0000701265-95-000023.txt : 19950824 0000701265-95-000023.hdr.sgml : 19950824 ACCESSION NUMBER: 0000701265-95-000023 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19950823 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER INTEGRITY FUNDS CENTRAL INDEX KEY: 0000701265 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 042912220 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 002-76547 FILM NUMBER: 95566155 BUSINESS ADDRESS: STREET 1: 3410 S GALENA CITY: DENVER STATE: CO ZIP: 80231 BUSINESS PHONE: 3036713200 MAIL ADDRESS: STREET 2: 3410 SOUTH GALENA STREET 3RD FL CITY: DENVER STATE: CO ZIP: 80231 FORMER COMPANY: FORMER CONFORMED NAME: MASSMUTUAL INTEGRITY FUNDS DATE OF NAME CHANGE: 19910329 FORMER COMPANY: FORMER CONFORMED NAME: MASSMUTUAL LIQUID ASSETS TRUST DATE OF NAME CHANGE: 19880403 497 1 OPP INTEGRITY FUNDS OPPENHEIMER STRATEGIC INVESTMENT GRADE BOND FUND 3410 South Galena Street, Denver, Colorado 80231 1-800-525-7048 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD SEPTEMBER 20, 1995 To the Shareholders of Oppenheimer Strategic Investment Grade Bond Fund: Notice is hereby given that a Special Meeting of the Shareholders of Oppenheimer Strategic Investment Grade Bond Fund ("Strategic Investment Grade Bond Fund"), a registered management investment company, will be held at 3410 South Galena Street, Denver, Colorado 80231, at 10:00 A.M., Denver time, on September 20, 1995, or any adjournments thereof (the "Meeting"), for the following purposes: 1. To approve or disapprove an Agreement and Plan of Reorganization between Strategic Investment Grade Bond Fund and Oppenheimer Bond Fund ("Bond Fund"), and the transactions contemplated thereby, including the transfer of substantially all the assets of Strategic Investment Grade Bond Fund in exchange for Class A and Class B shares of Bond Fund, the distribution of such shares to the Class A and Class B shareholders of Strategic Investment Grade Bond Fund in complete liquidation of Strategic Investment Grade Bond Fund, the de-registration of Strategic Investment Grade Bond Fund as an investment company under the Investment Company Act of 1940, as amended, and the cancellation of the outstanding shares of Strategic Investment Grade Bond Fund (the "Proposal"). 2. To act upon such other matters as may properly come before the Meeting. Shareholders of record at the close of business on July 14, 1995 are entitled to notice of, and to vote at, the Meeting. The Proposal is more fully discussed in the Proxy Statement and Prospectus. Please read it carefully before telling us, through your proxy or in person, how you wish your shares to be voted. Strategic Investment Grade Bond Fund's Board of Trustees recommends a vote in favor of the Proposal. WE URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY. By Order of the Board of Trustees, George C. Bowen, Secretary August 21, 1995 _______________________________________________________________________ Shareholders who do not expect to attend the Meeting are requested to indicate voting instructions on the enclosed proxy and to date, sign and return it in the accompanying postage-paid envelope. To avoid unnecessary duplicate mailings, we ask your cooperation in promptly mailing your proxy no matter how large or small your holdings may be. 285 OPPENHEIMER BOND FUND 3410 South Galena Street, Denver, Colorado 80231 1-800-525-7048 PROXY STATEMENT AND PROSPECTUS This Proxy Statement of Strategic Investment Grade Bond Fund relating to the Reorganization Agreement and the transactions contemplated thereby (the "Reorganization") also constitutes a Prospectus of Bond Fund included in a Registration Statement on Form N-14 filed by Bond Fund with the securities and Exchange Commission (the "SEC"). Such Registration Statement relates to the registration of shares of Bond Fund to be offered to the shareholders of Strategic Investment Grade Bond Fund pursuant to the Reorganization Agreement. Strategic Investment Grade Bond Fund is located at 3410 South Galena Street, Denver, Colorado 80231 (telephone 1- 800-525-7048). This Proxy Statement and Prospectus sets forth concisely information about Bond Fund that shareholders of Strategic Investment Grade Bond Fund should know before voting on the Reorganization. A copy of the Prospectus for Bond Fund, dated July 10, 1995, supplemented July 14, 1995 is enclosed, and is incorporated herein by reference. The following documents have been filed with the SEC and are available without charge upon written request to Oppenheimer Shareholder Services ("OSS"), the transfer and shareholder servicing agent for Bond Fund and Strategic Investment Grade Bond Fund, at P.O. Box 5270, Denver, Colorado 80217, or by calling the toll-free number shown above: (i) a Prospectus for Strategic Investment Grade Bond Fund, dated February 1, 1995, supplemented July 14, 1995; (ii) a Statement of Additional Information about Strategic Investment Grade Bond Fund, dated February 1, 1995, supplemented July 14, 1995; and (iii) a Statement of Additional Information about Bond Fund, dated July 10, 1995 (the "Bond Fund Additional Statement"). The Bond Fund Additional Statement, which is incorporated herein by reference, contains more detailed information about Bond Fund and its management. A Statement of Additional Information relating to the Reorganization, dated August 21, 1995, has been filed with the SEC as part of the Bond Fund Registration Statement on Form N-14 and is incorporated herein by reference, and is available by written request to OSS at the same address immediately above or by calling the toll-free number shown above. Investors are advised to read and retain this Proxy Statement and Prospectus for future reference. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. This Proxy Statement and Prospectus is dated August 21, 1995. TABLE OF CONTENTS PROXY STATEMENT AND PROSPECTUS Page Introduction 1 General 1 Record Date; Vote Required; Share Information 1 Proxies 2 Costs of the Solicitation and the Reorganization 3 Comparative Fee Table 3 Synopsis 6 Parties to the Reorganization 7 Shares to be Issued 7 The Reorganization 7 Reasons for the Reorganization 8 Tax Consequences of the Reorganization 9 Investment Objectives and Policies 9 Investment Advisory and Distribution and Service Plan Fees 10 Purchases, Exchanges and Redemptions 10 Principal Risk Factors 11 Approval of the Reorganization (The Proposal) 14 Reasons for the Reorganization 14 The Reorganization 16 Tax Aspects of the Reorganization 17 Capitalization Table (Unaudited) 16 Comparison Between Strategic Investment Grade Bond Fund and Bond Fund Investment Objectives and Policies 19 Permitted Investments by Strategic Investment Grade Bond Fund and Bond Fund 22 Investment Restrictions 29 Portfolio Turnover 30 Description of Brokerage Practices 30 Expense Ratios and Performance 31 Shareholder Services 32 Rights of Shareholders 33 Management and Distribution Arrangements 34 Purchase of Additional Shares 36 Method of Carrying Out the Reorganization 37 Miscellaneous 39 Additional Information 39 Financial Information 39 Public Information 39 Other Business 40 Annex A - Agreement and Plan of Reorganization by and between Oppenheimer Strategic Investment Grade Bond Fund and Oppenheimer Bond Fund A-1 OPPENHEIMER STRATEGIC INVESTMENT GRADE BOND FUND 3410 South Galena Street, Denver, Colorado 80231 1-800-525-7048 PROXY STATEMENT AND PROSPECTUS Special Meeting of Shareholders to be held September 20, 1995 INTRODUCTION General This Proxy Statement and Prospectus is being furnished to the shareholders of Oppenheimer Strategic Investment Grade Bond Fund ("Strategic Investment Grade Bond Fund"), a registered management investment company, in connection with the solicitation by the Board of Trustees (the "Board") of proxies to be used at the Special Meeting of Shareholders of Strategic Investment Grade Bond Fund to be held at 3410 South Galena Street, Denver, Colorado 80231, at 10:00 A.M., Denver time, on September 20, 1995, or any adjournments thereof (the "Meeting"). It is expected that the mailing of this Proxy Statement and Prospectus will commence on or about August 25, 1995. At the Meeting, shareholders of Strategic Investment Grade Bond Fund will be asked to approve an Agreement and Plan of Reorganization (the "Reorganization Agreement") between Strategic Investment Grade Bond Fund and Oppenheimer Bond Fund ("Bond Fund"), and the transactions contemplated thereby (the "Reorganization"), including the transfer of substantially all the assets of Strategic Investment Grade Bond Fund in exchange for Class A and Class B shares of Bond Fund, the distribution of such shares to the shareholders of Strategic Investment Grade Bond Fund in complete liquidation of Strategic Investment Grade Bond Fund, the de-registration of Strategic Investment Grade Bond Fund as an investment company, under the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the cancellation of the outstanding shares of Strategic Investment Grade Bond Fund. Bond Fund currently offers Class A shares with a sales charge imposed at the time of purchase and Class B and Class C shares without an initial sales charge. There is no initial sales charge on purchases of Class B or Class C shares; however a contingent deferred sales charge may be imposed, depending on when the shares are sold. The Class A and Class B shares issued pursuant to the Reorganization will be issued at net asset value without a sales charge and without the imposition of the contingent deferred sales charge. Additional information with respect to these changes by Bond Fund is set forth herein, in the Prospectus of Bond Fund accompanying this Proxy Statement and Prospectus and in the Bond Fund Additional Statement which is incorporated herein by reference. Record Date; Vote Required; Share Information The Board has fixed the close of business on July 14, 1995 as the record date (the "Record Date") for the determination of shareholders entitled to notice of, and to vote at, the Meeting. An affirmative vote of the holders of a majority of the outstanding voting securities of all of the Class A and Class B shares in the aggregate of Strategic Investment Grade Bond Fund is required to approve the Reorganization. That level of vote is defined in the Investment Company Act of 1940 as the vote of the holders of the lesser of: (i) 67% or more of the voting securities present or represented by proxy at the shareholders meeting, if the holders of more than 50% of the outstanding voting securities are present or represented by proxy, or (ii) more than 50% of the outstanding voting securities. Each shareholder will be entitled to one vote for each share and a fractional vote for each fractional share held of record at the close of business on the Record Date. Only shareholders of Strategic Investment Grade Bond Fund will vote on the Reorganization. The vote of shareholders of Bond Fund is not being solicited. At the close of business on the Record Date, there were approximately 8,007,873.184 shares of Strategic Investment Grade Bond Fund issued and outstanding, consisting of 4,746,684.138 shares of Class A shares and 3,261,189.046 Class B shares. At the close of business on the Record Date, there were 11,686,850.128 shares of Bond Fund issued and outstanding, consisting of 10,976,686.128 of Class A shares and 710,164.480 Class B shares. The presence in person or by proxy of the holders of a majority of the shares constitutes a quorum for the transaction of business at the Meeting. To the knowledge of Strategic Investment Grade Bond Fund, as of the Record Date, no person owned of record or beneficially owned 5% or more of its outstanding shares. As of the Record Date, to the knowledge of Bond Fund, no person owned of record or beneficially owned 5% or more of its outstanding shares except for MML Reinsurance (Bermuda) Ltd., c/o Investment Services, 1295 State Street, Springfield, MA 0111-0001, which owned of record 789,794.139 Class A shares of Bond Fund as of such date (7.20% of the outstanding Class A shares of Bond Fund which represented 6.75% of the outstanding shares of Bond Fund) and Smith Barney, Inc., 388 Greenwich Street, New York, NY 10013, which of record owned 102,753.693 shares of Class B shares of Bond Fund (14.47% of the outstanding Class B shares of Bond Fund as of such date which represented less than 5% of the outstanding shares of Bond Fund). In addition, as of the record date, the Trustees and officers of Strategic Investment Grade Bond Fund and Bond Fund owned less than 1% of the outstanding shares of either Strategic Investment Grade Bond Fund or Bond Fund, respectively. Proxies The enclosed form of proxy, if properly executed and returned, will be voted (or counted as an abstention or withheld from voting) in accordance with the choices specified thereon, and will be included in determining whether there is quorum to conduct the Meeting. The proxy will be voted in favor of the Proposal unless a choice is indicated to vote against or to abstain from voting on the Proposal. Shares owned of record by broker-dealers for the benefit of their customers ("street account shares") will be voted by the broker-dealer based on instructions received from its customers. If no instructions are received, the broker-dealer may (if permitted under applicable stock exchange rules), as record holder, vote such shares on the Proposal in the same proportion as that broker-dealer votes street account shares for which voting instructions were received in time to be voted. If a shareholder executes and returns a proxy but fails to indicate how the votes should be cast, the proxy will be voted in favor of the Proposal. The proxy may be revoked at any time prior to the voting thereof by: (i) writing to the Secretary of Strategic Investment Grade Bond Fund at 3410 South Galena Street, Denver, Colorado 80231; (ii) attending the Meeting and voting in person; or (iii) signing and returning a new proxy (if returned and received in time to be voted). Costs of the Solicitation and the Reorganization All expenses of this solicitation, including the cost of printing and mailing this Proxy Statement and Prospectus, will be borne by Strategic Investment Grade Bond Fund. Any documents such as existing prospectuses or annual reports that are included in that mailing will be a cost of the fund issuing the document. In addition to the solicitation of proxies by mail, proxies may be solicited by officers of Strategic Investment Grade Bond Fund or officers and employees of OSS, personally or by telephone or telegraph; any expenses so incurred will be borne by OSS. Proxies may also be solicited by a proxy solicitation firm hired at Strategic Investment Grade Bond Fund's expense for such purpose. Brokerage houses, banks and other fiduciaries may be requested to forward soliciting material to the beneficial owners of shares of Strategic Investment Grade Bond Fund and to obtain authorization for the execution of proxies. For those services, if any, they will be reimbursed by Strategic Investment Grade Bond Fund for their reasonable out-of-pocket expenses. With respect to the Reorganization, Strategic Investment Grade Bond Fund and Bond Fund will bear the cost of their respective tax opinions. Any other out-of-pocket expenses of Strategic Investment Grade Bond Fund and Bond Fund associated with the Reorganization, including legal, accounting and transfer agent expenses, will be borne by Strategic Investment Grade Bond Fund and Bond Fund, respectively, in the amounts so incurred by each. COMPARATIVE FEE TABLE Strategic Investment Grade Bond Fund and Bond Fund each pay a variety of expenses for management of their assets, administration, distribution of their shares and other services, and those expenses are reflected in each fund's net asset value per share. Shareholders pay other expenses directly, such as sales charges. The following table is provided to help you compare the direct expenses of investing in each class of Strategic Investment Grade Bond Fund with the direct expenses of investing in each class of Bond Fund and the pro forma expenses of the surviving fund after giving effect to the reorganization.
Strategic Investment Grade Bond Fund Bond Fund Class A Class B Class A Class B Class C Shares Shares Shares Shares Shares Shareholder Transaction Expenses Maximum Sales Charge on 4.75% None 4.75% None None Purchases (as a % of offering price) Sales Charge on None None None None None Reinvested Dividends Deferred Sales None(1) 5% in the None(1) 5% in the 1% if Charge (as a % first year, first year, shares are of the lower declining declining redeemed of the original to 1% in the to 1% in the within 12 purchase price sixth year and sixth year and months of or redemption eliminated eliminated purchase proceeds) thereafter thereafter Exchange Fee None None None None None Pro Forma Surviving Bond Fund Class A Class B Class C Shares Shares Shares Shareholder Transaction Expenses Maximum Sales Charge on 4.75% None None Purchases (as a % of offering price) Sales Charge on None None None Reinvested Dividends Deferred Sales Charge None(1) 5% in the 1% if (as a % of the lower first year, shares are of the original declining redeemed purchase price to 1% in the within 12 or redemption sixth year and months of proceeds eliminated purchase thereafter Exchange Fee None None None
(1) If you invest more than $1 million in Class A shares, you may have to pay a sales charge of up to 1% if you sell your shares within 18 calendar months from the end of the calendar month during which you purchased those shares. The following tables are projections of the operating expenses of Class A and Class B shares of Strategic Investment Grade Bond Fund and the operating expenses of Class A and Class B shares of Bond Fund based on expenses for the six month period (annualized) ended March 31, 1995 (unaudited). Class C shares of Bond Fund were not publicly offered during the six month period ended March 31, 1995 and therefore these amounts are estimates based on Class B shares. Class C shares will not be issued as part of the Reorganization and the information with respect to these shares is for informational purposes only. The pro forma information is an estimate of the business expenses of the surviving Bond Fund after giving effect to the reorganization. The management fees with respect to the pro forma information have been restated to reflect Bond Fund's new investment advisory agreement dated July 10, 1995 with Oppenheimer Management Corporation. The restated management fee rate is as if the new investment advisory agreement had been in effect during the six month period ended March 31, 1995. Although the management fee rates were increased, they are now identical to the management fee rates of Strategic Investment Grade Bond Fund. All amounts shown are a percentage of net assets of each class of each of the funds.
Strategic Investment Grade Bond Fund Bond Fund Pro Forma Surviving Bond Fund Class A Class B Class A Class B Class C Class A Class B Class C Management Fees .75% .75% .50% .50% .50% .75% .75% .75% 12b-1 Distribution and Service Plan Fees .24% 1.00% .24% 1.00% 1.00% .24% 1.00% 1.00% Other Expenses .44% .43% .30% .30% .30% .28% .28% .28% Total Fund Operating Expenses 1.43% 2.18% 1.04% 1.80% 1.80% 1.27% 2.03% 2.03%
The 12b-1 fees for Class A shares of Strategic Investment Grade Bond Fund and Bond Fund are service plan fees. The service plan fees are a maximum of 0.25% of average annual net assets of Class A shares of each fund. The 12b-1 fees for Class B shares of each of the funds and the Class C shares of Bond Fund are Distribution and Service Plan fees which include a service fee of 0.25% and an asset-based sales charge of 0.75%. Examples To try and show the effect of the expenses on an investment over time, the hypotheticals shown below have been created. Assume that you make a $1,000 investment in Class A and Class B shares of Strategic Investment Grade Bond Fund, or Class A or Class B shares of Bond Fund, or Class A or Class B of the pro forma surviving Bond Fund (Class C shares are shown for information purposes only since such shares are not a part of the Reorganization and will not be issued to shareholders of Strategic Investment Grade Bond Fund) and that the annual return is 5% and that the operating expenses for each fund are the ones shown in the chart above. If you were to redeem your shares at the end of each period shown below, your investment would incur the following expenses by the end of each period shown.
1 year 3 years 5 years 10 years Oppenheimer Strategic Investment Grade Bond Fund Class A Shares $61 $91 $122 $211 Class B Shares $72 $98 $137 $215* Oppenheimer Bond Fund Class A Shares $58 $79 $102 $169 Class B Shares $68 $87 $117 $173* Class C Shares $28 $57 $97 $212* Pro Forma Surviving Oppenheimer Bond Fund Class A Shares $60 $86 $114 $194 Class B Shares $71 $94 $129 $198* Class C Shares $31 $64 $109 $236* If you did not redeem your investment, it would incur the following expenses: 1 year 3 years 5 years 10 years Oppenheimer Strategic Investment Grade Bond Fund Class A Shares $61 $91 $122 $211 Class B Shares $22 $68 $117 $215* Oppenheimer Bond Fund Class A Shares $58 $79 $102 $169 Class B Shares $18 $57 $97 $173* Class C Shares $18 $57 $97 $212* Pro Forma Surviving Oppenheimer Bond Fund Class A Shares $60 $86 $114 $194 Class B Shares $21 $64 $109 $198* Class C Shares $21 $64 $109 $236* ______________________ * The Class B expenses in years 7 through 10 are based on the Class A expenses shown above, because each of the funds automatically converts your Class B shares into Class A shares after 6 years. Long term Class B and C shareholders could pay the economic equivalent of more than the maximum front-end sales charge allowed under applicable regulations, because of the effect of the asset-based sales charge and contingent deferred sales charge. The automatic conversion of Class B shares to Class A Shares is designed to minimize the likelihood that this will occur.
The examples show the effect of expenses on an investment, but are not meant to state or predict actual or expected costs or investment returns of the Fund, all of which will vary. SYNOPSIS The following is a synopsis of certain information contained in or incorporated by reference in this Proxy Statement and Prospectus and presents key considerations for shareholders of Strategic Investment Grade Bond Fund to assist them in determining whether to approve the Reorganization. This synopsis is only a summary and is qualified in its entirety by the more detailed information contained in or incorporated by reference in this Proxy Statement and Prospectus and by the Reorganization Agreement, a copy of which is attached as an Annex hereto. Shareholders should carefully review this Proxy Statement and Prospectus and the Reorganization Agreement in their entirety and, in particular, the current Prospectus of Bond Fund which accompanies this Proxy Statement and Prospectus and is incorporated herein by reference. Parties to the Reorganization Strategic Investment Grade Bond Fund is a diversified, open-end management investment company organized in 1991 as a Massachusetts business trust. Oppenheimer Integrity Funds (the "Trust") is an investment company organized in 1982 as a multi-series Massachusetts business trust, and Bond Fund is a series of that Trust. Strategic Investment Grade Bond Fund and Bond Fund are each located at 3410 South Galena Street, Denver, Colorado 80231. The members of the Board of Trustees (the "Board") of Strategic Investment Grade Bond Fund and of the Board of Trustees of the Trust are the same. Oppenheimer Management Corporation (the "Manager") whose address is Two World Trade Center, New York, New York 10048-0203, acts as investment adviser to Strategic Investment Grade Bond Fund and Bond Fund (collectively referred to herein as the "funds"). Additional information about the parties is set forth below. Shares to be Issued. All shareholders of Strategic Investment Grade Bond Fund who own Class A shares will receive Class A shares of Bond Fund in exchange for their Class A shares of Strategic Investment Grade Bond Fund. Shareholders of Strategic Investment Grade Bond Fund who own Class B shares will receive Class B shares of Bond Fund in exchange for their Class B shares of Strategic Investment Grade Bond Fund. All classes of shares vote together in the aggregate as to certain matters; however shares of a particular class vote together on matters that affect that class alone. The Class A and Class B shares of Strategic Investment Grade Bond Fund, and the Class A and Class B shares of Bond Fund to be issued in the reorganization are substantially similar. The Reorganization The Reorganization Agreement provides for the transfer of substantially all the assets of Strategic Investment Grade Bond Fund to Bond Fund in exchange for Class A and Class B shares of Bond Fund. Presently Strategic Investment Grade Bond Fund has two classes of shares which are Class A and Class B shares. The net asset value of Bond Fund Class A and Class B shares issued in the exchange will equal the value of the assets of Strategic Investment Grade Bond Fund received by Bond Fund. Following the Closing of the Reorganization, presently scheduled for September 22, 1995, Strategic Investment Grade Bond Fund will distribute the Class A and Class B shares of Bond Fund received by Strategic Investment Grade Bond Fund on the Closing Date to holders of Class A and Class B shares of Strategic Investment Grade Bond Fund, respectively. As a result of the Reorganization, each Class A or Class B Strategic Investment Grade Bond Fund shareholder will receive the number of full and fractional Bond Fund Class A or Class B shares that equals in value to such shareholder's pro rata interest in the assets transferred to Bond Fund as of the Valuation Date. The Board has determined that the interests of existing Strategic Investment Grade Bond Fund shareholders will not be diluted as a result of the Reorganization. For the reasons set forth below under "The Reorganization - Reasons for the Reorganization," the Board, including the trustees who are not "interested persons" of the Trust (the "Independent Trustees'), as that term is defined in the Investment Company Act, has concluded that the Reorganization is in the best interests of Strategic Investment Grade Bond Fund and its shareholders and recommends approval of the Reorganization by Strategic Investment Grade Bond Fund shareholders. If the Reorganization is not approved, Strategic Investment Grade Bond Fund will continue in existence and the Board will determine whether to pursue alternative actions. Reasons for the Reorganization The Manager proposed to the Board a reorganization into Bond Fund (formerly Oppenheimer Investment Grade Bond Fund) so that shareholders of Strategic Investment Grade Bond Fund may become shareholders of a larger fund, which after such reorganization allows shareholders to experience a reduction in expenses. When the Board considered the reorganization, the investment advisory fee rate of Bond Fund was lower than that of Strategic Investment Grade Bond Fund. However, the Board of Oppenheimer Integrity Funds, on behalf of Bond Fund had approved a proposal, subsequently approved by shareholders of Bond Fund to increase the investment advisory fees which would make it identical to the investment advisory fee of Strategic Investment Grade Bond Fund. The Board considered pro forma information which indicated the expense ratio of a combined fund (after the increase in investment advisory fee) would still be lower than that of Strategic Investment Grade Bond Fund. The ratio of expenses for Strategic Investment Grade Bond Fund for the fiscal year ended September 30, 1994 was 1.33% (after reimbursement) for Class A shares. Before reimbursement the ratio of expenses for Class A shares of Strategic Investment Grade Bond Fund for the fiscal year ended September 30, 1994 was 1.38%. The ratio of expenses for Strategic Investment Grade Bond Fund for the fiscal year ended September 30, 1994 for Class B shares was 2.12% (after reimbursement) and 2.16% (before reimbursement). For the fiscal year ended December 31, 1994 the ratio of expenses for Bond Fund was 1.06% for Class A shares and 1.78% for Class B shares. The pro forma fees of the combined fund at December 31, 1994 (assuming the new management fee was in effect at such time) would have been 1.31% for Class A shares and 2.03% for Class B shares. In addition to the above the Board also considered information with respect to the historical performance of Strategic Investment Grade and Bond Fund. The Board analyzed that as of the date of the meeting the average annual returns at net asset value was better for Class A shares of Bond Fund than Class A shares of Strategic Investment Grade Bond Fund. As of July 10, 1995, the investment policies of Bond Fund changed. Previously, Bond Fund's investments were substantially limited to investment grade bonds, U.S. government securities and money market instruments. The Manager expects that the approved changes, permitting Bond Fund to seek a high level of current income by investing mainly in debt instruments and permitting it, as a non-fundamental policy, to expand its permissible investments to include up to 35% of its total assets in non-investment grade debt securities, will improve the investment performance of Bond Fund. Although past performance is not predictive of future results, shareholders of Oppenheimer Bond Fund would have an opportunity to become shareholders of a fund with a better performance history. The Board also considered that the Reorganization would be a tax free reorganization, and there would be no sales charge imposed in effecting the Reorganization. The Board concluded that the Reorganization would not result in dilution to shareholders of Strategic Investment Grade Bond Fund and it would not result in dilution to shareholders of Bond Fund. Tax Consequences of the Reorganization In the opinion of Deloitte & Touche LLP, tax adviser to Strategic Investment Grade Bond Fund, the Reorganization will qualify as a tax-free reorganization for Federal income tax purposes. As a result, no gain or loss will be recognized by either fund, or by the shareholders of either fund for Federal income tax purposes as a result of the Reorganization. For further information about the tax consequences of the Reorganization, see "Approval of the Reorganization - Tax Aspects" below. Investment Objectives and Policies Strategic Investment Grade Bond Fund Strategic Investment Grade Bond Fund's investment objective is to seek a high level of current income, consistent with the stability of principal, as is available from a portfolio of investment grade debt securities. In seeking its investment objective, Strategic Investment Grade Bond Fund intends to invest principally in the following three sectors: (i) U.S. government securities; (ii) foreign fixed-income securities; and (iii) investment grade corporate bonds and debentures. Although under normal market conditions Strategic Investment Grade Bond Fund intends to invest in each of these three sectors, from time to time the Manager may adjust the amounts Strategic Investment Grade Bond Fund invests in each sector depending upon, among other things, the Manager's evaluation of economic and market conditions. Distributable income will fluctuate as Strategic Investment Grade Bond Fund shifts its assets among the three sectors. Under normal circumstances, the assets of Strategic Investment Grade Bond Fund will principally be invested in each of the three respective sectors described above, and at least 65% of Strategic Investment Grade Bond Fund's total assets (the "65% Policy") will be invested in U.S. government securities and domestic and foreign bonds and debentures rated at least investment grade. Strategic Investment Grade Bond Fund may from time to time invest up to 35% of its total assets in securities rated below investment grade. Lower-rated securities (often called "junk bonds") are considered speculative and involve greater volatility of price and risk of principal and income default than securities in the higher-rated categories. Bond Fund Under normal market conditions, the Fund invests at least 65% of its total assets in investment-grade debt securities, U.S. Government securities, and money market instruments. Investment-grade debt securities are those rated in one of the four highest categories by Standard & Poor's Corporation, Moody's Investors Service, Inc., Fitch Investors Service, Inc. or other nationally-recognized rating organizations. A description of these rating categories is included as an Appendix to Bond Fund's Additional Statement. Debt securities (often referred to as "fixed-income securities") are used by issuers to borrow money from investors. The issuer promises to pay the investor interest at a fixed or variable rate, and to pay back the amount it borrowed (the "principal") at maturity. Some debt securities, such as zero coupon bonds do not pay current interest. The Fund may invest up to 35% of its total assets in debt securities rated less than investment grade or, if unrated, judged by the Manager to be of comparable quality to such lower-rated securities (collectively, "lower-grade securities"). Lower-grade securities (often called "junk bonds") are considered speculative and involve greater risk. Bond Fund may also write covered calls and use certain types of securities called "derivatives" and hedging instruments to try to manage investment risks. Investment Advisory and Distribution and Service Plan Fees The terms and conditions of each investment advisory agreement are substantially the same. Both funds obtain investment management services from the Manager. Prior to July 10, 1995, the Manager had contracted with Massachusetts Mutual Life Insurance Company ("MassMutual") to act as Bond Fund's Sub-Adviser. Effective July 10, 1995, the Sub-Advisory agreement between the Manager and MassMutual terminated, and the Manager is responsible for selecting Bond Funds investments as well as its day to day business pursuant to an investment advisory agreement dated July 10, 1995. The management fee is payable monthly and computed on the net asset value of each fund as of the close of business each day. Both funds pay the same management fee rate of 0.75% of the first $200 million of average annual net assets, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million and 0.50% of net assets in excess of $1 billion. Strategic Investment Grade Bond Fund and Bond Fund have both adopted Service Plans for their respective Class A shares. Both Service Plans provide for reimbursement to the Distributor for a portion of its costs incurred in connection with the personal service and maintenance of accounts that hold Class A shares. Under each plan, reimbursement is made at an annual rate that may not exceed 0.25% of the average annual net assets of Class A shares of each of the funds. Strategic Investment Grade Bond Fund and Bond Fund have adopted Distribution and Service Plans (the "Plans") for Class B shares under which each fund pays the Distributor for its services in connection with distributing Class B shares and servicing accounts. Under each Plan, the funds pay the Distributor an asset-based sales charge of 0.75% per annum of 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 determined as of the close of each regular business day of each fund. The Plan for Strategic Investment Grade Bond Fund makes payments to reimburse the Distributor for its distribution expenses. The Plan for Bond Fund is a compensation plan under which Bond Fund pays the Distributor for certain distribution services but Bond Fund payments are not tied to reimbursing the Distributor for its expenses. Under Bond Fund's compensation plan, the payments Bond Fund makes may over time be greater than the payments to be made by Strategic Investment Grade Bond Fund. Purchases, Exchanges and Redemptions Both Strategic Investment Grade Bond Fund and Bond Fund are part of the OppenheimerFunds complex of mutual funds. The procedures for purchases, exchanges and redemptions of shares of the funds are substantially the same. Shares of either fund may be exchanged only for Class A or Class B shares of certain other OppenheimerFunds offering such shares. Both Strategic Investment Grade Bond Fund and Bond Fund have an initial sales charge of 4.75% on Class A shares. Investors who purchase more than $1 million in Class A shares may have to pay a sales charge of up to 1% if shares are sold within 18 calendar months from the end of the calendar month during which shares are purchased. Each of the funds has a contingent deferred sales charge imposed on the proceeds of Class B shares redeemed within six years of buying them. The contingent deferred sales charge ("CDSC") varies depending on how long you hold your shares. Class A and Class B shares of Bond Fund received in the Reorganization will be issued at net asset value, without a sales charge and no CDSC will be imposed as a result of the Reorganization. Services available to shareholders of both funds include purchase and redemption of shares through OppenheimerFunds AccountLink and PhoneLink (an automated telephone system), telephone redemptions, and exchanges by telephone to other OppenheimerFunds which offer Class A and Class B shares, and reinvestment privileges. Please see "Shareholder Services," and you should refer to Strategic Investment Grade Bond Fund's Prospectus and Bond Fund's Prospectus included with this document for further information. PRINCIPAL RISK FACTORS In evaluating whether to approve the Reorganization and invest in Bond Fund, shareholders should carefully consider the following risk factors, the information set forth in this Proxy Statement and Prospectus and the more complete description of risk factors set forth in the documents incorporated by reference herein, including the Prospectuses of the funds and their respective Statements of Additional Information. Strategic Investment Grade Bond Fund Strategic Investment Grade Bond Fund in seeking its investment objectives as described above, intends to invest principally in the following three sectors: (i) U.S. government securities; (ii) foreign fixed-income securities; and (iii) investment grade corporate bonds and debentures. There are risks of foreign investing. For example, foreign issuers are not required to use generally-accepted accounting principles. If foreign securities are not registered for sale in the U.S. under U.S. securities laws, the issuer does not have to comply with the disclosure requirements of U.S. laws, which are generally more stringent than foreign laws. The values of foreign securities investments will be affected by other factors, including exchange control regulations or currency blockage and possible expropriation or nationalization of assets. There are risks of changes in foreign currency values. Because Strategic Investment Grade Bond Fund may purchase securities denominated in foreign currencies, a change in value of a foreign currency against the U.S. dollar will result in a change in the U.S. dollar value of Strategic Investment Grade Bond Fund securities denominated in that currency. The currency rate change will also affect its income available for distribution. Although Strategic Investment Grade Bond Fund's investment income from foreign securities may be received in foreign currencies, Strategic Investment Grade Bond Fund will be required to absorb the cost of currency fluctuations. If Strategic Investment Grade Bond Fund suffers a loss on foreign currencies after it has distributed its income during the year, Strategic Investment Grade Bond Fund may find that it has distributed more income than was available from actual investment income. There may also be changes in governmental administration or economic or monetary policy in the U.S. or abroad that can affect foreign investing. In addition, it is generally more difficult to obtain court judgments outside the United States if Strategic Investment Grade Bond Fund has to sue a foreign broker or issuer. Additional costs may be incurred because foreign broker commissions are generally higher than U.S. rates, and there are additional custodial costs associated with holding securities abroad. If Strategic Investment Grade Bond Fund's assets are held abroad, the countries in which they are held and the sub-custodians holding them must be approved by Strategic Investment Grade Bond Fund's Board of Trustees. No more than 25% of Strategic Investment Grade Bond Fund's total assets, at the time of purchase, will be invested in government securities of any one foreign country or in debt securities issued by companies organized under the laws of any one foreign country. More information about the risks and potential rewards of investing in foreign securities is contained in Strategic Investment Grade Bond Fund's Statement of Additional Information. Strategic Investment Grade Bond Fund may from time to time invest up to 35% of its total assets (including securities downgraded below investment grade subsequent to purchase) in other investments, such as non-investment grade domestic and foreign bonds and debentures, notes, preferred stocks, dividend-paying common stocks, participation interests, zero coupon securities, asset-backed securities, sinking fund and callable bonds, municipal securities, as well as short-term debt obligations issued by foreign governments or domestic or foreign corporations denominated in U.S. dollars or selected foreign currencies (including, among others, participation interests, commercial paper and bank obligations, discussed below). Strategic Investment Grade Bond Fund may invest in such securities if, in the Manager's judgment, Strategic Investment Grade Bond Fund has the opportunity of seeking a high level of current income without undue risk to principal. Lower-rated securities (often called "junk bonds") are considered speculative and involve greater volatility of price and risk of principal and income default than securities in the higher-rated categories. They may be less liquid than higher-rated securities. If Strategic Investment Grade Bond Fund were forced to sell a lower-rated debt security during a period of rapidly-declining prices, it might experience significant losses especially if a substantial number of other holders decide to sell at the same time. Debt securities have both interest rate and credit risks. Debt securities are subject to changes in their value due to changes in prevailing interest rates. When prevailing interest rates fall, the values of already-issued debt securities generally rise. When interest rates rise, the values of already-issued debt securities generally decline. The magnitude of these fluctuations will often be greater for longer-term debt securities than shorter-term debt securities. Changes in the value of securities held by Strategic Investment Grade Bond Fund mean that Strategic Investment Grade Bond Fund's share prices can go up or down when interest rates change, because of the effect of the change on the value of Strategic Investment Grade Bond Fund's portfolio of debt securities. Debt securities are also subject to credit risks. Credit risk relates to the ability of the issuer of a debt security to make interest or principal payments on the security as they become due. Generally, higher-yielding, lower-rated bonds (which Strategic Investment Grade Bond Fund may hold) are subject to greater credit risk than higher-rated bonds. Securities issued or guaranteed by the U.S. Government are subject to little, if any, credit risk. While the Manager may rely to some extent on credit ratings by nationally recognized rating agencies, such as Standard & Poor's or Moody's, in evaluating the credit risk of securities selected for the Fund's portfolio, it may also use its own research and analysis. However, many factors affect an issuer's ability to make timely payments, and there can be no assurance that the credit risk of a particular security will not change over time. Bond Fund Under normal market conditions, the Fund invests at least 65% of its total assets in a diversified portfolio of investment grade fixed-income securities. These include (i) investment-grade debt securities rated BBB or above by Standard and Poor's Corporation or Baa or above by Moody's Investors Service, Inc. or, if unrated, are of comparable quality as determined by Bond Fund's Manager; (ii) securities issued or guaranteed as to principal and interest by the U.S. Government, its agencies or instrumentalities or obligations secured by such securities ("U.S. Government Securities"); and (iii) high-quality, short-term money market domestic and foreign instruments. Bond Fund may (as a matter of non- fundamental policy) invest up to 35% of its total assets in non-investment grade debt instruments. These lower-rated securities (often called "junk bonds" are considered speculative and involve greater risks. They have the same risks as those lower rated securities which may be purchased by Strategic Investment Grade Bond Fund. The Manager anticipates that Bond Fund would generally invest at least 75% of its total assets in: (i) U.S. corporate bonds rated "A" or better and (ii) U.S. government and agency bonds. The Manager further anticipates that Bond Fund would invest an additional 15% of its total assets in non- investment grade domestic corporate bonds and 10% of its total assets in non-investment grade foreign bonds. These anticipated investment targets, including the allocation between domestic and foreign lower-grade debt securities, are subject to fluctuation and may be changed by the Manager without further notice to shareholders or amended prospectus disclosure. Under normal market conditions, the target duration will be approximately five. Duration is a measure of the anticipated rise or decline in value for a 1% change in interest rates. For example, a duration of 2 in a portfolio indicates that for every 1% rise in general interest rates, the portfolio's value would be expected to fall 2%, and vice versa. While both funds may invest in foreign fixed-income securities, Bond Fund is not restricted in the amount of assets it may invest in foreign countries, nor is it restricted with respect to which countries it can invest in. Investments in securities of foreign governments and companies present the same risks as those discussed with respect to Strategic Investment Grade Bond Fund. Debt securities present the same credit and interest risks as those discussed with respect to Strategic Investment Grade Bond Fund. Although both funds may invest up to 35% of their total assets in non- investment grade bonds ("junk bonds"), Oppenheimer Bond Fund has the ability, without shareholder approval, to increase the percentage of its assets invested in junk bonds. However, such a change may only be made with the approval of the Board of Oppenheimer Integrity Funds, on behalf of Bond Fund, which has no plans for such a change. APPROVAL OF THE REORGANIZATION (The Proposal) Reasons for the Reorganization At a meeting of the Board of Trustees (the "Board") held April 18, 1995, the Trustees reviewed and discussed materials relevant to the proposed Reorganization. The Board, including the Independent Trustees, unanimously approved and recommended to shareholders of Strategic Investment Grade Bond Fund that they approve the Reorganization. Strategic Investment Grade Bond Fund is organized as a Massachusetts business trust. Both funds offer Class A and Class B shares and the terms and conditions of their offer, sale, redemption and exchange, distribution arrangements, expenses borne separately by each class and other related matters are essentially the same. The Board considered that this will facilitate an exchange. In the reorganization, Class A and Class B shareholders of Strategic Investment Grade Bond Fund will receive Class A and Class B shares, respectively, of Bond Fund (formerly Oppenheimer Investment Grade Bond Fund). In considering the proposed Reorganization, the Board reviewed information which demonstrated that Strategic Investment Grade Bond Fund is a significantly smaller fund, with $38,670,437 assets as of March 31, 1995. In comparison, Bond Fund had $115,885,874 of assets as of March 31, 1995. It is not anticipated that Strategic Investment Grade Bond Fund will increase substantially in size in the near future. After the reorganization, the shareholders of Strategic Investment Grade Bond Fund will be shareholders of a larger fund and will incur lower operating, transfer agency and other expenses. Thus economics of scale will benefit shareholders of Strategic Investment Grade Bond Fund. Among several other factors, the Board focused on the investment objectives of the two funds. Strategic Investment Grade seeks a high level of current income, consistent with stability of principal, as is available from a portfolio of investment grade debt securities. Bond Fund, at the time of the meeting, had the investment objective of seeking to achieve a high level of current income consistent with prudent investment risk and the stability of capital primarily through investment. The current investment objective, which was proposed at the time of the meeting, and was subsequently approved by shareholders at a meeting held on July 10, 1995, is to seek a high level of current income by investing mainly in debt instruments. This is also consistent with the objective of Strategic Investment Grade Bond Fund. Both funds may invest up to 35% of their total assets in securities rated below investment grade. The Board took the proposed changes, including the change in Bond Fund's investment objective and policies into consideration and determined that the objectives were substantially similar and that Bond Fund's proposed investment policies, which were approved by shareholders would be essentially the same. The Board, in reviewing financial information, considered the investment advisory fee of both funds. At the time of the April meeting the management fees paid by Bond Fund, were lower than Strategic Investment Grade Bond Fund. On July 10, 1995, Bond Fund's shareholders approved an increase in the investment advisory fee rate (also known as the "management fee rate"). The management fee rates of both funds which decline as each fund grows are as follows: 0.75% of the first $200 million of average annual net assets; 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million, and 0.50% of net assets in excess of $1 billion. The higher investment advisory fee rates were not in effect at Bond Fund's fiscal year end. Had they been in effect, Bond Fund's ratio of expenses for the period ended December 31, 1994 would have been higher. However, the higher investment advisory rates are identical to Strategic Investment Grade Bond Fund's investment advisory rates. If the two funds were combined, shareholders of the Strategic Investment Grade Bond Fund would continue to have a management fee of 0.75% but they would be closer to the $200 million breakpoint. The Board considered pro forma information which indicated the expense ratio of a combined fund would still be slighter lower than that of Strategic Investment Grade Fund. The ratio of expenses for Strategic Investment Grade for the fiscal year ended September 30, 1994 was 1.38% for Class A shares (before reimbursement). The ratio of expenses for Strategic Investment Grade Bond Fund for the fiscal year ended September 30, 1994 was 1.33% for Class A shares (after reimbursement). The ratio of expenses for Class B shares of Strategic Investment Grade Bond Fund for the fiscal year ended September 30, 1994 was 2.16% (before reimbursement) and 2.12% (after reimbursement). Up until November 24, 1993, the Manager had undertaken to assume Strategic Investment Grade Bond Fund's expenses (other than extraordinary non- recurring expenses) to enable Strategic Investment Grade Bond Fund to pay a dividend of $.378 per Class A share per annum, with the limitation that the dividend could not exceed Strategic Investment Grade Bond Fund's annual gross earnings per share per annum. For the fiscal year ended December 31, 1994 the ratio of expenses for Bond Fund for Class A shares was 1.06% and 1.78% for Class B shares. The pro forma ratio of expenses of the combined fund at December 31, 1994 (after an increase, in Bond Fund's investment advisory fee) would have been 1.31% for Class A shares and 2.03% for Class B shares. The investment policies of Bond Fund were changed by shareholder approval. Prior to such change Bond Fund's investments were limited to investment grade bonds, U.S. government securities and money market securities. The Manager expects that the approved changes which expands its permissible investments will improve Bond Fund's investment performance. In addition to the above, the Board also considered information with respect to the historical performance of Strategic Investment Grade and Bond Fund. The Board analyzed that as of the date of the meeting the average annual returns at net asset value were better for Class A of Bond Fund than Class A shares of Strategic Investment Grade Bond Fund. Although past performance is not predictive of future results, shareholders of Bond Fund would have an opportunity to become shareholders of a fund with a better performance history. The Board also considered that the Reorganization would be a tax free reorganization, and there would be no sales charge imposed in effecting the Reorganization. The Board concluded that the Reorganization would not result in dilution to shareholders of Strategic Investment Grade Bond Fund and it would not result in dilution to shareholders of Bond Fund. The Reorganization The Reorganization Agreement (a copy of which is set forth in full as Annex A to this Proxy Statement and Prospectus) contemplates a reorganization under which (i) all of the assets of Strategic Investment Grade Bond Fund (other than the cash reserve described below (the "Cash Reserve")) will be transferred to Bond Fund in exchange for Class A and Class B shares of Bond Fund, (ii) these shares will be distributed among the shareholders of Strategic Investment Grade Bond Fund in complete liquidation of Strategic Investment Grade Bond Fund, (iii) the outstanding shares of Strategic Investment Grade Bond Fund will be cancelled. Bond Fund will not assume any of Strategic Investment Grade Bond Fund's liabilities except for portfolio securities purchased which have not settled and outstanding shareholder redemption and dividend checks. The result of effectuating the Reorganization would be that: (i) Bond Fund will add to its gross assets all of the assets (net of any liability for portfolio securities purchased but not settled and outstanding shareholder redemption and dividend checks) of Strategic Investment Grade Bond Fund other than its Cash Reserve; and (ii) the shareholders of Strategic Investment Grade Bond Fund as of the close of business on the Closing Date will become shareholders of either Class A or Class B shares of Bond Fund. The effect of the Reorganization will be that shareholders of Strategic Investment Grade Bond Fund who vote their Class A and Class B shares in favor of the Reorganization will be electing to redeem their shares of Strategic Investment Grade Bond Fund (at net asset value on the Valuation Date referred to below under "Method of Carrying Out the Reorganization Plan," calculated after subtracting the Cash Reserve) and reinvest the proceeds in Class A or Class B shares of Bond Fund at net asset value without sales charge and without recognition of taxable gain or loss for Federal income tax purposes (see "Tax Aspects of the Reorganization" below). The Cash Reserve is that amount retained by Strategic Investment Grade Bond Fund which is sufficient in the discretion of the Board for the payment of: (a) Strategic Investment Grade Bond Fund's expenses of liquidation, and (b) its liabilities, other than those assumed by Bond Fund. Strategic Investment Grade Bond Fund and Bond Fund will bear all of their respective expenses associated with the Reorganization, as set forth under "Costs of the Solicitation and the Reorganization" above. Management estimates that such expenses associated with the Reorganization to be borne by Strategic Investment Grade Bond Fund will not exceed $30,000. Liabilities as of the date of the transfer of assets will consist primarily of accrued but unpaid normal operating expenses of Strategic Investment Grade Bond Fund, excluding the cost of any portfolio securities purchased but not yet settled and outstanding shareholder redemption and dividend checks. See "Method of Carrying Out the Reorganization Plan" below. The Reorganization Agreement provides for coordination between the funds as to their respective portfolios so that, after the closing, Bond Fund will be in compliance with all of its investment policies and restrictions. Strategic Investment Grade Bond Fund will recognize capital gain or loss on any sales made pursuant to this paragraph. As noted in "Tax Aspects of the Reorganization" below, if Strategic Investment Grade Bond Fund realizes net gain from the sale of securities in 1995, such gain, to the extent not offset by capital loss carry-forward, will be distributed to shareholders prior to the Closing Date and will be taxable to shareholders as capital gain. Tax Aspects of the Reorganization Immediately prior to the Valuation Date referred to in the Reorganization Agreement, Strategic Investment Grade Bond Fund will pay a dividend or dividends which, together with all previous such dividends, will have the effect of distributing to Strategic Investment Grade Bond Fund's shareholders all of Strategic Investment Grade Bond Fund's investment company taxable income for taxable years ending on or prior to the Closing Date (computed without regard to any deduction for dividends paid) and all of its net capital gain, if any, realized in taxable years ending on or prior to the Closing Date (after reduction for any available capital loss carry-forward). Such dividends will be included in the taxable income of Strategic Investment Grade Bond Fund's shareholders as ordinary income and capital gain, respectively. The exchange of the assets of Strategic Investment Grade Bond Fund for Class A and Class B shares of Bond Fund and the assumption by Bond Fund of certain liabilities of Strategic Investment Grade Bond Fund is intended to qualify for Federal income tax purposes as a tax-free reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"). Strategic Investment Grade Bond Fund has represented to Deloitte & Touche LLP, tax adviser to Strategic Investment Grade Bond Fund, that there is no plan or intention by any Fund shareholder who owns 5% or more of Strategic Investment Grade Bond Fund's outstanding shares, and, to Strategic Investment Grade Bond Fund's best knowledge, there is no plan or intention on the part of the remaining Strategic Investment Grade Bond Fund shareholders, to redeem, sell, exchange or otherwise dispose of a number of Bond Fund Class A or Class B shares received in the transaction that would reduce Strategic Investment Grade Bond Fund shareholders' ownership of Bond Fund shares to a number of shares having a value, as of the Closing Date, of less than 50% of the value of all the formerly outstanding Strategic Investment Grade Bond Fund shares as of the same date. Oppenheimer Bond Fund and Strategic Investment Grade Bond Fund have each represented to Deloitte & Touche LLP, that, as of the Closing Date, it will qualify as a regulated investment company or will meet the diversification test of Section 368(a)(2)(F)(ii) of the Code. As a condition to the closing of the Reorganization, Bond Fund and Strategic Investment Grade Bond Fund will receive the opinion of Deloitte & Touche LLP to the effect that, based on the Reorganization Agreement, the above representations, existing provisions of the Code, Treasury Regulations issued thereunder, current Revenue Rulings, Revenue Procedures and court decisions, for Federal income tax purposes: 1. The transactions contemplated by the Reorganization Agreement will qualify as a tax-free "reorganization" within the meaning of Section 368(a)(1) of the Code. 2. Strategic Investment Grade Bond Fund and Bond Fund will each qualify as "a party to a reorganization" within the meaning of Section 368(b)(2) of the Code. 3. No gain or loss will be recognized by the shareholders of Strategic Investment Grade Bond Fund upon the distribution of Class A or Class B shares of beneficial interest in Bond Fund to the shareholders of Strategic Investment Grade Bond Fund pursuant to Section 354 of the Code. 4. Under Section 361(a) of the Code no gain or loss will be recognized by Strategic Investment Grade Bond Fund by reason of the transfer of its assets solely in exchange for Class A or Class B shares of Bond Fund. 5. Under Section 1032 of the Code no gain or loss will be recognized by Bond Fund by reason of the transfer of Strategic Investment Grade Bond Fund's assets solely in exchange for Class A or Class B shares of Bond Fund. 6. The shareholders of Strategic Investment Grade Bond Fund will have the same tax basis and holding period for the shares of beneficial interest in Bond Fund that they receive as they had for Strategic Investment Grade Bond Fund stock that they previously held, pursuant to Sections 358(a) and 1223(1) of the Code, respectively. 7. The securities transferred by Strategic Investment Grade Bond Fund to Bond Fund will have the same tax basis and holding period in the hands of Bond Fund as they had for Strategic Investment Grade Bond Fund, pursuant to Sections 362(b) and 1223(1) of the Code, respectively. Shareholders of Strategic Investment Grade Bond Fund should consult their tax advisors regarding the effect, if any, of the Reorganization in light of their individual circumstances. Since the foregoing discussion only relates only to the Federal income tax consequences of the Reorganization, shareholders of Strategic Investment Grade Bond Fund should also consult their tax advisers as to state and local tax consequences, if any, of the Reorganization. Capitalization Table (Unaudited) The table below sets forth the capitalization of Strategic Investment Grade Bond Fund and Bond Fund and indicates the pro forma combined capitalization as of March 31, 1995 as if the Reorganization had occurred on that date. March 31, 1995
Net Asset Shares Value Net Assets Outstanding Per Share Oppenheimer Strategic Investment Grade Bond Class A $ 23,190,699 4,906,735 $ 4.73 Class B $ 15,479,738 3,278,697 $ 4.72 Oppenheimer Bond Fund Class A $109,961,008 10,644,112 $10.33 Class B $ 5,924,866 573,516 $10.33 Oppenheimer Bond Fund (Pro Forma Surviving Fund) Class A $133,151,707 12,889,097 $10.33 Class B $ 21,404,604 2,072,039 $10.33
Reflects issuance of 2,244,985 of Class A shares and 1,498,523 of Class B shares of Bond Fund in a tax-free exchange for the net assets of Strategic Investment Grade Bond Fund, aggregating $38,670,437. Class C shares were not publicly offered prior to July 11, 1995, accordingly no information on Class C shares is reflected in the table. The pro forma ratio of expenses to average annual net assets of the Class A shares at March 31, 1995 would have been 1.27%. The pro forma ratio of expenses to average net assets of Class B shares at March 31, 1995 would have been 2.03%. COMPARISON BETWEEN STRATEGIC INVESTMENT GRADE BOND FUND AND BOND FUND Information about Strategic Investment Grade Bond Fund and Bond Fund is presented below. Additional information about Bond Fund is set forth in its Prospectus, accompanying this Proxy Statement and Prospectus, and additional information about both funds is set forth in documents that may be obtained upon request of the transfer agent or upon review at the offices of the SEC. See "Miscellaneous - Public Information." Investment Objectives and Policies Summary Under normal market conditions, Bond Fund invests at least 65% of its total assets in a diversified portfolio of investment grade fixed-income securities. Bond Fund may invest up to 35% of its total assets in non- investment grade debt instruments. Bond Fund may also lend its portfolio securities, enter into repurchase agreements, purchase illiquid and restricted securities, purchase and make short sales against-the-box, borrow for leverage, buy participation interests, and purchase certain derivatives. It may also purchase and sell certain kinds of futures contracts, and options on futures, securities indices and securities, or enter into interest rate swap agreements. Strategic Investment Grade Bond Fund seeks a high level of current income, consistent with stability of principal, as is available from a portfolio of investment grade debt securities. It intends to invest its assets principally in the following three sectors (1) U.S. government securities, (ii) foreign fixed-income securities, and (iii) investment grade corporate bonds and debenture. Under normal circumstances, at least 65% of its total assets will be invested in U.S. government securities and domestic and foreign bonds and debentures rated at least investment grade. It may invest up to 35% of its total assets in certain other investments, including securities rated below investment grade, such as non-investment grade domestic and foreign bonds and debentures, notes, preferred stocks, dividends-paying common stocks, participation interests, zero coupon securities, asset backed securities, sinking fund and callable bonds and municipal securities, as well as short-term debt obligations issued by foreign governments or domestic corporations denominated in U.S. dollars or selected foreign currencies (including, among others, participation interests, commercial paper and bank obligations, discussed below.) Strategic Investment Grade Bond Fund may also invest in money market securities, lend its portfolio securities, enter into repurchase agreements, purchase illiquid and restricted securities, purchase and make short sales against-the-box, borrow for leveraging, buy participation interests and preferred stock and purchase certain derivatives. It may also purchase and sell certain kinds of futures contracts, and options on futures, securities indices and securities, or enter into interest rate swap agreements. These are all referred to as hedging instruments. Both of the funds invest in fixed income securities which are subject to interest rate risks and credit risks. All debt securities, including U.S. Government Securities are subject to changes in value due to changes in prevailing interest rates, when prevailing interest rates fall, the value of outstanding debt securities generally rise. Conversely, when interest rates rise, the values of outstanding debt securities generally decline. The magnitude of these fluctuations will be greater when the average maturity of the portfolio securities is larger. Debt securities are also subject to credit risks. Credit risks relate to the ability of the issuer of a debt security to make interest or principal payments on the security as they become due. Generally higher-yielding, lower-rated bonds which each fund may hold are subject to greater credit risks than higher-rated bonds. Securities issued or guaranteed by the U.S. Government are subject to little, if any credit risk. These risks mean that each of the funds may not achieve the expected income from lower-grade securities. Each fund's net asset value per share may be affected by declines in the value of these securities. There are also certain risks associated with investments in foreign securities, including those related to changes in foreign currency rates, that are not present in domestic stocks. The securities in which Bond Fund and Strategic Investment Grade Bond Fond invest are summarized below. Both funds invest in substantially the same types of securities. Although both funds may invest up to 35% of their total assets in non-investment grade debt securities, Bond Fund has the ability, without shareholder approval to increase the percentage of its assets invested in non-investment grade debt (often called "junk bonds"). However, it may do so only with approval of the Board of Oppenheimer Integrity Funds, which has no plans to make such a change. In addition, any change of this significance would be disclosed in amendments to Bond Fund's prospectus. For more information on all of these securities, please refer to each fund's prospectus and statement of additional information. Bond Fund Under normal market conditions, Bond Fund invests at least 65% of its total assets in a diversified portfolio of investment grade fixed-income securities. These include (i) investment-grade debt securities rated BBB or above by Standard and Poor's Corporation or Baa or above by Moody's Investors Service, Inc. or, if unrated, are of comparable quality as determined by Bond Fund's Manager; (ii) securities issued or guaranteed as to principal and interest by the U.S. Government, its agencies or instrumentalities or obligations secured by such securities ("U.S. Government Securities"); and (iii) high-quality, short-term money market domestic and foreign instruments. Bond Fund may also invest up to 35% of its total assets in non-investment grade debt instruments. The Manager anticipates that Bond Fund would generally invest at least 75% of its total assets in: (i) U.S. corporate bonds rated "A" or better and (ii) U.S. government and agency bonds. The Manager further anticipates that Bond Fund would invest an additional 15% of its total assets in non- investment grade domestic corporate bonds and 10% of total assets in non- investment grade foreign bonds. These anticipated investment targets, including the allocation between domestic and foreign lower-grade debt securities, are subject to fluctuation and may be changed by the Manager without further notice to shareholders or amended prospectus disclosure. Under normal market conditions, the target duration will be approximately 5. Duration is a measure of the anticipated rise or decline in value for a 1% change in interest rates. For example, a duration of 2 in a portfolio indicates that for every 1% rise in general interest rates, the portfolio's value would be expected to fall 2%, and vice versa. Bond Fund may invest in debt securities issued or guaranteed by foreign companies and debt securities of foreign governments or their agencies. These securities may include debt obligations such as government bonds, debentures issued by companies, as well as notes. Bond Fund may also invest in certain U.S. Government securities, including 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. Bond Fund may also invest in mortgage-related U.S. Government securities that are issued or guaranteed by federal agencies or government-sponsored entities but are not supported by the full faith and credit of U.S. Government. Bond Fund may also invest in mortgage-backed securities, whether issued by the U.S. government or private issuer, as well as CMOs. It may also invest in asset-backed securities. Strategic Investment Grade Bond Fund Under normal circumstances, the assets of Strategic Investment Grade Bond Fund will principally be invested in each of the three respective sectors described above, and at least 65% of Strategic Investment Grade Bond Fund's total assets (the "65% Policy") will be invested in U.S. government securities and domestic and foreign bonds and debentures rated at least investment grade. Investment grade debt securities are rated at least "Baa" by Moody's Investors Service, Inc. ("Moody's") or at least "BBB" by Standard & Poor's Corporation ("Standard & Poor's") or, if unrated, are determined by the Manager as offering risks comparable to securities meeting those rating requirements. Strategic Investment Grade Bond Fund may from time to time invest up to 35% of its total assets (including securities downgraded below investment grade subsequent to purchase) in other investments, such as non-investment grade domestic and foreign bonds and debentures, notes, preferred stocks, dividend-paying common stocks, participation interests, zero coupon securities, asset-backed securities, sinking fund and callable bonds, as well as short-term debt obligations issued by foreign governments or domestic or foreign corporations denominated in U.S. dollars or selected foreign currencies (including, among others, participation interests, commercial paper and bank obligations. Permitted Investments by Both Strategic Investment Grade Bond Fund and Bond Fund U.S. Government Securities Both of the funds may invest in debt obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities ("U.S. Government Securities"). Both of the funds may invest in obligations supported by the full faith and credit of the U.S. Government such as mortgage-backed securities guaranteed by the Government National Mortgage Association ("Ginnie Maes") or they may invest in other securities, issued or guaranteed by federal agencies or government-sponsored enterprises that are not supported by the full faith and credit of the United States, and securities of agencies and instrumentalities that are supported by the discretionary authority of the U.S. Government to purchase such securities which include: Federal Land Banks, Farmers Home Administration, Central Bank for Cooperatives, and Federal Intermediate Credit Banks and Freddie Mac. Both of the funds may invest in mortgaged-backed securities, including collateralized mortgage-backed obligations ("CMOs"), of the fully-modified pass-through type, such as GNMA certificates, which are guaranteed as to timely payment of principal and interest by the full faith and credit of the United States Government or which are issued or guaranteed by agencies of the U.S. Government, such as Federal Home Loan Mortgage Corporation ("Freddie Mac") or the Federal National Mortgage Association ("Fannie Mae"). Both funds have the ability to invest in mortgage-backed securities, including CMO's that may be issued by private issuers, such as commercial banks, savings and loan institutions and private mortgage insurance companies and other secondary market issuers. There can be no assurance that private issuers will be able to meet their obligations. The effective maturity of a mortgage-backed security may be shortened by unscheduled or early payment of principal and interest on the underlying mortgages, which may affect the effective yield of such securities. The principal that is returned may be invested in instruments having a higher or lower yield than the prepaid instruments, depending on then-current market conditions. Such securities therefore may be less effective as a means of "locking in" attractive long-term interest rates and may have less potential for appreciation during periods of declining interest rates than conventional bonds with comparable stated maturities. Mortgage- backed securities purchased at a premium, prepayments of principal and foreclosures of mortgages may result in some loss of the principal investment to the extent of the premium paid. Payment of the interest and principal generated by the pool of mortgages is passed through to the holders as the payments are received by the issuer of the CMO. CMOs may be issued in a variety of classes or series ("tranches") that have different maturities. The principal value of certain CMO tranches may be more volatile than other types of mortgage- related securities, because of the possibility that the principal value of the CMO may be prepaid earlier than the maturity of the CMO as a result of prepayments of the underlying mortgage loans by the borrowers. Both funds may invest in "stripped" mortgage-backed securities or CMOs or other securities issued by agencies or instrumentalities of the U.S. Government. Stripped mortgage-backed securities usually have two classes. The classes receive different proportions of the interest and principal distributions on the pool of mortgage assets that act as collateral for the security. In certain cases, one class will receive all of the interest payments (and is known as an "I/O"), while the other class will receive all of the principal value on maturity (and is known as a "P/O"). The yield to maturity on the class that receives only interest is extremely sensitive to the rate of payment of the principal on the underlying mortgages. Principal prepayments increase that sensitivity. Stripped securities that pay "interest only" are therefore subject to greater price volatility when interest rates change, and they have the additional risk that if the underlying mortgages are prepaid, a fund will lose the anticipated cash flow from the interest on the prepaid mortgages. The value of "principal only" securities generally increases as interest rates decline and prepayment rates rise. The price of these securities is typically more volatile than that of coupon-bearing bonds of the same maturity. Stripped securities are generally purchased and sold by institutional investors through investment banking firms. At present, established trading markets have not yet developed for these securities. Therefore, some stripped securities may be deemed "illiquid." Zero Coupon Securities Both funds may invest in zero coupon securities issued by the U.S. Treasury. In general, zero coupon U.S. Treasury securities include (1) U.S. Treasury notes or bonds that have been "stripped" of their interest coupons, (2) U.S. Treasury bills issued without interest coupons, or (3) certificates representing an interest in stripped securities. A zero coupon Treasury security pays no current interest and trades at a deep discount from its face value. It will be subject to greater market fluctuations from changes in interest rates than interest-paying securities. Either fund accrues interest on zero coupon securities without receiving the actual cash. As a result of holding these securities, either fund could possibly be forced to sell portfolio securities to pay cash dividends or meet redemptions. Both funds may also invest in zero coupon securities issued by corporations or private issuers. These zero coupon securities are: (i) notes or debentures that do not pay current interest and are issued at substantial discounts from par value, or (ii) notes or debentures that pay no current interest until a stated date one or more years into the future, after which the issuer is obligated to pay interest until maturity, usually at a higher rate than if interest were payable from the date of issuance. Such zero coupon securities are subject to certain risks, in addition to the risks identified above for zero coupon securities issued by the U.S. Treasury, such as the risk of the issuer's failure to pay interest and repay principal in accordance with the terms of the obligation. When-Issued and Delayed Delivery Transactions The funds may purchase securities on a "when-issued" basis and may purchase or sell securities on a "delayed delivery" basis. These terms refer to securities that have been created and for which a market exists, but which are not available for immediate delivery. There may be a risk of loss to either fund if the value of the security declines prior to the settlement date. Repurchase Agreements Each of the funds may enter into repurchase agreements. Neither of the funds will enter into repurchase agreements that will cause more than 10% of its net assets to be subject to repurchase agreements having a maturity beyond seven days. However, if the vendor fails to pay the resale price on the delivery date, the funds may experience costs in disposing of the collateral and losses if there is any delay in doing so. Foreign Securities Both funds invest in debt securities issued or guaranteed by foreign companies, and debt securities of foreign governments or their agencies. These foreign securities may include debt obligations such as government bonds, debentures issued by companies, as well as notes. Some of these debt securities may have variable interest rates or "floating" interest rates that change in different market conditions. Those changes will affect the income each fund receives. Strategic Investment Grade Bond Fund will have no more than 25% of its total assets invested in government securities of any one foreign country or in debt securities issued by companies organized under the laws of any one foreign country. Bond Fund has no such restriction. Neither fund has a restriction with respect to the amount it may invest in foreign securities. However, the Manager anticipates, with respect to Bond Fund, that 10% of its total assets would be invested in non-investment grade foreign bonds. Foreign securities have special risks. For example, the values of foreign securities investments may be affected by changes in foreign currency rates, exchange control regulations, expropriation or nationalization of a company's assets, foreign taxes, delays in settlement of transactions, changes in governmental economic or monetary policy in the U.S. or abroad, or other political and economic factors. Hedging Both funds may use hedging investments. As described below, each of the funds may purchase and sell certain kinds of futures contracts, put and call options, forward contracts, and options on futures, securities indices and securities, or enter into interest rate swap agreements. These are all referred to as "hedging instruments." The funds do not use hedging instruments for speculative purposes, and have limits on the use of them, described below. The hedging instruments each fund may use are described below and in greater detail in the Statement of Additional Information for each fund. The funds may buy and sell options, futures and forward contracts for a number of purposes. They may do so to try to manage their exposure to the possibility that the prices of their portfolio securities may decline, or to establish a position in the securities market as a temporary substitute for purchasing individual securities. They may do so to try to manage their exposure to changing interest rates. Some of these strategies, such as selling futures, buying puts and writing covered calls, hedge a fund's portfolio against price fluctuations. Other hedging strategies, such as buying futures and call options, tend to increase a fund's exposure to the securities market. Forward contracts are used to try to manage foreign currency risks on each of the funds foreign investments. Foreign currency options are used to try to protect against declines in the dollar value of foreign securities the funds own, or to protect against an increase in the dollar cost of buying foreign securities. Writing covered call options may also provide income to each of the funds for liquidity purposes or to raise cash to distribute to shareholders. The hedging investments that the funds may use are summarized below, and you should refer to each fund's prospectus and statement of additional information for a more complete discussion of these investments and their risks. Neither fund uses hedging investments for speculative purposes. Both funds may buy and sell futures contracts and options thereon that relate to financial futures such as bond indexes; buy and sell foreign currencies and forward contracts and options thereon; purchase put options on futures whether or not the fund owns the future; and may also use "cross hedging." The funds may buy and sell futures contracts and options thereon that relate (1) to broadly-based bond indices ("Bond Index Futures") and (2) interest rated ("Interest Rate Futures"). Either fund may purchase calls on (1) debt securities, (2) futures, (3) broadly-based bond indices and (4) foreign currencies, or to terminate its obligation on a call that a fund previously wrote. The funds may write covered call options on debt securities to raise cash for income to distribute to shareholders or for defensive reasons. The funds may purchase and write put options on (1) securities they own, (2) interest rate futures, (3) bond index futures and (4) foreign currencies. Both funds may buy and sell puts and calls only if certain conditions are met: (1) calls each fund sells must be listed on a securities exchange, or traded in the over-the-counter market; (2) calls each fund buys must be listed on a securities or commodities exchange, quoted on the Automated Quotation System of the National Association of Securities Dealers, Inc. (NASDAQ) or traded in the over-the-counter market; (3) in the case of puts and calls on foreign currency, they must be traded on a securities or commodities exchange, or quoted by recognized dealers in those options; (4) each call the funds write must be "covered" while it is outstanding: that means the funds must own the investment on which the call was written or it must own other securities that are acceptable for the escrow arrangements required for calls; (5) puts each of the funds buy and sell must be listed on a securities or commodities exchange, quoted on NASDAQ or traded in the over-the-counter market and any put sold must be covered by segregated liquid assets with not more than 50% of a fund's assets subject to puts; (6) each of the funds may write calls on futures contracts it owns, but these calls must be covered by securities or other liquid assets that fund owns and segregated to enable it to satisfy its obligations if the call is exercised; and (7) a call or put option may not be purchased if the value of all of the fund's put and call options would exceed 5% of that fund's total assets. Both of the funds may enter into interest rate swaps. The funds enter into swaps only on securities they own. The funds may not enter into swaps with respect to more than 25% of their total respective assets. Also, the funds will segregate liquid assets (such as cash or U.S. Government securities or other appropriate high grade debt obligations) to cover any amounts it could owe under swaps that exceed the amounts it is entitled to receive, and it will adjust that amount daily, as needed. Interest rate swaps are subject to credit risks (if the other party fails to meet its obligations) and also to interest rate risks. A fund could be obligated to pay more under its swap agreements than it receives under them, as a result of interest rate changes. Hedging instruments can be volatile investments and may involve special risks. The use of hedging instruments requires special skills and knowledge of investment techniques that are different than what is required for normal portfolio management. If the Manager uses a hedging instrument at the wrong time or judges market conditions incorrectly, hedging strategies may reduce a fund's return. A fund could also experience losses if the prices of its futures and options positions were not correlated with its other investments or if it could not close out a position because of an illiquid market for the future or option. Options trading involves the payment of premiums and has special tax effects on the fund. There are also special risks in particular hedging strategies and they are addressed in each fund's Prospectus and Statement of Additional Information. Loan of Portfolio Securities Both funds may lend their portfolio securities to brokers, dealers and other financial institutions. These loans are limited to 25% of each funds respective net assets and are subject to the conditions in each fund's Statements of Additional Information. Neither fund presently intends to lend its portfolio securities, but if they do the value of the securities borrowed is not expected to exceed 5% of each fund's total assets. Illiquid and Restricted Securities Both of the funds may invest in illiquid and restricted securities. Investments may be illiquid because of the absence of an active trading market, making it difficult to value them or dispose of them promptly at an acceptable price. A restricted security is one that has a contractual restriction on its resale or which cannot be sold publicly until it is registered under the Securities Act of 1933. The funds will not invest more than 10% of their net assets in illiquid or restricted securities (that limit may increase to 15% if certain state laws are changed or if the fund's shares are no longer sold in those states). The fund's percentage limitation on these investments does not apply to certain restricted securities that are eligible for resale to qualified institutional purchasers. Derivative Investments Strategic Investment Grade Bond Fund and Bond Fund can invest in a number of different kinds of "derivative investments." Each fund may use some types of derivatives for hedging purposes, and may invest in others because they offer the potential for increased income. In general, a "derivative investment" is a specially-designed investment whose performance is linked to the performance of another investment or security, such as an option, future, index, currency or commodity. The funds may not purchase or sell physical commodities; however, the funds may purchase and sell foreign currency in hedging transactions. This shall not prevent the funds from buying or selling options and futures contracts or from investing in securities or other instruments backed by physical commodities. In the broadest sense, derivative investments include exchange-traded options and futures contracts (please refer to "Hedging," above). One risk of investing in derivative investments is that the company issuing the instrument might not pay the amount due on the maturity of the instrument. There is also the risk that the underlying investment or security might not perform the way the Manager expected it to perform. The performance of derivative investments may also be influenced by interest rate changes in the U.S. and abroad. All of these risks can mean that the fund will realize less income than expected from its investments, or that it can lose part of the value of its investments, which will affect the fund's share price. Certain derivative investments held by a fund may trade in the over-the-counter markets and may be illiquid. The funds may invest in different types of derivatives. "Index-linked" or "commodity-linked" notes are debt securities of companies that call for interest payments and/or payment on the maturity of the note in different terms than the typical note where the borrower agrees to make fixed interest payments and/or to pay a fixed sum on the maturity of the note. Principal and/or interest payments on an index-linked note depend on the performance of one or more market indices, such as the S & P 500 Index or a weighted index of commodity futures, such as crude oil, gasoline and natural gas. The Fund may invest in "debt exchangeable for common stock" of an issuer or "equity-linked" debt securities of an issuer. At maturity, the principal amount of the debt security is exchanged for common stock of the issuer or is payable in an amount based on the issuer's common stock price at the time of maturity. In either case there is a risk that the amount payable at maturity will be less than the principal amount of the debt. The funds may also invest in currency-indexed securities. Typically, these are short-term or intermediate-term debt securities having a value at maturity, and/or an interest rate, determined by reference to one or more foreign currencies. The currency-indexed securities purchased by the funds may make payments based on a formula. The payment of principal or periodic interest may be calculated as a multiple of the movement of one currency against another currency, or against an index. These investments may entail increased risk to principal and increased price volatility. Borrowing for Leverage Strategic Investment Grade Bond Fund may borrow money from banks to buy securities. It will borrow only if it can do so without putting up assets as security for a loan. This investment technique may subject Strategic Investment Grade Bond Fund to greater risks and costs than funds that do not borrow. These risks may include the possible reduction of income and the possibility that Strategic Investment Grade Bond Fund's net asset value per share will fluctuate more than funds that don't borrow, since Strategic Investment Grade Bond Fund pays interest on borrowing and interest expense affects the fund's share price and yield. Borrowing is subject to the limitations under the Investment Company Act of 1940. Bond Fund's fundamental investment policy on borrowing is different and is set forth under "Investment Restrictions" on page 29 of this Prospectus. Although both funds are authorized to borrow money, neither fund has any present plans to borrow money. Participation Interests Both funds may acquire participation interests in loans that are made to U.S. or foreign companies (the "borrower"). They may be interests in, or assignments of, the loan and are acquired from banks or brokers that have made the loan or are members of the lending syndicate. No more than 5% of each fund's net assets can be invested in participation interest of the same issuer. See "Illiquid and Restricted Securities." Asset-Backed Securities. Both funds may invest in asset-backed securities. Asset-backed securities are fractional interests in pools of consumer loans and other trade receivables, similar to mortgage-backed securities. They are issued by trusts and special purpose corporations. They are backed by a pool of assets, such as credit card or auto loan receivables, which are the obligations of a number of different parties. Preferred Stocks The funds may invest in common and preferred stocks issued by domestic or foreign corporations. Municipal Securities The funds may invest in municipal bonds, municipal notes, tax-exempt commercial paper, certificates of participation and other debt obligations issued by or on behalf of the states and the District of Columbia, their political subdivisions, or any commonwealth, territory or possession of the United States or their respective agencies, instrumentalities or authorities. Money Market Instruments Bond Fund may invest in high quality, short-term money market securities which include 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 issuers; bank participation certificates; and certificates of deposit and bankers acceptance (time drafts drawn on commercial banks usually in connection with international transactions) of banks and savings and loan association. Strategic Investment Grade Bond Fund has a substantially similar policy with respect to money market instruments. Investment Restrictions Strategic Investment Grade Bond Fund and Bond Fund have certain investment restrictions that, together with their investment objectives, are fundamental policies, changeable only by shareholder approval. Set forth below is a summary of these investment restrictions which are different for each fund. Other investment restrictions for each fund are substantially the same. Under these fundamental policies, the fund named cannot do the following: (1) with respect to Bond Fund it will not borrow money or enter into reverse repurchase agreements, except that it may borrow money from banks and enter into reverse repurchase agreements as a temporary measure for extraordinary or emergency purposes (but not for the purpose of making investments) provided that the aggregate amount of all such borrowings and commitments under such agreements does not, at the time of borrowing or of entering into such an agreement, exceed 10% of its total assets taken at current market value; it will not purchase additional portfolio securities at any time that the aggregate amount of its borrowings and its commitments under reverse repurchase agreements exceed 5% of its assets (for purposes of this restriction, entering into portfolio lending agreements shall not be deemed to constitute borrowing money); (2) with respect to Strategic Investment Grade Bond Fund it will not buy securities of an issuer which, together with any predecessor, has been in operation for less than three years, if as a result, the aggregate of such investments would exceed 5% of the value of its total assets; Bond Fund has the same policy, but it is not a fundamental policy; (3) with respect to Bond Fund it will not pledge, mortgage or hypothecate its assets, except that, to secure permitted borrowings, it may pledge securities having a market value at the time of the pledge not exceeding 15% of the cost of Bond Fund's total assets and except in connection with permitted transactions in options, futures contracts and options on futures contracts, and except for reverse repurchase agreements and securities lending; (4) with respect to Strategic Investment Grade Bond Fund it will not buy or sell commodities or commodity contracts, including futures contracts, however, it may buy and sell any of the hedging instruments which it may use as approved by the Board, whether or not such hedging instrument is considered to be a commodity or commodity contract; Bond Fund has no fundamental policy in this regard; (5) with respect to Strategic Investment Grade Bond Fund it may not buy securities on margin, except that Strategic Investment Grade Bond Fund may make margin deposits in connection with any of the hedging instruments which it may use; Bond Fund has no fundamental policy in this regard. In connection with qualifications of its shares in certain states, Strategic Investment Grade Bond Fund has undertaken that it will not (a) invest in real estate limited partnerships or (b) invest more than 10% of its total assets in other investment companies as defined in the Investment Company Act, except in connection with a merger, consolidation, reorganization or acquisition of assets. Portfolio Turnover Holding a portfolio security for any particular length of time is not generally a consideration in investment decisions. As a result of each fund's investment policies and market factors, their portfolio securities may be actively traded to try to benefit from short-term yield differences among debt securities. As a result, portfolio turnover of each of the funds may be higher than other mutual funds. This strategy may involve greater transaction costs from brokerage commissions and dealer mark-ups. Neither fund however, incurs significant brokerage costs for U.S. Government Securities. Additionally, high portfolio turnover may result in increased short-term capital gains and affect the ability of each of the funds to qualify for tax deductions for payments made to shareholders as a "regulated investment company" under the Internal Revenue Code. Strategic Investment Grade Bond Fund and Bond Fund each qualified in their last fiscal year and intend to do so in the coming year, although they reserve the right not to qualify. For the fiscal years ended September 30, 1994, and December 31, 1994 the portfolio turnover rate for Strategic Investment Grade Bond Fund and Bond Fund was 68.6% and 70.3%, respectively. For the six months ended March 31, 1995 (unaudited), the portfolio turnover rate for Strategic Investment Grade Bond Fund and Bond Fund was 42.6% and 13.9%, respectively. Description of Brokerage Practices The brokerage practices of the two funds are substantially similar and are conducted in accordance with the terms and conditions of each fund's investment advisory agreement and other brokerage policies of the Manager. Purchases of U.S. Government Securities, money market instruments and debt obligations by both funds are normally principal transactions at net prices and each fund incurs little or no brokerage costs for these transactions. Principal transactions include purchases of securities from underwriters, which include a commission or concession paid by the issuer to the underwriter, and purchases from dealers which include a spread between the bid and asked price. When brokers are used, the Manager is permitted to select qualified brokers to obtain best execution. Brokerage is allocated among brokers under the supervision of the Manager's executive officers and the Manager is permitted to consider brokers which have sold shares of the funds and other OppenheimerFunds in selecting brokers for fund transactions. Commissions paid to such brokers may be higher than commissions charged by other qualified brokers. The Manager is also permitted to allocate brokerage commissions from fund transactions to brokers to obtain research services to assist the Manager in the investment-making decision process. Please refer to the Statement of Additional Information for each fund for further information on each fund's brokerage practices. Expense Ratios and Performance The ratio of expenses to average net assets for Strategic Investment Grade Bond Fund for the fiscal year ended September 30, 1994 was 1.33% for Class A shares and 2.12% for Class B shares (after reimbursement). The ratio of expenses with respect to Class A shares was 1.38% and 2.16% for Class B shares (before reimbursement). The ratio of expenses to average net assets for Bond Fund for the fiscal year ended December 31, 1994, for its Class A and Class B shares was 1.06% and 1.78%, respectively. For the six months ended March 31, 1995 (unaudited) (annualized) the ratio of expenses to average net assets for Strategic Investment Grade Bond Fund for its Class A and Class B shares was 1.43% and 2.18%, respectively. For the six months ended March 31, 1995 (unaudited) (annualized), the ratio of expenses to average net assets for Bond Fund was 1.04% for its Class A shares and 1.80% for its Class B shares. Further details are set forth under "Fund Expenses" and "Financial Highlights" in Strategic Investment Grade Bond Fund's Prospectus dated February 1, 1995, supplemented July 14, 1995, and in Strategic Investment Grade Bond Fund's Annual Report as of September 30, 1994 and financial statements (unaudited) as of March 31, 1995, and Bond Fund's Annual Report as of December 31, 1994, which are included in the Statement of Additional Information. The standardized yield for Strategic Investment Grade Bond Fund for the 30 day period ended March 31, 1995 was 6.95% for Class A shares and 6.55% for Class B shares. The average annual total return on an investment in Class A shares of Strategic Investment Grade Bond Fund for the one-year period ended March 31, 1995 and from the period April 22, 1992 (commencement of operations) through March 31, 1995 was -1.61% and 3.71%, respectively. The average annual return at net asset value on an investment in Class A shares of Strategic Investment Grade Bond Fund for the one-year period ended March 31, 1995 and from the period April 22, 1992 (commencement of operations) through March 31 1995 was 3.30% and 5.44%, respectively. The average annual total return on an investment in Class B shares of Strategic Investment Grade Bond Fund for the one-year period ended March 31, 1995 and from the period November 30, 1992 (inception of the class) through March 31, 1995 was -2.47% and 3.26%. The average annual return at net asset value on an investment in Class B shares of Strategic Investment Grade Bond Fund for the one-year period ended March 31, 1995 and from the period November 30, 1992 (inception of the class) through March 31 1995 was 2.35% and 4.43%, respectively. The standardized yield for Bond Fund for the 30 day period ended March 31, 1995 was 6.12% for Class A shares and 5.60% for Class B shares. The average annual total return on an investment in Bond Fund's Class A shares for the one-year period ended March 31, 1995 was -.76% and for the five years ended March 31, 1995 was 7.31%. The average annual return on an investment in Class A shares for the period April 15, 1988 (the date it became an open-end fund) to March 31, 1995 was 7.28%. The average annual return at net asset value for Class A shares for the one-year period ended March 31, 1995, for the five year period ended March 31, 1995 and for the period from April 15, 1988 to March 31, 1995, was 4.19%, 8.36% and 8.03%, respectively. The average annual return on an investment in Class B shares for the one-year period ended March 31, 1995 and from the period May 1, 1993 (inception of the class) to March 31, 1995 was -1.35% and .11%, respectively. The average annual return at net asset value on Bond Fund Class B shares for the one-year ended March 31, 1995 and for the period May 1, 1993 through March 31, 1995 was 3.52% and 2.03%, respectively. The increase of the management fee rate for Bond Fund was not in effect during the time periods noted above. If the new higher fee rate had been in effect, the standard yield and average annual returns would have been lower. However, the higher fee rate would have been identical to that of Strategic Investment Grade Bond Fund. Please refer to the Statement of Additional Information, which is incorporated by reference, for further information concerning the investment performance of the funds. More information on performance of each fund as compared to the market, may be found in the section "Comparing the Fund's Performance To the Market" in the respective prospectus of each fund. Shareholder Services The policies of Strategic Investment Grade Bond Fund and Bond Fund with respect to minimum initial investments and subsequent investments by its shareholders are substantially the same. Both Strategic Investment Grade Bond Fund and Bond Fund offer the following privileges: (i) Right of Accumulation, (ii) Letter of Intent, (iii) reinvestment of dividends and distributions at net asset value, (iv) net asset value purchases by certain individuals and entities, (v) Asset Builder (automatic investment) Plans, (vi) Automatic Withdrawal and Exchange Plans for shareholders who own shares of the fund valued at $5,000 or more, (vii) reinvestment of net redemption proceeds at net asset value within six months of a redemption, (viii) AccountLink and PhoneLink arrangements, (ix) exchanges of shares for shares of the same class of certain other funds at net asset value, and (x) telephone redemption and exchange privileges. Shareholders may purchase shares through OppenheimerFunds AccountLink, which links a shareholder account to an account at a bank or financial institution and enables shareholders to send money electronically between those accounts to perform a number of types of account transactions. This includes the purchase of shares through the automated telephone system (PhoneLink). Exchanges can also be made by telephone, or automatically through PhoneLink. After AccountLink privileges have been established with a bank account, shares may be purchased by telephone in an amount up to $100,000. Shares of either Fund may be exchanged for shares of certain OppenheimerFunds at net asset value per share; however, shares of a particular class may be exchanged only for shares of the same class of other OppenheimerFunds. At present, not all of the OppenheimerFunds offer the same classes of shares. Shareholders of the funds may redeem their shares by written request or by telephone request in an amount up to $50,000 in any seven-day period. Shareholders may arrange to have share redemption proceeds wired to a pre-designated account at a U.S. bank or other financial institution that is an ACH member, through AccountLink. There is no dollar limit on telephone redemption proceeds sent to a bank account when AccountLink has been established. Shareholders may also redeem shares automatically by telephone by using PhoneLink. Shareholders may also have the Transfer Agent send redemption proceeds of $2,500 or more by Federal Funds wire to a designated commercial bank which is a member of the Federal Reserve wire system. Shareholders of the funds have up to six months to reinvest redemption proceeds of their Class A shares in Class A shares of the funds or other OppenheimerFunds without paying a sales charge. Strategic Investment Grade Bond Fund and Bond Fund may redeem accounts valued at less than $200 if the account has fallen below such stated amount for reasons other than market value fluctuations. Both funds offer Automatic Withdrawal and Automatic Exchange Plans under certain conditions. Rights of Shareholders Class A shares of Strategic Investment Grade Bond Fund and Class A shares of Bond Fund are each sold an initial sales charge of 4.75% on purchases of less than $50,000. The reduced front-end sales loads on larger purchases are the same for each fund. If Class A shares of either fund are purchased as part of an investment of at least $1 million in shares of one or more OppenheimerFunds, there is no initial sales charge, but if shares are sold within 18 months after purchase, there may be imposed a contingent deferred sales charge ("CDSC") which will vary, depending on the amount invested. Class B shares of Strategic Investment Grade Bond Fund, and Class B shares of Bond Fund are sold at net asset value per share, without an initial sales charge. However, if Class B shares of either fund are sold within six years of purchase, there is a CDSC, depending on how long the shares are owned. Both of the funds have the same CDSC with respect to their Class B shares. The shares of each such fund, including shares of each class, entitle the holder to one vote per share on the election of trustees and all other matters submitted to shareholders of the fund. Class A and Class B shares of Strategic Investment Grade Bond Fund and the Class A and Class B shares of Bond Fund which Strategic Investment Grade Bond Fund shareholders will receive in the Reorganization participate equally in the funds' dividends and distributions and in the funds' net assets upon liquidation, after taking into account the different expenses paid by each class. Distributions and dividends for each class will be different and Class B dividends and distributions will be lower than Class A dividends. It is not contemplated that Strategic Investment Grade Bond Fund or Bond Fund will hold regular annual meetings of shareholders. Under the Investment Company Act, shareholders of Strategic Investment Grade Bond Fund do not have rights of appraisal as a result of the transactions contemplated by the Reorganization Agreement. However, they have the right at any time prior to the consummation of such transaction to redeem their shares at net asset value. Shareholders of both of the funds have the right, under certain circumstances, to remove a Trustee and will be assisted in communicating with other shareholders for such purpose. Strategic Investment Grade Bond Fund was organized in 1991 as a Massachusetts business trust. Bond Fund is one of two series of Oppenheimer Integrity Funds (the "Trust"). The Trust was organized in 1982 as a multi-series Massachusetts business trust under the name MassMutual Liquid Assets Trust and changed its name to MassMutual Integrity Funds on April 15, 1988. Bond Fund was reorganized from a closed-end investment company into a series of the Trust on April 15, 1988. On March 29, 1991, the Trust changed its name from MassMutual Integrity Funds to Oppenheimer Integrity Funds and Bond Fund changed its name from MassMutual Investment Grade Bond Fund to Oppenheimer Investment Grade Bond Fund. On July 10, 1995 the Fund changed its name to Oppenheimer Bond Fund. Bond Fund, as a series of the Trust, issues its own shares, has its own investment portfolio and its own assets and liabilities. Both Strategic Investment Grade Bond Fund and the Trust are open-end, diversified management investment companies, with an unlimited number of authorized shares of beneficial interest. Strategic Investment Grade Bond Fund is governed by a Board of Trustees (referred to as the "Board" with respect to Strategic Investment Grade Bond Fund and the "Board of Oppenheimer Integrity Funds" with respect to Bond Fund). The Board of Oppenheimer Integrity Funds has established three classes of shares with respect to Bond Fund, Class A, Class B and Class C. With respect to Strategic Investment Grade Bond Fund, the Board has established two classes of shares, Class A and Class B. With respect to Strategic Investment Grade Bond Fund and Bond Fund, each class has its own dividends and distributions and pays certain expenses which will be different for the different classes. Each class may have a different net asset value. Each share has one vote at shareholder meetings, with fractional shares voting proportionately. Shares of a particular class vote together on matters that affect that class. Most Amendments to the Declaration of Trust of each of the funds require the approval of a "majority" (as defined in the Investment Company Act) of a fund's shareholders. Under certain circumstances, shareholders of the funds may be held personally liable as partners for the funds' obligations, and under each Declaration of Trust such a shareholder is entitled to indemnification rights by the funds; the risk of a shareholder incurring any such loss is limited to the remote circumstances in which the fund is unable to meet its obligations. Management and Distribution Arrangements The Manager, located at Two World Trade Center, New York, New York 10048-0203, acts as the investment adviser for Strategic Investment Grade Bond Fund and also acts as the investment adviser to Bond Fund. Prior to July 10, 1995, the manager had contracted with Massachusetts Mutual Life Insurance Company ("MassMutual") to act as Bond Fund's Sub-Adviser. Effective July 10, 1995, the Sub-Advisory Agreement between the manager and MassMutual terminated and the Manager is responsible for selecting Bond Fund's investments as well as for its day-to-day business, pursuant to an investment advisory dated July 10, 1995. The terms and conditions of the investment advisory agreement for each fund are substantially the same. The monthly management fee payable to the Manager by each fund is set forth under "Synopsis - Investment Advisory and Distribution and Service Plan Fees." The 12b-1 Distribution and Service Plan fees paid by Strategic Investment Grade Bond Fund with respect to Class A and Class B shares and paid by Bond Fund with respect to its Class A and Class B shares of Bond Fund are set forth above under "Synopsis - Investment Advisory and Distribution and Service Plan Fees." Pursuant to each investment advisory agreement, the Manager supervises the investment operations of the funds and the composition of their portfolios, and furnishes advice and recommendations with respect to investments, investment policies and the purchase and sale of securities. Both investment advisory agreements require the Manager to provide Strategic Investment Grade Bond Fund and Bond Fund with adequate office space, facilities and equipment and to provide and supervise the activities of all administrative and clerical personnel required to provide effective administration for the funds, including the compilation and maintenance of records with respect to their operations, the preparation and filing of specified reports, and composition of proxy materials and registration statements for continuous public sale of shares of each fund. The management fee paid by Strategic Investment Grade Bond Fund for the six months ended March 31, 1995 was $144,908 (unaudited). For the fiscal year ended September 30, 1994 the management fee paid by Strategic Investment Grade Bond Fund was $319,025. For the fiscal year ended December 31, 1994, the management fee paid by Bond Fund to the Manager was $522,205, of which $362,287 was paid by the Manager to the Sub-Advisor. For the six months ended March 31, 1995 (unaudited), the fee paid by Bond Fund was $259,096, of which $180,072 were paid to the Sub-Advisor by the Manager. The new higher management fee rate approved by Bond Fund shareholders was not in effect during these time periods. Had they been in effect, the management fees paid by Bond Fund to the Manager would have been higher. However, independently of the advisory agreement with Strategic Investment Grade Bond Fund, the Manager has undertaken that the total expenses of Strategic Investment Grade Bond Fund in any fiscal year (including the management fee but exclusive of taxes, interest, brokerage commissions, distribution plan payments and any extraordinary non- recurring expenses, including litigation) shall not exceed the most stringent state regulatory limitation on fund expenses applicable to the funds. The Manager has made the same undertaking with respect to Bond Fund. At present, that limitation is imposed by California and limits expenses (with specified exclusions) to 2.5% of the first $30 million of average annual net assets, 2% of the next $70 million and 1.5% of average annual net assets in excess of $100 million. Until November 24, 1993, the Manager had also undertaken to assume Strategic Investment Grade Bond Fund's expenses (other than extraordinary non-recurring expenses) to enable Strategic Investment Grade Bond Fund to pay a dividend of $.378 per share per annum, with the limitation that the dividend could not exceed Strategic Investment Grade Bond Fund's annual gross earnings per share. Strategic Investment Grade Bond Fund yield and total return were higher during that period than they otherwise would have been. The undertaking terminated November 24, 1994. Any assumption of either fund's expenses, would lower Strategic Investment Grade Bond Fund's or Bond Fund's overall expense ratio and increase its total return during each period in which expenses are limited. The Manager reserves the right to change or eliminate the expense limitations at any time and there can be no assurance as to the duration of the expense limitation by either fund. It is not expected that Investment Grade Bond Fund will maintain a fixed dividend rate for either Class A and Class B shares and there can be no assurance as to the payment of any dividends or the realization of any capital gains by either fund. The Manager is controlled by Oppenheimer Acquisition Corp., a holding company owned in part by senior management of the Manager and ultimately controlled by Massachusetts Mutual Life Insurance Company, a mutual life insurance company that also advises pension plans and investment companies. The Manager has operated as an investment company adviser since 1959. The Manager and its affiliates currently advise investment companies with combined net assets aggregating over $35 billion as of June 30, 1995, with more than 2.4 million shareholder accounts. Oppenheimer Shareholder Services, a division of the Manager, acts as transfer and shareholder servicing agent on an at-cost basis for Strategic Investment Grade Bond Fund and Bond Fund and for certain other open-end funds managed by the Manager and its affiliates. The Distributor, under a General Distributor's Agreement for each of the funds, acts as the principal underwriter in the continuous public offering of Strategic Investment Grade Bond Fund's Class A and Class B shares, and Bond Fund's Class A, Class B and Class C shares. During Strategic Investment Grade Bond Fund's fiscal year ended September 30, 1994, the aggregate sales charges on sales of Strategic Investment Grade Bond Fund's Class A shares were $25,282, of which the Distributor and an affiliated broker-dealer retained in the aggregate $10,165. During Strategic Investment Grade Bond Fund's fiscal year ended December 31, 1994, the contingent deferred sales charges collected on Strategic Investment Grade Bond Fund's Class B shares totalled $21,115. For the fiscal year ended December 31, 1994, the aggregate amount of sales charges on sales of Bond Fund's Class A shares was $143,088, of which $67,090 was retained by the Distributor and an affiliated broker-dealer. Contingent deferred sales charges collected by the Distributor on the redemption of Class B shares for the fiscal year ended December 31, 1994 totaled $8,916. Purchase of Additional Shares Class A shares of Strategic Investment Grade Bond Fund and Class A shares of Bond Fund may be purchased with an initial sales charge of 4.75% for purchases of less than $50,000. The sales charge of 4.75% is reduced for purchases of either fund's Class A shares of $50,000 or more. If shares of Class A of either fund are redeemed within 18 months of the end of the calendar month of their purchase, a contingent sales charge may be deducted from the redemption proceeds. Class B shares of Strategic Investment Grade Bond Fund and Bond Fund are sold at net asset value without an initial sales charge, however, if Class B shares of either fund are redeemed within six years of the end of the calendar month of their purchase, a contingent deferred sales charge may be deducted. The initial sales charge and contingent deferred sales charge on Class A shares and Class B shares of Bond Fund will only affect shareholders of Strategic Investment Grade Bond Fund to the extent that they desire to make additional purchases of shares of Bond Fund in addition to the shares which they will receive as a result of the Reorganization. The Class A and Class B shares to be issued under the Reorganization Agreement will be issued by Bond Fund at net asset value. Future dividends and capital gain distributions of Bond Fund, if any, may be reinvested without sales charge. Any Strategic Investment Grade Bond Fund shareholder who is entitled to a reduced sales charge on additional purchases by reason of a Letter of Intent or Right of Accumulation based upon holdings of shares of Strategic Investment Grade Bond Fund will continue to be entitled to a reduced sales charge on any future purchase of shares of Bond Fund. METHOD OF CARRYING OUT THE REORGANIZATION The consummation of the transactions contemplated by the Reorganization Agreement is contingent upon the approval of the Reorganization by the shareholders of Strategic Investment Grade Bond Fund and the receipt of the opinions and certificates set forth in Sections 10 and 11 of the Reorganization Agreement and the occurrence of the events described in those Sections. Under the Reorganization Agreement, all the assets of Strategic Investment Grade Bond Fund, excluding the Cash Reserve, will be delivered to Bond Fund in exchange for Class A and Class B shares of Bond Fund. The Cash Reserve to be retained by Strategic Investment Grade Bond Fund will be sufficient in the discretion of the Board for the payment of Strategic Investment Grade Bond Fund's liabilities, and Strategic Investment Grade Bond Fund's expenses of liquidation. Assuming the shareholders of Strategic Investment Grade Bond Fund approve the Reorganization, the actual exchange of assets is expected to take place on September 22, 1995, or as soon thereafter as is practicable (the "Closing Date") on the basis of net asset values as of the close of business on the business day preceding the Closing Date (the "Valuation Date"). Under the Reorganization Agreement, all redemptions of shares of Strategic Investment Grade Bond Fund shall be permanently suspended on the Valuation Date; only redemption requests received in proper form on or prior to the close of business on that date shall be fulfilled by it; redemption requests received by Strategic Investment Grade Bond Fund after that date will be treated as requests for redemptions of Class A or Class B shares of Bond Fund to be distributed to the shareholders requesting redemption. The exchange of assets for shares will be done on the basis of the per share net asset value of the Class A and Class B shares of Bond Fund, and the value of the assets of Strategic Investment Grade Bond Fund to be transferred as of the close of business on the Valuation Date, valued in the manner used by Bond Fund in the valuation of assets. Bond Fund is not assuming any of the liabilities of Strategic Investment Grade Bond Fund, except for portfolio securities purchased which have not settled and outstanding shareholder redemption and dividend checks. The net asset value of the shares transferred by Bond Fund to Strategic Investment Grade Bond Fund will be the same as the value of the assets of the portfolio received by Bond Fund. For example, if, on the Valuation Date, Strategic Investment Grade Bond Fund were to have securities with a market value of $95,000 and cash in the amount of $10,000 (of which $5,000 was to be retained by it as the Cash Reserve), the value of the assets which would be transferred to Bond Fund would be $100,000. If the net asset value per share of Bond Fund were $10 per share at the close of business on the Valuation Date, the number of shares to be issued would be 10,000 ($100,000 divided by $10). These 10,000 shares of Bond Fund would be distributed to the former shareholders of Strategic Investment Grade Bond Fund. This example is given for illustration purposes only and does not bear any relationship to the dollar amounts or shares expected to be involved in the Reorganization. After the Closing Date, Strategic Investment Grade Bond Fund will distribute on a pro rata basis to its shareholders of record on the Valuation Date the Class A and Class B shares of Bond Fund received by Strategic Investment Grade Bond Fund at the closing, in liquidation of the outstanding shares of Strategic Investment Grade Bond Fund, and the outstanding shares of Strategic Investment Grade Bond Fund will be cancelled. To assist Strategic Investment Grade Bond Fund in this distribution, Bond Fund will, in accordance with a shareholder list supplied by Strategic Investment Grade Bond Fund, cause its transfer agent to credit and confirm an appropriate number of shares of Bond Fund to each shareholder of Strategic Investment Grade Bond Fund. Certificates for Class A and Class B shares of Bond Fund will be issued upon written request of a former shareholder of Strategic Investment Grade Bond Fund but only for whole shares with fractional shares credited to the name of the shareholder on the books of Bond Fund. Former shareholders of Strategic Investment Grade Bond Fund who wish certificates representing their shares of Bond Fund must, after receipt of their confirmations, make a written request to OSS, P.O. Box 5270, Denver, Colorado 80217. Shareholders of Strategic Investment Grade Bond Fund holding certificates representing their shares will not be required to surrender their certificates to anyone in connection with the Reorganization. After the Reorganization, however, it will be necessary for such shareholders to surrender such certificates in order to redeem, transfer, pledge or exchange any shares of Bond Fund. Under the Reorganization Agreement, within one year after the Closing Date, Strategic Investment Grade Bond Fund shall: (a) either pay or make provision for all of its debts and taxes; and (b) either (i) transfer any remaining amount of the Cash Reserve to Bond Fund, if such remaining amount is not material (as defined below) or (ii) distribute such remaining amount to the shareholders of Strategic Investment Grade Bond Fund who were such on the Valuation Date. Such remaining amount shall be deemed to be material if the amount to be distributed, after deducting the estimated expenses of the distribution, equals or exceeds one cent per share of the number of Strategic Investment Grade Bond Fund shares outstanding on the Valuation Date. Within one year after the Closing Date, Strategic Investment Grade Bond Fund will complete its liquidation. Under the Reorganization Agreement, either Strategic Investment Grade Bond Fund or Bond Fund may abandon and terminate the Reorganization Agreement without liability if the other party breaches any material provision of the Reorganization Agreement or, if prior to the closing, any legal, administrative or other proceeding shall be instituted or threatened (i) seeking to restrain or otherwise prohibit the transactions contemplated by the Reorganization Agreement and/or (ii) asserting a material liability of either party, which proceeding or liability has not been terminated or the threat thereto removed prior to the Closing Date. In the event that the Reorganization Agreement is not consummated for any reason, the Board will consider and may submit to the shareholders other alternatives. MISCELLANEOUS Additional Information Financial Information The Reorganization will be accounted for by the surviving fund in its financial statements similar to a pooling. Further financial information as to Strategic Investment Grade Bond Fund is contained in its current Prospectus, which is available without charge from Oppenheimer Shareholder Services, the Transfer Agent, P.O. Box 5270, Denver, Colorado 80217, and is incorporated herein by reference, and in its Annual Report as of September 30, 1994, and unaudited financial statements as of March 31, 1995, which are included in the Additional Statement. Financial information for Bond Fund is contained in its current Prospectus accompanying this Proxy Statement and Prospectus and incorporated herein by reference, and in its Annual Report as of December 31, 1994, which are included in the Additional Statement. Public Information Additional information about Strategic Investment Grade Bond Fund and Bond Fund is available, as applicable, in the following documents which are incorporated herein by reference: (i) Bond Fund's Prospectus dated July 10, 1995, supplemented July 14, 1995, accompanying this Proxy Statement and Prospectus and incorporated herein; (ii) Strategic Investment Grade Bond Fund's Prospectus dated February 1, 1995, supplemented July 14, 1995, which may be obtained without charge by writing to OSS, P.O. Box 5270, Denver, Colorado 80217; (iii) Bond Fund's Annual Report as of December 31, 1994, which may be obtained without charge by writing to OSS at the address indicated above; and (iv) Strategic Investment Grade Bond Fund's Annual Report as of September 30, 1994 and unaudited Semi-Annual Report as of March 31, 1995, which may be obtained without charge by writing to OSS at the address indicated above. All of the foregoing documents may be obtained by calling the toll-free number on the cover of this Proxy Statement and Prospectus. Additional information about the following matters is contained in the Statement of Additional Information, which incorporates by reference the Bond Fund Statement of Additional Information dated July 10, 1995, and Strategic Investment Grade Bond Fund's Prospectus dated February 1, 1995, supplemented July 14, 1995, and Statement of Additional Information dated February 1, 1995, supplemented July 14, 1995; the organization and operation of Bond Fund and Strategic Investment Grade Bond Fund; more information on investment policies, practices and risks; information about Strategic Investment Grade Bond Fund's and Bond Fund's Boards of Trustees and their responsibilities; a further description of the services provided by Bond Fund's and Strategic Investment Grade Bond Fund's investment adviser, distributor, and transfer and shareholder servicing agent; dividend policies; tax matters; an explanation of the method of determining the offering price of the shares and/or contingent deferred sales charges, as applicable of Class A, B and C shares of Bond Fund and Class A and Class B shares of Strategic Investment Grade Bond Fund; purchase, redemption and exchange programs; the different expenses paid by each class of shares; and distribution arrangements. Strategic Investment Grade Bond Fund and Bond Fund are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith, file reports and other information with the SEC. Proxy material, reports and other information about Strategic Investment Grade Bond Fund and Bond Fund which are of public record can be inspected and copied at public reference facilities maintained by the SEC in Washington, D.C. and certain of its regional offices, and copies of such materials can be obtained at prescribed rates from the Public Reference Branch, Office of Consumer Affairs and Information Services, SEC, Washington, D.C. 20549. OTHER BUSINESS Management of Strategic Investment Grade Bond Fund knows of no business other than the matters specified above which will be presented at the Meeting. Since matters not known at the time of the solicitation may come before the Meeting, the proxy as solicited confers discretionary authority with respect to such matters as properly come before the Meeting, including any adjournment or adjournments thereof, and it is the intention of the persons named as attorneys-in-fact in the proxy to vote this proxy in accordance with their judgment on such matters. By Order of the Board of Trustees George C. Bowen, Secretary August 21, 1995 285 AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of April 18, 1995 by and between Oppenheimer Strategic Investment Grade Bond Fund ("Strategic Investment Grade Bond Fund"), a Massachusetts business trust, and Oppenheimer Bond Fund ("Bond Fund"), a series of Oppenheimer Integrity Funds, a Massachusetts business trust (the "Trust"). W I T N E S S E T H: WHEREAS, the parties are each open-end investment companies of the management type; and WHEREAS, the parties hereto desire to provide for the reorganization pursuant to Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), of Strategic Investment Grade Bond Fund through the acquisition by Bond Fund of substantially all of the assets of Strategic Investment Grade Bond Fund in exchange for the voting shares of beneficial interest ("shares") of Class A and Class B shares of Bond Fund and the assumption by Bond Fund of certain liabilities of Strategic Investment Grade Bond Fund, which Class A and Class B shares of Bond Fund are thereafter to be distributed by Strategic Investment Grade Bond Fund pro rata to its shareholders in complete liquidation of Strategic Investment Grade Bond Fund and complete cancellation of its shares; NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties hereto agree as follows: 1. The parties hereto hereby adopt this Agreement and Plan of Reorganization (the "Agreement") pursuant to Section 368(a)(1) of the Code as follows: The reorganization will be comprised of the acquisition by Bond Fund of substantially all of the properties and assets of Strategic Investment Grade Bond Fund in exchange for Class A and Class B shares of Bond Fund and the assumption by Bond Fund of certain liabilities of Strategic Investment Grade Bond Fund, followed by the distribution of such Class A and Class B shares of Bond Fund shares to the Class A and Class B shareholders of Strategic Investment Grade Bond Fund in exchange for their Class A and Class B shares of Strategic Investment Grade Bond Fund, all upon and subject to the terms of the Agreement hereinafter set forth. The share transfer books of Strategic Investment Grade Bond Fund will be permanently closed at the close of business on the Valuation Date (as hereinafter defined) and only redemption requests received in proper form on or prior to the close of business on the Valuation Date shall be fulfilled by Strategic Investment Grade Bond Fund; redemption requests received by Strategic Investment Grade Bond Fund after that date shall be treated as requests for the redemption of the shares of Bond Fund to be distributed to the shareholder in question as provided in Section 5. 2. On the Closing Date (as hereinafter defined), all of the assets of Strategic Investment Grade Bond Fund on that date, excluding a cash reserve (the "Cash Reserve") to be retained by Strategic Investment Grade Bond Fund sufficient in its discretion for the payment of the expenses of Strategic Investment Grade Bond Fund's dissolution and its liabilities, but not in excess of the amount contemplated by Section 10E, shall be delivered as provided in Section 8 to Bond Fund, in exchange for and against delivery to Strategic Investment Grade Bond Fund on the Closing Date of a number of Class A and Class B shares of Bond Fund, having an aggregate net asset value equal to the value of the assets of Strategic Investment Grade Bond Fund so transferred and delivered. 3. The net asset value of Class A and Class B shares of Bond Fund and the value of the assets of Strategic Investment Grade Bond Fund to be transferred shall in each case be determined as of the close of business of the New York Stock Exchange on the Valuation Date. The computation of the net asset value of the Class A and Class B shares of Bond Fund and the Class A and Class B shares of Strategic Investment Grade Bond Fund shall be done in the manner used by Bond Fund and Strategic Investment Grade Bond Fund, respectively, in the computation of such net asset value per share as set forth in their respective prospectuses. The methods used by Bond Fund in such computation shall be applied to the valuation of the assets of Strategic Investment Grade Bond Fund to be transferred to Bond Fund. Strategic Investment Grade Bond Fund shall declare and pay, immediately prior to the Valuation Date, a dividend or dividends which, together with all previous such dividends, shall have the effect of distributing to Strategic Investment Grade Bond Fund's shareholders all of Strategic Investment Grade Bond Fund's investment company taxable income for taxable years ending on or prior to the Closing Date (computed without regard to any dividends paid) and all of its net capital gain, if any, realized in taxable years ending on or prior to the Closing Date (after reduction for any capital loss carry-forward). 4. The closing (the "Closing") shall be at the office of Oppenheimer Management Corporation (the "Agent"), Two World Trade Center, Suite 3400, New York, New York 10048, at 4:00 P.M. New York time on September 22, 1995, or at such other time or place as the parties may designate or as provided below (the "Closing Date"). The business day preceding the Closing Date is herein referred to as the "Valuation Date." In the event that on the Valuation Date either party has, pursuant to the Investment Company Act of 1940, as amended (the "Act"), or any rule, regulation or order thereunder, suspended the redemption of its shares or postponed payment therefor, the Closing Date shall be postponed until the first business day after the date when both parties have ceased such suspension or postponement; provided, however, that if such suspension shall continue for a period of 60 days beyond the Valuation Date, then the other party to the Agreement shall be permitted to terminate the Agreement without liability to either party for such termination. 5. As soon as practicable after the closing, Strategic Investment Grade Bond Fund shall distribute on a pro rata basis to the shareholders of Strategic Investment Grade Bond Fund on the Valuation Date the Class A and Class B shares of Bond Fund received by Strategic Investment Grade Bond Fund on the Closing Date in exchange for the assets of Strategic Investment Grade Bond Fund in complete liquidation of Strategic Investment Grade Bond Fund; for the purpose of the distribution by Strategic Investment Grade Bond Fund of Class A and Class B shares of Bond Fund to its shareholders, Bond Fund will promptly cause its transfer agent to: (a) credit an appropriate number of Class A and Class B shares of Bond Fund on the books of Bond Fund to each Class A and Class B shareholder, respectively of Strategic Investment Grade Bond Fund in accordance with a list (the "Shareholder List") of its shareholders received from Strategic Investment Grade Bond Fund; and (b) confirm an appropriate number of Class A and Class B shares of Bond Fund to each shareholder of Strategic Investment Grade Bond Fund; certificates for Class A and Class B shares of Bond Fund will be issued upon written request of a former shareholder of Strategic Investment Grade Bond Fund but only for whole shares, with fractional shares credited to the name of the shareholder on the books of Bond Fund. The Shareholder List shall indicate, as of the close of business on the Valuation Date, the name and address of each shareholder of Strategic Investment Grade Bond Fund, indicating his or her share balance. Strategic Investment Grade Bond Fund agrees to supply the Shareholder List to Bond Fund not later than the Closing Date. Shareholders of Strategic Investment Grade Bond Fund holding certificates representing their shares shall not be required to surrender their certificates to anyone in connection with the reorganization. After the Closing Date, however, it will be necessary for such shareholders to surrender their certificates in order to redeem, transfer or pledge the shares of Bond Fund which they received. 6. Within one year after the Closing Date, Strategic Investment Grade Bond Fund shall (a) either pay or make provision for payment of all of its liabilities and taxes, and (b) either (i) transfer any remaining amount of the Cash Reserve to Bond Fund, if such remaining amount (as reduced by the estimated cost of distributing it to shareholders) is not material (as defined below) or (ii) distribute such remaining amount to the shareholders of Strategic Investment Grade Bond Fund on the Valuation Date. Such remaining amount shall be deemed to be material if the amount to be distributed, after deduction of the estimated expenses of the distribution, equals or exceeds one cent per share of Strategic Investment Grade Bond Fund outstanding on the Valuation Date. 7. Prior to the Closing Date, there shall be coordination between the parties as to their respective portfolios so that, after the closing, Bond Fund will be in compliance with all of its investment policies and restrictions. At the Closing, Strategic Investment Grade Bond Fund shall deliver to Bond Fund two copies of a list setting forth the securities then owned by Strategic Investment Grade Bond Fund. Promptly after the Closing, Strategic Investment Grade Bond Fund shall provide Bond Fund a list setting forth the respective federal income tax bases thereof. 8. Portfolio securities or written evidence acceptable to Bond Fund of record ownership thereof by The Depository Trust Company or through the Federal Reserve Book Entry System or any other depository approved by Strategic Investment Grade Bond Fund pursuant to Rule 17f-4 and Rule 17f-5 under the Act shall be endorsed and delivered, or transferred by appropriate transfer or assignment documents, by Strategic Investment Grade Bond Fund on the Closing Date to Bond Fund, or at its direction, to its custodian bank, in proper form for transfer in such condition as to constitute good delivery thereof in accordance with the custom of brokers and shall be accompanied by all necessary state transfer stamps, if any. The cash delivered shall be in the form of certified or bank cashiers' checks or by bank wire or intra-bank transfer payable to the order of Bond Fund for the account of Bond Fund. Shares of Bond Fund representing the number of shares of Bond Fund being delivered against the assets of Strategic Investment Grade Bond Fund, registered in the name of Strategic Investment Grade Bond Fund, shall be transferred to Strategic Investment Grade Bond Fund on the Closing Date. Such shares shall thereupon be assigned by Strategic Investment Grade Bond Fund to its shareholders so that the shares of Bond Fund may be distributed as provided in Section 5. If, at the Closing Date, Strategic Investment Grade Bond Fund is unable to make delivery under this Section 8 to Bond Fund of any of its portfolio securities or cash for the reason that any of such securities purchased by Strategic Investment Grade Bond Fund, or the cash proceeds of a sale of portfolio securities, prior to the Closing Date have not yet been delivered to it or Strategic Investment Grade Bond Fund's custodian, then the delivery requirements of this Section 8 with respect to said undelivered securities or cash will be waived and Strategic Investment Grade Bond Fund will deliver to Bond Fund by or on the Closing Date and with respect to said undelivered securities or cash executed copies of an agreement or agreements of assignment in a form reasonably satisfactory to Bond Fund, together with such other documents, including a due bill or due bills and brokers' confirmation slips as may reasonably be required by Bond Fund. 9. Bond Fund shall not assume the liabilities (except for portfolio securities purchased which have not settled and for shareholder redemption and dividend checks outstanding) of Strategic Investment Grade Bond Fund, but Strategic Investment Grade Bond Fund will, nevertheless, use its best efforts to discharge all known liabilities, so far as may be possible, prior to the Closing Date. The cost of printing and mailing the proxies and proxy statements will be borne by Strategic Investment Grade Bond Fund. Strategic Investment Grade Bond Fund and Bond Fund will bear the cost of their respective tax opinion. Any documents such as existing prospectuses or annual reports that are included in that mailing will be a cost of the fund issuing the document. Any other out-of-pocket expenses of Bond Fund and Strategic Investment Grade Bond Fund associated with this reorganization, including legal, accounting and transfer agent expenses, will be borne by Strategic Investment Grade Bond Fund and Bond Fund, respectively, in the amounts so incurred by each. 10. The obligations of Bond Fund hereunder shall be subject to the following conditions: A. The Board of Trustees of Strategic Investment Grade Bond Fund shall have authorized the execution of the Agreement, and the shareholders of Strategic Investment Grade Bond Fund shall have approved the Agreement and the transactions contemplated thereby, and Strategic Investment Grade Bond Fund shall have furnished to Bond Fund copies of resolutions to that effect certified by the Secretary or an Assistant Secretary of Strategic Investment Grade Bond Fund; such shareholder approval shall have been by the affirmative vote of "a majority of the outstanding voting securities" (as defined in the Act) of Strategic Investment Grade Bond Fund at a meeting for which proxies have been solicited by the Proxy Statement and Prospectus (as hereinafter defined). B. Bond Fund shall have received an opinion dated the Closing Date of counsel to Strategic Investment Grade Bond Fund, to the effect that (i) Strategic Investment Grade Bond Fund is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts with full powers to carry on its business as then being conducted and to enter into and perform the Agreement; and (ii) that all action necessary to make the Agreement, according to its terms, valid, binding and enforceable on Strategic Investment Grade Bond Fund and to authorize effectively the transactions contemplated by the Agreement have been taken by Strategic Investment Grade Bond Fund. C. The representations and warranties of Strategic Investment Grade Bond Fund contained herein shall be true and correct at and as of the Closing Date, and Bond Fund shall have been furnished with a certificate of the President, or a Vice President, or the Secretary or the Assistant Secretary or the Treasurer of Strategic Investment Grade Bond Fund, dated the Closing Date, to that effect. D. On the Closing Date, Strategic Investment Grade Bond Fund shall have furnished to Bond Fund a certificate of the Treasurer or Assistant Treasurer of Strategic Investment Grade Bond Fund as to the amount of the capital loss carry-over and net unrealized appreciation or depreciation, if any, with respect to Strategic Investment Grade Bond Fund as of the Closing Date. E. The Cash Reserve shall not exceed 10% of the value of the net assets, nor 30% in value of the gross assets, of Strategic Investment Grade Bond Fund at the close of business on the Valuation Date. F. A Registration Statement on Form N-14 filed by Oppenheimer Integrity Funds under the Securities Act of 1933, as amended (the "1933 Act"), containing a preliminary form of the Proxy Statement and Prospectus, shall have become effective under the 1933 Act not later than August 30, 1995. G. On the Closing Date, Bond Fund shall have received a letter of Andrew J. Donohue or other senior executive officer of Oppenheimer Management Corporation acceptable to Bond Fund, stating that nothing has come to his or her attention which in his or her judgment would indicate that as of the Closing Date there were any material actual or contingent liabilities of Strategic Investment Grade Bond Fund arising out of litigation brought against Strategic Investment Grade Bond Fund or claims asserted against it, or pending or to the best of his or her knowledge threatened claims or litigation not reflected in or apparent from the most recent audited financial statements and footnotes thereto of Strategic Investment Grade Bond Fund delivered to Bond Fund. Such letter may also include such additional statements relating to the scope of the review conducted by such person and his or her responsibilities and liabilities as are not unreasonable under the circumstances. H. Bond Fund shall have received an opinion, dated the Closing Date, of Deloitte & Touche LLP, to the same effect as the opinion contemplated by Section 11.E. of the Agreement. I. Bond Fund shall have received at the closing all of the assets of Strategic Investment Grade Bond Fund to be conveyed hereunder, which assets shall be free and clear of all liens, encumbrances, security interests, restrictions and limitations whatsoever. 11. The obligations of Strategic Investment Grade Bond Fund hereunder shall be subject to the following conditions: A. The Board of Trustees of Oppenheimer Integrity Funds shall have authorized the execution of the Agreement, and the transactions contemplated thereby, and Bond Fund shall have furnished to Strategic Investment Grade Bond Fund copies of resolutions to that effect certified by the Secretary or an Assistant Secretary of Oppenheimer Integrity Funds. B. Strategic Investment Grade Bond Fund's shareholders shall have approved the Agreement and the transactions contemplated hereby, by an affirmative vote of "a majority of the outstanding voting securities" (as defined in the Act) of Strategic Investment Grade Bond Fund, and Strategic Investment Grade Bond Fund shall have furnished Bond Fund copies of resolutions to that effect certified by the Secretary or an Assistant Secretary of Strategic Investment Grade Bond Fund. C. Strategic Investment Grade Bond Fund shall have received an opinion dated the Closing Date of counsel to Bond Fund, to the effect that (i) Bond Fund is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts with full powers to carry on its business as then being conducted and to enter into and perform the Agreement; (ii) all action necessary to make the Agreement, according to its terms, valid, binding and enforceable upon Bond Fund and to authorize effectively the transactions contemplated by the Agreement have been taken by Bond Fund, and (iii) the shares of Bond Fund to be issued hereunder are duly authorized and when issued will be validly issued, fully-paid and non-assessable, except as set forth in Bond Fund's then current Prospectus and Statement of Additional Information. D. The representations and warranties of Bond Fund contained herein shall be true and correct at and as of the Closing Date, and Strategic Investment Grade Bond Fund shall have been furnished with a certificate of the President, a Vice President or the Secretary or an Assistant Secretary or the Treasurer of Bond Fund to that effect dated the Closing Date. E. Strategic Investment Grade Bond Fund shall have received an opinion of Deloitte & Touche LLP to the effect that the Federal tax consequences of the transaction, if carried out in the manner outlined in this Plan of Reorganization and in accordance with (i) Strategic Investment Grade Bond Fund's representation that there is no plan or intention by any Fund shareholder who owns 5% or more of Strategic Investment Grade Bond Fund's outstanding shares, and, to Strategic Investment Grade Bond Fund's best knowledge, there is no plan or intention on the part of the remaining Fund shareholders, to redeem, sell, exchange or otherwise dispose of a number of Bond Fund shares received in the transaction that would reduce Strategic Investment Grade Bond Fund shareholders' ownership of Bond Fund shares to a number of shares having a value, as of the Closing Date, of less than 50% of the value of all of the formerly outstanding Fund shares as of the same date, and (ii) the representation by each of Strategic Investment Grade Bond Fund and Bond Fund that, as of the Closing Date, Strategic Investment Grade Bond Fund and Bond Fund will qualify as regulated investment companies or will meet the diversification test of Section 368(a)(2)(F)(ii) of the Code, will be as follows: 1. The transactions contemplated by the Agreement will qualify as a tax-free "reorganization" within the meaning of Section 368(a)(1) of the Code, and under the regulations promulgated thereunder. 2. Strategic Investment Grade Bond Fund and Bond Fund will each qualify as a "party to a reorganization" within the meaning of Section 368(b)(2) of the Code. 3. No gain or loss will be recognized by the shareholders of Strategic Investment Grade Bond Fund upon the distribution of shares of beneficial interest in Bond Fund to the shareholders of Strategic Investment Grade Bond Fund pursuant to Section 354 of the Code. 4. Under Section 361(a) of the Code no gain or loss will be recognized by Strategic Investment Grade Bond Fund by reason of the transfer of substantially all its assets in exchange for shares of Bond Fund. 5. Under Section 1032 of the Code no gain or loss will be recognized by Bond Fund by reason of the transfer of substantially all Strategic Investment Grade Bond Fund's assets in exchange for Class A and Class B shares of Bond Fund and Bond Fund's assumption of certain liabilities of Strategic Investment Grade Bond Fund. 6. The shareholders of Strategic Investment Grade Bond Fund will have the same tax basis and holding period for the Class A or Class B shares of beneficial interest in Bond Fund that they receive as they had for Strategic Investment Grade Bond Fund shares that they previously held, pursuant to Section 358(a) and 1223(1), respectively, of the Code. 7. The securities transferred by Strategic Investment Grade Bond Fund to Bond Fund will have the same tax basis and holding period in the hands of Bond Fund as they had for Strategic Investment Grade Bond Fund, pursuant to Section 362(b) and 1223(1), respectively, of the Code. F. The Cash Reserve shall not exceed 10% of the value of the net assets, nor 30% in value of the gross assets, of Strategic Investment Grade Bond Fund at the close of business on the Valuation Date. G. A Registration Statement on Form N-14 filed by Oppenheimer Integrity Funds under the 1933 Act, containing a preliminary form of the Proxy Statement and Prospectus, shall have become effective under the 1933 Act not later than August 30, 1995. H. On the Closing Date, Strategic Investment Grade Bond Fund shall have received a letter of Andrew J. Donohue or other senior executive officer of Oppenheimer Management Corporation acceptable to Strategic Investment Grade Bond Fund, stating that nothing has come to his or her attention which in his or her judgment would indicate that as of the Closing Date there were any material actual or contingent liabilities of Bond Fund arising out of litigation brought against Bond Fund or claims asserted against it, or pending or, to the best of his or her knowledge, threatened claims or litigation not reflected in or apparent by the most recent audited financial statements and footnotes thereto of Bond Fund delivered to Strategic Investment Grade Bond Fund. Such letter may also include such additional statements relating to the scope of the review conducted by such person and his or her responsibilities and liabilities as are not unreasonable under the circumstances. I. Strategic Investment Grade Bond Fund shall acknowledge receipt of the shares of Bond Fund. 12. Strategic Investment Grade Bond Fund hereby represents and warrants that: A. The financial statements of Strategic Investment Grade Bond Fund as at September 30, 1994 (audited) and March 31, 1995 (unaudited) heretofore furnished to Bond Fund, present fairly the financial position, results of operations, and changes in net assets of Strategic Investment Grade Bond Fund as of that date, in conformity with generally accepted accounting principles applied on a basis consistent with the preceding year; and that from September 30, 1994 through the date hereof there have not been, and through the Closing Date there will not be, any material adverse change in the business or financial condition of Strategic Investment Grade Bond Fund, it being agreed that a decrease in the size of Strategic Investment Grade Bond Fund due to a diminution in the value of its portfolio and/or redemption of its shares shall not be considered a material adverse change; B. Contingent upon approval of the Agreement and the transactions contemplated thereby by Strategic Investment Grade Bond Fund's shareholders, Strategic Investment Grade Bond Fund has authority to transfer all of the assets of Strategic Investment Grade Bond Fund to be conveyed hereunder free and clear of all liens, encumbrances, security interests, restrictions and limitations whatsoever; C. The Prospectus, as amended and supplemented, contained in Strategic Investment Grade Bond Fund's Registration Statement under the 1933 Act, as amended, is true, correct and complete, conforms to the requirements of the 1933 Act and does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Registration Statement, as amended, was, as of the date of the filing of the last Post-Effective Amendment, true, correct and complete, conformed to the requirements of the 1933 Act and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; D. There is no material contingent liability of Strategic Investment Grade Bond Fund and no material claim and no material legal, administrative or other proceedings pending or, to the knowledge of Strategic Investment Grade Bond Fund, threatened against Strategic Investment Grade Bond Fund, not reflected in such Prospectus; E. There are no material contracts outstanding to which Strategic Investment Grade Bond Fund is a party other than those ordinary in the conduct of its business; F. Strategic Investment Grade Bond Fund is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts; and has all necessary and material Federal and state authorizations to own all of its assets and to carry on its business as now being conducted; and Strategic Investment Grade Bond Fund is duly registered under the Act and such registration has not been rescinded or revoked and is in full force and effect; G. All Federal and other tax returns and reports of Strategic Investment Grade Bond Fund required by law to be filed have been filed, and all Federal and other taxes shown due on said returns and reports have been paid or provision shall have been made for the payment thereof and to the best of the knowledge of Strategic Investment Grade Bond Fund no such return is currently under audit and no assessment has been asserted with respect to such returns and to the extent such tax returns with respect to the taxable year of Strategic Investment Grade Bond Fund ended September 30, 1994 have not been filed, such returns will be filed when required and the amount of tax shown as due thereon shall be paid when due; and H. Strategic Investment Grade Bond Fund has elected to be treated as a regulated investment company and, for each fiscal year of its operations, Strategic Investment Grade Bond Fund has met the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company and Strategic Investment Grade Bond Fund intends to meet such requirements with respect to its current taxable year. 13. Bond Fund hereby represents and warrants that: A. The financial statements of Bond Fund as at December 30, 1994 (audited) heretofore furnished to Strategic Investment Grade Bond Fund, present fairly the financial position, results of operations, and changes in net assets of Bond Fund, as of that date, in conformity with generally accepted accounting principles applied on a basis consistent with the preceding year; and that from December 30, 1994 through the date hereof there have not been, and through the Closing Date there will not be, any material adverse changes in the business or financial condition of Bond Fund, it being understood that a decrease in the size of Bond Fund due to a diminution in the value of its portfolio and/or redemption of its shares shall not be considered a material or adverse change; B. The Prospectus, as amended and supplemented, contained in Oppenheimer Integrity Funds Registration Statement under the 1933 Act, is true, correct and complete, conforms to the requirements of the 1933 Act and does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Registration Statement, as amended, was, as of the date of the filing of the last Post-Effective Amendment, true, correct and complete, conformed to the requirements of the 1933 Act and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; C. There is no material contingent liability of Bond Fund and no material claim and no material legal, administrative or other proceedings pending or, to the knowledge of Bond Fund, threatened against Bond Fund, not reflected in such Prospectus; D. There are no material contracts outstanding to which Bond Fund is a party other than those ordinary in the conduct of its business; E. Bond Fund is a series of Oppenheimer Integrity Funds, a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts; has all necessary and material Federal and state authorizations to own all its properties and assets and to carry on its business as now being conducted; the shares of Bond Fund which it issues to Strategic Investment Grade Bond Fund pursuant to the Agreement will be duly authorized, validly issued, fully-paid and non-assessable, except as otherwise set forth in Bond Fund's Registration Statement; and will conform to the description thereof contained in Bond Fund's Registration Statement, will be duly registered under the 1933 Act and in the states where registration is required; and Bond Fund is duly registered under the Act and such registration has not been revoked or rescinded and is in full force and effect; F. All Federal and other tax returns and reports of Bond Fund required by law to be filed have been filed, and all Federal and other taxes shown due on said returns and reports have been paid or provision shall have been made for the payment thereof and to the best of the knowledge of Bond Fund no such return is currently under audit and no assessment has been asserted with respect to such returns and to the extent such tax returns with respect to the taxable year of Bond Fund ended December 31, 1994 have not been filed, such returns will be filed when required and the amount of tax shown as due thereon shall be paid when due; G. Bond Fund has elected to be treated as a regulated investment company and, for each fiscal year of its operations, Bond Fund has met the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company and Bond Fund intends to meet such requirements with respect to its current taxable year; H. Bond Fund has no plan or intention (i) to dispose of any of the assets transferred by Strategic Investment Grade Bond Fund, other than in the ordinary course of business, or (ii) to redeem or reacquire any of the shares issued by it in the reorganization other than pursuant to valid requests of shareholders; and I. After consummation of the transactions contemplated by the Agreement, Bond Fund intends to operate its business in a substantially unchanged manner. 14. Each party hereby represents to the other that no broker or finder has been employed by it with respect to the Agreement or the transactions contemplated hereby. Each party also represents and warrants to the other that the information concerning it in the Proxy Statement and Prospectus will not as of its date contain any untrue statement of a material fact or omit to state a fact necessary to make the statements concerning it therein not misleading and that the financial statements concerning it will present the information shown fairly in accordance with generally accepted accounting principles applied on a basis consistent with the preceding year. Each party also represents and warrants to the other that the Agreement is valid, binding and enforceable in accordance with its terms and that the execution, delivery and performance of the Agreement will not result in any violation of, or be in conflict with, any provision of any charter, by-laws, contract, agreement, judgment, decree or order to which it is subject or to which it is a party. Bond Fund hereby represents to and covenants with Strategic Investment Grade Bond Fund that, if the reorganization becomes effective, Bond Fund will treat each shareholder of Strategic Investment Grade Bond Fund who received any of Bond Fund's shares as a result of the reorganization as having made the minimum initial purchase of shares of Bond Fund received by such shareholder for the purpose of making additional investments in shares of Bond Fund, regardless of the value of the shares of Bond Fund received. 15. Bond Fund agrees that it will prepare and file a Registration Statement on Form N-14 under the 1933 Act which shall contain a preliminary form of proxy statement and prospectus contemplated by Rule 145 under the 1933 Act. The final form of such proxy statement and prospectus is referred to in the Agreement as the "Proxy Statement and Prospectus." Each party agrees that it will use its best efforts to have such Registration Statement declared effective and to supply such information concerning itself for inclusion in the Proxy Statement and Prospectus as may be necessary or desirable in this connection. Oppenheimer Strategic Investment Grade Bond Fund covenants and agrees to deregister as an investment company under the Investment Company Act of 1940, as amended, as soon as practicable and, thereafter, to cause the cancellation of its outstanding shares. 16. The obligations of the parties under the Agreement shall be subject to the right of either party to abandon and terminate the Agreement without liability if the other party breaches any material provision of the Agreement or if any material legal, administrative or other proceeding shall be instituted or threatened between the date of the Agreement and the Closing Date (i) seeking to restrain or otherwise prohibit the transactions contemplated hereby and/or (ii) asserting a material liability of either party, which proceeding has not been terminated or the threat thereof removed prior to the Closing Date. 17. The Agreement may be executed in several counterparts, each of which shall be deemed an original, but all taken together shall constitute one Agreement. The rights and obligations of each party pursuant to the Agreement shall not be assignable. 18. All prior or contemporaneous agreements and representations are merged into the Agreement, which constitutes the entire contract between the parties hereto. No amendment or modification hereof shall be of any force and effect unless in writing and signed by the parties and no party shall be deemed to have waived any provision herein for its benefit unless it executes a written acknowledgement of such waiver. 19. Strategic Investment Grade Bond Fund understands that the obligations of Bond Fund under the Agreement are not binding upon any Trustee or shareholder of Bond Fund personally, but bind only Bond Fund and Bond Fund's property. Strategic Investment Grade Bond Fund represents that it has notice of the provisions of the Declaration of Trust of Bond Fund disclaiming shareholder and Trustee liability for acts or obligations of Bond Fund. 20. Bond Fund understands that the obligations of Strategic Investment Grade Bond Fund under the Agreement are not binding upon any Trustee or shareholder of Strategic Investment Grade Bond Fund personally, but bind only Strategic Investment Grade Bond Fund and Strategic Investment Grade Bond Fund's property. Bond Fund represents that it has notice of the provisions of the Declaration of Trust of Strategic Investment Grade Bond Fund disclaiming shareholder and Trustee liability for acts or obligations of Strategic Investment Grade Bond Fund. IN WITNESS WHEREOF, each of the parties has caused the Agreement to be executed and attested by its officers thereunto duly authorized on the date first set forth above. Attest: OPPENHEIMER STRATEGIC INVESTMENT GRADE BOND FUND __________________________ By:__________________________________ Robert G. Zack George C. Bowen Assistant Secretary Vice President Attest: OPPENHEIMER INTEGRITY FUNDS On behalf of OPPENHEIMER BOND FUND __________________________ By:_________________________________ Robert G. Zack Andrew J. Donohue Assistant Secretary Vice President Oppenheimer Strategic Investment Proxy for Shareholders Meeting To Grade Bond Fund - Class A Shares Be Held September 20, 1995 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 STRATEGIC INVESTMENT GRADE BOND FUND PROXY FOR SPECIAL SHAREHOLDERS MEETING TO BE HELD SEPTEMBER 20, 1995 The undersigned shareholder of Oppenheimer Strategic Investment Grade Bond Fund (the "Fund"), does hereby appoint George C. Bowen, Rendle Myer, Robert Bishop and Scott Farrar, and each of them, as attorneys-in-fact and proxies of the undersigned, with full power of substitution, to attend the Special Meeting of the Fund to be held on September 20, 1995, at 3410 South Galena Street, Denver, Colorado at 10:00 A.M., Denver time, and at all adjournments thereof, and to vote the shares held in the name of the undersigned on the record date for said meeting on the Proposal specified on the reverse side. Said attorneys-in-fact shall vote in accordance with their best judgment as to any other matter. PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHO RECOMMENDS A VOTE FOR THE PROPOSAL ON THE REVERSE SIDE. THE SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED ON THE REVERSE SIDE OR FOR IF NO CHOICE IS INDICATED. Please mark your proxy, date and sign it on the reverse side and return it promptly in the accompanying envelope, which requires no postage if mailed in the United States. The Proposal: To approve an Agreement and Plan of Reorganization between the Fund and Oppenheimer Bond Fund ("Bond Fund"), and the transactions contemplated thereby, including the transfer of substantially all the assets of the Fund, in exchange for Class A and Class B shares of Bond Fund. The distribution of such shares to the Class A and Class B shareholders of the Fund in complete liquidation of the Fund, the de-registration of the Fund as an investment company under the Investment Company Act of 1940, as amended, and the cancellation of the outstanding shares of the Fund (the "Proposal"). FOR____ AGAINST____ ABSTAIN____ Dated: ___________________________, 1995 (Month) (Day) ___________________________________ Signature(s) ___________________________________ Signature(s) Please read both sides of this ballot. NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When signing as custodian, attorney, executor, administrator, trustee, etc., please give your full title as such. All joint owners should sign this proxy. If the account is registered in the name of a corporation, partnership or other entity, a duly authorized individual must sign on its behalf and give his or her title. Oppenheimer Strategic Investment Proxy for Shareholders Meeting To Grade Bond Fund - Class B Shares Be Held September 20, 1995 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 STRATEGIC INVESTMENT GRADE BOND FUND PROXY FOR SPECIAL SHAREHOLDERS MEETING TO BE HELD SEPTEMBER 20, 1995 The undersigned shareholder of Oppenheimer Strategic Investment Grade Bond Fund (the "Fund"), does hereby appoint George C. Bowen, Rendle Myer, Robert Bishop and Scott Farrar, and each of them, as attorneys-in-fact and proxies of the undersigned, with full power of substitution, to attend the Special Meeting of the Fund to be held on September 20, 1995, at 3410 South Galena Street, Denver, Colorado at 10:00 A.M., Denver time, and at all adjournments thereof, and to vote the shares held in the name of the undersigned on the record date for said meeting on the Proposal specified on the reverse side. Said attorneys-in-fact shall vote in accordance with their best judgment as to any other matter. PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHO RECOMMENDS A VOTE FOR THE PROPOSAL ON THE REVERSE SIDE. THE SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED ON THE REVERSE SIDE OR FOR IF NO CHOICE IS INDICATED. Please mark your proxy, date and sign it on the reverse side and return it promptly in the accompanying envelope, which requires no postage if mailed in the United States. The Proposal: To approve an Agreement and Plan of Reorganization between the Fund and Oppenheimer Bond Fund ("Bond Fund"), and the transactions contemplated thereby, including the transfer of substantially all the assets of the Fund, in exchange for Class A and Class B shares of Bond Fund. The distribution of such shares to the Class A and Class B shareholders of the Fund in complete liquidation of the Fund, the de-registration of the Fund as an investment company under the Investment Company Act of 1940, as amended, and the cancellation of the outstanding shares of the Fund (the "Proposal"). FOR____ AGAINST____ ABSTAIN____ Dated: ___________________________, 1995 (Month) (Day) ___________________________________ Signature(s) ___________________________________ Signature(s) Please read both sides of this ballot. NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When signing as custodian, attorney, executor, administrator, trustee, etc., please give your full title as such. All joint owners should sign this proxy. If the account is registered in the name of a corporation, partnership or other entity, a duly authorized individual must sign on its behalf and give his or her title. OPPENHEIMER INTEGRITY FUNDS 3410 South Galena Street, Denver, Colorado 80231 1-800-525-7048 PART B STATEMENT OF ADDITIONAL INFORMATION August 21, 1995 ___________________________________ This Statement of Additional Information of Oppenheimer Bond Fund consists of this cover page and the following documents: 1. Prospectus of Oppenheimer Bond Fund dated July 10, 1995, supplemented July 14, 1995, filed July 21, 1995 with Registrant's N-14 and is incorporated herein by reference. 2. Statement of Additional Information of Oppenheimer Bond Fund dated July 10, 1995, filed July 21, 1995 with Registrant's N-14 and is incorporated herein by reference. 3. Prospectus of Oppenheimer Strategic Investment Grade Bond Fund dated February 1, 1995, supplemented July 14, 1995, filed July 21, 1995 with Registrant's N-14 and is incorporated herein by reference. 4. Statement of Additional Information of Oppenheimer Strategic Investment Grade Bond Fund dated February 1, 1995, supplemented July 14, 1995, filed July 21, 1995 with Registrant's N-14 and is incorporated herein by reference. 5. Oppenheimer Investment Grade Bond Fund's Annual Report as of December 31, 1994, filed July 21, 1995 with Registrant's N-14 and is incorporated herein by reference. 6. Oppenheimer Strategic Investment Grade Bond Fund's Annual Report as of September 30, 1994, filed July 21, 1995 with Registrant's N-14 and is incorporated herein by reference. 7. Oppenheimer Strategic Investment Grade Bond Fund's Semi-Annual Report (unaudited) as of March 31, 1995, filed July 21, 1995 with Registrant's N-14 and is incorporated herein by reference. 8. Pro Forma Financials - filed July 21, 1995 with Registrant's N-14 and is incorporated herein by reference. This Statement of Additional Information is not a Prospectus. This Statement of Additional Information should be read in conjunction with the Proxy Statement and Prospectus, which may be obtained by written request to Oppenheimer Shareholder Services ("OSS"), P.O. Box 5270, Denver, Colorado 80217, or by calling OSS at the toll-free number shown above.