SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant / x /
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/ X / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Oppenheimer Investment Grade Bond Fund, a series of
Oppenheimer Integrity Funds
- -------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Katherine P. Feld, Esq.
- -------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or
14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee Computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
- -------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the
date of its filing.
- -------------------------------------------------------------------------
(1) Amount previously paid:
- -------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- -------------------------------------------------------------------------
(3) Filing Party:
- -------------------------------------------------------------------------
(4) Date Filed:
- -----------------------
1Set forth the amount on which the filing fee is calculated and state how
it was determined.
OPPENHEIMER INVESTMENT GRADE BOND FUND
3410 South Galena Street, Denver, Colorado 80231
NOTICE OF MEETING OF SHAREHOLDERS TO BE HELD
June 28, 1995
To The Class A & Class B Shareholders of
Oppenheimer Investment Grade Bond Fund
Notice is hereby given that a Meeting of the Class A and Class B
Shareholders of Oppenheimer Investment Grade Bond Fund (the "Fund"), a
series of Oppenheimer Integrity Funds (the "Trust") will be held at 3410
South Galena Street, Denver, Colorado, 80231, at 10:00 A.M., Denver time,
on June 28, 1995, or any adjournments thereof, for the following purposes:
To be voted on by holders of:
Class A Class B
Shares Shares
X X (a) To approve changes in the Fund's fundamental
investment policies (Proposal No. 1);
X X (b) To approve a new investment advisory agreement
with Oppenheimer Management Corporation (Proposal
No. 2);
X (c) To approve the Fund's Class B 12b-1 Distribution
and Service Plan (Proposal No. 3); and
X X (d) To transact such other business as may properly
come before the meeting, or any adjournments
thereof.
Shareholders of record at the close of business on April 28, 1995, are
entitled to vote at the meeting. The Proposals are more fully discussed
in the Proxy Statement. Please read it carefully before telling us,
through your proxy or in person, how you wish your shares to be voted.
The Board of Trustees of the Trust recommends a vote in favor of each
Proposal. WE URGE YOU TO MARK, SIGN, DATE AND MAIL THE ENCLOSED PROXY
PROMPTLY.
By Order of the Board of Trustees,
George C. Bowen, Secretary
May 25, 1995
- -------------------------------------------------------------------------
Shareholders who do not expect to attend the Meeting are asked to indicate
voting instructions on the enclosed proxy and to date, sign and return it
in the accompanying postage-paid envelope. To avoid unnecessary duplicate
mailings, we ask your cooperation in promptly mailing your proxy no matter
how large or small your holdings may be.
285
OPPENHEIMER INVESTMENT GRADE BOND FUND
3410 South Galena Street, Denver, Colorado 80231
PROXY STATEMENT
MEETING OF SHAREHOLDERS
TO BE HELD JUNE 28, 1995
This statement is furnished to the Class A and Class B shareholders of
Oppenheimer Investment Grade Bond Fund (the "Fund") in connection with the
solicitation by the Board of Trustees of Oppenheimer Integrity Funds (the
"Trust") of proxies to be used at a meeting (the "Meeting") of
shareholders to be held at 3410 South Galena Street, Denver, Colorado,
80231, at 10:00 A.M., Denver time, on June 28, 1995, or any adjournments
thereof. It is expected that the mailing of this Proxy Statement will be
made on or about May 25, 1995. For a free copy of the annual report
covering the operations of the Fund for the fiscal year ended December
31, 1994, call Oppenheimer Shareholder Services, 3410 South Galena Street,
Denver, Colorado 80231, the Fund's transfer agent, at 1-800-525-7048. The
Fund is one of two series of Oppenheimer Integrity Funds.
The enclosed 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 a quorum to conduct the meeting. The proxy will be voted in
favor of each Proposal unless a choice is indicated to vote against or to
abstain from voting on that Proposal. Shares owned of record by broker-
dealers for the benefit of their customers ("street account shares") will
be voted by the broker-dealer based on instructions received from its
customers. If no instructions are received, the broker-dealer may (if
permitted under applicable stock exchange rules) as record holder vote
such shares on the Proposals in the same proportion as that broker-dealer
votes street account shares for which voting instructions were received
in time to be voted.
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 each
Proposal.
The proxy may be revoked at any time prior to the voting by: (1) writing
to the Secretary of the Fund at 3410 South Galena Street, Denver, Colorado
80231; (2) attending the meeting and voting in person; or (3) signing and
returning a new proxy (if returned and received in time to be voted).
The cost of printing and distributing these proxy materials is an expense
of the Fund. In addition to the solicitation of proxies by mail, proxies
may be solicited by officers or employees of the Fund's transfer agent,
personally or by telephone; any expenses so incurred will be borne by the
Fund's transfer agent. Proxies may also be solicited by a proxy
soliciting firm hired at the Fund's expense for such purpose. Brokers,
banks and other fiduciaries may be required to forward soliciting material
to their principals and to obtain authorization for the execution of
proxies. For those services they will be reimbursed by the Fund for their
out-of-pocket expenses.
Shares Outstanding and Entitled to Vote. As of April 28, 1995, the record
date, there were (1) 10,938,977.812 shares of the Fund issued and
outstanding, consisting of 10,343,211.769 Class A shares and 595,766.043
Class B shares. Each Class A and Class B share of the Fund has voting
rights as stated in this Proxy Statement and is entitled to one vote for
each share (and a fractional vote for a fractional share) held of record
at the close of business on the record date. As of the record date, no
person owned of record or was known by the management of the Fund to be
the beneficial owner of 5% or more of the outstanding shares of either
class of Fund, other than: (1) MML Reinsurance (Bermuda) Ltd., c/o
Investment Services, 1295 State Street, Springfield, MA 01111-0001, which
owned 781,771.259 Class A shares (approximately 7.55% of outstanding Class
A shares on the record date and 7.15% of the outstanding shares of the
Fund) and (2) Smith Barney, Inc., 388 Greenwich Street, New York, N.Y.
10013, which owned 102,753.693 Class B Shares (approximately 17.24% of
outstanding Class B Shares on the record date, which represented less than
5% of the outstanding shares of the Fund).
APPROVAL OF CHANGES TO THE FUND'S FUNDAMENTAL
INVESTMENT POLICIES WITH RESPECT TO INVESTMENT
IN NON-INVESTMENT GRADE SECURITIES
(Proposal No. 1)
At the present time, the Fund's investment objective is to "seek to
achieve a high level of current income consistent with prudent investment
risk and the stability of capital primarily through investment in a
diversified portfolio of investment garde fixed-income securities."
In addition, it is currently a fundamental policy of the Fund to invest
substantially all of its assets in investment grade debt securities which
may be domestic and/or foreign securities. The Fund may write covered
calls and hedge with options and futures on investment grade bonds. The
Fund's investments include:
(1) Investment grade bonds, that is, debt securities rated BBB or above
by Standard & Poor's Corporation or Baa or above by Moody's Investors
Service, Inc. or a comparable rating by a nationally recognized
rating organization, or, if unrated, determined by the Manager to be
of comparable quality;
(2) Securities issued or guaranteed as to principal and interest by the
U.S. Government, its agencies or instrumentalities or obligations
secured by such securities (U.S. Government Securities).
U.S. Government Securities include U.S. Treasury bills, notes and
bonds, and mortgage participation certificates guaranteed by
Government National Mortgage Association ("Ginnie Mae") which 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 Fund
invests in. Other mortgage-related U.S. Government Securities the
Fund invests in that are issued or guaranteed by federal agencies or
government-sponsored entities are not supported by the full faith and
credit of the U.S. government. Those securities include obligations
supported by the ability of the issuer to borrow from the U.S.
Treasury, such as obligations of Federal Home Loan Mortgage
Corporation ("Freddie Mac"), obligations supported only by the credit
of the instrumentality, such as Federal National Mortgage Association
("Fannie Mae") 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 Fund invests in are collateralized mortgage
obligations ("CMOs");
(3) High-quality, short-term money market instruments, including U.S.
Treasury and agency obligations; commercial paper (short-term,
unsecured, negotiable promissory notes of a domestic or foreign
company); short-term obligations of corporate users; bank
participation certificates; and certificates of deposit and bankers'
acceptances (time drafts drawn on commercial banks usually in
connection with international transactions) of banks and savings and
loan associations.
The Fund also has a fundamental restriction that it cannot purchase
commodities or commodity contracts except futures contracts, including but
not limited to contracts for the future delivery of securities and futures
contracts based on securities indices.
The Fund's investment objective and its other fundamental investment
policies may be changed by the Fund only with appropriate shareholder
approval. Non-fundamental policies may be changed by the Board of
Trustees without shareholder approval in response to, for example,
changing market or economic conditions.
The Manager proposes that the following changes be made to the Fund's
fundamental investment policies:
(1) that its investment objective be changed to : "to seek a high level
of current income by investing mainly in debt instruments"; this new
investment objective will be a fundamental policy;
(2) that permissible investments be expanded to permit the Fund, as a
matter of non fundamental policy, under normal market conditions, to
invest up to 35% of its total assets in non-investment grade debt
instruments (that is, those rated less than BBB/Baa by Standard &
Poor's or Moody's or a comparable rating by a nationally recognized
rating organization, or, if unrated, determined by the Manager to be
of comparable quality); and
(3) that the fundamental limit on investing in commodities be replaced
with a non-fundamental policy that, "The Fund may not purchase or
sell physical commodities; however, the Fund may purchase and sell
foreign currency and engage in hedging transactions. This shall not
prevent the Fund from buying or selling options and futures contracts
or from investing in securities or other instruments backed by
physical commodities."
This Proposal would permit the Fund to invest up to 35% of its total
assets in non-investment grade debt securities, and in other debt
securities that currently are not permitted investments, when consistent
with the Fund's proposed investment objective of seeking a high level of
current income by investing mainly in debt instruments. If this Proposal
is approved, the Board of Trustees would change the Fund's name to
"Oppenheimer Bond Fund." If this Proposal is approved, the Manager
anticipates that the Fund would generally invest at least 75% of its total
assets in (i) U.S. corporate bonds rated "A" or better and (ii) U.S.
government and agency bonds. The Fund further anticipates that it would
invest an additional 15% of its total assets in lower-grade domestic
corporate bonds and 10% of total assets in lower-grade foreign bonds.
These anticipated investment targets, including the allocation between
domestic and foreign lower-grade debt securities, are subject to
fluctuation and may be changed by the Manager from time to time without
further notice to shareholders or amended prospectus disclosure.
If this Proposal is approved, the change in the fundamental limit on
investing in commodities would permit the Fund to invest in
commodity-linked notes and other debt instruments backed by physical
commodities. Payment of periodic interest and principal payment at
maturity of a commodity-linked note depend upon the performance of, for
example, a weighted index of commodity futures, such as crude oil,
gasoline and natural gas. There is a risk that the index will not perform
as the Manager anticipated, in addition to any credit risk of the issuer
of the commodity-linked note failing to make payments on the note.
Currently, the Fund's portfolio is managed so that the dollar weighted
average maturity of the Fund's portfolio will be between five and ten
years. At December 31, 1994, the Fund's dollar-weighted average portfolio
maturity was 9 years. If this Proposal is approved, the Manager expects
to focus on the duration of the Fund's portfolio rather than its
dollar-weighted average maturity. Duration is a measure of the
anticipated rise or decline in value for a 1% change in interest rates.
For example, a duration of 2 in a portfolio indicates that for every 1%
rise in general interest rates, the portfolio value would be expected to
fall 2%, and vice versa. The Fund's target duration will be approximately
five.
All debt securities are subject to interest rate risk. Interest rate risk
refers to the fluctuations in value of debt securities resulting solely
from the inverse relationship between the market value of outstanding
fixed-income securities and changes in interest rates. An increase in
interest rates will generally reduce the value of debt securities, and a
decline in interest rates will tend to increase their value. However, a
portfolio made up entirely of investment grade securities is generally
very sensitive to changes in interest rates, and therefore the Fund's net
asset value is now particularly susceptible to declines in a rising
interest rate environment. Allowing the Fund's portfolio managers to
diversify the Fund's portfolio among securities of various credit quality
categories may help better protect the portfolio against interest rate
volatility. In addition, the Manager believes that, from time to time,
investment opportunities exist in non-investment grade securities in which
the Fund should be able to participate.
Although the yield on non-investment grade debt securities tends to be
higher than that of higher grade debt securities, and the potential for
higher long-term returns increases if such investments are made, there is
an increased credit risk that issuers of non-investment grade debt
securities may not be able to make interest or principal payments as they
become due. High yield non-investment grade debt securities are often
referred to as "junk bonds" and 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 a
greater risk of default because of the issuer's low creditworthiness.
Their prices may decline significantly during periods of general economic
difficulty. There may be less of a market for them, they may be more
difficult to value, and they may be harder to sell at an acceptable.
price. Further, a decline in the high-yield bond market is likely during
an economic downturn. An economic downturn or an increase in interest
rates could severely disrupt the market for high-yield securities and
adversely affect the value of outstanding securities and the ability of
issuers to repay principal and interest.
These risks mean that the Fund may not achieve the expected income from
non-investment grade securities, and that the Fund's net asset value per
share may be affected by declines in value of these securities. The Fund
is not obligated to dispose of securities when issuers are in default or
if the rating of the security is reduced. The Fund's portfolio managers
intend to continue to consider issuer creditworthiness, among other
factors, in selecting individual debt securities and in determining from
time to time whether a portion (but under the proposed non-fundamental
limit, not more than 35%) of the Fund's portfolio should be invested in
non-investment grade rated or unrated securities.
The Fund's investments in foreign securities and foreign currencies may
involve additional risks. These include currency fluctuations and/or
devaluations, risks relating to political or economic conditions in the
foreign country, and the generally less stringent disclosure requirement
of foreign markets. Other risks included changes in U.S. economic or
monetary policy that affect investment abroad. 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.
At a meeting of the Board of Trustees held on February 28, 1995, the
Manager presented to the Board of Trustees this Proposal to change the
Fund's investment objective and to eliminate the fundamental investment
restrictions outlined above. The Manager explained to the Trustees the
advantages and risks of allowing the Fund's investment adviser flexibility
to invest up to 35% of the Fund's portfolio in non-investment grade debt
securities. If shareholders approve this Proposal, the Manager and the
Board of Trustees will have greater flexibility to respond to market,
economic and other conditions, and the Board will be able to further
adjust the Fund's investment policies and strategies as it may deem
appropriate. The Trustees approved and recommended, subject to
shareholder approval, the change in the investment objective and
fundamental investment policies described in this Proposal. If approved,
the effective date of this Proposal can be delayed by the Fund until the
Fund's Prospectus is updated to reflect this change.
Vote Required. An affirmative vote of the holders of a "majority" (as
defined in the Investment Company Act) of all outstanding Class A and
Class B voting securities of the Fund is required to approve this
Proposal; the classes do not vote separately. Such "majority" vote is
defined in the Investment Company Act as the vote of the holders of the
lesser of: (i) 67% or more of the 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. If this Proposal
is not approved, the above-described investment objective and other
fundamental investment policies will not change. The Board of Trustees
recommends a vote in favor of approving this Proposal.
APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENT
(Proposal No. 2)
The Fund has an investment advisory agreement dated March 28, 1991, with
the Manager (the "Current Agreement") which was submitted to and approved
by the Fund's shareholders at a meeting held March 22, 1991. In December
of 1994, the Board of Trustees renewed the Current Agreement for one year.
The Manager subsequently requested that the management fee paid by the
Fund to the Manager be increased.
At a meeting of the Board of Trustees held April 18, 1995, the Board,
including a majority of the Trustees who are not "interested persons" (as
defined in the Investment Company Act) of the Trust or the Manager,
approved the terms of a new investment advisory agreement (the "Proposed
Agreement") between the Fund and the Manager. If the Proposed Agreement
is approved by the shareholders at this meeting, the Proposed Agreement
will be effective on such date and continue in effect until December 31,
1995 and thereafter from year to year unless terminated, but only so long
as such continuance is approved in accordance with the Investment Company
Act.
The Proposed Agreement differs from the Current Agreement in the schedule
of the management fee rates paid the Fund. The management fee rates of
the Proposed Agreement are higher at all asset levels than under the
Current Agreement. Under the Proposed Agreement, the management fee would
be payable monthly to the Manager and computed on the aggregate net assets
of the Fund as of the close of business each day at annual rates of: .75%
of the first $200 million of the Fund's average annual net assets, .72%
of the next $200 million, .69% of the next $200 million, .66% of the next
$200 million, .60% of the next $200 million, and .50% of aggregate net
assets over $1 billion. Under the Current Agreement, the management fee
payable monthly to the Manager is computed on the aggregate net assets of
the Fund as of the close of business each day at the annual rates of: .50%
of the first $100 million of average annual net assets, .45% of the next
$200 million, .40% of the next $200 million, and .35% of aggregate net
assets over $500 million.
If shareholders approve the Proposed Agreement, all investment advisory
services will be performed by the Manager. The sub-advisory agreement
between the Manager and Massachusetts Mutual Life Insurance Company (the
"Sub-Advisor"), under which the Manager, not the Fund, pays a fee to the
Sub-Advisor for managing the Fund's portfolio securities and making
investments decisions with respect to the Fund's investments, would be
terminated.
At March 31, 1995, the Fund's assets were $115.5 million. For the fiscal
year ended December 31, 1994, the Fund paid a management fee of $522,205
to the Manager under the Current Agreement. If the Proposed Agreement had
been in effect during that period, the management fee would have been
$786,863, a management fee increase of approximately 50.7%, and total
expenses of Class A shares would have increased by 23.6% and total
expenses of Class B shares would have increase by 14.0%.
The table below shows projections of the Fund's business expenses based
on the Fund's expenses in its most recent fiscal year ended December 31,
1994, under the Current Agreement and the Proposed Agreement. "Other
Expenses" includes other regular expenses for services paid by the Fund,
including transfer agent fees, custodial fees to the bank that holds the
Fund's portfolio securities, audit fees and legal fees.
Proposed
Current Agreement Agreement
Class A Class B Class A Class B
Management Fees 0.50% 0.50% 0.75% 0.75%
12b-1 Distribution Plan Fees
Plan Fees (includes Shareholders
Service Plan Fees) 0.25%(1) 1.00%(2) 0.25%(1) 1.00%(2)
Other Expenses 0.31% 0.28% 0.31% 0.28%
Total Fund Operating Expenses 1.06% 1.78% 1.31% 2.03%
- --------------------
(1) Service Plan fees only
(2) Includes Service Plan fees and asset-based sales charge
The hypothetical examples immediately below show the effect of the Fund's
operating expenses described above over time. These examples assume that
you make a $1,000 investment in each class of shares of the Fund, and that
the Fund's annual return is 5%, and that its operating expenses for each
class are the ones shown in the 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:
Current
Agreement 1 year 3 years 5 years 10 years*
Class A $58 $80 $103 $171
Class B $68 $86 $116 $173
Proposed
Agreement
Class A $60 $87 $116 $198
Class B $71 $94 $129 $200
If you did not redeem your investment, it would incur the following
expenses:
Current
Agreement 1 year 3 years 5 years 10 years*
Class A $58 $80 $103 $171
Class B $18 $56 $ 96 $173
Proposed
Agreement
Class A $60 $87 $116 $198
Class B $21 $64 $109 $200
* The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Long-term Class B
shareholders could pay the economic equivalent of more than the maximum
front-end sales charge allowed under applicable regulations, because of
the effect of the asset-based sales charge and contingent deferred sales
charge. The automatic conversion of Class B shares to Class A shares
is designed to minimize the likelihood that this will occur.
The Manager also acts as investment adviser to eight other funds that have
similar investment objections as the Fund at the following advisory fee
rates. Seven of those funds pay a management fee to the Manager at the
same rate as that proposed for the Fund under the Proposed Agreement.
Approximate Advisory
Net Assets Fee Rate as
at 3/31/95 % of Average Annual
Name of Fund ($ millions) Net Assets
Oppenheimer High Yield $1,174.2 ) 0.75% of the first $200 million,
Fund ) 0.72% of the next $200 million,
) 0.69% of the next $200 million,
Oppenheimer Strategic $ 72.3 ) 0.66% of the next $200 million,
Diversified Income Fund ) 0.60% of the next $200 million,
) and 0.50% of net assets in
Oppenheimer Strategic $4,644.5 ) excess of $1 billion.
Income Fund )
)
Oppenheimer Strategic $ 56.1 )
Income & Growth Fund )
)
Oppenheimer Bond Fund, $ 155.4 )
a series of Oppenheimer )
Variable Account Funds )
)
Oppenheimer High Income $ 108.9 )
Fund, a series of )
Oppenheimer Variable )
Account Funds )
)
Oppenheimer Strategic $ 25.7 )
Bond Fund, a series of )
Oppenheimer Variable )
Account Funds )
Oppenheimer Champion $ 253.0 0.70% of the first $250 million,
High Yield Fund 0.65% of the next $250 million,
0.60% of the next $500 million
and 0.55% of net assets in
excess of $1 billion.
Considerations by the Board of Trustees. In connection with the revision
in the investment management fee, the Manager provided extensive
information to the Independent Trustees. The Independent Trustees were
provided with data as to the qualifications of the Manager's personnel,
the quality and extent of the services rendered and its commitment to its
mutual fund advisory business. Information prepared specifically for the
purpose of assisting the Independent Trustees in their evaluation of the
Proposed Agreements included an analysis of the performance and expenses
of the Fund as compared to other similar funds. The Independent Trustees
relied upon information previously provided to them in connection with
their annual and ongoing review, on the nature, quality and extent of the
Manager's services to the Fund.
The Independent Trustees first examined the nature, quality and scope of
the services provided to the Fund by the Manager. Second, they reviewed
the basis for an adjustment in the management fee and analyzed the fee
proposed by the Manager in terms of management fees charged by the Manager
and other investment advisors for similar services. Finally, the
Independent Trustees examined the mutual fund related revenues and
expenses of the Manager.
Analysis of Nature, Quality and Extent of Services and Proposed Fee
Adjustment. The Independent Trustees considered, among other factors: (1)
the necessity of the Manager maintaining and enhancing its ability to
retain and attract capable personnel to serve the Fund; (2) the investment
record of other investment companies for which the Manager acts as
investment adviser; (3) the Manager's overall profitability; (4) the
Manager's profitability giving effect to the proposed revision in the
management fee; (5) the effect of the proposed management fee revision on
the expense ratio of the Fund; (6) possible economies of scale; (7) data
as to investment performance, advisory fees and expense ratios of other
investment companies not advised by the Manager but believed to be in the
same overall investment and size category as the Fund; (8) other benefits
to the Manager from serving as investment manager to the Fund, as well as
benefits to its affiliates acting as principal underwriter and its
division acting as transfer agent to the Fund; (9) current and developing
conditions in the financial services industry, including the entry into
the industry of larger and highly capitalized companies which are spending
and appear to be prepared to continue to spend substantial sums to engage
personnel and to provide services to competing investment vehicles; (10)
the financial stability and resources of the Manager and the desirability
of appropriate incentives to assure that the Manager will furnish high
quality services to the Fund; and (11) the increased complexity and
expansion of domestic and foreign securities markets and higher costs
associated therewith. The Independent Trustees also considered that once
the Fund is restructured as a general bond fund (see Proposal No. 1,
above,) the time and effort expended by the Manager's portfolio
management, fund accounting, and legal departments on behalf of the Fund
will be essentially the same as the time and effort it expends on behalf
of the Oppenheimer bond funds identified in the chart on page 9.
Analysis of Profitability of the Manager. The Trustees reviewed the
nature, quality and extent of the investment advisory and other services
performed by the Manager for the Fund. The Trustees concluded that the
Manager and its affiliates provide a wide range of services to the Fund
and its shareholders. The Board determined that those services have been
satisfactory in the past, and that the Manager is well qualified to act
as the investment adviser for the Fund. The Trustees also noted that the
distribution and transfer agency services provided to the Fund by the
Manager and its affiliates have been satisfactory.
The Board considered that, if the Proposal is approved, investment
personnel of the Manager will render all portfolio investment advice and
services to the Fund. The Manager advised the Board that it has the
ability to and will contribute financial resources in performing its
investment advisory services for the Fund, and the Manager will provide
experienced investment personnel and portfolio managers to enhance the
investment performance of the Fund. The Trustees recognized that the
increase in the management fee rate will benefit the Manager and will
increase the expenses of the Fund, but considered that if assets increase
as anticipated, the Fund's expense ratio should decline. The Trustees
were advised that the proposed management fee is comparable to, although
slightly higher than, the average and the median management fee rates
charged by comparable general bond mutual funds. The Trustees also noted
that the proposed increase would have no different effect on Class A and
Class B shareholders, and each Class would be affected the same.
The Manager provides the Independent Trustees on an annual basis with an
analysis of the profitability of the Fund to the Manager. In connection
with the Proposal, the Independent Trustees considered specific
information provided by the Manager regarding its general profitability
and also considered comparative information relating to the profitability
of other mutual fund investment managers.
Determination by the Independent Trustees and the Board of Trustees. The
Independent Trustees determined that in light of all of the factors, the
Manager's request to increase the management fee paid by the Fund was
reasonable and warranted at this time. After completion of their review,
and with the approval of the Proposal by the Independent Trustees, the
Board of Trustees approved the proposed management fee increase and the
Proposed Agreement.
Description of the Agreements. The Proposed Agreement and the Current
Agreement (hereinafter jointly referred to as the "Agreements") are
identical except for the change in the management fee rates described
above and the dates of the Agreements. Under the Agreements, the Manager
supervises the investment operations of the Fund and the composition of
its portfolio and furnishes the Fund advice and recommendations with
respect to investments, investment policies and the purchase and sale of
securities. The Agreements require the Manager, at its expense, to
provide the Fund with adequate office space, facilities and equipment as
well as to provide, and supervise the activities of, all administrative
and clerical personnel required to provide effective administration for
the Fund, including the compilation and maintenance of records with
respect to its operations, the preparation and filing of specified
reports, and composition of proxy materials and registration statements
for continuous public sale of shares of the Fund. Expenses not expressly
assumed by the Manager under the Agreements or by the distributor of the
Fund's shares are paid by the Fund. The Agreements list examples of
expenses paid by the Fund, the major categories of which relate to
interest, taxes, brokerage commissions, fees to certain Trustees, legal
and audit expenses, custodian and transfer agent expenses, share
certificate issuance costs, certain printing and registration costs, and
non-recurring expenses, including litigation.
The Agreements contain no expense limitation. However, independently of
the Agreements, the Manager has undertaken that the total expenses of the
Fund in any fiscal year (including the management fee but excluding taxes,
interest, brokerage fees and any extraordinary non-recurring expenses,
such as litigation) shall not exceed the most stringent applicable
regulatory limitation. At present, that limitation is imposed by
California and it limits expenses (with specified exclusions) to 2.5% of
the first $30 million of average annual net assets, 2% of the next $70
million and 1.5% of average annual net assets in excess of $100 million.
The payment of the management fee at the end of any month will be reduced
or eliminated so that there will not be any accrued but unpaid liability
under this expense limitation. The Manager reserves the right to change
or eliminate this expense limitation at any time.
The Agreements provide that in the absence of willful misfeasance, bad
faith or gross negligence in the performance of its duties or reckless
disregard of its obligations under the Agreements, the Manager shall not
be liable for any loss sustained by reason of good faith errors or
omissions in connection with any matters to which the Agreements relate.
The Agreements permit the Manager to act as investment adviser for any
other person, firm or corporation and to use the name "Oppenheimer" in
connection with other investment companies for which it may act as
investment adviser. If the Manager shall no longer act as investment
adviser to the Fund, the right of the Fund to use the name "Oppenheimer"
as part of its name may by withdrawn.
The Agreements provide that they will continue in effect from year to year
so long as such continuance is approved annually by the Board of Trustees,
including the vote by a majority of the Trustees who are not "interested
persons" as defined in the Investment Company Act, or by the vote of a
"majority" of the Fund's outstanding voting securities as defined in the
Investment Company Act. Neither Agreement may be amended without the
affirmative vote of a "majority" of the Fund's outstanding voting
securities as defined in the Investment Company Act. Either Agreement may
be terminated by the Manager or by the Trust, provided termination by the
Trust shall be directed by the vote of a majority of the Trustees or by
a vote of a "majority" of the Fund's outstanding voting securities as
defined in the Investment Company Act.
Brokerage Provisions of the Investment Advisory Agreements. One of the
duties of the Manager under both Agreements is to arrange the portfolio
transactions for the Fund. The Agreements contain provisions relating to
the employment of broker-dealers ("brokers") to effect the Fund's
portfolio transactions. In doing so, the Manager is authorized by the
Agreements to employ 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 the Fund
to obtain, at reasonable expense, the "best execution" (prompt and
reliable execution at the most favorable price obtainable) of such
transactions. The Manager need not seek competitive commission bidding
but is expected to minimize the commissions paid to the extent consistent
with the interest and policies of the Fund as established by its Board of
Trustees. Purchases of securities from underwriters include a commission
or concession paid by the issuer to the underwriter, and purchases from
dealers include a spread between the bid and asked price.
Under the Agreements, the Manager is authorized to select brokers that
provide brokerage and/or research services for the Fund and/or the other
accounts over which the Manager or its affiliates have investment
discretion. The commissions paid to such brokers may be higher than
another qualified broker would have charged if a good faith determination
is made by the Manager that the commission is fair and reasonable in
relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the 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.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the Agreements, and the procedures and rules described
above, allocations of brokerage are generally made by the Manager's
portfolio traders 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 the
Agreements and the rules described above. In either case, brokerage is
allocated under the supervision of the Manager's executive officers.
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 and are otherwise paid only if it appears likely that
a better price or execution can be obtained. When the Fund engages in an
option transaction, ordinarily the same broker will be used for the
purchase or sale of the option and any transaction in the securities to
which the option relates. When possible, concurrent orders to purchase
or sell the same security by more than one of the accounts managed by the
Manager or its affiliates are combined. The transactions effected
pursuant to such combined orders are averaged as to price and allocated
in accordance with the purchase or sale orders actually placed for each
account.
Most purchases of money market instruments and debt obligations are
principal transactions at net prices. Instead of using a broker for those
transactions, the Fund normally deals directly with the selling or
purchasing principal or market maker unless it determines that a better
price or execution can be obtained by using a broker. Purchases of these
securities from underwriters include a commission or concession paid by
the issuer to the underwriter. Purchases from dealers include a spread
between the bid and asked prices. The Fund seeks to obtain prompt
execution of these orders at the most favorable net price.
The research services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and its affiliates,
and investment research received for the commissions of those other
accounts may be useful both to the Fund and one or more of such other
accounts. Such research, which may be supplied by a third party at the
instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars. The Board of Trustees has permitted the Manager to
use concessions on fixed-price, fixed-income securities offerings to
obtain research, in the same manner as is permitted for agency
transactions.
The research services provided by brokers broadens the scope and
supplements the research activities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the Independent Trustees, annually reviews information
furnished by the Manager as to the commissions paid to brokers furnishing
such services so that the Board may ascertain whether the amount of such
commissions was reasonably related to the value or benefit of such
services.
The Manager and the Distributor. Subject to the authority of the Board
of Trustees, the Manger is responsible for the day-to-day management of
the Fund's business, pursuant to the Agreements. Oppenheimer Funds
Distributor, Inc., a wholly-owned subsidiary of the Manager is the general
distributor (the "Distributor") of the Fund's shares. Both the Manager
and the Distributor are located at Two World Trade Center, 34th floor, New
York, NY 10048.
For the year ended December 31, 1994, commissions (sales charges paid by
investors) on sales of the Fund's Class A shares totaled $143,088 of which
$67,090 was retained by the Distributor and by an affiliated
broker/dealer. During the year ended December 31, 1994, the Distributor
received contingent deferred sales charges of $8,916 upon redemption of
Class B shares, as reimbursement for sales commissions advanced by the
Distributor at the time of sales of such shares. For the fiscal year
ended December 31, 1994, payments by the Fund under the Fund's Class A
12b-1 Plan totaled $247,136, all of which was paid by the Distributor to
Recipients, including $154,100 paid to an affiliated broker/dealer.
Service fee payments made by the Fund under the Fund's Class B 12b-1 Plan
during the fiscal year ended December 31, 1994 totaled $26,383, all of
which was paid by the Distributor to Recipients, including an affiliated
broker/dealer. Transfer agent fees paid by the Fund to a division of the
Manager during the fiscal year ended December 31, 1994 totaled $184,806.
The names and principal occupations of the executive officers and
directors of the Manager are as follows: Jon S. Fossel, Chief Executive
Officer and Chairman of the Board of Directors; Bridget A. Macaskill,
President, Chief Operating Officer and a director; Donald W. Spiro, a
director and Chairman Emeritus of the Board of Directors; James C. Swain,
a director and Vice Chairman of the Board of Directors; Robert G. Galli,
Vice Chairman of the Board of Directors; Tilghman G. Pitts, III, Executive
Vice President and a director of the Manager and President of the
Distributor; Andrew J. Donohue, Executive Vice President and General
Counsel of the Manager and the Distributor; Robert Doll, Jr. and O.
Leonard Darling, Executive Vice Presidents; Kenneth C. Eich, Executive
Vice President and Chief Financial Officer; George C. Bowen, Senior Vice
President and Treasurer; Victor Babin, Loretta McCarthy, Robert E.
Patterson, Nancy Sperte, Arthur P. Steinmetz, Ralph Stellmacher and Robert
G. Zack, Senior Vice Presidents. The address of Messrs. Bowen, Eich and
Swain is 3410 South Galena Street, Denver, Colorado 80231. the address
of all other officers is Two World Trade Center, New York, New York
10048-0203, which is also the address of the Manager and the Distributor.
The names and principal occupations of the officers of the Fund who are
currently officers of the Manager or its affiliates are as follows: Mary
E. Wilson, Vice President and Portfolio Manager (Vice President and
Managing Director of Massachusetts Mutual Life Insurance Company); Andrew
J. Donohue, Vice President (Executive Vice President and General Counsel
of the Manager); George C. Bowen, Vice President, Secretary and Treasurer
(Senior Vice President and Treasurer of the Manager); Robert G. Zack,
Assistant Secretary (Senior Vice President and Associate General Counsel
of the Manager); Robert J. Bishop, Assistant Treasurer (Assistant Vice
President of the Manger/Mutual Fund Accounting); and Scott Farrar,
Assistant Treasurer (Assistant Vice President of the Manager/Mutual Fund
Accounting). If Proposal No. 1 is approved, David P. Negri and David A.
Rosenberg will each become a Vice President and Portfolio Manager of the
Fund, replacing Ms. Wilson. Messrs. Negri and Rosenberg are each a Vice
President of the Manager, and Vice Presidents and Portfolio Managers of
other OppenheimerFunds.
Vote Required. An affirmative vote of the holders of a "majority" (as
defined in the Investment Company Act) of the outstanding voting
securities of the Fund is required for approval of the Proposed Agreement.
Such "majority" vote is defined in the Investment Company Act as the vote
of the holders of the lesser of: (i) 67% or more of the 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. If shareholders do not approve this Proposal, the current
investment advisory agreement will remain in effect. The Board of
Trustees recommends a vote in favor of approving the Proposed Investment
Advisory Agreement.
APPROVAL OF THE FUND'S CLASS B 12b-1 DISTRIBUTION
AND SERVICE PLAN AND AGREEMENT
(Proposal No. 3)
NOTE: This Proposal applies to Class B Shareholders only.
Class B shares were first offered to the public on May 1, 1993. At that
time, the Fund had adopted a Distribution Plan and Agreement for Class B
shares pursuant to Rule 12b-1 of the Investment Company Act. In June of
1993, the Board of Trustees, including a majority of the Trustees who are
not "interested persons" (as defined in the Investment Company Act) of the
Fund and who have no direct or indirect financial interest in the
operation of the Fund's current 12b-1 plans or in any related agreements
("Independent Trustees"), approved amendments to that plan to
recharacterize it as a distribution and service plan and agreement in
conformity with the National Association of Securities Dealers, Inc.
("NASD") Rule which permits the Fund to pay on an annual basis up to 0.25%
of its average annual net assets as a service fee and up to 0.75% of its
average annual assets as an asset-based sales charge. In February of
1994, that Distribution and Service Plan was further amended by the Board
of Trustees to eliminate a provision which had required the Fund to
continue to make payments to the Distributor after a termination of the
Distribution and Service Plan to reimburse the Distributor for its
previously expanded distribution expenses, although continuation of such
payments remained discretionary with the Trustees.
At meetings of the Board of Trustees held February 28, 1995 and April 18,
1995, the Manager proposed the adoption of a new Distribution and Service
Plan and Agreement (the "Proposed Plan") which is a "compensation type
plan" instead of the current "reimbursement type plan." After
consideration of materials submitted by the Manager and the Distributor
on February 28, 1995, the Board requested additional material which was
provided to the Board for its consideration and review at a meeting held
on April 18, 1995. The Fund's Board of Trustees, including a majority of
the Independent Trustees, approved the new Distribution and Service Plan,
subject to shareholder approval, and determined to recommend the
Distribution and Service Plan and Agreement for approval by the
shareholders. A copy of the Proposed Distribution and Service Plan is
attached as Exhibit A to this proxy statement.
Description of the Distribution and Service Plans. Under both the
Proposed Plan and the current Distribution and Service Plan and Agreement
(the "Current Plan"), the Fund makes payments to the Distributor in
connection with the distribution of Class B Shares and the personal
service and maintenance of accounts that hold Class B shares. The Fund
pays the Distributor an asset-based sales charge of 0.75% per annum in
Class B shares outstanding for six years or less, and also pays the
Distributor a service fee of 0.25% per annum, each of which is computed
on the average annual net assets of Class B shares of the Fund.
Service Fee. Under the Proposed Plan and the Current Plan, the
Distributor pays certain brokers, dealers, banks or other persons or
entities ("Recipients") a service fee of 0.25% for providing personal
services to Class B shareholders and for maintenance of shareholder
accounts by those Recipients. The services rendered by Recipients in
connection with personal services and the maintenance of Class B
shareholder accounts may include but shall not be limited to, the
following: answering routine inquiries from the Recipient's customers
concerning the Fund, assisting in the establishment and maintenance of
accounts or sub-accounts in the Fund and processing share redemption
transactions, making the Fund's investment plans and dividend payment
options available, and providing such other information and services in
connection with the rendering of personal services and/or the maintenance
of accounts, as the Distributor or the Fund may reasonably request.
Service fee payments under the Proposed and Current Plans by the
Distributor to Recipients are made (i) in advance for the first year Class
B shares are outstanding, following the purchase of shares, in an amount
equal to 0.25% of the net asset value of the shares purchased by the
Recipient or its customers and (ii) thereafter, on a quarterly basis,
computed as of the close of business each day at an annual rate of 0.25%
of the net asset value of Class B shares held in accounts of the Recipient
or its customers. In the event Class B shares are redeemed less than one
year after the date such shares were sold, the Recipient is obligated to
repay to the Distributor on demand a pro rata portion of such advance
service fee payments, based on the ratio of the remaining period to one
year.
Asset-Based Sales Charge. The Current Plan, a reimbursement type plan,
provides that the Fund will pay the Distributor on a monthly basis an
asset-based sales charge at an annual rate of 0.75% of the net asset value
of Class B Shares outstanding to reimburse the Distributor for its
expenses in rendering other services in connection with the distribution
of the Fund's Class B shares. Under the Current Plan, the distribution
assistance and administrative support services rendered by the Distributor
in connection with the sales of Class B shares may include: (i) paying
sales commissions to any broker, dealer, bank or other institution that
sells the Fund's Class B shares, (ii) paying compensation to and expenses
of personnel of the Distributor who support distribution of Class B shares
by Recipients, and (iii) paying or reimbursing the Distributor for
interest and other borrowing costs incurred on any unreimbursed expenses
carried forward to subsequent fiscal quarters.
The Proposed Plan, a compensation type plan, provides that the Fund will
pay the Distributor on a monthly basis an asset-based sales charge at an
annual rate of 0.75% of the net asset value of Class B Shares outstanding
to compensate the Distributor for providing distribution assistance in
connection with the distribution of the Fund's Class B Shares. Under the
Proposed Plan, the distribution assistance and administrative support
services rendered by the Distributor in connection with the distribution
of Class B Shares may include: (i) paying service fees and sales
commissions to any broker, dealer, bank or other person or entity that
sells and services the Fund's Class B Shares, (ii) paying compensation to
and expenses of personnel of the Distributor who support distribution of
Class B Shares by Recipients, (iii) obtaining financing or providing such
financing from its own resources, or from an affiliate, for interest and
other borrowing costs of the Distributor's unreimbursed expenses incurred
in rendering distribution assistance for Class B Shares, and (iv) paying
certain other distribution expenses.
Other distribution assistance rendered by the Distributor and Recipients
under either Plan may include, but shall not be limited to, the following:
distributing sales literature and prospectuses other than those furnished
to current Class B shareholders, and providing such other information and
services in connection with the distribution of Class B shares as the
Distributor or the Fund may reasonably request. The Proposed Plan further
provides that such other distribution assistance may include distribution
assistance and administrative support services rendered in connection with
Class B Shares acquired (i) by purchase, (ii) in exchange for shares of
another investment company for which the Distributor serves as distributor
or sub-distributor, or (iii) pursuant to a plan of reorganization to which
the Fund is a party.
Under both Plans, the Distributor pays sales commissions from its own
resources to Recipients at the time of sale currently equal to 3.75% of
the purchase price of Fund shares sold by such Recipient, and advances the
first year service fee of 0.25%. Asset-based sales charge payments are
designed to permit an investor to purchase shares of the Fund without
paying a front-end sales load and at the same time permit the Distributor
to compensate Recipients in connection with the sale of Class B shares of
the Fund. After the first year Class B shares are outstanding, the
Distributor retains the asset-based sales charge. Under the Current Plan,
the Distributor uses the asset-based sales charge to recoup the sales
commissions it paid, the advances of the service fee payments it made, and
its financing costs. Under the Proposed Plan, the asset-based sales
charge is paid to compensate the Distributor for its services, described
above, to the Fund.
The Distributor and the Fund anticipate that under the Current Plan it
will take a number of years for the Distributor to recoup the sales
commissions paid to Recipients and other distribution-related expenses,
from the Fund's payments to the Distributor and from the contingent
deferred sales charge deducted from redemption proceeds for Class B shares
redeemed before the end of six years after their purchase, as described
in the Fund's prospectus.
The Proposed and Current Plans contain a provision which provides that the
Board may allow the Fund to continue payments to the Distributor for Class
B shares sold prior to termination of the Distribution and Service Plan.
Pursuant to this provision, payment of the service fee and the asset-based
sales charge could be continued by the Board after termination. Class B
shares automatically convert to Class A shares six years after their
purchase, and the Class A 12b-1 plan does not provide for an asset-based
sales charge.
Additional Information. The Current Plan has the effect of increasing
annual expenses of Class B Shares of the Fund by up to 1.00% of the
class's average annual net assets from what those expenses would otherwise
be. The Proposed Plan would have the effect of increasing annual expenses
of Class B Shares of the Fund by 1.00% of the class's average annual net
assets from what those expenses would otherwise be. Payments by the Fund
to the Distributor under the Current Plan for the fiscal year ended
December 31, 1994 were $26,383 (1.00% of the Fund's average net assets
represented by Class B Shares during that period), all of which the
Distributor paid to Recipients, including an affiliate of the Distributor.
If the Class B shareholders approve this Proposal, the Proposed Plan
shall, unless terminated as described below, become effective upon
shareholder approval and continue in effect until December 31, 1995 and
from year to year thereafter only so long as such continuance is
specifically approved, at least annually, by the Fund's Board of Trustees
and its Independent Trustees by a vote cast in person at a meeting called
for the purpose of voting on such continuance. Either Plan may be
terminated at any time by a vote of a majority of the Independent Trustees
or by a vote of the holders of a "majority" (as defined in the Investment
Company Act) of the Fund's outstanding Class B shares. Each Plan may not
be amended to increase materially the amount of payments to be made
without approval by Class B shareholders. All material amendments must
be approved by a majority of the Independent Trustees.
Each of the Proposed Plan and Current Plan provides that while it is in
effect, the selection and nomination of those Trustees of the Fund who are
not "interested persons" of the Fund is committed to the discretion of the
Independent Trustees. This does not prevent the involvement of others in
such selection and nomination if the final decision on any such selection
or nomination is approved by a majority of the Independent Trustees.
Under either Plan, the Board of Trustees may determine that no payment for
service fees will be made to any Recipient in any quarter if the aggregate
net asset value of all Fund shares held by the Recipient for itself and
its customers did not exceed a minimum amount, if any, that may be fixed
from time to time by a majority of the Independent Trustees. Initially,
the Board of Trustees has set the fee at the maximum rate and set no
minimum amount. Each Plan permits the Distributor and the Manager to make
additional distribution payments to Recipients from their own resources
(including profits from management fees) at no cost to the Fund. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of distribution assistance payments they make to
Recipients from their own assets.
Analysis of the Proposed Plan by the Board of Trustees. In considering
whether to recommend the Proposed Plan for approval, the Board requested
and evaluated information it deemed necessary to make an informed
determination. The Board found that there is a reasonable likelihood that
the Proposed Plan benefits the Fund and its Class B shareholders by
providing financial incentives to financial intermediaries to attract new
Class B shareholders to the Fund and by assisting the efforts of the Fund
and the Distributor to service and retain existing shareholders and
attract new investors. The Proposed Plan enables the Fund and the
Distributor to offer investors in the Fund alternative ways to purchase
shares. An investor may purchase Class A shares and pay a front-end sales
charge, or an investor may purchase Class B shares without a front-end
sales charge but which are subject to a declining contingent deferred
sales charge for six (6) years. This arrangement allows the Fund to be
competitive with similar funds, including funds that impose sales charges,
provide financial incentives to institutions that direct investors to such
funds, and provide shareholder servicing and administrative services.
The Distributor identified two main difficulties with the Current Plan.
These involve accurately following certain distribution expenses when
exchanges among the funds occur, and the Distributor's inability to
recover its distribution-related expenses incurred when funds enter into
reorganization agreements.
The Fund and the other mutual funds in the OppenheimerFunds complex have
arrangements so that a shareholder of one fund may exchange his or her
shares for the shares of one or more other OppenheimerFunds. Frequently,
a shareholder will enter into a number of exchanges.
The Distributor advised the Board that the Distributor could not at this
time design and implement an expedient and cost-effective accounting
system to follow expenses of the sales commission, service fee payment and
other distribution related expenses among the funds as exchanges occur.
Under a reimbursement type plan, accurate recording of such expenses may
be important so that one Fund is not burdened with expenses for which it
no longer has the assets.
It occasionally happens that, for various reasons, it is desirable for one
fund to reorganize into another fund when it is anticipated that such a
reorganization will benefit the funds involved. When reorganizations
occur, the Distributor currently must write off and thus is unable to
recover previously spent, but unrecovered, distribution expenses for the
fund which will go out of existence.
The compensation type Plan proposed for approval will eliminate the
foregoing difficulties and allow the Distributor to continue to provide
exchanges and reorganizations without having to risk the loss of, in some
cases, substantial amounts of money previously spent for distribution.
The Proposed Plan expressly provides that the distribution and
administrative support services under the plan may be rendered in
connection with Class B shares issued by the Fund in exchanges for other
Oppenheimer Funds and in a reorganization with another mutual fund.
The Distributor advised the Board that under the Proposed Plan, it will
be able to track its expenses of distribution for the Oppenheimer Funds
complex, and that it will also be able reasonably to identify its
distribution costs with respect to the Fund and each other Oppenheimer
Fund by allocating the Distributor's distribution expenses among the funds
in the complex according to sales. While not a precise method, the Board
concluded that this method of allocating distribution expenses to the Fund
is a reasonable manner by which to identify the Distributor's expenses in
distributing the Fund's shares. The payments under the proposed Plan will
remain subject to the limits imposed on asset-based sales charges by the
NASD.
The Board considered that a wide range of different situations might occur
in the future regarding the sale and redemption of Fund shares. It is
possible under the current reimbursement Plan for the Fund's payments to
be substantially reduced or cease when limited to reimbursement to the
Distributor for its costs. The Board concluded that this type of
situation is unlikely to occur. The Board also recognized that superior
investment performance could result in larger amounts paid by the Fund
under the Proposed Plan and the Distributor's recovery of more Plan
payments from the Fund than the Distributor had expended on the Fund.
Other differing scenarios were also discussed.
The Board also recognized that current shareholders who purchased Class
B shares may have reasonably expected to pay the asset-based charge for
six years although they may also have reasonably expected that the Fund's
payments would reimburse the Distributor sooner. The level of annual
payments by the Fund under the Proposed Plan will not increase over the
amounts currently paid by the Fund. Under the Proposed Plan, however,
over time, the Fund's Plan payments may exceed the amount which the Fund
might pay under the Current Plan. The length of time over which the
Fund's payments will continue under the Proposed Plan is not limited by
any reimbursement factor, and the Fund's payments may thus continue for
a longer period of time than under the Current Plan, thus potentially
increasing the amount of Plan payments which reduce the dividends and
total return on Fund shares. The Board also recognized that Class B
shares convert to Class A shares at the end of 6 years after their
purchase. The distribution plan for Class A shares is a reimbursement
plan and does not provide for an asset-based sales charge.
The Board concluded that it is extremely difficult to predict purchases,
sales and exchanges by shareholders, and how future individual, market and
economic events may influence individual investor decisions. The Board
thus concluded that it is not reasonably possible to determine with any
degree of certainty at this time whether the Fund will pay more under the
Proposed Plan than it would under the Current Plan. The Distributor has
agreed to provide the Board with certain quarterly reports as to the
amount of payments made by the Fund under the Proposed Plan and the
purpose for which payments were made. The Distributor will provide more
extensive annual reports to the Board which set forth the Distributor's
allocated expenses and recovery of money by the Distributor from the
asset-based sales charges and contingent deferred sales charges, and
information on sales, redemptions and exchanges of Fund shares and related
data. The Board determined that under these quarterly and annual reports,
the Board will be provided with adequate information about the payments
which the Fund makes to the Distributor, about the payments which the
Distributor makes and receives in connection with the distribution of the
Fund's shares, and about the Distributor's other distribution expenses.
The Board anticipates that with this information, the Board will be able
to review each year the benefits which the Fund is receiving from the Plan
payments it makes to determine if the Fund is benefiting at a level
commensurate with those payments.
The Board concluded that it is likely that because the Proposed Plan
provides an alternative means for investors to acquire Fund shares without
paying an initial sales charge, it will benefit Class B shareholders of
the Fund by enabling the Fund to maintain or increase its present asset
base in the face of competition from a variety of financial products. The
Trustees recognized that payments made pursuant to the Proposed Plan would
likely be offset in part by economies of scale associated with the growth
of the Fund's assets. With larger assets, the Class B shareholders should
benefit as the Proposed Plan should help Fund assets increase to reach
breakpoints in the investment advisory fee rate. Costs of shareholder
administration and transfer agency operations will be spread among a
larger number of shares and shareholders as the Fund grows larger, thereby
reducing the Fund's expense ratio. The Manager has advised the Trustees
that investing larger amounts of money is made more readily, more
efficiently, and at lesser cost to the Fund. The Board found that a
positive flow of new investment money is desirable primarily to offset the
potentially adverse effects that might result from a pattern of net
redemptions. Net cash outflow increases the likelihood that the Fund will
have to dispose of portfolio securities for other than investment
purposes, and redemptions may increase administrative and transfer agent
costs. Net cash inflow minimizes the need to sell securities to meet
redemptions when investment considerations would dictate otherwise,
reduces daily liquidity requirements, and may assist in a prompt
restructuring of the portfolio without the need to dispose of present
holdings.
Stimulation of distribution of mutual fund shares and providing for
shareholder services and account maintenance services by payments to a
mutual fund's distributor and to brokers, dealers, banks and other
financial institutions has become common in the mutual fund industry.
Competition among brokers and dealers for these types of payments has
intensified. The Trustees concluded that promotion, sale and servicing
of mutual fund shares and shareholders through various brokers, dealers,
banks and other financial institutions is a successful way of distributing
shares of a mutual fund. The Trustees concluded that without an effective
means of selling and distributing Fund shares and servicing shareholders
and providing account maintenance, expenses may remain higher on a per
share basis. By providing an alternative means of acquiring Fund shares,
the Distribution and Service Plan proposed for shareholder approval is
designed to stimulate sales by and services from many types of financial
institutions.
The Trustees recognize that the Manager will benefit from the Proposed
Plan through larger investment advisory fees resulting from an increase
in Fund assets, since its investment advisory fees are based upon a
percentage of net assets of the Fund. The Board was also advised by the
Manager that a compensation plan could possibly decrease the time
necessary for the Distributor to recover, and could possibly increase the
likelihood that the Distributor might actually recover, the costs of
distributing Class B shares. If either were to occur, the profits of the
Manager, which is the parent company of the Distributor, would be
increased. The Board, including each of the Independent Trustees,
determined that the Proposed Plan is in the best interests of the Fund,
and that its adoption has a reasonable likelihood of benefiting the Fund
and its Class B shareholders. In its annual review of the Proposed Plan,
the Board will consider the continued appropriateness of the Distribution
and Service Plan, including the level of payments provided for therein.
Vote Required. Pursuant to Rule 12b-1 under the Investment Company Act,
an affirmative vote of the holders of a "majority" (as defined in the
Investment Company Act) of the Fund's Class B voting securities is
required for approval of the Proposed Plan. The requirements for such
"majority" vote under the Investment Company Act are as described in
Proposal No. 2. A vote in favor of this Proposal shall be deemed a vote
to approve the prior Plans and the Proposed Plan. The Board of Trustees
recommends a vote in favor of approving this Proposal.
ADDITIONAL INFORMATION
The Manager and the Distributor. Subject to the authority of the Board
of Trustees, the Manager is responsible for the day-to-day management of
the Fund's business, pursuant to its investment advisory agreement with
the Fund. Oppenheimer Funds Distributor, Inc., a wholly-owned subsidiary
of the Manager, is the general distributor of the Fund's shares. The
address of the Manager and the Distributor is Two World Trade Center, New
York, New York 10048-0203.
The Manager (including a subsidiary) currently manages investment
companies, including other OppenheimerFunds, with assets of more than $34
billion as of March 31, 1995, and with more than 2.4 million shareholder
accounts. The Manager is a wholly-owned subsidiary of Oppenheimer
Acquisition Corp. ("OAC"), a holding company located at 3410 South Galena
Street, Denver, Colorado 80231, that is controlled by Massachusetts Mutual
Life Insurance Company ("MassMutual"). MassMutual is located at 1295
State Street, Springfield, Massachusetts 01111. OAC acquired the Manager
on October 22, 1990. As indicated below, the common stock of OAC is owned
by (i) certain officers and/or directors of the Manager, (ii) MassMutual
and (iii) another investor. No institution or person holds 5% or more of
OAC's outstanding common stock except MassMutual. MassMutual has engaged
in the life insurance business since 1851. It is the nation's twelfth
largest life insurance company by assets and has an A.M. Best Co. rating
of "A++".
The common stock of OAC is divided into three classes. At December 31,
1994, MassMutual held (i) all of the 2,160,000 shares of Class A voting
stock, (ii) 422,023 shares of Class B voting stock, and (iii) 937,403
shares of Class C non-voting stock. This collectively represented 80.2%
of the outstanding common stock and 86.5% of the voting power of OAC as
of that date. Certain officers and/or directors of the Manager held (i)
706,286 shares of the Class B voting stock, representing 16.1% of the
outstanding common stock and 10.9% of the voting power, and (ii) options
acquired without cash payment which, when they become exercisable, allow
the holders to purchase up to 744,282 shares of Class C non-voting stock.
That group includes persons who serve as officers of the Fund and two of
whom (Messrs. Jon S. Fossel and James C. Swain) serve as Trustees of the
Fund. Holders of OAC Class B and Class C common stock may put (sell)
their shares and vested options to OAC or MassMutual at a formula price
(based on earnings of the Manager). MassMutual may exercise call
(purchase) options on all outstanding shares of both such classes of
common stock and vested options at the same formula price, according to
a schedule that will commence on September 30, 1995. Since January 1,
1994, the only transaction by persons who serve as Trustees of the Fund
in excess of 1% of the outstanding shares of common stock or options of
OAC was by Mr. Fossel, who sold 12,662 shares of Class B OAC common stock
to MassMutual for $791,248, for cash payments by OAC or MassMutual to be
made as follows: one-third of the amount due (i) within 30 days of the
transaction, (ii) by the first anniversary following the transaction (with
interest), and (iii) by the second anniversary following the transaction
(with interest).
RECEIPT OF SHAREHOLDER PROPOSALS
The Fund is not required to hold shareholder meetings on a regular basis.
Special meetings of shareholders may be called from time to time by either
the Fund or the shareholders (under special conditions described in the
Fund's Statement of Additional Information). Under the proxy rules of the
Securities and Exchange Commission, shareholder proposals which meet
certain conditions may be included in the Fund's proxy statement and proxy
for a particular meeting. Those rules require that for future meetings
the shareholder must be a record or beneficial owner of Fund shares with
a value of at least $1,000 at the time the proposal is submitted and for
one year prior thereto, and must continue to own such shares through the
date on which the meeting is held. Another requirement relates to the
timely receipt by the Fund of any such proposal. Under those rules, a
proposal submitted for inclusion in the Fund's proxy material for the next
meeting after the meeting to which this proxy statement relates must be
received by the Fund a reasonable time before the solicitation is made.
The fact that the Fund receives a proposal from a qualified shareholder
in a timely manner does not ensure its inclusion in the proxy material,
since there are other requirements under the proxy rules for such
inclusion.
OTHER BUSINESS
Management of the Fund knows of no business other than the matters
specified above that will be presented at the Meeting. Since matters not
known at the time of the solicitation may come before the Meeting, the
proxy as solicited confers discretionary authority with respect to such
matters as properly come before the Meeting, including any adjournment or
adjournments thereof, and it is the intention of the persons named as
attorneys-in-fact in the proxy to vote the proxy in accordance with their
judgment on such matters.
By Order of the Board of Trustees,
George C. Bowen, Secretary
May 25, 1995
Exhibit A
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS B SHARES OF
OPPENHEIMER BOND FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the __th
day of June, 1995, by and between Oppenheimer Integrity Funds (the
"Trust") for the account of its OPPENHEIMER BOND FUND (the "Fund") and
OPPENHEIMER FUNDS DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service
plan for Class B shares of the Fund (the "Shares"), contemplated by Rule
12b-1 (the "Rule") under the Investment Company Act of 1940 (the "1940
Act"), pursuant to which the Fund will compensate the Distributor for its
services in connection with the distribution of Shares, and the personal
service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it
is the issuer, pursuant to the Rule, according to the terms of this Plan.
The Distributor is authorized under the Plan to pay "Recipients," as
hereinafter defined, for rendering (1) distribution assistance in
connection with the sale of Shares and/or (2) administrative support
services with respect to Accounts. Such Recipients are intended to have
certain rights as third-party beneficiaries under this Plan. The terms
and provisions of this Plan shall be interpreted and defined in a manner
consistent with the provisions and definitions contained in (i) the 1940
Act, (ii) the Rule, (iii) Article III, Section 26, of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., or its
successor (the "NASD Rules of Fair Practice") and (iv) any conditions
pertaining either to distribution-related expenses or to a plan of
distribution, to which the Fund is subject under any order on which the
Fund relies, issued at any time by the Securities and Exchange Commission.
2. Definitions. As used in this Plan, the following terms shall have
the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other person
or entity which: (i) has rendered assistance (whether direct,
administrative or both) in the distribution of Shares or has
provided administrative support services with respect to Shares
held by Customers (defined below) of the Recipient; (ii) shall
furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to
answer such questions as may arise concerning the sale of
Shares; and (iii) has been selected by the Distributor to
receive payments under the Plan. Notwithstanding the foregoing,
a majority of the Trust's Board of Trustees (the "Board") who
are not "interested persons" (as defined in the 1940 Act) and
who have no direct or indirect financial interest in the
operation of this Plan or in any agreements relating to this
Plan (the "Independent Trustees") may remove any broker, dealer,
bank or other person or entity as a Recipient, whereupon such
person's or entity's rights as a third-party beneficiary hereof
shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii)
such customers, clients and/or accounts as to which such
Recipient is a fiduciary or custodian or co-fiduciary or co-
custodian (collectively, the "Customers"), but in no event shall
any such Shares be deemed owned by more than one Recipient for
purposes of this Plan. In the event that more than one person
or entity would otherwise qualify as Recipients as to the same
Shares, the Recipient which is the dealer of record on the
Fund's books as determined by the Distributor shall be deemed
the Recipient as to such Shares for purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support
Services.
(a) The Fund will make payments to the Distributor, (i) within
forty-five (45) days of the end of each calendar quarter, in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the
average during the calendar quarter of the aggregate net asset
value of the Shares computed as of the close of each business
day (the "Service Fee"), plus (ii) within ten (10) days of the
end of each month, in the aggregate amount of 0.0625% (0.75% on
an annual basis) of the average during the month of the
aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge") outstanding
for six years or less (the "Maximum Holding Period"). Such
Service Fee payments received from the Fund will compensate the
Distributor and Recipients for providing administrative support
services with respect to Accounts. Such Asset-Based Sales
Charge payments received from the Fund will compensate the
Distributor and Recipients for providing distribution assistance
in connection with the sales of Shares.
The administrative support services in connection with the
Accounts to be rendered by Recipients may include, but shall not
be limited to, the following: answering routine inquiries
concerning the Fund, assisting in the establishment and
maintenance of accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's
investment plans and dividend payment options available, and
providing such other information and services in connection with
the rendering of personal services and/or the maintenance of
Accounts, as the Distributor or the Fund may reasonably request.
The distribution assistance in connection with the sale of
Shares to be rendered by the Distributor and Recipients may
include, but shall not be limited to, the following:
distributing sales literature and prospectuses other than those
furnished to current holders of the Fund's Shares
("Shareholders"), and providing such other information and
services in connection with the distribution of Shares as the
Distributor or the Fund may reasonably request.
It may be presumed that a Recipient has provided distribution
assistance or administrative support services qualifying for
payment under the Plan if it has Qualified Holdings of Shares
to entitle it to payments under the Plan. In the event that
either the Distributor or the Board should have reason to
believe that, notwithstanding the level of Qualified Holdings,
a Recipient may not be rendering appropriate distribution
assistance in connection with the sale of Shares or
administrative support services for Accounts, then the
Distributor, at the request of the Board, shall require the
Recipient to provide a written report or other information to
verify that said Recipient is providing appropriate distribution
assistance and/or services in this regard. If the Distributor
or the Board of Trustees still is not satisfied, either may take
appropriate steps to terminate the Recipient's status as such
under the Plan, whereupon such Recipient's rights as a third-
party beneficiary hereunder shall terminate.
(b) The Distributor shall make service fee payments to any Recipient
quarterly, within forty-five (45) days of the end of each
calendar quarter, at a rate not to exceed 0.0625% (0.25% on an
annual basis) of the average during the calendar quarter of the
aggregate net asset value of Shares, computed as of the close
of each business day, constituting Qualified Holdings owned
beneficially or of record by the Recipient or by its Customers
for a period of more than the minimum period (the "Minimum
Holding Period"), if any, to be set from time to time by a
majority of the Independent Trustees.
Alternatively, the Distributor may, at its sole option, make
service fee payments ("Advance Service Fee Payments") to any
Recipient quarterly, within forty-five (45) days of the end of
each calendar quarter, at a rate not to exceed (i) 0.25% of the
average during the calendar quarter of the aggregate net asset
value of Shares, computed as of the close of business on the day
such Shares are sold, constituting Qualified Holdings sold by
the Recipient during that quarter and owned beneficially or of
record by the Recipient or by its Customers, plus (ii) 0.0625%
(0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares computed as
of the close of each business day, constituting Qualified
Holdings owned beneficially or of record by the Recipient or by
its Customers for a period of more than one (1) year, subject
to reduction or chargeback so that the Advance Service Fee
Payments do not exceed the limits on payments to Recipients that
are, or may be, imposed by Article III, Section 26, of the NASD
Rules of Fair Practice. In the event Shares are redeemed less
than one year after the date such Shares were sold, the
Recipient is obligated and will repay to the Distributor on
demand a pro rata portion of such Advance Service Fee Payments,
based on the ratio of the time such shares were held to one (1)
year.
The Advance Service Fee Payments described in part (i) of this
paragraph (b) may, at the Distributor's sole option, be made
more often than quarterly, and sooner than the end of the
calendar quarter. However, no such payments shall be made to
any Recipient for any such quarter in which its Qualified
Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, to be set
from time to time by a majority of the Independent Trustees.
A majority of the Independent Trustees may at any time or from
time to time decrease and thereafter adjust the rate of fees to
be paid to the Distributor or to any Recipient, but not to
exceed the rate set forth above, and/or direct the Distributor
to increase or decrease the Maximum Holding Period, the Minimum
Holding Period or the Minimum Qualified Holdings. The
Distributor shall notify all Recipients of the Minimum Qualified
Holdings, Maximum Holding Period and Minimum Holding Period, if
any, and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice
within thirty (30) days after any change in these provisions.
Inclusion of such provisions or a change in such provisions in
a revised current prospectus shall constitute sufficient notice.
The Distributor may make Plan payments to any "affiliated
person" (as defined in the 1940 Act) of the Distributor if such
affiliated person qualifies as a Recipient.
(c) The Service Fee and the Asset-Based Sales Charge on Shares are
subject to reduction or elimination of such amounts under the
limits to which the Distributor is, or may become, subject under
Article III, Section 26, of the NASD Rules of Fair Practice.
The distribution assistance and administrative support services
to be rendered by the Distributor in connection with the Shares
may include, but shall not be limited to, the following: (i)
paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and\or paying such persons
Advance Service Fee Payments in advance of, and\or greater than,
the amount provided for in Section 3(b) of this Agreement; (ii)
paying compensation to and expenses of personnel of the
Distributor who support distribution of Shares by Recipients;
(iii) obtaining financing or providing such financing from its
own resources, or from an affiliate, for interest and other
borrowing costs of the Distributor's unreimbursed expenses
incurred in rendering distribution assistance and administration
support services to the Fund; (iv) paying other direct
distribution costs, including without limitation the costs of
sales literature, advertising and prospectuses (other than those
furnished to current Shareholders) and state "blue sky"
registration expenses; and (v) providing any service rendered
by the Distributor that a Recipient may render pursuant to part
(a) of this Section 3. Such services include distribution
assistance and administrative support services rendered in
connection with Shares acquired (i) by purchase, (ii) in
exchange for shares of another investment company for which the
Distributor serves as distributor or sub-distributor, or (iii)
pursuant to a plan of reorganization to which the Fund is a
party. In the event that the Board should have reason to
believe that the Distributor may not be rendering appropriate
distribution assistance or administrative support services in
connection with the sale of Shares, then the Distributor, at the
request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is
providing appropriate services in this regard.
(d) Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own
resources (which may include profits derived from the advisory
fee it receives from the Fund), or (ii) by the Distributor (a
subsidiary of OMC), from its own resources, from Asset-Based
Sales Charge payments or from its borrowings.
(e) Notwithstanding any other provision of this Plan, this Plan
does not obligate or in any way make the Fund liable to make any
payment whatsoever to any person or entity other than directly
to the Distributor. In no event shall the amounts to be paid
to the Distributor exceed the rate of fees to be paid by the
Fund to the Distributor set forth in paragraph (a) of this
Section 3.
4. Selection and Nomination of Trustees. While this Plan is in effect,
the selection and nomination of those persons to be Trustees of the Trust
who are not "interested persons" of the Fund or the Trust ("Disinterested
Trustees") shall be committed to the discretion of such Disinterested
Trustees. Nothing herein shall prevent the Disinterested Trustees from
soliciting the views or the involvement of others in such selection or
nomination if the final decision on any such selection and nomination is
approved by a majority of the incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Trust
shall provide written reports to the Trust's Board for its review,
detailing services rendered in connection with the distribution of the
Shares, the amount of all payments made and the purpose for which the
payments were made. The reports shall be provided quarterly, and shall
state whether all provisions of Section 3 of this Plan have been complied
with.
6. Related Agreements. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at
any time, without payment of any penalty, by a vote of a majority of the
Independent Trustees or by a vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class, on not more than sixty days written notice to any other party
to the agreement; (ii) such agreement shall automatically terminate in the
event of its assignment (as defined in the 1940 Act); (iii) it shall go
into effect when approved by a vote of the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on
such agreement; and (iv) it shall, unless terminated as herein provided,
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by a vote of the Board and its
Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved by a vote of the Board and its Independent Trustees cast
in person at a meeting called on April 18, 1995, for the purpose of voting
on this Plan, and shall take effect after approval by the Class B
shareholders of the Fund, at which time it shall replace the Fund's
Distribution and Service Plan dated February 23, 1994. Unless terminated
as hereinafter provided, it shall continue in effect from year to year
thereafter or as the Board may otherwise determine only so long as such
continuance is specifically approved at least annually by a vote of the
Board and its Independent Trustees cast in person at a meeting called for
the purpose of voting on such continuance. This Plan may not be amended
to increase materially the amount of payments to be made without approval
of the Class B Shareholders, in the manner described above, and all
material amendments must be approved by a vote of the Board and of the
Independent Trustees. This Plan may be terminated at any time by vote of
a majority of the Independent Trustees or by the vote of the holders of
a "majority" (as defined in the 1940 Act) of the Fund's outstanding voting
securities of the Class. In the event of such termination, the Board and
its Independent Trustees shall determine whether the Distributor shall be
entitled to payment from the Fund of all or a portion of the Service Fee
and/or the Asset-Based Sales Charge in respect of Shares sold prior to the
effective date of such termination.
8. Disclaimer of Shareholder Liability. The Distributor understands
that the obligations of the Trust and Fund under this Plan are not binding
upon any Trustee or shareholder of the Fund personally, but bind only the
Fund and the Fund's property. The Distributor represents that it has
notice of the provisions of the Declaration of Trust of the Trust
disclaiming shareholder and Trustee liability for acts or obligations of
the Trust and the Fund.
OPPENHEIMER INTEGRITY FUNDS
for the account of its
OPPENHEIMER BOND FUND
By:____________________________________
Robert G. Zack, Assistant Secretary
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By:___________________________________
Katherine P. Feld
Vice President & Secretary
Oppenheimer Integrity Funds Proxy for Shareholders Meeting To
Oppenheimer Investment Grade Be Held June 28, 1995
Bond Fund - Class A Shares
Your shareholder Your prompt response can save your
vote is important! 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.
Oppenheimer Investment Grade Bond Fund - Class A Shares
Proxy For Shareholders Meeting To Be Held June 28, 1995
The undersigned shareholder of Oppenheimer Investment Grade Bond Fund
(the "Fund"), does hereby appoint Robert Bishop, George C. Bowen, Rendle
Myer and Scott Farrar, and each of them, as attorneys-in-fact and proxies
of the undersigned, with full power of substitution, to attend the Meeting
of Shareholders of Oppenheimer Integrity Funds and of the Fund to be held
June 28, 1995, at 3410 South Galena Street, Denver, Colorado 80231 at
10:00 A.M., Denver time and at all adjournments thereof, and to vote the
shares held in the name of the undersigned on the record date for said
meeting for the election of Trustees and on the proposals specified on the
reverse side. Said attorneys-in-fact shall vote in accordance with their
best judgment as to any other matter.
Proxy solicited on behalf of the Board Of Trustees, which recommends a
vote FOR the election of all nominees for Trustee and FOR each Proposal
on the reverse side. The shares represented hereby will be voted as
indicated on the reverse side or FOR if no choice is indicated.
(over)
285
Oppenheimer Integrity Funds Proxy for Shareholders Meeting To
Oppenheimer Investment Grade Be Held June 28, 1995
Bond Fund - Class A Shares
Your shareholder Your prompt response can save your
vote is important! 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. Election of Trustees
____ For all nominees listed _____ Withhold authority
except as marked to the vote for all nominees
contrary at left. listed at left.
R. Avis W. Baker C. Conrad J. Fossel
(A) (B) (C) (D)
R. Kalinowski C. Kast R. Kirchner N. Steel
(E) (F) (G) (H)
C. Swain
(I)
Instruction: To withhold authority to vote for any individual nominee,
line out that nominee's name at left.
2. Ratification of selection of Deloitte & Touche LLP as independent
auditors (Proposal No. 1)
For ____ Against ____ Abstain ____
3. Approval of the proposed changes in fundamental investment policies
(Proposal No. 2)
For ____ Against ____ Abstain ____
4. Approval of new advisory agreement with Oppenheimer Management
Corporation (Proposal No. 3)
For ____ Against ____ Abstain ____
NOTE: Please sign exactly as your name(s) appear hereon. When signing
as custodian, attorney, executor, administrator, trustee, etc., please
give your full title as such. All joint owners should sign this proxy.
If the account is registered in the name of a corporation, partnership or
other entity, a duly authorized individual must sign on its behalf and
give title.
Dated: _______________________, 1995
(Month) (Day)
____________________________
Signature(s)
____________________________
Signature(s)
Please read both sides of this ballot.
285
Oppenheimer Integrity Funds Proxy for Shareholders Meeting To
Oppenheimer Investment Grade Be Held June 28, 1995
Bond Fund - Class B Shares
Your shareholder Your prompt response can save your
vote is important! 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.
Oppenheimer Investment Grade Bond Fund - Class B Shares
Proxy For Shareholders Meeting To Be Held June 28, 1995
The undersigned shareholder of Oppenheimer Investment Grade Bond Fund
(the "Fund"), does hereby appoint Robert Bishop, George C. Bowen, Rendle
Myer and Scott Farrar, and each of them, as attorneys-in-fact and proxies
of the undersigned, with full power of substitution, to attend the Meeting
of Shareholders of Oppenheimer Integrity Funds and the Fund to be held
June 14, 1995, at 3410 South Galena Street, Denver, Colorado 80231 at
10:00 A.M., Denver time and at all adjournments thereof, and to vote the
shares held in the name of the undersigned on the record date for said
meeting for the election of Trustees and on the proposals specified on the
reverse side. Said attorneys-in-fact shall vote in accordance with their
best judgment as to any other matter.
Proxy solicited on behalf of the Board Of Trustees, which recommends a
vote FOR the election of all nominees for Trustee and FOR each Proposal
on the reverse side. The shares represented hereby will be voted as
indicated on the reverse side or FOR if no choice is indicated.
(over)
286
Oppenheimer Integrity Funds Proxy for Shareholders Meeting To
Oppenheimer Investment Grade Be Held June 28, 1995
Bond Fund - Class B Shares
Your shareholder Your prompt response can save your
vote is important! 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. Election of Trustees
____ For all nominees listed _____ Withhold authority
except as marked to the vote for all nominees
contrary at left. listed at left.
R. Avis W. Baker C. Conrad J. Fossel
(A) (B) (C) (D)
R. Kalinowski C. Kast R. Kirchner N. Steel
(E) (F) (G) (H)
C. Swain
(I)
Instruction: To withhold authority to vote for any individual nominee,
line out that nominee's name at left.
2. Ratification of selection of Deloitte & Touche LLP as independent
auditors (Proposal No. 1)
For ____ Against ____ Abstain ____
3. Approval of the proposed changes in fundamental investment policies
(Proposal No. 2)
For ____ Against ____ Abstain ____
4. Approval of new advisory agreement with Oppenheimer Management
Corporation (Proposal No. 3)
For ____ Against ____ Abstain ____
5. Approval of the proposed Class B 12b-1 Distribution and Service Plan
(Proposal No. 4)
For ____ Against ____ Abstain ____
NOTE: Please sign exactly as your name(s) appear hereon. When signing
as custodian, attorney, executor, administrator, trustee, etc., please
give your full title as such. All joint owners should sign this proxy.
If the account is registered in the name of a corporation, partnership or
other entity, a duly authorized individual must sign on its behalf and
give title.
Dated: _______________________, 1995
(Month) (Day)
____________________________
Signature(s)
____________________________
Signature(s)
Please read both sides of this ballot.
286
May 1995
Dear Oppenheimer Investment Grade Bond Fund Class A shareholder:
We have scheduled a shareholder meeting on June 28, 1995 for you to
decide upon some important proposals for the Fund. Your ballot card and
a detailed statement of the issues are enclosed with this letter.
Your vote is very important because these decisions will affect your
investment, and it's your chance to help shape the policies of the Fund.
So we urge you to consider these issues carefully and to make your vote
count.
How do you vote?
To vote, simply complete the ballot by marking your choices and
return it in the postage-paid envelope provided. Remember, it can be
expensive for the Fund -- and ultimately for you as a shareholder -- to
remail ballots if not enough responses are received to conduct the
meeting.
What are the issues?
After consideration, the Board of Trustees, who represent your
interests in the day-to-day management of the Fund, recommend approval of
the following items:
- - Election of Trustees. There are nine Trustees up for reelection on
June 14. You will find detailed information on the members of the
Board in the enclosed proxy statement.
- - Ratification of Auditors. Each year, outside auditors are employed
to review the Fund's financial statements, as explained in the proxy
statement.
- - Change in Certain Fundamental Investment Policies. The fundamental
investment policies described in the prospectus determine the types
of securities that may be purchased by the Fund.
In the wake of last year's turbulent marketplace, the Fund's
investment adviser requests your approval to amend some of these
investment limitations to allow the portfolio manager more
flexibility to diversify the Fund's holdings. Specifically, the
investment adviser recommends that the Fund have the capacity to
invest at least 35% of its total assets in lower-grade debt
securities. Currently, the Fund may invest only in investment grade
debt securities, U.S. government and agency securities, and money
market instruments. A portfolio made up primarily of investment
grade securities generally more sensitive to changes in interest
rates than a portfolio of securities with varying credit quality.
The investment adviser firmly believes the ability to diversify the
Fund's assets in securities of various credit qualities may help
protect your investment against volatility, as well as potentially
add to your investment return over time.
New Investment Advisory Agreement with Oppenheimer Management
Corporation. Oppenheimer Management Corporation, your fund's
adviser, requests your approval of a new investment advisory
agreement. The new agreement would compensate your fund's adviser
at the same, higher rate paid by the other general bond funds within
the OppenheimerFunds family.
Please contact your financial advisor or call at 1-800-525-7048 if
you have any questions.
As always, we appreciate your confidence in OppenheimerFunds and
thank you for allowing us to manage a portion of your investment assets.
Sincerely,
Jon S. Fossel
May 1995
Dear Oppenheimer Investment Grade Bond Fund Class B shareholder:
We have scheduled a shareholder meeting on June 28, 1995 for you to
decide upon some important proposals for the Fund. Your ballot card and
a detailed statement of the issues are enclosed with this letter.
Your vote is very important because these decisions will affect your
investment, and it's your chance to help shape the policies of the Fund.
So we urge you to consider these issues carefully and to make your vote
count.
How do you vote?
To vote, simply complete the ballot by marking your choices and
return it in the postage-paid envelope provided. Remember, it can be
expensive for the Fund -- and ultimately for you as a shareholder -- to
remail ballots if not enough responses are received to conduct the
meeting.
What are the issues?
After consideration, the Board of Trustees, who represent your
interests in the day-to-day management of the Fund, recommend approval of
the following items:
- - Election of Trustees. There are nine Trustees up for reelection on
June 14. You will find detailed information on the members of the
Board in the enclosed proxy statement.
- - Ratification of Auditors. Each year, outside auditors are employed
to review the Fund's financial statements, as explained in the proxy
statement.
- - Change in Certain Fundamental Investment Policies. The fundamental
investment policies described in the prospectus determine the types
of securities that may be purchased by the Fund.
In the wake of last year's turbulent marketplace, the Fund's
investment adviser requests your approval to amend some of these
investment limitations to allow the portfolio manager more
flexibility to diversify the Fund's holdings. Specifically, the
investment adviser recommends that the Fund have the capacity to
invest at least 35% of its total assets in lower-grade debt
securities. Currently, the Fund may invest only in investment grade
debt securities, U.S. government and agency securities, and money
market instruments. A portfolio made up primarily of investment
grade securities generally more sensitive to changes in interest
rates than a portfolio of securities with varying credit quality.
The investment adviser firmly believes the ability to diversify the
Fund's assets in securities of various credit qualities may help
protect your investment against volatility, as well as potentially
add to your investment return over time.
New Investment Advisory Agreement with Oppenheimer Management
Corporation. Oppenheimer Management Corporation, your fund's
adviser, requests your approval of a new investment advisory
agreement. The new agreement would compensate your fund's adviser
at the same, higher rate paid by the other general bond funds within
the OppenheimerFunds family.
- - Changes in Distribution Plan Contracts for Class B Shares.
Currently, the Fund's distributor is reimbursed for a portion of its
distribution expenses from the service fee and the asset-based sales
charge. Your approval is requested to change the way the distributor
is paid so that it is compensated for its distribution efforts at the
same rate. This is a common type of plan in the mutual fund industry
and is not expected to increase fund expenses materially under normal
circumstances. Any distribution costs in excess of that rate will
be the responsibility of the distributor.
Please contact your financial advisor or call at 1-800-525-7048 if
you have any questions.
As always, we appreciate your confidence in OppenheimerFunds and
thank you for allowing us to manage a portion of your investment assets.
Sincerely,
Jon S. Fossel