OPPENHEIMER LIFESPAN INCOME FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 9, 1998
To the Shareholders of Oppenheimer LifeSpan Income Fund:
Notice is hereby given that a Special Meeting of the Shareholders of Oppenheimer
LifeSpan Income Fund ("LifeSpan Income Fund"), a series of Oppenheimer Series
Fund, Inc., a registered management investment company, will be held at 6803
South Tucson Way, Englewood, Colorado 80112 at 10:00 A.M., Denver time, on June
9, 1998, or any adjournments thereof (the "Meeting"), for the following
purposes:
1. To approve or disapprove an Agreement and Plan of Reorganization between
LifeSpan Income Fund and Oppenheimer Bond Fund ("Bond Fund") and the
transactions contemplated thereby, including (a) the transfer of substantially
all the assets of LifeSpan Income Fund to Bond Fund in exchange for Class A,
Class B
and Class C shares of Bond Fund, (b) the distribution of such shares to the
Class A, Class B and Class C shareholders of LifeSpan Income Fund in complete
liquidation of LifeSpan Income Fund, and (c) the cancellation of the outstanding
shares of LifeSpan Income Fund (the "Proposal" or the "Reorganization").
2. To act upon such other matters as may properly come before the
Meeting.
Shareholders of record at the close of business on March 17, 1998 are entitled
to notice of, and to vote at, the Meeting. The Proposal is more fully discussed
in the Proxy Statement and Prospectus. Please read it carefully before telling
us, through your proxy or in person, how you wish your shares to be voted.
LifeSpan Income Fund's Board of Directors recommends a vote in favor of the
Proposal. WE URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Directors,
Andrew J. Donohue, Secretary
April 6, 1998
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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.
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OPPENHEIMER LIFESPAN INCOME FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROXY STATEMENT
OPPENHEIMER BOND FUND
6803 South Tucson Way, Englewood, CO 80112
1-800-525-7048
PROSPECTUS
This Proxy Statement of Oppenheimer LifeSpan Income Fund ("LifeSpan Income
Fund") relates to the Agreement and Plan of Reorganization (the "Reorganization
Agreement")and the transactions contemplated thereby (the "Reorganization")
between LifeSpan Income Fund and Oppenheimer Bond Fund ("Bond Fund"). This
document also constitutes a Prospectus of Bond Fund included in a Registration
Statement on Form N-14 filed by Oppenheimer Bond Fund with the Securities and
Exchange Commission (the "SEC"). Such Registration Statement relates to the
registration of shares of Bond Fund to be offered to the shareholders of
LifeSpan Income Fund pursuant to the Reorganization Agreement. LifeSpan Income
Fund is located at Two World Trade Center, New York, New York 10048-0203
(telephone 1-800- 525-7048).
This Proxy Statement and Prospectus sets forth information about Bond Fund and
the Reorganization that shareholders of LifeSpan Income Fund should know before
voting on the Reorganization. A copy of the Prospectus for Bond Fund, dated
April 30, 1997, is enclosed, and incorporated herein by reference. The following
documents have been filed with the SEC and are available without charge upon
written request to OppenheimerFunds Services, the transfer and shareholder
servicing agent for Bond Fund and LifeSpan Income Fund, at P.O. Box 5270,
Denver, Colorado 80217, or by calling the toll-free number shown above: (i) a
Prospectus for LifeSpan Income Fund, dated February 19, 1998, as supplemented on
February 24, 1998 (ii) a Statement of Additional Information for LifeSpan Income
Fund, dated February 19, 1998, and (iii) a Statement of Additional Information
for Bond Fund, dated April 30, 1997. A Statement of Additional Information
relating to the Reorganization, dated April 6, 1998 (the "Bond Fund Additional
Statement") which is incorporated herein by reference and which contains more
detailed information about Bond Fund and its management, has been filed with the
SEC as part of the Bond Fund Registration Statement on Form N-14 and is
available by written request to OppenheimerFunds Services at the same address
listed above or by calling the toll-free number shown above.
Investors are advised to read and retain this Proxy Statement
and
Prospectus for future reference.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE 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 April 6, 1998
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TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
Page
Introduction...................................................
General....................................................1
Record Date; Vote Required; Share Information..............2
Proxies....................................................4
Costs of the Solicitation and the Reorganization...........5
Comparative Fee Tables........................................5
Synopsis......................................................9
Parties to the Reorganization..............................9
Shares to be Issued.......................................10
The Reorganization ..................................10
Reasons for the Reorganization............................11
Tax Consequences of the Reorganization....................11
Investment Objectives and Policies........................11
Investment Advisory and Distribution and Service Plan Fees..
Purchases, Exchanges and Redemptions......................12
Principal Risk Factors.......................................13
Approval of the Reorganization (The Proposal)................16
Reasons for the Reorganization............................16
The Reorganization........................................18
Tax Aspects of the Reorganization.........................19
Capitalization Table (Unaudited)..........................21
Comparison Between LifeSpan Income Fund and
Bond Fund
Investment Objectives and Policies........................22
Permitted Investments By Both LifeSpan Income Fund
and Bond Fund...........................................23
Investment Restrictions...................................32
Description of Brokerage Practices........................34
Expense Ratios and Performance............................35
Shareholder Services......................................35
Rights of Shareholders....................................36
Organization and History..................................38
Management and Distribution Arrangements..................38
Purchase of Additional Shares.............................40
Dividends and Distributions...............................41
Method of Carrying Out the Reorganization ...................42
Additional Information.......................................44
Financial Information.....................................44
Public Information........................................44
Other Business...............................................45
Exhibit A - Agreement and Plan of Reorganization by and between
LifeSpan Income Fund and Bond Fund..........................A-1
Exhibit B - Average Annual Total Returns for the Period
Ended 12/31/97.............................................B-1
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OPPENHEIMER LIFESPAN INCOME FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROXY STATEMENT
Oppenheimer Bond Fund
6803 South Tucson Way
Englewood, CO 80112
1-800-525-7048
PROSPECTUS
Special Meeting of Shareholders
to be held June 9, 1998
INTRODUCTION
General
This Proxy Statement and Prospectus is being furnished to the shareholders of
Oppenheimer LifeSpan Income Fund("LifeSpan Income Fund"), a series of
Oppenheimer Series Fund, Inc. (the "Company"), a registered management
investment company, in connection with the solicitation by the Board of
Directors (the "Board") of proxies to be used at the Special Meeting of
Shareholders of LifeSpan Income Fund to be held at 6803 South Tucson Way,
Englewood, Colorado 80112, at 10:00 A.M., Denver time, on June 9, 1998, or any
adjournments thereof (the "Meeting"). It is expected that the mailing of this
Proxy Statement and Prospectus will commence on or about April 14, 1998.
At the Meeting, shareholders of LifeSpan Income Fund will be asked to approve an
Agreement and Plan of Reorganization (the "Reorganization Agreement") between
the Company on behalf of LifeSpan Income Fund and Oppenheimer Integrity Funds
(the "Trust") on behalf of Oppenheimer Bond Fund ("Bond Fund"), and the
transactions contemplated thereby including (a) the transfer of substantially
all the assets of LifeSpan Income Fund to Bond Fund in exchange for Class A,
Class B and Class C shares of Bond Fund, (b) the distribution of such shares to
the Class A, Class B and Class C shareholders of LifeSpan Income Fund in
complete liquidation of LifeSpan Income Fund, and (c) the cancellation of the
outstanding shares of LifeSpan Income Fund (the "Proposal" or the
"Reorganization").
Bond Fund currently offers Class A shares with a sales charge imposed at the
time of purchase. There is no initial sales charge on purchases of Class B or
Class C shares; however, a contingent deferred sales charge may be imposed,
depending on when the shares are sold. The Class A, Class B and Class C shares
issued pursuant to the Reorganization will be issued at net asset value without
a
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sales charge and no contingent deferred sales charge will be imposed on any
LifeSpan Income Fund shares exchanged in the Reorganization. However, any
contingent deferred sales charge which applies to LifeSpan Income Fund shares
will continue to apply to Bond Fund shares received in the reorganization.
Additional information with respect to these charges by Bond Fund is set forth
herein, in the Prospectus of Bond Fund accompanying this Proxy Statement and
Prospectus and in the Bond Fund Statement of Additional Information, both of
which are incorporated herein by reference.
Commencing on or about April 17, 1998, Bond Fund will offer Class Y shares to
certain institutional investors that have special arrangements with the
Distributor. Bond Fund's Class Y shares are not offered to LifeSpan Income Fund
shareholders in this proxy statement and prospectus nor is any description of
them included herein.
Record Date; Vote Required; Share Information
The Board of Directors of the Company has fixed the close of business on March
17, 1998 as the record date (the "Record Date") for the determination of
shareholders entitled to notice of, and to vote at, the Meeting. An affirmative
vote of the holders of a "majority of the outstanding voting securities" as
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act") of all of the Class A, Class B and Class C shares in the aggregate
of LifeSpan Income Fund is required to approve the Reorganization. That level of
vote is defined in the Investment Company Act as the vote of the holders of the
lesser of: (i) 67% or more of the voting securities present or represented by
proxy at the shareholders meeting, if the holders of more than 50% of the
outstanding voting securities are present or represented by proxy, or (ii) more
than 50% of the outstanding voting securities. Each shareholder will be entitled
to one vote for each share and a fractional vote for each fractional share held
of record at the close of business on the Record Date. Only shareholders of
LifeSpan Income Fund will vote on the Reorganization. The vote of shareholders
of Bond Fund is not being solicited.
At the close of business on the Record Date, there were 2,807,518.761 shares of
LifeSpan Income Fund issued and outstanding, consisting of 2,719,106.304 Class A
shares, 80,784.497 Class B shares and 7,627.960 Class C shares. At the close of
business on the Record Date, there were 23,635,082.256 shares of Bond Fund
issued and outstanding, consisting of 17,688,130.448 Class A shares,
4,918,437.965 Class B shares and 1,028,513.843 Class C shares. The presence in
person or by proxy of the holders of a majority of the shares of all classes
constitutes a quorum for the transaction of business at the Meeting. To the
knowledge of LifeSpan Income Fund, as of the Record Date, no person owned of
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record or beneficially owned 5% or more of its outstanding shares except for
MML, 1295 State Street, Springfield, MA 01111-0001, which owned of record
2,411,090.544 Class A shares of LifeSpan Income Fund as of such date (88.67% of
the outstanding Class A shares of LifeSpan Income Fund); Bank of Boston Trust
Rollover IRA For The Benefit Of Kathy R. Simkins, 314 W. 1700 S, Orem VT 84058-
7542, which owned of record 11,771.850 Class B shares of LifeSpan Income Fund as
of such date (14.57% of the outstanding Class B shares of LifeSpan Income Fund),
Bank of Boston Trust IRA For The Benefit Of Frances L. Barnes; Harriman Hill
Road, P.O. Box 362, Raymond, NH 03077-0362, which owned of record 5,597.535
Class B shares of LifeSpan Income Fund as of such date (6.92% of the outstanding
Class B shares of LifeSpan Income Fund); Davie E. & Gail M. Tilton Joint
Revocable Trust, 34 Wawayanda Road, Warwick, NY 10990-3339, which owned of
record 5,300.664 Class B shares of LifeSpan Income Fund as of such date (6.56%
of the outstanding Class B shares of LifeSpan Income Fund); Bank of Boston
Custodian 403-B Plan For The Benefit Of Mildred H. Macnaughton, 507 Serrill
Drive, Hatboro, PA 19040-1420, which owned of record 2,502.937 Class C shares of
LifeSpan Income Fund as of such date (32.81% of the outstanding Class C shares
of LifeSpan Income Fund); Beverly A. Filla Trust, Filla Irrevocable Trust For
The Benefit Of Elizabeth Lynn Filla, 405 Bethany Court, Valley Park, MO
63088-2307, which owned of record 1,004.378 Class C shares of LifeSpan Income
Fund as of such date (13.16% of the outstanding Class C shares of LifeSpan
Income Fund); Norman I. Bobczynski, 189 Leeward Avenue, Pismo Beach, CA
93449-2017, who owned of record 901.169 Class C shares of LifeSpan Income Fund
as of such date (11.81% of the outstanding Class C shares of LifeSpan Income
Fund); Laura M. Simmons, 718 N. Greece Road, Rochester, NY 14626-1025, who owned
of record 724.522 Class C shares of LifeSpan Income Fund as of such date (9.49%
of the outstanding Class C shares of LifeSpan Income Fund); Bank of Boston Trust
Account For Paula Rosenstein SEP IRA For The Benefit Of Paula Rosenstein, 4756
Biona Drive, San Diego, CA 92116-2530, which owned of record 626.307 Class C
shares of LifeSpan Income Fund as of such date (8.21% of the outstanding Class C
shares of LifeSpan Income Fund); National Financial Securities Corporation For
The Exclusive Benefit of Phillip S. Shapiro and Ruth A. Shapiro, 102 Claybrook
Drive, Silver Springs, MD 20902, which owned of record 497.513 Class C shares of
LifeSpan Income Fund as of such date (6.52% of the outstanding Class C shares of
LifeSpan Income Fund) and Bank of Boston Trust Rollover IRA For The Benefit Of
Robin R. Prafke, P.O. Box 88, New Auburn, MN 55366-0088, which owned of record
444.257 Class C shares of LifeSpan Income Fund as of such date (5.82% of the
outstanding Class C shares of LifeSpan Income Fund). As of the Record Date, to
the knowledge of Bond Fund, no person owned of record or beneficially owned 5%
or more of its outstanding shares except for Merrill Lynch Pierce Fenner &
Smith, Inc. ("Merrill Lynch"), 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, FL 32246-6484, which owned of record 424,188.685 Class B shares of
Bond Fund as of such date (8.61% of the outstanding Class B shares of Bond
Fund); Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch"), 4800 Deer
Lake Drive East,
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3rd Floor, Jacksonville, FL 32246-6484, which owned of record 223,881.222 Class
C shares of Bond Fund as of such date (21.80% of the outstanding Class C shares
of LifeSpan Income Fund). The Manager has been advised that such shares were
held by Merrill Lynch for the sole benefit of their respective customers. In
addition, as of the Record Date, the Directors and officers of LifeSpan Income
Fund and the Trustees and Officers of Bond Fund owned less than 1% of the
outstanding shares of either LifeSpan Income Fund or Bond Fund, respectively.
Massachusetts Mutual Life Insurance Company, the majority shareholder of the
Fund, intends to vote its shares in favor of the
Reorganization.
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. The proxy will be voted in favor of the Proposal unless
a choice is indicated to vote against or to abstain from voting on the Proposal.
Shares owned of record by broker-dealers for the benefit of their customers
("street account shares") will be voted by the broker-dealer based on
instructions received from its customers. If no instructions are received, the
broker-dealer may (if permitted under applicable stock exchange rules), as
record holder, vote such shares on the Proposal in the same proportion as that
broker-dealer votes street account shares for which voting instructions were
received in time to be voted. Broker "non-votes" exist where a proxy received
from a broker indicates that the broker does not have discretionary authority to
vote the shares on the matter. Shares represented in person or by proxy
(including shares which abstain or do not vote on the Proposal, including broker
"non- votes") will be counted for purposes of determining the number of shares
that are present and are entitled to vote on the Proposal, but will not be
counted as a vote in favor of such Proposal. Accordingly, an abstention from
voting on the Proposal or a broker "non-vote" will have the same legal effect as
a vote against the Proposal. 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 LifeSpan Income Fund at Two World
Trade Center, New York, New York 10048-0203 (if received in time to be acted
upon); (ii) attending the Meeting and voting in person; or (iii) signing and
returning a new proxy (if returned and received in time to be voted).
If at the time any session of the Meeting is called to order a
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quorum is not present, in person or by proxy, the persons named as proxies may
vote those proxies which have been received to adjourn the Meeting to a later
date. In the event that a quorum is present but sufficient votes in favor of the
Proposal have not been received, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of proxies. All
such adjournments will require the affirmative vote of a majority of the shares
present in person or by proxy at the session of the Meeting to be adjourned. The
persons named as proxies will vote those proxies which they are entitled to vote
in favor of the Proposal, in favor of such an adjournment, and will vote those
proxies required to be voted against the Proposal, against any such adjournment.
A vote may be taken on the Proposal in this proxy statement prior to any such
adjournment if sufficient votes for its approval have been received and it is
otherwise appropriate. Any adjourned session or sessions may be held within 90
days after the date set for the original Meeting without the necessity of
further notice.
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 LifeSpan Income Fund. Any
documents such as existing prospectuses or annual reports that are included in
that mailing will be a cost of the Fund issuing the document. In addition to the
solicitation of proxies by mail, proxies may be solicited by officers of
LifeSpan Income Fund or officers and employees of OppenheimerFunds Services,
personally or by telephone or telegraph; any expenses so incurred will be borne
by OppenheimerFunds Services. Proxies may also be solicited by a proxy
solicitation firm hired at LifeSpan Income Fund's expense for such purpose.
Brokerage houses, banks and other fiduciaries may be requested to forward
soliciting material to the beneficial owners of shares of LifeSpan Income Fund
and to obtain authorization for the execution of proxies. For those services, if
any, they will be reimbursed by LifeSpan Income Fund for their reasonable
out-of-pocket expenses.
With respect to the Reorganization, LifeSpan Income Fund and Bond Fund will bear
equally the cost of the tax opinions. Any other out-of-pocket expenses of
LifeSpan Income Fund and Bond Fund associated with the Reorganization, including
legal, accounting and transfer agent expenses, will be borne by LifeSpan Income
Fund and Bond Fund, respectively, in the amounts so incurred by each.
COMPARATIVE FEE TABLES
Shareholder Transaction Expenses. LifeSpan Income Fund and Bond
Fund each pay a variety of expenses for management of their
assets,
administration, distribution of their shares and other services,
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and those expenses are reflected in each Fund's net asset value per share.
Shareholders pay other expenses directly, such as sales charges. The following
table is provided to help you compare the direct expenses of investing in each
class of either LifeSpan Income Fund, Bond Fund or the surviving Bond Fund after
giving effect to the Reorganization.
LifeSpan Income Fund
Shareholder Transaction Expenses
Class A Class B Class C
Shares Shares Shares
Maximum Sales Charge 5.75% None None
on Purchases
(as a % of
offering price)
Maximum None(1) 5% in the 1% if
Deferred Sales ` first year shares are
Charge (as a % declining to redeemed
of the lower of the 1% in the within 12
original offering price sixth year and months of
or redemption proceeds) eliminated purchase(2)
thereafter(2)
Maximum Sales Charge
on Reinvested Dividends None None None
Exchange Fee None None None
Redemption Fee None(3) None(3) None(3)
Bond Fund and Bond Fund as Surviving Fund
Shareholder Transaction Expenses
Class A Class B Class C
Shares Shares Shares
Maximum Sales Charge 4.75% None None
on Purchases
(as a % of
offering price)
Maximum None(1) 5% in the 1% if
Deferred Sales ` first year shares are
Charge (as a % declining to redeemed
of the lower of the 1% in the within 12
original offering price sixth year and months of
or redemption proceeds) eliminated purchase(2)
thereafter(2)
Maximum Sales Charge
on Reinvested Dividends None None None
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Exchange Fee None None None
Redemption Fee None(3) None(3) None(3)
(1) If you invest more than $1 million ($500,000 or more for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales Charge" in
each Fund's Prospectus) in Class A shares, you may have to pay a sales charge of
up to 1% if you sell your shares within 12 calendar months (18 months for shares
purchased prior to May 1, 1997)from the end of the calendar month during which
you purchased those shares.
(2) See "How to Buy Shares - Buying Class B Shares" and "How to Buy Shares -
Buying Class C Shares" in each Fund's Prospectus.
(3) There is a $10 transaction fee for redemption proceeds paid by Federal Fund
wire, but not for redemptions paid by check or by ACH wire transfer through
AccountLink, or, in the case of Bond Fund, for which checkwriting privileges are
used (see "How to Sell Shares").
Annual Fund Operating Expenses. The following tables are the operating expenses
of Class A, Class B and Class C shares of LifeSpan Income Fund and the operating
expenses of Class A, Class B and Class C shares of Bond Fund. These are based on
expenses for the twelve month period ended December 31, 1997. The expense
numbers for LifeSpan Income Fund are unaudited. The pro forma information is an
estimate of the business expenses of the surviving Bond Fund after giving effect
to the Reorganization. All amounts shown are a percentage of net assets of each
class of each of the Funds.
LifeSpan Income Fund* Bond Fund
Class A Class B Class C Class A Class B Class C
Management Fees 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
12b-1 Plan Fees 0.25% 1.00% 1.00% 0.25% 1.00% 1.00%
Other Expenses 0.32% 0.33% 0.39% 0.27% 0.27% 0.27%
Total Fund Operating 1.32% 2.08% 2.14% 1.27% 2.02% 2.02%
Expenses
Pro Forma Surviving Bond Fund
Class A Class B Class C
Management Fees 0.74% 0.74% 0.74%
12b-1 Plan Fees 0.25% 1.00% 1.00%
Other Expenses 0.27% 0.26% 0.26%
Total Fund Operating 1.26% 2.00% 2.00%
Expenses
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* Unaudited
The 12b-1 fees for Class A shares of LifeSpan Income Fund and Bond Fund are
service plan fees. The service plan fees are a maximum of
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0.25% of average annual net assets of Class A shares of each Fund. The 12b-1
fees for Class B and Class C shares of each of the Funds are Distribution and
Service Plan fees which include a service fee of 0.25% and an asset-based sales
charge of 0.75%.
Examples. To try and show the effect of the expenses on an investment over time,
the hypothetical examples shown below have been created. Assume that you make a
$1,000 investment in Class A, Class B and Class C shares of LifeSpan Income
Fund, or Class A, Class B and Class C shares of Bond Fund, or Class A, Class B
and Class C shares of the pro forma surviving Bond 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.
1 year 3 years 5 years 10 years*
LifeSpan Income Fund
Class A Shares $70 $97 $126 $207
Class B Shares $71 $95 $132 $204
Class C Shares $32 $67 $115 $247
Bond Fund
Class A Shares $60 $86 $114 $194
Class B Shares $71 $93 $129 $198
Class C Shares $31 $63 $109 $235
Pro Forma Surviving
Bond Fund
Class A Shares $60 $86 $113 $193
Class B Shares $70 $93 $128 $196
Class C Shares $30 $63 $108 $233
If you did not redeem your investment, it would incur the
following
expenses:
1 year 3 years 5 years 10 years*
LifeSpan Income Fund
Class A Shares $70 $97 $126 $207
Class B Shares $21 $65 $112 $204
Class C Shares $22 $67 $115 $247
Bond Fund
Class A Shares $60 $86 $114 $194
Class B Shares $21 $63 $109 $198
Class C Shares $21 $63 $109 $235
Pro Forma Surviving
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Bond Fund
Class A Shares $60 $86 $113 $193
Class B Shares $20 $63 $108 $196
Class C Shares $20 $63 $108 $233
* In the first example, expenses include the Class A initial sales charge and
the applicable Class B or Class C contingent deferred sales charge. In the
second example, Class A expenses include the initial sales charge, but Class B
and Class C expenses do not include contingent deferred sales charges. The Class
B expenses in years 7 through 10 are based on the Class A expenses shown above,
because each of the Funds automatically converts your Class B shares into Class
A shares after 6 years. Long term Class B and C shareholders could pay the
economic equivalent of more than the maximum front-end sales charge allowed
under applicable regulations, because of the effect of the asset-based sales
charge and contingent deferred sales charge. The automatic conversion of Class B
shares to Class A shares is designed to minimize the likelihood that this will
occur.
The examples show the effect of expenses on an investment, but are not meant to
state or predict actual or expected costs or investment returns of the Funds,
all of which may be more or less
than the amounts shown.
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 LifeSpan Income 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 by the Reorganization Agreement, a copy of which is attached as Exhibit A
hereto. Shareholders should carefully review this Proxy Statement and Prospectus
and the Reorganization Agreement in their entirety and, in particular, the
current Prospectus of Bond Fund which accompanies this Proxy Statement and
Prospectus and is incorporated herein by reference.
Parties to the Reorganization
Oppenheimer Series Fund, Inc. (defined above as the Company) was
organized in 1981 as a multi-series Maryland corporation which
currently has five series. The Company is governed by Articles
of
Incorporation and By-Laws and is managed under the direction of
a
Board of Directors. LifeSpan Income Fund is a diversified
series
of the Company. Oppenheimer Integrity Funds (defined above as
the
"Trust") was organized in 1982 as a multi-series Massachusetts
business trust and Bond Fund is the only series of that Trust.
The
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Trust is governed by a Declaration of Trust and By-Laws and is managed under the
direction of a Board of Trustees. The Company is governed by applicable Maryland
law, whereas the Trust is governed by applicable Massachusetts law. Both Funds
are governed by applicable federal law. Oppenheimer Series Fund, Inc. and
Oppenheimer Integrity Funds are open-end, diversified management investment
companies. Oppenheimer Integrity Funds have an unlimited number of authorized
shares of beneficial interest. LifeSpan Income Fund is located at Two World
Trade Center, New York, New York 10048-0203 and Bond Fund is located at 6803
South Tucson Way, Englewood, CO 80112. The Company is governed by a Board of
Directors (defined above as the "Board") and the Trust is governed by a Board of
Trustees. OppenheimerFunds, Inc. (the "Manager") whose address is Two World
Trade Center, New York, New York 10048-0203, acts as investment adviser to
LifeSpan Income Fund and Bond Fund (collectively referred to herein as the
"Funds"). Additional information about the parties is set forth below.
Shares to be Issued
All shareholders of LifeSpan Income Fund who own Class A shares will receive
Class A shares of Bond Fund in exchange for their Class A shares of LifeSpan
Income Fund. Shareholders of LifeSpan Income Fund who own Class B shares will
receive Class B shares of Bond Fund in exchange for their Class B shares of
LifeSpan Income Fund. Shareholders of LifeSpan Income Fund who own Class C
shares will receive Class C shares of Bond Fund in exchange for their Class C
shares of LifeSpan Income Fund. The voting rights of shares of each Fund are
substantially the same. See "Rights of Shareholders" below for more information.
The Reorganization
The Reorganization Agreement provides for the transfer of substantially all the
assets of LifeSpan Income Fund to Bond Fund in exchange for Class A, Class B and
Class C shares of Bond
Fund.
The net asset value of Bond Fund Class A, Class B and Class C shares issued in
the exchange will equal the value of the assets of LifeSpan Income Fund received
by Bond Fund. In conjunction with the Closing of the Reorganization, presently
scheduled for June 12, 1998, LifeSpan Income Fund will distribute the Class A,
Class B and Class C shares of Bond Fund received by LifeSpan Income Fund on the
Closing Date to holders of Class A, Class B and Class C shares of LifeSpan
Income Fund, respectively. As a result of the Reorganization, each Class A,
Class B and Class C LifeSpan Income Fund shareholder will receive the number of
full and fractional Bond Fund Class A, Class B or Class C shares that equals in
value such shareholder's pro rata interest in the assets transferred to Bond
Fund as of the Valuation Date. The Board of the Company has determined that the
interests of existing LifeSpan Income Fund shareholders will not be diluted as a
result of the Reorganization.
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For the reasons set forth below under "The Reorganization Reasons for the
Reorganization," the Board, including the directors who are not "interested
persons" of Oppenheimer Series Fund, Inc. (the "Independent Directors"), as that
term is defined in the Investment Company Act, have concluded that the
Reorganization is in the best interests of LifeSpan Income Fund and its
shareholders and recommends approval of the Reorganization by LifeSpan Income
Fund shareholders. If the Reorganization is not approved, LifeSpan Income Fund
will continue in existence and the Board will determine whether to pursue
alternative actions.
Reasons for the Reorganization
The Manager proposed to the Board a reorganization of LifeSpan Income Fund into
Bond Fund so that shareholders of LifeSpan Income Fund may become shareholders
of a larger but similar Fund, which is anticipated to have lower expenses after
such Reorganization. The Board considered pro forma information which indicated
the expense ratio of a combined Fund would be lower than that of LifeSpan Income
Fund, as shown above under "Comparative Fee Table."
The Board also considered that the Reorganization would be a tax free
reorganization, and there would be no sales charge imposed in effecting the
Reorganization. The Board concluded that the Reorganization would not result in
dilution to shareholders of
LifeSpan Income Fund.
Tax Consequences of the Reorganization
In the opinion of KPMG Peat Marwick LLP, tax adviser to both Funds, the
Reorganization will qualify as a tax-free reorganization for Federal income tax
purposes. As a result, it is expected that no gain or loss will be recognized by
either Fund, or by the shareholders of either Fund for Federal income tax
purposes as a result of the Reorganization. For further information about the
tax consequences of the Reorganization, see "Approval of the Reorganization -
Tax Aspects" below.
Investment Objectives and Policies
The investment objectives of the Funds are substantially the same. Bond Fund
seeks a high level of current income by investing mainly in debt securities.
LifeSpan Income Fund seeks high current income, with opportunities for capital
appreciation. LifeSpan Income Fund is an asset allocation fund that invests in a
strategically allocated portfolio of stocks and bonds, consisting primarily of
bonds. The investment policies of each Fund are substantially similar. The only
major differences between the Funds regarding permitted investments is that
LifeSpan Income Fund may invest up to 35% of its assets in stocks. Bond Fund may
not purchase stocks. LifeSpan Income Fund may invest in inverse
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floating rate instruments, and warrants and rights. Bond Fund
may
purchase zero coupon securities.
Investment Advisory and Distribution and Service Plan Fees
Investment Advisory Fees. The terms and conditions of the Investment Advisory
Agreement of each Fund are similar. Both Funds obtain investment management
services from the Manager. The management fee is computed on the net asset value
of each Fund as of the close of business each day and payable monthly at the
following annual rates: LifeSpan Income Fund pays 0.75% of the average annual
net assets up to $250 million and 0.65% of average annual net assets over $250
million. Bond Fund pays 0.75% of the first $200 million of average annual net
assets, 0.72% of the next $200 million of average annual net assets, 0.69% of
the next $200 million of average annual net assets, 0.66% of the next $200
million of average annual net assets, 0.60% of the next $200 million of average
annual net assets and .50% of average annual net assets in excess of $1 billion.
For LifeSpan Income Fund, the Manager employs BEA Associates ("BEA") which
provides investment advisory services to the high yield/high risk bond component
of the Fund (the "Subadviser"). The Manager manages the remaining components
using its own investment management personnel. Pursuant to a Sub-Advisory
Agreement with BEA, the Manager pays BEA quarterly at the annual rate of 0.45%
of the first $25 million of combined average daily net assets allocated to BEA,
0.40% of the next $25 million, 0.35% of the next $50 million and 0.25% of the
assets in excess of $100 million. For purposes of calculation of the fees
payable to BEA, the net asset value of those portions of the assets of each
Oppenheimer fund subadvised by BEA are aggregated with those portions of the net
assets of Panorama Series Fund, Inc. managed by BEA.
Distribution and Service Fees. LifeSpan Income Fund and Bond Fund have both
adopted Service Plans for their respective Class A shares. Both Service Plans
provide for reimbursement to the Distributor for a portion of its costs incurred
in connection with the personal service and maintenance of accounts that hold
Class A shares. Under each plan, payment is made quarterly at an annual rate
that may not exceed 0.25% of the average annual net assets of Class A shares of
the Fund.
LifeSpan Income Fund and Bond Fund have each adopted Distribution and Service
Plans (the "Plans") for Class B and Class C shares under which each Fund pays
the Distributor for its services in connection with distributing Class B and
Class C shares and servicing accounts. Under each Plan, the Fund pays the
Distributor an asset-based sales charge of 0.75% per year on Class B shares
outstanding for six years or less and on Class C shares. The Funds also each pay
the Distributor a service fee of 0.25% per year.
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<PAGE>
Each payment is computed on the average annual net assets of Class A, Class B
and Class C shares determined as of the close of each regular business day of
each Fund. The Distribution and Service Plans for Class B and Class C shares of
LifeSpan Income Fund and of Bond Fund are compensation plans whereby payments by
the Funds are made at a fixed rate as specified above and the Funds' payments
are not limited to reimbursing the Distributor's costs. The terms of the
respective Plans for each Fund are substantially the same.
Purchases, Exchanges and Redemptions
LifeSpan Income Fund and Bond Fund are part of the OppenheimerFunds complex of
mutual funds. The procedures for purchases, exchanges and redemptions of shares
of the Funds are substantially the
same.
Shares of either Fund may be exchanged for shares of the same class of other
Oppenheimer funds offering such shares.
LifeSpan Income Fund has a maximum initial sales charge of 5.75% on Class A
shares. Bond Fund has a maximum initial sales charge of 4.75% on Class A shares.
Investors who purchase more than $1 million ($500,000 or more for purchases by
"Retirement Plans" as defined in "Class A Contingent Deferred Sales Charge" in
each Fund's Prospectus) in Class A shares pay no initial sales charge but may
have to pay a sales charge of up to 1% if shares are sold within 12 calendar
months (18 months for shares purchased prior to May 1, 1997) from the end of the
calendar month during which shares are purchased. Each of the Funds has a
contingent deferred sales charge imposed on the proceeds of Class B shares
redeemed within six years of buying them. The contingent deferred sales charge
("CDSC") varies depending on how long you hold your shares. Each of the Funds
has a contingent deferred sales charge of 1% imposed on the proceeds of Class C
shares if redeemed within twelve months of their purchase. Class A, Class B and
Class C shares of Bond Fund received in the Reorganization will be issued at net
asset value, without a sales charge and no CDSC will be imposed on any LifeSpan
Income Fund shares exchanged for Bond Fund shares as a result of the
Reorganization. However, any CDSC which applies to LifeSpan Income Fund shares
will continue to apply to Bond Fund shares received in the reorganization.
Services available to shareholders of both Funds include purchase and redemption
of shares through OppenheimerFunds AccountLink and PhoneLink (an automated
telephone system), telephone redemptions, and exchanges by telephone to other
Oppenheimer funds which offer Class A, Class B and Class C shares, and
reinvestment privileges. Please see "Shareholder Services" below and each Fund's
Prospectus for further information.
PRINCIPAL RISK FACTORS
In evaluating whether to approve the Reorganization and invest in Bond Fund,
shareholders should carefully consider the following
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risk factors, the information set forth in this Proxy Statement and Prospectus
and the more complete description of risk factors set forth in the documents
incorporated by reference herein, including the Prospectuses of the Funds and
their respective Statements of Additional Information.
Stock Investment Risks. All investments carry risks to some degree, whether they
are risks that market prices of the investment will fluctuate (this is known as
"market risk") or that the underlying issuer will experience financial
difficulties and may default on its obligation under a fixed-income investment
to pay interest and repay principal (this is referred to as "credit risk").
These general investment risks affect the value of both Funds' investments,
their investment performance, and the prices of their shares. LifeSpan Income
Fund invests approximately 25% of its assets in stocks, therefore the value of
the Fund's portfolio will be affected by changes in the stock markets. This
market risk will affect the Fund's net asset value per share, which will
fluctuate as the values of the Fund's portfolio securities change. Not all stock
prices change uniformly or at the same time, and other factors can affect a
particular stock's price (for example, poor earnings reports by an issuer, loss
of major customers, major litigation against an issuer, or changes in government
regulations affecting an industry). Not all of these factors can be predicted.
Changes in the overall market conditions and prices can occur at any time.
LifeSpan Income Fund attempts to limit certain market risks by diversifying its
investments, that is, by not holding a substantial amount of the stock of any
one company, and by not investing too great a percentage of the Fund's assets in
any one company.
Interest Rate Risks. Debt securities are subject to changes in their values due
to changes in prevailing interest rates. When prevailing interest rates fall,
the value 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. Each 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. Each Fund has the ability to
invest its assets in high-yield securities. The Funds' investments in high-yield
securities are subject to greater market fluctuation and risk of loss of income
and principal than lower yielding, investment grade securities. There are
additional risks of investing in lower grade securities that are described in
the prospectus for each Fund.
Foreign Securities Risks. There are risks of foreign investing
that
increase the risk of investing in both LifeSpan Income Fund and
in
Bond Fund and also increase the operating costs of both Funds.
For
example, foreign issuers are not required to use
generally-accepted
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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 U.S. 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. Because LifeSpan Income Fund and Bond Fund may
purchase securities denominated in foreign currencies, 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 securities of that Fund denominated in that currency. 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
that 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. More information about the risks and potential rewards of
investing in foreign securities is contained in the Statement of Additional
Information of each Fund.
Derivative Investments Risks. Both Funds may invest in a number of different
kinds of "derivative" investments. In general, a "derivative" investment is a
specially designed investment whose performance is linked to the performance of
another investment or security. The company issuing the instrument may fail to
pay the amount due on the maturity of the instrument. Also, the underlying
investment or security on which the derivative is based, and the derivative
itself, may not perform the way the Manager expected it to perform. The
performance of derivative investments may also be influenced by stock market and
interest rate changes in the U.S. and abroad. All of this can mean that the Fund
may realize less principal or income from the investment than expected. Certain
derivative investments held by the Funds may trade in the over-the-counter
market and may be illiquid.
Hedging Instruments Risks. Each Fund may use certain hedging instruments. The
use of hedging instruments requires special skills and knowledge of investment
techniques that are different than what is required for normal portfolio
management. If the Manager uses a hedging instrument at the wrong time or judges
market conditions incorrectly, hedging strategies may reduce the Fund's return.
Losses could also be experienced if the prices of its futures and options
positions were not correlated with its other investments or if it could not
close out a position because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has special tax effects on
the Funds. There are also special risks in particular hedging
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strategies. For example, if a covered call written by the Fund is exercised on a
security that has increased in value, the Fund will be required to sell the
security at the call price and will not be able to realize any profit if the
security has increased in value above the call price. The use of Forward
Contracts may reduce the gain that would otherwise result from a change in the
relationship between the U.S. dollar and a foreign currency. To limit its
exposure in foreign currency exchange contracts, each Fund limits its exposure
to the amount of its assets denominated in foreign currency. Interest rate swaps
are subject to risk that the other party will fail to meet its obligations (or
that the underlying issuer will fail to pay on time), as well as interest rate
risks. A Fund could be obligated to pay more under its swap agreements than it
received under them, as a result of interest rate changes.
Lower-Grade Securities Risks. The Funds can invest in high-yield, below
investment grade debt securities (including both rated and unrated securities).
These "lower-grade" securities are commonly known as "junk bonds". All corporate
debt securities (whether foreign or domestic) are subject to some degree of
credit risk. High yield, lower-grade securities, whether rated or unrated, often
have speculative characteristics and special risks that make them riskier
investments than investment grade securities. They may be subject to greater
market fluctuations and risk of loss of income and principal than lower
yielding, investment grade securities. There may be less of a market for them
and therefore they may be harder to sell at an acceptable price. There is a
relatively greater possibility that the issuer's earnings may be insufficient to
make the payments of interest and principal due on the bonds. The issuer's low
creditworthiness may increase the potential for its insolvency. During an
economic downturn, lower-grade securities might decline in value more than
investment grade securities. For foreign lower-grade debt securities, these
risks are in addition to the risks of investing in foreign securities, described
above. These risks mean that the Fund may not achieve the expected income from
lower-grade securities, and that the Fund's net asset value per share may be
affected by declines in value of these securities. Bond Fund may invest up to
35% of its assets in high-yield securities and LifeSpan Income Fund may invest
between 10% and 15% of its assets in these securities.
APPROVAL OF THE REORGANIZATION
(The Proposal)
Reasons for the Reorganization
At a meeting of the Board of Directors of the Company held on December 11, 1997,
the Directors reviewed and discussed materials relevant to the proposed
Reorganization. The Board, including the Independent Directors, unanimously
approved the Reorganization and recommended to shareholders of LifeSpan Income
Fund that they
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approve the Reorganization. Both Funds offer Class A, Class B and Class C shares
and the terms and conditions of their offer, sale, redemption and exchange,
distribution arrangements, expenses borne separately by each class and other
related matters are essentially the same. The Board considered that this will
facilitate an exchange. In the reorganization, Class A, Class B and Class C
shareholders of LifeSpan Income Fund will receive Class A, Class B and Class C
shares, respectively, of Bond Fund.
In considering the proposed Reorganization, the Board reviewed information which
demonstrated that LifeSpan Income Fund is a smaller Fund, with $30.1 million in
net assets as of October 31, 1997. In comparison, Bond Fund had $239.8 million
of net assets as of October 31, 1997. It is not anticipated that LifeSpan Income
Fund will increase substantially in size in the near future. After the
Reorganization, the shareholders of LifeSpan Income Fund will be shareholders of
a larger fund and will likely incur lower operating, transfer agency and other
expenses. Thus economies of scale may benefit shareholders of LifeSpan Income
Fund.
Among several other factors, the Board focused on the similar investment
objectives of the two Funds. Oppenheimer LifeSpan Income Fund seeks high current
income, with opportunities for capital appreciation. Bond Fund seeks a high
level of current income by investing mainly in debt instruments. The investment
techniques and strategies of the Funds are similar with respect to purchasing
debt securities, mortgage-backed securities and collateralized mortgage-backed
securities, asset-backed securities, hedging instruments, when issued and
delayed delivery transactions, repurchase agreements, illiquid and restricted
securities, loans of portfolio securities, and derivative investments. The only
major differences between the Funds regarding permitted investments is that Bond
Fund may purchase zero coupon securities, and LifeSpan Income Fund may invest up
to 35% of its assets in equity securities of U.S. and foreign issuers, may
invest in inverse floating rate instruments, and may invest in warrants and
rights.
Accordingly,
the Board determined that the investment objectives and
techniques
were comparable.
The Board, in reviewing financial information, considered the investment
advisory fee rate of both Funds (also known as the "management fee rate"). The
management fee rates for both Funds are set forth in "Synopsis - Investment
Advisory and Distribution and Service Plan Fees" above. LifeSpan Income Fund's
management fee for its fiscal year ended October 31, 1997 was 0.75% of average
annual net assets for Class A, Class B and Class C shares. Bond Fund's
management fee for the fiscal year ended December 31, 1997 was 0.75% of the
average annual net assets for Class A, Class B and Class C shares. If the two
Funds were combined, shareholders of Bond Fund would have a reduced management
fee of approximately 0.01% for Class A, Class B and Class C shares. The Board
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considered pro forma information which indicated that the expense ratio of a
combined Fund would therefore be lower than that of
LifeSpan Income Fund.
In addition to the above, the Board also considered information with respect to
the historical performance of LifeSpan Income Fund and Bond Fund, including the
performance information contained in
Exhibit B to this Proxy Statement.
The Board also considered that the Reorganization is expected to be a tax free
reorganization, and there would be no sales charge imposed in effecting the
Reorganization. The Board concluded that the Reorganization would not result in
dilution of the interests of existing shareholders of LifeSpan Income Fund.
The Reorganization
The Reorganization Agreement (a copy of which is set forth in full as Exhibit A
to this Proxy Statement and Prospectus) contemplates a reorganization under
which (i) all of the assets of LifeSpan Income Fund other than the cash reserve
described below (the "Cash Reserve") will be transferred to Bond Fund in
exchange for Class A, Class B and Class C shares of Bond Fund, (ii) these shares
will be distributed among the shareholders of LifeSpan Income Fund in complete
liquidation of LifeSpan Income Fund, (iii) the outstanding shares of LifeSpan
Income Fund will be canceled. Bond Fund will not assume any of LifeSpan Income
Fund's liabilities except for portfolio securities purchased which have not
settled and outstanding shareholder redemption and dividend checks.
The result of effectuating the Reorganization would be that: (i) Bond Fund will
add to its gross assets all of the assets (net of any liability for portfolio
securities purchased but not settled and outstanding shareholder redemption and
dividend checks) of LifeSpan Income Fund other than its Cash Reserve; and (ii)
the shareholders of LifeSpan Income Fund as of the close of business on the
Closing Date will become shareholders of either Class A, Class B or Class C
shares of Bond Fund.
Shareholders of LifeSpan Income Fund who vote their Class A, Class B and Class C
shares in favor of the Reorganization, will be electing in effect to redeem
their shares of LifeSpan Income Fund(at net asset value on the Valuation Date
referred to below under "Method of Carrying Out the Reorganization Plan,"
calculated after subtracting the Cash Reserve) and to reinvest the proceeds in
Class A, Class B or Class C shares of Bond Fund at net asset value without sales
charge and without recognition of taxable gain or loss for Federal income tax
purposes (see "Tax Aspects of the Reorganization" below). The Cash Reserve is
that amount retained by LifeSpan Income Fund which is deemed sufficient in the
discretion of that Fund's Board for the payment of: (a) LifeSpan
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Income Fund's expenses of liquidation, and (b) its liabilities, other than those
assumed by Bond Fund. LifeSpan Income Fund and Bond Fund will bear all of their
respective expenses associated with the Reorganization, as set forth under
"Costs of the Solicitation and the Reorganization" above. Management estimates
that such expenses associated with the Reorganization to be borne by LifeSpan
Income Fund will not exceed $28,739.80. Liabilities as of the date of the
transfer of assets will consist primarily of accrued but unpaid normal operating
expenses of LifeSpan Income Fund, excluding the cost of any portfolio securities
purchased but not yet settled and outstanding shareholder redemption and
dividend checks. See "Method of Carrying Out the Reorganization Plan" below.
The Reorganization Agreement provides for coordination between the Funds as to
their respective portfolios so that, after the Closing, Bond Fund will be in
compliance with all of its investment policies and restrictions. In that regard,
the Manager does not anticipate selling more than 50% of the existing securities
in the LifeSpan Income Fund portfolio. LifeSpan Income Fund will recognize
capital gain or loss on any sales made prior to the Reorganization pursuant to
this paragraph.
Tax Aspects of the Reorganization
Immediately prior to the Valuation Date referred to in the Reorganization
Agreement, LifeSpan Income Fund will pay a dividend or dividends which, together
with all previous dividends, will have the effect of distributing to LifeSpan
Income Fund's shareholders all of LifeSpan Income Fund's investment company
taxable income for taxable years ending on or prior to the Closing Date
(computed without regard to any deduction for 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 available capital loss carry-forward).
Such dividends will be included in the taxable income of LifeSpan Income Fund's
shareholders as ordinary income and capital gain, respectively.
The exchange of the assets of LifeSpan Income Fund for Class A, Class B and
Class C shares of Bond Fund and the assumption by Bond Fund of certain
liabilities of LifeSpan Income Fund is intended to qualify for Federal income
tax purposes as a tax-free reorganization under Section 368(a)(1) of the
Internal Revenue Code of 1986, as amended (the "Code"). LifeSpan Income Fund has
represented to KPMG Peat Marwick LLP, tax adviser to LifeSpan Income Fund, that
there is no plan or intention by any Fund shareholder who owns 5% or more of
LifeSpan Income Fund's outstanding shares, and, to LifeSpan Income Fund's best
knowledge, there is no plan or intention on the part of the remaining LifeSpan
Income Fund shareholders, to redeem, sell, exchange or otherwise dispose of a
number of Bond Fund Class A, Class B or Class C shares
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received in the transaction that would reduce LifeSpan 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 the formerly outstanding
LifeSpan Income Fund shares as of the same date. Bond Fund and LifeSpan Income
Fund have each represented to KPMG Peat Marwick LLP, that, as of the Closing
Date, it will qualify as a regulated investment company 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 LifeSpan
Income Fund will receive the opinion of KPMG Peat Marwick LLP to the effect
that, based on the Reorganization Agreement, the above representations, existing
provisions of the Code, Treasury Regulations issued thereunder, current Revenue
Rulings, Revenue Procedures and court decisions, for Federal income tax
purposes:
1. The transactions contemplated by the Reorganization
Agreement
will qualify as a tax-free "reorganization" within the
meaning
of Section 368(a)(1)(c) of the Code.
2. LifeSpan Income Fund and Bond Fund will each qualify as "a party to a
reorganization" within the meaning of Section 368(b) of the Code.
3. No gain or loss will be recognized by the shareholders of LifeSpan Income
Fund upon the distribution of Class A, Class B or Class C shares of
beneficial interest in Bond Fund to the shareholders of LifeSpan Income
Fund pursuant to Section 354(a)(1) of the Code.
4. Under Section 361(a) of the Code no gain or loss will be recognized by
LifeSpan Income Fund by reason of the transfer of its assets solely in
exchange for Class A, Class B or Class C shares of Bond Fund.
5. Under Section 1032(a) of the Code no gain or loss will be recognized by
Bond Fund by reason of the transfer of LifeSpan Income Fund's assets solely
in exchange for Class A, Class B or
Class C shares of Bond Fund.
6. The shareholders of LifeSpan Income Fund will have the same
tax
basis and holding period for the shares of beneficial
interest
in Bond Fund that they receive as they had for LifeSpan
Income
Fund stock that they previously held, pursuant to Sections
358(a)(1) and 1223(1) of the Code, respectively.
7. The securities transferred by LifeSpan Income Fund to Bond Fund will have
the same tax basis and holding period in the hands of Bond Fund as they had
for LifeSpan Income Fund, pursuant to Sections 362(b) and 1223(2) of the
Code, respectively.
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Shareholders of LifeSpan Income Fund should consult their tax advisors regarding
the effect, if any, of the Reorganization in light of their individual
circumstances. Since the foregoing discussion relates only to the Federal income
tax consequences of the Reorganization, shareholders of LifeSpan Income 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 LifeSpan Income Fund and Bond
Fund and indicates the pro forma combined capitalization as of December 31, 1997
as if the Reorganization had
occurred on that date.
December 31, 1997
Net
Asset
Shares Value
Net Assets Outstanding Per
Share
LifeSpan Income Fund
Class A $29,330,773 2,642,551 $11.10
Class B $ 880,281 79,058 $11.13
Class C $ 34,796 3,127 $11.13
Bond Fund
Class A $190,705,711 17,383,073 $10.97
Class B $ 48,254,895 4,399,924 $10.97
Class C $ 9,188,036 837,017 $10.98
Bond Fund
(Pro Forma Surviving Fund)
Class A $220,036,484 20,056,799 $10.97
Class B $ 49,135,176 4,480,168 $10.97
Class C $ 9,222,832 840,186 $10.98
Reflects issuance of 2,673,726 of Class A shares, 80,244 of Class B shares and
3,169 of Class C shares of Bond Fund in a tax-free exchange for the net assets
of LifeSpan Income Fund, aggregating
$30,245,850.
The pro forma ratio of expenses to average annual net assets of the Class A
shares at December 31, 1997 would have been 1.26%. The pro forma ratio of
expenses to average net assets of Class B shares at December 31, 1997 would have
been 2.00%. The pro forma ratio of expenses to average net assets of Class C
shares at December 31, 1997 would have been 2.00%.
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COMPARISON BETWEEN
LifeSpan Income Fund AND
Bond Fund
Information about LifeSpan Income Fund and Bond Fund is presented below.
Additional information about Bond Fund is set forth in its Prospectus which
accompanies this Proxy Statement and
Prospectus.
More information about both Funds is set forth in documents that
may be obtained upon request of the transfer agent or upon
review
at the offices of the SEC. See "Additional Information- Public
Information."
Investment Objectives and Policies
Bond Fund. Bond Fund seeks a high level of current income by investing mainly in
debt instruments. Under normal market conditions, the Fund invests at least 65%
of its total assets in investment grade debt securities, U.S. Government
Securities, and money market instruments. Investment-grade debt securities are
those rated in one of the four highest categories by Standard & Poor's
Corporation ("Standard & Poor's"), Moody's Investors Service, Inc. ("Moody's"),
Fitch Investors Service, Inc. or other nationally-recognized rating
organization. Debt securities (often referred to as "fixed-income securities")
are used by issuers to borrow money from investors. The issuer promises to pay
the investor interest at a fixed or variable rate, and to pay back the amount it
borrowed (the "principal") at maturity. Some debt securities, such as zero
coupon bonds do not pay current interest. The Fund may invest up to 35% of its
total assets in debt securities rated less than investment grade or, if unrated,
judged by the Manager to be of comparable quality to such lower-rated securities
(collectively, "lower-grade securities"). Lower-grade securities include
securities rated BB, B, CCC, CC and D by Standard & Poor's or Ba, B, Caa, Ca and
C by Moody's. Lower-grade securities (often called "junk bonds") are considered
speculative and involve greater risk.
When investing the Fund's assets, the Manager considers many factors, including
current developments and trends in both the economy and the financial markets.
The Fund may try to hedge against losses in the value of its portfolio of
securities by using hedging strategies described below. The Manager may employ
special investment techniques, also described below. Additional information
about the securities the Fund may invest in, the hedging strategies the Fund may
employ and the special investment techniques may be found under the same
headings in the Bond Fund Statement of Additional Information.
LifeSpan Income Fund. LifeSpan Income Fund seeks high current
income, with opportunities for capital appreciation. The Fund
is
an asset allocation fund which seeks to achieve its investment
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objective by allocating its assets among two broad classes of investments-stocks
and bonds. The stock class includes growth and income type securities. The Fund
normally allocates 25% of its assets to the stock component. The bond class
includes several varieties of fixed-income instruments. Allocating assets among
different types of investments allows this Fund to take advantage of a greater
variety of investment opportunities than funds that invest in only one asset
class, but also subjects the Fund to the risks of those types of investments.
The Manager has the ability to allocate the Fund's assets within specified
ranges. The Fund's normal allocation (which is 25% in stocks and 75% in bonds)
indicates the benchmark for its combination of investments in each asset class
over time. As market and economic conditions change, however, the Manager may
adjust the asset mix between the stock and bond classes within a normal asset
allocation range as long as the relative risk and return characteristics of this
Fund remain distinct and this Fund's investment objective is preserved. The
Manager will review normal allocations between the stock and bond classes
quarterly and, if necessary, will rebalance the investment allocation at that
time. Additional adjustments may be made if an asset allocation shift of 5% or
more is warranted.
Permitted Investments by Both LifeSpan Income Fund and Bond Fund
Foreign Securities. Each Fund may invest in debt securities issued or guaranteed
by foreign companies, and debt securities of foreign governments or their
agencies. These foreign securities may include debt obligations such as
government bonds, debentures issued by companies, as well as notes. Some of
these debt securities may have variable interest rates or "floating" interest
rates that change in different market conditions. Those changes will affect the
income the Fund receives. LifeSpan Income Fund may also invest up to 15% of the
stock component of the portfolio in stocks of foreign issuers that generally
have a substantial portion of their business in the U.S.
ADRs, EDRs and GDRs. Both Funds may invest a portion of their
assets in ADRs, EDRs and GDRs. ADRs are receipts issued by a
U.S.
bank or trust company which evidence ownership of underlying
securities of foreign companies. ADRs are traded on domestic
exchanges or in the U.S. over-the-counter market and, generally,
are in registered form. EDRs and GDRs are receipts evidencing
an
arrangement with a non-U.S. bank similar to that for ADRs and
are
designed for use in non-U.S. securities markets.
Convertible Securities. LifeSpan Income Fund may invest in
convertible securities. Convertible securities are bonds,
preferred stocks and other securities that normally pay a fixed
rate of interest or dividend and give the owner the option to
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convert the security into common stock. While the value of convertible
securities depends in part on interest rate changes and the credit quality of
the issuer, the price will also change based on the price of the underlying
stock. While convertible securities generally have less potential for gain than
common stock, their income provides a cushion against the stock price's
declines. They generally pay less income than non-convertible bonds. The Manager
generally analyzes these investments from the perspective of the growth
potential of the underlying stock and treats them as "equity substitutes."
Hedging. Each Fund may purchase and sell certain kinds of futures contracts,
forward contracts, and options on futures, broadly-based stock or bond indices
and foreign currencies, or enter into interest rate swap agreements. LifeSpan
Income Fund may sell covered call options and may purchase put options on
Futures. These are all referred to as "hedging instruments." While each Fund
currently does not engage extensively in hedging, each Fund may use these
instruments for hedging purposes and , in the case of covered calls, non-hedging
purposes. The hedging instruments the Funds may use are described below and in
greater detail in the "Other Investment Techniques and Strategies" section in
each Fund's respective Statement of Additional Information.
The Funds may use hedging instruments for a number of purposes. Each Fund may do
so to try to manage its exposure to the possibility that the prices of its
portfolio securities may decline, or to establish a position in the securities
market as a temporary substitute for purchasing individual securities. Each Fund
may do so to try to manage its exposure to changing interest rates. Some of
these strategies, such as selling futures, buying puts and writing covered
calls, hedge a Fund's portfolio against price fluctuations. Other hedging
strategies, such as buying futures and call options, tend to increase a Funds'
exposure to the securities market.
Forward Contracts. Forward contracts are used by both Funds to try to manage
foreign currency risks on foreign investments. Foreign currency options are used
to try to protect against declines in the dollar value of foreign securities the
Funds own, or to protect against an increase in the dollar cost of buying
foreign securities. Writing covered call options may also provide income to the
Funds for liquidity purposes or to raise cash to distribute to shareholders.
Futures. Both Funds may buy and sell futures contracts that relate to (1)
foreign currencies (these are referred to as "Forward Contracts" and are
discussed above),(2) financial indices, such as U.S. or foreign government
securities indices, corporate debt securities indices or equity securities
indices (these are referred to as Financial Futures) and (3) interest rates
(those are referred
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to as Interest Rate Futures). Both Funds may use futures for hedging purposes
and LifeSpan Income Fund may use futures for non- hedging purposes. These types
of Futures are described in "Hedging" in the Statement of Additional Information
of each Fund.
Covered Call Options and Options on Futures. Both Funds may write (that is,
sell) covered call options on securities, indices and foreign currencies for
hedging or liquidity purposes and write call options on Futures for hedging and
non-hedging purposes. Each call the Funds write must be "covered". This means
the Fund must own the investment on which the call was written or it must own
other securities that are acceptable for the escrow arrangements required for
calls. When either Fund writes a call, it receives cash (called a premium). The
call gives the buyer the ability to buy the investment on which the call was
written from the Fund at the call price during the period in which the call may
be exercised. If the value of the investment does not rise above the call price,
it is likely that the call will lapse without being exercised, while the Fund
keeps the cash premium (and the investment). Up to 50% of Bond Fund's total
assets may be subject to calls. Bond Fund may also buy call options on
securities indices, foreign currencies, or Futures, or to terminate its
obligation on a call the Fund previously wrote.
Both Funds may purchase and sell put options on Futures. Buying a put on an
investment gives the Fund the right to sell the investment at a set price to a
seller of a put on that
investment.
Both Funds may sell a put on Futures only if the puts are
covered
by segregated liquid assets.
LifeSpan Income Fund may sell covered call options that are traded on U.S. or
foreign securities or commodity exchanges as well as over the counter markets.
In the case of foreign currency options, they may be quoted by major recognized
dealers in those options.
Bond Fund may purchase put options. Bond Fund may buy puts that relate to
securities, indices, Futures, or foreign currencies. The Fund may buy a put on a
security whether or not the Fund owns the particular security in its portfolio.
The Fund may sell a put on securities, indices, Futures, or foreign currencies,
but only if the puts are covered by segregated liquid assets. The Bond Fund will
not write puts if more than 50% of the Fund's net assets would have to be
segregated to cover put obligations.
A call or put may be purchased by Bond Fund only if, after the purchase, the
value of all call and put options held by the Bond Fund will not exceed 5% of
the Fund's total assets. The Fund may buy and sell put and call options that are
traded on U.S. or foreign securities or commodity exchanges or are traded in the
over-the-counter markets. In the case of foreign currency options, they may be
quoted by major recognized dealers in those options.
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Options traded in the over-the-counter market may be "illiquid,"
and therefore may be subject to the Fund's restrictions on
illiquid
investments.
Both Funds may enter into interest rate swaps for hedging purposes and, for
LifeSpan Income Fund to seek to increase total return.
In
an interest rate swap, the Fund and another party exchange their right to
receive, or their obligation to pay, interest on a security. For example, they
swap a right to receive floating rate interest payments for fixed rate payments.
The Fund enters into swaps only on a net basis, which means the two payment
streams are netted out, with the Fund receiving or paying, as the case may be,
only the net amount of the two payments. The Fund will segregate liquid assets
of any type (such as cash, U.S. Government, equity or debt securities) to cover
any amounts it could owe under swaps that exceed the amounts it is entitled to
receive, and it will adjust that amount daily, as needed. The Bond Fund may not
enter into swaps with respect to more than 25% of its total assets, and only on
assets it owns.
Loans of Portfolio Securities. To raise cash for liquidity purposes, both Funds
may lend their portfolio securities to brokers, dealers and other financial
institutions. Both Funds must receive collateral for a loan. Bond Fund limits
these loans to not more than 25% of the value of the Fund's total assets.
LifeSpan Income Fund limits these loans to not more than 33-1/3% of the Fund's
assets (taken at market value). Neither Fund presently intends to lend its
portfolio securities, but if they do the value of the securities borrowed is not
expected to exceed 5% of each Fund's total assets in the coming year.
Illiquid and Restricted Securities. Both of the Funds may invest in illiquid and
restricted securities. Investments may be illiquid because of the absence of an
active trading market, making it difficult to value them or dispose of them
promptly at an acceptable price. A restricted security is one that has a
contractual restriction on its resale or which cannot be sold publicly until it
is registered under the Securities Act of 1933. Bond Fund will not invest more
than 10% of its net assets in illiquid and restricted securities (the Board of
Bond Fund may increase that limit to 15% of net assets). LifeSpan Income Fund
will not invest more than 15% of its net assets in illiquid and restricted
securities. The percentage limitation on these investments does not apply to
certain restricted securities that are eligible for resale to qualified
institutional purchasers. The Manager monitors holdings of such securities on an
ongoing basis and at times a Fund may be required to sell some holdings to
maintain adequate liquidity.
Derivative Investments. Both Funds can invest in a number of
different kinds of "derivative investments." Each Fund may use
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some types of derivatives for hedging purposes, and may invest in others to seek
income. In general, a "derivative investment" is a specially-designed investment
whose performance is linked to the performance of another investment or
security, such as an option, future, index, currency or commodity. Both Funds
may not purchase or sell physical commodities. This policy also does not prevent
the Funds from engaging in hedging transactions, buying or selling options and
futures contracts or foreign currency or from investing in securities or other
instruments backed by physical commodities. In the broadest sense,
exchange-traded options and futures contracts may be considered "derivative
investments". Each Fund may invest in different types of derivatives.
"Index-linked" or "commodity-linked" notes are debt securities of companies that
call for interest payments and/or payment on the maturity of the note in
different terms than the typical note where the borrower agrees to pay a fixed
sum on the maturity of the note. Principal and/or interest payments on an
index-linked note depend on the performance of one or more market indices, such
as the S & P 500 Index or a weighted index of commodity futures, such as crude
oil, gasoline and natural gas. Each Fund may invest in "debt exchangeable for
common stock" of an issuer or "equity-linked" debt securities of an issuer. At
maturity, the principal amount of the debt security is exchanged for common
stock of the issuer or is payable in an amount based on the issuer's common
stock price at the time of maturity. In either case there is a risk that the
amount payable at maturity will be less than the expected principal amount of
the debt.
Bond Fund may also invest in currency-indexed securities. Typically, these are
short-term or intermediate-term debt securities having a value at maturity,
and/or an interest rate, determined by reference to one or more foreign
currencies. The currency-indexed securities purchased by the Fund may make
payments based on a formula. The payment of principal or periodic interest may
be calculated as a multiple of the movement of one currency against another
currency, or against an index. These investments may entail increased risk to
principal and increased price volatility.
Repurchase Agreements. Each of the Funds may enter into
repurchase
agreements. In a repurchase transaction, the Fund buys a
security
and simultaneously sells it to the vendor for delivery at a
future
date. Repurchase agreements must be fully collaterized.
However,
if the vendor fails to pay the resale price on the delivery date, the Fund may
incur costs in disposing of the collateral and may experience losses if there is
any delay in its ability to do so. Bond Fund will not enter into a repurchase
agreement that will cause more than 10% of the Fund's net assets to be subject
to repurchase agreements maturing in more than seven days. LifeSpan Income Fund
will not enter into a repurchase agreement that will cause more than 15% of its
net assets to be subject to repurchase agreements maturing in more than seven
days. There is no limit on
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the amount of either Fund's net assets that may be subject to repurchase
agreements of seven days or less.
Warrants and Rights. Warrants basically are options to purchase stock at set
prices that are valid for a limited period of time. Rights are similar to
warrants but normally have a short duration and are distributed directly by the
issuer to its shareholders. LifeSpan Income Fund may invest up to 5% of its
total assets in warrants or rights. That 5% limitation does not apply to
warrants acquired as part of units with other securities or that are attached to
other securities. No more than 2% of LifeSpan Income Fund's total assets may be
invested in warrants that are not listed on either The New York Stock Exchange
or The American Stock Exchange. Bond Fund does not invest in Warrants and
Rights.
"When-Issued" and Delayed Delivery Transactions. Both Funds may purchase
securities on a "when-issued" basis and may purchase or sell 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. There may be a risk of loss to the Fund if the value of the security
declines prior to the settlement date.
U.S. Government Securities. Both Funds may invest in U.S.
Government Securities which include debt securities issued or
guaranteed by the U.S. Government or its agencies and
instrumentalities. Certain U.S. Government Securities, including
U.S. Treasury bills, notes and bonds, and mortgage participation
certificates guaranteed by the Government National Mortgage
Association ("Ginnie Mae") are supported by the full faith and
credit of the U.S. Government, which in general terms means that
the U.S. Treasury stands behind the obligation to pay principal
and
interest.
Ginnie Mae certificates are one type of mortgage-related U.S. Government
Security the Funds may invest in. The Funds may also invest in other
mortgage-related U.S. Government Securities that are issued or guaranteed by
federal agencies or government-sponsored entities but which are not supported by
the full faith and credit of the U.S. Government. Those securities include
obligations supported by the right of the issuer to borrow from the U.S.
Treasury, such as obligations of the Federal Home Loan Mortgage Corporation
("Freddie Mac"), obligations supported only by the credit of the
instrumentality, such as the Federal National Mortgage Association ("Fannie
Mae") or the Student Loan Marketing Association, and obligations supported by
the discretionary authority of the U.S. Government to repurchase certain
obligations of U.S. Government agencies or instrumentalities such as the Federal
Land Banks and the Federal Home Loan Banks. Other U.S. Government Securities the
Funds may
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invest in are collateralized mortgage obligations ("CMOs").
The value of U.S. Government Securities will fluctuate until they mature
depending on prevailing interest rates. Because the yields on U.S. Government
Securities are generally lower than on corporate debt securities, when the Funds
hold U.S. Government Securities each may attempt to increase the income it can
earn from them by writing covered call options against them, when market
conditions are appropriate. Writing covered calls is explained above, under
"Hedging."
Lower-Grade Debt Securities. Both Funds may invest in "lower-grade" debt
securities which generally offer higher income potential than investment grade
securities. "Lower-grade" securities are those rated below "BBB" by Standard &
Poor's Corporation("Standard & Poor's") or "Baa" by Moody's Investors Services,
Inc.
("Moody's")
or similar ratings given by other domestic or foreign rating organizations, or
securities that are not rated by a nationally-recognized rating organization but
the Manager judges them to be comparable to lower-rated securities.
Mortgage-Backed Securities, CMOs and REMICS. Certain mortgage-backed securities,
whether issued by the U.S. Government or by private issuers, "pass-through" to
investors the interest and principal payments generated by a pool of mortgages
assembled for sale by government agencies. Pass-through mortgage-backed
securities entail the risk that principal may be repaid at any time because of
prepayments on the underlying mortgages. As a result, these securities may be
subject to greater price and yield volatility than traditional fixed-income
securities that have a fixed maturity and interest rate.
Both Funds may invest in collateralized mortgage-backed obligations ("CMOs"),
which generally are obligations fully collateralized by a portfolio of mortgages
or mortgage-related securities. LifeSpan Income Fund may also invest in real
estate mortgage investment conduits (REMICS)but it does not intend to acquire
"residual" interest in them. Payments of the interest and principal generated by
the pool of mortgages relating to the CMOs and REMICS are passed through to the
holders as the payments are received. CMOs and REMICS are issued with a variety
of classes or series which have different maturities. Certain CMOs and REMICS
may be more volatile and less liquid than other types of mortgage-related
securities, because of the possibility of the early repayment of principal due
to prepayments on the underlying mortgage loans. Prepayments on fixed rate
mortgage loans generally increase during periods of falling interest rates and
decrease during periods of rising interest rates. If prepayments of mortgages
underlying a short-term or intermediate-term CMO occur more slowly than
anticipated, the CMO effectively may become a long-term security. The prices of
long-term securities generally fluctuate more widely in response to
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<PAGE>
changes in interest rates.
o "Stripped" Securities. Both Funds may also invest in CMOs that are "stripped."
LifeSpan Income Fund may also invest in REMICS that are "stripped". That means
that the security is divided into two parts, one of which receives some or all
of the principal payments (and is known as a "principal-only" security, or
"P/O") and the other which receives some or all of the interest (and is known as
an "interest-only" security, or "I/O"). P/Os and I/Os are generally referred to
as "derivative investments", discussed further above.
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, a 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, a Fund might receive back less than
its investment.
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.
Private-issuer stripped securities are generally purchased and sold by
institutional investors through investment banking firms. At present,
established trading markets have not yet developed for these securities.
Therefore, most private-issuer stripped securities may be deemed "illiquid." If
either Fund holds illiquid stripped securities, the amount it can hold will be
subject to that Fund's investment policy limiting investments in illiquid
securities to 10% for Bond Fund, and 15% for LifeSpan Income Fund.
Bond Fund may also enter into "forward roll" transactions with mortgage-backed
securities. The Fund sells mortgage-backed securities it holds to banks or other
buyers and simultaneously agrees to repurchase a similar security from that
party at a later date at an agreed-upon price. Forward rolls are considered to
be a borrowing. The Fund is required to segregate liquid assets with its
custodian bank in an amount equal to its obligation under the forward roll. The
main risk of this investment strategy is risk of default by the counterparty.
Asset-Backed Securities. Both Funds 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
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<PAGE>
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 a 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.
Inverse Floating Rate Instruments. LifeSpan Income Fund may invest in inverse
floating rate debt instruments ("inverse floaters"), including leveraged inverse
floaters and inverse floating rate mortgage-backed securities, such as inverse
floating rate "interest only" stripped mortgage-backed securities. The interest
rate on inverse floaters resets in the opposite direction from the market rate
of interest to which the inverse floater is indexed. An inverse floater may be
considered to be leveraged to the extent that its interest rate varies by a
magnitude that exceeds the magnitude of the change in the index rate of
interest. The higher degree of leverage inherent in inverse floaters is
associated with greater volatility in their market values.
Structured Notes. Both Funds may invest in structured notes. A structured note
is a debt security having an interest rate or principal repayment requirement
based on the performance of a benchmark asset or market, such as stock prices,
currency exchange rates or commodity prices. They provide exposure to the
benchmark market while fixing the maximum loss if that market does not perform
as expected. Depending on the terms of the note, a Fund could lose all or part
of the interest and principal that would be payable on a comparable conventional
note.
Short-Term Debt Securities. Under normal market conditions, both Funds may
invest in short-term debt securities, such as money market instruments and U.S.
Government securities. When the Manager believes it is appropriate (for example,
for temporary defensive purposes during unstable market conditions), a Fund can
hold cash or invest without limit in money market instruments.
A
Fund will invest in high quality, short-term money market instruments such as
U.S. Treasury and agency obligations; commercial paper (short-term, unsecured,
negotiable promissory notes of a domestic or foreign company); short-term debt
obligations of corporate issuers; and certificates of deposit and bankers'
acceptances (time drafts drawn on commercial banks usually in connection with
international transactions) of domestic or foreign banks and savings and loan
associations.
Eurodollar and Yankee Dollar Bank Obligations. LifeSpan Income
Fund
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may invest in obligations of foreign branches of U.S. banks
(referred to as Eurodollar obligations) and U.S. branches of
foreign banks (referred to as Yankee Dollars) as well as foreign
branches of foreign banks. These investments entail risks that
are
different from investment in securities of U.S. banks.
Small, Unseasoned Companies. LifeSpan Income Fund may invest in securities of
small, unseasoned companies. These are companies that have been in operation
less than three years, including the operations of any predecessors. Securities
of these companies may have limited liquidity (which means that the Fund may
have difficulty selling them at an acceptable price when it wants to) and the
price of these securities may be volatile.
Zero Coupon Securities. Bond Fund may invest in zero coupon securities. These
securities, which may be issued by the U.S. government, its agencies or
instrumentalities or by private issuers, are purchased at a substantial discount
from their face value. They are subject to greater fluctuations in market value
as interest rates change than debt securities that pay interest periodically.
Interest accrues on zero coupon bonds even though cash is not actually received.
Preferred Stocks. Bond Fund may invest in preferred stocks. Preferred stock,
unlike common stock, generally offers a stated dividend rate payable from the
corporation's earnings. Such preferred stock dividends may be cumulative or
non-cumulative, fixed, participating, or auction rate. If interest rates rise, a
fixed dividend on preferred stocks may be less attractive, causing the price of
preferred stocks to decline. The rights to payment of preferred stocks are
generally subordinate to rights associated with a corporation's debt securities.
Investment Restrictions
LifeSpan Income Fund and Bond Fund have certain investment restrictions that,
together with their investment objectives, are fundamental policies, changeable
only by shareholder approval. Set forth below is a summary of the investment
restrictions which are different for each Fund. Other investment restrictions
for each Fund are substantially the same. Unless the Prospectus of the Fund
states that a percentage restriction applies on an ongoing basis, it applies
only at the time that Fund makes an investment and the Fund need not sell
securities to meet the percentage limits if the value of the investment
increases in proportion to the size of the Fund.
Bond Fund - Investment Restrictions. Bond Fund cannot do the
following:
1. The Fund cannot make short sales except for sales "against
the
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box";
2. The Fund cannot borrow money or enter into reverse repurchase agreements,
except that the 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 the Fund's total assets taken at current market value; the 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 the Fund's net assets (for purposes of this restriction, entering
into portfolio lending agreements shall not be deemed to constitute borrowing
money);
3. The Fund cannot 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);
4. The Fund may not make loans other than by investing in obligations in which
the Fund may invest consistent with its investment objective and policies and
other than repurchase agreements and loans of portfolio securities; and
5. The Fund may not 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 the Fund's total assets
and except in connection with permitted transactions in options, futures
contracts and options on future contracts, and except for reverse repurchase
agreements and securities lending.
LifeSpan Income Fund - Investment Restrictions. LifeSpan Income
Fund cannot do the following:
1. Borrow money, except for emergency or extraordinary purposes including (i)
from banks for temporary or short-term purposes or for the clearance of
transactions in amounts not to exceed 33 1/3% of the value of the Fund's total
assets (including the amount borrowed) taken at market value, (ii) in connection
with the redemption of Fund shares or to finance failed settlements of portfolio
trades without immediately liquidating portfolio securities or other assets; and
(iii) in order to fulfill commitments or plans to purchase additional securities
pending the anticipated sale of other portfolio securities or assets, but only
if after each such borrowing there is asset coverage of at least 300% as defined
in the Investment Company Act. For purposes of this investment restriction,
reverse repurchase agreements,
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mortgage dollar rolls, short sales, futures contracts, options on futures
contracts, securities or indices and forward commitment
transactions shall not constitute borrowing.
2. A Fund cannot make loans, except that the Fund (1) may lend portfolio
securities in accordance with the Fund's investment policies up to 33-1/3% of
the 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 bonds, debentures or other similar obligations.
3. A Fund cannot purchase the securities of issuers conducting their principal
activity in the same industry if, immediately after such purchase, the value of
its investments in such industry would exceed 25% of its total assets taken at
market value at the time of such investment. This limitation does not apply to
investments in obligations of the U.S. Government or any of its agencies,
instrumentalities or authorities. The Funds have undertaken, as a matter of
non-fundamental policy, to apply this restriction to 25% or more of their
assets.
Description of Brokerage Practices
The brokerage practices of the Funds are the same. One of the duties of the
Manager under each Investment Advisory Agreement is to arrange the portfolio
transactions for each Fund. Each Investment Advisory Agreement contains
provisions relating to the employment of broker-dealers ("brokers") to effect a
Fund's portfolio transactions. In doing so, the Manager is authorized by the
Investment Advisory Agreement to employ such broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company Act, as
may, in its best judgment based on all relevant factors, implement the policy of
a Fund to obtain, at reasonable expense, the "best execution" (prompt and
reliable execution at the most favorable price obtainable) of such transactions.
The Manager need not seek competitive commission bidding, but is expected to
minimize the commissions paid to the extent consistent with the interest and
policies of a Fund as established by its Board.
Under each Investment Advisory Agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for a Fund and/or the
other accounts over which the Manager or its affiliates have investment
discretion. The commissions paid to such brokers may be higher than another
qualified broker would have charged, if a good faith determination is made by
the Manager and the commission is fair and reasonable in relation to the
services provided. Subject to the foregoing considerations, the Manager may also
consider sales of shares of a Fund and other investment companies managed by the
Manager or its affiliates as a factor in the selection of brokers for the Fund's
portfolio transactions.
Subject to the provisions of each Fund's Investment Advisory
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Agreement, the procedures and rules described above, allocations of brokerage
are generally made by the Manager's portfolio traders based upon recommendations
from the Manager's portfolio managers. In certain instances, portfolio managers
may directly place trades and allocate brokerage, also subject to the provisions
of each Investment Advisory Agreement and the procedures and rules described
above. In either case, brokerage is allocated under the supervision of the
Manager's executive officers and the Manager. Transactions in securities other
than those for which an exchange is the primary market are generally done with
principals or market makers. Brokerage commissions are paid primarily for
effecting transactions in listed securities or for certain fixed-income agency
transactions in the secondary market and are otherwise paid only if it appears
likely that a better price or execution can be obtained. Most purchases made by
the Funds are principal transactions at net prices, and the Funds incur little
or no brokerage costs.
Please refer to the Statement of Additional Information for each Fund for
further information on each Fund's brokerage practices.
Expense Ratios and Performance
The ratio of expenses to average annual net assets for LifeSpan Income Fund for
the fiscal year ended October 31, 1997 for its Class A, Class B and Class C
shares was 1.45%, 2.18% and 2.20%, respectively. The ratio of expenses to
average annual net assets for Bond Fund for the fiscal year ended December 31,
1997 for its Class A, Class B and Class C were 1.27%, 2.02% and 2.02%,
respectively. Further details are set forth above under "Comparative Fee
Tables", and in LifeSpan Income Fund's Annual Report as of October 31, 1997, and
Bond Fund's Annual Report as of December 31, 1997, which are included in the
Statement of Additional Information. The performance of the Funds for the 1, 3
and 5 year periods ended December 31, 1997 is set forth in Exhibit B.
Shareholder Services
The policies of LifeSpan Income Fund and Bond Fund with respect to minimum
initial investments and subsequent investments by its shareholders are the same.
Both LifeSpan Income Fund and Bond Fund offer the following privileges: (i)
Right of Accumulation, (ii) Letter of Intent, (iii) reinvestment of dividends
and distributions at net asset value, (iv) net asset value purchases by certain
individuals and entities, (v) Asset Builder (automatic investment) Plans, (vi)
Automatic Withdrawal and Exchange Plans for shareholders who own shares of the
Fund valued at $5,000 or more, (vii) AccountLink and PhoneLink arrangements,
(viii) exchanges of shares for shares of the same class of certain other Funds
at net asset value, and (ix) telephone redemption and exchange privileges.
Shareholders may purchase shares through OppenheimerFunds AccountLink, which
links a shareholder account to an account at a bank or financial institution and
enables shareholders to send
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money electronically between those accounts to perform a number of types of
account transactions. This includes the purchase of shares through the automated
telephone system (PhoneLink). Exchanges can also be made by telephone, or
automatically through PhoneLink. After AccountLink privileges have been
established with a bank account, shares may be purchased by telephone in an
amount up to $100,000. Shares of either Fund may be exchanged for shares of
certain Oppenheimer funds at net asset value per share; however, shares of a
particular class may be exchanged only for shares of the same class of other
Oppenheimer funds. Shareholders of the Funds may redeem their shares by written
request, or by telephone request in an amount up to $50,000 in any seven-day
period, and in the case of Bond Fund, by using the checkwriting feature.
Shareholders 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
ACH member, through AccountLink. There is no dollar limit on telephone
redemption proceeds sent to a bank account when AccountLink has been
established. Shareholders may also redeem shares automatically by telephone by
using PhoneLink. Shareholders of each Fund may also have the Transfer Agent send
redemption proceeds of $2,500 or more by Federal Funds wire to a designated
commercial bank which is a member of the Federal Reserve wire system.
Shareholders of the Funds have up to six months to reinvest redemption proceeds
of their Class A shares which they purchase subject to a sales charge or their
Class B shares on which they paid a contingent deferred sales charge, in Class A
shares of the Funds or other Oppenheimer funds without paying a sales charge.
LifeSpan Income Fund may redeem accounts with less than 100 shares. Bond Fund
may redeem accounts if the account value has fallen below $1,000 for reasons
other than market value fluctuations. Both Funds offer Automatic Withdrawal and
Automatic Exchange Plans under certain conditions.
Rights of Shareholders
The shares of each Fund, including shares of each class, entitle the holder to
one vote per share on the election of directors of the Company or trustees of
the Trust, as the case my be, and all other matters submitted to shareholders of
the Fund. Each share of the Fund represents an interest in the Fund
proportionately equal to the interest of each other share of the same class and
entitle the holder to one vote per share (and a fractional vote for a fractional
share) on matters submitted to their vote at shareholders' meetings.
Shareholders of each Fund vote together in the aggregate and not by class or
series on certain matters at shareholders' meetings, such as the election of
Directors or Trustees, as the case may be, 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 is not affected by that matter are not entitled to vote on the
proposal. For example, only shareholders of a series, such as LifeSpan Income
Fund, vote exclusively on any material amendment to the Investment Advisory
Agreement with respect to the series. Shares of a particular class vote together
on matters that affect that class. Only shareholders
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of a class of a series vote on certain amendments to the Distribution and/or
Service Plans if the amendments affect only that class. Each Fund's Board is
authorized to create new series and classes of series. Each Fund's Board may
reclassify unissued shares of the Funds into additional series or classes of
shares. Each Fund's Board may also divide or combine the shares of a class into
a greater or lesser number of shares without thereby changing the proportionate
beneficial interest of a shareholder in each Fund. Shares do not have cumulative
voting rights or preemptive or subscription rights. Shares may be voted in
person or by proxy. Each share has one vote at shareholder meetings, with
fractional shares voting proportionately. Most amendments to the Articles of
Incorporation in the case of LifeSpan Income Fund or Declaration of Trust in the
case of Bond Fund require the approval of a "majority" of the outstanding voting
securities (as defined in the Investment Company Act) of the Company's or
Trust's shares without regard to series or class.
Class A, Class B and Class C shares of LifeSpan Income Fund and the Class A,
Class B and Class C shares of Bond Fund which LifeSpan Income Fund shareholders
will receive in the Reorganization participate equally in the Funds' dividends
and distributions and in the Funds' net assets upon liquidation, after taking
into account the different expenses paid by each class. Distributions and
dividends for each class will be different and Class B and Class C dividends and
distributions will be lower than Class A dividends.
It is not contemplated that the Trust or Company will hold
regular
annual meetings of shareholders. Under the Investment Company Act, shareholders
of LifeSpan Income Fund do not have rights of appraisal as a result of the
transactions contemplated by the Reorganization Agreement. However, they have
the right at any time prior to the consummation of such transaction to redeem
their shares at net asset value, less any applicable contingent deferred sales
charge. Shareholders of both of the Funds have the right, under certain
circumstances, to remove a Director or Trustee, as the case may be, and will be
assisted in communicating with other shareholders for such purpose.
LifeSpan Income Fund is a series of the Company, which is a corporation
organized under the laws of the state of Maryland. As a general matter,
shareholders of a corporation will not be liable to the corporation or its
creditors with respect to their interests in the corporation as long as their
shares have been paid for and the requisite corporate formalities have been
observed, both in the organization of the corporation and in the conduct of its
business. Under Massachusetts law, shareholders of Bond Fund which is a business
trust, could, under certain circumstances, be held personally liable for the
obligations of the business trust. However, the Declaration of Trust under which
the Trust was established disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Fund or
the Trustees. The Declaration of Trust provides for
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indemnification out of the Trust's property for all losses and expenses of any
shareholder held personally liable for the obligation of the Fund. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is considered remote since it is limited to circumstances in which the
Trust would be unable to meet its obligations. A substantial number of mutual
funds in the United States are organized as Massachusetts business trusts.
Organization and History
Oppenheimer Series Fund, Inc. was organized in 1981 as a multi-
series Maryland corporation. LifeSpan Income Fund is a series of
that Company. Oppenheimer Integrity Funds was organized in 1982
as
a multi-series Massachusetts business trust and Bond Fund
currently
is the only series of that Trust. Oppenheimer Integrity Funds
is
governed by a Board of Trustees. Oppenheimer Series Fund Inc.
and
Oppenheimer Integrity Funds are open-end, diversified management
investment companies. Oppenheimer Integrity Funds have an
unlimited number of authorized shares of beneficial interest.
Oppenheimer Series Fund, Inc. presently has five series,
including
the Fund. Oppenheimer Series Fund, Inc. is governed by a Board
of
Directors.
Management and Distribution Arrangements
The Manager, located at Two World Trade Center, New York, New York 10048-0203,
acts as the investment adviser for both LifeSpan Income Fund and Bond Fund. The
terms and conditions of the Investment Advisory Agreement for each Fund are
substantially the same. The monthly management fee payable to the Manager by
each Fund and 12b-1 Distribution and Service Plan fees paid by each Fund with
respect to Class A, Class B and Class C shares are set forth under "Synopsis -
Investment Advisory and Distribution and Service Plan Fees" along with the fees
paid by the Manager to the Subadviser for LifeSpan Income Fund.
Pursuant to each Investment Advisory Agreement, the Manager supervises the
investment operations of the Funds and the composition of their portfolios, and
furnishes advice and recommendations with respect to investments, investment
policies and the purchase and sale of securities. Both Investment Advisory
Agreements require the Manager to provide LifeSpan Income Fund and Bond Fund
with adequate office space, facilities and equipment and to provide and
supervise the activities of all administrative and clerical personnel required
to provide effective administration for the Funds, including the compilation and
maintenance of records with respect to their operations, the preparation and
filing of specified reports, and composition of proxy materials and registration
statements for continuous public sale of shares of each Fund.
BEA acts as Subadviser to LifeSpan Income Fund. The Subadviser
is
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responsible for choosing the Fund's investments and its duties
and
responsibilities are set forth in the agreement with the
Manager.
The Manager, not LifeSpan Income Fund, pays the Subadviser. BEA began providing
management services to institutional clients in 1984. BEA is a partnership
between Credit Suisse Capital Corporation and CS Advisors Corp.
Expenses not expressly assumed by the Manager under each Fund's
Investment Advisory Agreement or by OppenheimerFunds
Distributor,
Inc., the Funds' distributor (the "Distributor"), under the General
Distributor's Agreement are paid by the Funds. The Investment Advisory
Agreements list examples of expenses paid by the Funds, the major categories of
which relate to interest, taxes, brokerage commissions, fees to certain
Directors or Trustees, as the case may be, legal and audit expenses, custodian
and transfer agent expenses, share issuance costs, certain printing and
registration costs and non-recurring expenses, including litigation costs. The
management fee paid by LifeSpan Income Fund for the fiscal year ended October
31, 1997 was $212,649. For the fiscal year ended December 31, 1997, the
management fee paid by Bond Fund was $1,751,986.
The Funds' Investment Advisory Agreements contain no expense
limitation.
The Manager is controlled by Oppenheimer Acquisition Corp., a holding company
owned in part by senior management of the Manager and ultimately controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance company
that also advises pension plans and investment companies. The Manager has
operated as an investment company adviser since 1959. The Manager and its
affiliates currently advise investment companies with combined net assets
aggregating over $75 billion as of December 31, 1997, with more than 3.5 million
shareholder accounts. OppenheimerFunds Services, a division of the Manager, acts
as transfer and shareholder servicing agent on an at-cost basis for LifeSpan
Income Fund and Bond Fund and for certain other open-end Funds managed by the
Manager and its affiliates.
The Distributor, under a General Distributor's Agreement for each of the Funds,
acts as the principal underwriter in the continuous public offering of Class A,
Class B and Class C shares of each Fund. During LifeSpan Income Fund's fiscal
year ended October 31, 1997, the aggregate sales charges on sales of LifeSpan
Income Fund's Class A shares were $19,537, of which the Distributor and an
affiliated broker-dealer retained in the aggregate $13,796. During LifeSpan
Income Fund's fiscal year ended October 31,1997, the contingent deferred sales
charges collected on LifeSpan Income Fund's Class B shares totaled $5,923, all
of which the Distributor retained. During LifeSpan Income Fund's fiscal year
ended October 31, 1997 there were no contingent deferred sales charges collected
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on the Fund's Class C shares. For the fiscal year ended December 31, 1997, the
aggregate amount of sales charges on sales of Bond Fund's Class A shares was
$346,782, of which $134,951 was retained by the Distributor and an affiliated
broker-dealer. Contingent deferred sales charges collected by the Distributor on
the redemption of Class B and Class C shares for the fiscal year ended December
31, 1997 totaled $156,781 and $1,757, respectively, all of which was retained by
the Distributor. For additional information about distribution of the Funds'
shares and the payments made by the Funds to the Distributor in connection with
such activities, please refer to "Distribution and Service Plans" in each Fund's
Statement of Addition Information.
Purchase of Additional Shares
Class A shares of LifeSpan Income Fund may be purchased with an initial sales
charge of 5.75% for purchases of less than $25,000. The sales charge of 5.75% is
reduced for purchases of LifeSpan Income Fund's Class A shares of $25,000 or
more. Class A shares of Bond Fund may be purchased with an initial sales charge
of 4.75% for purchases of less than $50,000. The sales charge of 4.75% is
reduced for purchases of Bond Fund's Class A shares of $50,000 or more. The
sales charges for larger purchases of Bond Fund's Class A shares are slightly
lower than similar purchases of LifeSpan Income Fund's shares and sales charges
for each Fund are listed in each Fund's prospectus. For purchases of Class A
shares of either fund of $1 million or more ($500,000 or more for purchases by
"Retirement Plans", as defined in each Fund's prospectus) if those shares are
redeemed within 12 calendar months (18 months for shares purchased prior to May
1, 1997) of the end of the calendar month of their purchase, a contingent
deferred sales charge may be deducted from the redemption proceeds. Class B
shares of LifeSpan Income Fund and Bond Fund are sold at net asset value without
an initial sales charge, however, if Class B shares of either Fund are redeemed
within six years of the end of the calendar month of their purchase, a
contingent deferred sales charge may be deducted of up to 5%, depending upon how
long such shares had been held. Class C shares of either Fund may be purchased
without an initial sales charge, but if sold within 12 months of buying them, a
contingent deferred sales charge of 1% may be deducted.
The initial sales charge and contingent deferred sales charge on Class A shares,
Class B shares and Class C shares of Bond Fund will only affect shareholders of
LifeSpan Income Fund to the extent that they desire to make additional purchases
of shares of Bond Fund in addition to the shares which they will receive as a
result of the Reorganization. The Class A, Class B and Class C shares to be
issued under the Reorganization Agreement will be issued by Bond Fund at net
asset value. Future dividends and capital gain distributions of Bond Fund, if
any, may be reinvested without sales charge. The contingent deferred sales
charge for each class of
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shares for both Funds is the same. If Class A, Class B or Class C shares of
LifeSpan Income Fund are currently subject to a contingent deferred sales
change, the Bond Fund shares issued in the Reorganization will continue to be
subject to the same contingent deferred sales charge. Any LifeSpan Income Fund
shareholder who is entitled to a reduced sales charge on additional purchases by
reason of a Letter of Intent or Right of Accumulation based upon holdings of
shares of LifeSpan Income Fund will continue to be entitled to a reduced sales
charge on any future purchase of shares of Bond Fund.
Dividends and Distributions
LifeSpan Income Fund declares dividends from net investment income on each
regular business day and pays such dividends to shareholders monthly. LifeSpan
Income Fund may also make distributions annually in December out of any net
short-term or long-term capital gains. Bond Fund declares and pays dividends and
capital gains distributions, if any, monthly. For both Funds, dividends are paid
separately for each class of shares and normally the dividends on Class A shares
are generally expected to be higher than for Class B and Class C shares because
the expenses allocable to Class B and Class C shares will generally be higher
than for Class A shares.
From time to time, Bond Fund may adopt the practice, to the extent consistent
with the amount of the Fund's net investment income and other distributable
income, of attempting to pay dividends on Class A shares at a constant level,
although the amount of such dividends may be subject to change from time to
time, depending on market conditions, the composition of the Bond Fund's
portfolio and expenses borne by the Bond Fund or borne separately by that Class.
A practice of attempting to pay dividends on Class A shares at a constant level
would require the Manager, consistent with the Fund's investment objective and
investment restrictions, to monitor the Fund's portfolio and select higher
yielding securities when deemed appropriate to maintain necessary net investment
income levels. If Bond Fund, from time to time, seeks to pay dividends on Class
A shares at a target level, Bond Fund anticipates it would pay dividends at the
target dividend level from net investment income and other distributable income
without any impact on Bond Fund's Class A net asset value per share. The Board
of Trustees of Bond Fund could change the Fund's targeted dividend level at any
time, without prior notice to shareholders. There is no target dividend for
Class B or Class C shares and Bond Fund would not otherwise have a fixed
dividend rate. Regardless, there can be no assurance as to the payment of any
dividends or the realization of any capital gains. There is no fixed dividend
rate for LifeSpan Income Fund and there can be no assurance that LifeSpan Income
Fund will pay any dividends or distributions.
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METHOD OF CARRYING OUT THE REORGANIZATION
The consummation of the transactions contemplated by the Reorganization
Agreement is contingent upon the receipt of an order from the Securities and
Exchange Commission exempting the Funds from the provisions of Section 17(a) of
the Investment Company Act of 1940, the approval of the Reorganization by the
shareholders of LifeSpan Income Fund and the receipt of the opinions and
certificates set forth in Sections 10 and 11 of the Reorganization Agreement and
the occurrence of the events described in those Sections. Under the
Reorganization Agreement, all the assets of LifeSpan Income Fund, excluding the
Cash Reserve, will be delivered to Bond Fund in exchange for Class A, Class B
and Class C shares of Bond Fund. The Cash Reserve to be retained by LifeSpan
Income Fund will be sufficient in the discretion of the Board for the payment of
LifeSpan Income Fund's liabilities, and LifeSpan Income Fund's expenses of
liquidation.
Assuming the shareholders of LifeSpan Income Fund approve the Reorganization,
the actual exchange of assets is expected to take place on June 12, 1998, or as
soon thereafter as is practicable (the "Closing Date") on the basis of net asset
values as of the close of business on the business day preceding the Closing
Date (the "Valuation Date"). Under the Reorganization Agreement, all redemptions
of shares of LifeSpan Income Fund shall be permanently suspended at the close of
business on the Valuation Date; only redemption requests received in proper form
on or prior to the close of business on that date shall be fulfilled by it;
redemption requests received by LifeSpan Income Fund after that date will be
treated as requests for redemptions of Class A, Class B or Class C shares of
Bond Fund to be distributed to the shareholders requesting redemption. The
exchange of assets for shares will be done on the basis of the per share net
asset value of the Class A, Class B and Class C shares of Bond Fund, and the
value of the assets of LifeSpan Income Fund to be transferred as of the close of
business on the Valuation Date, valued in the manner used by Bond Fund in the
valuation of assets. Bond Fund is not assuming any of the liabilities of
LifeSpan Income Fund, except for portfolio securities purchased which have not
settled and outstanding shareholder redemption and dividend checks.
The net asset value of the shares transferred by Bond Fund to LifeSpan Income
Fund will be the same as the value of the assets received by Bond Fund. For
example, if, on the Valuation Date, LifeSpan Income Fund were to have securities
with a market value of $95,000 and cash in the amount of $10,000 (of which
$5,000 was to be retained by it as the Cash Reserve), the value of the assets
which would be transferred to Bond Fund would be $100,000. If the net asset
value per share of Bond Fund were $10 per share at the close of business on the
Valuation Date, the number of shares to be
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issued would be 10,000 ($100,000 / $10). These 10,000 shares of Bond Fund would
be distributed to the former shareholders of LifeSpan Income Fund. This example
is given for illustration purposes only and does not bear any relationship to
the dollar amounts or shares expected to be involved in the Reorganization.
Following the Closing Date, LifeSpan Income Fund will distribute on a pro rata
basis to its shareholders of record on the Valuation Date the Class A, Class B
and Class C shares of Bond Fund received by LifeSpan Income Fund at the Closing,
in liquidation of the outstanding shares of LifeSpan Income Fund, and the
outstanding shares of LifeSpan Income Fund will be canceled. To assist LifeSpan
Income Fund in this distribution, Bond Fund will, in accordance with a
shareholder list supplied by LifeSpan Income Fund, cause its transfer agent to
credit and confirm an appropriate number of shares of Bond Fund to each
shareholder of LifeSpan Income Fund. Certificates for Class A shares of Bond
Fund will be issued upon written request of a former shareholder of LifeSpan
Income Fund but only for whole shares with fractional shares credited to the
name of the shareholder on the books of Bond Fund and only if shares represented
by certificates are delivered for cancellation. Former Class A shareholders of
LifeSpan Income 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 LifeSpan Income 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.
Under the Reorganization Agreement, within one year after the Closing Date,
LifeSpan Income Fund shall: (a) either pay or make provision for all of its
debts and taxes; and (b) either (i) transfer any remaining amount of the Cash
Reserve to Bond Fund, if such remaining amount is not material (as defined
below) or (ii) distribute such remaining amount to the shareholders of LifeSpan
Income Fund who were such on the Valuation Date. Such remaining amount shall be
deemed to be material if the amount to be distributed, after deducting the
estimated expenses of the distribution, equals or exceeds one cent per share of
the number of LifeSpan Income Fund shares outstanding on the Valuation Date.
Within one year after the Closing Date, LifeSpan Income Fund will complete its
liquidation.
The obligations of either LifeSpan Income Fund or Bond Fund under the Agreement
shall be subject to obtaining the necessary relief from the Securities and
Exchange Commission and to the right of either Fund to abandon and terminate the
Reorganization Agreement for any reason and without liability provided, however,
that if the
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<PAGE>
party terminating the Agreement does so without reasonable cause, the
terminating party shall, upon demand, reimburse the other party for all
expenses, including reasonable out-of-pocket expenses and fees incurred in
connection with the Agreement.
In the event that the Reorganization Agreement is not
consummated
for any reason, the Board will consider and may submit to the
shareholders other alternatives.
ADDITIONAL INFORMATION
Financial Information
The Reorganization will be accounted for by the surviving Fund
in
its financial statements similar to a pooling without
restatement.
Further financial information as to LifeSpan Income Fund is contained in its
current Prospectus, which is available without charge from OppenheimerFunds
Services, the Transfer Agent, P.O. Box 5270, Denver, Colorado 80217, and is
incorporated herein by reference, and in its Annual Report as of October 31,
1997, which is included in its Statement of Additional Information. Financial
information for Bond Fund is contained in its current Prospectus accompanying
this Proxy Statement and Prospectus and incorporated herein by reference, and in
its Annual Report as of December 31, 1997 which is included in its Statement of
Additional Information.
Public Information
Additional information about LifeSpan Income Fund and Bond Fund is available, as
applicable, in the following documents which are incorporated herein by
reference: (i) Bond Fund's Prospectus dated April 30, 1997 accompanying this
Proxy Statement and incorporated herein; (ii) LifeSpan Income Fund's Prospectus
dated February 19, 1998, which may be obtained without charge by writing to
OppenheimerFunds Services, P.O. Box 5270, Denver, Colorado 80217; (iii) Bond
Fund's Annual Report as of December 31, 1997, which may be obtained without
charge by writing to OppenheimerFunds Services at the address indicated above;
and (iv) LifeSpan Income Fund's Annual Report as of October 31, 1997, which may
be obtained without charge by writing to OppenheimerFunds Services at the
address indicated above. All of the foregoing documents may be obtained by
calling the toll-free number on the cover of this Proxy Statement and
Prospectus.
Additional information about the following matters is contained in the Statement
of Additional Information relating to this Reorganization, which incorporates by
reference the Bond Fund Statement of Additional Information dated April 30,
1997, and LifeSpan Income Fund's Prospectus and Statement of Additional
Information dated February 19, 1998; the organization and operation of Bond Fund
and LifeSpan Income Fund; more information on
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investment policies, practices and risks; information about the the Trust's
Board and the Company's Board and their respective responsibilities; a further
description of the services provided by Bond Fund's and LifeSpan Income Fund's
Manager, Distributor, and transfer and shareholder servicing agent; dividend
policies; tax matters; an explanation of the method of determining the offering
price of the shares and/or contingent deferred sales charges, as applicable of
Class A, Class B and Class C shares of Bond Fund and LifeSpan Income Fund;
purchase, redemption and exchange programs; the different expenses paid by each
class of shares; and distribution arrangements.
The Trust on behalf of Bond Fund and the Company of behalf of LifeSpan 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
LifeSpan Income Fund and Bond 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 LifeSpan Income Fund knows of no business other than the matters
specified above which will be presented at the
Meeting.
Since matters not known at the time of the solicitation may come before the
Meeting, the proxy as solicited confers discretionary authority with respect to
such matters as properly come before the Meeting, including any adjournment or
adjournments thereof, and it is the intention of the persons named as
attorneys-in-fact in the proxy to vote this proxy in accordance with their
judgment on such matters.
By Order of the Board of Directors
Andrew J. Donohue, Secretary
April 6, 1998 305
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of
___________, by and between Oppenheimer LifeSpan Income Fund("LifeSpan Income
Fund"), a series of Oppenheimer Series
Fund,
Inc., a Maryland corporation (the "Company"),and Bond Fund
("Bond
Fund"), a series of Oppenheimer Integrity Funds, a Massachusetts
business trust (the "Trust").
W I T N E S S E T H:
WHEREAS, the parties are each a series of an open-end
investment company 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 LifeSpan Income Fund through the acquisition by Bond Fund of
substantially all of the assets of LifeSpan Income Fund in exchange for the
voting shares of beneficial interest ("shares") of Class A, Class B and Class C
shares of Bond Fund and the assumption by Bond Fund of certain liabilities of
LifeSpan Income Fund, which Class A, Class B and Class C shares of Bond Fund are
to be distributed by LifeSpan Income Fund pro rata to its shareholders in
complete liquidation of LifeSpan 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 LifeSpan
Income Fund in exchange for Class A, Class B and Class C shares of Bond Fund and
the assumption by Bond Fund of certain liabilities of LifeSpan Income Fund,
followed by the distribution of such Class A, Class B and Class C shares of Bond
Fund shares to the Class A, Class B and Class C shareholders of LifeSpan Income
Fund in exchange for their Class A, Class B and Class C shares of LifeSpan
Income Fund, all upon and subject to the terms of the Agreement hereinafter set
forth.
The share transfer books of LifeSpan 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 LifeSpan Income Fund;
redemption requests received by LifeSpan Income Fund after that date shall be
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treated as requests for the redemption of the shares of Bond
Fund
to be distributed to the shareholder in question as provided in
Section 5.
2. On the Closing Date (as hereinafter defined), all of the assets of
LifeSpan Income Fund on that date, excluding a cash reserve (the "Cash Reserve")
to be retained by LifeSpan Income Fund sufficient in its discretion for the
payment of the expenses of LifeSpan Income Fund's dissolution and its
liabilities, but not in excess of the amount contemplated by Section 10E, shall
be delivered as provided in Section 8 to Bond Fund, in exchange for and against
delivery to LifeSpan Income Fund on the Closing Date of a number of Class A,
Class B and Class C shares of Bond Fund, having an aggregate net asset value
equal to the value of the assets of LifeSpan Income Fund so transferred and
delivered.
3. The net asset value of Class A, Class B and Class C shares of Bond Fund
and the value of the assets of LifeSpan 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, Class B and Class C shares of Bond Fund and the Class A, Class B and
Class C shares of LifeSpan Income Fund shall be done in the manner used by Bond
Fund and LifeSpan 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 LifeSpan Income Fund to be transferred to Bond Fund.
LifeSpan 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 LifeSpan Income Fund's
shareholders all of LifeSpan 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 (the "Closing") shall be at the offices of OppenheimerFunds,
Inc. (the "Agent"), Two World Trade Center, 34th Floor, New York, New York
10048, at 4:00 P.M. New York time on June 12, 1998 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 hereinafter 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
A-2
<PAGE>
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. In conjunction with the Closing, LifeSpan Income Fund shall distribute
on a pro rata basis to the shareholders of LifeSpan Income Fund on the Valuation
Date the Class A, Class B and Class C shares of Bond Fund received by LifeSpan
Income Fund on the Closing Date in exchange for the assets of LifeSpan Income
Fund in complete liquidation of LifeSpan Income Fund; for the purpose of the
distribution by LifeSpan Income Fund of Class A, Class B and Class C shares of
Bond Fund to its shareholders, Bond Fund will promptly cause its transfer agent
to: (a) credit an appropriate number of Class A, Class B and Class C shares of
Bond Fund on the books of Bond Fund to each Class A, Class B and Class C
shareholder, respectively of LifeSpan Income Fund in accordance with a list (the
"Shareholder List") of its shareholders received from LifeSpan Income Fund; and
(b) confirm an appropriate number of Class A, Class B and Class C shares of Bond
Fund to each shareholder of LifeSpan Income Fund; certificates for Class A,
Class B and Class C shares of Bond Fund will be issued upon written request of a
former shareholder of LifeSpan 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 LifeSpan Income
Fund, indicating his or her share balance. LifeSpan Income Fund agrees to supply
the Shareholder List to Bond Fund not later than the Closing Date. Shareholders
of LifeSpan 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, LifeSpan 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 LifeSpan 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
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exceeds one cent per share of LifeSpan 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.
Promptly after the
Closing,
LifeSpan Income Fund shall deliver to Bond Fund two copies of a list setting
forth the securities then owned by LifeSpan Income Fund. Promptly after the
Closing, LifeSpan 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 LifeSpan 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
LifeSpan 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
delivered shall be in the form of certified or bank cashiers' checks or by bank
wire or intra-bank transfer 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 LifeSpan Income Fund, registered in the
name of LifeSpan Income Fund, shall be transferred to LifeSpan Income Fund on
the Closing Date. Such shares shall thereupon be assigned by LifeSpan 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, LifeSpan Income Fund is unable in the
ordinary course of business 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 LifeSpan 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 LifeSpan Income Fund's custodian, then the delivery requirements of this
Section 8 with respect to said undelivered securities or cash will be waived and
LifeSpan 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 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.
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<PAGE>
9. Bond Fund shall not assume the liabilities (except for portfolio
securities purchased which have not settled and for shareholder redemption and
dividend checks outstanding) of LifeSpan Income Fund, but LifeSpan Income Fund
will, nevertheless, use its best efforts to discharge all known liabilities, so
far as may be possible, prior to the Closing Date. The cost of printing and
mailing the proxies and proxy statements will be borne by LifeSpan Income Fund.
LifeSpan Income Fund and Bond Fund will bear the cost of their respective tax
opinion. Any documents such as existing prospectuses or annual reports that are
included in that mailing will be a cost of the Fund issuing the document. Any
other out-of-pocket expenses of Bond Fund and LifeSpan Income Fund associated
with this reorganization, including legal, accounting and transfer agent
expenses, will be borne by LifeSpan Income Fund and Bond Fund, respectively, in
the amounts so incurred by each.
10. The obligations of Bond Fund hereunder shall be subject
to the following conditions:
A. The Board of Trustees of the Trust shall have authorized the
execution of the Agreement, and the shareholders of LifeSpan Income Fund shall
have approved the Agreement and the transactions contemplated thereby, and
LifeSpan 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" (as defined in the Act) of LifeSpan 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
counsel to LifeSpan Income Fund, to the effect that (i) LifeSpan Income Fund is
a series of the Company which is a corporation duly organized, validly existing
and in good standing under the laws of the State of Maryland with full powers to
carry on its business as then being conducted and to enter into and perform the
Agreement (Maryland counsel may be relied upon for this opinion); and (ii) that
all action necessary to make the Agreement, according to its terms, valid,
binding and enforceable on LifeSpan Income Fund and to authorize effectively the
transactions contemplated by the Agreement have been taken by LifeSpan Income
Fund.
C. The representations and warranties of LifeSpan 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.
A-5
<PAGE>
D. On the Closing Date, LifeSpan 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 and net unrealized appreciation
or depreciation, if any, with respect to LifeSpan Income Fund as of the Closing
Date.
E. The Cash Reserve shall not exceed 10% of the value of the net
assets, nor 30% in value of the gross assets, of LifeSpan Income Fund at the
close of business on the Valuation
Date.
F. A Registration Statement on Form N-14 filed by the Company under
the Securities Act of 1933, as amended (the "1933 Act"), containing a
preliminary form of the Proxy Statement and Prospectus, shall have become
effective under the 1933 Act not
later than July 15, 1998.
G. On the Closing Date, Bond Fund shall have received a letter from
Andrew J. Donohue or other senior executive officer of OppenheimerFunds, Inc.
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 LifeSpan Income Fund
arising out of litigation brought against LifeSpan 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 LifeSpan 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 KPMG Peat Marwick 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
LifeSpan 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 LifeSpan Income Fund hereunder shall be subject to
the following conditions:
A. The Board of Directors of the Company shall have authorized the
execution of the Agreement, and the transactions contemplated thereby, and Bond
Fund shall have furnished to LifeSpan Income Fund copies of resolutions to that
effect certified by the Secretary or an Assistant Secretary of the Trust.
A-6
<PAGE>
B. LifeSpan Income Fund's shareholders shall have approved the
Agreement and the transactions contemplated hereby, by an affirmative vote of "a
majority of the outstanding voting securities" (as defined in the Act) of
LifeSpan Income Fund, and LifeSpan Income Fund shall have furnished Bond Fund
copies of resolutions to that effect certified by the Secretary or an Assistant
Secretary of the Company.
C. LifeSpan Income Fund shall have received an opinion dated the
Closing Date of counsel to Bond Fund, to the effect that (i) Bond Fund is a
series of the Trust which is 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 then being conducted and to enter into and perform the
Agreement (Massachusetts counsel may be relied upon for this opinion); (ii) all
action necessary to make the Agreement, according to its terms, valid, binding
and enforceable upon Bond Fund and to authorize effectively the transactions
contemplated by the Agreement have been taken by 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 Registration Statement.
D. The representations and warranties of Bond Fund contained herein
shall be true and correct at and as of the Closing Date, and LifeSpan 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. LifeSpan Income Fund shall have received an opinion of KPMG Peat
Marwick LLP to the effect that the Federal tax consequences of the transaction,
if carried out in the manner outlined in this Plan of Reorganization and in
accordance with (i) LifeSpan Income Fund's representation that there is no plan
or intention by any Fund shareholder who owns 5% or more of LifeSpan Income
Fund's outstanding shares, and, to LifeSpan 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 LifeSpan 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 LifeSpan
Income Fund and Bond Fund that, as of the Closing Date, LifeSpan Income Fund and
Bond Fund will meet the diversification test of Section 368(a)(2)(F)(ii) of the
Code, will be as follows:
1. The transactions contemplated by the
Agreement
will qualify as a tax-free "reorganization" within the meaning
of
A-7
<PAGE>
Section 368(a)(1) of the Code, and under the regulations promulgated thereunder.
2. LifeSpan Income Fund and Bond Fund will each qualify as a
"party to a reorganization" within the meaning of Section 368(b)(2) of the Code.
3. No gain or loss will be recognized by the shareholders of
LifeSpan Income Fund upon the distribution of shares of beneficial interest in
Bond Fund to the shareholders of LifeSpan Income Fund pursuant to Section 354 of
the Code.
4. Under Section 361(a) of the Code no gain or loss will be
recognized by LifeSpan Income Fund by reason of the transfer of substantially
all its assets in exchange for shares of
Bond Fund.
5. Under Section 1032 of the Code no gain or loss will be
recognized by Bond Fund by reason of the transfer of substantially all LifeSpan
Income Fund's assets in exchange for Class A, Class B and Class C shares of Bond
Fund and Bond Fund's assumption of certain liabilities of LifeSpan Income Fund.
6. The shareholders of LifeSpan Income Fund will have the same
tax basis and holding period for the Class A, Class B or Class C shares of
beneficial interest in Bond Fund that they receive as they had for LifeSpan
Income Fund shares that they previously held, pursuant to Section 358(a) and
1223(1), respectively, of the Code.
7. The securities transferred by LifeSpan Income Fund to Bond
Fund will have the same tax basis and holding period in the hands of Bond Fund
as they had for LifeSpan Income Fund, pursuant to Section 362(b) and 1223(1),
respectively, of the Code.
F. The Cash Reserve shall not exceed 10% of the value of the net
assets, nor 30% in value of the gross assets, of LifeSpan Income Fund at the
close of business on the Valuation
Date.
G. A Registration Statement on Form N-14 filed by the Company under
the 1933 Act, containing a preliminary form of the Proxy Statement and
Prospectus, shall have become effective under
the 1933 Act not later than July 15, 1998.
H. On the Closing Date, LifeSpan Income Fund shall have received a
letter from Andrew J. Donohue or other senior executive officer of
OppenheimerFunds, Inc. acceptable to LifeSpan 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
A-8
<PAGE>
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 LifeSpan
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. LifeSpan Income Fund shall acknowledge receipt of the shares of
Bond Fund.
12. The Company on behalf of LifeSpan Income Fund hereby represents and
warrants that:
A. The financial statements of LifeSpan Income Fund as at October 31,
1997(audited) heretofore furnished to Bond Fund, present fairly the financial
position, results of operations, and changes in net assets of LifeSpan 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
October 31, 1997 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 LifeSpan Income Fund, it being agreed that a decrease in
the size of LifeSpan 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 LifeSpan Income Fund's shareholders, LifeSpan Income
Fund has authority to transfer all of the assets of LifeSpan 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 LifeSpan
Income Fund'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
A-9
<PAGE>
LifeSpan Income Fund and no material claim and no material legal, administrative
or other proceedings pending or, to the knowledge of LifeSpan Income Fund,
threatened against LifeSpan Income Fund, not reflected in such Prospectus;
E. Except for this Agreement, there are no material contracts
outstanding to which LifeSpan Income Fund is a party other than those ordinary
in the conduct of its business;
F. LifeSpan Income Fund is a series of the Company which is 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 the Company 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 LifeSpan 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
LifeSpan 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 LifeSpan Income Fund ended October
31, 1997 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. LifeSpan Income Fund has elected to be treated as a regulated
investment company and, for each fiscal year of its operations, LifeSpan Income
Fund has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and LifeSpan 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, 1997
(audited) heretofore furnished to LifeSpan 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, 1997 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
A-10
<PAGE>
shares shall not be considered a material or adverse change;
B. The Prospectus 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. Except for this Agreement, 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. Except for this Agreement, 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 the Trust which is a Massachusetts
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 LifeSpan Income Fund pursuant to the Agreement will be duly
authorized, validly issued, fully-paid and non-assessable, except as otherwise
set forth in Bond Fund's Registration Statement; and will conform to the
description thereof contained in Bond Fund'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, 1997 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;
A-11
<PAGE>
G. Bond Fund has elected to be treated as a regulated investment
company and, for each fiscal 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 LifeSpan 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 LifeSpan Income Fund that, if the
reorganization becomes effective, Bond Fund will treat each shareholder of
LifeSpan 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.
15. Bond Fund agrees that it will prepare and file a Registration Statement
on Form N-14 under the 1933 Act 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
A-12
<PAGE>
necessary or desirable in this connection. LifeSpan Income Fund covenants and
agrees, as soon as practicable and, upon closing, to cause the cancellation of
its outstanding shares.
16. The obligations of the parties, their respective trustees, directors,
officers, agents or others acting on their behalf under the Agreement shall be
subject to obtaining an exemptive order from the Securities and Exchange
Commission under Section 17(a) of the Act and to the right of either party to
abandon and terminate the Agreement for any reason and there shall be no
liability for damages or other recourse available to a party not so terminating
the Agreement, provided, however, that in the event that a party shall terminate
this Agreement without reasonable cause, the party so terminating shall, upon
demand, reimburse the party not so terminating for all expenses, including
reasonable out-of-pocket expenses and fees incurred in connection with this
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
acknowledgment of such waiver.
19. LifeSpan Income Fund understands that the obligations of Bond Fund
under the Agreement are not binding upon any Trustee or shareholder of Bond Fund
personally, but bind only Bond Fund and Bond Fund's property. LifeSpan 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.
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.
OPPENHEIMER INTEGRITY FUNDS
on behalf of
OPPENHEIMER BOND FUND
By:_________________________________
Andrew J. Donohue, Vice President
A-13
<PAGE>
OPPENHEIMER SERIES FUND, INC.
on behalf of
OPPENHEIMER LIFESPAN INCOME FUND
By:_________________________________
Andrew J. Donohue, Secretary
A-14
B-14
<PAGE>
Exhibit B
Average Annual Total Returns
for the Periods Ended 12/31/97
1-year 3-year 5-year 10-year
Bond Fund Class A Shares(1) 4.90% 8.75% 6.40% -
LifeSpan Income Fund Class A Shares(15.36% - - -
Bond Fund Class B Shares(2) 4.41% 8.87% - -
LifeSpan Income Fund Class B Shares(25.98% - - -
Bond Fund Class C Shares(3) 8.39% - - -
LifeSpan Income Fund Class C Shares(3) 10. - - -
Total Returns include change in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
An explanation of the different performance calculations is in each Fund's
Prospectus.
(1) Class A returns include the current maximum initial sales charge of 5.75%
for LifeSpan Income Fund and the current maximum initial sales charge of 4.75%
for Bond Fund.
(2) Class B returns include the applicable contingent deferred sales charge of
5% (1-year) and 3% (3-year). Class B shares are subject to an annual 0.75%
asset-based sales charge.
(3) Class C returns reflect the 1% contingent deferred sales charge for the
1-year result. Class C shares are subject to an annual
0.75% asset-based sales charge.
B-1
<PAGE>
OPPENHEIMER BOND FUND
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
PART B
STATEMENT OF ADDITIONAL INFORMATION
April 6, 1998
This Statement of Additional Information of Oppenheimer Bond Fund consists
of this cover page and the following documents:
1. Statement of Additional Information of Oppenheimer Bond Fund
dated April 30, 1997*
2. Prospectus of Oppenheimer LifeSpan Income Fund dated
February
19, 1998*
3. Statement of Additional Information of Oppenheimer LifeSpan
Income Fund dated February 19, 1998*
4. Oppenheimer Bond Fund's Annual Report as of December 31,
1997*
5. Oppenheimer LifeSpan Income Fund's Annual Report as of
October
31, 1997*
6. Pro Forma Financial Statements, including Pro Forma
Statement
of Investments of Oppenheimer LifeSpan Income Fund into
Oppenheimer
Bond Fund*
This Statement of Additional Information (the "Additional Statement") is
not a Prospectus. This Additional Statement should be read in conjunction with
the Proxy Statement and Prospectus of Oppenheimer Bond Fund dated April 6, 1998,
which may be obtained by written request to OppenheimerFunds Services, P.O. Box
5270, Denver, Colorado 80217, or by calling OppenheimerFunds Services at the
toll-free number shown above.
- ------------------
* Filed with Registrant's Registration Statement on Form N-14
(Reg. No. 333-47115) 2/27/98, and incorporated herein by
reference.
MERGE\305.#2
<PAGE>
LifeSpan Income Fund
Proxy for Special Shareholders Meeting To Be Held June 9, 1998
Your shareholder vote is important!
Your prompt response can save your Fund the expense of another mailing.
Please mark your proxy on the reverse side, date and sign it, and return it
promptly in the accompanying envelope which requires no postage if mailed in the
United States.
Please detach at perforation before mailing.
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LifeSpan Income Fund
Proxy For Special Shareholders Meeting to be held June 9, 1998
The undersigned shareholder of LifeSpan Income Fund, a series of Oppenheimer
Series Fund, Inc. (the "Fund"), does hereby appoint Robert J. Bishop, George C.
Bowen, Andrew J. Donohue and Scott T. Farrar, and each of them, as
attorneys-in-fact and proxies of the undersigned, with full power of
substitution, to attend the Special Meeting of the Shareholders of the Fund to
be held on June 9, 1998, at 6803 South Tucson Way, Englewood, Colorado 80112 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 IF NO CHOICE IS INDICATED.
(Over)
305
<PAGE>
LifeSpan Income Fund
Proxy for Special Shareholders Meeting To Be Held June 9, 1998
Your shareholder vote is important!
Your prompt response can save your Fund money. Please vote, sign and mail your
proxy ballot (this card) in the enclosed postage-paid envelope today, no matter
how many shares you own. A majority of the Fund's shares must be represented in
person or by proxy. Please vote your proxy so your Fund can avoid the expense of
another mailing.
Please detach at perforation before mailing.
- -----------------------------------------------------------------------------
1. The Proposal: To approve an Agreement and Plan of Reorganization between
Oppenheimer Series Fund, Inc. on behalf of the Fund and Oppenheimer Integrity
Funds on behalf of Oppenheimer Bond Fund ("Bond Fund"), and the transactions
contemplated thereby, including (a) the transfer of substantially all the assets
of the Fund in exchange for shares of Bond Fund, (b) the distribution of such
shares to the shareholders of the Fund in complete liquidation of the Fund, and
(c) the cancellation of the outstanding shares of the Fund.
o FOR o AGAINST o ABSTAIN
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS PROXY.
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.
Dated: _________________________,
1998
(Month) (Day)
----------------------------------------
Signature(s)
----------------------------------------
Signature(s)
Please read both sides of this
ballot
(Over)
305
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<PAGE>
Bridget A. Macaskill
President and Chief Executive Officer
April 8, 1998
Dear Oppenheimer LifeSpan Income Fund Shareholder,
One of the things we pride ourselves on at OppenheimerFunds,
Inc. is our commitment to
searching for new investment opportunities for our shareholders.
I am writing to you today to let you
know about one of these opportunities - a positive change that has been proposed
for Oppenheimer LifeSpan Income Fund.
After careful consideration, the Board of Directors agreed that it would
be in the best interest of shareholders of Oppenheimer LifeSpan Income Fund to
reorganize into another Oppenheimer fund, Oppenheimer Bond Fund. A shareholder
meeting has been scheduled for June 9th, and all Oppenheimer LifeSpan Income
Fund shareholders of record on March 17th are being asked to vote either in
person or by proxy. You will find a notice of the meeting, a ballot card, a
proxy statement detailing the proposal, an Oppenheimer Bond Fund prospectus and
a postage-paid return envelope enclosed for your use.
Why does the Board of Directors recommend this change?
Oppenheimer LifeSpan Income Fund and Oppenheimer Bond Fund have compatible
objectives, as discussed in the enclosed proxy statement. We believe that
Oppenheimer Bond Fund's flexible management approach allows that fund to respond
more effectively to changing market and economic conditions, and can offer
shareholders even better investment opportunities over the long term.
Another benefit for shareholders is the greater economy of scale resulting
from consolidation into a much larger fund. By merging into Oppenheimer Bond
Fund which now has over $190 million in assets - former shareholders of
Oppenheimer LifeSpan Income Fund may benefit from a lower expense ratio as costs
are spread among a larger number of shares.
How do you vote?
No matter how large or small your investment, your vote is important, so
please review the proxy statement carefully. To cast your vote, simply mark,
sign and date the enclosed proxy ballot and return it in the postage-paid
envelope today. Remember, it can be expensive for the Fund - and ultimately you
as a shareholder - to remail the ballots if not enough responses are received to
conduct the meeting.
(over, please)
<PAGE>
If you have any questions about the proposal, please feel free to contact
your financial advisor, or call us at 1-800-525-7048.
As always, we appreciate your confidence in OppenheimerFunds and look
forward to serving you for many years to come.
Sincerely,
/s/ Bridget A. Macaskill
------------------------
Bridget A. Macaskill
Enclosures
