth,
such as cable, communications, broadcasting and media firms. Bond Fund
also allocated assets to non-agency mortgage-backed securities, which have
a higher degree of issuer default and therefore pay higher yields than
Government agency mortgage obligations. Issues of utilities and cyclical
industries such as mining and metals companies were underweighted in Bond
Fund's portfolio.
The chart below shows the performance of a hypothetical $10,000 investment
in Class A and Class B shares of Bond Fund held until December 31, 1995;
in the case of Class A shares, from the inception of the class on April
15, 1988, and in the case of Class B shares, from the inception of the
class on May 1, 1993. Class C shares are not being offered in the
Reorganization, and thus no performance information about Class C shares
is given.
The performance of Bond Fund's Class A and Class B shares is compared to
the performance of the Lehman Brothers Corporate Bond Index, a broad-
based, unmanaged index of publicly-issued nonconvertible investment grade
corporate debt of U.S. issuers, widely recognized as a measure of the U.S.
fixed-rate corporate bond market. Prior to July 10, 1995, Bond Fund's
investments were limited to investment grade bonds, U.S. Government
Securities, and money market instruments. The Lehman Brothers Corporate
Bond Index includes a factor for the reinvestment of interest, but does
not reflect expenses or taxes. Index performance reflects the
reinvestment of dividends but does not consider the effect of capital
gains or transaction costs, and none of the data below shows the effect
of taxes. Also, Bond Fund's performance reflects the effect of its
business and operating expenses. While index comparisons may be useful
to provide a benchmark for Bond Fund's performance, it must be noted that
Bond Fund's investments are not limited to the securities in any one
index. Moreover, the index performance data does not reflect any
assessment of the risk of the investments included in the index.
The performance of Bond Fund's Class A and Class B shares should also be
compared to the performance of the comparable class of Income Fund shares.
The average annual total returns on an investment in Income Fund Class A
shares for 1, 5 and 10 year periods ended December 31, 1995 were 7.29%,
7.03% and 7.30%, respectively. These calculations reflect investment of
all dividends and capital gains distributions and are shown net of the
applicable 4% maximum initial sales charge. The cumulative total return
on an investment in Income Fund Class B shares for the period from October
1, 1995 (inception) to December 31, 1995 was -2.71%. This calculation
also reflects reinvestment of all dividends and distributions and are
shown net of the applicable 5% contingent deferred sales charge.
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Bond Fund (Class A) and Lehman Brothers Corporate Bond Index
[graph]
Average Annual Total Return of Class A Shares of Bond Fund at 12/31/95(1)
1 Year 5 Years Life
11.38% 8.33% 8.05%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Bond Fund (Class B) and Lehman Brothers Corporate Bond Index
[graph]
Average Annual Total Return of Class B Shares of Bond Fund at 12/31/95(2)
1 Year Life
- --------------------------------------------------------------------
11.06% 4.40%
1 The inception date of Bond Fund (Class A shares) was 4/15/88. The
average annual total returns and the ending account value in the graph
reflect reinvestment of all dividends and capital gains distributions and
are shown net of the applicable 4.75% maximum initial sales charge.
2 Class B shares of Bond Fund were first publicly offered on 5/1/93. The
average annual total returns reflect reinvestment of all dividends and
capital gains distributions and are shown net of the applicable 5% and 3%
contingent deferred sales charges, respectively, for the 1-year period and
life-of-the-class. The ending account value in the graph is net of the
applicable 3% contingent deferred sales charge.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
Additional information on Income Fund performance is set forth in the
Fund's Annual Report as of December 31, 1995, which is incorporated herein
by reference and may be obtained without charge as set forth in
"Miscellaneous - Public Information."
Additional Comparative Information
General
For a discussion of the organization and operation of Bond Fund, including
brokerage practices, see "Investment Objective and Policies" and "How the
Fund is Managed" in Bond Fund's current Prospectus and "Brokerage Policies
of the Fund" in the Bond Fund Statement of Additional Information. For
a discussion of the organization and operation of the Fund, including
brokerage practices, see "Investment Objectives and Policies,"
"Management" and "The Company" in the Company's current Prospectus and
"Portfolio Transactions and Brokerage" in the Company's current Statement
of Additional Information.
Financial Information
For certain financial information about Bond Fund and Income Fund, see (as
to Bond Fund) "Financial Highlights" and "Performance of the Fund" in Bond
Fund's current Prospectus and (as to Income Fund) "Financial Highlights"
in the Company's current Prospectus.
Management of Bond Fund and Income Fund
For information about the management of Bond Fund and the Fund, including
their respective Boards of Trustees or Directors, investment adviser,
portfolio managers and distributor, see (as to Bond Fund) "Expenses" and
"How the Fund is Managed" in the Bond Fund current Prospectus and (as to
Income Fund) "Management" and "The Company" in the Company's current
Prospectus.
Description of Shares of Bond Fund and Income Fund
Bond Fund is a series of the Trust, a Massachusetts business trust. Each
share of Bond Fund represents an interest in Bond 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 a vote at shareholder meetings. Shares of
Bond Fund and of the Trust's other series vote together in the aggregate
on certain matters at shareholder meetings, such as the election of
Trustees and ratification of appointment of auditors. Shareholders of a
particular series or class vote separately on proposals which affect that
series or class, and shareholders of a series or class which are not
affected by that matter are not entitled to vote on the proposal.
Shareholders of Bond Fund have the right, under certain circumstances, to
remove a Trustee and will be assisted in communicating with other
shareholders for such purpose.
Bond Fund is authorized to issue an unlimited number of shares of
beneficial interest. Shares are freely transferrable and shares do not
have cumulative voting rights or preemptive or subscription rights. Bond
Fund is governed by a Board of Trustees that has the power, without
shareholder approval, to establish and designate one or more series and
to divide unissued shares into two or more classes. The Board of Trustees
has established three classes of shares for Bond Fund, 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. Under certain
circumstances, a shareholder of Bond Fund may be held personally liable
as a partner for the obligations of Bond Fund, and under the Trust's
Declaration of Trust, such a shareholder is entitled to indemnification
rights by Bond Fund; the risk of a shareholder incurring any such loss is
limited to the remote circumstances in which Bond Fund is unable to meet
its obligations.
The Company is a Maryland corporation with 3 billion shares of common
stock, par value $0.001 per share, authorized. The Board is authorized
to classify and reclassify unissued common stock into additional series
and the series into one or more classes. The shares of each class
represent an interest in the same portfolio of investments as the series
and have equal rights as to voting, redemption, dividends and liquidation.
On matters affecting only one series, only the shareholders of that series
are entitled to vote. On matters relating to all of the series but
affecting the series differently, separate votes by each series are
required. On matters relating to a single class of shares of a series,
only the shareholders of that class are entitled to vote. Shareholders
holding more than 50% of the shares of the Company can elect all of the
Company's directors. Each share is entitled to one vote within each
series.
Neither Bond Fund nor Income Fund are required to hold, and neither plans
to hold, regular annual meetings of shareholders.
For further information about the shares of Bond Fund, see "How the Fund
is Managed" in the Bond Fund current Prospectus and Bond Fund Statement
of Additional Information. For a description of the classes of shares of
Income Fund, including voting rights and restrictions on disposition, see
"The Company" in the Company's current Prospectus.
Dividends, Distributions and Taxes
Bond Fund declares dividends from net investment income on each regular
business day, distributes dividends monthly and distributes net long-term
capital gains annually. Bond Fund declares and distributes net short-term
capital gains annually. Dividends from net investment income of Income
Fund are declared and paid monthly. All realized net short-term capital
gains in excess of net long-term capital gains, if any, and all realized
net long-term capital losses, if any, of Income Fund are declared and paid
at least annually. For a discussion of the policies of Bond Fund and the
Fund with respect to dividends and distributions, and a discussion of the
tax consequences of an investment in Bond Fund and the Fund, see (as to
Bond Fund) "Dividends, Capital Gains and Taxes" in the Bond Fund current
Prospectus and (as to Income Fund) "Dividends, Capital Gains and Taxes"
in the Company's current Prospectus.
Purchases, Redemptions and Exchanges of Shares
For a discussion of how shares of Bond Fund and the Fund may be purchased,
redeemed and exchanged, see (as to Bond Fund) "How to Buy Shares," "How
to Sell Shares," "Exchanges of Shares," "Special Investor Services,"
"Service Plan for Class A Shares," and "Distribution and Service Plan for
Class B Shares" in Bond Fund's current Prospectus; and (as to Income Fund)
"Prospectus Summary" and "Your Account" in the Company's current
Prospectus.
Shareholder Inquiries
For a description of how shareholder inquiries should be made, see (as to
Bond Fund) "How the Fund is Managed" in Bond Fund current Prospectus and
(as to the Fund) the March 18, 1996 supplement to the Company's current
Prospectus.
INFORMATION CONCERNING THE MEETING
The Meeting
The Meeting and any adjournments thereof will be held at OppenheimerFunds,
Inc., 3410 South Galena Street, Denver, Colorado 80231, at 10:00 A.M.,
Denver time, on April 24, 1996. At the Meeting, Income Fund shareholders
will be asked to consider and vote upon approval of the Reorganization
Agreement, and the transactions contemplated thereby, including the
transfer of substantially all the assets of the Fund to Bond Fund in
exchange for the issuance of Class A and Class B shares of Bond Fund, the
distribution by the Fund of such shares to its shareholders in liquidation
of the Fund and the cancellation of the outstanding shares of the Fund.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on March 18, 1996 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 the
holders of a majority of Income Fund's Class A and Class B shares
outstanding, entitled to vote and voting together as a series, 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 Income Fund
shareholders will vote on the Reorganization. The vote of shareholders
of Bond Fund is not being solicited to approve the Reorganization
Agreement.
At the close of business on the Record Date, there were approximately
3,460,009 Class A and 9,167 Class B shares of the Fund issued and
outstanding. The presence in person or by proxy of the holders of a
majority of Income Fund's shares constitutes a quorum for the transaction
of business at the Meeting. As of the close of business on the Record
Date, there were approximately 15,069,194 Class A, 3,577,274 Class B and
280,063 Class C shares of Bond Fund issued and outstanding. To the
knowledge of the Fund, as of March 8, 1996, no person owned of record or
beneficially 5% or more of the outstanding Class A or Class B Income Fund
shares or 5% or more of the outstanding shares of the Company, except for
the following Class B Income Fund shareholders (the numbers shown
parenthetically are the approximate percentage of the outstanding Class
B shares of Income Fund): (i) Murphy Trust Estate, 404 Beryl Cove Way,
Seal Beach, CA 90740, which held 4,219.409 shares (46.0%); (ii) Dale &
Douglas Meunier JTWROS, 444 Round Lake Drive, Caledonia, MI 49316, which
held 2,154,868 shares (23.5%); (iii) Ethel Jones, Diane Bichsel, Carolyn
Lowe, JTWROS, 703 N. Alta Dena, Royal Oaks, MI 48067, which held 549,109
shares (6.0%); and (iv) Cynthia Hannah, Custodian for Famous Spellman,
UTMA - VA, 1709 Birch Trail Cir., Chesapeake, VA 23320, which held
1,308.926 shares (14.3%). To the knowledge of Bond Fund, as of March 8,
1996, no person owned of record or beneficially 5% or more of the
outstanding shares of the Trust, or 5% or more of the outstanding Class
A, Class B or Class C Bond Fund shares except as follows (the numbers
shown parenthetically are the approximate percentage of the outstanding
Bond Fund shares of that class): (i) MassMutual and affiliates, 1295 State
Street, Springfield, MA 01111, which held 825,144.176 shares (5.5%); (ii)
RPSS TR IRA FBO Shirley Einhorn, 10662 S.W. 79th Terrace, Miami, FL 33173,
24,670.768 Class C shares (9.28%), (iii) Merrill Lynch Pierce Fenner &
Smith, 4800 Deer Lake Drive East, Jacksonville, FL 32246, 17,145 Class C
shares (6.45%); (iv) Oppenheimer & Co., Inc., P.O. Box 3484, New York, NY
10008, 16,554.132 Class C shares (6.2%); (v) Merchants & Farmers Bank
401(k) Plan, Millport, AL 35576, 15,711.805 Class C shares (5.9%); and
(vi) David B. Landers PC PSP, 3364 East Slauson Avenue, Vernon, CA 90058,
13,534.984 Class C shares (5.09%). As of March 8, 1996, the officers and
Directors of the Trust, and the officers and Directors of the Company,
beneficially owned as a group less than 1% of the outstanding shares of
each class of Bond Fund and Income Fund, respectively, and of the
outstanding shares of the Trust and the Company, respectively.
In the event a quorum does not exist 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. In the event that a quorum is present at the Meeting but
the shareholders do not approve the Reorganization, the Reorganization
will be deemed to have not been approved and the Board will consider what
further action, if any, to take.
Shares of common stock of the Company represented in person or by proxy
(including shares which abstain or do not vote with respect to the
Proposal presented for shareholder approval) will be counted for purposes
of determining whether a quorum is present at the Meeting. 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,
except as follows: if a broker or nominee holding street account shares
indicates on the proxy that it does not have discretionary authority to
vote on the Proposal, those shares will not be considered as present and
entitled to vote on the Proposal and are not considered to be votes cast.
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. The proxy may be revoked
at any time prior to the voting thereof by: (i) writing to the Secretary
of the Company at OppenheimerFunds, Inc., Two World Trade Center, New
York, New York 10048-0203; (ii) attending the Meeting and voting in
person; (iii) signing and returning a new proxy (if returned and received
in time to be voted); or (iv) voting by telephone as explained below.
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 borne by MassMutual.
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 OFI or OFI's affiliates, personally
or by telephone or telegraph. In addition, the Company has retained D.F.
King & Co., Inc., 77 Water Street, New York, New York 10005 to assist in
the solicitation of proxies primarily by contacting shareholders by
telephone and telegram. The cost of such proxy solicitor will be borne
by MassMutual. 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 a shareholder's identity, to
allow a shareholder to authorize the voting of shares in accordance with
the shareholder's instructions and to confirm that the voting instructions
have been properly recorded. If these procedures were subject to a
successful legal challenge, such votes would not be counted at the
Meeting. The Company has not sought to obtain an opinion of counsel on
this matter and is unaware of any such challenge at this time. A
shareholder would be called on a recorded line at the telephone number the
Company has in its records for the account and could be asked the
shareholder's Social Security number or other identifying information.
The shareholder would then be given an opportunity to authorize proxies
to vote his or her shares at the Meeting in accordance with the
shareholder's instructions. To ensure that the shareholder's instructions
have been recorded correctly, the shareholder will also receive a
confirmation of the voting instructions in the mail. A special telephone
number will be available in case the voting information contained in the
confirmation is incorrect. If the shareholder decides after voting by
telephone to provide a written proxy or attend the Meeting, the
shareholder can revoke the proxy at that time and provide a written proxy
or vote the shares at the Meeting.
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 MassMutual for their reasonable out-of-
pocket expenses.
In addition to the proxy solicitation expenses (as described above),
MassMutual will bear the cost of the tax opinion, as well as any other
expenses associated with the Reorganization, including legal and
accounting expenses.
MISCELLANEOUS
Financial Information
The Reorganization will be accounted for by Bond Fund in its financial
statements similar to a pooling without restatement. Further financial
information as to Income Fund is contained in the Company's current
Prospectus, which is available without charge upon written request to OFS
at P.O. Box 5270, Denver, Colorado 80217, and is incorporated herein, and
in its audited financial statements as of December 31, 1995, which are
included in the Statement of Additional Information. Financial
information for Bond Fund 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, 1995, which are
included in the Statement of Additional Information.
Public Information
Additional information about Bond Fund and Income Fund is available, as
applicable, in the following documents, which may be obtained without
charge by writing to OFS at P.O. Box 5270, Denver, Colorado 80217 or by
calling 1-800-525-7048: (i) Bond Fund's Prospectus dated July 10, 1995,
supplemented November 22, 1995, January 1, 1996 and January 5, 1996,
accompanying this Proxy Statement and Prospectus (ii) the Company's
Prospectus dated October 1, 1995, supplemented March 18, 1996, and
incorporated by reference herein; (iii) Bond Fund's Annual Report as of
December 31, 1995; and (iv) the Company's Annual Report as of December 31,
1995.
Additional information about the following matters is contained in the
Statement of Additional Information, which is incorporated herein by
reference and includes Bond Fund's Statement of Additional Information,
the Company's Statement of Additional Information and the Annual Reports
described in the preceding paragraph: the organization and operation of
Bond Fund and Income Fund; more information on investment policies,
practices and risks; information about the Board of Trustees of the Trust
and the Board of Directors of the Company (on behalf of Bond Fund and
Income Fund, respectively) and their responsibilities; a further
description of the services provided by Bond Fund'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 Bond Fund and Income Fund;
purchase, redemption and exchange programs; and distribution arrangements.
Bond Fund and Income 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 Bond Fund 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, 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 if no voting instructions
are provided.
By Order of the Board of Directors
Andrew J. Donohue, Secretary
March 18, 1996
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of
March 18, 1996 by and between Oppenheimer Series Fund, Inc., a Maryland
corporation (the "Company") on behalf of Connecticut Mutual Income
Account, a series of the Company ("Income Fund") and Oppenheimer Integrity
Funds, a Massachusetts business trust (the "Trust") on behalf of
Oppenheimer Bond Fund, a series of the Trust ("Bond Fund").
W I T N E S S E T H:
WHEREAS, the parties are each open-end investment companies of the
management type; and
WHEREAS, the parties hereto desire to provide for the reorganization
pursuant to Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"), of Income Fund and Bond Fund through the acquisition
by Bond Fund of substantially all of the assets of Income Fund in exchange
solely for the issuance of voting Class A and Class B shares of beneficial
interest ("shares") of Bond Fund to Income Fund and the assumption by Bond
Fund of certain liabilities of Income Fund, which Class A and Class B
shares of Bond Fund are thereafter to be distributed by Income Fund pro
rata to its shareholders in complete liquidation of Income Fund and
complete cancellation of its shares;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. The parties hereto hereby adopt this Agreement and Plan of
Reorganization (the "Agreement") pursuant to Section 368(a)(1) of the Code
as follows: The reorganization will be comprised of the acquisition by
Bond Fund of substantially all of the properties and assets of Income Fund
in exchange for the issuance of Class A and Class B shares of Bond Fund
to Income Fund and the assumption by Bond Fund of certain liabilities of
Income Fund, followed by the distribution by Income Fund of such Class A
and Class B shares of Bond Fund to the Class A and Class B shareholders
of Income Fund in exchange for their Class A and Class B shares of Income
Fund, all upon and subject to the terms of the Agreement hereinafter set
forth.
The share transfer books of Income Fund will be permanently
closed at the close of business on the Valuation Date (as hereinafter
defined) and only redemption requests received in proper form on or prior
to the close of business on the Valuation Date shall be fulfilled by
Income Fund; redemption requests received by Income Fund after that date
shall be treated as requests for the redemption of the shares of Bond Fund
that shall have been distributed to the shareholder in question as
provided in Section 5.
2. On the Closing Date (as hereinafter defined), all of the assets
of Income Fund on that date, excluding a cash reserve (the "Cash Reserve")
to be retained by Income Fund sufficient in its discretion for the payment
of the expenses of Income Fund's dissolution and its liabilities, but not
in excess of the amount contemplated by Section 10E of the Agreement,
shall be delivered as provided in Section 8 of the Agreement to Bond Fund,
in exchange for and against delivery to Income Fund on the Closing Date
of a number of Class A and Class B shares of Bond Fund, having an
aggregate net asset value equal to the value of the assets of Income Fund
so transferred and delivered.
3. The net asset value of Class A and Class B shares of Bond Fund
and the value of the assets of Income Fund to be transferred shall in each
case be determined as of the close of business of The New York Stock
Exchange on the Valuation Date. The computation of the net asset value
of the Class A and Class B shares of Bond Fund and the Class A and Class
B shares of Income Fund shall be done in the manner used by Bond Fund and
Income Fund, respectively, in the computation of such net asset value per
share as set forth in their respective prospectuses. The methods used
by Bond Fund in such computation shall be applied to the valuation of the
assets of Income Fund to be transferred to Bond Fund.
Income Fund shall declare and pay, immediately prior to the
Valuation Date, a dividend or dividends which, together with all previous
such dividends, shall have the effect of distributing to Income Fund's
shareholders all of Income Fund's investment company taxable income for
taxable years ending on or prior to the Closing Date (computed without
regard to any dividends paid) and all of its net capital gain, if any,
realized in taxable years ending on or prior to the Closing Date (after
reduction for any capital loss carry-forward).
4. The closing of the transactions contemplated herein (the
"Closing") shall be at the office of OppenheimerFunds, Inc. (the "Agent"),
Two World Trade Center, Suite 3400, New York, New York 10048, at 4:00 P.M.
New York time on April 26, 1996, or at such other time or place as the
parties may designate or as provided below (the "Closing Date"). The
business day preceding the Closing Date is herein referred to as the
"Valuation Date."
In the event that on the Valuation Date either party has,
pursuant to the Investment Company Act of 1940, as amended (the "Act"),
or any rule, regulation or order thereunder, suspended the redemption of
its shares or postponed payment therefore, the Closing Date shall be
postponed until the first business day after the date when both parties
have ceased such suspension or postponement; provided, however, that if
such suspension shall continue for a period of 60 days beyond the
Valuation Date, then the other party to the Agreement shall be permitted
to terminate the Agreement without liability to either party for such
termination.
5. As soon as practicable after the Closing, Income Fund shall
distribute on a pro rata basis to the shareholders of Income Fund on the
Valuation Date the Class A and Class B shares of Bond Fund received by
Income Fund on the Closing Date in exchange for the assets of Income Fund
in complete liquidation of Income Fund; for the purpose of the
distribution by Income Fund of Class A and Class B shares of Bond Fund to
its shareholders, Bond Fund will promptly cause its transfer agent to: (a)
credit an appropriate number of Class A and Class B shares of Bond Fund
on the books of Bond Fund to each Class A and Class B shareholder,
respectively of Income Fund in accordance with a list (the "Shareholder
List") of its shareholders received from Income Fund; and (b) confirm an
appropriate number of Class A and Class B shares of Bond Fund to each
shareholder of Income Fund; certificates for Class A and Class B shares
of Bond Fund will be issued upon written request of a former shareholder
of Income Fund but only for whole shares, with fractional shares credited
to the name of the shareholder on the books of Bond Fund.
The Shareholder List shall indicate, as of the close of business
on the Valuation Date, the name and address of each shareholder of Income
Fund, indicating his or her share balance. Income Fund agrees to supply
the Shareholder List to Bond Fund not later than the Closing Date.
Shareholders of Income Fund holding certificates representing their shares
shall not be required to surrender their certificates to anyone in
connection with the reorganization. After the Closing Date, however, it
will be necessary for such shareholders to surrender their certificates
in order to redeem, transfer or pledge the shares of Bond Fund which they
received.
6. Within one year after the Closing Date, Income Fund 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 Bond 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 Income Fund 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 Income Fund outstanding on the Valuation Date.
7. Prior to the Closing Date, there shall be coordination between
the parties as to their respective portfolios so that, after the closing,
Bond Fund will be in compliance with all of its investment policies and
restrictions. At the Closing, Income Fund shall deliver to Bond Fund two
copies of a list setting forth the securities, cash and receivables then
owned by Income Fund. Promptly after the Closing, Income Fund shall
provide Bond Fund a list setting forth the respective federal income tax
bases thereof.
8. Portfolio securities or written evidence acceptable to Bond Fund
of record ownership thereof by The Depository Trust Company or through the
Federal Reserve Book Entry System or any other depository approved by
Income Fund pursuant to Rule 17f-4 and Rule 17f-5 under the Act shall be
endorsed and delivered, or transferred by appropriate transfer or
assignment documents, by Income Fund on the Closing Date to Bond Fund, or
at its direction, to its custodian bank, in proper form for transfer in
such condition as to constitute good delivery thereof in accordance with
the custom of brokers and shall be accompanied by all necessary state
transfer stamps, if any. The cash holding of Income Fund shall be
delivered to Bond Fund in the form of certified or bank cashiers' checks
or by bank wire or intra-bank transfer to Bond Fund's custodian bank
payable to the order of Bond Fund for the account of Bond Fund.
Shares of Bond Fund representing the number of shares of Bond Fund
being delivered against the assets of Income Fund, registered in the name
of Income Fund, shall be transferred to Income Fund on the Closing Date.
Such shares shall thereupon be assigned by Income Fund to its shareholders
so that the shares of Bond Fund may be distributed as provided in Section
5.
If, at the Closing Date, Income Fund is unable to make delivery
under this Section 8 to Bond Fund of any of its portfolio securities or
cash for the reason that any of such securities purchased by Income Fund,
or the cash proceeds of a sale of portfolio securities, prior to the
Closing Date have not yet been delivered to it or Income Fund's custodian,
then the delivery requirements of this Section 8 with respect to said
undelivered securities or cash will be waived and Income Fund will deliver
to Bond Fund by or on the Closing Date and with respect to said
undelivered securities or cash executed copies of an agreement or
agreements of assignment as to such securities or cash proceeds in a form
reasonably satisfactory to Bond Fund, together with such other documents,
including a due bill or due bills and brokers' confirmation slips as may
reasonably be required by Bond Fund.
9. Bond Fund shall not assume the liabilities (except for (a)
portfolio securities purchased which have not settled and (b) shareholder
redemption and dividend checks outstanding) of Income Fund, but Income
Fund will, nevertheless, use its best efforts to discharge all known
liabilities, so far as may be possible, prior to the Closing Date. Each
party represents to the other that Massachusetts Mutual Life Insurance
Company has agreed to assume liability for and pay all expenses associated
with the reorganization, including legal and accounting expenses, the
costs of required tax opinions, and the cost of printing and mailing the
proxies and proxy statements in connection with the solicitation of the
approval by the shareholders of Income Fund of this reorganization.
However, any documents such as existing prospectuses or annual reports
that are included in that proxy mailing will be a cost of the Fund issuing
the document. Other than the cost of such documents, neither party will
bear any expenses associated with the reorganization.
10. The obligations of Bond Fund hereunder shall be subject to the
following conditions:
A. The Board of Directors of the Company on behalf of Income
Fund shall have authorized the execution of the Agreement, and the
shareholders of Income Fund shall have approved the Agreement and the
transactions contemplated thereby, and Income Fund shall have furnished
to Bond Fund copies of resolutions to that effect certified by the
Secretary or an Assistant Secretary of the Company; such shareholder
approval shall have been by the affirmative vote of a majority of the
outstanding voting securities of Income Fund at a meeting for which
proxies have been solicited by the Proxy Statement and Prospectus (as
hereinafter defined).
B. Bond Fund shall have received an opinion dated the Closing
Date of Piper & Marbury LLP, counsel to the Company, to the effect that
(i) the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Maryland with
full powers to conduct its business as described by its charter and as
currently being conducted; (ii) the execution and delivery of the
Agreement and the consummation of the transactions contemplated therein
will not result in any violation of the provisions of the charter or by-
laws of the Company; and (iii) the Agreement has been duly authorized and
executed by the Company and the Agreement constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratoriums and other
similar laws relating to or affecting creditor rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
C. The representations and warranties of the Company on behalf
of Income Fund contained herein shall be true and correct at and as of the
Closing Date, and Bond Fund shall have been furnished with a certificate
of the President, or a Vice President, or the Secretary or the Assistant
Secretary or the Treasurer of the Company, dated the Closing Date, to that
effect.
D. On the Closing Date, Income Fund shall have furnished to
Bond Fund a certificate of the Treasurer or Assistant Treasurer of the
Company as to the amount of the capital loss carry-over , if any, and net
unrealized appreciation or depreciation, if any, with respect to Income
Fund as of the Closing Date.
E. The Cash Reserve shall not exceed 1% of the value of the
net assets, nor 10% in value of the gross assets, of Income Fund at the
close of business on the Valuation Date.
F. A Registration Statement on Form N-14 filed by Oppenheimer
Integrity Funds under the Securities Act of 1933, as amended (the "1933
Act"), containing a preliminary form of the Proxy Statement and Prospectus
required under the Act to request the approval of the shareholders of
Income Fund of the reorganization contemplated in the Agreement (the
"Proxy Statement and Prospectus"), shall have become effective under the
1933 Act not later than December 31, 1996.
G. On the Closing Date, Bond Fund shall have received a letter
of David E. Sams, Jr. or other senior executive officer of G.R. Phelps &
Co. Inc. (Income Fund's administrator and former investment manager)
acceptable to Bond Fund, stating that nothing has come to his or her
attention which in his or her judgment would indicate that as of the
Closing Date there were any material actual or contingent liabilities of
Income Fund arising out of litigation brought against Income Fund or
claims asserted against it, or pending or to the best of his or her
knowledge threatened claims or litigation not reflected in or apparent
from the most recent audited financial statements and footnotes thereto
of Income Fund delivered to Bond Fund. Such letter may also include such
additional statements relating to the scope of the review conducted by
such person and his or her responsibilities and liabilities as are not
unreasonable under the circumstances.
H. Bond Fund shall have received an opinion, dated the Closing
Date, of Arthur Andersen LLP, to the same effect as the opinion
contemplated by Section 11.E. of the Agreement.
I. Bond Fund shall have received at the closing all of the
assets of Income Fund to be conveyed hereunder, which assets shall be free
and clear of all liens, encumbrances, security interests, restrictions and
limitations whatsoever.
11. The obligations of Income Fund hereunder shall be subject to the
following conditions:
A. The Board of Trustees of the Trust on behalf of Bond Fund
shall have authorized the execution of the Agreement, and the transactions
contemplated thereby, and Bond Fund shall have furnished to Income Fund
copies of resolutions to that effect certified by the Secretary or an
Assistant Secretary of Oppenheimer Integrity Funds.
B. Income Fund's shareholders shall have approved the
Agreement and the transactions contemplated hereby, by an affirmative vote
of the holders of a majority of Income Fund's Class A and Class B shares
outstanding and entitled to vote, voting together as a series; and Income
Fund shall have furnished Bond Fund copies of resolutions to that effect
certified by the Secretary or an Assistant Secretary of Income Fund.
C. Income Fund shall have received an opinion dated the
Closing Date of Myer, Swanson, Adams & Wolf, P.C., counsel to Bond Fund,
to the effect that (i) the Trust is a business trust duly organized,
validly existing and in good standing under the laws of the Commonwealth
of Massachusetts with full powers to carry on its business as described
by its Declaration of Trust and to the best knowledge of such counsel,
then being conducted and to enter into and perform the Agreement; (ii) all
action necessary to make the Agreement, according to its terms, valid,
binding and enforceable upon the Trust in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratoriums and other similar laws relating to or
affecting creditor rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant
of good faith and fair dealing, and to authorize effectively the
transactions contemplated by the Agreement, have been taken by the Trust
on behalf of Bond Fund, and (iii) the shares of Bond Fund to be issued
hereunder are duly authorized and when issued will be validly issued,
fully-paid and non-assessable, except as set forth in Bond Fund's then
current Prospectus and Statement of Additional Information.
D. The representations and warranties of the Trust on behalf of
Bond Fund contained herein shall be true and correct at and as of the
Closing Date, and Income Fund shall have been furnished with a certificate
of the President, a Vice President or the Secretary or an Assistant
Secretary or the Treasurer of the Trust to that effect dated the Closing
Date.
E. Income Fund shall have received an opinion of Arthur
Andersen LLP to the effect that the Federal tax consequences of the
transaction, if carried out in the manner outlined in this Agreement and
Plan of Reorganization and in accordance with (i) Income Fund's
representation that there is no plan or intention by any Fund shareholder
who owns 5% or more of Income Fund's outstanding shares, and, to Income
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 Bond Fund shares received in the transaction that
would reduce Income Fund shareholders' ownership of Bond Fund shares to
a number of shares having a value, as of the Closing Date, of less than
50% of the value of all of the formerly outstanding Fund shares as of the
same date, and (ii) the representation by each of Income Fund and Bond
Fund that, as of the Closing Date, Income Fund and Bond Fund will qualify
as regulated investment companies or will meet the diversification test
of Section 368(a)(2)(F)(ii) of the Code and (iii) the other
representations by each of Income Fund and Bond Fund made to Arthur
Andersen LLP, and set forth in the opinion, will generally be as follows:
1. The transfer of substantially all of Income Fund's
assets in exchange for Class A and Class B shares of Bond Fund and the
assumption by Bond Fund of certain identified liabilities of Income Fund
followed by the distribution by Income Fund of Class A and Class B shares
of Bond Fund to Income Fund shareholders in exchange for their Income Fund
shares will constitute a "reorganization" within the meaning of Section
368(a)(1) of the Code and Income Fund and Bond Fund will each be a "party
to a 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 Bond Fund upon the receipt of the assets of Income
Fund solely in exchange for Class A and Class B shares of Bond Fund and
the assumption by Bond Fund of certain identified liabilities of Income
Fund.
3. Pursuant to Sections 361(a) and 361(c) of the Code,
no gain or loss will be recognized by Income Fund upon the transfer of the
assets of Income Fund to Bond Fund in exchange for Class A and Class B
shares of Bond Fund and the assumption by Bond Fund of certain identified
liabilities of Income Fund or upon the distribution of Class A and Class
B shares of Bond Fund to Income Fund shareholders in exchange for Income
Fund shares.
4. Pursuant to Section 354(a) of the Code, no gain or
loss will be recognized by Income Fund shareholders upon the exchange of
Income Fund shares for the Class A and Class B shares of Bond Fund.
However, Income Fund shareholders may recognize taxable income or gain to
the extent they receive any portion of the Cash Reserve, as defined in the
Agreement.
5. Pursuant to Section 358 of the Code, the aggregate tax
basis for Class A and Class B shares of Bond Fund received by each Income
Fund shareholder pursuant to the Reorganization will be the same as the
aggregate tax basis of Income Fund shares held by each such Income Fund
shareholder immediately prior to the Reorganization.
6. Pursuant to Section 1223 of the Code, the holding
period of Class A and Class B shares of Bond Fund to be received by each
Income Fund shareholder will include the period during which Income Fund
shares surrendered in exchange therefor were held (provided such Income
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 Income Fund acquired by Bond Fund will be the same as the
tax basis of such assets of Income Fund immediately prior to the
Reorganization.
8. Pursuant to Section 1223 of the Code, the holding
period of the assets of Income Fund in the hands of Bond Fund will include
the period during which those assets were held by Income Fund.
9. Bond Fund will succeed to and take into account the
items of Income Fund described in Section 381(c) of the Code, including
the earnings and profits, or deficit in earnings and profits, of Income
Fund as of the date of the transactions. Bond Fund 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.
F. The Cash Reserve shall not exceed 1% of the value of the
net assets, nor 10% in value of the gross assets, of Income Fund at the
close of business on the Valuation Date.
G. A Registration Statement on Form N-14 filed by Oppenheimer
Integrity Funds under the 1933 Act, containing a preliminary form of the
Proxy Statement and Prospectus required under the Act to request the
approval of the shareholders of Income Fund of the reorganization
contemplated in the Agreement shall have become effective under the 1933
Act not later than December 31, 1996.
H. On the Closing Date, Income Fund shall have received a
letter of Andrew J. Donohue or other senior executive officer of
OppenheimerFunds, Inc. acceptable to Income Fund, stating that nothing has
come to his or her attention which in his or her judgment would indicate
that as of the Closing Date there were any material actual or contingent
liabilities of Bond Fund arising out of litigation brought against Bond
Fund or claims asserted against it, or pending or, to the best of his or
her knowledge, threatened claims or litigation not reflected in or
apparent by the most recent audited financial statements and footnotes
thereto of Bond Fund delivered to Income Fund. Such letter may also
include such additional statements relating to the scope of the review
conducted by such person and his or her responsibilities and liabilities
as are not unreasonable under the circumstances.
I. Income Fund shall acknowledge receipt of the shares of Bond
Fund.
12. The Company on behalf of Income Fund hereby represents and
warrants that:
A. The financial statements of Income Fund as at December 31,
1995 (audited) heretofore furnished to Bond Fund, present fairly the
financial position, results of operations, and changes in net assets of
Income Fund as of that date, in conformity with generally accepted
accounting principles applied on a basis consistent with the preceding
year; and that from December 31, 1995 through the date hereof there have
not been, and through the Closing Date there will not be, any material
adverse change in the business or financial condition of Income Fund, it
being agreed that a decrease in the size of Income Fund due to a
diminution in the value of its portfolio and/or redemption of its shares
shall not be considered a material adverse change;
B. Contingent upon approval of the Agreement and the
transactions contemplated thereby by Income Fund's shareholders, Income
Fund has authority to transfer all of the assets of Income Fund to be
conveyed hereunder free and clear of all liens, encumbrances, security
interests, restrictions and limitations whatsoever;
C. The Prospectus, as amended and supplemented, contained in
the Company's Registration Statement under the 1933 Act, as amended, is
true, correct and complete, conforms to the requirements of the 1933 Act
and does not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading. The Registration Statement, as
amended, was, as of the date of the filing of the last Post-Effective
Amendment, true, correct and complete, conformed to the requirements of
the 1933 Act and did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
D. There is no material contingent liability of Income Fund
and no material claim and no material legal, administrative or other
proceedings pending or, to the knowledge of Income Fund, threatened
against Income Fund, not reflected in such Prospectus;
E. There are no material contracts outstanding to which Income
Fund is a party other than those ordinary in the conduct of its business;
F. Income Fund is a series of Oppenheimer Series Fund, Inc.,
a corporation duly organized, validly existing and in good standing under
the laws of the State of Maryland; and has all necessary and material
Federal and state authorizations to own all of its assets and to carry on
its business as now being conducted; and Income Fund is duly registered
under the Act and such registration has not been rescinded or revoked and
is in full force and effect;
G. All Federal and other tax returns and reports of Income
Fund required by law to be filed have been filed, and all Federal and
other taxes shown due on said returns and reports have been paid or
provision shall have been made for the payment thereof and to the best of
the knowledge of Income Fund no such return is currently under audit and
no assessment has been asserted with respect to such returns and to the
extent such tax returns with respect to the taxable year of Income Fund
ended December 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; and
H. Income Fund has elected to be treated as a regulated
investment company and, for each taxable year of its operations, Income
Fund has met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company and Income
Fund intends to meet such requirements with respect to its current taxable
year.
13. The Trust on behalf of Bond Fund hereby represents and warrants
that:
A. The financial statements of Bond Fund as at December 31,
1995 (audited) heretofore furnished to Income Fund, present fairly the
financial position, results of operations, and changes in net assets of
Bond Fund, as of that date, in conformity with generally accepted
accounting principles applied on a basis consistent with the preceding
year; and that from December 31, 1995 through the date hereof there have
not been, and through the Closing Date there will not be, any material
adverse changes in the business or financial condition of Bond Fund, it
being understood that a decrease in the size of Bond Fund due to a
diminution in the value of its portfolio and/or redemption of its shares
shall not be considered a material or adverse change;
B. The Prospectus, as amended and supplemented, contained in
the Trust's Registration Statement under the 1933 Act, is true, correct
and complete, conforms to the requirements of the 1933 Act and does not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. The Registration Statement, as
amended, was, as of the date of the filing of the last Post-Effective
Amendment, true, correct and complete, conformed to the requirements of
the 1933 Act and did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
C. There is no material contingent liability of Bond Fund and
no material claim and no material legal, administrative or other
proceedings pending or, to the knowledge of Bond Fund, threatened against
Bond Fund, not reflected in such Prospectus;
D. There are no material contracts outstanding to which Bond
Fund is a party other than those ordinary in the conduct of its business;
E. Bond Fund is a series of Oppenheimer Integrity Funds, a
business trust duly organized, validly existing and in good standing under
the laws of the Commonwealth of Massachusetts; has all necessary and
material Federal and state authorizations to own all its properties and
assets and to carry on its business as now being conducted; the shares of
Bond Fund which it issues to Income Fund pursuant to the Agreement will
be duly authorized, validly issued, fully-paid and non-assessable, except
as otherwise set forth in the Trust's Registration Statement; and will
conform to the description thereof contained in the Trust's Registration
Statement, will be duly registered under the 1933 Act and in the states
where registration is required; and Bond Fund is duly registered under the
Act and such registration has not been revoked or rescinded and is in full
force and effect;
F. All Federal and other tax returns and reports of Bond Fund
required by law to be filed have been filed, and all Federal and other
taxes shown due on said returns and reports have been paid or provision
shall have been made for the payment thereof and to the best of the
knowledge of Bond Fund no such return is currently under audit and no
assessment has been asserted with respect to such returns and to the
extent such tax returns with respect to the taxable year of Bond Fund
ended December 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;
G. Bond Fund has elected to be treated as a regulated
investment company and, for each taxable year of its operations, Bond Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and Bond Fund intends to meet
such requirements with respect to its current taxable year;
H. Bond Fund has no plan or intention (i) to dispose of any
of the assets transferred by Income Fund, other than in the ordinary
course of business, or (ii) to redeem or reacquire any of the shares
issued by it in the reorganization other than pursuant to valid requests
of shareholders; and
I. After consummation of the transactions contemplated by the
Agreement, Bond Fund intends to operate its business in a substantially
unchanged manner.
14. Each party hereby represents to the other that no broker or
finder has been employed by it with respect to the Agreement or the
transactions contemplated hereby. Each party also represents and warrants
to the other that the information concerning it in the Proxy Statement and
Prospectus will not as of its date contain any untrue statement of a
material fact or omit to state a fact necessary to make the statements
concerning it therein not misleading and that the financial statements
concerning it will present the information shown fairly in accordance with
generally accepted accounting principles applied on a basis consistent
with the preceding year. Each party also represents and warrants to the
other that the Agreement is valid, binding and enforceable in accordance
with its terms and that the execution, delivery and performance of the
Agreement will not result in any violation of, or be in conflict with, any
provision of any charter, by-laws, contract, agreement, judgment, decree
or order to which it is subject or to which it is a party. Bond Fund
hereby represents to and covenants with Income Fund that, if the
reorganization becomes effective, Bond Fund will treat each shareholder
of Income Fund who received any of Bond Fund's shares as a result of the
reorganization as having made the minimum initial purchase of shares of
Bond Fund received by such shareholder for the purpose of making
additional investments in shares of Bond Fund, regardless of the value of
the shares of Bond Fund received. Bond Fund represents to Income Fund
that each shareholder of Income Fund who received shares of Bond Fund as
a result of the reorganization and was subject to a Class B contingent
deferred sales charge waiver, as described in the proxy statement of
Income Fund dated December 18, 1995, relating to the approval of
OppenheimerFunds, Inc. as Income Fund's investment adviser, will remain
eligible for such waiver as described therein, upon the supplementing of
the Prospectus of Bond Fund with respect thereto.
15. Bond Fund agrees that it will prepare and file a Registration
Statement on Form N-14 under the 1933 Act (unless it has already done so)
which shall contain a preliminary form of proxy statement and prospectus
contemplated by Rule 145 under the 1933 Act. The final form of such proxy
statement and prospectus is referred to in the Agreement as the "Proxy
Statement and Prospectus." Each party agrees that it will use its best
efforts to have such Registration Statement declared effective and to
supply such information concerning itself for inclusion in the Proxy
Statement and Prospectus as may be necessary or desirable in this
connection.
16. The obligations of the parties under the Agreement shall be
subject to the right of (a) both parties to mutually consent to abandon
and terminate the Agreement without liability, and (b) either party to
abandon and terminate the Agreement without liability if the other party
breaches any material provision of the Agreement or if any material legal,
administrative or other proceeding shall be instituted or threatened
between the date of the Agreement and the Closing Date (i) seeking to
restrain or otherwise prohibit the transactions contemplated hereby and/or
(ii) asserting a material liability of either party, which proceeding has
not been terminated or the threat thereof removed prior to the Closing
Date. In the event of termination, damages will be limited to
reimbursement by the party breaching any material provision of the
Agreement of the reasonable out-of-pocket fees and expenses (if any)
incurred by the other party in connection with the transactions
contemplated by the Agreement.
17. The Agreement may be executed in several counterparts, each of
which shall be deemed an original, but all taken together shall constitute
one Agreement. The rights and obligations of each party pursuant to the
Agreement shall not be assignable.
18. All prior or contemporaneous agreements and representations are
merged into the Agreement, which constitutes the entire contract between
the parties hereto. No amendment or modification hereof shall be of any
force and effect unless in writing and signed by the parties and no party
shall be deemed to have waived any provision herein for its benefit unless
it executes a written acknowledgement of such waiver.
19. Income Fund understands that the obligations of Bond Fund and
the Trust under the Agreement are not binding upon any Trustee or
shareholder of Bond Fund or the Trust personally, but bind only Bond Fund
and Bond Fund's property. Income Fund represents that it has notice of
the provisions of the Declaration of Trust of the Trust disclaiming
shareholder and Trustee liability for acts or obligations of Bond Fund or
the Trust.
IN WITNESS WHEREOF, each of the parties has caused the Agreement to
be executed and attested by its officers thereunto duly authorized on the
date first set forth above.
Attest: OPPENHEIMER SERIES FUND, INC.
On behalf of
CONNECTICUT MUTUAL INCOME ACCOUNT
/s/ Robert G. Zack /s/ Andrew J. Donohue
__________________________ By: _____________________________
Robert G. Zack, Assistant
Secretary Name and Title: Andrew J. Donohue,
Secretary
Attest: OPPENHEIMER INTEGRITY FUNDS
On behalf of OPPENHEIMER BOND FUND
/s/ Robert G. Zack /s/ Andrew J. Donohue
__________________________ By:_________________________________
Robert G. Zack, Assistant
Secretary Name and Title: Andrew J. Donohue, Vice
President & Secretary
<PAGE>
APPENDIX TO PROXY STATEMENT AND PROSPECTUS OF
OPPENHEIMER BOND FUND
Graphic material included in Proxy Statement and Prospectus of
Oppenheimer Bond Fund "Bond Fund Performance":
Linear graphs will be included in the Proxy Statement and Prospectus
of Oppenheimer Bond Fund ("Bond Fund") depicting the initial account value
and subsequent account value of a hypothetical $10,000 in Bond Fund. In
the case of Bond Fund's Class A shares, that graph will cover each of Bond
Fund's fiscal years since the inception of the class on April 15, 1988
through December 31, 1995 and in the case of Class B shares the graph will
cover the period from the inception of the class on May 1, 1993 through
December 31, 1995. The graphs will compare such values with the same
investments over the same time periods with The Lehman Brothers Corporate
Bond Index. Set forth below are the relevant data points that will appear
on the linear graphs. Additional information with respect to the
foregoing, including a description of The Lehman Brothers Corporate Bond
Index, is set forth in the Proxy Statement and Prospectus under Bond Fund
Performance.
<TABLE>
<CAPTION>
Lehman Brothers
Oppenheimer Corporate
(Period) Ended Bond Fund A Bond Index
<S> <C> <C>
04/15/88 $9,525 $10,000
12/31/88 $9,952 $10,368
12/31/89 $11,077 $11,885
12/31/90 $11,602 $12,759
12/31/91 $13,723 $15,170
12/31/92 $14,653 $16,392
12/31/93 $16,163 $18,310
12/31/94 $15,538 $17,530
12/31/95 $18,169 $21,429
</TABLE>
<TABLE>
<CAPTION>
Lehman Brothers
Fiscal Year Oppenheimer Corporate
(Period) Ended Bond Fund B(1) Bond Index
<S> <C> <C>
05/01/93 $10,000 $10,000
12/31/93 $10,391 $10,503
12/31/94 $ 9,920 $10,056
12/31/95 $11,216 $12,292
</TABLE>
- ----------------------
(1) Class B shares of the Fund were first publicly offered on May 1, 1993.
<PAGE>
Preliminary Copy
OPPENHEIMER SERIES FUND, INC.
CONNECTICUT MUTUAL INCOME ACCOUNT
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD APRIL 24, 1996
The undersigned shareholder of Connecticut Mutual Income Account (the
"Fund"), a series of Oppenheimer Series Fund, Inc. (the "Company"), does
hereby appoint Andrew J. Donohue, George Bowen and Robert Bishop, 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 April 24, 1996, at OppenheimerFunds, Inc., 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 on the Proposal
specified on the reverse side. Said attorneys-in-fact shall vote in
accordance with their best judgment as to any other matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, WHO RECOMMENDS A VOTE
FOR THE PROPOSAL ON THE REVERSE SIDE. THE SHARES REPRESENTED HEREBY WILL
BE VOTED AS INDICATED ON THE REVERSE SIDE OR FOR THE PROPOSAL. IF NO
CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and return
it promptly in the accompanying envelope, which requires no postage if
mailed in the United States.
The Proposal:
To approve an Agreement and Plan of Reorganization dated as of March
18, 1996 by and among Oppenheimer Integrity Funds, on behalf of
Oppenheimer Bond Fund and the Company, on behalf of the Fund, and
the transactions contemplated thereby, including the transfer of
substantially all the assets of the Fund to Oppenheimer Bond Fund in
exchange for the issuance of Class A and Class B shares of
Oppenheimer Bond Fund, the distribution by the Fund of such shares
to its shareholders in liquidation of the Fund and the cancellation
of the outstanding shares of the Fund.
FOR____ AGAINST____ ABSTAIN____
Dated:________________________, 1996
(Month) (Day)
______________________________
Signature(s)
______________________________
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When signing
as custodian, attorney, executor, administrator, trustee, etc., please
give your full title as such. All joint owners should sign this proxy.
If the account is registered in the name of a corporation, partnership or
other entity, a duly authorized individual must sign on its behalf and
give his or her title.
Oppenheimer Series Fund, Inc.
Connecticut Mutual Income Account
Proxy For Shareholders Meeting
to be Held April 24, 1996
Your shareholder Your prompt response can avoid the expense
vote is important! of another mailing.
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 the
expense of another mailing can be avoided.
merge\285.solicit
