<PAGE>
As filed with the Securities and Exchange Commission on April 29, 1996
Registration No. 2-73969
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 24
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 24
CONNECTICUT MUTUAL FINANCIAL SERVICES SERIES FUND I, INC.
(Exact Name of Registrant as Specified in Charter)
3410 South Galena Street
Denver, Colorado 80210
(Address of Principal Office)(Zip Code)
Registrant's Telephone Number, including Area Code: (203) 987-5047
Andrew J. Donahue, Secretary
Connecticut Mutual Financial Services Series Fund I, Inc.
3410 South Galena Street
Denver, Colorado 80210
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on May 1, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a), of Rule 485
Registrant has registered an indefinite number of securities under the
Securities Act of 1933 pursuant to of Rule 24f-2 promulgated under the
Investment Company Act of 1940. The Company's Rule 24f-2 Notice for the
fiscal year ending December 31, 1995 was filed on or about February 29, 1996.
<PAGE>
CONNECTICUT MUTUAL FINANCIAL SERVICES SERIES FUND I, INC.
(as proposed to be renamed, Panorama Series Fund, Inc.)
Cross-Reference Sheet Showing Location in Prospectus and
Statement of Additional Information of Information Required by
Items of the Registration Form
<TABLE>
<CAPTION>
Form N-1A Item Number
and Caption Location in Prospectus
--------------------- --------------------------
<S> <C> <C>
1. Cover Page....................... Cover Page.
2. Synopsis......................... Not Applicable
3. Condensed Financial
Information.................... About The Portfolios --
Financial Highlights.
4. General Description of
Registrant..................... Cover Page; About The Portfolios
-- Introduction
-- Investment Objectives
and Policies
-- Investment Risks
-- Investment Techniques and Strategies
-- How The Portfolios are Managed
5. Management of the Fund........... About The Portfolios -- How the
Portfolios are Managed.
6. Capital Stock and Other
Securities..................... About The Portfolios --
Investment Objectives and
Policies -- Investment Risks
-- Investment Techniques
and Strategies.
7. Purchase of Securities
Being Offered.................. About Your Account -- How to
Buy Shares.
8. Redemption or Repurchase......... About Your Account -- How to
Sell Shares.
9. Pending Legal Proceedings........ Not Applicable.
Location in Statement of
Additional Information
10. Cover Page....................... Cover Page.
11. Table of Contents................ Cover Page.
12. General Information and
History........................ Cover Page; How The Portfolios
are Managed -- Organization
and History.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
13. Investment Objectives and
Policy......................... About The Portfolios --
Investment Objectives and
Policies.
14. Management of the Fund........... About The Portfolios -- How
the Portfolios are Managed.
15. Control Persons and Principal
Holders of Securities.......... About The Portfolios -- How the
Portfolios are Managed.
16. Investment Advisory and
Other Services................. About The Portfolios -- How
the Portfolios are Managed; The
Manager, the Subadvisers and
Their Affiliates; The
Transfer Agent; Additional
Information about the
Portfolios -- The Custodian.
17. Brokerage Allocation and
Other Practices................ About the Portfolios --
Brokerage Policies of the
Portfolios.
18. Capital Stock and Other
Securities..................... About the Portfolios -- How
the Portfolios are Managed --
Organization and History.
19. Purchase, Redemption and Pricing
of Securities Being Offered.... About Your Account -- How
to Buy Shares.
20. Tax Status....................... About Your Account --
Dividends, Capital Gains and
Taxes.
21. Underwriters..................... About The Portfolios -- How
the Portfolios are Managed --
The Manager, the Subadvisers
and Their Affiliates; About
Your Account -- How To Buy
Shares.
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C> <C>
22. Calculation of Performance
Data........................... About The Portfolios --
Performance of the Portfolios;
About Your Account --
Dividends, Capital Gains and
Taxes.
23. Financial Statements............. Financial Information About
the Portfolios -- Independent
Auditors' Report --
Financial Statements.
</TABLE>
-3-
<PAGE>
Panorama Series Fund, Inc.
PROSPECTUS DATED MAY 1, 1996
PANORAMA SERIES FUND, INC. (referred to in this Prospectus as the "Company") is
an open-end investment company consisting of nine separate series (each is
referred to as a "Portfolio" and collectively, as the "Portfolios"). Shares of
the Portfolios are offered only through certain variable annuity or variable
life insurance contracts by insurance companies.
TOTAL RETURN PORTFOLIO seeks to maximize total investment return (including both
capital appreciation and income) principally by allocating its assets among
stocks, corporate bonds, U.S. Government securities and money market instruments
according to changing market conditions.
GROWTH PORTFOLIO seeks long term growth of capital by investing primarily in
common stocks with low price-earnings ratios and better-than-anticipated
earnings. Realization of current income is a secondary consideration.
INTERNATIONAL EQUITY PORTFOLIO seeks long-term growth of capital by investing
primarily in equity securities of companies wherever located, the primary stock
market of which is outside the United States.
LIFESPAN CAPITAL APPRECIATION PORTFOLIO ("Capital Appreciation Portfolio") seeks
long-term capital appreciation by investing in a strategically allocated
portfolio consisting primarily of stocks. Current income is not a primary
consideration.
LIFESPAN BALANCED PORTFOLIO ("Balanced Portfolio") seeks a blend of capital
appreciation and income by investing in a strategically allocated portfolio of
stocks and bonds with a slightly stronger emphasis on stocks.
LIFESPAN DIVERSIFIED INCOME PORTFOLIO ("Diversified Income Portfolio") seeks
high current income, with opportunities for capital appreciation by investing in
a strategically allocated portfolio consisting primarily of bonds.
MONEY MARKET PORTFOLIO seeks high current income consistent with preservation of
capital and maintenance of liquidity by investing in money market instruments.
AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. WHILE THE MONEY MARKET PORTFOLIO SEEKS TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE, THERE CAN BE NO ASSURANCE THAT IT WILL BE
ABLE TO DO SO.
INCOME PORTFOLIO seeks high current income consistent with prudent investment
risk and preservation of capital by investing primarily in fixed income debt
securities anticipated to have an average maturity of eight to twelve years.
GOVERNMENT SECURITIES PORTFOLIO seeks a high level of current income with a high
degree of safety of principal by investing primarily in U.S. Government
securities and U.S. Government related securities.
This Prospectus explains concisely what you should know before investing in
the Portfolios. Please read this Prospectus carefully and keep it for future
reference. You can find more detailed information about each Portfolio in the
May 1, 1996 Statement of Additional Information. For a free copy, call
OppenheimerFunds Services, the Portfolios' Transfer Agent, at 1-800-525-7048, or
write to the Transfer Agent at the address on the back cover. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission ("SEC") and is incorporated into this Prospectus by reference (which
means that it is legally part of this Prospectus).
[LOGO]
SHARES OF THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK, ARE NOT
GUARANTEED BY ANY BANK, ARE NOT INSURED BY THE F.D.I.C. OR ANY OTHER AGENCY, AND
INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
CONTENTS
<TABLE>
<S> <C>
ABOUT THE PORTFOLIOS
3 INTRODUCTION
3 FINANCIAL HIGHLIGHTS
9 INVESTMENT OBJECTIVES AND POLICIES
Total Return Portfolio
Growth Portfolio
International Equity Portfolio
LifeSpan Portfolios
Money Market Portfolio
Income Portfolio
Government Securities Portfolio
16 INVESTMENT RISKS
18 INVESTMENT TECHNIQUES AND STRATEGIES
25 HOW THE PORTFOLIOS ARE MANAGED
30 PERFORMANCE OF THE PORTFOLIOS
ABOUT YOUR ACCOUNT
31 HOW TO BUY SHARES
32 HOW TO SELL SHARES
32 DIVIDENDS, CAPITAL GAINS AND TAXES
33 APPENDIX A: DESCRIPTION OF RATINGS CATEGORIES OF RATINGS SERVICES
34 APPENDIX B: CREDIT QUALITY OF PORTFOLIO SECURITIES
</TABLE>
2
<PAGE>
ABOUT THE PORTFOLIOS
INTRODUCTION
Shares of the Company's Portfolios are offered only as investment vehicles for
the variable annuity or variable life insurance contracts offered through
separate accounts of insurance companies (these are referred to as "Accounts").
Shares of the Portfolios cannot be purchased directly by investors. The variable
contracts may offer the shares of some or all of the Portfolios described in
this Prospectus. The term "shareholder" in this Prospectus refers only to the
insurance companies issuing the variable contracts. The interests of contract
owners with respect to shares of a Portfolio held for their contracts are
subject to the terms of the contract and the prospectus for your insurance
company's separate accounts, which you as a contract holder or prospective
contract holder should read carefully.
FINANCIAL HIGHLIGHTS
The tables on the following pages present selected financial information about
the Portfolios, including per share data and expense ratios and other data based
on each Portfolio's respective average net assets. The information for the
Portfolios has been audited by Arthur Andersen LLP, the Company's independent
auditors, whose reports for the Company's fiscal year ended December 31, 1995
are included in the Statement of Additional Information. Additional information
about the performance of the Portfolios (except the LifeSpan Portfolios) is
contained in the Company's 1995 Annual Reports which may be obtained without
charge by calling or writing the Company at the telephone or address on the back
cover.
TOTAL RETURN PORTFOLIO*
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- ---------
PER SHARE OPERATING DATA:
Net asset value, beginning of period....... $ 1.51 $ 1.65 $ 1.56 $ 1.57 $ 1.33 $ 1.41 $ 1.27
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from investment operations:
Net investment income (loss)............... .07 .06 .06 .07 .07 .08 .09
Net realized and unrealized gain (loss) on
investments............................... .30 (.09) .20 .10 .32 (.07) .20
--------- --------- --------- --------- --------- --------- ---------
Total income (loss) from investment
operations................................ .37 (.03) .26 .17 .39 .01 .29
--------- --------- --------- --------- --------- --------- ---------
Dividends and distributions to
shareholders:
Dividends from net investment income....... (.07) (.06) (.06) (.07) (.07) (.08) (.09)
Distributions from net realized gain on
investments............................... (.06) (.05) (.11) (.11) (.08) (.01) (.06)
Total dividends and distributions to
shareholders.............................. (.13) (.11) (.17) (.18) (.15) (.09) (.15)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net asset value, end of period............. $ 1.75 $ 1.51 $ 1.65 $ 1.56 $ 1.57 $ 1.33 $ 1.41
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN, AT NET ASSET VALUE(a)........ 24.66% (1.97)% 16.28% 10.21% 28.79% 0.50% 22.98%
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)... $ 993,926 $ 742,135 $ 610,416 $ 401,826 $ 304,365 $ 229,343 $ 220,941
--------- --------- --------- --------- --------- --------- ---------
Ratios to average net assets:
Net investment income (loss)............... 4.48% 4.21% 3.90% 4.27% 4.44% 5.65% 6.20%
Expenses................................... .59% .56% .60% .68% .72% .78% .80%
--------- --------- --------- --------- --------- --------- ---------
Portfolio turnover rate.................... 62.31% 88.25% 161.55% 182.10% 128.78% 109.23% 150.98%
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
<S> <C> <C> <C>
1988 1987 1986
--------- --------- ---------
PER SHARE OPERATING DATA:
Net asset value, beginning of period....... $ 1.20 $ 1.42 $ 1.36
--------- --------- ---------
Income (loss) from investment operations:
Net investment income (loss)............... .06 .06 .05
Net realized and unrealized gain (loss) on
investments............................... .08 .02 .12
--------- --------- ---------
Total income (loss) from investment
operations................................ .14 .08 .17
--------- --------- ---------
Dividends and distributions to
shareholders:
Dividends from net investment income....... (.07) (.06) (.05)
Distributions from net realized gain on
investments............................... -- (.24) (.06)
Total dividends and distributions to
shareholders.............................. (.07) (.30) (.11)
--------- --------- ---------
--------- --------- ---------
Net asset value, end of period............. $ 1.27 $ 1.20 $ 1.42
--------- --------- ---------
--------- --------- ---------
TOTAL RETURN, AT NET ASSET VALUE(a)........ 11.64% 4.26% 12.58%
--------- --------- ---------
--------- --------- ---------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)... $ 184,117 $ 167,861 $ 137,774
--------- --------- ---------
Ratios to average net assets:
Net investment income (loss)............... 4.93% 3.53% 3.32%
Expenses................................... .79% .78% .82%
--------- --------- ---------
Portfolio turnover rate.................... 244.72% 198.88% 184.30%
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------------------------
* G.R. Phelps & Co. managed the Portfolio during these periods.
(a) Annual total returns are for the Portfolio without regard to the
performance of the Account.
3
<PAGE>
GROWTH PORTFOLIO*
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- ---------
PER SHARE OPERATING DATA:
Net asset value, beginning of period............ $ 1.97 $ 2.08 $ 1.91 $ 1.87 $ 1.46 $ 1.65 $ 1.36
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from investment operations:
Net investment income (loss).................... .04 .03 .04 .04 .04 .05 .07
Net realized and unrealized gain (loss) on
investments.................................... .71 (.04) .36 .19 .51 (.18) .42
Total income (loss) from investment
operations..................................... .75 (.01) .40 .23 .55 (.13) .49
--------- --------- --------- --------- --------- --------- ---------
Dividends and distributions to shareholders:
Dividends from net investment income............ (.04) (.03) (.04) (.04) (.04) (.05) (.07)
Distributions from net realized gain on
investments and foreign currency
transactions................................... (.15) (.07) (.19) (.15) (.10) (.01) (.13)
Total dividends and distributions to
shareholders................................... (.19) (.10) (.23) (.19) (.14) (.06) (.20)
--------- --------- --------- --------- --------- --------- ---------
Net asset value, end of period.................. $ 2.53 $ 1.97 $ 2.08 $ 1.91 $ 1.87 $ 1.46 $ 1.65
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN, AT NET ASSET VALUE(a)............. 38.06% (0.51)% 21.22% 12.36% 37.53% (7.90)% 35.81%
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)........ $ 405,935 $ 230,195 $ 165,775 $ 101,215 $ 75,058 $ 50,998 $ 53,955
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Ratios to average net assets:
Net investment income (loss).................... 2.01% 1.87% 2.30% 2.19% 2.16% 3.04% 4.16%
Expenses........................................ .66% .67% .69% .76% .80% .84% .87%
--------- --------- --------- --------- --------- --------- ---------
Portfolio turnover rate......................... 69.34% 97.25% 97.64% 136.11% 142.85% 146.78% 174.08%
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
<S> <C> <C> <C>
1988 1987 1986
--------- --------- ---------
PER SHARE OPERATING DATA:
Net asset value, beginning of period............ $ 1.22 $ 1.60 $ 1.56
--------- --------- ---------
Income (loss) from investment operations:
Net investment income (loss).................... .03 .04 .05
Net realized and unrealized gain (loss) on
investments.................................... .15 -- .14
Total income (loss) from investment
operations..................................... .18 .04 .19
--------- --------- ---------
Dividends and distributions to shareholders:
Dividends from net investment income............ (.04) (.04) (.05)
Distributions from net realized gain on
investments and foreign currency
transactions................................... -- (.38) (.10)
Total dividends and distributions to
shareholders................................... (.04) (.42) (.15)
--------- --------- ---------
Net asset value, end of period.................. $ 1.36 $ 1.22 $ 1.60
--------- --------- ---------
--------- --------- ---------
TOTAL RETURN, AT NET ASSET VALUE(a)............. 14.46% 0.25% 11.58%
--------- --------- ---------
--------- --------- ---------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)........ $ 41,434 $ 40,995 $ 38,605
--------- --------- ---------
--------- --------- ---------
Ratios to average net assets:
Net investment income (loss).................... 2.24% 1.97% 2.61%
Expenses........................................ .88% .86% .90%
--------- --------- ---------
Portfolio turnover rate......................... 246.36% 218.02% 175.49%
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------------------------
* G.R. Phelps & Co. managed the Portfolio during these periods.
(a) Annual total returns are for the Portfolio without regard to the
performance of the Accounts.
4
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO*
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993 1992
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period.................................. $ 1.09 $ 1.09 $ .92 $ 1.00
--------- --------- --------- ---------
Income (loss) from investment operations:
Net investment income (loss).......................................... .03 (.01) .00 .01
Net realized and unrealized gain (loss) on investments, options
written and foreign currency transactions............................ .08 .03 .20 (.06)
Total income (loss) from investment operations........................ .11 .02 .20 (.05)
--------- --------- --------- ---------
Dividends and Distributions to shareholders:
Dividends from net investment income.................................. (.04) -- (.02) (.02)
Distributions from net realized gain on investments and foreign
currency transactions................................................ (.01) (.02) (.01) (.01)
--------- --------- --------- ---------
Total dividends and distributions to shareholders..................... (.05) (.02) (.03) (.03)
--------- --------- --------- ---------
Net asset value, end of period........................................ $ 1.15 $ 1.09 $ 1.09 $ .92
--------- --------- --------- ---------
--------- --------- --------- ---------
TOTAL RETURN, AT NET ASSET VALUE(a)................................... 10.30% 1.44% 21.80% (4.32)%
--------- --------- --------- ---------
--------- --------- --------- ---------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).............................. $ 45,775 $ 31,603 $ 18,315 $ 10,493
--------- --------- --------- ---------
--------- --------- --------- ---------
Ratios to average net asets:
Net investment income (loss).......................................... 1.61% (1.85)% (0.31)% 1.63%(b)
--------- --------- --------- ---------
Expenses.............................................................. 1.26% 1.28% 1.50% 1.50%(b)
--------- --------- --------- ---------
Portfolio turnover rate............................................... 85.11% 76.54% 57.42% 206.69%(b)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ------------------------
* G.R. Phelps & Co. managed the Portfolio during these periods.
(a) Annual total returns are for the Portfolio without regard to the performance
of the Accounts.
(b) Annualized.
5
<PAGE>
THE LIFESPAN PORTFOLIOS*
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1995*
-----------------------------------
CAPITAL DIVERSIFIED
APPRECIATION BALANCED INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------- -----------
<S> <C> <C> <C>
PER SHARE OPERATING DATA(a):
Net asset value, beginning of period........................................... $ 1.00 $ 1.00 $ 1.00
----------- --------- -----------
Income (loss) from investment operations:
Net investment income (loss)................................................... $ .01 $ .01 $ .02
Net realized and unrealized gain (loss) on investments and foreign currency
transactions .06 .05 .04
Total income (loss) from investment operations................................. .07 .06 .06
----------- --------- -----------
Dividends and distributions to shareholders:
Dividends from net investment income........................................... $ (.01) $ (.01) $ (.02)
Distributions from net realized gain on investments and foreign currency
transactions.................................................................. -- -- --
----------- --------- -----------
Total dividends and distributions to shareholders.............................. (.01) (.01) (.02)
----------- --------- -----------
Net asset value, end of period................................................. $ 1.06 $ 1.05 $ 1.04
----------- --------- -----------
----------- --------- -----------
TOTAL RETURN, AT NET ASSET VALUE (b)(c)........................................ 6.65% 6.08% 5.69%
----------- --------- -----------
----------- --------- -----------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)....................................... $ 26,768 $ 35,467 $ 21,176
----------- --------- -----------
----------- --------- -----------
Ratios to average net assets:
Net investment income (loss)................................................... 1.73% 3.08% 5.11%
Expenses....................................................................... 1.50% 1.50% 1.50%
----------- --------- -----------
Portfolio turnover rate........................................................ 38.73% 39.67% 41.21%
----------- --------- -----------
----------- --------- -----------
</TABLE>
- ------------------------
* G.R. Phelps & Co. managed the Portfolios during this period.
(a) For the period from September 1, 1995 (Inception) to December 31, 1995
(b) Annualized
(c) Annualized total returns are for the Portfolios without regard to the
performance of the Accounts
6
<PAGE>
MONEY MARKET PORTFOLIO*
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- ---------
PER SHARE OPERATING DATA:
Net asset value, beginning of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from investment operations:
Net investment income (loss)........................ .0541 .0379 .0265 .0332 .0560 .0769 .0859
Net realized and unrealized gain (loss) on
investments........................................ -- -- -- -- -- -- --
Total income (loss) from investment operations...... .0541 .0379 .0265 .0332 .0560 .0769 .0859
--------- --------- --------- --------- --------- --------- ---------
Dividends and distributions to shareholders:
Dividends from net investment income................ (.0541) (0379) (.0265) (.0332) (.0560) (.0769) (.0859)
Distributions from net realized gain on
investments........................................ -- -- -- -- -- -- --
Total dividends and distributions to shareholders... (.0541) (.0379) (.0265) (.0332) (.0560) (.0769) (.0859)
--------- --------- --------- --------- --------- --------- ---------
Net asset value, end of period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN, AT NET ASSET VALUE.................... 5.55% 3.79% 2.69% 3.35% 5.73% 7.97% 8.96%
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)............ $ 70,693 $ 66,116 $ 52,527 $ 60,447 $ 76,559 $ 84,124 $ 65,417
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Ratios to average net assets:
Net investment income (loss)........................ 5.41% 3.79% 2.65% 3.32% 5.60% 7.69% 8.59%
Expenses............................................ .57% .58% .60% .61% .63% .68% .70%
--------- --------- --------- --------- --------- --------- ---------
Portfolio turnover rate............................. n/a n/a n/a n/a n/a n/a n/a
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
<S> <C> <C> <C>
1988 1987 1986
--------- --------- ---------
PER SHARE OPERATING DATA:
Net asset value, beginning of period................ $ 1.00 $ 1.00 $ 1.00
--------- --------- ---------
Income (loss) from investment operations:
Net investment income (loss)........................ .0704 .0620 .0621
Net realized and unrealized gain (loss) on
investments........................................ -- -- --
Total income (loss) from investment operations...... .0704 .0620 .0621
--------- --------- ---------
Dividends and distributions to shareholders:
Dividends from net investment income................ (.0704) (.0620) (.0621)
Distributions from net realized gain on
investments........................................ -- -- --
Total dividends and distributions to shareholders... (.0704) (.0620) (.0621)
--------- --------- ---------
Net asset value, end of period...................... $ 1.00 $ 1.00 $ 1.00
--------- --------- ---------
--------- --------- ---------
TOTAL RETURN, AT NET ASSET VALUE.................... 7.22% 6.33% 6.40%
--------- --------- ---------
--------- --------- ---------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)............ $ 50,763 $ 39,514 $ 28,330
--------- --------- ---------
--------- --------- ---------
Ratios to average net assets:
Net investment income (loss)........................ 7.04% 6.20% 6.21%
Expenses............................................ .70% .71% .70%
--------- --------- ---------
Portfolio turnover rate............................. n/a n/a n/a
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------------------------
* G.R. Phelps & Co. managed the Portfolio during these periods.
INCOME PORTFOLIO*
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- ---------
PER SHARE OPERATING DATA:
Net asset value, beginning of period............. $ 1.11 $ 1.25 $ 1.21 $ 1.23 $ 1.12 $ 1.15 $ 1.10
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from investment operations:
Net investment income (loss)..................... .08 .09 .08 .09 .10 .10 .10
Net realized and unrealized gain (loss) on
investments..................................... .12 (.14) .07 -- .11 (.03) .05
Total income (loss) from investment operations... .20 (.05) .15 .09 .21 .07 .15
--------- --------- --------- --------- --------- --------- ---------
Dividends and distributions to shareholders:
Dividends from net investment income............. (.08) (.09) (.08) (.09) (.10) (.10) (.10)
Distributions from net realized gain on
investments..................................... -- (.00) (.03) (.02) -- -- --
Total dividends and distributions to
shareholders.................................... (.08) (.09) (.11) (.11) (.10) (.10) (.10)
--------- --------- --------- --------- --------- --------- ---------
Net asset value, end of period................... $ 1.23 $ 1.11 $ 1.25 $ 1.21 $ 1.23 $ 1.12 $ 1.15
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN, AT NET ASSET VALUE(a).............. 18.18% (4.08)% 12.34% 7.13% 18.31% 5.91% 13.91%
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)......... $ 114,677 $ 100,399 $ 107,333 $ 80,104 $ 62,018 $ 48,959 $ 44,171
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Ratios to average net assets:
Net investment income (loss)..................... 6.69% 7.07% 6.54% 7.31% 7.94% 8.42% 8.74%
Expenses......................................... .65% .68% .70% .77% .80% .85% .87%
--------- --------- --------- --------- --------- --------- ---------
Portfolio turnover rate.......................... 46.55% 74.29% 124.33% 115.71% 51.15% 36.77% 172.89%
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
<S> <C> <C> <C>
1988 1987 1986
--------- --------- ---------
PER SHARE OPERATING DATA:
Net asset value, beginning of period............. $ 1.12 $ 1.24 $ 1.23
--------- --------- ---------
Income (loss) from investment operations:
Net investment income (loss)..................... .10 .09 .11
Net realized and unrealized gain (loss) on
investments..................................... (.01) (.06) .06
Total income (loss) from investment operations... .09 .03 .17
--------- --------- ---------
Dividends and distributions to shareholders:
Dividends from net investment income............. (.11) (.09) (.11)
Distributions from net realized gain on
investments..................................... -- (.06) (.05)
Total dividends and distributions to
shareholders.................................... (.11) (.15) (.16)
--------- --------- ---------
Net asset value, end of period................... $ 1.10 $ 1.12 $ 1.24
--------- --------- ---------
--------- --------- ---------
TOTAL RETURN, AT NET ASSET VALUE(a).............. 7.88% 1.76% 13.79%
--------- --------- ---------
--------- --------- ---------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)......... $ 35,156 $ 32,222 $ 32,288
--------- --------- ---------
--------- --------- ---------
Ratios to average net assets:
Net investment income (loss)..................... 8.77% 6.93% 8.59%
Expenses......................................... .85% .85% .86%
--------- --------- ---------
Portfolio turnover rate.......................... 104.30% 161.24% 160.71%
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------------------------
* G.R. Phelps & Co. managed the Portfolio during these periods.
(a) Annual total returns are for the Portfolio without regard to the
performance of the Accounts.
7
<PAGE>
GOVERNMENT SECURITIES PORTFOLIO*
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES PORTFOLIO
YEARS ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993 1992(c)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period.................................. $ .95 $ 1.06 $ 1.01 $ 1.00
-------- -------- -------- --------
Income (loss) from investment operations:
Net investment income (loss).......................................... .06 .06 .04 .02
Net realized and unrealized gain (loss) on investments................ .12 (.11) .07 .04
-------- -------- -------- --------
Total income (loss) from investment operations........................ .18 (.05) .11 .06
-------- -------- -------- --------
Dividends and distributions to shareholders:
Dividends from net investment income.................................. (.06) (.06) (.04) (.02)
Distributions from net realized gain on investments and foreign
currency transactions................................................ -- (.00) (.02) (.03)
-------- -------- -------- --------
Total dividends and distributions to shareholders..................... (.06) (.06) (.06) (.05)
-------- -------- -------- --------
-------- -------- -------- --------
Net asset value, end of period........................................ $ 1.07 $ .95 $ 1.06 $ 1.01
-------- -------- -------- --------
-------- -------- -------- --------
TOTAL RETURN, AT NET ASSET VALUE(a)................................... 18.91% (4.89)% 10.98% 6.61%
-------- -------- -------- --------
-------- -------- -------- --------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).............................. $ 24,309 $ 18,784 $ 15,687 $ 7,634
-------- -------- -------- --------
-------- -------- -------- --------
Ratios to average net assets:
Net investment income (loss).......................................... 6.08% 6.04% 5.13% 4.64%(b)
Expenses.............................................................. .71% .85% .93% 1.20%(b)
-------- -------- -------- --------
Portfolio turnover rate............................................... 54.74% 102.31% 178.18% 458.62%(b)
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
- ------------------------
* G.R. Phelps & Co. managed the Portfolio during these periods.
(a) Annual total returns are for the Portfolio without regard to the performance
of the Accounts.
(b) Annualized.
(c) For the period from May 13, 1992 (inception) to December 31, 1992.
8
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and the principal types of securities each Portfolio
invests in are described to this section. The investment risks of these types of
investments are discussed in the next section, entitled "Investment Risks,"
followed by an explanation of the characteristics of the types of securities and
strategies each Portfolio uses, in "Investment Techniques and Strategies."
Appendix A contains a description of the ratings categories of certain national
ratings organizations that relate to debt securities that certain Portfolios
invest in.
TOTAL RETURN PORTFOLIO. The Total Return Portfolio seeks to maximize total
investment return (including both capital appreciation and income) by allocating
its assets among stocks, bonds (including corporate debt securities, U.S.
Government and U.S. Government-related securities) and money market instruments
according to changing market conditions.
In allocating the Portfolio's assets for investment, the Manager uses
quantitative asset allocation tools, which measure the relative characteristics
of these asset categories, in combination with the judgment of the Manager
concerning current market dynamics. Allocating assets among different types of
investments allows the Portfolio to take advantage of opportunities in different
segments of the securities markets, but also subjects the Portfolio to the risks
of those market segments. In selecting stocks, the Manager searches for
out-of-favor stocks with low price-earnings ratios (for example, below the
price-earnings ratio of the S&P 500 Index). If an out-of-favor company
demonstrates better earnings than market analysts expected (this is referred to
as a favorable "earnings surprise"), the company's earnings expectations and
price earnings multiple may be re-evaluated, which may cause the stock to
increase in value.
The Portfolio's debt securities are expected to have a portfolio maturity of
six to twelve years. At least 25% of the Portfolio's total assets will be
invested in fixed income senior securities. Otherwise, the Manager may allocate
the Portfolio's assets to one or more of these asset classes in amounts that may
vary from time to time, without the requirement to allocate a fixed percentage
in any particular category.
The Portfolio may invest up to 20% of its total assets in the aggregate in
debt securities and preferred stocks rated below investment grade (commonly
called "junk bonds") and unrated securities determined by the Manager to be of
comparable credit quality. However, the Manager presently does not intend to
invest more than 5% of the Portfolio's assets in below investment grade
securities in the current year. The Portfolio will not invest in securities
rated below B at the time of purchase. Unrated debt securities will not exceed
10% of the Portfolio's total assets.
The Portfolio may invest up to 20% of its total assets in mortgage dollar
rolls. The Portfolio may also invest up to 5% of its total assets in inverse
floating rate instruments, which are a type of derivative security. Consistent
with the foregoing policies, the Portfolio may invest to a limited degree in
securities of foreign issuers.
GROWTH PORTFOLIO. The Growth Portfolio seeks long term growth of capital by
investing primarily in common stocks with low price-earnings ratios and
better-than-anticipated earnings. Realization of current income is a secondary
consideration.
The Manager chooses investments for the Portfolio using a quantitative
investment discipline in combination with fundamental securities analysis. A low
price-earnings ratio (for example, below the price-earnings ratio of the S&P 500
Index) is often a characteristic of a stock which is out-of-favor in the market.
When an out-of-favor company demonstrates better earnings than what most
analysts were expecting, this is referred to as a favorable earnings surprise.
An upward revaluation of both earnings expectations and the price-earnings
multiple may result, which may cause the company's stock price to increase in
value. As stocks with low price-earnings ratios and favorable earnings surprises
are identified, the Manager uses fundamental securities analysis to select
individual stocks for the Portfolio. When the price-earnings ratio of a stock
held by the Portfolio moves significantly above the multiple of the overall
stock market, or the company reports a material earnings disappointment, the
Portfolio will normally sell the stock.
The Portfolio may invest the remainder of its assets (up to 10% under normal
circumstances) in U.S. Government and corporate debt obligations, including
convertible bonds which may be rated as low as B by Moody's Investors Service,
Inc. ("Moody's") or Standard and Poor's Ratings Group ("Standard & Poor's").
Consistent with the foregoing policies, the Portfolio may invest to a limited
degree in securities of foreign issuers, including issuers in developing
countries, which involve special risks (described below).
9
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO. The International Equity Portfolio seeks to
provide long-term growth of capital by investing, under normal circumstances, at
least 90% of its assets in equity securities of companies wherever located, the
primary stock market of which is outside the United States.
The Manager employs a subadviser, Babson-Stewart Ivory International
("Babson-Stewart" or the "Subadviser"), to invest the Portfolio's assets. The
Subadviser pursues the Portfolio's objective by investing in equity securities
of seasoned companies which are listed on foreign stock exchanges and which the
subadviser considers to have attractive characteristics in terms of
profitability, growth and financial resources. "Seasoned" companies are those
which in the Subadviser's opinion are known for the quality and acceptance of
their products or services and for their ability to generate profits.
The Portfolio will invest in large, intermediate and small capitalization
stocks, with no emphasis on any particular category. As a result, investments
within the Portfolio may include the lower 25% capitalization levels of a
particular market's publicly-traded securities. Stocks will be purchased on the
basis of a number of criteria, including fundamental and valuation analysis, but
investment decisions are not based on the integration of any particular
analytical disciplines. Capitalization levels are measured relative to specific
markets; thus large and intermediate capitalization ranges vary country by
country.
The Portfolio may invest up to 25% of its total assets in securities of
companies based in "emerging" countries, as defined by the International Bank
for Reconstruction and Development, the International Finance Committee, the
United Nations or its authorities or the MSCI Emerging Markets Index. An issuer
is considered by the Portfolio to be located in an emerging country if the
issuer is organized under the laws of an emerging country; the issuer's
principal securities trading market is in an emerging market; or at least 50% of
the issuer's noncurrent assets, capitalization, gross revenue or profit is
derived (directly or indirectly through subsidiaries) from assets or activities
located in emerging markets. The special risks of investing in securities of
issuers located in emerging countries are discussed in "Investment Risks,"
below.
When the Subadviser believes that it is appropriate to do so in order to
seek the Portfolio's investment objective, the Portfolio may invest up to 20% of
its total assets in debt securities. Those debt securities include debt
securities of foreign governments, supranational organizations and private
issuers, including bonds denominated in the European Currency Unit. Debt
investments will be selected on the basis of, among other things, yield, credit
quality, and the fundamental outlook for currency and interest rate trends in
different parts of the globe. The Portfolio may purchase investment grade bonds,
which are those rated Baa or higher by Moody's or BBB or higher by Standard &
Poor's and unrated securities judged by the Subadviser to be of equivalent
quality. The Portfolio may also invest up to 15% of its total assets in debt
securities which are rated below investment grade. The Portfolio currently does
not intend to invest more than 5% of its assets in debt securities rated below
investment grade. These lower quality securities are commonly called "junk
bonds." For a description of the risks associated with lower quality debt
securities, see "Investment Risks," below. Changes in interest rates will affect
the market value of fixed-income investments made by the Portfolio, as discussed
in "Investment Risks," below.
The Portfolio may enter into forward contracts, which are foreign currency
exchange contracts, to manage the Portfolio's exposure to variations in foreign
exchange rates. The Portfolio may also buy or sell futures and options contracts
relating to foreign currencies or purchase securities indexed to foreign
currencies. See "Investment Techniques and Strategies," below for additional
information.
In appropriate circumstances, such as when a direct investment cannot be
made by the Portfolio in the securities of a particular country or when the
securities of an investment company are more liquid than the underlying
portfolio securities, the Portfolio may, consistent with the provisions of the
Investment Company Act of 1940, as amended (the "Investment Company Act"),
invest in the securities of closed-end investment companies that invest in
foreign securities. Since the Portfolio's shareholders would be subject to
additional fees, including management fees, for any Portfolio assets invested in
closed-end funds, the Subadviser will make such investments only if, in its
opinion, the potential returns justify incurring the additional expense.
International investing can help investors reduce their overall portfolio
risk through diversification. In addition, international investing enables
investors to benefit from foreign economies that may have more favorable growth
rates than the United States economy. However, international investments,
particularly investments in developing countries, are subject to special risks.
For a description of these risks, see "Investment Risks," below.
10
<PAGE>
THE LIFESPAN PORTFOLIOS. There are three LifeSpan Portfolios, each of which is
an asset allocation fund that seeks to achieve its objective by allocating its
assets between two broad classes of investments--stocks and bonds. The stock
class includes equity securities of all types and the bond class includes a
variety of fixed income investments. Within those broad classes are investment
components among which the Portfolio's assets are further allocated. The three
LifeSpan Portfolios are:
LIFESPAN CAPITAL APPRECIATION PORTFOLIO which seeks long-term capital
appreciation (current income is not a primary consideration);
LIFESPAN BALANCED PORTFOLIO which seeks a blend of capital appreciation and
income; and
LIFESPAN DIVERSIFIED INCOME PORTFOLIO which seeks high current income with
opportunities for capital appreciation.
Allocating assets among different types of investments allows each Portfolio
to take advantage of a greater variety of opportunities than funds that invest
in only one investment class, but also subjects the Portfolio to the risks of
those types of investments. The general risks of stock and fixed income
investments are discussed in "Investment Risks," below.
The Manager has the ability to allocate a Portfolio's assets within
specified ranges. A Portfolio's normal allocation indicates the benchmark for
its combination of investments in each asset class over time. As market and
economic conditions change, however, the Manager may adjust the asset mix
between the stock and bond classes within a normal asset allocation range as
long as the relative risk and return characteristics of the respective
Portfolios remain distinct and each Portfolio's investment objective is
preserved. The Manager will review normal allocations between the stock and bond
classes quarterly and, if necessary, will rebalance the investment allocation at
that time. Additional adjustments may be made at any time if in the judgment of
the Manager an asset allocation shift of 5% or more appears warranted.
/ / THE PORTFOLIO COMPONENTS. The Manager will diversify each Portfolio's
stock investments among four stock components: international stocks,
value/growth stocks, growth and income stocks and small-capitalization growth
stocks ("small-cap" stocks). Each stock component is also permitted to invest a
portion of its assets in bonds when the Manager or relevant Subadviser
determines that increased flexibility in portfolio management is desirable to
enhance the potential for appreciation or income. The Manager will diversify a
Portfolio's bond investments among three bond components: government and
corporate bonds, high yield/high risk bonds (also called "junk bonds") and
short-term bonds. There is no requirement that the Manager allocate a
Portfolio's assets among all stock or bond components at all times. These stock
and bond components have been selected because the Manager believes that this
additional level of asset diversification will provide each Portfolio with the
potential for higher returns with lower overall volatility. Each Portfolio's
normal allocation and potential range of allocations are shown in the chart
below.
<TABLE>
<CAPTION>
CAPITAL DIVERSIFIED
APPRECIATION BALANCED INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
---------------------- ---------------------- ----------------------
NORMAL NORMAL NORMAL
ASSET CLASSES AND COMPONENTS ALLOCATION RANGE ALLOCATION RANGE ALLOCATION RANGE
- --------------------------------------------------- ----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
STOCKS............................................. 80% 70-90% 60% 50-70% 25% 15-35%
International.................................... 20% 15-25% 15% 5-20% 0% 0%
Value/Growth..................................... 20% 15-30% 15% 10-25% 0% 0%
Growth/Income.................................... 20% 15-30% 15% 10-25% 25% 15-35%
Small Cap........................................ 20% 15-25% 15% 5-20% 0% 0%
BONDS.............................................. 20% 10-30% 40% 30-50% 75% 65-85%
Government/Corporate............................. 10% 5-15% 15% 10-25% 35% 30-34%
High Yield/High Risk Bonds....................... 10% 5-15% 15% 5-20% 15% 5-20%
Short Term Bonds................................. 0% 0% 10% 5-20% 25% 15-30%
</TABLE>
All percentage limitations are applied at the time of purchase of a
security. The Manager may rebalance the asset allocations quarterly to realign
them in response to market conditions. Once the Manager has determined the
weighting of the stock and bond asset classes and the components of each
LifeSpan Portfolio, the Manager or the relevant subadviser will then select the
individual securities to be included in each component.
11
<PAGE>
/ / SUBADVISERS. The Manager has engaged three subadvisers (each is referred
to as a "Subadviser" and together they are referred to as the "Subadvisers") to
manage a portion of the assets of the Portfolios. Each Subadviser manages the
portion of a Portfolio's assets invested in the particular component assigned to
it by the Manager. The Manager has assigned the management of the components as
follows:
<TABLE>
<CAPTION>
SUBADVISER PORTFOLIO COMPONENT
- -------------------------------------------------------------- ------------------------------
<S> <C>
Babson-Stewart................................................ International Stocks
Pilgrim Baxter & Associates................................... Small Cap Stocks
BEA Associates................................................ High Yield/High Risk Bonds
</TABLE>
The Manager manages the remaining components using its own investment
management personnel. See "How the Portfolios are Managed" below for additional
information.
/ / STOCK INVESTMENTS. Each LifeSpan Portfolio will invest the portion of
its assets which are allocated to stock investments among four components each
of which invests principally in equity securities. Each component differs with
respect to investment criteria and characteristics as described below.
/ / INTERNATIONAL COMPONENT. This component seeks long-term growth of
capital primarily through a diversified portfolio of marketable international
equity securities. The investments in the international component normally will
be allocated among several countries. In addition, up to 25% of the assets in
this component may be invested in stocks and bonds of companies based in
emerging countries. The component's assets generally will be invested in equity
securities of seasoned companies that are listed on foreign stock exchanges and
which are considered to have attractive characteristics as to profitability,
growth and financial resources. "Seasoned" companies are those known for the
quality and acceptance of their products or services and for their ability to
generate profits. There are no issuer capitalization limits on investments.
Stocks will be selected based on a number of criteria, including fundamental and
valuation analysis, but investments are not based on the integration of any
particular analytical disciplines. Consistent with the provisions of the
Investment Company Act, the component's assets may be invested in the securities
of closed-end investment companies that invest in foreign securities. A portion
of the international component's investments may be held in corporate bonds and
government securities of foreign issuers and cash and short-term instruments.
The special risks of investing in foreign securities and in emerging markets are
described in "Investment Risks," below.
/ / VALUE/GROWTH COMPONENT. This component seeks to achieve long-term growth
of capital primarily through investments in common stocks with low
price-earnings ratios and better than anticipated earnings. Realization of
current income is not a primary consideration. Stocks with low price-earnings
ratios and favorable earnings surprises are identified by the Manager using
fundamental securities analysis to select individual stocks for purchase. When
the price earnings ratio of a stock held by the value/growth component moves
significantly above the multiple of the overall stock market, or the company
reports a material earnings disappointment, the Manager may consider selling the
stock. Up to 15% of the component's assets may be invested in stocks of foreign
issuers that generally have a substantial portion of their business in the
United States, and in American Depository Receipts (ADRs) for foreign stocks. A
portion of the component's assets may be held in cash and in short-term
investments.
/ / GROWTH/INCOME COMPONENT. This component seeks to enhance the Portfolio's
total return through capital appreciation and dividend income primarily from
investments in common stocks with low price-earnings ratios,
better-than-anticipated earnings and better-than-market-average dividend yields.
Stocks with low price-earnings ratios (for example, below the price-earnings
ratio of the S&P 500 Index), favorable earnings surprises and above-average
yields are identified by the Manager using fundamental securities analysis to
select individual stocks for this component. When the price-earnings ratio of a
stock held by the component moves significantly above the multiple of the
overall stock market, or the company reports a material earnings disappointment,
or when the yield drops significantly below the market yield, normally that
stock will be sold. Up to 15% of the component's assets may be invested in
stocks of foreign issuers that generally have a substantial portion of their
business in the United States, and in ADRs. A portion of the component's
investments may be held in investment grade or below investment grade
convertible securities, corporate bonds and U.S. Government securities, cash and
short-term instruments.
/ / SMALL CAP COMPONENT. This component seeks long-term growth of capital
primarily through investments in stocks of companies with relatively small
market capitalization, typically between $250 million to $1.5 billion.
Capitalization is the aggregate value of a company's stock, or its price per
share
12
<PAGE>
times the number of shares outstanding. Current income is a secondary
consideration. When selecting individual securities for the component's
portfolio, the Subadviser seeks companies that have an outlook for strong growth
in earnings and the potential for significant capital appreciation, particularly
in industry segments that are experiencing rapid growth. Securities will be sold
when the Subadviser believes that anticipated appreciation is no longer probable
and that alternative investments offer superior appreciation prospects, or the
risk of a decline in market price is too great. A portion of the component's
investments may also be held in cash and short-term instruments.
/ / BOND INVESTMENTS. Each Portfolio will invest those assets which are
allocated to the bond class among three components, each of which invests in an
array of fixed-income securities as described below:
/ / GOVERNMENT/CORPORATE COMPONENT. This component seeks current income and
the potential for capital appreciation primarily through investments in
fixed-income debt securities, including investment grade corporate debt
obligations of foreign and U.S. issuers and securities issued by the U.S.
Government and its agencies and instrumentalities or by foreign governments.
Although the component may invest in securities with maturities across the
entire slope of the yield curve, including long bonds (having maturities of 10
or more years), intermediate notes (with maturities of 3 to 10 years) and short
term notes (with maturities of 1 to 3 years), the Manager expects that normally
the component will have an intermediate average maturity and duration. The
Manager may take into account prepayment features when determining the maturity
of an investment. The Manager's investment strategy includes the purchase of
bonds that are underpriced relative to other debt securities having similar risk
profiles. The Manager evaluates a broad array of factors, including maturity,
creditworthiness, cash flow certainty and interest rate volatility, and compares
yields in relation to trends in the economy, the financial and commodity markets
and prevailing interest rates. The component may also invest a portion of its
assets in cash and short-term instruments.
/ / HIGH YIELD/HIGH RISK BOND COMPONENT. This component seeks to earn as
high a level of current income as is consistent with the risks associated with
high yield investments. The component's assets are invested primarily in bonds
that are rated BB or lower by Standard & Poor's or Ba or lower by Moody's or, if
not rated, that are deemed by the Subadviser to be of comparable quality to
rated securities in those categories. These are commonly referred to as "junk
bonds." This component may invest in bonds that are in default. Bonds in default
are not making interest or principal payments on the date due. The Subadviser
employs an active sector rotational style utilizing all sectors of the high
yield market, with an emphasis on diversification to control risk. The
Subadviser typically favors higher quality companies in the non-investment grade
market, senior debt over junior debt, and secured over unsecured investments.
The Subadviser screens individual securities for such characteristics as minimum
yield and issue size, issue liquidity and financial and operational strength.
In-depth credit research is then conducted to arrive at a core group of
securities within the high yield universe for the component. Continuous credit
monitoring and adherence to sell disciplines associated with both price
appreciation and depreciation are utilized to seek the overall yield and price
objectives of the component. The component may also invest a portion of its
assets in cash and short-term instruments. The special risks of investing in
below investment grade securities are described in "Investment Risks," below.
/ / SHORT-TERM BOND COMPONENT. This component seeks a high level of current
income consistent with prudent investment risk and preservation of capital by
investing primarily in debt obligations of foreign and U.S. issuers and
securities issued by the U.S. Government and its agencies and instrumentalities
and by foreign governments. This component invests primarily in fixed-income
securities generally maturing within five years of the date of purchase, or in
securities having prepayment or similar features which, in the view of the
Manager, give the instrument a remaining effective maturity of up to five years.
It is anticipated that the average dollar weighted maturity of the component
will generally range between two and three years. The Manager's investment
management process incorporates analysis of an issuer's debt service capability,
financial flexibility and liquidity, as well as the fundamental trends and the
outlook for an issuer and its industry. Credit risk management is also an
important factor. The Manager conducts intensive credit research, and carefully
selects individual issues. The Manager attempts to broadly diversify portfolio
holdings by industry sector and issuer. The Manager believes that determination
of an issuer's
13
<PAGE>
attractiveness relative to alternative issues and valuations within the
marketplace are important considerations in its investment decision-making. The
component may also invest a portion of its assets in cash and money market
securities.
MONEY MARKET PORTFOLIO. The Money Market Portfolio seeks as high a level of
current income as is consistent with preservation of capital and maintenance of
liquidity by investing in money market instruments. The money market instruments
the Portfolio invests in are high quality, short-term securities that present
minimal credit risk. They include obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, commercial paper of U.S. and
non-U.S. issuers and certificates of deposit, banker's acceptances, bank
deposits of U.S. and non-U.S. banks (including Eurodollar and Yankee dollar
deposits) and short-term corporate debt securities. These instruments are
denominated in U.S. dollars and may carry fixed or variable interest rates.
These instruments are described further under the caption "Investment Techniques
and Strategies."
The Portfolio seeks to maintain a constant net asset value of $1.00 per
share by investing in securities having an actual or effective maturity of 365
days or less and maintaining a dollar-weighted average portfolio maturity of 90
days or less. It may not invest in a security with an actual or effective
maturity exceeding 397 days.
The Portfolio may purchase only money market instruments that are within the
two highest rating categories of the major rating agencies (for example, Moody's
or Standard and Poor's). The Portfolio may not invest more than 5% of its total
assets in securities of any one issuer (other that the U.S. Government, its
agencies or instrumentalities). The Portfolio will not invest more than 5% of
its total assets in securities that are rated in the second-highest short-term
rating category or, if unrated, are judged by the Manager to be of equivalent
quality. Within this 5% "second tier" limitation, the Portfolio will not invest
more than 1% of its total assets, or $1 million, whichever is greater, in
securities (other than U.S. Government securities) of any single issuer.
Appendix A contains a description of these rating categories.
The Portfolio intends to hold its investments until maturity, but may sell
them prior to maturity for a number of reasons, including: to shorten or
lengthen the average maturity of its investment portfolio; to increase yield; to
maintain the quality of the portfolio; to maintain a stable share value; or to
meet redemption or exchange requests.
Securities in which the Money Market Portfolio invests will generally not
yield as high a level of current income as lower quality and longer-term
securities. Lower quality and longer-term securities, however, may have less
liquidity and greater credit and interest rate risk.
INCOME PORTFOLIO. The Income Portfolio seeks high current income consistent with
prudent investment risk and preservation of capital. The Portfolio seeks to
achieve its objective by investing primarily in corporate debt securities and
securities issued by the U.S. Government and its agencies and instrumentalities.
The Portfolio anticipates maintaining an average dollar-weighted portfolio
maturity of generally between eight and twelve years. By restricting the
maturities of the Portfolio's investments, the potential for dramatic changes in
the value of the Portfolio's investments should be reduced, and the value of the
Portfolio's shares should remain more stable than that of a longer-term bond
fund. Investors should be mindful, however, that the value of the Portfolio's
shares fluctuates based on changes in interest rates and in the credit quality
of the issuers represented in its portfolio.
The Portfolio invests at least 75% of its total assets in: U.S. Government
and U.S. Government-related securities, dollar-denominated foreign government
and corporate securities and short-term investments. These investments must be
rated at least investment grade by a major rating agency at the time of
purchase, or, if unrated, be judged by the Manager to be of comparable credit
quality, except that the Portfolio's investments in short-term investments must
be rated, or judged to be the equivalent of, 'Prime' which means that the issuer
has a superior capacity for repayment. Some investments in the lowest investment
grade category may have speculative characteristics and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade
securities. The Income Portfolio will not dispose of a debt security merely
because of a downward change in the credit rating of that security assigned by a
major credit agency.
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The Portfolio may invest the remainder of its total assets (up to 25% under
normal circumstances) in debt securities and preferred stocks rated below
investment grade and unrated debt securities determined by the Manager to be of
comparable credit quality, commonly called "junk bonds". Unrated debt securities
will not exceed 10% of the Portfolio's total assets. Debt securities having low
credit quality involve greater price volatility and risk of loss of principal
and income than higher quality securities. To the extent the Portfolio invests
in lower quality debt securities, its net asset value may be subject to greater
fluctuation. For a description of these and other risks associated with lower
quality debt securities, see " Investment Techniques and Strategies." Appendix A
contains a description of certain rating categories. Appendix B provides a
summary of ratings assigned to debt holdings (not including money market
instruments) of the Portfolio. These percentages are historical and do not
necessarily indicate the current or future debt holdings of the Portfolio.
The Portfolio may invest up to 20% of its total assets in mortgage dollar
rolls. The Portfolio may also invest up to 5% of its total assets in inverse
floating rate instruments. See "Investment Techniques and Strategies."
Consistent with the foregoing policies, the Portfolio may invest up to 5% of its
total assets in non-dollar denominated securities of foreign issuers, including
issuers in developing countries. These investments are subject to special risks
described below in "Investment Risks."
GOVERNMENTAL SECURITIES PORTFOLIO. The Government Securities Portfolio seeks a
high level of current income with a high degree of safety of principal by
investing primarily (at least 65% of its total assets under normal market
conditions) in U.S. Government securities and U.S. Government-related
securities.
U.S. Government securities are high quality instruments issued or guaranteed
as to principal and interest by the U.S. Treasury or by an agency or
instrumentality of the U.S. Government. These may include bills, notes and bonds
of the U.S. Treasury, mortgage participation certificates guaranteed by the
Government National Mortgage Association (Ginnie Mae Certificates), or
obligations of the Federal Home Loan Mortgage Corporation or the Federal
National Mortgage Association. U.S. Government-related securities are
obligations that are fully collateralized or otherwise secured by U.S.
Government securities. U.S. Government securities and U.S. Government-related
securities may include pools of consumer loans or mortgages, such as
collateralized mortgage obligations (CMOs). The Portfolio's investments in
privately issued CMOs will be limited to those rated within the two highest
rating categories by a nationally recognized rating agency. CMOs are derivative
securities; for a discussion of derivative securities, see "Investment
Techniques and Strategies." The U.S. Government and U.S. Government-related
securities in which the Portfolio will invest may have fixed or floating rates
of interest.
U.S. Government and U.S. Government-related securities do not generally
involve the credit risks associated with corporate debt securities. As a result,
the Portfolio's yield is generally lower than the yield of most general purpose
fixed-income funds, which assume certain credit risks in exchange for higher
potential yield. Like corporate debt securities, however, the value of U.S.
Government and U.S. Government-related securities, and thus the Portfolio's net
asset value, generally fluctuates inversely with changes in interest rates. The
Manager may seek to take advantage of market developments and yield disparities
by shortening average maturity in anticipation of rising interest rates and by
lengthening average maturity in anticipation of declining interest rates. The
Portfolio may also invest up to 20% of its total assets in mortgage dollar
rolls. The Portfolio may invest up to 5% of its total assets in inverse floating
rate instruments. For additional information, see "Investment Techniques and
Strategies," below. Under normal circumstances, the Portfolio may invest the
remainder of its assets (up to 35%) in investment grade debt obligations of
private issuers.
Although the Government Securities Portfolio invests primarily in U.S.
Government and U.S. Government related securities which generally have less
credit risk than other securities, an investment in the Government Securities
Portfolio is not insured or guaranteed.
CAN A PORTFOLIO'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? Each Portfolio has
an investment objective, described above, as well as investment policies it
follows to try to achieve its objective. Additionally, a Portfolio uses certain
investment techniques and strategies in carrying out those investment policies.
A Portfolio's investment policies and practices are not "fundamental" unless
this Prospectus or the Statement of
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Additional Information says that a particular policy is "fundamental." Each
Portfolio's investment objective is not a fundamental policy. Portfolio
shareholders will be given 30 days' advance written notice of a change to a
Portfolio's investment objective.
Fundamental policies are those that cannot be changed without the approval
of a "majority" of a Portfolio's outstanding voting shares. The term "majority"
is defined in the Investment Company Act to be a particular percentage of
outstanding voting shares (and this term is explained in the Statement of
Additional Information). The Company's Board of Directors may change a
Portfolio's non-fundamental policies without shareholder approval, although
significant changes will be described in amendments to this Prospectus.
PORTFOLIO TURNOVER. A change in the securities held by a Portfolio is known as
"portfolio turnover." Income Portfolio and Government Securities Portfolio may
take advantage of short-term differentials in yields when short-term trading is
consistent with their objectives of seeking income. While short-term trading
increases portfolio turnover, the Portfolios incur little or no brokerage costs
for U.S. Government securities. The "Financial Highlights," above, show the
Portfolios' (other than Money Market Portfolio's) portfolio turnover rates
during past fiscal years. High portfolio turnover may affect the ability of a
Portfolio to qualify as a "regulated investment company" under the Internal
Revenue Code and avoid being taxed on amounts distributed as dividends and
capital gains to shareholders. Each Portfolio qualified in its fiscal period
ended December 31, 1995 and intends to do so in the current and coming fiscal
years.
INVESTMENT RISKS
All investments carry risks to some degree, whether they are risks that market
prices of the investment will fluctuate (this is known as "market risk"), or
that the underlying issuer will experience financial difficulties and may
default on its obligation under a fixed income investment to pay interest and
repay principal (this is referred to as "credit risk."). These general
investment risks, and the special risks of certain types of investments that
some of the Portfolios may hold are described below. They affect the value of a
Portfolio's investments, its investment performance, and the price of its
shares. These risks collectively form the risk profile of a particular
Portfolio. Certain of the Portfolios are more aggressive than others, and
therefore entail more risk.
While the Manager (and Subadvisers in the applicable Portfolios) try to
reduce risks by diversifying investments, by carefully researching securities
before they are purchased for a Portfolio, and in some cases by using hedging
techniques, there is no assurance that the Portfolios will achieve their
investment objectives, and when shares of a Portfolio are redeemed, they may be
worth more or less than their original cost.
/ / STOCK INVESTMENT RISKS. At times, the stock markets can be volatile, and
stock prices can change substantially. This market risk will affect a
Portfolio's net asset values per share, which will fluctuate as the values of
the portfolio securities change. Not all stock prices change uniformly or at the
same time, not all stock markets move in the same direction at the same time,
and other factors can affect a particular stock's prices (for example, poor
earnings reports by an issuer, loss of major customers, major litigation against
an issuer, or changes in government regulations affecting an industry). Not all
of these factors can be predicted. Each Portfolio attempts to limit market risks
by diversifying its investments, that is, by not holding a substantial amount of
stock of any one company and by not investing too great a percentage of a
Portfolio's assets in any one company. Small cap stocks may be more volatile
than those of more highly capitalized issuers.
/ / RISKS OF DEBT SECURITIES. 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 a Portfolio mean that the Portfolio's share prices
can go up or down when interest rates change, because of the effect of the
change on the value of the Portfolio's investments in debt securities. Debt
securities are also subject to credit risks. Credit risk relates
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to the ability of the issuer of a debt security to make interest or principal
payments on the security as they become due. Generally, higher-yielding,
lower-rated bonds are subject to greater credit risk than higher-rated bonds.
See "Special Risks of Investing in Lower-Grade Securities," below.
/ / SPECIAL RISKS OF INVESTING IN LOWER-GRADE SECURITIES. Each Portfolio
except Money Market Portfolio and Government Securities Portfolio can invest in
high-yield, below investment grade debt securities (including both rated and
unrated securities). These "lower-grade" securities are commonly known as "junk
bonds." They generally offer higher income potential than investment grade
securities. Lower-grade securities have a rating below BBB by Standard & Poor's
or Baa by Moody's or similar ratings by other domestic or foreign rating
organizations, or they are not rated by a nationally-recognized rating
organization, but the Manager judges them to be comparable to lower-rated
securities. Income Portfolio, Total Return Portfolio and Growth Portfolio may
not invest in lower-rated securities rated below B by Moody's or Standard &
Poor's. Each of those Portfolios may retain securities whose ratings fall below
B after purchase unless and until the Manager determines that disposing of the
securities in the best interests of the respective Portfolio. Each LifeSpan
Portfolio may invest in securities rated as low as D by Standard & Poor's or C
by Moody's. Appendix A to this Prospectus describes the rating categories of
Moody's and Standard & Poor's.
All corporate debt securities (whether foreign or domestic) are subject to
some degree of credit risk. High yield, lower-grade securities, whether rated or
unrated, often have speculative characteristics and have special risks that make
them riskier investments than investment grade securities. They may be subject
to greater market fluctuations and risk of loss of income and principal than
lower yielding, investment grade securities. There may be less of a market for
them and therefore they may be harder to sell at an acceptable price. There is a
relatively greater possibility that the issuer's earnings may be insufficient to
make the payments of interest due on the bonds. The issuer's low
creditworthiness may increase the potential for its insolvency. For foreign
lower-grade debt securities, these risks are in addition to the risks of
investing in foreign securities, described below. These risks mean that a
Portfolio may not achieve the expected income from lower-grade securities, and
that a Portfolio's net asset value per share may be affected by declines in
value of these securities.
/ / FOREIGN SECURITIES HAVE SPECIAL RISKS. There are special risks in
investing in foreign securities and in securities issued by companies and
governments located in emerging market countries. Because each Portfolio (other
than the Money Market Portfolio and Government Securities Portfolio) may
purchase securities denominated in foreign currencies or traded primarily in
foreign markets, a change in the value of a foreign currency against the U.S.
dollar will result in a change in the U.S. dollar value of those foreign
securities. Foreign issuers are not required to use generally-accepted
accounting principles that apply to U.S. issuers. 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 that U.S. companies are subject
to. The value of foreign investments may be affected by other factors, including
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.
In addition, it is generally more difficult to obtain court judgements
outside the U.S. if a Portfolio were to sue a foreign issuer or broker.
Additional costs may be incurred because foreign brokerage commissions are
generally higher than U.S. rates, and there are additional custodial costs
associated with holding securities abroad.
/ / SPECIAL RISKS OF INVESTING IN EMERGING MARKET COUNTRIES. The Portfolios'
definition of "emerging countries" includes any country that is defined as an
emerging or developing economy by the International Bank for Reconstruction and
Development, the International Finance Committee, the United Nations or its
authorities, or the MSCI Emerging Markets Index. Investments in emerging market
countries may involve risks in addition to those that generally apply to
investments in foreign securities. Securities issued by emerging market
countries and by companies located in those countries may be subject to extended
settlement periods, so that a Portfolio might not receive principal and/or
income on a timely basis and its net asset values could be affected. Emerging
market countries may have smaller, less well-developed markets and exchanges;
there may be a lack of liquidity for emerging market securities. Interest rates
and foreign currency exchange rates may be more volatile than in more developed
markets. Sovereign limitations on foreign investments may be more likely to be
imposed. There may be significant balance of
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payment deficits; and their economies and markets may respond in a more volatile
manner to economic changes than those of developed countries. More information
about the risks and potential rewards of investing in foreign securities is
contained in the Statement of Additional Information.
/ / 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 from what is required for normal
portfolio management. If the Manager or a Subadviser uses a hedging instrument
at the wrong time or judges market conditions incorrectly, hedging strategies
may reduce a Portfolio's return. A Portfolio could also experience losses if the
prices of its futures and options positions were not correlated with its other
investments or if it could not close out a position because of an illiquid
market for the future or option.
Options trading involves the payment of premiums, and options, futures and
forward contracts are subject to special tax rules that may affect the amount,
timing and character of a Portfolio's income and distributions. There are also
special risks in particular hedging strategies. For example, if a covered call
written by a Portfolio is exercised on an investment that has increased in
value, the Portfolio will be required to sell the investment at the call price
and will not be able to realize any profit if the investment has increased in
value above the call price. In writing puts, there is a risk that a Portfolio
may be required to buy the underlying security at a disadvantageous price. The
use of Forward Contracts may reduce the gain that would otherwise result from a
change in the relationship between the U.S. dollar and a foreign currency.
Interest rate swaps are subject to the risk that the other party will fail to
meet its obligations (or that the underlying issuer will fail to pay on time),
as well as interest rate risks. A Portfolio could be obligated to pay more under
its swap agreements than it receives under them, as a result of interest rate
changes. These risks are described in greater detail in the Statement of
Additional Information.
/ / THERE ARE SPECIAL RISKS IN INVESTING IN DERIVATIVE INVESTMENTS. The
Portfolios may invest in different types of derivatives. 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 company issuing the instrument may
fail to pay the amount due on the maturity of the instrument. Also, the
underlying investment or security might not perform the way the Manager or
relevant Subadviser expected it to perform. Markets, underlying securities and
indices may move in a direction not anticipated by the Manager or relevant
Subadviser. Performance of derivative investments may also be influenced by
interest rate and stock market changes in the U.S. and abroad. All of this can
mean that a Portfolio will realize less principal or income from the investment
than expected. Certain derivative investments held by a Portfolio may be
illiquid. Please refer to "Illiquid and Restricted Securities."
INVESTMENT TECHNIQUES AND STRATEGIES
The Portfolios may use the investment techniques and strategies described below,
each of which involves certain risks. Not all of the Portfolios use all of these
techniques and strategies, and each section indicates which Portfolios use a
particular technique or strategy. The Statement of Additional Information
contains more detailed information about these practices, including limitations
on their use that may help to reduce some of the risks.
FOREIGN SECURITIES. Foreign securities offer special investment opportunities
but also offer special risks, described above. Neither the Income Portfolio, the
Growth Portfolio nor the Total Return Portfolio may invest more than 10% of its
total assets in foreign securities, except the following securities, in which
such Portfolios may invest up to 25% of their total assets: foreign equity and
debt securities (i) issued, assumed or guaranteed by foreign governments or
their political subdivisions or instrumentalities, (ii) assumed or guaranteed by
domestic issuers, including Eurodollar securities, and (iii) issued, assumed or
guaranteed by foreign issuers having a class of securities listed for trading on
The New York Stock Exchange.
/ / ADRS, EDRS AND GDRS. (ALL PORTFOLIOS EXCEPT MONEY MARKET PORTFOLIO AND
GOVERNMENT SECURITIES PORTFOLIO). ADRs are receipts issued by a U.S. bank or
trust company which evidence ownership of underlying securities of foreign
corporations. ADRs are traded on domestic exchanges or in the U.S. over-
the-counter market and, generally, are in registered form. To the extent a
Portfolio acquires ADRs through
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banks which do not have a contractual relationship with the foreign issuer of
the security underlying the ADR to issue and service such ADRs, there may be an
increased possibility that the Portfolio would not become aware of and be able
to respond in a timely manner to corporate actions such as stock splits or
rights offerings involving the foreign issuer. In addition, the lack of
information may result in inefficiencies in the valuation of such instruments.
EDRs and GDRs are receipts evidencing an arrangement with a non-U.S. bank
similar to that for ADRs and are designed for use in non-U.S. securities
markets. EDRs and GDRs are not necessarily quoted in the same currency as the
underlying security.
CONVERTIBLE SECURITIES (ALL PORTFOLIOS EXCEPT MONEY MARKET PORTFOLIO, GOVERNMENT
SECURITIES PORTFOLIO AND INCOME PORTFOLIO). Convertible securities are bonds,
preferred stocks and other securities that normally pay a fixed rate of interest
or dividend and give the owner the option to convert the security into common
stock. While the value of convertible securities depends in part on interest
rate changes and the credit quality of the issuer, the price will also change
based on the price of the underlying stock. While convertible securities
generally have less potential for gain than common stock, their income provides
a cushion against the stock price's declines. They generally pay less income
than non-convertible bonds. The Manager generally analyzes these investments
from the perspective of the growth potential of the underlying stock and treats
them as "equity substitutes."
DEBT SECURITIES. Each Portfolio may purchase a variety of debt securities. Debt
securities include corporate debt obligations, U.S. Government securities,
mortgage-backed and asset-backed securities, adjustable rate securities,
"stripped" securities, custodial receipts for Treasury certificates, zero coupon
bonds, equipment trust certificates, loan participation notes, structured notes
and money market instruments. The issuer of a debt security normally pays the
investor a fixed or variable rate of interest and must repay the amount borrowed
at maturity. Debt securities have varying degrees of credit quality and respond
differently to changes in interest rates.
Some debt securities, such as zero coupon bonds, do not pay interest but are
purchased at a discount from their face value. However, they accrue income for
tax and accounting purposes, which must be distributed to shareholders. Because
no cash is received by a Portfolio at such accrual periods, the Portfolio may be
required to liquidate other securities to meet distribution requirements.
/ / U.S. GOVERNMENT SECURITIES. (ALL PORTFOLIOS). U.S. Government Securities
include debt securities issued by the U.S. Government, or its agencies and
instrumentalities. Certain U.S. Government Securities, including U.S. Treasury
bills, notes and bonds, and mortgage participation certificates guaranteed by
the Government National Mortgage Association ("GNMA") are supported by the full
faith and credit of the U.S. Government, which in general terms means that the
U.S. Treasury stands behind the obligation to pay principal and interest.
GNMA certificates are one type of mortgage-related U.S. Government
Securities in which a Portfolio may invest. Other mortgage-related U.S.
Government Securities the Portfolios invest in that are issued or guaranteed by
federal agencies or government-sponsored entities are not supported by the full
faith and credit of the U.S. Government. Those securities include obligations
supported by the right of the issuer to borrow from the U.S. Treasury, such as
obligations of Federal Home Loan Mortgage Corporation ("FHLMC"), obligations
supported only by the credit of the instrumentality, such as Federal National
Mortgage Association ("FNMA") or the Student Loan Marketing Association and
obligations supported by the discretionary authority of the U.S. Government to
repurchase certain obligations of U.S. Government agencies or instrumentalities
such as the Federal Land Banks and the Federal Home Loan Banks. Certain
mortgage-backed securities, whether issued by the U.S. Government or by private
issuers, "pass-through" to investors the interest and principal payments
generated by a pool of mortgages assembled for sale by government agencies.
Pass-through mortgage-backed securities entail the risk that principal may be
repaid at any time because of prepayments on the underlying mortgages. That may
result in greater price and yield volatility than traditional fixed-income
securities that have a fixed maturity and interest rate.
The value of U.S. Government Securities will fluctuate until they mature
depending on prevailing interest rates. Because the yields on U.S. Government
Securities are generally lower than on corporate debt securities, when a
Portfolio holds U.S. Government Securities it may attempt to increase the income
it can earn from them by writing covered call options against them, when market
conditions are appropriate. Writing covered calls is explained below, under
"Hedging."
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/ / COLLATERALIZED MORTGAGE OBLIGATIONS. (ALL PORTFOLIOS EXCEPT MONEY MARKET
PORFOLIO, GROWTH PORTFOLIO AND INTERNATIONAL EQUITY PORTFOLIO). Collateralized
mortgage obligations ("CMOs") generally are obligations fully collateralized by
a portfolio of mortgages or mortgage-related securities. Payments of the
interest and principal generated by the pool of mortgages relating to the CMOs
are passed through to the holders as the payments are received. CMOs are issued
with a variety of classes or series which have different maturities. Certain
CMOs may be more volatile and less liquid than other types of mortgage-related
securities, because of the possibility of the prepayment of principal due to
prepayments on the underlying mortgage loans.
Certain CMOs are "stripped." That means that the security is divided into
two parts, one of which receives some or all of the principal payments (and is
known as a "principal-only" or "P/O" security) and the other which receives some
or all of the interest (and is known as an "interest-only" or "I/O" security).
P/Os and I/Os are generally referred to as "derivative investments," discussed
further below. 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 Portfolio will lose the anticipated cash flow from the
interest on the prepaid mortgages. That risk is increased when general interest
rates fall, and in times of rapidly falling interest rates, a Portfolio might
receive back less than its investment. The value of "principal only" securities
generally increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of coupon-bearing
bonds of the same maturity.
Private-issuer stripped securities are generally purchased and sold by
institutional investors through investment banking firms. At present,
established trading markets have not yet developed for these securities.
Therefore, most private-issuer stripped securities may be deemed "illiquid." If
a Portfolio holds illiquid stripped securities, the amount it can hold will be
subject to the Portfolio's investment policy limiting investments in illiquid
securities to 15% of the Portfolio's net assets.
/ / ASSET-BACKED SECURITIES. (ALL PORTFOLIOS EXCEPT MONEY MARKET PORTFOLIO,
GROWTH PORTFOLIO AND INTERNATIONAL EQUITY PORTFOLIO). Asset-backed securities
represent interests in pools of consumer loans and other trade receivables,
similar to mortgage-backed securities. They are issued by trusts and special
purpose corporations. They are backed by a pool of assets, such as credit card
or auto loan receivables, which are the obligations of a number of different
parties. The income from the underlying pool is passed through to holders, such
as one of the Portfolios. These securities may be supported by a credit
enhancement, such as a letter of credit, a guarantee or a preference right.
However, the extent of the credit enhancement may be different for different
securities and generally applies to only a fraction of the security's value.
These securities present special risks. For example, in the case of credit card
receivables, the issuer of the security may have no security interest in the
related collateral.
/ / INVERSE FLOATING RATE INSTRUMENTS. (ALL PORTFOLIOS EXCEPT MONEY MARKET
PORTFOLIO, GROWTH PORTFOLIO AND INTERNATIONAL EQUITY PORTFOLIO). Inverse
floating rate debt instruments ("inverse floaters") include leveraged inverse
floaters and inverse floating rate mortgage-backed securities, such as inverse
floating rate "interest only" stripped mortgage-backed securities. The interest
rate on inverse floaters resets in the opposite direction from the market rate
of interest to which the inverse floater is indexed. An inverse floater may be
considered to be leveraged to the extent that its interest rate varies by a
magnitude that exceeds the magnitude of the change in the index rate of
interest. The higher degree of leverage inherent in inverse floaters is
associated with greater volatility in their market values.
/ / MORTGAGE DOLLAR ROLLS. (INCOME PORTFOLIO, GOVERNMENT SECURITIES
PORTFOLIO AND TOTAL RETURN PORTFOLIO ONLY). Certain Portfolios may invest up to
20% of their total assets in mortgage dollar rolls. In a mortgage dollar roll
the Portfolio sells mortgage-backed securities for delivery in the current month
and simultaneously contracts to repurchase substantially similar (same type,
coupon and maturity) securities on a specified future date. During the roll
period, the Portfolio foregoes principal and interest paid on the
mortgage-backed securities. The Portfolio is compensated by the difference
between the current sales price and the lower forward price for the future
purchase (often referred to as the "drop") as well as by the interest earned on
the cash proceeds of the initial sale. A "covered roll" is a specific type of
dollar roll for which there is an offsetting cash position or a cash equivalent
security position which matures on or before the forward settlement date of the
dollar roll transaction. All rolls entered into by a Portfolio will be
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covered rolls. Covered rolls are not treated as a borrowing or other senior
security and are excluded from the calculation of a Portfolio's borrowings and
other senior securities. A Portfolio is also permitted to purchase
mortgage-backed securities and to sell such securities without regard to the
length of time held in separate transactions that do not constitute dollar
rolls. For financial reporting and tax purposes, the Portfolios treat mortgage
rolls as two separate transactions: one involving the purchase of securities and
a separate transaction involving a sale. The Portfolios do not currently intend
to enter into mortgage dollar roll transactions that are accounted for as a
financing.
/ / STRUCTURED NOTES (ALL PORTFOLIOS EXCEPT MONEY MARKET PORTFOLIO,
INTERNATIONAL EQUITY PORTFOLIO AND GROWTH PORTFOLIO) A structured note is a debt
security having an interest rate or principal repayment requirement based on the
performance of a benchmark asset or market, such as stock prices, currency
exchange rates and commodity prices. They provide exposure to the benchmark
market while fixing the maximum loss if the market does not perform as expected.
Depending on the terms of the note, a Portfolio could forego all or part of the
interest and principal that would be payable on a comparable conventional note,
and the Portfolio's loss could not exceed that amount.
/ / EURODOLLAR AND YANKEE DOLLAR BANK OBLIGATIONS. (ALL PORTFOLIOS EXCEPT
GOVERNMENT SECURITIES PORTFOLIO). The Portfolios may also invest in obligations
of foreign branches of U.S. banks referred to as Eurodollar obligations and U.S.
branches of foreign banks (Yankee dollars) as well as foreign branches of
foreign banks. These investments involve risks that are different from
investment in securities of U.S. banks.
SHORT-TERM DEBT SECURITIES. (ALL PORTFOLIOS). Each Portfolio may invest in high
quality, short-term money market instruments such as U.S. Treasury and agency
obligations; commercial paper (short-term, unsecured, negotiable promissory
notes of a domestic or foreign company); short-term debt obligations of
corporate issuers; bank participation certificates; and certificates of deposit
and bankers' acceptances (time drafts drawn on commercial banks usually in
connection with international transactions) of banks and savings loan
associations. When the Manager believes it appropriate for temporary defensive
purposes or for liquidity purposes, each Portfolio (other than Money Market
Portfolio, which normally focuses on these investments) may hold cash or invest
without limit in money market instruments.
WARRANTS AND RIGHTS. (ALL PORTFOLIOS EXCEPT MONEY MARKET PORTFOLIO AND
GOVERNMENT SECURITIES PORTFOLIO). Warrants are options to purchase stock at set
prices that are valid for a limited period of time. Rights are similar to
warrants but normally have a short duration and are distributed directly by the
issuer to its shareholders. A Portfolio may invest up to 5% of its total assets
in warrants or rights. That 5% limitation does not apply to warrants a Portfolio
has acquired as part of units with other securities or that are attached to
other securities. No more than 2% of a Portfolio's total assets may be invested
in warrants that are not listed on either The New York Stock Exchange or The
American Stock Exchange.
SMALL, UNSEASONED COMPANIES. (LIFESPAN PORTFOLIOS ONLY). Each LifeSpan Portfolio
may invest in securities of small, unseasoned companies. These are companies
that have been in operation less than three years, including the operations of
any predecessors. Securities of these companies may have limited liquidity
(which means that a Portfolio may have difficulty selling them at an acceptable
price when it wants to) and the price of these securities may be volatile.
LOANS OF PORTFOLIO SECURITIES. (ALL PORTFOLIOS). To attempt to increase its
income or raise cash for liquidity purposes, each Portfolio may lend its
portfolio securities, in transactions other than repurchase agreements, to
brokers, dealers and other financial institutions. A Portfolio must receive
collateral for a loan. As a matter of non-fundamental operating policy, the
Manager limits such loans to 10% of the Portfolio's total assets, and such loans
are subject to other conditions described in the Statement of Additional
Information.
"WHEN-ISSUED" AND DELAYED DELIVERY TRANSACTIONS. (ALL PORTFOLIOS EXCEPT MONEY
MARKET PORTFOLIO). Each Portfolio 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 a Portfolio if the value of the security declines prior to the settlement
date.
21
<PAGE>
REPURCHASE AGREEMENTS. (ALL PORTFOLIOS). Each Portfolio may enter into
repurchase agreements. In a repurchase transaction, a Portfolio buys a security
and simultaneously sells it to the vendor for delivery at a future date.
Repurchase agreements must be fully collateralized. However, if the vendor fails
to pay the resale price on the delivery date, a Portfolio may experience costs
in disposing of the collateral and may experience losses if there is any delay
in doing so.
ILLIQUID AND RESTRICTED SECURITIES. (ALL PORTFOLIOS). Under the policies
established by the Portfolios' Board of Directors, the Manager determines the
liquidity of certain of the Portfolios' investments. 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. A LifeSpan
Portfolio will not invest more than 15% of its net assets in illiquid securities
(including restricted securities that are illiquid). The LifeSpan Portfolios
will not invest more than 15% of their assets in restricted securities,
including those that are eligible for resale to qualified institutional
purchasers. The remaining Portfolios (other than the Money Market Portfolio)
will not invest more than 15% of their net assets in illiquid or restricted
securities (excluding restricted securities eligible resale to qualified
institutional investors). The Money Market Portfolio may not invest more than
10% of its net assets in illiquid and restricted securities (including
repurchase agreements having a maturity beyond 7 days, portfolio securities
which do not have readily available market quotations and time deposits maturing
in more than 2 days).
HEDGING. (ALL PORTFOLIOS EXCEPT MONEY MARKET). The Portfolios may write (sell)
and Government Securities Portfolio and International Equity Portfolio may also
purchase exchange traded covered call options on securities, securities indices
and foreign currencies, in each case as a hedge against decreases in prices of
existing portfolio securities or increases in prices of securities whose
purchase is anticipated. The International Equity Portfolio and the
international component of the LifeSpan Portfolios may purchase options on
currency in the over-the-counter ("OTC") markets. The Portfolios may use covered
call options for non-hedging purposes as described below.
A Portfolio may, subject to its investment policies, sell or purchase
covered call options and buy and sell futures and forward contracts for a number
of purposes. It may do so to try to manage its exposure to the possibility that
the prices of its portfolio securities may decline, or to establish a position
in the securities market as a temporary substitute for purchasing individual
securities. It may do so to try to manage its exposure to changing interest
rates. Some of these strategies, such as selling futures and writing covered
calls, hedge a Portfolio's portfolio against price fluctuations.
Other hedging strategies, such as buying futures, tend to increase a
Portfolio's exposure to the securities market. Forward contracts are used to try
to manage foreign currency risks on a Portfolio's foreign investments. Foreign
currency options are used to try to protect against declines in the dollar value
of foreign securities a Portfolio owns, or to protect against an increase in the
dollar cost of buying foreign securities. Writing covered call options may also
provide income to a Portfolio for liquidity purposes or may be for defensive
reasons, or to raise cash to distribute to shareholders. Hedging strategies
entail special risks, described in "Investment Risks," above.
/ / FUTURES. To hedge against changes in interest rates, securities prices
or currency exchange rates, each Portfolio (other than the Money Market
Portfolio) may, subject to its investment objectives and policies, purchase and
sell various kinds of futures contracts. A Portfolio may also enter into closing
purchase and sale transactions with respect to these contracts and options.
Futures contracts may be based on various securities (such as U.S. Government
securities), securities indices, foreign currencies and other financial
instruments and indices.
The Growth Portfolio and Total Return Portfolio may purchase and sell
futures contracts on stock indices and sell options on such futures. The Income
Portfolio and Total Return Portfolio may purchase and sell interest rate futures
and sell options on such futures. In addition, each Portfolio that may invest in
securities that are denominated in foreign currency may purchase and sell
futures on currencies. The International Equity Portfolio may purchase and sell,
and the LifeSpan Portfolios may sell, options on such futures. A Portfolio will
engage in futures and related options transactions only for bona fide hedging
and non-hedging purposes as permitted in regulations of the Commodity Futures
Trading Commission. No
22
<PAGE>
Portfolio will enter into futures contracts or options thereon for non-hedging
purposes if, immediately thereafter, the aggregate initial margin and premiums
required to establish non-hedging positions in futures contracts and options on
futures will exceed 5 percent of the net asset value of the Portfolio's
portfolio, after taking into account unrealized profits and losses on any such
positions and excluding the amount by which such options were in-the-money at
the time of purchase.
/ / COVERED CALL OPTIONS AND PUT OPTIONS ON FUTURES. A Portfolio may write
(that is, sell) call options on securities, indices and foreign currencies for
hedging or non-hedging purposes and write call options on Futures for hedging
purposes but only if they are "covered." This means a Portfolio 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 while the call is
outstanding. Calls on Futures must be covered by securities or other liquid
assets a Portfolio owns and segregates to enable it to satisfy its obligations
if the call is exercised. When a Portfolio writes a call, it receives cash
(called a premium). The call gives the buyer the ability to buy the investment
on which the call was written from a Portfolio at the call price during the
period in which the call may be exercised. If the value of the investment does
not rise above the call price, it is likely that the call will lapse without
being exercised, while the Portfolio keeps the cash premium (and the
investment). After a Portfolio writes a call, not more than 20% of the value of
its total assets may be subject to calls.
A Portfolio may sell covered call options that are traded on U.S. or foreign
securities or commodity exchanges or which are issued by the Options Clearing
Corporation. In the case of foreign currency options, they may be quoted by
major recognized dealers in those options. The International Equity Portfolio
and the international component of the respective LifeSpan Portfolios may
purchase options on currency in the over-the-counter markets.
/ / FORWARD CONTRACTS. (ALL PORTFOLIOS EXCEPT MONEY MARKET
PORTFOLIO). Forward Contracts are foreign currency exchange contracts. They are
used to buy or sell foreign currency for future delivery at a fixed price. A
Portfolio uses them to try to "lock in" the U.S. dollar price of a security
denominated in a foreign currency that the Portfolio has purchased or sold, or
to protect against possible losses from changes in the relative value of the
U.S. dollar and a foreign currency. A Portfolio may also use "cross hedging,"
where the Portfolio hedges against changes in currencies other than the currency
in which a security it holds is denominated. No Portfolio will speculate in
foreign exchange.
/ / INTEREST RATE SWAPS. (GOVERNMENT SECURITIES PORTFOLIO ONLY). Government
Securities Portfolio may enter into interest rate swaps both for hedging and to
seek to increase total return. In an interest rate swap, the Portfolio and
another party exchange their right to receive, or their obligation to pay,
interest on a security. For example, they may swap a right to receive floating
rate interest payments for fixed rate payments. The Portfolio enters into swaps
only on a net basis, which means the two payment streams are netted out, with
the Portfolio receiving or paying, as the case may be, only the net amount of
the two payments. The Portfolio will segregate liquid assets (such as cash or
U.S. Government securities) to cover any amounts it could owe under swaps that
exceed the amounts it is entitled to receive, and it will adjust that amount
daily, as needed.
DERIVATIVE INVESTMENTS. A Portfolio may not purchase or sell physical
commodities; however, a Portfolio may purchase and sell foreign currency in
hedging transactions. The restriction against purchasing commodities shall not
prevent a Portfolio from buying or selling options and futures contracts or from
investing in securities or other instruments backed by physical commodities.
Derivative investments may be used by a Portfolio in some cases for hedging
purposes and in other cases to seek income. In the broadest sense,
exchange-traded options and futures contracts (discussed in "Hedging," above)
may be considered derivative investments, and other examples of derivatives are
CMOs, stripped securities, asset-backed securities, structured notes and
floating interest rate securities. Some of the special risks of derivatives are
described in "Investment Risks," above.
Index-linked or commodity-linked notes are debt securities of companies that
call for interest payments and/or payment on the maturity of the note in
different terms than the typical note where the borrower agrees to pay a fixed
sum on the maturity of the note. Principal and/or interest payments on an
23
<PAGE>
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. A Portfolio may invest in debt exchangeable for
common stock of an issuer or equity-linked debt securities of an issuer. At
maturity, the principal amount of the debt security is exchanged for common
stock of the issuer or is payable in an amount based on the issuer's common
stock price at the time of maturity. In either case there is a risk that the
amount payable at maturity will be less than the expected principal amount of
the debt.
TEMPORARY DEFENSIVE INVESTMENTS. When stock or bond market prices are falling or
in other unusual economic or business circumstances, each Portfolio may invest
substantially all of its assets in cash equivalents, cash, or short-term money
market instruments for temporary defensive purposes.
OTHER INVESTMENT RESTRICTIONS. The Portfolios have other investment restrictions
which are "fundamental" policies. A Portfolio cannot deviate from its other
fundamental policies described in "Investment Objectives and Policies" and
"Other Investment Techniques and Strategies" in the Statement of Additional
Information.
/ / EACH PORTFOLIO, OTHER THAN THE LIFESPAN PORTFOLIOS, MAY NOT:
/ / Borrow amounts in excess of 10% of the Portfolio's total assets, taken
at market value at the time of the borrowing, and then only from banks as a
temporary measure for extraordinary or emergency purposes, or make investments
in portfolio securities while such outstanding borrowings exceed 5% of the
Portfolio's total assets.
/ / (a) Invest more than 5% of the Portfolio's total assets (taken at
market value at the time of each investment) in the securities (other than U.S.
Government agency securities) of any one issuer (including repurchase agreements
with any one bank); and (b) purchase more than either (i) 10% of the principal
amount of the outstanding debt securities of an issuer, or (ii) 10% of the
outstanding voting securities of an issuer, except that such restrictions shall
not apply to securities issued or guaranteed by the U.S. Government or its
agencies, bank money instruments or bank repurchase agreements. (This
restriction does not apply to the Government Securities Portfolio.)
/ / Invest more than 25% of its assets in securities of issuers in any
single industry, provided that this limitation shall not apply to obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
For the purpose of this restriction, each utility that provides a separate
service (e.g., gas, gas transmission, electric or telephone) shall be considered
a separate industry. This test shall be applied on a pro forma basis using the
market value of all assets immediately prior to making any investment. (This
restriction does not apply to the International Equity Portfolio or the
Government Securities Portfolio). (Each Portfolio subject to this restriction
has undertaken to apply it to 25% or more of its assets.)
/ / EACH LIFESPAN PORTFOLIO MAY NOT:
/ / Borrow money, except from banks for temporary purposes in amounts not
in excess of 33 1/3% of the value of its assets. Borrowings may also be made for
liquidity purposes to satisfy redemption requests when liquidation of portfolio
securities is considered inconvenient or disadvantageous. However, a Portfolio
may enter into futures contracts, options on futures contracts, securities or
indices and when-issued and delayed delivery transactions.
/ / With respect to 75% of its total assets, purchase any securities (other
than U.S. Government Securities) that would cause more than 5% of a Portfolio's
total assets to be invested in securities of a single issuer, or purchase more
than 10% of the outstanding voting securities of an issuer.
/ / Invest more than 25% of its assets in securities of issuers in any
single industry, provided that this limitation shall not apply to obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
For the purpose of this restriction, each utility that provides a separate
service (e.g., gas, gas transmission, electric or telephone) shall be considered
a separate industry. This test shall be applied on a pro forma basis using the
market value of all assets immediately prior to making any investment. (The
Portfolios have undertaken to apply this restriction to 25% or more of their
assets.)
All of the percentage restrictions described above and elsewhere in this
Prospectus (except the 300% asset coverage requirement on borrowing) apply only
at the time a Portfolio purchases a security, and a
24
<PAGE>
Portfolio need not dispose of a security merely because the Portfolio's assets
have changed or the security has increased in value relative to the size of the
Portfolio. There are other fundamental policies discussed in the Statement of
Additional Information.
HOW THE PORTFOLIOS ARE MANAGED
ORGANIZATION AND HISTORY. The Company was organized in 1981 as a Maryland
corporation. The Company is an open-end management investment company. Organized
as a series fund, the Company presently has nine diversified series.
The Company is governed by a Board of Directors, which is responsible for
protecting the interests of shareholders under Maryland law. The Directors meet
periodically throughout the year to oversee each Portfolio's activities, review
its performance, and review the actions of the Manager and Subadvisers.
"Directors and Officers of the Portfolios" in the Statement of Additional
Information names the Directors and officers of the Portfolios and provides more
information about them. Although the Portfolios are not required by law to hold
annual meetings, and do not plan to do so, they may hold shareholder meetings
from time to time on important matters, and shareholders have the right to call
a meeting to remove a Director or to take other action described in the
Company's Articles of Incorporation. On matters affecting only one Portfolio,
only the shareholders of that Portfolio are entitled to vote. Separate votes by
Portfolio are required for matters relating to all Portfolios but affecting the
Portfolios differently. An insurance company issuing a variable contract for
which shares of a Portfolio are held by the insurance company's separate account
will vote the shares in accordance with applicable law, which currently requires
the insurance company to request voting instructions from policy owners and to
vote the shares in proportion to the voting instructions received. For more
information, please refer to your insurance company's separate account
prospectus.
The Board of Directors has the power, without shareholder approval, to
divide unissued shares of the Company into additional series. Shares of each
Portfolio currently consist of a single class and have equal rights as to
voting, redemption, dividends and liquidation with respect to that Portfolio.
Shares are freely transferrable. Please refer to "How the Portfolios are
Managed" in the Statement of Additional Information for further information on
voting of shares.
THE MANAGER, THE SUBADVISERS AND THEIR AFFILIATES. The Portfolios are managed by
the Manager, Oppenheimer Funds, Inc., which supervises each Portfolio's
investment program and handles its day-to-day business. The Manager carries out
its duties, subject to the policies established by the Board of Directors, under
separate Investment Advisory Agreements for each Portfolio which state the
Manager's responsibilities. The Agreements set forth the fees paid by a
Portfolio to the Manager, and describe the expenses that a Portfolio is
responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The Manager
and its affiliates currently manage investment companies, including other
Oppenheimer funds, with assets of more than $50 billion as of March 31, 1996,
and with nearly 3 million shareholder accounts. The Manager is owned by
Oppenheimer Acquisition Corp., a holding company that is owned in part by senior
officers of the Manager and controlled by Massachusetts Mutual Life Insurance
Company.
The Manager has engaged three Subadvisers to provide day-to-day portfolio
management for certain components of the LifeSpan Portfolios. The Manager has
engaged Babson-Stewart to provide day-to-day portfolio management services to
the International Equity Portfolio and to the international components of the
Capital Appreciation Portfolio and Balanced Portfolio. Babson-Stewart, One
Memorial Drive, Cambridge, MA 02142, was originally established in 1987. The
general partners of Babson-Stewart are David L. Babson & Co., which is an
indirect subsidiary of Massachusetts Mutual Life Insurance Company, and Stewart
Ivory & Co., Ltd. As of December 31, 1995, Babson-Stewart had approximately $5.4
billion in assets under management. BEA Associates, One Citicorp Center, 153
East 53rd Street, 57th Floor, New York, NY 10022, the Subadviser to the high
yield/high risk bond component of the LifeSpan Portfolios, has been providing
fixed-income and equity management services to institutional clients since 1984.
BEA is a partnership between Credit Suisse Capital Corporation and CS Advisors
Corp. As of December 31, 1995, BEA Associates, together with its global
affiliate, had $27.4 billion in assets under management. Pilgrim
25
<PAGE>
Baxter, 1255 Drummers Lane, Wayne, PA 19087, the Subadviser to the small cap
component, was established in 1982 to provide specialized equity management for
institutional investors including other investment companies. Pilgrim Baxter is
a wholly-owned subsidiary of United Asset Management Corporation. As of March
31, 1996, Pilgrim Baxter had over $9 billion in assets under management. Each
Subadviser is responsible for choosing the investments of its respective
component for each Portfolio and its duties and responsibilities are set forth
in its respective contract with the Manager. Babson-Stewart is responsible for
choosing all investments for the International Equity Portfolio. The Manager,
not the Portfolios, pays the Subadvisers.
<TABLE>
<CAPTION>
PORTFOLIO/PRINCIPAL YEAR BECAME
PORTFOLIO MANAGER PORTFOLIO MANAGER BUSINESS EXPERIENCE (LAST 5 YEARS)
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN PORTFOLIO
Peter M. Antos, C.F.A. 1989 Principal Portfolio Manager of the Portfolio, and leader of
the Total Return Portfolio management team that includes the
managers listed below. Senior Vice President and Portfolio
Manager of the Manager since March, 1996; previously Vice
President and Senior Portfolio Manager, Equities--G.R. Phelps
(1989-1996)
Michael C. Strathearn, C.F.A. 1988 Vice President and Portfolio Manager of the Manager since
March, 1996; previously a Portfolio Manager, Equities--G.R.
Phelps (1988-1996)
Stephen F. Libera, C.F.A. 1985 Vice President and Portfolio Manager of the Manager since
March 1996; previously Vice President and Senior Portfolio
Manager, Fixed Income--G.R. Phelps (1985-1996)
Kenneth B. White, C.F.A. 1992 Vice President and Portfolio Manager of the Manager since
March, 1996; previously a Portfolio Manager, Equities--G.R.
Phelps (1992-1996); Senior Investment Officer, Equities--CML
(1987-1992)
Arthur Zimmer 1996 Vice President and Portfolio Manager of the Manager and an
officer and Portfolio Manager of other Oppenheimer funds
- -------------------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO
Peter M. Antos, C.F.A. 1989 Principal Portfolio Manager of the Portfolio, and leader of
the Growth Portfolio management team that includes the
managers listed below. Senior Vice President and Portfolio
Manager of the Manager since March, 1996; previously Vice
President and Senior Portfolio Manager, Equities--G.R. Phelps
(1989-1996)
Michael C. Strathearn, C.F.A. 1988 Vice President and Portfolio Manager of the Manager since
March, 1996; previously a Portfolio Manager, Equities--G.R.
Phelps (1988-1996)
Kenneth B. White, C.F.A. 1992 Vice President and Portfolio Manager of the Manager since
March, 1996; previously Portfolio Manager, Equities--G.R.
Phelps (1992-1996); Senior Investment Officer, Equities--CML
(1987-1992)
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO/PRINCIPAL YEAR BECAME
PORTFOLIO MANAGER PORTFOLIO MANAGER BUSINESS EXPERIENCE (LAST 5 YEARS)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO
(Babson-Stewart)
James W. Burns 1996 Managing Director, Babson-Stewart (1993-present) and
Director, Stewart Ivory & Co., Ltd. (since 1990)
John G.L. Wright 1996 Managing Director, Babson-Stewart (1987-present); Director,
Stewart Ivory & Co., Ltd. (since 1971)
- -------------------------------------------------------------------------------------------------------------------
THE COMPONENTS OF THE LIFESPAN
PORTFOLIOS
INTERNATIONAL COMPONENT
(Babson-Stewart)
James W. Burns 1996 Managing Director, Babson-Stewart (1993-present) and
Director, Stewart, Ivory & Co., Ltd. (since 1990)
John G.L. Wright 1996 Managing Director, Babson-Stewart (1987-present); Director,
Stewart, Ivory & Co., Ltd. (since 1971)
VALUE/GROWTH AND GROWTH/ INCOME
COMPONENTS
(the Manager)
Peter M. Antos, C.F.A. 1995 Leader of the Value/Growth and Growth/Income management teams
that includes the managers listed below. Senior Vice
President and Portfolio Manager of the Manager since March,
1996; previously Vice President and Senior Portfolio Manager,
Equities-- G.R. Phelps (1989-1996)
Michael C. Strathearn, C.F.A. 1995 Vice President and Portfolio Manager of the Manager since
March, 1996; previously a Portfolio Manager, Equities--G.R.
Phelps (1988-1996)
Kenneth B. White, C.F.A. 1992 Vice President and Portfolio Manager of the Manager since
March, 1996; previously Portfolio Manager, Equities--G.R.
Phelps (1992-1996); Senior Investment Officer, Equities--CML
(1987-1992)
SMALL CAP COMPONENT
(Pilgrim Baxter)
Gary L. Pilgrim 1995 Director, Member of Executive Committee, President and Chief
Investment Officer, Pilgrim Baxter (1985-Present)
John F. Force 1995 Portfolio Manager/Analyst, Pilgrim Baxter (since 1993); and
Vice President/Portfolio Manager, Fiduciary Management
Associates (1989-1993)
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO/PRINCIPAL YEAR BECAME
PORTFOLIO MANAGER PORTFOLIO MANAGER BUSINESS EXPERIENCE (LAST 5 YEARS)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
James M. Smith 1995 Portfolio Manager/Analyst, Pilgrim Baxter (since 1993);
Senior Vice President/Portfolio Manager, Selected Financial
Services (1992-1993); and Vice President, Sears Investment
Management Company (prior to 1992)
Michael D. Jones 1995 Portfolio Manager and Analyst, Pilgrim Baxter (since 1995);
Vice President/Portfolio Manager, Bank of New York
(1990-1995)
GOVERNMENT SECURITIES/ CORPORATE
BONDS COMPONENT
(the Manager)
Stephen F. Libera, C.F.A. 1985 Vice President and Portfolio Manager of the Manager since
March 1996; previously Vice President and Senior Portfolio
Manager, Fixed Income--G.R. Phelps (1985-1996)
HIGH YIELD BONDS COMPONENT
(BEA Associates)
Richard J. Lindquist 1995 Managing Director and High Yield Portfolio Manager, BEA
Associates (1995); CS First Boston (1989-1995)
SHORT-TERM BOND COMPONENT
(the Manager)
Stephen F. Libera, C.F.A. 1985 Vice President and Portfolio Manager of the Manager since
March 1996; previously Vice President and Senior Portfolio
Manager, Fixed Income--G.R. Phelps (1985-1996)
- -------------------------------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
Carol E. Wolf 1996 Vice President of the Manager and of Centennial Asset
Management Corporation (a subsidiary of the Manager); an
officer and Portfolio Manager of other Oppenheimer funds
- -------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO
AND INCOME PORTFOLIO
David A. Rosenberg 1996 Vice President of the Manager (1994-present) and an Officer
and Portfolio Manager of other Oppenheimer funds; an officer
and Portfolio Manager, Delaware Investment Advisors (until
1994)
</TABLE>
/ / FEES AND EXPENSES. Under separate Investment Advisory Agreements with
each Portfolio, each Portfolio pays the Manager a monthly fee equal to a
percentage of the Portfolio's average daily net assets as follows:
/ / TOTAL RETURN PORTFOLIO
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------------------------------------------------- -------------
<S> <C>
First $600,000,000.......................................................................... 0.625%
Amount over $600,000,000.................................................................... 0.45%
</TABLE>
28
<PAGE>
/ / INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------------------------------------------------- -------------
<S> <C>
First $250,000,000.......................................................................... 1.00%
Amount over $250,000,000.................................................................... 0.90%
</TABLE>
/ / GROWTH PORTFOLIO, INCOME PORTFOLIO AND GOVERNMENT SECURITIES PORTFOLIO.
<TABLE>
<CAPTION>
GROWTH INCOME
PORTFOLIO PORTFOLIO GOVERNMENT SECURITIES
NET ASSET VALUE ANNUAL RATE ANNUAL RATE PORTFOLIO ANNUAL RATE
- ---------------------------------------------------------- ------------- ------------- ---------------------
<S> <C> <C> <C>
First $300,000,000........................................ 0.625% 0.575% 0.525%
Next $100,000,000......................................... 0.500% 0.500% 0.500%
Amount over $400,000,000.................................. 0.450% 0.450% 0.450%
</TABLE>
/ / MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------------------------------------------------- -------------
<S> <C>
First $200,000,000.......................................................................... 0.50%
Next $100,000,000........................................................................... 0.45%
Amount over $300,000,000.................................................................... 0.40%
</TABLE>
Under separate Investment Advisory Agreements, the Capital Appreciation
Portfolio, Balanced Portfolio and Diversified Income Portfolio pay the Manager
an annual fee equal to 0.85%, 0.85% and 0.75%, respectively, of the Portfolio's
average annual net asset value up to $250 million and 0.75%, 0.75% and 0.65%,
respectively on such assets over $250 million.
Under its Investment Subadvisory Agreements with Babson-Stewart, the Manager
pays Babson-Stewart a monthly fee at the following annual rates, which decline
as the average daily net assets of the International Equity Portfolio and that
portion of Capital Appreciation Portfolio and Balanced Portfolio allocated to
Babson-Stewart grow: 0.75% of the first $10 million of average daily net assets
allocated to Babson-Stewart, 0.625% of the next $15 million, 0.50% of the next
$25 million and 0.375% of such assets in excess of $50 million. The portion of
the net assets of all Portfolios allocated to Babson-Stewart will not be
aggregated in applying these breakpoints.
Under its Investment Subadvisory Agreements with BEA, the Manager pays BEA a
quarterly fee which declines as the combined average daily net assets of each
Portfolio allocated to BEA grow at the following annual rates: 0.45% of the
first $25 million of combined average daily net assets allocated to BEA, 0.40%
of the next $25 million, 0.35% of the next $50 million and 0.25% of the such
assets in excess of $100 million.
Under its Investment Subadvisory Agreements with Pilgrim Baxter, the Manager
pays Pilgrim Baxter a monthly fee at the annual rate of 0.60% of the combined
average daily net assets of the Portfolios allocated to Pilgrim Baxter.
For purposes of calculating the fee payable to BEA and Pilgrim Baxter, the
net asset values of that portion of the assets of each Portfolio subadvised by
BEA and Pilgrim Baxter are aggregated with that portion of the net asset value
of the assets of Oppenheimer Series Fund, Inc. managed by BEA and Pilgrim
Baxter, respectively.
29
<PAGE>
During the fiscal year ended December 31, 1995, the management fees
(computed on an annualized basis as a percentage of the net assets of the
Portfolios as of the close of business each day) paid to the prior investment
adviser and the total operating expenses as a percentage of average net assets
of each Portfolio, were as follows:
<TABLE>
<CAPTION>
MANAGEMENT TOTAL OPERATING
PORTFOLIO FEES EXPENSES (1)
- -------------------------------------------------------------------- -------------- ---------------
<S> <C> <C>
Money Market........................................................ .500% .57%
Government Securities............................................... .554% .71%
Income.............................................................. .590% .65%
Total Return........................................................ .553% .59%
Growth.............................................................. .613% .66%
International Equity................................................ .980% 1.26%
Capital Application (2)............................................. .850% 1.50%
Balanced (2)........................................................ .850% 1.50%
Diversified Income (2).............................................. .750% 1.50%
</TABLE>
- ------------------------
(1) This table does not reflect expenses that apply at the separate account
level or to related insurance products.
(2) Because the LifeSpan Portfolios are new funds and have not completed a full
fiscal year, the expenses shown above are based on amounts estimated to be
payable in the current fiscal year.
Each Portfolio pays expenses related to its daily operations, such as
custodian fees, Directors' fees, transfer agency fees, legal and auditing costs.
Those expenses are paid out of a Portfolio's assets and are not paid directly by
shareholders. However, those expenses reduce the net asset value of shares, and
therefore are indirectly borne by shareholders through their investment. More
information about the Investment Advisory Agreements and the other expenses paid
by the Portfolios is contained in the Statement of Additional Information.
There is also information about the Portfolios' brokerage policies and
practices in "Brokerage Policies of the Portfolios" in the Statement of
Additional Information. That section discusses how brokers and dealers are
selected for the Portfolios' portfolio transactions. When deciding which brokers
to use, the Manager is permitted by the Investment Advisory Agreements to
consider whether brokers have sold shares of the Portfolios or any other funds
for which the Manager serves as investment adviser.
/ / SHAREHOLDER INQUIRIES. Inquiries by policy owners for Account
information are to be directed to the insurance company issuing the Account at
the address or telephone number shown in the accompanying Account Prospectus.
PERFORMANCE OF THE PORTFOLIOS
EXPLANATION OF PERFORMANCE TERMINOLOGY. Each Portfolio uses the term "total
return" and certain Portfolios may use the term "yield" to illustrate their
performance. These returns measure the performance of a hypothetical account in
a Portfolio over various periods, and do not show the performance of each
shareholder's account (which will vary if dividends are received in cash, or
shares are sold or purchased). A Portfolio's performance data may help you see
how well your investment has done over time and to compare it to market indices.
However, the performance data published by the Portfolios does not include
expenses that apply at the separate account level or to related insurance
products which, if considered, would reduce such performance. Since shares of
the Portfolios may be purchased only through a variable contract, you should
carefully review the prospectus of the insurance product you have chosen for
information on charges and expenses.
It is important to understand that a Portfolio's yields and total returns
represent past performance and should not be considered to be predictions of
future returns or performance. This performance data is described below, but
more detailed information about how total returns and yields are calculated is
30
<PAGE>
contained in the Statement of Additional Information, which also contains
information about other ways to measure and compare a Portfolio's performance. A
Portfolio's investment performance will vary over time, depending on market
conditions, the composition of the portfolio and expenses.
/ / TOTAL RETURNS. There are different types of "total returns" used to
measure a Portfolio's performance. Total return is the change in value of a
hypothetical investment in a Portfolio over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares.
The cumulative total return measures the change in value over the entire period
(for example, ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the cumulative total
return over the entire period. However, average annual total returns do not show
a Portfolio's actual year-by-year performance.
/ / YIELD. Government Securities Portfolio, Income Portfolio, Total Return
Portfolio and the LifeSpan Diversified Income Portfolio calculate yield by
dividing the annualized net investment income per share on the portfolio during
a 30-day period by the maximum offering price on the last day of the period. The
yield data represents a hypothetical investment return on the portfolio, and
does not measure an investment return based on dividends actually paid to
shareholders. To show that return, a dividend yield may be calculated. Dividend
yield is calculated by dividing the dividends of a class derived from net
investment income during a stated period by the maximum offering price on the
last day of the period.
/ / YIELD FOR MONEY MARKET PORTFOLIO. The "yield" of Money Market Portfolio
is the income generated by an investment in the Portfolio over a seven-day
period, which is then "annualized." In annualizing, the amount of income
generated by the investment during that seven days is assumed to be generated
each week over a 52-week period, and is shown as a percentage of the investment.
The "compounded effective yield" is calculated similarly, but the annualized
income earned by an investment in Money Market Portfolio is assumed to be
reinvested in additional shares. The "compounded effective yield" will be
slightly higher than the yield because of the effect of the assumed
reinvestment.
ABOUT YOUR ACCOUNT
HOW TO BUY SHARES
Shares of each Portfolio are offered only for purchase by insurance company
Accounts as an investment medium for variable life insurance policies and
variable annuity contracts, as described in the accompanying Account Prospectus.
Charges and deductions made from purchase payments for variable contracts are
stated in the current prospectus for those contracts. Particular variable
contracts may not offer investments in all of the Portfolios described in this
prospectus. Shares of each Portfolio are offered at their respective offering
price, which (as used in this Prospectus and the Statement of Additional
Information) is net asset value (without a sales charge).
All purchase orders are processed at the offering price next determined
after receipt by the Company of a purchase order in proper form from an Account.
The offering price (and net asset value) is determined as of the close of The
New York Stock Exchange, which is normally 4:00 P.M., New York time, but may be
earlier on some days. Net asset value per share of each Portfolio is determined
by dividing the value of that Portfolio's net assets by the number of its shares
outstanding. The sale of shares of a Portfolio will be suspended during any
period when the determination of net asset value is suspended and may be
suspended by the Board of Directors whenever the Board judges it in that
Portfolio's best interest to do so.
The Board of Directors has established procedures for valuing each
Portfolio's securities. In general, those valuations are based on market value.
Under Rule 2a-7, the amortized cost method is used to value Money Market
Portfolio's net asset value per share, which is expected to remain fixed at
$1.00 per share except under extraordinary circumstances. There can be no
assurance that Money Market Portfolio's net asset value will not vary. Further
details are in "About Your Account--How to Buy Shares--Money Market Portfolio
Net Asset Valuation" in the Statement of Additional Information.
31
<PAGE>
HOW TO SELL SHARES
Because shares of the Portfolios are held by insurance company Accounts, and not
directly by investors, you should refer to the prospectus of your insurance
company's Account for information on how to redeem shares of a Portfolio held
for your policy or contract. Payment for shares tendered by an Account for
redemption is made ordinarily in cash and forwarded within seven days after
receipt by the Company's transfer agent, OppenheimerFunds Services (the
"Transfer Agent"), of redemption instructions in proper form from an Account,
except under unusual circumstances as determined by the Securities and Exchange
Commission. The redemption price will be the net asset value next determined
after the receipt by the Transfer Agent of a request in proper form. The market
value of the securities in the portfolio of the Portfolios is subject to daily
fluctuations and the net asset value of the Portfolios' shares (other than
shares of the Money Market Portfolio) will fluctuate accordingly. Therefore, the
redemption value may be more or less than the original cost.
DIVIDENDS, CAPITAL GAINS AND TAXES
/ / DIVIDENDS OF THE PORTFOLIOS. The Company intends to declare Money Market
Portfolio's dividends from its net investment income on each day The New York
Stock Exchange is open for business. Such dividends will be payable on shares
held of record at the time of the previous determination of net asset value.
Daily dividends accrued since the prior dividend payment will be paid monthly as
of a date selected by the Board of Directors. The Money Market Portfolio's net
income for dividend purposes consists of all interest income accrued on
portfolio assets, less all expenses of that Portfolio for such period. Accrued
market discount is included in interest income; amortized market premium is
treated as an expense. Although distributions from net realized gains on
securities, if any, will be paid at least once each year, and may be made more
frequently, the Money Market Portfolio does not expect to realize long-term
capital gains, and therefore does not contemplate payment of any capital gains
distribution. Distributions from net realized gains will not be distributed
unless the Money Market Portfolio's capital loss carry forwards, if any, have
been used or have expired. The Money Market Portfolio seeks to maintain a net
asset value of $1.00 per share for purchases and redemptions. To effect this
policy, under certain circumstances the Money Market Portfolio may withhold
dividends or make distributions from capital or capital gains (see "Dividends,
Capital Gains and Taxes" in the Statement of Additional Information).
Each other Portfolio (except the Money Market Portfolio) intends to pay out
all of its net investment income and net realized capital gains, if any, on an
annual basis. The Portfolios distribute their dividends, if any, each year on a
date set by the Board of Directors. Normally, net realized capital gains, if
any, are distributed annually for the Portfolios. Such income and capital gains
are reinvested in additional shares of the Portfolios. Each Portfolio (except
the Money Market Portfolio) makes dividend and capital gain distributions on a
per-share basis. After every distribution from each of these Portfolios, the
Portfolio's share price drops by the amount of the distribution. Since dividends
and capital gain distributions are reinvested, the total value of an account
will not be affected by such distributions because, although the shares will
have a lower price, there will be correspondingly more of them.
/ / TAX TREATMENT TO THE ACCOUNT AS SHAREHOLDER. The portion of
distributions attributable to the excess of a Portfolio's net long-term capital
gain over its net short-term capital loss is generally characterized as long-
term capital gain. The tax treatment of such dividends and distributions to an
Account depends on the tax status of and the tax rules applicable to that
Account, concerning which you should consult the prospectus of your insurance
company's separate account. It is expected that shares of the Portfolios will be
held by life insurance company separate accounts that fund variable contracts.
Under current federal tax law, dividends and capital gains distributions paid by
any Portfolio to reserves for a variable contract are not currently taxable.
/ / TAX STATUS OF THE PORTFOLIOS. If each Portfolio qualifies as a
"regulated investment company" under the Internal Revenue Code, that Portfolio
will not be liable for Federal income taxes on amounts paid as dividends and
distributions in accordance with the Code's requirements. The Portfolios did
qualify during their last fiscal year and the Company intends that they will
qualify in current and future years. Each Portfolio also intends to follow
certain portfolio diversification requirements under the Internal Revenue
32
<PAGE>
Code so that Accounts investing in the Portfolios may satisfy the tax
diversification requirements to which they are subject. The above discussion
relates solely to Federal tax laws. This discussion is not exhaustive and a
qualified tax adviser should be consulted if you have any questions about the
tax effects of your investment through a variable contract.
APPENDIX A:
DESCRIPTION OF RATINGS CATEGORIES OF RATING SERVICES
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
AAA: Bonds rated "Aaa" are judged to be the best quality and to carry the
smallest degree of investment risk. Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such issues.
AA: Bonds rated "Aa" are judged to be of high quality by all standards.
Together with the "Aaa" group, they comprise what are generally known as
"high-grade" bonds. They are rated lower than the best bonds because margins of
protection may not be as large as with "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than those of
"Aaa" securities.
A: Bonds rated "A" possess many favorable investment attributes and are
to be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA: Bonds rated "Baa" are considered medium grade obligations, that is,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and have
speculative characteristics as well.
BA: Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered well-assured. Often the protection of interest and
principal payments may be very moderate and not well safeguarded during both
good and bad times over the future. Uncertainty of position characterizes bonds
in this class.
B: Bonds rated "B" generally lack characteristics of desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA: Bonds rated "Caa" are of poor standing and may be in default or
there may be present elements of danger with respect to principal or interest.
CA: Bonds rated "Ca" represent obligations which are speculative in a
high degree and are often in default or have other marked shortcomings.
C: Bonds rated "C" can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
DESCRIPTION OF STANDARD & POOR'S BOND RATINGS
AAA: "AAA" is the highest rating assigned to a debt obligation and
indicates an extremely strong capacity to pay principal and interest. AA: Bonds
rated "AA" also qualify as high quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from "AAA" issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to adverse effects of change in
circumstances and economic conditions.
33
<PAGE>
BBB: Bonds rated "BBB" are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "CC" the highest degree.
While such bonds will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C, D: Bonds on which no interest is being paid are rated "C." Bonds rated
"D" are in default and payment of interest and/or repayment of principal is in
arrears.
APPENDIX B
CREDIT QUALITY DISTRIBUTION
The average quality distribution of the portfolio of Income Portfolio during the
year ended December 31, 1995 was as follows:
<TABLE>
<CAPTION>
% OF
QUALITY DISTRIBUTION AS ASSIGNED BY SERVICE AVERAGE VALUE PORTFOLIO
- ----------------------------------------------------------------- ----------------- ---------
<S> <C> <C>
Government Securities............................................ $ 46,424,399.69 43.80
Aaa.............................................................. 2,609,639.04 2.46
Aa............................................................... 3,992,835.20 3.77
A................................................................ 25,003,868.02 23.59
Baa.............................................................. 15,008,524.18 14.16
Ba............................................................... 4,859,096.79 4.58
B................................................................ 412,791.67 0.39
Unrated.......................................................... 3,919,640.51 3.70
----------------- ---------
Total Bonds...................................................... 102,230,795.10 96.45
Short Term Investments........................................... 3,762,339.95 3.55
----------------- ---------
Total Portfolio.................................................. $ 105,993,135.07 100.00%
</TABLE>
The average quality distribution of the portfolio of Total Return Portfolio
during the year ended December 31, 1995 was as follows:
<TABLE>
<CAPTION>
% OF
QUALITY DISTRIBUTION AS ASSIGNED BY SERVICE AVERAGE VALUE PORTFOLIO
- ----------------------------------------------------------------- ----------------- ---------
<S> <C> <C>
Government Securities............................................ $ 190,954,014.07 22.04
Aaa.............................................................. 2,943,019.95 0.34
Aa............................................................... 6,193,060.79 0.71
A................................................................ 67,033,591.23 7.74
Baa.............................................................. 45,574,560.91 5.26
Ba............................................................... 17,634,969.18 2.04
B................................................................ 1,319,513.44 0.15
Unrated.......................................................... 6,952,068.59 0.80
----------------- ---------
Total Bonds...................................................... 338,604,798.14 39.08
Stocks........................................................... 343,768,338.42 39.67
Short-Term Investments........................................... 184,172,794.00 21.25
----------------- ---------
Total Portfolio.................................................. $ 866,545,930.56 100.00%
</TABLE>
34
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<PAGE>
PANORAMA SERIES FUND, INC.
TOTAL RETURN PORTFOLIO
GROWTH PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
LIFESPAN CAPITAL APPRECIATION PORTFOLIO
LIFESPAN BALANCED PORTFOLIO
LIFESPAN DIVERSIFIED INCOME PORTFOLIO
MONEY MARKET PORTFOLIO
GOVERNMENT SECURITIES PORTFOLIO
INCOME PORTFOLIO
3410 South Galena Street
Denver, Colorado 80210
1-800-525-7048
INVESTMENT ADVISOR
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
TRANSFER AGENT
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
CUSTODIAN OF PORTFOLIO SECURITIES
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
INDEPENDENT AUDITORS
Arthur Andersen LLP
One Financial Plaza
Hartford, Connecticut 06103
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
NO DEALER, BROKER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS OR THE STATEMENT OF ADDITIONAL INFORMATION, AND IF GIVEN OR
MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE PORTFOLIOS, OPPENHEIMERFUNDS, INC., OR ANY AFFILIATE
THEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY STATE TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE.
<PAGE>
Supplement to the Statement of Additional Information
dated May 1, 1996
PANORAMA SERIES FUND, INC.
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
The members of the Company's Board of Directors described under the caption,
"How the Portfolios are Managed--Directors and Officers of the Company" will
take office as Directors of the Company on May 31, 1996. Until that date, the
Company's Board of Directors is comprised of the following members:
RICHARD H. AYERS, 52, DIRECTOR
Chairman and Chief Executive Officer, The Stanley Works (tool manufacturer).
Address: The Stanley Works, 1000 Stanley Drive, New Britain, Connecticut 06050
DAVID E.A. CARSON, 61, DIRECTOR
President, Chairman and Chief Executive Officer, People's Bank.
Address: People's Bank, 899 Main Street, Bridgeport, Connecticut 06604
RICHARD W. GREENE, 60, DIRECTOR
Executive Vice President and Treasurer, University of Rochester.
Address: University of Rochester, Wilson Boulevard, Rochester, New York 14627
BEVERLY L. HAMILTON, 48, DIRECTOR
President, ARCO Investment Management Company (1991-Present); Deputy
Comptroller, City of New York (1987-1991).
Address: ARCO Investment Management Company, 555 South Flower Street, Los
Angeles, California 90071
DAVID E. SAMS, JR., 52, DIRECTOR*
President and Chief Operating Officer, Massachusetts Mutual Life Insurance
Company; President and Chief Executive Officer, Connecticut Mutual Life
Insurance Company (1993-March 1, 1996); President and Chief Executive Officer,
Agency Group, Capital Holdings Corporation (1987-1993).
____________________
*Denotes an "interested person" of the Company as defined in the Investment
Company Act of 1940, as amended.
REMUNERATION OF DIRECTORS. The officers of the Company are affiliated with the
Manager; they and the Directors of the Company who are affiliated with the
Manager receive no salary or fee from the Company or the Portfolios.
As of December 31, 1995, the then Directors and officers of the Company as
a group owned of record or beneficially less than 1% of the outstanding shares
of the Company.
The chart below sets forth the fees paid by each Portfolio to the persons
who served as Directors of the Company for the fiscal year ended December 31,
1995 and certain other information for the same period:
<PAGE>
<TABLE>
<CAPTION>
RICHARD M. DONALD E. A. RICHARD W. BEVERLY L. DONALD H. DAVID E.
AYERS CARSON GREENE HAMILTON POND, JR. SAMS, JR.
---------- ------------ ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
COMPENSATION RECEIVED
FROM EACH PORTFOLIO
MONEY MARKET PORTFOLIO $480 $500 $575 $490 $-0- $-0-
GOVERNMENT SECURITIES
PORTFOLIO 334 344 398 340 -0- -0-
INCOME PORTFOLIO 638 673 769 655 -0- -0-
TOTAL RETURN PORTFOLIO 3,473 3,778 4,280 3,625 -0- -0-
GROWTH PORTFOLIO 1,418 1,533 1,743 1,475 -0- -0-
INTERNATIONAL EQUITY
PORTFOLIO 407 422 485 415 -0- -0-
LIFESPAN INCOME PORTFOLIO -0- -0- -0- -0- -0- -0-
LIFESPAN BALANCED PORTFOLIO -0- -0- -0- -0- -0- -0-
LIFESPAN GROWTH PORTFOLIO -0- -0- -0- -0- -0- -0-
TOTAL COMPENSATION FROM
COMPANY AND OTHER FORMER
CONNECTICUT MUTUAL FUNDS
PAID TO THE DIRECTORS** 13,500 14,500 16,500 14,000 -0- -0-
</TABLE>
________________________
** As of the calendar year ended December 31, 1996, there were 22
investment companies (including the Portfolios) among the former
Connecticut Mutual funds.
<PAGE>
PANORAMA SERIES FUND, INC.
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1996
PANORAMA SERIES FUND, INC. (referred to as the "Company") is an
investment company consisting of nine separate series (each is
referred to as a "Portfolio" and collectively as the
"Portfolios"):
TOTAL RETURN PORTFOLIO
GROWTH PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
MONEY MARKET PORTFOLIO
INCOME PORTFOLIO
GOVERNMENT SECURITIES PORTFOLIO
(COLLECTIVELY, THESE ARE REFERRED TO AS THE "PANORAMA
PORTFOLIOS")
AND
LIFESPAN CAPITAL APPRECIATION PORTFOLIO ("CAPITAL APPRECIATION
PORTFOLIO")
LIFESPAN BALANCED PORTFOLIO ("BALANCED PORTFOLIO")
LIFESPAN DIVERSIFIED INCOME PORTFOLIO ("DIVERSIFIED INCOME
PORTFOLIO")
(COLLECTIVELY, THESE ARE REFERRED TO AS THE "LIFESPAN
PORTFOLIOS")
Shares of the Portfolios are sold only to provide benefits
under variable life insurance policies and variable annuity
contracts (collectively, these are referred to as the "Accounts"),
as described in such Accounts' Prospectuses.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
THIS DOCUMENT CONTAINS ADDITIONAL INFORMATION ABOUT THE PORTFOLIOS
AND SUPPLEMENTS INFORMATION IN THE PORTFOLIOS' PROSPECTUS DATED
MAY 1, 1996. IT SHOULD BE READ TOGETHER WITH THE PROSPECTUS WHICH
MAY BE OBTAINED BY WRITING TO THE PORTFOLIOS' TRANSFER AGENT,
OPPENHEIMERFUNDS SERVICES, AT P.O. BOX 5270, DENVER, COLORADO
80217 OR BY CALLING THE TRANSFER AGENT AT THE TOLL-FREE NUMBER
SHOWN ABOVE.
<PAGE>
CONTENTS
PAGE
ABOUT THE PORTFOLIOS
Investment Objectives and Policies..........................
Investment Techniques and Strategies........................
Other Investment Restrictions...............................
How the Portfolios are Managed..............................
Organization and History.................................
Directors and Officers of the Company....................
The Manager, and Subadvisers and their Affiliates........
Brokerage Policies of the Portfolios........................
Performance of the Portfolios...............................
ABOUT YOUR ACCOUNT
How to Buy Shares...........................................
Dividends, Capital Gains and Taxes..........................
Additional Information About the Portfolios.................
FINANCIAL INFORMATION ABOUT THE PORTFOLIOS
Independent Auditors' Report................................
Financial Statements........................................
Appendix: Industry Classifications..........................
-2-
<PAGE>
ABOUT THE PORTFOLIOS
The Portfolios' investment adviser is OppenheimerFunds, Inc.
(the "Manager"). In the case of the LifeSpan Portfolios, the
Manager has engaged Babson-Stewart Ivory International
("Babson-Stewart"), BEA Associates and Pilgrim, Baxter & Assoc.
Ltd. ("Pilgrim") as subadvisers to assist in the management of the
LifeSpan Portfolios. Babson-Stewart also serves as subadviser to
the International Equity Portfolio. Babson-Stewart, BEA
Associates and Pilgrim are sometimes referred to herein
individually as a "Subadviser" and collectively as the
"Subadvisers."
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of each Portfolio are
described in the Prospectus. Set forth below is supplemental
information about those policies and the types of securities in
which the Portfolios may invest, as well as the strategies the
Portfolios may use to try to achieve their objective. Certain
capitalized terms used in this Statement of Additional Information
have the same meaning as those terms have in the Prospectus. Not
all of the Portfolios engage in all of the investment practices
described below, and each section indicates which Portfolios
engage in a particular practice.
INVESTMENT TECHNIQUES AND STRATEGIES
FOREIGN SECURITIES (ALL PORTFOLIOS EXCEPT MONEY MARKET PORTFOLIO
AND GOVERNMENT SECURITIES PORTFOLIO). Consistent with any
limitations a Portfolio may have on foreign investing set forth in
the Prospectus, each Portfolio and, in particular, the
International Equity Portfolio, may invest in foreign securities.
The Portfolios may also invest in debt and equity securities of
corporate and governmental issuers of countries with emerging
economies or securities markets. Each Portfolio, except the
International Equity Portfolio, is subject to restrictions on the
amount of its assets that may be invested in foreign securities.
See "Other Investment Restrictions," below.
Investing in foreign securities offers potential benefits not
available from investing solely in securities of domestic issuers,
such as the opportunity to invest in foreign issuers that appear
to offer growth potential, or in foreign countries with economic
policies or business cycles different from those of the U.S., or
to reduce fluctuations in portfolio value by taking advantage of
foreign stock or bond markets that do not move in a manner
parallel to U.S. markets. If a Portfolio's portfolio securities
are held abroad, the countries in which such securities may be
held and the sub-custodians holding them must be approved by the
Portfolio's Board of Directors under applicable rules of the
Securities and Exchange Commission ("SEC"). In buying foreign
-3-
<PAGE>
securities, a Portfolio may convert U.S. dollars into foreign
currency, but only to effect securities transactions on foreign
securities exchanges and not to hold such currency as an
investment.
"Foreign securities" include equity and debt securities of
companies organized under the laws of countries other than the
United States and debt securities of foreign governments that are
traded primarily on foreign securities exchanges or in the foreign
over-the-counter markets. Securities of foreign issuers that are
represented by American depository receipts, or that are primarily
traded on a U.S. securities exchange, or are traded primarily in
the U.S. over-the-counter market are not considered "foreign
securities" for purposes of a Portfolio's investment allocations,
because they are not subject to many of the special considerations
and risks (discussed below) that apply to foreign securities
traded and held abroad.
RISKS OF FOREIGN INVESTING. Investing in foreign securities,
and in particular in securities in emerging countries, involves
special additional risks and considerations not typically
associated with investing in securities of issuers traded in the
U.S. These include: reduction of income by foreign taxes;
fluctuation in value of foreign portfolio investments due to
changes in currency rates and control regulations (E.G., currency
blockage); transaction charges for currency exchange; lack of
public information about foreign issuers; lack of uniform
accounting, auditing and financial reporting standards comparable
to those applicable to domestic issuers; less volume on foreign
exchanges than on U.S. exchanges; greater volatility and less
liquidity in some foreign markets than in the U.S.; less
regulation of foreign issuers, stock exchanges and brokers than in
the U.S.; greater difficulties in commencing lawsuits against
foreign issuers; higher brokerage commission rates than in the
U.S.; increased risks of delays in settlement of portfolio
transactions or loss of certificates for portfolio securities;
possibilities in some countries, and in particular emerging
countries, of expropriation or nationalization of assets,
confiscatory taxation, political, financial or social instability
or adverse diplomatic developments; and unfavorable differences
between the U.S. economy and foreign economies. In the past, U.S.
Government policies have discouraged certain investments abroad by
U.S. investors, through taxation or other restrictions, and it is
possible that such restrictions could be re-imposed.
Because the Portfolios may invest in securities that are
denominated or quoted in foreign currencies, the strength or
weakness of the U.S. dollar against such currencies may account
for part of a Portfolio's investment performance. A decline in
value of any particular currency against the U.S. dollar will
cause a decline in the U.S. dollar value of a Portfolio's holdings
of securities denominated in that currency, and therefore will
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cause an overall decline in the Portfolio's net asset value and
any net investment income (and capital gains) to be distributed in
U.S. dollars to shareholders of the Portfolios.
A Portfolio's investment income or, in some cases, capital
gains from foreign issuers may be subject to foreign withholding
or other foreign taxes, thereby reducing a Portfolio's net
investment income and/or net realized capital gains.
CONVERTIBLE SECURITIES (ALL PORTFOLIOS EXCEPT MONEY MARKET
PORTFOLIO, INCOME PORTFOLIO AND GOVERNMENT SECURITIES PORTFOLIO).
While convertible securities are a form of debt security, in many
cases their conversion feature (allowing conversion into equity
securities) causes them to be regarded more as "equity
equivalents." As a result, any rating assigned to the security
has less impact on the Manager's or relevant Subadviser's
investment decision with respect to convertible securities than in
the case of non-convertible debt securities. To determine whether
convertible securities should be regarded as "equity equivalents,"
the Manager or relevant Subadviser examines the following factors:
(1) whether, at the option of the investor, the convertible
security can be exchanged for a fixed number of shares of common
stock of the issuer, (2) whether the issuer of the convertible
securities has restated its earnings per share of common stock on
a fully diluted basis (considering the effect of converting the
convertible securities), and (3) the extent to which the
convertible security may be a defensive "equity substitute,"
providing the ability to participate in any appreciation in the
price of the issuer's common stock.
DEBT SECURITIES (ALL PORTFOLIOS). All debt securities are subject
to two types of risks: credit risk and interest rate risk (these
are in addition to other investment risks that may affect a
particular security).
CREDIT RISK. Credit risk relates to the ability of the
issuer to meet interest or principal payments or both as they
become due. Generally, higher yielding bonds are subject to
credit risk to a greater extent than higher quality bonds.
INTEREST RATE RISK. Interest rate risk refers to the
fluctuations in value of fixed-income securities resulting solely
from the inverse relationship between the market value of
outstanding fixed-income securities and changes in interest rates.
An increase in interest rates will generally reduce the market
value of fixed-income investments, and a decline in interest rates
will tend to increase their value. In addition, debt securities
with longer maturities, which tend to produce higher yields, are
subject to potentially greater capital appreciation and
depreciation than obligations with shorter maturities.
Fluctuations in the market value of fixed-income securities
subsequent to their acquisition will not affect the interest
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payable on those securities, and thus the cash income from such
securities, but will be reflected in the valuations of those
securities used to compute a Portfolio's net asset values.
U.S. GOVERNMENT SECURITIES (ALL PORTFOLIOS). U.S. Government
Securities are debt obligations issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities, and
include "zero coupon" Treasury securities. Some of these
obligations, including U.S. Treasury notes and bonds, and
mortgage-backed securities guaranteed by the Government National
Mortgage Association ("GNMA"), are supported by the full faith and
credit of the United States, which means that the government
pledges to use its taxing power to repay the debt. Other U.S.
Government Securities issued or guaranteed by Federal agencies or
government-sponsored enterprises are not supported by the full
faith and credit of the United States. They may include
obligations supported by the ability of the issuer to borrow from
the U.S. Treasury. However, the Treasury is not under a legal
obligation to make a loan. Examples of these are obligations of
Federal Home Loan Mortgage Corporation ("FHLMC") Other
obligations are supported by the credit of the instrumentality,
such as bonds issued by Federal National Mortgage Association
("FNMA").
U.S. TREASURY OBLIGATIONS. These include Treasury Bills
(which have maturities of one year or less when issued), Treasury
Notes (which have maturities of one to ten years when issued) and
Treasury Bonds (which have maturities generally greater than ten
years when issued). U.S. Treasury obligations are backed by the
full faith and credit of the United States.
MORTGAGE-BACKED SECURITIES (ALL PORTFOLIOS EXCEPT MONEY
MARKET PORTFOLIO, GROWTH PORTFOLIO AND INTERNATIONAL EQUITY
PORTFOLIO). These securities represent participation interests in
pools of residential mortgage loans which are guaranteed by
agencies or instrumentalities of the U.S. Government. Such
securities differ from conventional debt securities which
generally provide for periodic payment of interest in fixed or
determinable amounts (usually semi-annually) with principal
payments at maturity or specified call dates. Some
mortgage-backed securities in which the Portfolios may invest may
be backed by the full faith and credit of the U.S. Treasury (E.G.,
GNMA direct pass-through certificates; some are supported by the
right of the issuer to borrower from the U.S. Government (E.G.,
FHLMC obligations); and some are backed by only the credit of the
issuer itself. Those guarantees do not extend to the value of or
yield of the mortgage-backed securities themselves or to the net
asset value of a Portfolio's shares.
The yield on mortgage-backed securities is based on the
average expected life of the underlying pool of mortgage loans.
The actual life of any particular pool will be shortened by any
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unscheduled or early payments of principal and interest.
Principal prepayments generally result from the sale of the
underlying property or the refinancing or foreclosure of
underlying mortgages. The occurrence of prepayments is affected
by a wide range of economic, demographic and social factors and,
accordingly, it is not possible to predict accurately the average
life of a particular pool. Yield on such pools is usually
computed by using the historical record of prepayments for that
pool, or, in the case of newly issued mortgages, the prepayment
history of similar pools. The actual prepayment experience of a
pool of mortgage loans may cause the yield realized by a Portfolio
to differ from the yield calculated on the basis of the expected
average life of the pool.
Prepayments tend to increase during periods of falling
interest rates, while during periods of rising interest rates
prepayments will most likely decline. When prevailing interest
rates rise, the value of a pass-through security may decrease as
do the values of other debt securities, but, when prevailing
interest rates decline, the value of a pass-through security is
not likely to rise to the extent that the value of other debt
securities rise, because of the prepayment feature of pass-through
securities. A Portfolio's reinvestment of scheduled principal
payments and unscheduled prepayments it receives may occur at
times when available investments offer higher or lower rates than
the original investment, thus affecting the yield of such
Portfolio. Monthly interest payments received by a Portfolio have
a compounding effect which may increase the yield to the Portfolio
more than debt obligations that pay interest semi-annually. A
Portfolio may purchase mortgage-backed securities at par, at a
premium or at a discount. Accelerated prepayments adversely
affect yields for pass-through securities purchased at a premium
(I.E., at a price in excess of their principal amount) and may
involve additional risk of loss of principal because the premium
may not have been fully amortized at the time the obligation is
repaid. The opposite is true for pass-through securities
purchased at a discount.
As new types of mortgage-related securities are developed and
offered to investors, the Manager will, subject to the direction
of the Board of Directors and consistent with a Portfolio's
investment objective and policies, consider making investments in
such new types of mortgage-related securities.
GNMA CERTIFICATES. GNMA certificates are mortgaged-backed
securities of GNMA that evidence an undivided interest in a pool
or pools of mortgages ("GNMA Certificates"). The GNMA
Certificates that a Portfolio may purchase may be of the "modified
pass-through" type, which entitle the holder to receive timely
payment of all interest and principal payments due on the mortgage
pool, net of fees paid to the "issuer" and GNMA, regardless of
whether the mortgagor actually makes the payments.
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The National Housing Act authorizes GNMA to guarantee the
timely payment of principal and interest on securities backed by a
pool of mortgages insured by the Federal Housing Administration
("FHA") or guaranteed by the Veterans Administration ("VA"). The
GNMA guarantee is backed by the full faith and credit of the U.S.
Government. GNMA is also empowered to borrow without limitation
from the U.S. Treasury if necessary to make any payments required
under its guarantee.
The average life of a GNMA Certificate is likely to be
substantially shorter than the original maturity of the mortgages
underlying the securities. Prepayments of principal by mortgagors
and mortgage foreclosures will usually result in the return of the
principal investment long before the maturity of the mortgages in
the pool. Foreclosures impose no risk to principal investment
because of the GNMA guarantee, except to the extent that a
Portfolio has purchased the certificates at a premium in the
secondary market.
FNMA SECURITIES. The Federal National Mortgage Association
("FNMA") was established to create a secondary market in mortgages
insured by the FHA. FNMA issues guaranteed mortgage pass-through
certificates ("FNMA Certificates"). FNMA Certificates resemble
GNMA Certificates in that each FNMA Certificate represents a pro
rata share of all interest and principal payments made and owed on
the underlying pool. FNMA guarantees timely payment of interest
and principal on FNMA Certificates. The FNMA guarantee is not
backed by the full faith and credit of the U.S. Government.
FHLMC SECURITIES. The Federal Home Loan Mortgage Corporation
("FHLMC") was created to promote development of a nationwide
secondary market for conventional residential mortgages. FHLMC
issues two types of mortgage pass-through certificates ("FHLMC
Certificates"): mortgage participation certificates ("PCs") and
guaranteed mortgage certificates ("GMCs"). PCs resemble GNMA
Certificates in that each PC represents a pro rata share of all
interest and principal payments made and owed on the underlying
pool. FHLMC guarantees timely monthly payment of interest on PCs
and the ultimate payment of principal. The FHLMC guarantee is not
backed by the full faith and credit of the U.S. Government. GMCs
also represent a pro rata interest in a pool of mortgages.
However, these instruments pay interest semi-annually and return
principal once a year in guaranteed minimum payments. The
expected average life of these securities is approximately ten
years. The FHLMC guarantee is not backed by the full faith and
credit of the U.S. Government.
PRIVATE-ISSUER MORTGAGE-BACKED SECURITIES. Mortgage-backed
securities may also be issued by trusts or other entities formed
or sponsored by private originators of and institutional investors
in mortgage loans and other foreign or domestic non-governmental
entities (or represent custodial arrangements administered by such
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institutions). These private originators and institutions include
domestic and foreign savings and loan associations, mortgage
bankers, commercial banks, insurance companies, investment banks
and special purpose subsidiaries of the foregoing. Privately
issued mortgage-backed securities are generally backed by pools of
conventional (I.E., non-government guaranteed or insured) mortgage
loans. Since such mortgage-backed securities are not guaranteed
by an entity having the credit standing of GNMA, FNMA or FHLMC, in
order to receive a high quality rating, they normally are
structured with one or more types of "credit enhancement." Such
credit enhancements fall generally into two categories; (1)
liquidity protection and (2) protection against losses resulting
after default by a borrower and liquidation of the collateral.
Liquidity protection refers to the providing of cash advances to
holders of mortgage-backed securities when a borrower on an
underlying mortgage fails to make its monthly payment on time.
Protection against losses resulting after default and liquidation
is designed to cover losses resulting when, for example, the
proceeds of a foreclosure sale are insufficient to cover the
outstanding amount on the mortgage. Such protection may be
provided through guarantees, insurance policies or letters of
credit, through various means of structuring the transaction or
through a combination of such approaches.
COLLATERALIZED MORTGAGE-BACKED OBLIGATIONS ("CMOS"). Total
Return Portfolio, Income Portfolio and Government Securities
Portfolio and each of the LifeSpan Portfolios may invest in
collateralized mortgage obligations ("CMOs"). CMOs are
fully-collateralized bonds that are the general obligations of the
issuer thereof, either the U.S. Government, a U.S. Government
instrumentality, or a private issuer, which may be a domestic or
foreign corporation. Such bonds generally are secured by an
assignment to a trustee (under the indenture pursuant to which the
bonds are issued) of collateral consisting of a pool of mortgages.
Payments with respect to the underlying mortgages generally are
made to the trustee under the indenture. Payments of principal
and interest on the underlying mortgages are not passed through to
the holders of the CMOs as such (I.E., the character of payments
of principal and interest is not passed through, and therefore
payments to holders of CMOs attributable to interest paid and
principal repaid on the underlying mortgages do not necessarily
constitute income and return of capital, respectively, to such
holders), but such payments are dedicated to payment of interest
on and repayment of principal of the CMOs. CMOs often are issued
in two or more classes with different characteristics such as
varying maturities and stated rates of interest. Because interest
and principal payments on the underlying mortgages are not passed
through to holders of CMOs, CMOs of varying maturities may be
secured by the same pool of mortgages, the payments on which are
used to pay interest on each class and to retire successive
maturities in sequence. Unlike other mortgage-backed securities
(discussed above), CMOs are designed to be retired as the
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underlying mortgages are repaid. In the event of prepayment on
such mortgages, the class of CMO first to mature generally will be
paid down. Therefore, although in most cases the issuer of CMOs
will not supply additional collateral in the event of such
prepayment, there will be sufficient collateral to secure CMOs
that remain outstanding.
"STRIPPED" MORTGAGE-BACKED SECURITIES. The Total Return
Portfolio, Income Portfolio and Government Securities Portfolio
and each LifeSpan Portfolio may invest in "stripped"
mortgage-backed securities, in which the principal and interest
portions of the security are separated and sold. Stripped
mortgage-backed securities usually have at least two classes, each
of which receives different proportions of interest and principal
distributions on the underlying pool of mortgage assets. One
common variety of stripped mortgage-backed security has one class
that receives some of the interest and most of the principal,
while the other class receives most of the interest and remainder
of the principal. In some cases, one class will receive all of
the interest (the "interest-only" or "IO" class), while the other
class will receive all of the principal (the "principal-only" or
"PO" class).
Interest only securities are extremely sensitive to interest
rate changes, and prepayments of principal on the underlying
mortgage assets. An increase in principal payments or prepayments
will reduce the income available from the IO security. In
accordance with a requirement imposed by the staff of the SEC, the
Manager or the relevant Subadviser will consider privately-issued
fixed rate IOs and POs to be illiquid securities for purposes of a
Portfolio's limitation on investments in illiquid securities.
Unless the Manager or the relevant Subadviser, acting pursuant to
guidelines and standards established by the Board of Directors,
determines that a particular government-issued fixed rate IO or PO
is liquid, they will also consider these IOs and POs to be
illiquid. In other types of CMOs, the underlying principal
payments may apply to various classes in a particular order, and
therefore the value of certain classes or "tranches" of such
securities may be more volatile than the value of the pool as a
whole, and losses may be more severe than on other classes.
CUSTODIAL RECEIPTS. In addition to stripped mortgage-backed
securities, each of the Portfolios may acquire U.S. Government
Securities and their unmatured interest coupons that have been
separated (stripped) by their holder, typically a custodian bank
or investment brokerage firm. Having separated the interest
coupons from the underlying principal of the U.S. Government
Securities, the holder will resell the stripped securities in
custodial receipt programs with a number of different names,
including Treasury Income Growth Receipts (TIGRs) and Certificate
of Accrual on Treasury Securities (CATS). The stripped coupons
are sold separately from the underlying principal, which is
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usually sold at a deep discount because the buyer receives only
the right to receive a future fixed payment on the security and
does not receive any rights to periodic interest (cash) payments.
The underlying U.S. Treasury bonds and notes themselves are
generally held in book-entry form at a Federal Reserve Bank.
Counsel to the underwriters of these certificates or other
evidences of ownership of U.S. Treasury securities have stated
that, in their opinion, purchasers of the stripped securities most
likely will be deemed the beneficial holders of the underlying
U.S. Government Securities for federal tax and securities
purposes. In the case of CATS and TIGRs, the IRS has reached this
conclusion for the purpose of applying the tax diversification
requirements applicable to regulated investment companies such as
the Portfolios. CATS and TIGRs are not considered U.S. Government
Securities by the staff of the SEC, however. Further, the IRS'
conclusion is contained only in a general counsel memorandum,
which is an internal document of no precedential value or binding
effect, and a private letter ruling, which also may not be relied
upon by the Portfolios. The Company is not aware of any binding
legislative, judicial or administrative authority on this issue.
ASSET-BACKED SECURITIES. (ALL PORTFOLIOS EXCEPT MONEY MARKET
PORTFOLIO, GROWTH PORTFOLIO AND INTERNATIONAL EQUITY PORTFOLIO).
The value of an asset-backed security is affected by changes in
the market's perception of the asset backing the security, the
creditworthiness of the servicing agent for the loan pool, the
originator of the loans, or the financial institution providing
any credit enhancement, and is also affected if any credit
enhancement has been exhausted. The risks of investing in
asset-backed securities are ultimately dependent upon payment of
consumer loans by the individual borrowers. As a purchaser of an
asset-backed security, a Portfolio would generally have no
recourse to the entity that originated the loans in the event of
default by a borrower. The underlying loans are subject to
prepayments, which shorten the weighted average life of
asset-backed securities and may lower their return, in the same
manner as described above for the prepayments of a pool of
mortgage loans underlying mortgage-backed securities.
MORTGAGE DOLLAR ROLLS. The Total Return Portfolio, Income
Portfolio and Government Securities Portfolio may enter into
"forward roll" transactions with respect to mortgage-backed
securities issued by GNMA, FNMA or FHLMC. In a forward roll
transaction, which is considered to be a "borrowing" by a
Portfolio, a Portfolio will sell a mortgage security to a bank or
other permitted entity and simultaneously agree to repurchase a
similar security from the institution at a later date at an agreed
upon price. The mortgage securities that are repurchased will
bear the same interest rate as those sold, but generally will be
collateralized by different pools of mortgages with different
prepayment histories than those sold. Risks of mortgage-backed
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security rolls include: (i) the risk of prepayment prior to
maturity, (ii) the possibility that the proceeds of the sale may
have to be invested in money market instruments (typically
repurchase agreements) maturing not later than the expiration of
the roll, and (iii) the possibility that the market value of the
securities sold by a Portfolio may decline below the price at
which the Portfolio is obligated to purchase the securities. Upon
entering into a mortgage-backed security roll, a Portfolio will be
required to place cash, U.S. Government Securities or other
high-grade debt securities in a segregated account with its
Custodian in an amount equal to its obligation under the roll.
HIGH YIELD SECURITIES (ALL PORTFOLIOS EXCEPT MONEY MARKET
PORTFOLIO). A Portfolio may invest in high-yield/high risk
securities (commonly called junk bonds).
The Manager does not rely solely on credit ratings assigned
by rating agencies in assessing investment opportunities in debt
securities. Ratings by credit agencies assess safety of principal
and interest payments and do not reflect market risks. In
addition, ratings by credit agencies may not be changed by the
agencies in a timely manner to reflect subsequent economic events.
By carefully selecting individual issues and diversifying
portfolio holdings by industry sector and issuer, the Manager
believes that the risk of the Portfolio holding defaulted lower
grade securities can be reduced. Emphasis on credit risk
management involves the Manager's own internal analysis to
determine the debt service capability, financial flexibility and
liquidity of an issuer, as well as the fundamental trends and
outlook for the issuer and its industry. The Manager's rating
helps it determine the attractiveness of specific issues relative
to the valuation by the market place of similarly rated credits.
SPECIAL RISKS OF LOWER RATED SECURITIES. High yield,
lower-grade securities, whether rated or unrated, often have
speculative characteristics. Lower-grade securities have special
risks that make them riskier investments than investment grade
securities. They may be subject to limited liquidity and
secondary market support, as well as substantial market price
volatility resulting from changes in prevailing interest rates.
They may be subordinated to the prior claims of banks and other
senior lenders. The operation of mandatory sinking fund or
call/redemption provisions during periods of declining interest
rates may cause the Portfolio to invest premature redemption
proceeds in lower yielding portfolio securities. There is a
possibility that earnings of the issuer may be insufficient to
meet its debt service, and the issuer may have low
creditworthiness and potential for insolvency during periods of
rising interest rates and economic downturn. As a result of the
limited liquidity of some high yield securities, their prices have
at times experienced significant and rapid decline when a
substantial number of holders decided to sell. A decline is also
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likely in the high yield bond market during an economic downturn.
An economic downturn or an increase in interest rates could
severely disrupt the market for high yield bonds and adversely
affect the value of outstanding bonds and the ability of the
issuers to repay principal and interest. In addition, there have
been several Congressional attempts to limit the use of tax and
other advantages of high yield bonds which, if enacted, could
adversely affect the value of these securities and the net asset
value of a Portfolio. For example, federally-insured savings and
loan associations have been required to divest their investments
in high yield bonds.
ZERO COUPON SECURITIES AND DEFERRED INTEREST BONDS. The
Portfolios may invest in zero coupon securities and deferred
interest bonds issued by the U.S. Treasury or by private issuers
such as domestic or foreign corporations. Zero coupon U.S.
Treasury securities include: (1) U.S. Treasury bills without
interest coupons, (2) U.S. Treasury notes and bonds that have been
stripped of their unmatured interest coupons and (3) receipts or
certificates representing interests in such stripped debt
obligations or coupons. Zero coupon securities and deferred
interest bonds usually trade at a deep discount from their face or
par value and will be subject to greater fluctuations in market
value in response to changing interest rates than debt obligations
of comparable maturities that make current payments of interest.
An additional risk of private-issuer zero coupon securities and
deferred interest bonds is the credit risk that the issuer will be
unable to make payment at maturity of the obligation.
While zero coupon bonds do not require the periodic payment
of interest, deferred interest bonds generally provide for a
period of delay before the regular payment of interest begins.
Although this period of delay is different for each deferred
interest bond, a typical period is approximately one-third of the
bond's term to maturity. Such investments benefit the issuer by
mitigating its initial need for cash to meet debt service, but
some also provide a higher rate of return to attract investors who
are willing to defer receipt of such cash. With zero coupon
securities, however, the lack of periodic interest payments means
that the interest rate is "locked in" and the investor avoids the
risk of having to reinvest periodic interest payments in
securities having lower rates.
Because a Portfolio accrues taxable income from zero coupon
and deferred interest securities without receiving cash and is
required to distribute its net investment income for each taxable
year, including such accrued income, in order to avoid liability
for federal income tax, a Portfolio may be required to sell
portfolio securities in order to obtain cash necessary to pay
dividends or redemption proceeds for its shares, which require the
payment of cash. This will depend on several factors: the
proportion of shareholders who elect to receive dividends in cash
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rather than reinvesting dividends in additional shares of a
Portfolio, and the amount of cash a Portfolio receives from other
investments and the sale of shares.
SHORT TERM DEBT SECURITIES
COMMERCIAL PAPER (ALL PORTFOLIOS). Each Portfolio may
purchase commercial paper for temporary defensive purposes as
described in the Prospectus. In addition, a Portfolio may invest
in floating rate notes as follows:
FLOATING RATE/VARIABLE RATE NOTES. Income Portfolio,
Government Securities Portfolio, Total Return Portfolio and the
LifeSpan Portfolios may purchase floating rate/variable rate
notes. Some of the notes a Portfolio may purchase may have
variable or floating interest rates. Variable rates are
adjustable at stated periodic intervals; floating rates are
automatically adjusted according to a specified market rate for
such investments, such as the percentage of the prime rate of a
bank, or the 91-day U.S. Treasury Bill rate. Such obligations may
be secured by bank letters of credit or other support
arrangements. Any bank providing such a bank letter, line of
credit, guarantee or loan commitment will meet a Portfolio's
investment quality standards relating to investments in bank
obligations.
A Portfolio will invest in variable and floating rate
instruments only when the Manager or relevant Subadviser deems the
investment to meet the investment guidelines applicable to a
Portfolio. The Manager or relevant Subadviser will also
continuously monitor the creditworthiness of issuers of such
instruments to determine whether a Portfolio should continue to
hold the investments.
The absence of an active secondary market for certain
variable and floating rate notes could make it difficult to
dispose of the instruments, and a Portfolio could suffer a loss if
the issuer defaults or during periods in which the Portfolio is
not entitled to exercise its demand rights.
Variable and floating rate instruments held by a Portfolio
will be subject to the Portfolio's limitation on investments in
illiquid securities when a reliable trading market for the
instruments does not exist and the Portfolio may not demand
payment of the principal amount of such instruments within seven
days.
BANK OBLIGATIONS AND INSTRUMENTS SECURED THEREBY (ALL
PORTFOLIOS). The bank obligations a Portfolio may invest in
include time deposits, certificates of deposit, and bankers'
acceptances if they are: (i) obligations of a domestic bank with
total assets of at least $1 billion or (ii) obligations of a
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foreign bank with total assets of at least U.S. $1 billion. A
Portfolio may also invest in instruments secured by such
obligations (e.g., debt which is guaranteed by the bank). For
purposes of this section, the term "bank" includes commercial
banks, savings banks, and savings and loan associations which may
or may not be members of the Federal Deposit Insurance
Corporation.
Time deposits are non-negotiable deposits in a bank for a
specified period of time at a stated interest rate, whether or not
subject to withdrawal penalties. However, time deposits that are
subject to withdrawal penalties, other than those maturing in
seven days or less, are subject to the limitation on investments
by a Portfolio in illiquid investments, set forth in the
Prospectus under "Illiquid and Restricted Securities."
Banker's acceptances are marketable short-term credit
instruments used to finance the import, export, transfer or
storage of goods. They are deemed "accepted" when a bank
guarantees their payment at maturity.
WARRANTS AND RIGHTS (ALL PORTFOLIOS EXCEPT MONEY MARKET PORTFOLIO,
INCOME PORTFOLIO AND GOVERNMENT SECURITIES PORTFOLIO). Warrants
are options to purchase equity securities at set prices valid for
a specified period of time. The prices of warrants do not
necessarily move in a manner parallel to the prices of the
underlying securities. The price a Portfolio pays for a warrant
will be lost unless the warrant is exercised prior to its
expiration. Rights are similar to warrants, but normally have a
short duration and are distributed directly by the issuer to its
shareholders. Rights and warrants have no voting rights, receive
no dividends and have no rights with respect to the assets of the
issuer.
PREFERRED STOCK (ALL PORTFOLIOS EXCEPT MONEY MARKET PORTFOLIO,
INCOME PORTFOLIO AND GOVERNMENT SECURITIES PORTFOLIO). Preferred
stocks are equity securities, but possess certain attributes of
debt securities and are generally considered fixed income
securities. Holders of preferred stocks normally have the right
to receive dividends at a fixed rate when and as declared by the
issuer's board of directors, but do not participate in other
amounts available for distribution by the issuing corporation.
Dividends on the preferred stock may be cumulative, and all
cumulative dividends usually must be paid prior to dividend
payments to common stockholders. Because of this preference,
preferred stocks generally entail less risk than common stocks.
Upon liquidation, preferred stocks are entitled to a specified
liquidation preference, which is generally the same as the par or
stated value, and are senior in right of payment to common stocks.
However, preferred stocks are equity securities in that they do
not represent a liability of the issuer and therefore do not offer
as great a degree of protection of capital or assurance of
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continued income as investments in corporate debt securities. In
addition, preferred stocks are subordinated in right of payment to
all debt obligations and creditors of the issuer, and convertible
preferred stocks may be subordinated to other preferred stock of
the same issuer.
LOANS OF PORTFOLIO SECURITIES. Each Portfolio may lend its
portfolio securities (other than in repurchase transactions) to
brokers, dealers and other financial institutions subject to the
restrictions stated in the Prospectus. Under applicable
regulatory requirements (which are subject to change), the loan
collateral must, on each business day, at least equal the market
value of the loaned securities and must consist of cash, bank
letters of credit, U.S. Government Securities, or other cash
equivalents in which the Portfolio is permitted to invest. To be
acceptable as collateral, letters of credit must obligate a bank
to pay amounts demanded by the Portfolio if the demand meets the
terms of the letter. Such terms and the issuing bank must be
satisfactory to the Portfolio. In a portfolio securities lending
transaction, the Portfolio receives from the borrower an amount
equal to the interest paid or the dividends declared on the loaned
securities during the term of the loan as well as the interest on
the collateral securities, less any finders', administrative or
other fees the Portfolio pays in connection with the loan. The
Portfolio may share the interest it receives on the collateral
securities with the borrower as long as it realizes at least a
minimum amount of interest required by the lending guidelines
established by the Board of Directors. A Portfolio will not lend
its portfolio securities to any officer, director, employee or
affiliate of the Portfolio, the Manager or any Subadviser. The
terms of a Portfolio's loans must meet certain tests under the
Internal Revenue Code and permit the Portfolio to reacquire loaned
securities on five business days' notice or in time to vote on any
important matter.
"WHEN-ISSUED" AND DELAYED DELIVERY TRANSACTIONS. (ALL PORTFOLIOS
EXCEPT MONEY MARKET PORTFOLIO). Securities may be purchased by a
Portfolio on a "when-issued" or on a "forward commitment" basis.
These transactions, which involve a commitment by a Portfolio to
purchase or sell particular securities with payment and delivery
taking place at a future date (perhaps one or two months later),
permit the Portfolio to lock in a price or yield on a security,
regardless of future changes in interest rates. A Portfolio will
purchase securities on a "when-issued" or forward commitment basis
only with the intention of completing the transaction and actually
purchasing the securities. If deemed appropriate by the Manager
or, in the case of the LifeSpan Portfolios and the International
Equity Portfolio, the relevant Subadviser, however, a Portfolio
may dispose of or renegotiate a commitment after it is entered
into, and may sell securities it has committed to purchase before
those securities are delivered to the Portfolio on the settlement
date. In these cases, the Portfolio may realize a gain or loss.
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When a Portfolio agrees to purchase securities on a
"when-issued" or forward commitment basis, the Portfolio's
custodian will set aside cash or High Grade Debt Securities equal
to the amount of the commitment in a separate account. Normally,
the custodian will set aside portfolio securities to satisfy a
purchase commitment, and in such a case the Portfolio may be
required subsequently to place additional assets in the separate
account in order to ensure that the value of the account remains
equal to the amount of the Portfolio's commitments. The market
value of a Portfolio's net assets may fluctuate to a greater
degree when it sets aside portfolio securities to cover such
purchase commitments then when it sets aside cash. Because a
Portfolio's liquidity and ability to manage its portfolio might be
affected when it sets aside cash or portfolio securities to cover
such purchase commitments, each Portfolio expects that its
commitments to purchase when-issued securities and forward
commitments will not exceed 33% of the value of its total assets
absent unusual market conditions. When a Portfolio engages in
"when-issued" and forward commitment transactions, it relies on
the other party to the transaction to consummate the trade.
Failure of such party to do so may result in the Portfolio
incurring a loss or missing an opportunity to obtain a price
considered to be advantageous.
The market value of the securities underlying a "when-issued"
purchase or a forward commitment to purchase securities, and any
subsequent fluctuations in their market value, are taken into
account when determining the market value of a Portfolio starting
on the day the Portfolio agrees to purchase the securities. The
Portfolio does not earn interest or dividends on the securities it
has committed to purchase until the settlement date.
REPURCHASE AGREEMENTS. Each Portfolio may acquire securities that
are subject to repurchase agreements, in order to generate income
while providing liquidity. In a repurchase transaction, the
Portfolio acquires a security from, and simultaneously resells it
to, an approved vendor for delivery on an agreed-upon future date.
An "approved vendor" is a U.S. commercial bank, the U.S. branch of
a foreign bank or a broker-dealer which has been designated a
primary dealer in government securities, which must meet the
credit requirements set by the Portfolio's Board of Directors from
time to time. The sale price exceeds the purchase price by an
amount that reflects an agreed-upon interest rate effective for
the period during which the repurchase agreement is in effect.
The majority of these transactions run from day to day, and
delivery pursuant to resale typically will occur within one to
five days of the purchase. Repurchase agreements are considered
"loans" under the Investment Company Act collateralized by the
underlying security. The Portfolio's repurchase agreements will
require that at all times while the repurchase agreement is in
effect, the collateral's value must equal or exceed the repurchase
price to fully collateralize the repayment obligation.
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Additionally, the Manager or relevant Subadviser will impose
creditworthiness requirements to confirm that the vendor is
financially sound and will continuously monitor the collateral's
value. If the vendor of a repurchase agreement fails to pay the
agreed-upon resale price on the delivery date, the Portfolio's
risks in such event may include any costs of disposing of the
collateral, and any loss from any delay in foreclosing on the
collateral.
REVERSE REPURCHASE AGREEMENTS. The LifeSpan Portfolios are
permitted to engage in reverse repurchase transactions but have no
current intention to do so. A LifeSpan Portfolio that does so
will maintain, in a segregated account with its Custodian, cash,
Treasury bills or other U.S. Government Securities have an
aggregate value equal to the amount of such commitment to
repurchase, including accrued interest, until payment is made.
The Portfolio will use reverse repurchase agreements as a source
of funds on a short-term basis (and not for leverage). In
determining whether to enter into a reverse repurchase agreement
with a bank or broker-dealer, the Portfolio will take into account
the creditworthiness of such party.
RESTRICTED AND ILLIQUID SECURITIES. To enable each Portfolio to
sell restricted securities not registered under the Securities Act
of 1933, the Portfolio may have to cause those securities to be
registered. The expenses of registration of restricted securities
may be negotiated by the Portfolio with the issuer at the time
such securities are purchased by the Portfolio, if such
registration is required before such securities may be sold
publicly. When registration must be arranged because the
Portfolio wishes to sell the security, a considerable period may
elapse between the time the decision is made to sell the
securities and the time the Portfolio would be permitted to sell
them. The Portfolio would bear the risks of any downward price
fluctuation during that period. A Portfolio may also acquire,
through private placements, securities having contractual
restrictions on their resale, which might limit the Portfolio's
ability to dispose of such securities and might lower the amount
realized upon the sale of such securities.
HEDGING. (ALL PORTFOLIOS EXCEPT MONEY MARKET PORTFOLIO).
Consistent with the limitations set forth in the Prospectus and
below, a Portfolio may employ one or more of the types of hedging
instruments described below. In the future, a Portfolio may
employ hedging instruments and strategies that are not presently
contemplated but which may be developed, to the extent such
investment methods are consistent with the Portfolio's investment
objective, legally permissible and adequately disclosed.
HEDGING STRATEGIES. Hedging, by use of futures contracts,
seeks to establish with more certainty the effective price and
rate of return on portfolio securities and securities that a
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Portfolio proposes to acquire. The Portfolios may, for example,
take a "short" position in the futures market by selling futures
contracts in order to hedge against an anticipated rise in
interest rates or a decline in market prices that would adversely
affect the value of a Portfolio's portfolio securities. Such
futures contracts may include contracts for the future delivery of
securities held by the Portfolio or securities with
characteristics similar to those of the Portfolio's portfolio
securities.
If, in the opinion of the Portfolio's Manager or, in the case
of the LifeSpan Portfolios and the International Equity Portfolio,
the relevant Subadviser, there is a sufficient degree of
correlation between price trends for a Portfolio's portfolio
securities and futures contracts based on other financial
instruments, securities indices or other indices, the Portfolio
may also enter into such futures contracts as part of its hedging
strategy. Although under some circumstances prices of securities
in a Portfolio's portfolio may be more or less volatile than
prices of such futures contracts, the Manager or, in the case of
the LifeSpan Portfolios and the International Equity Portfolio,
the relevant Subadviser will attempt to estimate the extent of
this volatility difference based on historical patterns and
compensate for any such differential by having the Portfolio enter
into a greater or lesser number of futures contracts or by
attempting to achieve only a partial hedge against price changes
affecting a Portfolio's securities portfolio. When hedging of
this character is successful, any depreciation in the value of
portfolio securities will be substantially offset by appreciation
in the value of the futures position. On the other hand, any
unanticipated appreciation in the value of a Portfolio's portfolio
securities would be substantially offset by a decline in the value
of the futures position.
On other occasions, the Portfolios may take a "long" position
by purchasing futures contracts. This would be done, for example,
when a Portfolio anticipates the subsequent purchase of particular
securities when it has the necessary cash, but expects the prices
then available in the applicable market to be less favorable than
prices that are currently available.
FUTURES CONTRACTS AND RELATED OPTIONS. To hedge against
changes in interest rates, securities prices or currency exchange
rates, each Portfolio (other than Money Market Portfolio) may,
subject to its investment objectives and policies, purchase and
sell various kinds of futures contracts and write covered call
options on such contracts. The International Equity Portfolio and
the Government Securities Portfolio may also purchase and sell
call and put options on such futures contracts. A Portfolio may
also enter into closing purchase and sale transactions with
respect to any of these contracts and options. The Total Return
Portfolio, the International Equity Portfolio, the Growth
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Portfolio and the Government Securities Portfolio may purchase and
sell stock index futures contracts; and the Total Return
Portfolio, International Equity Portfolio, the Income Portfolio
and the Government Securities Portfolio may purchase and sell
interest rate future contracts. In addition, each Portfolio that
may invest in securities that are denominated in a foreign
currency may purchase and sell futures on currencies. The
International Equity Portfolio may purchase and sell options on
futures on currencies. A Portfolio will engage in futures and
related options transactions only for bona fide hedging purposes
as defined in regulations promulgated by the CFTC. All futures
contracts entered into by the Portfolios are traded on U.S.
exchanges or boards of trade that are licensed and regulated by
the CFTC or on foreign exchanges approved by the CFTC.
A Portfolio may buy and sell futures contracts on interest
rates ("Interest Rate Futures"). No price is paid or received
upon the purchase or sale of an Interest Rate Future. An Interest
Rate Future obligates the seller to deliver and the purchaser to
take a specific type of debt security at a specific future date
for a fixed price. That obligation may be satisfied by actual
delivery of the debt security or by entering into an offsetting
contract.
The Portfolio may buy and sell futures contracts related to
financial indices (a "Financial Future"). A financial index
assigns relative values to the securities included in the index
and fluctuates with the changes in the market value of those
securities. Financial indices cannot be purchased or sold
directly. The contracts obligate the seller to deliver, and the
purchaser to take, cash to settle the futures transaction or to
enter into an offsetting contract. No physical delivery of the
securities underlying the index is made on settling the futures
obligation. No price is paid or received by a Portfolio on the
purchase or sale of a Financial Future.
Upon entering into a futures transaction, a Portfolio will be
required to deposit an initial margin payment in cash or U.S.
Treasury bills with the futures commission merchant (the "futures
broker"). The initial margin will be deposited with a Portfolio's
Custodian in an account registered in the futures broker's name;
however the futures broker can gain access to that account only
under specified conditions. As the Future is marked to market to
reflect changes in its market value, subsequent margin payments,
called variation margin, will be made to or by the futures broker
on a daily basis. Prior to expiration of the Future, if a
Portfolio elects to close out its position by taking an opposite
position, a final determination of variation margin is made and
additional cash is required to be paid by or released to the
Portfolio. Although Financial Futures and Interest Rate Futures
by their terms call for settlement by delivery cash or securities,
respectively, in most cases the obligation is fulfilled by
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entering into an offsetting position. All futures transactions
are effected through a clearinghouse associated with the exchange
on which the contracts are traded.
OPTIONS ON FUTURES CONTRACTS. The Portfolios may use options
on futures contracts solely for bona fide hedging purposes as
described below. The writing of a call option on a futures
contract generates a premium which may partially offset a decline
in the value of a Portfolio's assets. By writing a call option, a
Portfolio becomes obligated, in exchange for the premium, to sell
a futures contract (if the option is exercised), which may have a
value higher than the exercise price. Conversely, the writing of
a put option on a futures contract generates a premium which may
partially offset an increase in the price of securities that a
Portfolio intends to purchase. However, a Portfolio becomes
obligated to purchase a futures contract (if the option is
exercised) which may have a value lower than the exercise price.
Thus, the loss incurred by a Portfolio in writing options on
futures is potentially unlimited and may exceed the amount of the
premium received. The Portfolios will incur transaction costs in
connection with the writing of options on futures.
The holder or writer of an option on a futures contract may
terminate its position by selling or purchasing an offsetting
option on the same series. There is no guarantee that such
closing transactions can be effected. The Portfolios' ability to
establish and close out positions on such options will be subject
to the development and maintenance of a liquid market.
OPTIONS ON SECURITIES, SECURITIES INDICES AND FOREIGN
CURRENCIES. Each Portfolio (other than Money Market Portfolio)
may write covered call options. In addition, the International
Equity Portfolio and the Government Securities Portfolio may
purchase covered call options. Such options may relate to
particular U.S. or non-U.S. securities, to various U.S. or
non-U.S. stock indices or to U.S. or non-U.S. currencies. To the
extent that a Portfolio engages in options transactions, the
Portfolio may purchase and write call options which are issued by
the Options Clearing Corporation (the "OCC") or which are traded
on U.S. and non-U.S. exchanges. The International Equity
Portfolio may purchase options on currency in the over-the-counter
markets ("OTC Markets").
WRITING COVERED CALLS. When a Portfolio writes a call on an
investment, it receives a premium and agrees to sell the callable
investment to a purchaser of a corresponding call on the same
investment if the option is exercised during the call period
(usually not more than nine months) at a fixed exercise price
(which may differ from the market price of the underlying
investment), regardless of market price changes during the call
period. A Portfolio retains the risk of loss should the price of
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the underlying investment decline during the call period, which
may be offset to some extent by the premium.
To terminate its obligation on a call it has written, a
Portfolio may purchase a corresponding call in a "closing purchase
transaction." A profit or loss will be realized, depending upon
whether the net of the amount of the option transaction costs and
the premium received on the call written was more or less than the
price of the call subsequently purchased. A profit may also be
realized if the call expires unexercised, because a Portfolio
retains the underlying investment and the premium received. If a
Portfolio could not effect a closing purchase transaction due to
lack of a market, it would have to hold the callable investments
until the call lapsed or was exercised.
PURCHASING COVERED CALLS. When a Portfolio purchases a call
(other than in a closing purchase transaction), it pays a premium
and, except as to calls on indices or futures, has the right to
buy the underlying investment from a seller of a corresponding
call on the same investment during the call period at a fixed
exercise price. When a Portfolio purchases a call on a securities
index or future, it pays a premium, but settlement is in cash
rather than by delivery of the underlying investment to the
Portfolio. In purchasing a call, a Portfolio benefits only if the
call is sold at a profit or if, during the call period, the market
price of the underlying investment is above the sum of the
exercise price, transaction costs and the premium paid, and the
call is exercised. If the call is neither exercised nor sold
(whether or not at a profit), it will become worthless at its ex-
piration date and the Portfolio will lose its premium payment and
the right to purchase the underlying investment.
Calls on broadly-based indices or futures are similar to
calls on securities or futures contracts except that all
settlements are in cash and gain or loss depends on changes in the
index in question (and thus on price movements in the underlying
market generally) rather than on price movements in individual
securities or futures contracts. When a Portfolio buys a call on
an index or future, it pays a premium. During the call period,
upon exercise of a call by a Portfolio, a seller of a
corresponding call on the same investment will pay the Portfolio
an amount of cash to settle the call if the closing level of the
index or future upon which the call is based is greater than the
exercise price of the call. That cash payment is equal to the
difference between the closing price of the index and the exercise
price of the call times a specified multiple (the "multiplier"),
which determines the total dollar value for each point of
difference.
An option position may be closed out only on a market which
provides secondary trading for options of the same series and
there is no assurance that a liquid secondary market will exist
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for any particular option. A Portfolio's option activities may
affect its turnover rate and brokerage commissions. A Portfolio
may pay a brokerage commission each time it buys a call, sells a
call, or buys or sells an underlying investment in connection with
the exercise of a call. Such commissions may be higher than those
which would apply to direct purchases or sales of such underlying
investments. Premiums paid for options are small in relation to
the market value of the related investments, and consequently,
call options offer large amounts of leverage. The leverage
offered by trading in options could result in a Portfolio's net
asset value being more sensitive to changes in the value of the
underlying investments.
FORWARD CONTRACTS. Each Portfolio (except the Money Market
Portfolio and the Government Securities Portfolio) may enter into
foreign currency exchange contracts ("Forward Contracts") for
hedging and non-hedging purposes. A forward currency exchange
contract generally has no deposit requirement, and no commissions
are generally charged at any stage for trades. A Forward Contract
involves bilateral obligations of one party to purchase, and
another party to sell, a specific currency at a future date (which
may be any fixed number of days from the date of the contract
agreed upon by the parties), at a price set at the time the
contract is entered into. A Portfolio generally will not enter
into a forward currency exchange contract with a term of greater
than one year. These contracts are traded in the interbank market
conducted directly between currency traders (usually large
commercial banks) and their customers.
A Portfolio may use Forward Contracts to protect against
uncertainty in the level of future exchange rates. The use of
Forward Contracts does not eliminate fluctuations in the prices of
the underlying securities a Portfolio owns or intends to acquire,
but it does fix a rate of exchange in advance. In addition,
although Forward Contracts limit the risk of loss due to a decline
in the value of the hedged currencies, at the same time they limit
any potential gain that might result should the value of the
currencies increase.
A Portfolio may enter into Forward Contracts with respect to
specific transactions. For example, when a Portfolio enters into
a contract for the purchase or sale of a security denominated in a
foreign currency, or when it anticipates receipt of dividend
payments in a foreign currency, a Portfolio may desire to
"lock-in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such payment by entering into a Forward Contract,
for a fixed amount of U.S. dollars per unit of foreign currency,
for the purchase or sale of the amount of foreign currency
involved in the underlying transaction ("transaction hedge"). A
Portfolio will thereby be able to protect itself against a
possible loss resulting from an adverse change in the relationship
between the currency exchange rates during the period between the
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date on which the security is purchased or sold, or on which the
payment is declared, and the date on which such payments are made
or received.
A Portfolio may also use Forward Contracts to lock in the
U.S. dollar value of portfolio positions ("position hedge"). In a
position hedge, for example, when a Portfolio believes that
foreign currency may suffer a substantial decline against the U.S.
dollar, it may enter into a forward sale contract to sell an
amount of that foreign currency approximating the value of some or
all of a Portfolio's portfolio securities denominated in such
foreign currency, or when it believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, it may
enter into a forward purchase contract to buy that foreign
currency for a fixed dollar amount. In this situation a Portfolio
may, in the alternative, enter into a Forward Contract to sell a
different foreign currency for a fixed U.S. dollar amount where
the Portfolio believes that the U.S. dollar value of the currency
to be sold pursuant to the Forward Contract will fall whenever
there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Portfolio are denominated
("cross hedge").
A Portfolio will not enter into such Forward Contracts or
maintain a net exposure to such contracts where the consummation
of the contracts would obligate the Portfolio to deliver an amount
of foreign currency in excess of the value of the Portfolio's
portfolio securities or other assets denominated in that currency.
However, in order to avoid excess transactions and transaction
costs, a Portfolio may maintain a net exposure to Forward
Contracts in excess of the value of the Portfolio's portfolio
securities or other assets denominated in that currency provided
the excess amount is "covered" by liquid, high-grade debt
securities, denominated in any currency, at least equal at all
times to the amount of such excess. As an alternative, a LifeSpan
Portfolio may purchase a call option permitting the Portfolio to
purchase the amount of foreign currency being hedged by a forward
sale contract at a price no higher than the forward contract
price. A LifeSpan Portfolio may purchase a put option permitting
the Portfolio to sell the amount of foreign currency subject to a
forward purchase contract at a price as high as or higher than the
forward contract price. Unanticipated changes in currency prices
may result in poorer overall performance for a Portfolio than if
it had not entered into such contracts.
The precise matching of the Forward Contract amounts and the
value of the securities involved will not generally be possible
because the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of
these securities between the date the Forward Contract is entered
into and the date it is sold. Accordingly, it may be necessary
for a Portfolio to purchase additional foreign currency on the
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spot (I.E., cash) market (and bear the expense of such purchase),
if the market value of the security is less than the amount of
foreign currency a Portfolio is obligated to deliver and if a
decision is made to sell the security and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency received upon the sale of
the portfolio security if its market value exceeds the amount of
foreign currency a Portfolio is obligated to deliver. The
projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. Forward Contracts involve the risk
that anticipated currency movements will not be accurately
predicted, causing a Portfolio to sustain losses on these
contracts and transactions costs.
At or before the maturity of a Forward Contract requiring a
Portfolio to sell a currency, a Portfolio may either sell a
portfolio security and use the sale proceeds to make delivery of
the currency or retain the security and offset its contractual
obligation to deliver the currency by purchasing a second contract
pursuant to which the Portfolio will obtain, on the same maturity
date, the same amount of the currency that it is obligated to
deliver. Similarly, a Portfolio may close out a Forward Contract
requiring it to purchase a specified currency by entering into a
second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The
Portfolio would realize a gain or loss as a result of entering
into such an offsetting Forward Contract under either circumstance
to the extent the exchange rate or rates between the currencies
involved moved between the execution dates of the first contract
and offsetting contract.
The cost to a Portfolio of engaging in Forward Contracts
varies with factors such as the currencies involved, the length of
the contract period and the market conditions then prevailing.
Because Forward Contracts are usually entered into on a principal
basis, no fees or commissions are involved. Because such
contracts are not traded on an exchange, a Portfolio must evaluate
the credit and performance risk of each particular counter party
under a Forward Contract.
Although a Portfolio values its assets daily in terms of U.S.
dollars, it does not intend to convert its holdings of foreign
currencies into U.S. dollars on a daily basis. A Portfolio may
convert foreign currency from time to time, and there are costs of
currency conversion. Foreign exchange dealers do not charge a fee
for conversion, but they do seek to realize a profit based on the
difference between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency
to a Portfolio at one rate, while offering a lesser rate of
exchange should a Portfolio desire to resell that currency to the
dealer.
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INTEREST RATE SWAP TRANSACTIONS. Government Securities
Portfolio and the LifeSpan Portfolios may enter into swap
transactions. A Portfolio will enter into swap transactions with
appropriate counterparties pursuant to master netting agreements.
A master netting agreement provides that all swaps done between a
Portfolio and that counterparty under that master agreement shall
be regarded as parts of an integral agreement. If on any date
amounts are payable in the same currency in respect of one or more
swap transactions, the net amount payable on that date in that
currency shall be paid. In addition, the master netting agreement
may provide that if one party defaults generally or on one swap,
the counterparty may terminate the swaps with that party. Under
such agreements, if there is a default resulting in a loss to one
party, the measure of that party's damages is calculated by
reference to the average cost of a replacement swap with respect
to each swap (I.E., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are
then netted, and the result is the counterparty's gain or loss on
termination. The termination of all swaps and the netting of
gains and losses on termination is generally referred to as
"aggregation."
Swap agreements entail both interest rate risk and credit
risk. There is a risk that, based on movements of interest rates
in the future, the payments made by a Portfolio under a swap
agreement will have been greater than those received by them.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, a
Portfolio's loss will consist of the net amount of contractual
interest payments that the Portfolio has not yet received. The
Manager or relevant Subadviser will monitor the creditworthiness
of counterparties to a Portfolio's interest rate swap transactions
on an ongoing basis.
The swap market has grown substantially in recent years with
a large number of banks and investment banking firms acting both
as principals and as agents utilizing standardized swap
documentation. As a result, the swap market has become relatively
liquid in comparison with the markets for other similar
instruments which are traded in the interbank market. However,
the staff of the SEC currently takes the position that swaps, caps
and floors are illiquid investments that are subject to a
limitation on such investments by investment companies.
ADDITIONAL INFORMATION ABOUT HEDGING INSTRUMENTS AND THEIR
USE. A Portfolio's Custodian, or a securities depository acting
for the Custodian, will act as a Portfolio's escrow agent, through
the facilities of the Options Clearing Corporation ("OCC"), as to
the investments on which a Portfolio has written options traded on
exchanges or as to other acceptable escrow securities, so that no
margin will be required for such transactions. OCC will release
the securities covering a call on the expiration of the option or
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upon a Portfolio entering into a closing purchase transaction. An
option position may be closed out only on a market which provides
secondary trading for options of the same series, and there is no
assurance that a liquid secondary market will exist for any
particular option.
When International Equity Portfolio writes an
over-the-counter ("OTC") option, it will enter into an arrangement
with a primary U.S. Government securities dealer, which would
establish a formula price at which the Portfolio would have the
absolute right to repurchase that OTC option. That formula price
would generally be based on a multiple of the premium received for
the option, plus the amount by which the option is exercisable
below the market price of the underlying security (that is, the
extent to which the option "is in-the-money"). When International
Equity Portfolio writes an OTC option, it will treat as illiquid
(for purposes of the limit on its assets that may be invested in
illiquid securities, stated in the Prospectus) the mark-to-market
value of any OTC option it holds. The SEC is evaluating whether
OTC options should be considered liquid securities, and the
procedure described above could be affected by the outcome of that
evaluation.
REGULATORY ASPECTS OF HEDGING INSTRUMENTS. The Portfolios
are required to operate within certain guidelines and restrictions
with respect to their use of futures and options thereon as es-
tablished by the Commodities Futures Trading Commission ("CFTC").
In particular, the Portfolios are excluded from registration as a
"commodity pool operator" if they comply with the requirements of
Rule 4.5 adopted by the CFTC. The Rule does not limit the
percentage of the Portfolios' assets that may be used for Futures
margin and related options premiums for a bona fide hedging
position. However, under the Rule a Portfolio must limit its
aggregate initial futures margin and related option premiums to no
more than 5% of the Portfolios' net assets for hedging strategies
that are not considered bona fide hedging strategies under the
Rule.
Transactions in options by the Portfolios are subject to
limitations established by each of the exchanges governing the
maximum number of options which may be written or held by a single
investor or group of investors acting in concert, regardless of
whether the options were written or purchased on the same or
different exchanges or are held in one or more accounts or through
one or more different exchanges through one or more brokers.
Thus, the number of options which the Portfolios may write or hold
may be affected by options written or held by other entities,
including other investment companies having the same or an
affiliated investment adviser. Position limits also apply to
Futures. An exchange may order the liquidation of positions found
to be in violation of those limits and may impose certain other
sanctions. Due to requirements under the Investment Company Act,
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when the Portfolios purchase a Future, the Portfolios will
maintain, in a segregated account or accounts with their
Custodian, cash or readily-marketable, short-term (maturing in one
year or less) debt instruments in an amount equal to the market
value of the securities underlying such Future, less the margin
deposit applicable to it.
TAX ASPECTS OF COVERED CALLS AND HEDGING INSTRUMENTS. Each
Portfolio intends to qualify as a "regulated investment company"
under the Internal Revenue Code. That qualification enables a
Portfolio to "pass through" its income and realized capital gains
to shareholders without the Portfolio having to pay tax on them.
One of the tests for a Portfolio's qualification is that less than
30% of its gross income (irrespective of losses) must be derived
from gains realized on the sale of securities or certain other
investments held for less than three months. To comply with that
30% cap, a Portfolio will limit the extent to which it engages in
the following activities, but will not be precluded from them: (i)
selling investments, including Futures, held for less than three
months, whether or not they were purchased on the exercise of a
call held by the Portfolio; (ii) purchasing calls or puts which
expire in less than three months; (iii) effecting closing
transactions with respect to calls or puts written or purchased
less than three months previously; (iv) exercising puts or calls
held by a Portfolio for less than three months; or (v) writing
calls on investments held for less than three months.
RISKS OF HEDGING WITH OPTIONS AND FUTURES. In addition to
the risks with respect to hedging discussed in the Prospectus and
above, there is a risk in using short hedging by selling Futures
to attempt to protect against a decline in value of a Portfolio's
portfolio securities (due to an increase in interest rates) that
the prices of such Futures will correlate imperfectly with the
behavior of the cash (I.E., market value) prices of a Portfolio's
securities. The ordinary spreads between prices in the cash and
futures markets are subject to distortions due to differences in
the natures of those markets. First, all participants in the
futures markets are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the
liquidity of the futures markets depends on participants entering
into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take
delivery, liquidity in the futures markets could be reduced, thus
producing distortion. Third, from the point of view of
speculators, the deposit requirements in the futures markets are
less onerous than margin requirements in the securities markets.
Therefore, increased participation by speculators in the futures
markets may cause temporary price distortions.
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PORTFOLIO TURNOVER. Each Portfolio's particular portfolio
securities may be changed without regard to the holding period of
these securities (subject to certain tax restrictions), when the
Manager or respective Subadviser deems that this action will help
achieve the Portfolio's objective given a change in an issuer's
operations or changes in general market conditions. Short-term
trading means the purchase and subsequent sale of a security after
it has been held for a relatively brief period of time. The
Portfolios do not generally intend to invest for the purpose of
seeking short-term profits. Variations in portfolio turnover rate
from year to year reflect the investment discipline applied to the
particular Portfolio and do not generally reflect trading for
short-term profits.
OTHER INVESTMENT RESTRICTIONS
INVESTMENT RESTRICTIONS THAT ARE FUNDAMENTAL POLICIES. Each
Portfolio has adopted the following investment restrictions that
are "fundamental policies." Each Portfolio's most significant
investment restrictions are also set forth in the Prospectus.
Fundamental policies cannot be changed without the vote of a
"majority" of a Portfolio's outstanding voting securities. Under
the Investment Company Act, such a "majority" vote is defined as
the vote of the holders of the lesser of (i) 67% or more of the
shares present or represented by proxy at a shareholder meeting,
if the holders of more than 50% of the outstanding shares are
present, or (ii) more than 50% of the outstanding shares.
With respect to each Panorama Portfolio, the Company does not
issue senior securities; in addition, except as noted, each
Panorama Portfolio may not:
1. (a) Invest more than 5% of its total assets (taken at market
value at the time of each investment) in the securities (other
than U.S. Government agency securities) of any one issuer
(including repurchase agreements with any one bank); and
(b) purchase more than either (i) 10% of the principal amount of
the outstanding debt securities of an issuer, or (ii) 10% of the
outstanding voting securities of an issuer, except that such
restrictions shall not apply to securities issued or guaranteed by
the U.S. Government or its agencies, bank money instruments or
bank repurchase agreements. (This restriction is not applicable
to the Government Securities Portfolio).
2. Invest more than 25% of its total assets (taken at market
value at the time of each investment) in the securities of issuers
primarily engaged in the same industry. Utilities will be divided
according to their services; for example, gas, gas transmissions,
electric and telephone each will be considered a separate industry
for purposes of this restriction; provided that this limitation
shall not apply to the purchase of obligations issued or
guaranteed by the U.S. Government, its agencies or
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instrumentalities, certificates of deposit issued by domestic
banks and bankers' acceptances. (This restriction is not
applicable to the International Equity Portfolio or the Government
Securities Portfolio).
3. Alone, or together with any other Portfolio or Portfolios,
make investments for the purpose of exercising control over, or
management of, any issuer.
4. Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or
reorganization, or by purchase in the open market of securities of
closed-end investment companies where no underwriter or dealer's
commission or profit, other than customary broker's commission, is
involved, and only if immediately thereafter not more than 10% of
such Portfolio's total assets, taken at market value, would be
invested in such securities.
5. Purchase or sell interests in oil, gas or other mineral
exploration or development programs, commodities, commodity
contracts or real estate, except that the Total Return Portfolio,
the International Equity Portfolio, the Growth Portfolio, the
Income Portfolio and the Government Securities Portfolio each may:
(1) purchase securities of issuers which invest or deal in any of
the above and (2) invest for hedging purposes in futures contracts
on securities, financial instruments and indices, and foreign
currency, as are approved for trading on a registered exchange.
The International Equity Portfolio may also invest in options on
foreign futures contracts on securities, financial instruments and
indices and foreign currency.
6. Purchase any securities on margin (except that the Company
may obtain such short term credits as may be necessary for the
clearance of purchases and sales of portfolio securities) or make
short sales of securities or maintain a short position. The
deposit or payment by a Portfolio of initial or maintenance margin
in connection with futures contracts or related options
transactions is not considered the purchase of a security on
margin.
7. Make loans, except that the Portfolio (1) may lend portfolio
securities in accordance with the Portfolio's investment policies
up to 33 1/3% of the Portfolio's total assets taken at market
value, (2) enter into repurchase agreements, and (3) purchase all
or a portion of an issue of publicly distributed debt securities,
bank loan participation interests, bank certificates of deposit,
bankers' acceptances, debentures or other securities, whether or
not the purchase is made upon the original issuance of the
securities.
8. Borrow amounts in excess of 10% of its total assets, taken at
market value at the time of the borrowing, and then only from
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banks as a temporary measure for extraordinary or emergency
purposes; or make investments in portfolio securities while its
outstanding borrowings exceed 5% of its total assets.
9. Mortgage, pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by such
Portfolio except as may be necessary in connection with borrowings
mentioned in (8) above, and then such mortgaging, pledging or
hypothecating may not exceed 10% of such Portfolio's total assets,
taken at market value at the time thereof. In order to comply
with certain state statutes, such Portfolio will not, as a matter
of non-fundamental policy mortgage, pledge or hypothecate its
portfolio securities to the extent that at any time the percentage
of the value of pledged securities plus the maximum sales charge
will exceed 10% of the value of such Portfolio's shares at the
maximum offering price. The deposit of cash equivalents and
liquid debt securities in a segregated account with the custodian
and/or with a broker in connection with futures contracts or
related options transactions and the purchase of securities on a
"when-issued" basis are not deemed to be pledges.
10. Underwrite securities of other issuers except insofar as the
Portfolio may be deemed an underwriter under the 1933 Act in
selling portfolio securities.
11. Write, purchase or sell puts, calls or combinations thereof,
except that the Total Return Portfolio, the Growth Portfolio and
the Income Portfolio may write covered call options and engage in
closing purchase transactions. (This restriction is not
applicable to the International Equity Portfolio and the
Government Securities Portfolio.)
12. Invest in securities of foreign issuers if at the time of
acquisition more than 10% of its total assets, taken at market
value at the time of the investment, would be invested in such
securities. However, up to 25% of the total assets of such
Portfolio may be invested in securities (i) issued, assumed or
guaranteed by foreign governments, or political subdivisions or
instrumentalities thereof, (ii) assumed or guaranteed by domestic
issuers, including Eurodollar securities, or (iii) issued, assumed
or guaranteed by foreign issuers having a class of securities
listed for trading on The New York Stock Exchange. (This
restriction is not applicable to the International Equity
Portfolio.)
Each LifeSpan Portfolio may not:
1. Issue senior securities, except as permitted by paragraphs 2,
3, 6 and 7 below. For purposes of this restriction, the issuance
of shares of common stock in multiple classes or series, the
purchase or sale of options, futures contracts and options on
futures contracts, forward commitments and repurchase agreements
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entered into in accordance with the Portfolio's investment
policies, are not deemed to be senior securities.
2. Purchase any securities on margin (except that the Company
may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of portfolio securities) or make
short sales of securities or maintain a short position. The
deposit or payment by a Portfolio of initial or maintenance margin
in connection with futures contracts or related options
transactions is not considered the purchase of a security on
margin.
3. Borrow money, except for emergency or extraordinary purposes
including (i) from banks for temporary or short-term purposes or
for the clearance of transactions in amounts not to exceed 33 1/3%
of the value of the Portfolio's total assets (including the amount
borrowed) taken at market value, (ii) in connection with the
redemption of Portfolio shares or to finance failed settlements of
portfolio trades without immediately liquidating portfolio
securities or other assets; and (iii) in order to fulfill
commitments or plans to purchase additional securities pending the
anticipated sale of other portfolio securities or assets, but only
if after each such borrowing there is asset coverage of at least
300% as defined in the Investment Company Act. For purposes of
this investment restriction, reverse repurchase agreements,
mortgage dollar rolls, short sales, futures contracts, options on
futures contracts, securities or indices and forward commitment
transactions shall not constitute borrowing.
4. Act as an underwriter, except to the extent that in
connection with the disposition of portfolio securities, the
Portfolio may be deemed to be an underwriter for purposes of the
1933 Act.
5. Purchase or sell real estate except that the Portfolio may
(i) acquire or lease office space for its own use, (ii) invest in
securities of issuers that invest in real estate or interests
therein, (iii) invest in securities that are secured by real
estate or interests therein, (iv) purchase and sell
mortgage-related securities and (v) hold and sell real estate
acquired by the Portfolio as a result of the ownership of
securities.
6. Invest in commodities, except the Portfolio may purchase and
sell options on securities, securities indices and currency,
futures contracts on securities, securities indices and currency
and options on such futures, forward foreign currency exchange
contracts, forward commitments, securities index put or call
options and repurchase agreements entered into in accordance with
the Portfolio's investment policies.
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7. Make loans, except that the Portfolio (1) may lend portfolio
securities in accordance with the Portfolio's investment policies
up to 33 1/3% of the Portfolio's total assets taken at market
value, (2) enter into repurchase agreements, and (3) purchase all
or a portion of an issue of publicly distributed bonds, debentures
or other similar obligations.
8. Purchase the securities of issuers conducting their principal
activity in the same industry if, immediately after such purchase,
the value of its investments in such industry would exceed 25% of
its total assets taken at market value at the time of such
investment. This limitation does not apply to investments in
obligations of the U.S. Government or any of its agencies,
instrumentalities or authorities.
9. With respect to 75% of total assets, purchase securities of
an issuer (other than the U.S. Government, its agencies,
instrumentalities or authorities), if:
(a) such purchase would cause more than 5% of the
Portfolio's total assets taken at market value to be
invested in the securities of such issuer; or
(b) such purchase would at the time result in more than 10%
of the outstanding voting securities of such issuer
being held by the Portfolio.
INVESTMENT RESTRICTIONS THAT ARE NON-FUNDAMENTAL. The
following restrictions are non-fundamental and may be changed by
the Board of Directors without the approval of shareholders.
Each LifeSpan Portfolio may not:
(1) Pledge, mortgage or hypothecate its assets, except to secure
permitted borrowings and then only if such pledging, mortgaging or
hypothecating does not exceed 33 1/3% of the Portfolio's total
assets taken at market value. Collateral arrangements with
respect to margin, option and other risk management and
when-issued and forward commitment transactions are not deemed to
be pledges or other encumbrances for purposes of this restriction.
(2) Participate on a joint or joint-and-several basis in any
securities trading account. The "bunching" of orders for the sale
or purchase of marketable portfolio securities with other accounts
under the management of the Manager or the relevant Subadvisers to
save commissions or to average prices among them is not deemed to
result in a joint securities trading account.
(3) Purchase or retain securities of an issuer if one or more of
the Directors or officers of the Company or directors or officers
of the Manager or any Subadviser or any investment management
subsidiary of the Manager or any Subadviser individually owns
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beneficially more than 0.5% and together own beneficially more
than 5% of the securities of such issuer.
(4) Purchase a security if, as a result, (i) more than 10% of the
Portfolio's assets would be invested in securities of other
investment companies, (ii) such purchase would result in more than
3% of the total outstanding voting securities of any one such
investment company being held by the Portfolio or (iii) more than
5% of the Portfolio's assets would be invested in any one such
investment company. The Portfolio will not purchase the
securities of any open-end investment company except when such
purchase is part of a plan of merger, consolidation,
reorganization or purchase of substantially all of the assets of
any other investment company, or purchase the securities of any
closed-end investment company except in the open market where no
commission or profit to a sponsor or dealer results from the
purchase, other than customary brokerage fees. The Portfolio has
no current intention of investing in other investment companies.
(5) Invest more than 15% of total assets in restricted
securities, including securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933.
(6) Invest more than 5% of total assets in securities of any
issuer which, together with its predecessors, has been in
operation for less than three years.
(7) Invest in securities which are illiquid if, as a result, more
than 15% of its net assets would consist of such securities,
including repurchase agreements maturing in more than seven days,
securities that are not readily marketable, certain restricted
securities, purchased OTC options, certain assets used to cover
written OTC options, and privately issued stripped mortgage-backed
securities.
(8) Purchase securities while outstanding borrowings exceed 5% of
the Portfolio's total assets.
(9) Invest in real estate limited partnership interests.
(10) Purchase warrants of any issuer, if, as a result of such
purchase, more than 2% of the value of the Portfolio's total
assets would be invested in warrants which are not listed on an
exchange or more than 5% of the value of the total assets of the
Portfolio would be invested in warrants generally, whether or not
so listed. For these purposes, warrants are to be valued at the
lesser of cost or market, but warrants acquired by the Portfolio
in units with or attached to debt securities shall be deemed to be
without value.
(11) Purchase interests in oil, gas, or other mineral exploration
programs or mineral leases; however, this policy will not prohibit
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the acquisition of securities of companies engaged in the
production or transmission of oil, gas, or other minerals.
(12) Write covered call or put options with respect to more than
25% of the value of its total assets, invest more than 25% of its
total assets in protective put options or invest more 5% of its
total assets in puts, calls, spreads or straddles, or any
combination thereof, other than protective put options. The
aggregate value of premiums paid on all options, other than
protective put options, held by the Portfolio at any time will not
exceed 20% of the Portfolio's total assets.
(13) Invest for the purpose of exercising control over or
management of any company.
For purposes of a Portfolios' policy not to concentrate their
assets, described above in Restriction (2) for the Panorama
Portfolios and Restriction (8) for the LifeSpan Portfolios, the
Portfolios have adopted the industry classifications set forth in
the Appendix to this Statement of Additional Information. This is
not a fundamental policy.
The percentage restrictions described above and in the
Prospectus are applicable only at the time of investment and
require no action by a Portfolio as a result of subsequent changes
in value of the investments or the size of a Portfolio.
As a matter of non-fundamental policy, each Portfolio has
undertaken to limit its investments in illiquid securities to a
stated percentage of net assets and to limit its investments in
issuers in a single industry to less that 25% of total assets.
In order to permit the sale of shares of the Portfolios in
certain states, the Board of Directors may, in its sole
discretion, adopt restrictions on investment policy more
restrictive than those described above. Should the Board of
Directors determine that any such more restrictive policy is no
longer in the best interest of a Portfolio and its shareholders,
the Portfolio may cease offering shares in the state involved and
the Board of Directors may revoke such restrictive policy.
Moreover, if the states involved shall no longer require any such
restrictive policy, the Board of Directors may, in its sole
discretion, revoke that policy.
HOW THE PORTFOLIOS ARE MANAGED
ORGANIZATION AND HISTORY. The Company was incorporated in
Maryland on August 17, 1981. Prior to May 1, 1996, the Company
was named Connecticut Mutual Financial Services Series Fund I,
Inc.
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As series of a Maryland corporation, the Portfolios are not
required to hold, and do not plan to hold, regular annual meetings
of shareholders. The Portfolios will hold meetings when required
to do so by the Investment Company Act or other applicable law, or
when a shareholder meeting is called by the Directors or upon
proper request of the shareholders. The Directors will call a
meeting of shareholders to vote on the removal of a Director upon
the written request of the record holders of 10% of the Company's
outstanding shares. In addition, if the Directors receive a
request from at least 10 shareholders (who have been shareholders
for at least six months) holding shares of the Company valued at
$25,000 or more or holding at least 1% of the Company's
outstanding shares, whichever is less, stating that they wish to
communicate with other shareholders to request a meeting to remove
a Director, the Directors will then either make each Portfolio's
shareholder list available to the applicants or mail their
communication to all other shareholders at the applicants'
expense, or the Directors may take such other action as set forth
under Section 16(c) of the Investment Company Act.
DIRECTORS AND OFFICERS OF THE COMPANY. The Company's Directors
and officers and their principal occupations and business
affiliations during the past five years are listed below. All of
the Directors are also trustees, directors or managing general
partners of Oppenheimer Total Return Fund, Inc., Oppenheimer
Equity Income Fund, Oppenheimer High Yield Fund, Oppenheimer
International Bond Fund, Oppenheimer Cash Reserves, Oppenheimer
Tax-Exempt Fund, The New York Tax-Exempt Income Fund, Inc.,
Oppenheimer Champion Income Fund, Oppenheimer Main Street Funds,
Inc., Oppenheimer Strategic Income Fund, Oppenheimer Integrity
Funds, Oppenheimer Strategic Income & Growth Fund, and Oppenheimer
Variable Account Funds; as well as the following "Centennial
Funds": Daily Cash Accumulation Fund, Inc., Centennial Money
Market Trust, Centennial Government Trust, Centennial New York Tax
Exempt Trust, Centennial Tax Exempt Trust, Centennial California
Tax Exempt Trust and Centennial America Fund, L.P. (all of the
foregoing funds are collectively referred to as the "Denver-based
Oppenheimer funds").
ROBERT G. AVIS, DIRECTOR*; AGE 64
One North Jefferson Avenue, St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and
A.G. Edwards, Inc. (its parent holding company); Chairman of
A.G.E. Asset Management and A.G. Edwards Trust Company (its
affiliated investment adviser and trust company, respectively).
______________________
* A Director who is an "interested person" of the Portfolios as
defined in the Investment Company Act.
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WILLIAM A. BAKER, DIRECTOR; AGE 81
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
CHARLES CONRAD, JR., DIRECTOR; AGE 65
19411 Merion Circle, Huntington Beach, California 92648
Vice President of McDonnell Douglas Space Systems Co.; formerly
associated with the National Aeronautics and Space Administration.
RAYMOND J. KALINOWSKI, DIRECTOR; AGE 66
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International Inc.; formerly Vice
Chairman and a director of A.G. Edwards, Inc., parent holding
company of A.G. Edwards & Sons, Inc., of which he was a Senior
Vice President.
C. HOWARD KAST, DIRECTOR; AGE 74
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an
accounting firm).
ROBERT M. KIRCHNER, DIRECTOR; AGE 74
7500 East Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
NED M. STEEL, DIRECTOR; AGE 80
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; Director of Visiting
Nurse Corporation of Colorado; formerly Senior Vice President and
a director of Van Gilder Insurance Corp. (insurance brokers).
JAMES C. SWAIN, CHAIRMAN AND DIRECTOR;* AGE 62
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman of the Manager; formerly President and a director of
Centennial Asset Management Corporation, an investment advisory
subsidiary of the Manager, ("Centennial") and Chairman of the
Board of Shareholder Services, Inc. ("SSI"), a transfer agent
subsidiary of the Manager.
BRIDGET A. MACASKILL, PRESIDENT; AGE: 47
President, Chief Executive Officer and a Director of the Manager;
Chairman and a Director of SSI; Vice President and a Director of
Oppenheimer Acquisition Corp.; a Director of HarbourView Asset
Management Corporation ("HarbourView"), a subsidiary of the
Manager, and of Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Manager; formerly an Executive Vice
President of the Manager.
ANDREW J. DONOHUE, VICE PRESIDENT AND SECRETARY; AGE 45
Executive Vice President and General Counsel of the Manager and
OppenheimerFunds Distributor, Inc. ("OFDI"); President and a
Director of Centennial; an officer of other Oppenheimer funds;
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formerly Senior Vice President and Associate General Counsel of
the Manager and OFDI; formerly a partner in Kraft & McManimon (a
law firm), prior to which he was an officer of First Investors
Corporation (a broker-dealer) and First Investors Management
Company, Inc. (broker-dealer and investment adviser); and a
director and an officer of First Investors Family of Funds and
First Investors Life Insurance Company.
GEORGE C. BOWEN, VICE PRESIDENT, TREASURER AND ASSISTANT
SECRETARY; AGE 59
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of OFDI and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI; an officer of other
Oppenheimer funds.
PETER M. ANTOS, SENIOR VICE PRESIDENT (TOTAL RETURN PORTFOLIO AND
GROWTH PORTFOLIO) AND SENIOR PORTFOLIO MANAGER; AGE 51
10 State House Square, Hartford, Connecticut 06103
Senior Vice President and Portfolio Manager of the Manager; a
Chartered Financial Analyst; an officer of other Oppenheimer
funds; Senior Vice President of HarbourView; prior to March, 1996
he was the senior equity portfolio manager for the Company and
other mutual funds managed by G.R. Phelps & Co. Inc. ("G.R.
Phelps"), the Company's former investment adviser, which was a
subsidiary of Connecticut Mutual Life Insurance Company.
STEPHEN F. LIBERA, VICE PRESIDENT (TOTAL RETURN PORTFOLIO) AND
PORTFOLIO MANAGER; AGE 45
10 State House Square, Hartford, Connecticut 06103
Vice President and Portfolio Manager of the Manager; a Chartered
Financial Analyst; an officer of other Oppenheimer funds; a Vice
President of HarbourView; prior to March, 1996 he was an equity
portfolio manager for the Company and other mutual funds managed
by G.R. Phelps.
MICHAEL C. STRATHEARN, VICE PRESIDENT (TOTAL RETURN PORTFOLIO AND
GROWTH PORTFOLIO) AND PORTFOLIO MANAGER; AGE 43
10 State House Square, Hartford, Connecticut 06103
Vice President and Portfolio Manager of the Manager; a Chartered
Financial Analyst; an officer of other Oppenheimer funds; a Vice
President of HarbourView; prior to March, 1996 he was an equity
portfolio manager for the Company and other mutual funds managed
by G.R. Phelps.
KENNETH B. WHITE, VICE PRESIDENT (TOTAL RETURN PORTFOLIO AND
GROWTH PORTFOLIO) AND PORTFOLIO MANAGER; AGE 44
10 State House Square, Hartford, Connecticut 06103
Vice President and Portfolio Manager of the Manager; Chartered
Financial Analyst; an officer of the Oppenheimer funds; Vice
President of HarbourView; prior to March, 1996 he was an equity
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portfolio manager for the Company and other mutual funds managed
by G.R. Phelps.
ARTHUR ZIMMER, VICE PRESIDENT (TOTAL RETURN PORTFOLIO) AND
PORTFOLIO MANAGER; AGE 48
Vice President and Portfolio Manager of the Manager; and Officer
and Portfolio Manager of other Oppenheimer funds.
ROBERT G. ZACK, ASSISTANT SECRETARY; AGE 47
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the
Manager, Assistant Secretary of SSI; an officer of other
Oppenheimer funds.
ROBERT J. BISHOP, ASSISTANT TREASURER; AGE 37
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other Oppenheimer funds; formerly a Fund Controller for
the Manager, prior to which he was an Accountant for Yale &
Seffinger, P.C., an accounting firm, and previously an Accountant
and Commissions Supervisor for Stuart James Company Inc., a
broker-dealer.
SCOTT FARRAR, ASSISTANT TREASURER; AGE 30
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other Oppenheimer funds; formerly a Fund Controller for
the Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman & Co., a bank, and
previously a Senior Fund Accountant for State Street Bank and
Trust Company.
REMUNERATION OF DIRECTORS AND OFFICERS. The officers of the
Company are affiliated with the Manager; they and the Directors of
the Company who are affiliated with the Manager receive no salary
or fee from the Company or the Portfolios.
As of December 31, 1995, the then Directors and officers of
the Company as a group owned of record or beneficially less than
1% of the outstanding shares of the Company.
MAJOR SHAREHOLDERS. As of March 31, 1996, Massachusetts
Mutual Life Insurance Company ("MML") and its affiliates (and not
on behalf of any separate account) owned shares of certain
accounts as follows: International Equity Portfolio (5,700,930
shares) (13% of shares outstanding); Government Securities
Portfolio (6,252,755 shares) (27% of shares outstanding); LifeSpan
Capital Appreciation Portfolio (25,154,664 shares) (97% of shares
outstanding; LifeSpan Balanced Portfolio (33,743,194 shares) (97%
of shares outstanding; and LifeSpan Diversified Income Portfolio
(20,324,034 shares) (99% of shares outstanding). On March 1,
1996, Connecticut Mutual Life Insurance Company ("CML") merged
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into MML (indirect parent of the Manager) and MML became the
successor owner of shares of the Company previously owned by CML,
and the separate accounts of CML became separate accounts of MML.
MML and its affiliates are deemed to be controlling persons of any
Portfolio of the Company of which they own more than 25% of the
shares outstanding. As such, the exercise by MML and its
affiliates of their voting rights may diminish the voting power of
other shareholders. As of March 31, 1996, no other shareholder of
the Company owned of record or beneficially 5% or more of the
shares outstanding of any Portfolio.
THE MANAGER, THE SUBADVISERS AND THEIR AFFILIATES. The Manager is
wholly-owned by Oppenheimer Acquisition Corporation ("OAC"), a
holding company controlled by MML. OAC is also owned in part by
certain of the Manager's directors and officers, some of whom also
serve as officers of the Portfolios, and one of whom (Mr. James C.
Swain) serves as a Director of the Company.
The Manager and the Company have a Code of Ethics, as does
each Subadviser. The Codes of Ethics are designed to detect and
prevent improper personal trading by certain employees, including
portfolio managers, that would compete with or take advantage of a
Portfolio's portfolio transactions. Compliance with the
respective Code of Ethics is carefully monitored and strictly
enforced by the Manager or the relevant Subadviser.
THE INVESTMENT ADVISORY AGREEMENTS. Each Portfolio has
entered into an Investment Advisory Agreement with the Manager,
effective March 1, 1996. The investment advisory agreement
between the Manager and each Portfolio requires the Manager, at
its expense, to provide each Portfolio with adequate office space,
facilities and equipment, and to provide and supervise the activi-
ties of all administrative and clerical personnel required to pro-
vide effective corporate administration for each Portfolio,
including the compilation and maintenance of records with respect
to its operations, the preparation and filing of specified
reports, and composition of proxy materials and registration
statements for the continuous public sale of shares of each
Portfolio.
Expenses not expressly assumed by the Manager under an
advisory agreement are paid by the relevant Portfolio. The
advisory agreement lists examples of expenses to be paid by a
Portfolio, the major categories of which relate to interest,
taxes, brokerage commissions, fees to certain Directors, legal,
and audit expenses, custodian and transfer agent expenses, share
issuance costs, certain printing and registration costs and
non-recurring expenses, including litigation.
The advisory fees paid by the Portfolios to G.R. Phelps, the
Portfolios' prior investment advisor (until March 1, 1996), for
the last three fiscal years were:
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<TABLE>
<CAPTION>
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Money Market Portfolio $ 274,197 $ 298,013 $ 337,460
Government Securities
Portfolio $ 71,274 $ 110,313 $ 117,370
Income Portfolio $ 585,385 $ 644,104 $ 630,695
Total Return Portfolio $2,817,177 $3,672,463 $4,780,963
Growth Portfolio $ 821,666 $1,249,284 $1,890,963
International Equity Portfolio $ 12,881 $ 269,195 $ 374,740
LifeSpan Balanced Portfolio $ 0 $ 0 $ 96,385
Capital Appreciation Portfolio $ 0 $ 0 $ 72,333
Diversified Income Portfolio $ 0 $ 0 $ 51,050
Total All Portfolios $4,582,580 $6,243,372 $8,324,959
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Under each advisory agreement, the Manager has undertaken
that if the total expenses of a Portfolio in any fiscal year
should exceed the most stringent state regulatory requirements on
expense limitations applicable to a Portfolio, the Manager's
compensation under the advisory agreement will be reduced by the
amount of such excess. For the purpose of such calculation, there
shall be excluded any expense borne directly or indirectly by a
Portfolio which is permitted to be excluded from the computation
of such limitation by such statute or state regulatory authority.
At present, the most stringent limitation is imposed by
California, and limits expenses (with specific exclusions) to 2.5%
of the first $30 million of average net assets, 2% of the next $70
million of average net assets and 1.5% of average net assets in
excess of $100 million. Any assumption of a Portfolio's expenses
under this limitation would lower a Portfolio's overall expense
ratio and increase its total return during any period in which
expenses are limited.
The advisory agreements provide that in the absence of
willful misfeasance, bad faith, gross negligence in the
performance of its duties, or reckless disregard of its
obligations and duties under the advisory agreement, the Manager
is not liable for any loss resulting from any good faith errors or
omissions in connection with any matters to which the agreement
relates. Each advisory agreement permits the Manager to act as
investment adviser for any other person, firm or corporation and
to use the name "Oppenheimer" in connection with its other
investment activities. The agreement permits the Company to use
the name "Oppenheimer" as part of its corporate name and for the
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names of the series, if the Board of Directors so elects. If the
Manager shall no longer act as investment adviser to the
Portfolios, the right of the Portfolios to use the name
"Oppenheimer" as part of their names may be withdrawn.
THE INVESTMENT SUBADVISORY AGREEMENTS. The advisory
agreements permit the Manager to hire one or more subadvisers to
assist with the management of the Portfolios. The Manager has
done so for the International Equity Portfolio and the LifeSpan
Portfolios.
With respect to the International Equity Portfolio and the
international component for the LifeSpan Capital Appreciation
Portfolio and LifeSpan Balanced Portfolio, the Manager has entered
into investment subadvisory agreements with Babson-Stewart Ivory
International ("Babson-Stewart"). With respect to the small cap
component of the LifeSpan Capital Appreciation and LifeSpan
Balanced Portfolios, the Manager has entered into investment
subadvisory agreements with Pilgrim Baxter & Associates
("Pilgrim"). With respect to the high yield/high risk bond
component for each LifeSpan Portfolio, the Manager has entered
into investment subadvisory agreements with BEA Associates.
Babson-Stewart, One Memorial Drive, Cambridge, Massachusetts
02142, is a Massachusetts general partnership and a registered
investment adviser and was originally established in 1987. The
general partners of Babson-Stewart are David L. Babson & Co.,
which is an indirect subsidiary of Massachusetts Life Insurance
Company, and Stewart Ivory & Co. (International), Ltd. As of
December 31, 1995, Babson-Stewart had approximately $514 billion
in assets under management.
BEA Associates, One Citicorp Center, 153 E. 53rd Street, 57th
Floor, New York, NY 10022, is a partnership between Credit Suisse
Capital Corporation and CS Advisors Corp. BEA Associates has been
providing domestic and global fixed income and equity investment
management services for institutional clients and mutual funds
since 1984 and, had $27.4 billion in assets under management as of
December 31, 1995.
Pilgrim, 1255 Drummers Lane, Wayne, Pennsylvania 19087, was
established in 1982 to provide specialized equity management for
institutional investors. Pilgrim is a Delaware corporation and a
wholly owned subsidiary of United Asset Management Corporation.
As of March 31, 1996, Pilgrim had over $9 billion in assets under
management.
Under the respective investment subadvisory agreements, the
corresponding Subadviser, subject to the review of the Board of
Directors and the overall supervision of the Manager, is
responsible for managing the investment operations of the
corresponding LifeSpan Portfolio component and the composition of
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the component's portfolio and furnishing the LifeSpan Portfolio
with advice and recommendations with respect to investments and
the purchase and sale of securities for the respective component.
The shareholders of the Portfolios approved new subadvisory
agreements with the relevant subadvisers effective March 1, 1996.
The Manager pays the subadvisers, not the Portfolios. The
subadvisers are paid at the rate set forth in the Prospectus.
The investment subadvisory agreements with Babson-Stewart
provide that in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard with respect to its
obligations and duties under the agreements, Babson-Stewart will
not be subject to liability for any loss sustained by reason of
its good faith errors of omissions in connection with any matters
to which the agreements relate.
The investment subadvisory agreements with Pilgrim provide
that in the absence of willful misfeasance, bad faith, negligence,
or reckless disregard of the performance of its duties under the
agreements, Pilgrim is not subject to liability for any error of
judgment or mistake of law or for any other action or omission in
the course of, or connected with, rendering services or for any
losses that may be sustained in the purchase, holding or sale of
any security, or otherwise.
The investment subadvisory agreements with BEA Associates
provide that in the absence of willful misfeasance, bad faith,
negligence, or reckless disregard of the performance of its duties
under the agreement, BEA Associates is not subject to liability
for losses as a result of its activities in connection with the
adoption of any investment policy or the purchase, sale or
retention of securities on behalf of the LifeSpan Portfolios
subadvised by BEA Associates if such activities were made with due
care and in good faith.
For the fiscal year ended December 31, 1995, the Company's
prior investment adviser paid subadvisory fees to BEA Associates,
Pilgrim and Scudder, Stevens & Clark, Inc. (the prior subadviser
to the International Equity Portfolio and the international
component of LifeSpan Capital Appreciation Portfolio and LifeSpan
Balanced Portfolio) of $15,868, $22,858 and $280,576 ($256,152 for
the International Equity Portfolio and $24,424 for the LifeSpan
Capital Appreciation and Balanced Portfolios), respectively.
THE TRANSFER AGENT. OppenheimerFunds Services, a division of
the Manager, each Portfolio's transfer agent, is responsible for
maintaining each Portfolio's shareholder registry and shareholder
accounting records, and for shareholder servicing and
administrative functions. It provides these services "at cost."
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BROKERAGE POLICIES OF THE PORTFOLIOS
The Company has no obligation to deal with any dealer or
group of dealers in the execution of transactions in portfolio
securities. Subject to any policy established by the Board of
Directors, the Manager and the relevant Subadvisers are primarily
responsible for the investment decisions of each Portfolio or
Portfolio component and the placing of its portfolio transactions.
It is the policy of each Portfolio to obtain the most favorable
net results, taking into account various factors, including price,
dealer spread or commission, if any, size of the transaction and
difficulty of execution. While the Manager and the Subadvisers
generally seek reasonably competitive spreads or commissions, the
Portfolios will not necessarily pay the lowest spread or
commission available.
BROKERAGE PROVISIONS OF THE INVESTMENT ADVISORY AGREEMENTS. One
of the duties of the Manager under each advisory agreement is to
arrange the portfolio transactions for each Portfolio. Each
advisory agreement contains provisions relating to the employment
of broker-dealers ("brokers") to effect a Portfolio's portfolio
transactions. In doing so, the Manager is authorized by the
advisory agreement to employ such broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment
Company Act, as may, in its best judgment based on all relevant
factors, implement the policy of a Portfolio to obtain, at
reasonable expense, the "best execution" (prompt and reliable
execution at the most favorable price obtainable) of such
transactions. The Manager need not seek competitive commission
bidding, but is expected to minimize the commissions paid to the
extent consistent with the interest and policies of a Portfolio as
established by its Board of Directors. Purchases of securities
from underwriters include a commission or concession paid by the
issuer to the underwriter, and purchasers from dealers include a
spread between the bid and asked price.
Under each advisory agreement, the Manager is authorized to
select brokers that provide brokerage and/or research services for
a Portfolio and/or the other accounts over which the Manager or
its affiliates have investment discretion. The commissions paid
to such brokers may be higher than another qualified broker would
have charged, if a good faith determination is made by the Manager
and the commission is fair and reasonable in relation to the
services provided. Subject to the foregoing considerations, the
Manager may also consider sales of shares of a Portfolio and other
investment companies managed by the Manager or its affiliates as a
factor in the selection of brokers for a Portfolio's portfolio
transactions.
DESCRIPTION OF BROKERAGE PRACTICES FOLLOWED BY THE MANAGER AND
SUBADVISERS. Most purchases of debt securities, commercial paper,
and money market instruments made by the Portfolios are principal
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transactions at net prices, and the Portfolios incur little or no
brokerage costs for these transactions.
Subject to the provisions of the advisory agreements and the
subadvisory agreements and the procedures and rules described
above, allocations of brokerage are generally made by the
Manager's or the Subadviser's portfolio traders based upon
recommendations from the Manager's portfolio managers. In certain
instances, portfolio managers may directly place trades and
allocate brokerage, also subject to the provisions of the advisory
agreements and the subadvisory agreements and the procedures and
rules described above. In either case, brokerage is allocated
under the supervision of the Manager's or the Subadviser's
executive officers. Transactions in securities other than those
for which an exchange is the primary market are generally done
with principals or market makers. Brokerage commissions are paid
primarily for effecting transactions in listed securities or for
certain fixed income agency transactions in the secondary market
and otherwise only if it appears likely that a better price or
execution can be obtained.
When the Portfolios engage in an option transaction,
ordinarily the same broker will be used for the purchase or sale
of the option and any transaction in the securities to which the
option relates. When possible, concurrent orders to purchase or
sell the same security by more than one of the accounts managed by
the Manager, the Subadvisers and their affiliates are combined.
The transactions effected pursuant to such combined orders are
averaged as to price and allocated in accordance with the purchase
or sale orders actually placed for each account.
The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Manager
and its affiliates, or a Subadviser, and investment research
received for the commissions of those other accounts may be useful
both to the Portfolios and one or more of such other accounts.
Such research, which may be supplied by a third party at the
instance of a broker, includes information and analyses on
particular companies and industries as well as market or economic
trends and portfolio strategy, receipt of market quotations for
portfolio evaluations, information systems, computer hardware and
similar products and services. If a research service also assists
the Manager in a non-research capacity (such as bookkeeping or
other administrative functions), then only the percentage or
component that provides assistance to the Manager (or Subadviser)
in the investment decision-making process may be paid in
commission dollars. The Board of Directors has permitted the
Manager to use concessions on fixed price offerings to obtain
research, in the same manner as is permitted for agency
transactions. The Board has also permitted the Manager to use
stated commissions on secondary fixed-income trades to obtain
research where the broker has represented to the Manager that (i)
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the trade is not from the broker's own inventory, (ii) the trade
was executed by the broker on an agency basis at the stated
commission, and (iii) the trade is not a riskless principal
transaction.
The research services provided by brokers broadens the scope
and supplements the research activities of the Manager and
Subadvisers, by making available additional views for
consideration and comparisons, and enabling the Manager and
Subadvisers to obtain market information for the valuation of
securities held in a Portfolio's portfolio or being considered for
purchase. The Board of Directors, including the "independent"
Directors of the Portfolios (those Directors of the Portfolios who
are not "interested persons" as defined in the Investment Company
Act) annually reviews information furnished by the Manager as to
the commissions paid to brokers furnishing such services so that
the Board may ascertain whether the amount of such commissions was
reasonably related to the value or benefit of such services.
As most purchases made by Money Market Portfolio, Income
Portfolio and Government Securities Portfolio are principal
transactions at net prices, these Portfolios incur little or no
brokerage costs. Purchases of securities from underwriters
include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers include a spread between
the bid and asked price. No principal transactions and, except
under unusual circumstances, no agency transactions for these
Portfolios will be handled by any affiliated securities dealer.
In the unusual circumstance when these Portfolios pay brokerage
commissions, the above-described brokerage practices and policies
are followed. Money Market Portfolio's policy of investing in
short-term debt securities with maturities of less than 397 days
results in high portfolio turnover. However, since brokerage
commissions, if any, are small, high portfolio turnover does not
have an appreciable adverse effect upon net asset value of the
Portfolio.
During the Portfolios' fiscal years ended December 31, 1993,
1994 and 1995, total brokerage commissions paid by the portfolios
listed below were:
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<TABLE>
<CAPTION>
1993 1994 1995
Brokerage Brokerage Brokerage
Portfolio Commissions Commissions Commissions
--------- ----------- ----------- -----------
<S> <C> <C> <C>
Growth Portfolio $ 466,977 $ 727,310 $781,682
Total Return Portfolio 1,058,612 1,311,239 910,605
International Equity 23,792 56,589 216,759
Portfolio
LifeSpan Capital
Appreciation
Portfolio* N/A N/A 91,744
Lifespan Diversified
Income Portfolio N/A N/A 9,149
LifeSpan Balanced
Portfolio N/A N/A 40,872
</TABLE>
PERFORMANCE OF THE PORTFOLIOS
YIELD (MONEY MARKET PORTFOLIO ONLY). Money Market Portfolio's
current yield is determined in accordance with regulations adopted
under the Investment Company Act. Yield is calculated for a
seven-day period of time as follows. First, a base period return
is calculated for the seven-day period by determining the net
change in the value of a hypothetical pre-existing account having
one share at the beginning of the seven-day period. The change
includes dividends declared on the original share and dividends
declared on any shares purchased with dividends on that share, but
such dividends are adjusted to exclude any realized or unrealized
capital gains or losses affecting the dividends declared. Next,
the base period return is multiplied by 365/7 to obtain the
current yield to the nearest hundredth of one percent. The
compounded effective yield for a seven-day period is calculated by
(a) adding 1 to the base period return (obtained as described
above), (b) raising the sum to a power equal to 365 divided by 7,
and (c) subtracting 1 from the result. Money Market Portfolio's
"current yield" for the seven days ended December 31, 1995, was
5.19% and its "compounded effective yield" was 5.32%.
The yield as calculated above may vary for accounts less than
approximately $100 in value due to the effect of rounding off each
daily dividend to the nearest full cent. Since the calculation of
yield under either procedure described above does not take into
consideration any realized or unrealized gains or losses on Money
Market Portfolio's portfolio securities which may affect
dividends, the return on dividends declared during a period may
not be the same on an annualized basis as the yield for that
period.
______________________
* The Portfolio commenced operations on September 1, 1995.
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YIELD AND TOTAL RETURN INFORMATION. (ALL PORTFOLIOS EXCEPT MONEY
MARKET PORTFOLIO). From time to time, as set forth in the
Prospectus, the "standardized yield," "dividend yield," "average
annual total return," or "cumulative total return," as the case
may be, of an investment in a Portfolio may be advertised. An
explanation of how yields and total returns are calculated and the
components of those calculations is set forth below.
A Portfolio's advertisement of its performance must, under
applicable rules of the SEC, include the average annual total
returns for the Portfolio for the 1, 5 and 10-year periods (or the
life of the Portfolio, if less) as of the most recently ended
calendar quarter prior to the publication of the advertisement.
This enables an investor to compare a Portfolio's performance to
the performance of other funds for the same periods. However, a
number of factors should be considered before using such
information as a basis for comparison with other investments. The
performance data for a Portfolio does not reflect the effect of
any charges or costs of the insurance company separate account
that invests in the Portfolio on behalf of the variable contracts
of contract owners. An investment in a Portfolio is not insured;
its yields and total returns and share prices are not guaranteed
and normally will fluctuate on a daily basis. When redeemed,
shares may be worth more or less than their original cost. Yields
and total returns for any given past period are not a prediction
or representation by a Portfolio of future yields or rates of
return on its shares. The yields and total returns of a Portfolio
are affected by portfolio quality, the type of investments the
Portfolio holds and its operating expenses.
STANDARDIZED YIELDS. A Portfolio's "yields" (referred to as
"standardized yield") for a given 30-day period are calculated
using the following formula set forth in rules adopted by the SEC
that apply to all funds that quote yields:
6
2 [( a-b + 1) - 1]
-----
Standardized Yield = ( cd )
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = net expenses accrued for the period (expense reimbursements).
c = the average daily number of Portfolio shares outstanding
during the 30-day period that were entitled to receive
dividends.
d = the Portfolio's maximum offering price per share on the last
day of the period, adjusted for undistributed net investment
income.
The standardized yield of a Portfolio for a 30-day period may
differ from its yield for any other period. The SEC formula
assumes that the standardized yield for a 30-day period occurs at
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a constant rate for a six-month period and is annualized at the
end of the six-month period. This standardized yield is not based
on actual distributions paid by a Portfolio to shareholders in the
30-day period, but is a hypothetical yield based upon the net
investment income from a Portfolio's portfolio investments
calculated for that period. The standardized yield may differ
from the "dividend yield" of the Portfolio, described below.
DIVIDEND YIELD AND DISTRIBUTION RETURN. From time to time a
Portfolio may quote a "dividend yield" or a "distribution return."
Dividend yield is based on a Portfolio's dividends derived from
net investment income during a stated period. Distribution return
includes dividends derived from net investment income and from
realized capital gains declared during a stated period. Under
those calculations, a Portfolio's dividends and/or distributions
declared during a stated period of one year or less (for example,
30 days) are added together, and the sum is divided by the
Portfolio's maximum offering price) on the last day of the period.
When the result is annualized for a period of less than one year,
the "dividend yield" is calculated as follows:
Dividend Yield =
Dividends Dividend by Number of days (accrual
---------------------- period) x 365
Max. Offering Price
(last day of period)
TOTAL RETURN INFORMATION
AVERAGE ANNUAL TOTAL RETURNS. A Portfolio's "average annual
total return" is an average annual compounded rate of return for
each year in a specified number of years. It is the rate of
return based on the change in value of a hypothetical initial
investment of $1,000 ("P" in the formula below) held for a number
of years ("n") to achieve an Ending Redeemable Value ("ERV") of
that investment according to the following formula:
1/n
(ERV) - 1 = AVERAGE ANNUAL TOTAL RETURN
---
P
CUMULATIVE TOTAL RETURNS. The "cumulative total return"
calculation measures the change in value of a hypothetical
investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total
return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV-P = TOTAL RETURN
-----
P
Total returns also assume that all dividends and capital gains
distributions during the period are reinvested to buy additional
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shares at net asset value per share, and that the investment is
redeemed at the end of the period.
VALUE OF A $1,000 INVESTMENT IN THE TOTAL RETURN PORTFOLIO:
Investment Investment Total Return
Period Date Annualized
10 Years Ended 12/31/95 12.57%
to 12/31/95
5 Years Ended 12/31/90 15.06%
12/31/95
1 Year Ended 12/31/94 24.66%
12/31/95
VALUE OF A $1,000 INVESTMENT IN THE GROWTH PORTFOLIO:
Investment Investment Total Return
Period Date Annualized
10 Years Ended 12/31/95 15.21%
to 12/31/95
5 Years Ended 12/31/90 20.81%
12/31/95
1 Year Ended 12/31/94 38.06%
12/31/95
VALUE OF A $1,000 INVESTMENT IN THE INTERNATIONAL EQUITY
PORTFOLIO:
Investment Investment Total Return
Period Date Annualized
Life of Portfolio 5/13/92* 7.57%
to 12/31/94
1 Year Ended 12/31/93 10.30%
12/31/94
*Date of Inception
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VALUE OF A $1,000 INVESTMENT IN THE LIFESPAN CAPITAL
APPRECIATION PORTFOLIO:
Investment Investment Total Return
Period Date Annualized
Life of Portfolio 9/1/95* 6.75%
to 12/31/95
*Date of Inception
VALUE OF A $1,000 INVESTMENT IN THE LIFESPAN BALANCED
PORTFOLIO:
Investment Investment Total Return
Period Date Annualized
Life of Portfolio 9/1/95* 6.08%
to 12/31/95
*Date of Inception
VALUE OF A $1,000 INVESTMENT IN THE LIFESPAN DIVERSIFIED
INCOME PORTFOLIO:
Investment Investment Total Return
Period Date Annualized
Life of Portfolio 9/1/95* 5.69%
to 12/31/95
*Date of Inception
VALUE OF A $1,000 INVESTMENT IN THE GOVERNMENT SECURITIES PORTFOLIO:
Investment Investment Total Return
Period Date Annualized
Life of Portfolio 5/13/92* 8.34%
to 12/31/95
1 Year Ended 12/31/94 18.91%
12/31/95
*Date of Inception
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VALUE OF A $1,000 INVESTMENT IN THE INCOME PORTFOLIO:
Investment Investment Total Return
Period Date Annualized
10 Years Ended 12/31/85 9.30%
to 12/31/95
5 Years Ended 12/31/90 10.05%
12/31/95
1 Year Ended 12/31/94 18.18%
12/31/95
From time to time a Portfolio may also include in its
advertisements and sales literature performance information about
a Portfolio or rankings of a Portfolio's performance cited in
newspapers or periodicals, such as The New York Times or the Wall
Street Journal. These articles may include quotations of
performance from other sources, such as Lipper Analytical
Services, Inc. or Morningstar, Inc.
OTHER PERFORMANCE COMPARISONS. From time to time a Portfolio may
publish the ranking of its shares by Lipper Analytical Services,
Inc. ("Lipper"), a widely-recognized independent mutual fund
monitoring service. Lipper monitors the performance of regulated
investment companies, including the Portfolios, and ranks their
performance for various periods based on categories relating to
investment objectives. The performance of the Portfolios is
ranked against other mutual funds offered under variable
contracts. The Lipper performance rankings are based on total
returns that include the reinvestment of capital gain
distributions and income dividends but do not take taxes into
consideration.
From time to time a Portfolio may publish the ranking of the
performance of its shares by Morningstar, Inc., an independent
mutual fund monitoring service that ranks mutual funds, including
the Portfolios, monthly in broad investment categories (equity,
taxable bond, municipal bond and hybrid) based on risk-adjusted
investment return. Investment return measures a fund's three,
five and ten-year average annual total returns (when available) in
excess of 90-day U.S. Treasury bill returns after considering
expenses. Risk measures fund performance below 90-day U.S.
Treasury bill monthly returns. Risk and investment return are
combined to produce star rankings reflecting performance relative
to the average fund in a fund's category. Five stars is the
"highest" ranking (top 10%), four stars is "above average" (next
22.5%), three stars is "average" (next 35%), two stars is "below
average" (next 22.5%) and one star is "lowest" (bottom 10%).
Morningstar may rank the shares of the Portfolio in relation to
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other funds in their respective categories. Rankings are subject
to change monthly.
From time to time, the Manager may publish rankings or
ratings of the Manager (or the Transfer Agent), by independent
third-parties, on the investor services provided by them to
shareholders of the Oppenheimer funds, other than the performance
rankings of the Oppenheimer funds themselves. These ratings or
rankings of shareholder/investor services by third parties may
compare the Oppenheimer funds services to those of other mutual
fund families selected by the rating or ranking services, and may
be based upon the opinions of the rating or ranking service
itself, using its own research or judgment, or based upon surveys
of investors, brokers, shareholders or others.
ABOUT YOUR ACCOUNT
HOW TO BUY SHARES
Insurance Companies are the record holders and the owners of
shares of beneficial interest in each Portfolio of the Company.
In accordance with any limitations set forth in their variable
contracts, contract holders may direct their Insurance Companies
to allocate amounts available for investment among the Company's
Portfolios. Instructions for any such allocation, or for the
purpose of redemption of shares of a Portfolio, must be made by
the investor's Insurance Company. The rights of Insurance
Companies as record holders and owners of shares of a Portfolio
are different from the rights of variable contract holders. The
term "shareholder" in this Statement of Additional Information
refers only to Insurance Companies and not to contract holders.
The Company reserves the right to limit the types of separate
accounts that may invest in any Portfolio.
The sale of shares of the Portfolios is currently limited to
Accounts as explained on the cover page of this Statement of
Additional Information and the Prospectus. Such shares are sold
at their respective offering prices (net asset values without
sales charges) and redeemed at their respective net asset values
as described in the Prospectus.
DETERMINATION OF NET ASSET VALUE PER SHARE. The net asset value
per share of each Portfolio is determined as of the close of
business of The New York Stock Exchange on each day the Exchange
is open by dividing the value of a Portfolio's net assets by the
number of shares of outstanding. The Exchange normally closes at
4:00 P.M., New York time, but may close earlier on some days (for
example, in case of weather emergencies or on days falling before
a holiday). The Exchange's most recent annual holiday schedule
(which is subject to change) states that it will close New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day; it may close on
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other days. Trading may occur at times when the Exchange is
closed (including weekends and holidays or after 4:00 P.M., on a
regular business day). Because the net asset values of a
Portfolio will not be calculated at such times, if securities held
by a Portfolio are traded at such time, the net asset values per
share of a Portfolio may be significantly affected on such days
when shareholders do not have the ability to purchase or redeem
shares.
The Board of Directors has established procedures for the
valuation of each Portfolio's securities, generally as follows:
(i) equity securities traded on a securities exchange or on NASDAQ
for which last sale information is regularly reported are valued
at the last reported sale prices on their primary exchange or
NASDAQ that day (or, in the absence of sales that day, at values
based on the last sales prices of the preceding trading day, or
closing bid and asked prices on the current day); (ii) securities
actively traded on a foreign securities exchange are valued at the
last sales price available to the pricing service approved the
Board of Directors or to the Manager as reported by the principal
exchange on which the security is traded; (iii) unlisted foreign
securities or listed foreign securities not actively traded are
valued as in (i) above, if available, or at the mean between "bid"
and "asked" prices obtained from active market makers in the
security on the basis of reasonable inquiry; (iv) long-term debt
securities having a remaining maturity in excess of 60 days are
valued at the mean between the "bid" and "asked" prices determined
by a portfolio pricing service approved by the Board of Directors
or obtained from active market makers in the security on the basis
of reasonable inquiry; (v) debt instruments having a maturity of
more than one year when issued, and non-money market instruments
having a maturity of one year or less when issued, which have a
remaining maturity of 60 days or less are valued at the mean
between "bid" and "asked" prices determined by a pricing service
approved by the Board of Directors or obtained from active market
makers in the security on the basis of reasonable inquiry; (vi)
money market debt securities having a maturity of less than one
year when issued that have a remaining maturity of 60 days or less
are valued at cost, adjusted for amortization of premiums and
accretion of discounts; and (vii) securities (including restricted
securities) not having readily-available market quotations are
valued at fair value under the Board's procedures.
In the case of U.S. Government Securities and mortgage-backed
securities, when last sale information is not generally available,
such pricing procedures may include "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield,
maturity, and other special factors involved. The Board of
Directors has authorized the Manager to employ a pricing service
to price U.S. Government Securities for which last sale
information is not generally available. The Directors will
monitor the accuracy of such pricing services by comparing prices
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used for portfolio valuation to actual sales prices of selected
securities.
Trading in securities on European and Asian exchanges and
over-the-counter markets is normally completed before the close of
The New York Stock Exchange. Events affecting the values of
foreign securities traded in stock markets that occur between the
time their prices are determined and the close of the Exchange
will not be reflected in a Portfolio's calculation of net asset
value unless the Board of Directors or the Manager, under
procedures established by the Board of Directors, determines that
the particular event would materially affect a Portfolio's net
asset value, in which case an adjustment would be made. Foreign
currency, including forward contracts, will be valued at the
closing price in the London foreign exchange market that day as
provided by a reliable bank, dealer or pricing service. The
values of securities denominated in foreign currency will be
converted to U.S. dollars at the closing price in the London
foreign exchange market that day as provided by a reliable bank,
dealer or pricing service.
Calls, puts and Futures held by a Portfolio are valued at the
last sale prices on the principal exchanges on which they are
traded, or on NASDAQ, as applicable, or, if there are no sales
that day, in accordance with (i) above. When a Portfolio writes
an option, an amount equal to the premium received by the
Portfolio is included in the Portfolio's Statement of Assets and
Liabilities as an asset, and an equivalent deferred credit is
included in the liability section. The deferred credit is
"marked-to-market" to reflect the current market value of the
option. In determining a Portfolio's gain on investments, if a
call written by a Portfolio is exercised, the proceeds are
increased by the premium received. If a call written by a
Portfolio expires, the Portfolio has a gain in the amount of the
premium; if the Portfolio enters into a closing purchase
transaction, it will have a gain or loss depending on whether the
premium was more or less than the cost of the closing transaction.
AMORTIZED COST METHOD (MONEY MARKET PORTFOLIO ONLY). Money Market
Portfolio will seek to maintain a net asset value of $1.00 per
share for purchases and redemptions. There can be no assurance
that it will do so. Under Rule 2a-7, Money Market Portfolio may
use the amortized cost method of valuing its shares. Under the
amortized cost method, a security is valued initially at its cost
and its valuation assumes a constant amortization of any premium
or accretion of a discount, regardless of the impact of
fluctuating interest rates on the market value of the security.
The method does not take into account unrealized capital gains or
losses.
Money Market Portfolio's Board of Directors has established
procedures intended to stabilize the Portfolio's net asset value
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at $1.00 per share. If Money Market Portfolio's net asset value
per share were to deviate from $1.00 by more than 0.5%, Rule 2a-7
requires the Board promptly to consider what action, if any,
should be taken. If the Directors find that the extent of any
such deviation may result in material dilution or other unfair
effects on shareholders, the Board will take whatever steps it
considers appropriate to eliminate or reduce such dilution or
unfair effects, including, without limitation, selling portfolio
securities prior to maturity, shortening the average portfolio
maturity, withholding or reducing dividends, reducing the
outstanding number of Portfolio shares without monetary
consideration, or calculating net asset value per share by using
available market quotations.
As long as it uses Rule 2a-7, Money Market Portfolio must
abide by certain conditions described in the prospectus. Some of
those conditions relate to portfolio management and require Money
Market Portfolio to: (i) maintain a dollar-weighted average
portfolio maturity not in excess of 90 days; (ii) limit its
investments, including repurchase agreements, to those instruments
which are denominated in U.S. dollars, and which are rated in one
of the two highest short-term rating categories by at least two
"nationally-recognized statistical rating organizations"
("NRSROs"), as defined in Rule 2a-7, or by only one NRSRO if only
one NRSRO has rated the security; an instrument that is not rated
must be of comparable quality as determined by the Board; and
(iii) not purchase any instruments with a remaining maturity of
more than 397 days. Under Rule 2a-7, the maturity of an
instrument is generally considered to be its stated maturity (or
in the case of an instrument called for redemption, the date on
which the redemption payment must be made), with special
exceptions for certain variable rate demand and floating rate
instruments. Repurchase agreements and securities loan agreements
are, in general, treated as having a maturity equal to the period
scheduled until repurchase or return, or if subject to demand,
equal to the notice period.
While the amortized cost method provides certainty in
valuation, there may be periods during which the value of an
instrument as determined by the amortized cost method is higher or
lower than the price Money Market Portfolio would receive if it
sold the instrument. During periods of declining interest rates,
the daily yield on shares of Money Market Portfolio may tend to be
lower (and net investment income and daily dividends higher) than
a like computation made by a fund with identical investments
utilizing a method of valuation based upon market prices or
estimates of market prices for its portfolio. Thus, if the use of
amortized cost by Money Market Portfolio resulted in a lower
aggregate portfolio value on a particular day, a prospective
investor in Money Market Portfolio would be able to obtain a
somewhat higher yield than would result from investment in a fund
utilizing only market values, and existing shareholders in Money
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Market Portfolio would receive less investment income than if the
Portfolio were priced at market value. Conversely, during periods
of rising interest rates, the daily yield on Portfolio shares will
tend to be higher and its aggregate value lower than that of a
portfolio priced at market value. A prospective investor would
receive a lower yield than from an investment in a portfolio
priced at market value, while existing investors in Money Market
Portfolio would receive more investment income than if the
Portfolio were priced at market value.
DIVIDENDS, CAPITAL GAINS AND TAXES
DIVIDENDS AND DISTRIBUTIONS. The Company intends for each
Portfolio to qualify and be treated as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code") for each taxable year. By so qualifying,
the Portfolios will not be subject to Federal income taxes on
amounts paid by them as dividends and distributions, as described
in the Prospectus. Each Portfolio is treated as a separate entity
for purposes of determining Federal tax treatment. The Company
will endeavor to ensure that each Portfolio's assets are so
invested so that all such requirements are satisfied, but there
can be no assurance that it will be successful in doing so.
In order to qualify as a regulated investment company under
Subchapter M of the Code, a Portfolio must, among other things,
derive at least 90% of its gross income for the taxable year from
dividends, interest, gains from the sale or other disposition of
stock, securities or foreign currencies, fees from certain
securities loans or other income (including gains from options,
futures and forward contracts) derived with respect to its
business of investing in such stock, securities or currencies (the
"90% income test"), limit its gains from the sale of stock,
securities and certain other investments held for less than three
months to less than 30% of its gross income for the taxable year
(the "30% test") and satisfy certain annual distribution and
quarterly diversification requirements. For purposes of the 90%
income test, income that a Portfolio earns from equity interests
in certain entities that are not treated as corporations (E.G.,
are treated as partnerships or trusts) for U.S. tax purposes will
generally have the same character for the Portfolio as in the
hands of such entities; consequently, the Portfolio may be
required to limit its equity investments in such entities that
earn fee income, rental income, or other nonqualifying income.
As noted in the Prospectus, each Portfolio must, and intends
to, comply with the diversification requirements imposed by
Section 817(h) of the Code and the regulations thereunder. These
requirements, which are in addition to the diversification
requirements imposed on a Portfolio by the Investment Company Act
and Subchapter M of the Code, place certain limitations on the
assets of each separate account and, because Section 817(h) and
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those regulations treat the assets of the Portfolio as assets of
the related separate account, the assets of a Portfolio, that may
be invested in securities of a single issuer. Specifically, the
regulations provide that, except as permitted by the "safe harbor"
described below, as of the end of each calendar quarter or within
30 days thereafter no more than 55% of the total assets of a
Portfolio may be represented by any one investment, no more than
70% by any two investments, no more than 80% by any three
investments and no more than 90% by any four investments. For
this purpose, all securities of the same issuer are considered a
single investment, and each U.S. Government agency and
instrumentality is considered a separate issuer. Section 817(h)
provides, as a safe harbor, that a separate account will be
treated as being adequately diversified if the diversification
requirements under Subchapter M are satisfied and no more than 55%
of the value of the account's total assets are cash and cash items
(including receivables), U.S. Government securities and securities
of other regulated investment companies. Failure by a Portfolio
to both qualify as a regulated investment company and satisfy the
Section 817(h) requirements would generally result in treatment of
the variable contract holders other than as described in the
applicable variable contract prospectus, including inclusion in
ordinary income of income accrued under the contracts for the
current and all prior taxable years. Any such failure may also
result in adverse tax consequences for the Portfolio and the
insurance company issuing the contracts.
Foreign exchange gains and losses realized by a Portfolio in
connection with certain transactions involving foreign currency
denominated debt securities, certain options and futures contracts
relating to foreign currency, forward foreign currency contracts,
foreign currencies, or payables or receivables denominated in a
foreign currency are subject to Section 988 of the Code, which
generally causes such gains and losses to be treated as ordinary
income and losses and may affect the amount, timing and character
of distributions to shareholders. Any such transactions that are
not directly related to a Portfolio's investment in stock or
securities may increase the amount of gain it is deemed to
recognize from the sale of certain investments held for less than
three months for purposes of the 30% test and may under future
Treasury regulations produce income not among the types of
"qualifying income" for purposes of the 90% income test. If the
net foreign exchange loss for a year were to exceed the
Portfolio's investment company taxable income (computed without
regard to such loss) the resulting overall ordinary loss for such
year would not be deductible by the Portfolio or its shareholders
in future years.
Limitations imposed by the Code on regulated investment
companies like the Portfolios may restrict the Portfolios' ability
to enter into futures, options and currency forward transactions.
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The Portfolios may be subject to withholding and other taxes
imposed by foreign countries with respect to their investments in
foreign securities. Tax conventions between certain countries and
the U.S. may reduce or eliminate such taxes.
The federal income tax rules applicable to mortgage dollar
rolls and interest rate swaps, caps, floors and collars are
unclear in certain respects, and the Portfolios may be required to
account for these instruments under tax rules in a manner that,
under certain circumstances, may limit their transactions in these
instruments.
If a Portfolio acquires stock in certain non-U.S.
corporations that receive at least 75% of their annual gross
income from passive sources (such as interest, dividends, rents,
royalties or capital gain) or hold at least 50% of their assets in
investments producing such passive income ("passive foreign
investment companies"), the Portfolio could be subject to Federal
income tax and additional interest charges on "excess
distributions" received from such companies or gain from the sale
of stock in such companies, even if all income or gain actually
received by the Portfolio is timely distributed to its
shareholders. The Portfolio would not be able to pass through to
its shareholders any credit or deduction for such a tax. Certain
elections may, if available, ameliorate these adverse tax
consequences, but any such election would require the Portfolio to
recognize taxable income or gain without the concurrent receipt of
cash. Each Portfolio may limit and/or manage its stock holdings
in passive foreign investment companies to minimize its tax
liability or maximize its return from these investments.
ADDITIONAL INFORMATION ABOUT THE PORTFOLIOS
THE CUSTODIAN. State Street Bank and Trust Company is the
Custodian of the Portfolios' assets. The Custodian's
responsibilities include safeguarding and controlling the
Portfolios' portfolio securities, collecting income on the
portfolio securities and handling the delivery of such securities
to and from the Portfolios.
INDEPENDENT AUDITORS. The independent auditors of the Portfolios
audit the Portfolios' financial statements and perform other
related audit services. They also act as auditors for certain
other funds advised by the Manager and its affiliates.
FINANCIAL INFORMATION ABOUT THE PORTFOLIOS
INDEPENDENT AUDITORS' REPORT AND FINANCIAL STATEMENTS. The
Portfolios' financial statements for the year ended December 31,
1995 are attached to and incorporated by reference from the
Company's Annual Report into this Statement of Additional
Information. The financial statements are so attached and
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incorporated in reliance upon the report of Arthur Andersen LLP,
independent public accountants, as experts in accounting and
auditing.
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Appendix A
Industry Classifications
Aerospace/Defense Food
Air Transportation Gas Utilities*
Auto Parts Distribution Gold
Automotive Health Care/Drugs
Bank Holding Companies Health Care/Supplies & Services
Banks Homebuilders/Real Estate
Beverages Hotel/Gaming
Broadcasting Industrial Services
Broker-Dealers Insurance
Building Materials Leasing & Factoring
Cable Television Leisure
Chemicals Manufacturing
Commercial Finance Metals/Mining
Computer Hardware Nondurable Household Goods
Computer Software Oil - Integrated
Conglomerates Paper
Consumer Finance Publishing/Printing
Containers Railroads
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Stores Specialty Retailing
Drug Wholesalers Steel
Durable Household Goods Supermarkets
Education Telecommunications - Technology
Electric Utilities Telephone - Utility
Electrical Equipment Textile/Apparel
Electronics Tobacco
Energy Services & Producers Toys
Entertainment/Film Trucking
Environmental
_____________________
*For purposes of a Portfolio's investment policy not to
concentrate in securities of issuers in the same industry,
utilities are divided into "industries" according to their
services (E.G., gas utilities, gas transmission utilities,
electric utilities and telephone utilities are each considered a
separate industry).
A-1
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PANORAMA SERIES FUND, INC.
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
INVESTMENT ADVISOR
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
TRANSFER AGENT
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
CUSTODIAN OF PORTFOLIO SECURITIES
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
INDEPENDENT AUDITORS
Arthur Andersen LLP
One Financial Plaza
Hartford, Connecticut 06103
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
<PAGE>
CONNECTICUT MUTUAL FINANCIAL SERVICES SERIES FUND I, INC.
PART C - OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits.
(a) Financial Statements.
(1) Included in Part A:
Financial Highlights for LifeSpan Diversified
Income Portfolio, LifeSpan Balanced Portfolio and
LifeSpan Capital Appreciation Portfolio, each for
the period ended December 31, 1995 (audited).
Financial Highlights for Money Market Portfolio,
Government Securities Portfolio, Income Portfolio,
Growth Portfolio, Total Return Portfolio,
International Equity Portfolio, LifeSpan
Diversified Income Portfolio, LifeSpan Balanced
Portfolio and LifeSpan Capital Appreciation
Portfolio, each for the period ended December 31,
1995 (audited).
(2) Incorporated in Part B by reference to the Annual Report of the
LifeSpan Portfolios as filed on Form N-30D on March 14, 1996
(accession no. 0000912057-96-004498) are the following:
Financial Statements for each of LifeSpan
Diversified Income Portfolio, LifeSpan Balanced
Portfolio and LifeSpan Capital Appreciation
Portfolio (audited):
Statement of Net Assets for the period ended
December 31, 1995
Statement of Operations for the period ended
December 31, 1995
Statement of Changes in Net Assets for the period
ended December 31, 1995
Financial Highlights for the period ended
December 31, 1995
Notes to Financial Statements as of
December 31, 1995
Auditors' Report on the LifeSpan Portfolios
<PAGE>
(2) Incorporated into Part B by reference to the Annual Report of
the Money Market Portfolio, Government Securities Portfolio,
Income Portfolio, Growth Portfolio, Total Return Portfolio and
International Equity Portfolio as filed on Form N-30D on April 5,
1996 (accession no. 0000912057-96-006041):
Financial Statements for each of Money Market
Portfolio, Government Securities Portfolio, Income
Portfolio, Growth Portfolio, Total Return
Portfolio and International Equity Portfolio (audited):
Statement of Net Assets for the period ended
December 31, 1995
Statement of Operations for the period ended
December 31, 1995
Statement of Changes in Net Assets for the periods
ended December 31, 1994 and December 31, 1995
Financial Highlights for the period ended
December 31, 1995
Notes to Financial Statements as of
December 31, 1995
Auditors' Report on Money Market Portfolio, Government Securities
Portfolio, Income Portfolio, Total Return Portfolio, Growth
Portfolio and International Equity Portfolio
(b) Exhibits
1. Amended and Restated Articles of Incorporation
dated May, 1995++
2. By-Laws++
3. Not Applicable
4. Not Applicable
5. Investment Advisory Agreement between the
Registrant, on behalf of Total Return Portfolio,
and OppenheimerFunds, Inc. and schedule of
omitted substantially similar documents+
5.1 Investment Subadvisory Agreement between
OppenheimerFunds, Inc. and Pilgrim,Baxter &
Associates, Ltd. (for LifeSpan Balanced
Portfolio) and schedule of omitted substantially
similar documents+
5.2 Investment Subadvisory Agreement between
OppenheimerFunds, Inc. and BEA Associates (for
LifeSpan Capital Appreciation Portfolio) and
schedule of omitted substantially similar
documents+
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5.3 Investment Subadvisory Agreement between
OppenheimerFunds, Inc. and Babson-Stewart Ivory
International (for LifeSpan Balanced Portfolio)
and schedule of omitted substantially similar
documents+
6. Not applicable
7. Not Applicable
8. Custodian Agreement++
8.1 Amendment to Custodian Agreement++
9. Service Contract between Registrant and
OppenheimerFunds Services+
10. Opinion and Consent of Counsel*
11. Auditors' Consents
12. (a) Annual Report of Money Market Portfolio,
Income Portfolio, Government Securities Portfolio,
Total Return Portfolio, and Growth Portfolio
incorporated by reference to the Annual Report
on Form N-30D as filed on April 5, 1996
(accession no. 0000912057-96-006041)
(File No. 2-73969)
(b) Annual Report of LifeSpan Capital
Appreciation Portfolio, LifeSpan Balanced Portfolio
and LifeSpan Diversified Income Portfolio
incorporated by reference to the Annual Report on
Form N-30D as filed on March 14, 1996
(accession no. 0000912057-96-004498)
(File No. 2-73969)
13. Not Applicable
14. Not Applicable
15. Not Applicable
16. Not Applicable
17. Financial Data Schedule+
18. Not Applicable
_____________
+ Filed herewith.
++ Filed as an exhibit to post-effective amendment no. 23 on March 1, 1996
(File No. 2-73969)
* Filed with Registrant's Rule 24f-2 opinion.
Item 25. Persons Controlled by or Under Common Control with
Registrant.
None
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ITEM 26. Number of Holders of Securities.
As of April 1, 1996, all outstanding shares of the Portfolios then existing
were owned by Mass Mutual Life Insurance Company or its affiliates.
ITEM 27. Indemnification.
Reference is made to Article VI of By-laws filed with Post-Effective
Amendment Number 23.
ITEM 28. Business and Other Connections of Investment Adviser.
(a) OppenheimerFunds, Inc. is the investment adviser of the
Registrant; it and certain subsidiaries and affiliates act in the same
capacity to other registered investment companies as described in Parts A and
B hereof and listed in Item 28(b) below.
(b) There is set forth below information as to any other
business, profession, vocation or employment of a substantial nature in which
each officer and director of OppenheimerFunds, Inc. is, or at any time during
the past two fiscal years has been, engaged for his/her own account or in the
capacity of director, officer, employee, partner or trustee.
NAME & CURRENT POSITION OTHER BUSINESS AND CONNECTIONS
WITH OPPENHEIMERFUNDS, INC. DURING THE PAST TWO YEARS
- --------------------------- -------------------------
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
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Robert J. Bishop,
Assistant Vice President Treasurer of the Oppenheimer Funds
(listed below); previously a Fund
Controller for OppenheimerFunds,
Inc. (the "Manager").
Bruce Bartlett,
Vice President Vice President and Portfolio Manager
of Oppenheimer Total Return Fund,
Inc., Oppenheimer Main Street Funds,
Inc. and Oppenheimer Variable
Account Funds; formerly a Vice
President and Senior Portfolio
Manager at First of America
Investment Corp.
George Bowen,
Senior Vice President
& Treasurer Treasurer of the New York-based
Oppenheimer Funds; Vice President,
Secretary and Treasurer of the
Denver-based Oppenheimer Funds. Vice
President and Treasurer of
OppenheimerFunds Distributor, Inc.
(the "Distributor") and HarbourView
Asset Management Corporation
("HarbourView"), an investment
adviser subsidiary of the Manager;
Senior Vice President, Treasurer,
Assistant Secretary and a director
of Centennial Asset Management
Corporation ("Centennial"), an
investment adviser subsidiary of the
Manager; Vice President, Treasurer
and Secretary of Shareholder
Services, Inc. ("SSI") and
Shareholder Financial Services, Inc.
("SFSI"), transfer agent
subsidiaries of the Manager;
President, Treasurer and Director of
Centennial Capital Corporation; Vice
President and Treasurer of Main
Street Advisers.
Michael A. Carbuto,
Vice President Vice President and Portfolio Manager
of Centennial California Tax Exempt
Trust, Centennial New York Tax
Exempt Trust and Centennial Tax
Exempt Trust; Vice President of
Centennial.
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William Colbourne,
Assistant Vice President Formerly, Director of Alternative
Staffing Resources, and Vice
President of Human Resources,
American Cancer Society.
Lynn Coluccy,
Vice President Formerly Vice President / Director
of Internal Audit of the Manager.
O. Leonard Darling,
Executive Vice President Formerly Co-Director of Fixed Income
for State Street Research &
Management Co.
Robert A. Densen,
Senior Vice President None.
Robert Doll, Jr.,
Executive Vice President Vice President and Portfolio Manager
of Oppenheimer Growth Fund,
Oppenheimer Variable Account Funds;
Senior Vice President and Portfolio
Manager of Oppenheimer Strategic
Income & Growth Fund; Vice President
of Oppenheimer Quest Value Fund,
Inc., Oppenheimer Quest Officers
Value Fund, Oppen-heimer Quest For
Value Funds and Oppenheimer Quest
Global Value Fund, Inc.
John Doney,
Vice President Vice President and Portfolio Manager
of Oppenheimer Equity Income Fund.
Andrew J. Donohue,
Executive Vice President
& General Counsel Secretary of the New York-based
Oppenheimer Funds; Vice President of
the Denver-based Oppenheimer Funds;
Executive Vice President, Director
and General Counsel of the
Distributor; President and a
director of Centennial; formerly
Senior Vice President and Associate
General Counsel of the Manager and
the Distributor.
Kenneth C. Eich,
Executive Vice President /
Chief Financial Officer Treasurer of Oppenheimer Acquisition
Corporation ("OAC").
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George Evans,
Vice President Vice President and Portfolio Manager
of Oppenheimer Global Emerging
Growth Fund.
Scott Farrar,
Assistant Vice President Assistant Treasurer of the
Oppenheimer Funds; previously a Fund
Controller for the Manager.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of
OppenheimerFunds Distributor, Inc.;
Secretary of HarbourView, Main
Street Advisers, Inc. and
Centennial; Secretary, Vice
President and Director of Centennial
Capital Corp.
Ronald H. Fielding,
Senior Vice President Chairman of the Board and Director
of Rochester Fund Distributors, Inc.
("RFD"); President and Director of
Fielding Management Company, Inc.
("FMC"); President and Director of
Rochester Capital Advisors, Inc.
("RCAI"); President and Director of
Rochester Fund Services, Inc.
("RFS"); President and Director of
Rochester Tax Managed Fund, Inc.;
Vice President and Portfolio Manager
of Rochester Fund Municipals and
Rochester Portfolio Series - Limited
Term New York Municipal Fund.
Jon S. Fossel,
Chairman of the Board
and Director Director of OAC (the Manager's
parent holding company); President,
CEO and a director of HarbourView; a
director of SSI and SFSI; Director,
Trustee, and Managing General
Partner of the Denver-based
Oppenheimer Funds; President and
Chairman of the Board of Main Street
Advisers, Inc.; formerly Chief
Executive Officer of the Manager.
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<PAGE>
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds; Vice President
and Counsel of OAC; formerly he held
the following positions: a director
of the Distributor, Vice President
and a director of HarbourView and
Centennial, a director of SFSI and
SSI, an officer of other Oppenheimer
Funds and Executive Vice President
& General Counsel of the Manager and
the Distributor.
Linda Gardner,
Assistant Vice President None.
Ginger Gonzalez,
Vice President Formerly 1st Vice President /
Director of Creative Services for
Shearson Lehman Brothers.
Mildred Gottlieb,
Assistant Vice President Formerly served as a Strategy
Consultant for the Private Client
Division of Merrill Lynch.
Dorothy Grunwager, None.
Assistant Vice President
Caryn Halbrecht,
Vice President Vice President and Portfolio Manager
of Oppenheimer Insured Tax-Exempt
Fund and Oppenheimer Intermediate
Tax Exempt Fund; an officer of other
Oppenheimer Funds; formerly Vice
President of Fixed Income Portfolio
Management at Bankers Trust.
Barbara Hennigar,
President and Chief Executive
Officer of OppenheimerFunds
Services, a division of the
Manager President and Director of SFSI.
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Scott T. Huebl,
Assistant Vice President None.
C-8
<PAGE>
Jane Ingalls,
Assistant Vice President Formerly a Senior Associate with
Robinson, Lake/Sawyer Miller.
Bennett Inkeles,
Assistant Vice President Formerly employed by Doremus &
Company, an advertising agency.
Frank Jennings,
Vice President Portfolio Manager of Oppenheimer
Global Growth & Income Fund.
Formerly a Managing Director of
Global Equities at Paine Webber's
Mitchell Hutchins division.
Stephen Jobe,
Vice President None.
Heidi Kagan,
Assistant Vice President None.
Avram Kornberg,
Vice President Formerly a Vice President with
Bankers Trust.
Paul LaRocco,
Assistant Vice President Portfolio Manager of Oppenheimer
Variable Account Funds and
Oppenheimer Variable Account Funds;
Associate Portfolio Manager of
Oppenheimer Discovery Fund. Formerly
a Securities Analyst for Columbus
Circle Investors.
Mitchell J. Lindauer,
Vice President None.
Loretta McCarthy,
Senior Vice President None.
Bridget Macaskill,
President, Chief Executive
Officer and Director President, Director and Trustee of
the Oppenheimer Funds; President and
a Director of OAC and HarbourView;
Director of Main Street Advisers,
Inc.; Chairman and a Director of
SSI.
Sally Marzouk,
Vice President None.
C-9
<PAGE>
Marilyn Miller,
Vice President Formerly a Director of marketing for
TransAmerica Fund Management
Company.
Robert J. Milnamow,
Vice President Vice President and Portfolio Manager
of Oppenheimer Main Street Funds,
Inc. Formerly a Portfolio Manager
with Phoenix Securities Group.
Denis R. Molleur,
Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President Vice President and Portfolio Manager
of Oppenheimer Variable Account
Funds, Oppenheimer Asset Allocation
Fund, Oppenheimer Strategic Income
Fund, Oppenheimer Strategic Income &
Growth Fund; an officer of other
Oppenheimer Funds.
Barbara Niederbrach,
Assistant Vice President None.
Stuart Novek,
Vice President Formerly a Director Account
Supervisor for J. Walter Thompson.
Robert A. Nowaczyk,
Vice President None.
Robert E. Patterson,
Senior Vice President Vice President and Portfolio Manager
of Oppenheimer Main Street Funds,
Inc., Oppenheimer Multi-State Tax-
Exempt Trust, Oppenheimer Tax-Exempt
Fund, Oppenheimer California Tax-
Exempt Fund, Oppenheimer New York
Tax-Exempt Fund and Oppenheimer Tax-
Free Bond Fund; Vice President of
The New York Tax-Exempt Income Fund,
Inc.; Vice President of Oppenheimer
Multi-Sector Income Trust.
Tilghman G. Pitts III,
Executive Vice President
and Director Chairman and Director of the
Distributor.
C-10
<PAGE>
Jane Putnam,
Vice President Associate Portfolio Manager of
Oppenheimer Growth Fund; Vice
President and Portfolio Manager of
Oppenheimer Target Fund and
Oppenheimer Variable Account Funds.
Formerly Senior Investment Officer
and Portfolio Manager with Chemical
Bank.
Russell Read,
Vice President Formerly an International Finance
Consultant for Dow Chemical.
Thomas Reedy,
Vice President Vice President of Oppenheimer Multi-
Sector Income Trust and Oppenheimer
Multi-Government Trust; an officer
of other Oppenheimer Funds; formerly
a Securities Analyst for the
Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Assistant Vice President Formerly a Product Manager for
Metropolitan Life Insurance Company.
Michael S. Rosen
Vice President Vice President of RFS; President and
Director of RFD; Vice President and
Director of FMC; Vice President and
director of RCAI; General Partner of
RCA; Vice President and Director of
Rochester Tax Managed Fund Inc.;
Vice President and Portfolio Manager
of Rochester Fund Series - The Bond
Fund For Growth.
David Rosenberg,
Vice President Vice President and Portfolio Manager
of Oppenheimer Limited-Term
Government Fund, Oppenheimer U.S.
Government Trust and Oppenheimer
Integrity Funds. Formerly Vice
President and Senior Portfolio
Manager for Delaware Investment
Advisors.
Rhonda Rosenberg,
Vice President Formerly a Vice President and
Manager of municipal portfolio
strategy for Lehman Brothers.
C-11
<PAGE>
Richard H. Rubinstein,
Vice President Vice President and Portfolio Manager
of Oppenheimer Asset Allocation
Fund, Oppenheimer Fund and
Oppenheimer Variable Account Funds;
an officer of other Oppenheimer
Funds; formerly Vice President and
Portfolio Manager/Security Analyst
for Oppenheimer Capital Corp., an
investment adviser.
Lawrence Rudnick,
Vice President Formerly Vice President of Dollar
Dry Dock Bank.
James Ruff,
Executive Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Diane Sobin,
Vice President Vice President and Portfolio Manager
of Oppenheimer Gold & Special
Minerals Fund, Oppenheimer Total
Return Fund, Inc. Oppenheimer Main
Street Funds, Inc. and Oppenheimer
Variable Account Funds; formerly a
Vice President and Senior Portfolio
Manager for Dean Witter
InterCapital, Inc.
Nancy Sperte,
Senior Vice President None.
Donald W. Spiro,
Chairman Emeritus
and Director Trustee of the New York-based
Oppenheimer Funds; formerly
Chairman of the Manager and the
Distributor.
Arthur Steinmetz,
Senior Vice President Vice President and Portfolio Manager
of Oppenheimer Strategic Income
Fund, Oppenheimer Strategic Income &
Growth Fund; an officer of other
Oppenheimer Funds.
Ralph Stellmacher,
Senior Vice President Vice President and Portfolio Manager
of Oppenheimer Champion Income Fund
and Oppenheimer High Yield Fund; an
officer of other Oppenheimer Funds.
C-12
<PAGE>
John Stoma,
Vice President Formerly Vice President of Pension
Marketing with Manulife Financial.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director
or Managing Partner of the Denver-
based Oppenheimer Funds; President
and a Director of Centennial;
formerly President and Director of
OAMC, and Chairman of the Board of
SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President Vice President of the Manager; Vice
President and Portfolio Manager of
Oppenheimer Discovery Fund
Oppenheimer Global Emerging Growth
Fund and Oppenheimer Enterprise
Fund. Formerly Managing Director of
Buckingham Capital Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant
Treasurer Assistant Treasurer of the
Distributor and SFSI.
Jeffrey Van Giesen,
Vice President Formerly employed by Kidder Peabody
Asset Management.
Ashwin Vasan,
Vice President Vice President and Portfolio Manager
of Oppenheimer Multi-Sector Income
Trust, Oppenheimer Multi-Government
Trust and Oppenheimer International
Bond Fund; an officer of other
Oppenheimer Funds.
Valerie Victorson,
Vice President None.
Dorothy Warmack,
Vice President Vice President and Portfolio Manager
of Daily Cash Accumulation Fund,
Inc., Oppenheimer Cash Reserves,
Centennial America Fund, L.P.,
Centennial Government Trust and
Centennial Money Market Trust; Vice
President of Centennial.
C-13
<PAGE>
Christine Wells,
Vice President None.
William L. Wilby,
Senior Vice President Vice President and Portfolio Manager
of Oppenheimer Variable Account
Funds, Oppenheimer Global Fund and
Oppenheimer Global Growth & Income
Fund; Vice President of HarbourView;
an officer of other Oppenheimer
Funds.
Susan Wilson-Perez,
Vice President None.
Carol Wolf,
Vice President Vice President and Portfolio Manager
of Oppenheimer Money Market Fund,
Inc., Centennial America Fund, L.P.,
Centennial Government Trust,
Centennial Money Market Trust and
Daily Cash Accumulation Fund, Inc.;
Vice President of Oppenheimer Multi-
Sector Income Trust; Vice President
of Centennial.
Robert G. Zack,
Senior Vice President and
Assistant Secretary Associate General Counsel of the
Manager; Assistant Secretary of the
Oppenheimer Funds; Assistant
Secretary of SSI, SFSI; an officer
of other Oppenheimer Funds.
Eva A. Zeff,
Assistant Vice President An officer of certain Oppenheimer
Funds; formerly a Securities
Analyst for the Manager.
Arthur J. Zimmer,
Vice President Vice President and Portfolio Manager
of Oppenheimer Variable Account
Funds, Centennial America Fund,
L.P., Centennial Government Trust,
Centennial Money Market Trust and
Daily Cash Accumulation Fund, Inc.;
Vice President of Oppenheimer Multi-
Sector Income Trust; Vice President
of Centennial; an officer of other
Oppenheimer Funds.
The Oppenheimer Funds include the New York-based Oppenheimer Funds and the
Denver-based Oppenheimer Funds set forth below:
C-14
<PAGE>
NEW YORK-BASED OPPENHEIMER FUNDS
Oppenheimer Asset Allocation Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Government Trust
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Tax-Exempt Trust
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest for Value Funds
Oppenheimer Target Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Series Fund, Inc.
DENVER-BASED OPPENHEIMER FUNDS
Oppenheimer Cash Reserves
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Strategic Funds Trust
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
ROCHESTER-BASED FUNDS
Rochester Fund Municipals
Rochester Fund Series - The Bond Fund For
Growth
C-15
<PAGE>
Rochester Portfolio Series - Limited Term
New York Municipal Fund
The address of OppenheimerFunds, Inc., the New York-based
OppenheimerFunds, OppenheimerFunds Distributor, Inc., HarbourView Asset
Management Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer
Acquisition Corp. is Two World Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder Financial
Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services,
Centennial Asset Management Corporation, Centennial Capital Corp., and Main
Street Advisers, Inc. is 3410 South Galena Street, Denver, Colorado 80231.
The address of the Rochester-based funds is 350 Linden Oaks, Rochester,
New York 14625-2807.
ITEM 29. Principal Underwriters.
Not Applicable
ITEM 30. Location of Portfolios and Records.
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940
and rules promulgated thereunder are in the possession of OppenheimerFunds,
Inc. at its offices at 3410 South Galena Street, Denver, Colorado 80231.
ITEM 31. Management Services.
Not applicable.
ITEM 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
C-16
<PAGE>
(c) The Company will furnish each person to whom a
prospectus is delivered with a copy of the Company's
latest annual report to shareholders, upon request and
without charge.
C-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant hereby certifies that this
Post-Effective Amendment No. 24 to the Registration Statement ("PEA No. 24")
meets the requirements for effectiveness pursuant to Rule 485(b) under the 1933
Act. The Registrant has caused PEA No. 24 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 29th day of April, 1996.
CONNECTICUT MUTUAL FINANCIAL
SERVICES SERIES FUND I, INC.
By: /s/ Bridget Macaskill
------------------------------
Bridget Macaskill
President
Pursuant to the requirements of the Securites Act of 1933, this
PEA No. 24 has been signed below by the following persons in the capacities
and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Bridget Macaskill President (Principal April 29, 1996
- --------------------------- Executive Officer)
Bridget Macaskill
*Richard Hixon Ayers Director
- ---------------------------
Richard Hixon Ayers
*David Ellis Adams Carson Director
- ----------------------------
David Ellis Adams Carson
*Richard Warren Greene Director
- ----------------------------
Richard Warren Greene
*Beverly Lannquist Hamilton Director
- ----------------------------
Beverly Lannquist Hamilton
*David E. Sams, Jr. Director
- ----------------------------
David E. Sams, Jr.
/s/ George C. Bowen Treasurer April 29, 1996
- ---------------------------- (Principal Financial
George C. Bowen and Accounting Officer)
*By: /s/ Ann F. Lomeli Attorney-in-fact April 29, 1996
-----------------------
Ann F. Lomeli
<PAGE>
EXHIBIT INDEX
Exhibit No.
- -----------
5. Investment Advisory Agreement between the Registrant, on behalf of
Total Return Portfolio, and OppenheimerFunds, Inc. and schedule of
omitted substantially similar documents
5.1 Investment Subadvisory Agreement between OppenheimerFunds, Inc. and
Pilgrim, Baxter & Associates, Ltd. (for LifeSpan Balanced Portfolio)
and schedule of omitted substantially similar documents
5.2 Investment Subadvisory Agreement between OppenheimerFunds, Inc. and
BEA Associates (for LifeSpan Capital Appreciation Portfolio) and
schedule of omitted substantially similar documents
5.3 Investment Subadvisory Agreement between OppenheimerFunds, Inc. and
Babson-Stewart Ivory International (for LifeSpan Balanced Portfolio)
and schedule of omitted substantially similar documents
9. Service Contract between Registrant and OppenheimerFunds Services
11. Consents of Auditors
27. Financial Data Schedule
<PAGE>
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 1st day of March, 1996, by and between
Connecticut Mutual Financial Services Series Fund I, Inc. on behalf of its
Total Return Portfolio (the "Fund"), and OppenheimerFunds, Inc. ("OFI").
WHEREAS, the Fund is a series of Connecticut Mutual Financial Services
Series Fund I, Inc. (the "Company"), an open-end, diversified management
investment company registered as such with the Securities and Exchange
Commission (the "Commission") pursuant to the Investment Company Act of
1940 (the "Investment Company Act"), and OFI is a registered investment
adviser;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, it is agreed by and between the parties, as follows:
1. GENERAL PROVISION.
The Fund hereby employs OFI and OFI hereby undertakes to act as the
investment adviser of the Fund and to perform for the Fund such other
duties and functions as are hereinafter set forth. OFI shall, in all
matters, give to the Fund and its Board of Directors the benefit of its
best judgment, effort, advice and recommendations and shall, at all times
conform to, and use its best efforts to enable the Fund to conform to (i)
the provisions of the Investment Company Act and any rules or regulations
thereunder; (ii) any other applicable provisions of state or federal law;
(iii) the provisions of the Company's Articles of Incorporation and By-Laws
as amended from time to time; (iv) policies and determinations of the Board
of Directors of the Company; (v) the fundamental policies and investment
restrictions of the Fund as reflected its registration statement under the
Investment Company Act or as such policies may, from time to time, be
amended by the Fund's shareholders; and (vi) the Prospectus and Statement
of Additional Information of the Fund in effect from time to time. The
appropriate officers and employees of OFI shall be available upon
reasonable notice for consultation with any of the Directors and officers
of the Company with respect to any matters dealing with the busines and
affairs of the Fund including the valuation of any of the Fund's portfolio
securities which are either not registered for public sale or not being
traded on any securities market.
2. INVESTMENT MANAGEMENT.
(a) OFI shall, subject to the direction and control by the Company's
Board of Directors, (i) regularly provide, alone or in consultation
with any subadvisor or subadvisors appointed pursuant to this
Agreement and subject to the provisions of any investment subadvisory
agreement respecting the responsibilities of such subadvisor or
subadvisors, investment advice and recommendations to the Fund with
respect to its investments, investment policies and the purchase and
sale of securities; (ii) supervise continuously the investment
program of the Fund and the composition of its portfolio and
determine what securities shall be purchased or sold by the Fund; and
(iii) arrange, subject to the provisions of paragraph "7" hereof, for
the purchase of securities and other investments for the Fund and the
sale of securities and other investments held in the portfolio of the
Fund.
<PAGE>
(b) Provided that the Fund shall not be required to pay any
compensation other than as provided by the terms of this Agreement
and subject to the provisions of paragraph "7" hereof, OFI may obtain
investment information, research or assistance from any other person,
firm or corporation to supplement, update or otherwise improve its
investment management services.
(c) Provided that nothing herein shall be deemed to protect OFI
from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or reckless disregard of its obligations
and duties under the Agreement, OFI shall not be liable for any loss
sustained by reason of good faith errors or omissions in connection
with any matters to which this Agreement relates.
(d) Nothing in this Agreement shall prevent OFI or any officer thereof
from acting as investment adviser for any other person, firm or
corporation and shall not in any way limit or restrict OFI or any of
its directors, officers or employees from buying, selling or trading
any securities for its own account or for the account of others for
whom it or they may be acting, provided that such activities will not
adversely affect or otherwise impair the performance by OFI
of its duties and obligations under this Agreement and under
the Investment Advisers Act of 1940.
3. OTHER DUTIES OF OFI.
OFI shall, at its own expense, employ, and supervise the
activities of, all administrative and clerical personnel or other
firms, agents or contractors, as shall be required to provide
effective corporate administration for the Fund, including the
compilation and maintenance of such records with respect to its
operations as may reasonably be required (other than those the
Fund's custodian or transfer agent is contractually obligated to
compile and maintain); the preparation and filing of such reports
with respect thereto as shall be required by the Commission;
composition of periodic reports with respect to its operations
for the shareholders of the Fund; composition of proxy materials
for meetings of the Fund's shareholders and the composition
of such registration statements as may be required by
federal securities laws for continuous public sale of shares of
the Fund. OFI shall, at its own cost and expense, also provide
the Fund with adequate office space, facilities and equipment.
4. ALLOCATION OF EXPENSES.
All other costs and expenses not expressly assumed by OFI under
this Agreement, or to be paid by the principal distributor of the
shares of the Fund, shall be paid by the Fund, including, but not
limited to: (i) interest and taxes; (ii) brokerage commissions;
(iii) premiums for fidelity and other insurance coverage requisite
to its operations; (iv) the fees and expenses of its Directors;
(v) legal and audit expenses; (vi) custodian and transfer agent
fees and expenses; (vii) expenses incident to the redemption of
its shares; (viii) expenses incident to the issuance of its
shares against payment therefor by or on behalf of the
subscribers thereto; (ix) fees and expenses, other than as
hereinabove provided, incident to the registration under
federal securities laws of shares of the Fund for public sale;
(x) expenses of printing and mailing reports, notices and proxy
materials to shareholders of the Fund; (xi) except as noted above,
all other expenses incidental to holding meetings of the Fund's
shareholders; and (xii) such extraordinary non-recurring expenses
as may arise, including litigation, affecting the Fund and any
obligation which
<PAGE>
the Fund may have to indemnify its officers and Directors with
respect thereto. Any officers or employees of OFI or any entity
controlling, controlled by or under common control with OFI, who
may also serve as officers, Directors or employees of the Fund
shall not receive any compensation from the Fund for their
services.
5. COMPENSATION OF OFI.
The Fund agrees to pay OFI and OFI agrees to accept as full
compensation for the performance of all functions and duties on
its part to be performed pursuant to the provisions hereof, a fee
computed on the aggregate net assets value of the Fund as of the
close of each business day and payable monthly at the annual
rates set for the in Appendix A.
6. USE OF NAME "OPPENHEIMER."
OFI hereby grants to the Fund a royalty-free, non-exclusive
license to use the name "Oppenheimer" in the name of the Fund for
the duration of this Agreement and any extensions or renewals
thereof. To the extent necessary to protect OFI's rights to the
name "Oppenheimer" under applicable law, such license shall allow
OFI to inspect, and subject to control by the Fund's Board of
Directors, control the name and quality of services offered by
the Fund under such name. Such license may, upon termination of
this Agreement, be terminated by OFI, in which event the Fund
shall promptly take whatever action may be necessary to change
its name and discontinue any further use of the name "Oppenheimer" in
the name of the Fund or otherwise. The name "Oppenheimer" may be used
or licensed by OFI in connection with any of its activities, or
licensed by OFI to any other party.
7. PORTFOLIO TRANSACTIONS and BROKERAGE.
(a) OFI is authorized, in arranging the Fund's portfolio transactions, to
employ or deal with such members of securities or commodities
exchanges, brokers or dealers including "affiliated" broker dealers
(as that term is defined in the Investment Company Act) (hereinafter
"broker-dealers"), as may, in its best judgment, implement the policy
of the Fund to obtain, at reasonable expense, the "best execution"
(prompt and reliable execution at the most favorable security price
obtainable) of the Fund's portfolio transactions as well as to obtain,
consistent with the rovisions of subparagraph "(c)" of this paragraph
"7," the enefit of such investment information or research as may be
of significant assistance to the performance by OFI of its investment
management functions.
(b) OFI shall select broker-dealers to effect the Fund's portfolio
transactions on the basis of its estimate of their ability to obtain
best execution of particular and related portfolio transactions. The
abilities of a broker-dealer to obtain best execution of particular
portfolio transaction(s) will be judged by OFI on the basis of all
relevant factors and considerations including, insofar as feasible,
the execution capabilities required by the transaction or ransactions;
the ability and willingness of the broker-dealer to facilitate the
Fund's portfolio transactions by participating therein for its own
account; the importance to the Fund of speed, efficiency or
confidentiality; the broker-dealer's apparent familiarity with sources
from or to whom particular securities might be purchased or sold; as
well as any other matters
<PAGE>
relevant to the selection of a broker-dealer for particular and
related transactions of the Fund.
(c) OFI shall have discretion, in the interests of the Fund, to allocate
brokerage on the Funds portfolio transactions to broker-dealers
(other than affiliated broker-dealers) qualified to obtain best
execution of such transactions who provide brokerage and/or research
services (as such services are defined in Section 28(e)(3)of the
Securities Exchange Act of 1934) for the Fund and/or other accounts
for which OFI and its affiliates exercise "investment discretion" (as
that term is defined in Section 3(a)(35) of the Securities Exchange
Act of 1934) and to cause the Fund to pay such broker-dealers a
commission for effecting a portfolio transaction for the Fund that is
in excess of the amount of commission another broker-dealer adequately
qualified to effect such transaction would have charged for effecting
that transaction, if OFI determines, in good faith, that such
commission is reasonable in relation to the value of the brokerage
and/or research services provided by such broker-dealer, viewed in
terms of either that particular transaction or the overall
responsibilities of OFI and its investment advisory affiliates with
respect to the accounts as to which they exercise investment
discretion. In reaching such determination, OFI will not be required
to place or attempt to place a specific dollar value on the brokerage
and/or research services provided or being provided by such
broker-dealer. In demonstrating that such determinations were made in
good faith, OFI shall be prepared to show that all commissions were
allocated for the purposes contemplated by this Agreement and that
the total commissions paid by the Fund over a representative period
selected by the Fund's Directors were reasonable in relation to the
benefits to the Fund.
(d) OFI shall have no duty or obligation to seek advance competitive
bidding for the most favorable commission rate applicable to any
particular portfolio transactions or to select any broker-dealer
on the basis of its purported or "posted" commission rate but
will, to the best of its ability, endeavor to be aware of the
current level of the charges of eligible broker-dealers and to
minimize the expense incurred by the Fund for effecting its
portfolio transactions to the extent consistent with the interests
and policies of the Fund as established by the determinations of the
Board of Directors and the provisions of this paragraph "7."
(e) The Fund recognizes that an affiliated broker-dealer (i) may act
as one of the Fund's regular brokers so long as it is lawful for
it so to act; (ii) may be a major recipient of brokerage
commissions paid by the Fund; and (iii) may effect portfolio
transactions for the Fund only if the commissions, fees or other
remuneration received or to be received by it are determined in
accordance with procedures contemplated by any rule, regulation
or order adopted under the Investment Company Act for determining
the permissible level of such commissions.
(f) Subject to the foregoing provisions of this paragraph "7," OFI
may also consider sales of Fund shares and shares of the other
investment companies managed by OFI or its affiliates as a factor
in the selection of broker-dealers for the Fund's portfolio
transactions.
<PAGE>
8. DURATION.
This Agreement will take effect on the date first set forth above and will
continue in effect until December 31, 1997, and thereafter, from year to
year, so long as such continuance shall be approved at least annually in
the manner contemplated by Section 15 of the Investment Company Act.
9. TERMINATION.
This Agreement may be terminated (i) by OFI at any time without penalty
upon giving the Fund sixty days' written notice (which notice may be waived
by the Fund); or (ii) by the Fund at any time without penalty upon sixty
days' written notice to OFI (which notice may be waived by OFI) provided
that such termination by the Fund shall be directed or approved by the vote
of a majority of all of the Directors of the Fund then in office or by
the vote of the holders of a "majority" (as defined in the Investment
Company Act) of the outstanding voting securities of the Fund.
10. ASSIGNMENT OR AMENDMENT.
This Agreement may not be amended without the affirmative vote or written
consent of the holders of the "majority" of the outstanding voting
securities of the Fund and shall automatically and immediately terminate in
the event of its "assignment," as defined in the Investment Company Act.
11. DISCLAIMER OF SHAREHOLDER LIABILITY.
OFI understands that the obligations of the Fund under this Agreement are
to binding upon any Director or shareholder of the Fund personally, but
bind only the Fund and the Fund's property. OFI represents that it has
notice of the provisions of the Company's Articles of Incorporation
disclaiming shareholder liability for acts or obligations of the Fund.
12. DEFINITIONS.
The terms and provisions of this Agreement shall be interpreted and defined
in a manner consistent with the provisions and definitions of the
Investment Company Act.
CONNECTICUT MUTUAL FINANCIAL
SERVICES SERIES FUND I, INC.
on behalf of Total Return Portfolio
By: /s/ Donald H. Pond, Jr.
--------------------------------------
President
OppenheimerFunds, Inc.
By: /s/ Robert G. Zack
--------------------------------------
Senior Vice President
<PAGE>
APPENDIX A
The Fund agrees to pay OFI and OFI agrees to accept as full
compensation for the performance of all functions and duties on its part to
be performed pursuant to the provisions hereof, a fee computed on the
aggregate net assets of the Fund as of the close of each business day
payable monthly at the following annual rates:
<TABLE>
<CAPTION>
Net Asset Value Annual Rate
--------------- -----------
<S> <C>
First $600,000,000 0.625%
Amount over $600,000,000 0.0450%
</TABLE>
<PAGE>
SCHEDULE OF OMITTED INVESTMENT ADVISORY AGREEMENTS
Due to the substantial similarity of the investment
agreements among OppenheimerFunds, Inc. ("OFI") and the
Registrant, on behalf of the respective series of the Registrant,
the following form of investment advisory agreement on behalf of
Total Return Portfolio and this schedule of omitted documents is
filed in accordance with the requirements of Rule 8b-31 under the
Investment Company Act of 1940.
1. Investment Advisory Agreement among OFI and the
Registrant, on behalf of Money Market Portfolio.
Advisory Fee (Appendix A):
The Fund agrees to pay OFI and OFI agrees to accept as
full compensation for the performance of all functions
and duties on its part to be performed pursuant to the
provisions hereof, a fee computed on the aggregate net
assets of the Fund as of the close of each business day
payable monthly at the following annual rates:
<TABLE>
<CAPTION>
Net Asset Value Annual Rate
--------------- -----------
<S> <C>
First $200,000,000 0.50%
Next $100,000,000 0.45%
Amount over $300,000,000 0.40%
</TABLE>
2. Investment Advisory Agreement among OFI and the
Registrant, on behalf of Income Portfolio.
Advisory Fee (Appendix A):
The Fund agrees to pay OFI and OFI agrees to accept as
full compensation for the performance of all functions
and duties on its part to be performed pursuant to the
provisions hereof, a fee computed on the aggregate net
assets of the Fund as of the close of each business day
payable monthly at the following annual rates:
<TABLE>
<CAPTION>
Net Asset Value Annual Rate
--------------- -----------
<S> <C>
First $300,000,000 0.575%
Next $100,000,000 0.500%
Amount over $400,000,000 0.450%
</TABLE>
3. Investment Advisory Agreement among OFI and the
Registrant, on behalf of Government Securities Portfolio.
<PAGE>
Advisory Fee (Appendix A):
The Fund agrees to pay OFI and OFI agrees to accept as
full compensation for the performance of all functions
and duties on its part to be performed pursuant to the
provisions hereof, a fee computed on the aggregate net
assets of the Fund as of the close of each business day
payable monthly at the following annual rates:
<TABLE>
<CAPTION>
Net Asset Value Annual Rate
--------------- -----------
<S> <C>
First $300,000,000 0.525%
Next $100,000,000 0.500%
Amount over $400,000,000 0.450%
</TABLE>
4. Investment Advisory Agreement among OFI and the
Registrant, on behalf of Growth Portfolio.
Advisory Fee (Appendix A):
The Fund agrees to pay OFI and OFI agrees to accept as
full compensation for the performance of all functions
and duties on its part to be performed pursuant to the
provisions hereof, a fee computed on the aggregate net
assets of the Fund as of the close of each business day
payable monthly at the following annual rates:
<TABLE>
<CAPTION>
Net Asset Value Annual Rate
--------------- -----------
<S> <C>
First $300,000,000 0.625%
Next $100,000,000 0.500%
Amount over $400,000,000 0.450%
</TABLE>
5. Investment Advisory Agreement among OFI and the
Registrant, on behalf of LifeSpan Balanced Portfolio.
Advisory Fee (Appendix A):
The Fund agrees to pay OFI and OFI agrees to accept as
full compensation for the performance of all functions
and duties on its part to be performed pursuant to the
provisions hereof, a fee computed on the aggregate net
assets of the Fund as of the close of each business day
payable monthly at the following annual rates:
<TABLE>
<CAPTION>
Net Asset Value Annual Rate
--------------- -----------
<S> <C>
First $250,000,000 0.85%
Amount over $250,000,000 0.75%
</TABLE>
-2-
<PAGE>
6. Investment Advisory Agreement among OFI and the
Registrant, on behalf of LifeSpan Capital Appreciation
Portfolio.
Advisory Fee (Appendix A):
The Fund agrees to pay OFI and OFI agrees to accept as
full compensation for the performance of all functions
and duties on its part to be performed pursuant to the
provisions hereof, a fee computed on the aggregate net
assets of the Fund as of the close of each business day
payable monthly at the following annual rates:
<TABLE>
<CAPTION>
Net Asset Value Annual Rate
--------------- -----------
<S> <C>
First $250,000,000 0.85%
Amount over $250,000,000 0.75%
</TABLE>
7. Investment Advisory Agreement among OFI and the
Registrant, on behalf of LifeSpan Diversified Income Portfolio.
Advisory Fee (Appendix A):
The Fund agrees to pay OFI and OFI agrees to accept as
full compensation for the performance of all functions
and duties on its part to be performed pursuant to the
provisions hereof, a fee computed on the aggregate net
assets of the Fund as of the close of each business day
payable monthly at the following annual rates:
<TABLE>
<CAPTION>
Net Asset Value Annual Rate
--------------- -----------
<S> <C>
First $250,000,000 0.75%
Amount over $250,000,000 0.65%
</TABLE>
8. Investment Advisory Agreement among OFI and the
Registrant, on behalf of International Portfolio.
Advisory Fee (Appendix A):
The Fund agrees to pay OFI and OFI agrees to accept as
full compensation for the performance of all functions
and duties on its part to be performed pursuant to the
provisions hereof, a fee computed on the aggregate net
assets of the Fund as of the close of each business day
payable monthly at the following annual rates:
<TABLE>
<CAPTION>
Net Asset Value Annual Rate
--------------- -----------
<S> <C>
First $250,000,000 1.00%
Amount over $250,000,000 0.90%
</TABLE>
-3-
<PAGE>
EXHIBIT 5.1
CONNECTICUT MUTUAL FINANCIAL SERVICES SERIES FUND I, INC.
INVESTMENT ADVISORY AGREEMENT FOR SUBADVISER
AGREEMENT made as of the 1st day of March, 1996, by and among
OppenheimerFunds, Inc. (the "Investment Adviser") and Pilgrim Baxter &
Associates, Ltd. (the "Subadviser").
Connecticut Mutual Financial Services Series Fund I, Inc., a Maryland
corporation (the "Company"), is an open-end, management investment company,
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The LifeSpan Balanced Portfolio (the "Portfolio") is a series of
the Company. The Investment Adviser and the Subadviser are
investment advisers registered under the Investment Advisers Act of 1940 (the
"Advisers Act").
Pursuant to authority granted the Investment Adviser by the
Company's Board of Directors and pursuant to the provisions of the
Investment Advisory Agreement between the Investment Adviser and Company, on
behalf of the Portfolio, the Investment Adviser has selected the Subadviser
to act as an investment subadviser of the Portfolio and to provide certain
other services, as more fully set forth below, and the Subadviser is willing
to act as such sub-investment adviser and to perform such services
under the terms and conditions hereinafter set forth. Accordingly, the
Investment Adviser and the Subadviser agree as follows:
1. The Subadviser will regularly provide the Portfolio with
advice concerning the investment management of the Small Capitalization
U.S. equity portfolio of the Portfolio (the "Sub-Portfolio"), designated by
the Investment Adviser. Such advice shall be consistent with the investment
objectives and policies of the Portfolio as set forth in the Portfolio's
Prospectus and Statement of Additional Information, and any investment
guidelines or other instructions received in writing from the Investment
Adviser. The Subadviser will determine what securities shall be purchased
for the Sub-Portfolio, and what securities shall be held or sold by the
Sub-Portfolio, subject always to the provisions of Section 9 hereof.
The Investment Adviser shall oversee the management of the
Sub-Portfolio by the Subadviser. The Investment Adviser shall manage
directly, or by engaging other subadvisers, and the Subadviser shall not be
responsible for the management of, any portion of the Portfolio not
designated as part of the Sub-Portfolio. The Subadviser shall not be
responsible for the provision of administrative, bookkeeping or accounting
services to the Portfolio, except as otherwise provided herein, as required
by the Advisers Act as may be necessary for the Subadviser to supply to the
Investment Adviser, the Company or the Company's Board of Directors the
information required to be supplied under this Agreement. Any records
required to be maintained shall be the property of the Company and shall be
surrendered promptly to the Company upon request.
In the performance of the Subadviser's duties hereunder, the Subadviser
is and shall be an independent contractor and unless otherwise expressly
provided herein or otherwise authorized in writing, shall have no authority
to act for or represent the Company, the Portfolio or the Investment Adviser
in any way or otherwise be deemed to be an agent of the Company, the
Portfolio or the Investment Adviser. The Subadviser will make its officers
and employees available to meet with the Company's officers and Board of
Directors at least quarterly on due
<PAGE>
notice to review the investments and investment program of the Portfolio in
the light of current and prospective economic and market conditions.
2. The Subadviser will bear its own costs of providing services
hereunder. Other than as herein specifically indicated, the Subadviser shall
not be responsible for the Portfolio's expenses, including brokerage and
other expenses incurred in placing orders for the purchase and sale of
securities. Specifically, the Subadviser will not be responsible for expenses
of the Portfolio including, but not limited to, the following: legal
expenses; auditing and accounting expenses; expenses of maintenance of the
Portfolio's books and records relating to the Portfolio, including
computation of the Portfolio's daily net asset value per share and dividends;
interest, taxes, governmental fees and membership dues; fees of custodians,
transfer agents, registrars or other agents; expenses of preparing share
certificates; expenses relating to the redemption or repurchase of the
Portfolio's shares; expenses of registering and qualifying Portfolio shares
for sale under applicable federal and state law; expenses of preparing,
setting in print, printing and distributing prospectuses, reports, notices
and dividends to Portfolio shareholders; cost of stationery; costs of
shareholders and other meetings of the Portfolio; traveling expenses of
officers, Directors and employees of the Company or Portfolio, if any; fees
of the Company's Directors and salaries of any officers or employees of the
Company or Portfolio; and the Portfolio's pro rata portion of premiums on any
fidelity bond and other insurance covering the Company, the Portfolio and
their officers and Directors.
The Portfolio shall reimburse the Subadviser for any such expenses or
other expenses of the Portfolio, as may be reasonably incurred by such
Subadviser on the Portfolio's behalf. The Subadviser shall keep and supply
to the Portfolio and the Investment Adviser adequate records of all such
expenses.
3. For all investment management services to be rendered hereunder, the
Investment Adviser will pay the Subadviser an annual fee, payable quarterly,
as described in Schedule A hereto. For any period less than a full fiscal
quarter during which this Agreement is in effect, the fee shall be prorated
according to the proportion which such period bears to a full fiscal quarter.
The Portfolio shall have no responsibility for any fee payable to the
Subadviser.
In the event that the advisory fee payable by the Portfolio to the
Investment Adviser shall be reduced as required by the securities laws or
regulations of any jurisdiction in which the Portfolio's shares are offered
for sale, the amount payable by the Investment Adviser to the Subadviser
shall be likewise reduced by a proportionate amount.
4. In connection with purchases or sales of securities for the
Portfolio, neither the Subadviser nor any of its partners, directors,
officers or employees will act as a principal or agent or receive directly or
indirectly any compensation in connection with the purchase or sale of
investment securities by the Sub-Portfolio, other than as provided in this
Agreement. The Subadviser, or its agent, shall arrange for the placing of
all orders for the purchase and sale of securities for the Sub-Portfolio with
brokers or dealers selected by the Subadviser, provided that the Subadviser
shall not be responsible for payment of brokerage commissions. In the
selection of such brokers or dealers and the placing of such orders, the
Subadviser is directed at all times to seek for the Portfolio the best
execution available. Neither the Subadviser nor any affiliate of the
Subadviser will act as principal or receive directly or indirectly
anycompensation in connection with the purchase or sale of investment
securities by the Portfolio, other than compensation provided for in this
Agreement or in the Investment Advisory Agreement of the Portfolio and such
brokerage commissions as are permitted by the 1940 Act. If and to the extent
authorized to act as
<PAGE>
broker in the relevant jurisdiction, the Subadviser or any of its affiliates
may act as broker for the Portfolio in the purchase and sale of securities.
The Subadviser agrees that all transactions effected through the Subadviser
or brokers affiliated with the Subadviser shall be effected in compliance
with Section 17(e) of the 1940 Act and written procedures established from
time to time by the Board of Directors of the Company pursuant to Rule 17e-1
under the 1940 Act, as amended, copies of which shall be provided to the
Subadviser by the Investment Adviser.
5. It is also understood that it is desirable for the Portfolio that the
Subadviser have access to supplemental investment and market research and
security and economic analyses provided by certain brokers who may execute
brokerage transactions at higher commissions to the Portfolio than may result
when allocating brokerage to other brokers on the basis of seeking the most
favorable price and efficient execution. Therefore, the Subadviser is
authorized to place orders for the purchase and sale of securities for the
Portfolio with such certain brokers, subject to review by the Company's Board
of Directors from time to time with respect to the extent and continuation of
this practice. It is understood that the services provided by such brokers
may be useful to the Subadviser in connection with its services to other
clients. If any occasion should arise in which the Subadviser gives any
advice to its clients concerning the shares of the Portfolio, the
Subadviser will act solely as investment counsel for such clients and not in
any way on behalf of the Portfolio. The Subadviser's services to the
Portfolio pursuant to this Agreement are not to be deemed to be exclusive and
it is understood that the Subadviser may render investment advice, management
and other services to others.
Provided the investment objectives of the Portfolio are adhered to, and
such aggregation is in the best interests of the Portfolio, the Subadviser
may aggregate sales and purchase orders of securities held for the Portfolio
with similar orders being made simultaneously for other accounts managed by
the Subadviser, if in the Subadviser's reasonable judgment, such aggregation
is equitable and consistent with the Subadviser's fiduciary obligation to the
Portfolio and shall result in an overall economic benefit to the Portfolio,
taking into consideration the advantageous selling or purchase price,
brokerage commission and other expenses. In accounting for such aggregated
order price, commission and other expenses shall be averaged on a per bond or
share basis daily.
The Subadviser will advise the Portfolio's custodian and the Investment
Adviser on a prompt basis of each purchase and sale of a portfolio security,
specifying the name of the issuer, the description and amount or number of
shares of the security purchased, the market price, commission and gross or
net price, trade date, settlement date and identity of the effecting broker
or dealer, and such other information as may be reasonably required. From
time to time as the Board of Directors of the Company or the Investment
Adviser may reasonably request, the Subadviser will furnish to the Company's
officers and to each of its Directors, at the Subadviser's expense, reports
on portfolio transactions and reports on issues of securities held in the
portfolio, all in such detail as the Portfolio or the Investment Adviser may
reasonably request.
6. In the absence of willful misfeasance, bad faith, negligence, or
reckless disregard of the performance of the duties of the Subadviser to the
Portfolio, the Subadviser shall not be subject toliabilities to the
Portfolio, the Investment Adviser, the Company, or to any shareholder of the
Portfolio for any error of judgment or mistake of law or for any other action
or omission in the course of, or connected with, rendering services hereunder
or for any losses that may be sustained in the purchase, holding or sale of
any security, or otherwise.
Notwithstanding the above, the Subadviser will indemnify and hold
harmless the Investment Adviser from, against, for and in respect to
losses, damages, costs and expenses
<PAGE>
incurred by the Investment Adviser, including attorneys' fees reasonably
incurred, in the event of the Subadviser's willful misfeasance, bad faith or
negligence in the performance of its duties or obligations hereunder or by
reason of its reckless disregard of such duties or obligations; provided,
however, that the Investment Adviser shall not be so indemnified for such
losses, damages, costs and expenses, including such attorneys' fees, to the
extent they result from the Investment Adviser's willful misfeasance, bad
faith or negligence. The Investment Adviser shall indemnify and hold
harmless the Subadviser to the same extent and subject to the same
limitations as the Subadviser shall indemnify the Investment Adviser pursuant
to the previous sentence.
7. This Agreement shall remain in force until December 31, 1997, and
from year to year thereafter, but only so long as such continuance, and the
continuance of the Investment Adviser as investment adviser of the Portfolio,
is specifically approved at least annually by the vote of a majority of the
Directors of the Company who are not interested persons of the Subadviser,
the Investment Adviser or the Portfolio, cast in person at a meeting called
for the purpose of voting on such approval and by a vote of the Board of
Directors or of a majority of the outstanding voting securities of the
Portfolio. The aforesaid requirement that continuance of this Agreement be
"specifically approved at least annually" shall be construed in a manner
consistent with the 1940 Act and the rules, regulations and interpretations
thereunder. This Agreement may be terminated at any time without the payment
of any penalty, (a) by the Company, by the Board of Directors, or by vote of
a majority of the outstanding voting securities of the Portfolio, upon 60
days' written notice to the Investment Adviser and Subadviser, (b) by the
Investment Adviser, upon 60 days' written notice to the Portfolio and the
Subadviser, or (c) by the Subadviser, upon 90 days' written notice to the
Portfolio and Investment Adviser. This Agreement shall automatically
terminate in the event of its assignment. In interpreting the provisions of
this Agreement, the definitions contained in Section 2(a) of the 1940 Act
(particularly the definitions of "interested person," "assignment" and
"majority of the outstanding voting securities"), as from time to time
amended, shall be applied, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission by any rule, regulation or
order.
8. No provisions of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by vote of the holders of a majority of the outstanding voting
securities of the Portfolio and by the Board of Directors, including a
majority of the Directors who are not interested persons of the Investment
Adviser, the Subadviser or the Portfolio, cast in person at a meeting called
for the purpose of voting on such approval.
It shall be the responsibility of the Subadviser to furnish to the Board
of Directors of the Company such information as may reasonably be necessary
in order for such Directors to evaluate this Agreement or any proposed
amendments thereto for the purposes of casting a vote pursuant to paragraphs
7 or 8 hereof.
9. The Subadviser will conform its conduct in accordance with and will
ensure that the Sub-Portfolio conforms with the Company's Articles of
Incorporation and By-laws, each as amended from time to time, and the 1940
Act, as amended, other applicable laws, and to the investment objectives,
policies and restrictions of the Portfolio as each of the same shall be from
time to time in effect as set forth in the Portfolio's Prospectus and
Statement of Additional Information, or any investment guidelines or other
instructions received in writing from the Investment Adviser, and subject,
further, to such policies and instructions as the Board of
<PAGE>
Directors or the Investment Adviser may from time to time establish
and deliver to the Subadviser.
In addition, the Subadviser, taking into Portfolio only income and gains
realized with respect to the Sub-Portfolio, will cause the Sub-Portfolio to
comply with the requirements of: (a) Section 851(b)(2) of the Internal
Revenue Code (the "Code") regarding derivation of income from specified
investment activities; (b) Section 851(b)(3) of the Code limiting
gains from the disposition of securities and certain other investments held
less than three months, in each case as if the Sub-Portfolio were a
"regulated investment company" as defined in Section 851(a) of the Code; and
Section 817(h) of the Code and the regulations pertaining thereto. The
Subadviser shall not without the prior express written consent of the
Investment Adviser: (a) invest Sub-Portfolio assets having a value exceeding
five percent of the Portfolio's total (gross) assets in securities of one
issuer; or (b) cause the Sub-Portfolio to acquire more than ten percent of
the outstanding voting securities of any one issuer; or (c) invest
Sub-Portfolio assets in investments that are not cash, cash items (including
receivables), Government securities, securities of other regulated investment
companies, or other securities within the meaning of Section 851(b)(4) of the
Code. For purposes of clauses (a) and (b) of the foregoing sentence the term
"securities" shall exclude "Government securities" and "securities of other
regulated investment companies" as each such term is used in Section
851(b)(4) of the Code.
10. The Subadviser represents that it has reviewed the Registration
Statement of the Company as filed with the Securities and Exchange Commission
and represents and warrants that with respect to disclosure about the
Subadviser or information relating directly or indirectly to the Subadviser,
such Registration Statement contains, as of the date hereof, no untrue
statement of any material fact and does not omit any statement of material
fact which was required to be stated therein or necessary to make the
statements contained therein not misleading. The Subadviser further
represents and warrants that it is an investment adviser registered under the
Advisers Act.
11. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
12. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
13. Any notice given to the Subadviser by the Investment Adviser
pursuant to the terms of this Agreement shall be deemed to have been given if
provided in writing (including by telecopy orsimilar hard copy reproduction)
and delivered or mailed, postpaid, to: Pilgrim Baxter & Associates, Ltd.,
1255 Drummers Lane, Suite 300, Wayne, PS 29087-1549, Attn: Mr. Brian
Bereznak. Any notice given to the Investment Adviser by the Subadviser,
pursuant to the terms of this Agreement shall be deemed to have been given if
provided in writing (including by telecopy or similar hard copy reproduction)
and delivered to OppenheimerFunds, Inc., Two World Trade Center, New York, NY
10048, attention: General Counsel.
14. It is understood and expressly stipulated that the Subadviser must
look solely to the property of the Portfolio for the enforcement of any
claims against the Portfolio and shall not look to or have recourse to the
assets of the Company generally or any other series of the Company.
15. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first written above, and effective as of
March 1, 1996.
OppenheimerFunds, Inc.
By: /s/ Robert G. Zack
________________________________
Its: Senior Vice President
________________________________
PILGRIM BAXTER & ASSOCIATES, LTD.
By: /s/ Brian Brezneck
________________________________
Its: Chief Operating Officer
________________________________
<PAGE>
PILGRIM BAXTER & ASSOCIATES, LTD.
SCHEDULE A
TO
SUBADVISORY AGREEMENT
The fee payable by the Investment Adviser to the Subadviser shall be at
an annual rate equal to a percentage of the average daily Net Assets Under
Management (as defined below) as follows:
Annual Rate
-----------
.60% of the total net assets under management
For purposes of this Schedule A, Net Assets Under Management shall
consist of the aggregated net assets of each Sub-Account or Sub-Portfolio as
follows:
(a) the Small Capitalization U.S. equity Sub-Account of the CMIA
LifeSpan Capital Appreciation Account; (b) the Small Capitalization U.S.
equity Sub-Portfolio of the Series Fund I Life Span Capital Appreciation
Portfolio; (c) the Small Capitalization U.S. equity Sub-Account of the CMIA
LifeSpan Balanced Account; and (d) the Small Capitalization U.S. equity
Sub-Portfolio of the Series Fund I LifeSpan Balanced Portfolio, in each case
to the extent and for so long as the Subadviser also manages such assets.
For purposes hereof, the value of the net assets of the foregoing
Sub-Accounts and Sub-Portfolios shall be computed in the manner
specified in the applicable Prospectuses and Statements of Additional
Information for the computation of the value of the net assets in connection
with the determination of net asset value of their shares. On any day that
the net asset determination is suspended as specified in the Prospectuses,
the net asset value for purposes of calculating the Subadvisory fee with
respect to each of the aforementioned shall be calculated as of the date last
determined.
<PAGE>
SCHEDULE OF OMITTED INVESTMENT SUBADVISORY AGREEMENT
Due to the substantial similarity of the investment
subadvisory agreements among OppenheimerFunds, Inc. ("OFI") and
Pilgrim, Baxter & Associates, Ltd. ("Pilgrim") for the respective
series of the Registrant, the following form of investment
subadvisory agreement for LifeSpan Balanced Portfolio and this
schedule of omitted documents is filed in accordance with the
requirements of Rule 8b-31 under the Investment Company Act of
1940.
1. Investment Subadvisory Agreement among OFI and
Pilgrim for LifeSpan Capital Appreciation Portfolio.
<PAGE>
EXHIBIT 5.2
CONNECTICUT MUTUAL FINANCIAL SERVICES SERIES FUND I, INC.
SUBADVISORY AGREEMENT
AGREEMENT made as of the 1st day of March, 1996 by and among
OppenheimerFunds, Inc., a Colorado corporation, (the "Investment
Adviser"), and BEA Associates, a New York General Partnership (the
"Subadviser").
Connecticut Mutual Financial Services Series Fund I, Inc., a Maryland
corporation (the "Company"), is an open-end, management investment company,
registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). The LifeSpan Capital Appreciation Portfolio (the
"Portfolio") is a series of the Company. The Investment Adviser and the
Subadviser are investment advisers registered under the Investment Advisers
Act of 1940 (the "Advisers Act").
Pursuant to authority granted the Investment Adviser by the Company's
Board of Directors and pursuant to the provisions of the Investment Advisory
Agreement dated March 1, 1996, between the Investment Adviser and the
Company, on behalf of the Portfolio, the Investment Adviser has selected the
Subadviser to act as an investment subadviser of the Portfolio and to provide
certain other services, as more fully set forth below, and the Subadviser is
willing to act as such investment subadviser and to perform such services
under the terms and conditions hereinafter set forth. Accordingly, the
Investment Adviser and the Company, on behalf of the Portfolio agree with the
Subadviser as follows:
1. The Subadviser will regularly provide the Portfolio with advice
concerning the investment management of the High Yield Fixed Income portion
of the Portfolio (the "Sub-Portfolio"), designated by the Investment Adviser.
Such advice shall be consistent with the investment objectives and policies
of the Portfolio as set forth in the Portfolio's Prospectus and Statement of
Additional Information, and any investment guidelines or other instructions
received in writing from the Investment Adviser. The Subadviser will
determine what securities shall be purchased for the Sub-Portfolio, and what
securities shall be held or sold by the Sub-Portfolio, subject always to the
provisions of Section 9 hereof.
The Investment Adviser shall oversee the management of the
Sub-Portfolio by the Subadviser. The Investment Adviser shall manage
directly, or by engaging other subadvisers, and the Subadviser shall not be
responsible for the management of, any portion of the Portfolio not
designated as part of the Sub-Portfolio. The Subadviser shall not be
responsible for the provision of administrative, bookkeeping or accounting
services to the Portfolio, except as otherwise provided herein, as required
by the Advisers Act as may be necessary for the Subadviser to supply to the
Investment Adviser, the Company or the Company's Board of Directors the
information required to be supplied under this Agreement. Any records
required to be maintained shall be the property of the Company and shall be
surrendered promptly to the Company upon request.
In the performance of the Subadviser's duties hereunder, the Subadviser
is and shall be an independent contractor and unless otherwise expressly
provided herein or otherwise authorized in writing, shall have no authority
to act for or represent the Company, Portfolio or the Investment Adviser in
any way or otherwise be deemed to be an agent of the Company, Portfolio or
the Investment Adviser. The Subadviser will make its officers and employees
available to meet with
<PAGE>
the Company's officers and Board of Directors at least quarterly on due notice
to review the investments and investment program of the Sub-Portfolio in the
light of current and prospective economic and market conditions.
2. The Subadviser will bear its own costs of providing services
hereunder. Other than as herein specifically indicated, the Subadviser
shall not be responsible for the Portfolio's expenses, including
brokerage and other expenses incurred in placing orders for the purchase and
sale of securities. Specifically, the Subadviser will not be responsible for
expenses of the Portfolio including, but not limited to, the following: legal
expenses; auditing and accounting expenses; expenses of maintenance of the
Portfolio's books and records relating to the Portfolio, including
computation of the Portfolio's daily net asset value per share and dividends;
interest, taxes, governmental fees and membership dues; fees of custodians,
transfer agents, registrars or other agents; expenses of preparing share
certificates; expenses relating to the redemption or repurchase of the
Portfolio's shares; expenses of registering and qualifying Portfolio shares
for sale under applicable federal and state law; expenses of preparing,
setting in print, printing and distributing prospectuses, reports, notices
and dividends to Portfolio shareholders; cost of stationery; costs of
shareholders and other meetings of the Portfolio; traveling expenses of
officers, Directors and employees of the Company or Portfolio, if any; fees
of the Company's Directors and salaries of any officers or employees of the
Company or Portfolio; and the Portfolio's pro rata portion of premiums on any
fidelity bond and other insurance covering the Company, the Portfolio and
their officers and Directors.
The Portfolio shall reimburse the Subadviser for any such expenses or
other expenses of the Portfolio, as may be reasonably incurred by such
Subadviser on the Portfolio's behalf. The Subadviser shall keep and supply
to the Portfolio and the Investment Adviser adequate records of all such
expenses.
3. For all investment management services to be rendered hereunder, the
Investment Adviser will pay the Subadviser an annual fee, payable quarterly,
as described in SCHEDULE A hereto. For any period less than a full fiscal
quarter during which this Agreement is in effect, the fee shall be prorated
according to the proportion which such period bears to a full fiscal quarter.
The Portfolio shall have no responsibility for any fee payable to the
Subadviser.
In the event that the advisory fee payable by the Portfolio to the
Investment Adviser shall be reduced as required by the securities laws or
regulations of any jurisdiction in which the Portfolio's shares are offered
for sale, the amount payable by the Adviser to the Subadviser shall be
likewise reduced by a proportionate amount.
4. In connection with the purchases or sales of portfolio securities on
behalf of the Portfolio, neither the Subadviser nor any of its partners,
directors, officers or employees will act as a principal or agent or receive
directly or indirectly any compensation in connection with the purchase or
sale of investment securities by the Portfolio, other than as
provided in this Agreement. The Subadviser, or its agent, shall arrange
for the placing of all orders for the purchase and sale of securities for the
Sub-Portfolio with brokers or dealers selected by the Subadviser, provided
that the Subadviser shall not be responsible for payment of brokerage
commissions. In the selection of such brokers or dealers and the placing of
such orders, the Subadviser is directed at all times to seek for the
Portfolio the best execution available. Neither the Subadviser nor any
affiliate of the Subadviser will act as principal or receive directly or
indirectly any compensation in connection with the purchase or sale of
investment securities by the
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<PAGE>
Sub-Portfolio, other than compensation provided for in this Agreement or in
the Investment Advisory Agreement of the Portfolio and such brokerage
commissions as are permitted by the 1940 Act. If and to the extent authorized
to act as broker in the relevant jurisdiction, the Subadviser or any of its
affiliates may act as broker for the Sub-Portfolio in the purchase and sale
of securities. The Subadviser agrees that all transactions effected through
the Subadviser or brokers affiliated with the Subadviser shall be effected in
compliance with Section 17(e) of the 1940 Act and written procedures
established from time to time by the Board of Directors of the Company
pursuant to Rule 17e-1 under the 1940 Act, as amended, copies of which shall
be provided to the Subadviser by the Investment Adviser.
5. It is also understood that it is desirable for the Portfolio that
the Subadviser have access to supplemental investment and market research and
security and economic analyses provided by certain brokers who may execute
brokerage transactions at higher commissions to the Portfolio than may result
when allocating brokerage to other brokers on the basis of seeking the most
favorable price and efficient execution. Therefore, the Subadviser is
authorized to place orders for the purchase and sale of securities for the
Sub-Portfolio with such certain brokers, subject to review by the Company's
Board of Directors from time to time with respect to the extent and
continuation of this practice. It is understood that the services provided
by such brokers may be useful to the Subadviser in connection with its
services to other clients. If any occasion should arise in which the
Subadviser gives any advice to its clients concerning the shares of the
Sub-Portfolio, the Subadviser will act solely as investment counsel for such
clients and not in any way on behalf of the Portfolio. The Subadviser's
services to the Portfolio pursuant to this Agreement are not to be deemed to
be exclusive and it is understood that the Subadviser may render investment
advice, management and other services to others.
Provided the investment objectives of the Portfolio are adhered to, and
such aggregation is in the best interests of the Portfolio, the Subadviser
may aggregate sales and purchase orders of securities held for the
Sub-Portfolio with similar orders being made simultaneously for other funds
managed by the Subadviser, if in the Subadviser's reasonable judgment, such
aggregation is equitable and consistent with the Subadviser's fiduciary
obligation to the Portfolio and shall result in an overall economic benefit
to the Portfolio, taking into consideration the advantageous selling or
purchase price, brokerage commission and other expenses. In accounting for
such aggregated order price, commission and other expenses shall be averaged
on a per bond or share basis daily.
The Subadviser will advise the Portfolio's custodian and the Investment
Adviser on a prompt basis of each purchase and sale of a portfolio security,
specifying the name of the issuer, the description and amount or number of
shares of the security purchases, the market price, commission and gross or
net price, trade date, settlement date and identity of the effecting broker
or dealer, and such other information as may be reasonably required. From
time to time as the Board of Directors of the Company or the Investment
Adviser may reasonably request, the Subadviser will furnish the Company's
officers and to each of its Directors, at the Subadviser's expense, reports
on portfolio transactions and reports on issues of securities held in the
Sub-Portfolio, all in such detail as the Portfolio or the Investment Adviser
may reasonably request.
Subject to any other written instructions of the Investment Adviser, the
Subadviser is hereby appointed the Investment Adviser's agent and
attorney-in-fact on behalf of the Sub-Portfolio in its discretion to vote,
tender or convert any securities in the Sub-Portfolio; to execute proxies,
waivers, consents, account documentation, agreements, contracts and other
instruments with respect to such securities and the assets of the
Sub-Portfolio; to endorse, transfer or deliver
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<PAGE>
such securities and to participate in or consent to any class action, plan of
reorganization, merger, combination, consolidation, liquidation or similar
plan with reference to such securities; and the Subadviser shall not incur
any liability to the Investment Adviser or the Sub-Portfolio by reason of any
exercise of, or failure to exercise, any such discretion in the absence of
wilful misfeasance, bad faith, or gross negligence.
6. The Subadviser will not be liable for any loss sustained by reason
of the adoption of any investment policy or the purchase, sale, or retention
of any security on the recommendation of the Subadviser whether or not such
recommendation shall have been based upon its own investigation and research
or upon investigation and research made by any other individual, firm or
corporation, if such recommendation shall have been made and such other
individual, firm, or corporation shall have been selected, with due care and
in good faith; but nothing herein contained will be construed to protect the
Subadviser against any liability to the Investment Adviser, the Company, the
Portfolio or its shareholders by reason of: (a) the Subadviser negligently
causing the Sub-Portfolio to be in violation of any federal or state law,
rule or regulation or any investment policy or restriction set forth in the
Portfolio's prospectus or Statement of Additional Information or any written
guidelines or instruction provided in writing by the Company's Board of
Directors or the Investment Adviser, (b) the Subadviser negligently causing
the Sub-Portfolio to fail to satisfy the requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code") due to the
Subadviser's failure to comply with the requirements set forth in the second
paragraph of Section 9; or (c) the Subadviser's willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of
its reckless disregard of its obligations and duties under this Agreement;
provided that, with respect to (a) and (b) above, the Subadviser shall be
deemed not to have been negligent if it acts in reliance upon written reports
provided by the Investment Adviser, the Company, the Portfolio, or any of
their respective authorized agents.
The Subadviser will indemnify the Investment Adviser to the fullest
extent permitted by law against any and all loss, damage, judgment, fines,
amounts paid in settlement and attorneys fees incurred by the Investment
Adviser to the extent resulting, in whole or in part, from any of the
Subadviser's acts or omissions specified in (a), (b) or (c) above or
otherwise from the Subadviser's willful misfeasance, bad faith, or gross
negligence, provided, however, that nothing herein contained will provide
indemnity to the Investment Adviser for liability resulting from its own
willful misfeasance, bad faith, or gross negligence in the performance of its
duties or reckless disregard of such duties.
7. This Agreement shall remain in force until December 31, 1998, and
from year to year thereafter, but only so long as such continuance, and the
continuance of the Investment Adviser as investment adviser of the Portfolio,
is specifically approved at least annually by the vote of a majority of the
Directors of the Company who are not interested persons of the Subadviser,
the Investment Adviser or the Portfolio, cast in person at a meeting called
for the purpose of voting on such approval and by a vote of the Board of
Directors or of a majority of the outstanding voting securities of the
Portfolio. The aforesaid requirement that continuance of this Agreement be
"specifically approved at least annually" shall be construed in a manner
consistent with the 1940 Act and the rules, regulations and interpretations
thereunder. This Agreement may be terminated at any time without the payment
of any penalty, (a) by the Company, by the Board of Directors, or by vote of
a majority of the outstanding voting securities of the Portfolio, upon 60
days' written notice to the Adviser and Subadviser, (b) by the Investment
Adviser, upon 60 days' written notice to the Portfolio and the Subadviser, or
(c) by the Subadviser, upon 90 days' written notice to the Portfolio and
Investment Adviser. This Agreement shall automatically terminate in
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<PAGE>
the event of its assignment. In interpreting the provisions of this
Agreement, the definitions contained in Section 2(a) of the 1940 Act
(particularly the definitions of "interested person," "assignment" and
"majority of the outstanding voting securities"), as from time to time
amended, shall be applied, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission by any rule, regulation or
order.
8. No provisions of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by vote of the holders of a majority of the outstanding voting
securities of the Portfolio and by the Board of Directors, including a
majority of the Directors who are not interested persons of the Investment
Adviser, the Subadviser or the Portfolio cast in person at a meeting called
for the purpose of voting on such approval.
It shall be the responsibility of the Subadviser to furnish to the Board
of Directors of the Company such information as may reasonably be necessary
in order for such Directors to evaluate this Agreement or any proposed
amendments thereto for the purposes of casting a vote pursuant to paragraphs
7 or 8 hereof.
9. The Subadviser will conform its conduct in accordance with and will
ensure that the Sub-Portfolio conforms with the Company's Articles of
Incorporation and By-laws, each as amended from time to time, and the 1940
Act, as amended, other applicable laws, and to the investment objectives,
policies and restrictions of the Portfolio as each of the same shall be from
time to time in effect as set forth in the Portfolio's Prospectus and
Statement of Additional Information, or any investment guidelines or other
instructions received in writing from the Investment Adviser, and subject,
further, to such policies and instructions as the Board of Directors or the
Investment Adviser may from time to time establish and deliver to
the Subadviser.
In addition, the Subadviser, taking into account only income and gains
realized with respect to the Sub-Portfolio, will cause the Sub-Portfolio to
comply with the requirements of: (a) Section 851(b)(2) of the Code regarding
derivation of income from specified investment activities; (b) Section
851(b)(3) of the Code limiting gains from the disposition of securities and
certain other investments held less than three months, in each case as if the
Sub-Portfolio were a "regulated investment company" as defined in Section
851(a) of the Code; and Section 817(h) of the Code and the regulations
pertaining thereto. The Subadviser shall not without the prior express
written consent of the Investment Adviser: (a) invest Sub-Portfolio assets
having a value exceeding five percent of the Portfolio's total (gross) assets
in securities of one issuer; or (b) cause the Sub-Portfolio to acquire more
than ten percent of the outstanding voting securities of any one issuer; or
(c) invest Sub-Portfolio assets in investments that are not cash, cash items
(including receivables), Government securities, securities of other regulated
investment companies, or other securities within the meaning of Section
851(b)(4) of the Code. For purposes of clauses (a) and (b) of the foregoing
sentence the term "securities" shall exclude "Government securities" and
"securities of other regulated investment companies" as each such term is
used in Section 851(b)(4) of the Code.
10. The Subadviser represents that it has reviewed the Registration
Statement of the Company as filed with the Securities and Exchange Commission
and represents and warrants that with respect to disclosure about the
Subadviser or information relating directly or indirectly to the
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<PAGE>
Subadviser, such Registration Statement contains, as of the date hereof, no
untrue statement of any material fact and does not omit any statement of
material fact which was required to be stated therein or necessary to make
the statements contained therein not misleading. The Subadviser further
represents and warrants that it is an investment adviser registered under the
Advisers Act.
11. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
12. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
13. Any notice given to the Subadviser by the Investment Adviser
pursuant to the terms of this Agreement shall be deemed to have been given if
provided in writing (including by telecopy or similar hard copy
reproduction) and delivered or mailed, postpaid, to: BEA Associates,
One Citicorp Center, 153 East 53rd Street, 57th Floor, New York, NY 10022.
Any notice given to the Investment Adviser by the Subadviser, pursuant to
the terms of this Agreement shall be deemed to have been given if provided in
writing (including by telecopy or similar hard copy reproduction) and
delivered to OppenheimerFunds, Inc., Two World Trade Center, New York, NY
10048-0203, Attention: General Counsel.
14. It is understood and expressly stipulated that the Subadviser must
look solely to the property of the Portfolio for the enforcement of any
claims against the Portfolio and shall not look to or have recourse to the
assets of the Company generally or any other series of the Company.
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<PAGE>
15. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first written above, and effective as of
March 1, 1996.
OPPENHEIMERFUNDS, INC.
By: /s/ Robert G. Zack
__________________________
Its: Senior Vice President
_________________________
BEA ASSOCIATES, A General Partnership
By: /s/ Hal Liebes
____________________________
Its: Vice President/Legal Counsel
____________________________
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<PAGE>
SCHEDULE A
TO
SUBADVISORY AGREEMENT
The fee payable by the Investment Adviser to the Subadviser shall be at
an annual rate equal to a percentage of the average daily Net Assets Under
Management (as defined below) as follows:
Annual Rate
-----------
.45% of the first $25 Million of such assets,
.40% of the next $25 Millon of such assets,
.35% of the next $50 Million of such assets, and
.25% of such assets over $100 Million.
For purposes of this Schedule A, Net Assets Under Management shall
consist of the aggregated net assets of each Sub-Portfolio as follows:
(a) the High Yield Sub-Portfolio of the CMIA LifeSpan Diversified Income
Portfolio; (b) the High Yield Sub-Portfolio of the Series Fund I LifeSpan
Diversified Income Portfolio; (c) the High Yield Sub-Portfolio of the CMIA
LifeSpan Balanced Portfolio; (d) the High Yield Sub-Portfolio of the Series
Fund I LifeSpan Balanced Portfolio; (e) the High Yield Sub-Portfolio of the
CMIA LifeSpan Capital Appreciation Portfolio; and (f) the High Yield
Sub-Portfolio of the Series Fund I LifeSpan Capital Appreciation Portfolio,
in each case to the extent and for so long as the Subadviser also manages
such assets.
For purposes hereof, the value of net assets of the foregoing
Sub-Portfolios and Portfolios shall be computed in the manner specified in
the applicable Prospectuses and Statements of Additional Information for the
computation of the value of the net assets in connection with the
determination of net asset value of their shares. On any day that the net
asset value determination is suspended as specified in the Prospectuses, the
net asset value for purposes of calculating the subadvisory fee with respect
to each of the aforementioned shall be calculated as of the date last
determined.
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<PAGE>
SCHEDULE OF OMITTED INVESTMENT SUBADVISORY AGREEMENTS
Due to the substantial similarity of the investment
subadvisory agreements among OppenheimerFunds, Inc. ("OFI") and
BEA Associates ("BEA") for the respective series of the
Registrant, the following form of investment subadvisory agreement
for LifeSpan Balanced Portfolio and this schedule of omitted
documents is filed in accordance with the requirements of Rule 8b-31
under the Investment Company Act of 1940.
1. Investment Subadvisory Agreement among OFI and BEA
for LifeSpan Capital Appreciation Portfolio.
2. Investment Subadvisory Agreement among OFI and BEA
for LifeSpan Diversified Income Portfolio.
<PAGE>
EXHIBIT 5.3
INVESTMENT SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT is by and between
Babson-Stewart Ivory International, a partnership organized under the laws
of the Commonwealth of Massachusetts (the "Subadviser"), and
OppenheimerFunds, Inc., a Colorado corporation ("OFI"), effective
March 1, 1996.
WHEREAS, LifeSpan Balanced Portfolio (the "Fund") is a series of
Connecticut Mutual Financial Services Series Fund I, Inc. (the "Company"), a
Maryland corporation which is an open-end diversified management investment
company registered as such with the Securities and Exchange Commission (the
"Commission") pursuant to the Investment Company Act of 1940, as amended (the
"1940 Act"), and the Company has appointed OFI as the investment adviser for
the Fund, pursuant to the terms of an Investment Advisory Agreement (the
"Advisory Agreement");
WHEREAS, the Advisory Agreement provides that OFI may, at its option,
subject to approval by the Board of Directors of the Company, and, to the
extent necessary, shareholders of the Fund, appoint a subadviser to assume
certain responsibilities and obligations of OFI under the Advisory Agreement;
WHEREAS, OFI and the Subadviser are investment advisers registered as
such with the Commission, and OFI desires to appoint the Subadviser as a
subadviser for the Fund and the Subadviser is willing to act in such
capacity upon the terms herein set forth;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, OFI and the Subadviser, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. GENERAL PROVISION.
OFI hereby employs the Subadviser and the Subadviser hereby undertakes
to act as the investment subadviser of the international portion of the
portfolio of the Fund designated by OFI (the "Sub-Account") and to
provide investment advice and to perform for the Fund such other duties
and functions as are hereinafter set forth. The Subadviser shall, in
all matters, give to the Fund and the Company's Board of Directors,
directly or through OFI, the benefit of the Subadviser's best judgment,
effort, advice and recommendations and shall, at all times conform to,
and use its best efforts to enable the Fund to conform to:
(a) the provisions of the 1940 Act and any rules or regulations
thereunder;
(b) the provisions of Subchapter M of the Internal Revenue Code, as it
may be amended from time to time;
(c) any other applicable provisions of state or federal law;
(d) the provisions of the Articles of Incorporation and By-Laws of the
Company as amended from time to time;
(e) policies and determinations of the Board of Directors of the Company
and OFI;
(f) the fundamental policies and investment restrictions of the Fund as
reflected in the Company's registration statement under the 1940 Act
or as such fundamental policies and investment restrictions may,
from time to time, be amended by the Fund's shareholders;
<PAGE>
(g) the Prospectus and Statement of Additional Information of the Fund
in effect from time to time; and
(h) any investment guidelines or other instructions received in writing
from OFI.
The appropriate officers and employees of the Subadviser shall be
available upon reasonable notice for consultation with any of the
Directors and officers of the Company and OFI with respect to any
matters dealing with the business and affairs of the Fund including
without limitation the valuation of portfolio securities of the
Sub-Account that are either not registered for public sale or not traded
on any securities market.
In the performance of its duties hereunder, the Subadviser is and
shall be an independent contractor and unless otherwise expressly
provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Company, the Fund or OFI in any
way or otherwise be deemed to be an agent of the Company, the Fund or
OFI.
2. DUTIES OF THE SUBADVISER.
(a) The Subadviser shall, subject to the direction and control by the
Company's Board of Directors or OFI, to the extent OFI's direction
is not inconsistent with that of the Board of Directors,
(i) regularly provide investment advice and recommendations to the
Fund, directly or through OFI, with respect to the Sub-Account's
investments, investment policies and the purchase and sale of
securities; (ii) supervise and monitor continuously the investment
program of the Fund with respect to the Sub-Account and the portfolio
composition of the Sub-Account and determine what securities shall
be purchased or sold for the Sub-Account of the Fund; (iii) arrange,
subject to the provisions of paragraph 5 hereof, for the purchase of
securities and other investments for the Sub-Account of the Fund and
the sale of securities and other portfolio investments held in the
Sub-Account of the Fund; and (iv) provide reports on the foregoing to
the Board of Directors at each Board meeting.
(b) Provided that neither OFI nor the Fund or the Company shall be
required to pay any compensation other than as provided by the
terms of this Agreement and subject to the provisions of paragraph
5 hereof, the Subadviser may obtain investment information,
research or assistance from any other person, firm or corporation to
supplement, update or otherwise improve its investment management
services.
(c) Provided that nothing herein shall be deemed to protect the
Subadviser from willful misfeasance, bad faith or gross negligence
in the performance of its duties, or reckless disregard of its
obligations and duties under this Agreement, the Subadviser shall
not be liable for any loss sustained by reason of good faith errors
or omissions inconnection with any matters to which this Agreement
relates.
(d) Nothing in this Agreement shall prevent OFI or the Subadviser or
any officer thereof from acting as investment adviser or subadviser
for any other person, firm or corporation and shall not in any way
limit or restrict OFI or the Subadviser or any of their respective
directors, officers, stockholders, partners or employees from buying,
selling or trading any securities for its or their own account or for
the account of others for whom it or they may be acting, provided
that such activities will not adversely affect or otherwise impair
the performance by any party of its duties and obligations under this
Agreement.
<PAGE>
(e) The Subadviser shall cooperate with OFI by providing OFI with any
information in the Subadviser's possession necessary for supervising
the activities of all administrative and clerical personnel as shall
be required to provide effective corporate administration for the
Fund, including the compilation and maintenance of such records with
respect to its operations as may reasonably be required. Any
records required to be maintained shall be the property of the
Company and shall be surrendered promptly to the Company on request.
The Subadviser shall, at its own expense, provide such officers
for the Company as its Board may request.
3. DUTIES OF OFI.
OFI shall provide (or cause to be provided to) the Subadviser the
following information about the Sub-Account:
(a) cash flow estimates on request;
(b) notice of the Sub-Account's "investable funds" by 11:00 a.m. each
business day;
(c) as they are modified, from time to time, current versions of the
documents and policies referred to in subparagraphs (d), (e), (f),
(g) and (h) of paragraph 1 above.
4. COMPENSATION OF THE SUBADVISER.
The Subadviser will bear its own costs of providing services
hereunder. The Subadviser shall not be responsible for the Fund's
expenses. OFI agrees to pay the Subadviser and the Subadviser agrees
to accept as full compensation for the performance of all functions and
duties on its part to be performed pursuant to the provisions hereof, a
fee computed on the net asset value of the Sub-Account of the Fund as of
the close of each business day and payable monthly by the tenth business
day of the following month, at the following annual rates:
.75% of the first $10 million of average net assets in the
Sub-Account;
.625% of the next $15 million of average net assets in the
Sub-Account;
.50% of the next $25 million of average net assets in the
Sub-Account; and
.375% of the average net assets in excess of $50 million in the
Sub-Account.
For any period less than a full month during which this Agreement is
in effect, the fee shall be pro-rated according to the proportion which
such period bears to a full month (a month being the calendar month of
which such period is part). The Fund shall have no responsibility for
any fee payable to the Subadviser.
5. PORTFOLIO TRANSACTIONS AND BROKERAGE.
(a) In connection with purchases or sales of portfolio securities on
behalf of the Fund, neither the Subadviser nor any of its partners,
directors, officers or employees will act as a principal or agent or
receive directly or indirectly any compensation in connection with
the purchase or sale of securities by the Fund, other than as
provided herein. The Subadviser is authorized, in arranging the
purchase and sale of the Sub-Account's portfolio securities, to
employ or deal with such members of securities exchanges, brokers or
dealers (hereinafter "broker-dealers"), including broker-dealers that
are "affiliated" broker-dealers (as that term is defined in the 1940
Act), as may, in the Subadviser's best judgment, implement the
policy of the Fund to obtain, at reasonable expense, the "best
execution" (prompt and reliable execution at the most favorable
security price
<PAGE>
obtainable) of the Fund's portfolio transactions. All
transactions effected through any affiliated brokers shall be
effected in compliance with Section 17(e) of the 1940 Act and any
written procedures established from time to time by the Board of
Directors of the Company pursuant to Rule 17e-1 under the 1940 Act,
as it may be amended from time to time, copies of which procedures
shall be provided to the Subadviser by OFI.
(b) The Subadviser may effect the purchase and sale of securities
(which are otherwise publicly traded) in private transactions on
such terms and conditions as are customary in such transactions, may
use a broker to effect said transactions, and may enter into a
contract in which the broker acts either as principal or as agent.
(c) The Subadviser shall select broker-dealers to effect the
Sub-Account's portfolio transactions on the basis of its estimate
of their ability to obtain best execution of particular and related
portfolio transactions. The abilities of a broker-dealer to obtain
best execution of particular portfolio transaction(s) will be judged
by the Subadviser on the basis of all relevant factors and
considerations including, insofar as feasible, the execution
capabilities required by the transaction or transactions; the
ability and willingness of the broker-dealer to facilitate the
Sub-Account's portfolio transactions by participating therein for
its own account; the importance to the Fund of speed, efficiency or
confidentiality; the broker-dealer's apparent familiarity with
sources from or to whom particular securities might be purchased or
sold; as well as any other matters relevant to the selection of a
broker-dealer for particular and related transactions of the Fund.
(d) The Subadviser shall not be responsible for payment of brokerage
commissions.
(e) Provided that such aggregation is in the best interests of the Fund,
the Subadviser may aggregate orders for the purchase and sale of
securities for the Sub-Account with similar orders being made
simultaneously for other funds managed by the Subadviser, if, in the
Subadviser's reasonable judgment, such aggregation is equitable and
consistent with the Subadviser's fiduciary obligation to the Fund
and shall result in an overall economic benefit to the Fund, taking
into consideration the advantageous sale or purchase price,
brokerage commissions or other expenses.
(f) The Subadviser will advise OFI and the Fund's Custodian promptly
of each purchase and sale of a portfolio security, specifying the
name of the issuer, the description and amount or number of shares
of the security purchased or sold, the market price, commissions and
gross or net price, trade date, settlement date and identity of the
effecting broker or dealer, and such other information as may be
reasonably required. From time to time as the Board of Directors of
the Company or OFI may reasonably request, the Subadviser will
furnish to the Company's officers and to its Directors, at the
Subadviser's expense, reports on portfolio transactions and reports
on issuers of securities held in the Sub-Account, all in such detail
as the Fund or OFI shall reasonably request.
6. DURATION.
This Agreement will take effect on March 1, 1996, and unless earlier
terminated pursuant to paragraph 7 shall remain in effect until
December 31, 1998. Thereafter it shall continue in effect from year
to year, so long as such continuance and the continuance of OFI as
Adviser to the Fund shall be approved at least annually by the Company's
Board of Directors, including the vote of the majority of the Directors
of the Company who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any such party cast
in person at a meeting called for the purpose of voting on such
<PAGE>
approval, or by the holders of a "majority" (as defined in the 1940 Act)
of the outstanding voting securities of the Fund and by such a vote of
the Company's Board of Directors.
7. TERMINATION.
This Agreement shall terminate automatically upon its assignment or in
the event of the Company's termination of the Advisory Agreement; it may
also be terminated: (i) by-the Subadviser at any time without penalty
upon ninety days' written notice to OFI and the Company; or (ii) by the
Company at any time without penalty upon sixty days' written notice to
OFI and the Subadviser provided that such termination by the Company
shall be directed or approved by a vote of a majority of all of the
Directors of the Company then in office or by the vote of the holders of
a "majority" of the outstanding voting securities of the Fund
(as defined in the 1940 Act); or (iii) by OFI, upon 60 days' written
notice to the Fund and the Subadviser.
8. NOTICE.
Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party, with a copy to
the Company, at the addresses below or such other address as such other
party may designate for the receipt of such notice.
If to OFI:
OppenheimerFunds, Inc.
Two World Trade Center, 34th Floor
New York, NY 10048-0203
Attention: Andrew J. Donohue, Esq.
If to the Subadviser:
Babson-Stewart Ivory International
One Memorial Drive
Cambridge, Massachusetts 02142-1300
Attention:______________________
If to either party, copy to:
LifeSpan Balanced Portfolio
3410 South Galena Street
Denver, Colorado 80231-5099
Attention: Chairman
9. No provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the
party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be
effective until its approval by vote of the holders of a majority of the
outstanding voting securities of the Fund and by the Board of Directors
of the Company, including a majority of the Directors who are not
interested persons of OFI, the Subadviser or the Fund, cast in person at
a meeting called for the purpose of voting on such approval.
<PAGE>
10. The Subadviser represents that it has reviewed the Registration
Statement of the Company, including any amendments or supplements
thereto, and any Proxy Statement relating to the approval of this
Agreement, as filed with the Securities and Exchange Commission and
represents and warrants that with respect to disclosure about the
Subadviser or information relating directly or indirectly to the
Subadviser, such Registration Statement or Proxy Statement contains,
as of the date hereof, no untrue statement of any material fact and
does not omit any statement of material fact which was required to be
stated therein or necessary to make the statements contained therein not
misleading. The Subadviser further represents and warrants that it is
an investment adviser registered under the Investment Advisers Act of
1940, as amended, and under the laws of all jurisdictions in which the
conduct of its business hereunder requires such registration.
11. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
12. It is expressly understood and stipulated that the Subadviser must look
solely to the property of the Fund for the enforcement of any claims
against the Fund and shall not look to or have recourse to the assets of
the Company generally or any other series of the Company.
13. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, OFI and the Subadviser have caused this Agreement to
be executed on the day and year first above written.
OppenheimerFunds, Inc.
By: /s/ Robert G. Zack, Senior Vice President
_________________________________________
(Name) (Title)
BABSON-STEWART IVORY INTERNATIONAL, a
Partnership
By: /s/ Ronald E. Swozdz, Managing Director
_________________________________________
(Name) (Title)
<PAGE>
SCHEDULE OF OMITTED INVESTMENT SUBADVISORY AGREEMENT
Due to the substantial similarity of the investment
subadvisory agreements among OppenheimerFunds, Inc. ("OFI") and
Babson-Stewart Ivory International ("Babson") for the respective
series of the Registrant, the following form of investment
subadvisory agreement for LifeSpan Balanced Portfolio and this
schedule of omitted documents is filed in accordance with the
requirements of Rule 8b-31 under the Investment Company Act of
1940.
1. Investment Subadvisory Agreement among OFI and
Babson for LifeSpan Capital Appreciation Portfolio.
2. Investment Subadvisory Agreement among OFI and
Babson for International Portfolio.
<PAGE>
SERVICE CONTRACT
THIS AGREEMENT is made effective the 18th day of March,
1996, between CONNECTICUT MUTUAL FINANCIAL SERVICES SERIES FUND I,
INC. (hereinafter referred to as the "Company"), a Maryland
corporation, having its principal place of business at 3410 South
Galena Street, Denver, Colorado 80231 on behalf of each series of
the Company designated by the Company to OFS on Exhibit 1 to this
Agreement (each series is hereinafter referred to as a "Fund") as
such Exhibit may be amended from time to time to add additional
series of the Company, and OPPENHEIMERFUNDS SERVICES, a division
of OPPENHEIMERFUNDS, INC., a Colorado corporation ("hereinafter
referred to as "OFS") having its principal place of business at
3410 South Galena Street, Denver, Colorado 80231.
WITNESSETH:
WHEREAS, the Company desires that OFS perform certain
registrar and transfer agency services for the Fund, as more
specifically set forth in Schedule A to this Agreement.
THEREFORE, the parties hereto agree as follows:
1. SERVICES TO BE PERFORMED BY OFS.
The services to be performed for the Funds by OFS are
set forth in Schedule A to this Agreement, which Schedule is
incorporated as part of this Agreement. OFS shall perform such
services as registrar, transfer agent, dividend and distribution
<PAGE>
disbursing agent, redemption agent, clearing agent and exchange
agent or as service agent for the Funds. OFS hereby represents to
the Company that it is, and during the term of this Agreement and
any renewals hereof will continue to be, an owner or authorized
licensee for the computer data processing systems used by OFS in
the rendition of services hereunder.
2. ADDITIONAL SERVICES.
OFS also agrees to perform such additional services
within its data processing and shareholder services capacities as
may be requested from time to time by a Fund, provided that such
services are the subject of an amendment to Schedule A hereof
executed by the parties hereto in the manner provided herein for
amendments to this Agreement.
3. FEES.
A. METHOD OF CALCULATING FEES PAID BY THE FUND. OFS
will render the services it agrees hereunder to provide to each
Fund on a cost basis to be determined as hereinafter provided.
Each Fund will pay OFS an amount (the "Fund's Share") of OFS's
"Reimbursable Expenses" as defined in subparagraph B of this
section, as frequently as requested by OFS, such amounts to be
paid by the Fund when billed by OFS for expenses incurred, or to
be prepaid based on estimates by OFS if such prepayment
arrangement is approved by the Board of Directors of the Company.
Any such estimates upon which prepayments are made shall be
verified and adjusted monthly thereafter in accordance with OFS's
-2-
<PAGE>
allocated costs, as described in subparagraph E below. All
servicing and transaction fees or charges, required by a Fund's
then-current prospectus to be paid by an investor in the Fund's
shares, will be collected by OFS and credited against the Fund's
Share of Reimbursable Expenses. Any credit for fees payable for
an investor's purchase of, or exchange for, the shares of any
other investment company for which OFS, or any subsidiary or
affiliate of OFS acts as a general distributor, will be shared
equally between applicable Fund and such other investment company.
B. DESCRIPTION OF "REIMBURSABLE EXPENSES." For the
purposes of this Agreement, the "Reimbursable Expenses" of OFS
shall include, in addition to the expenses described in
subparagraphs (1) and (2) of this subparagraph B, any operating
and overhead expenses as may be paid or incurred by OFS to provide
such personnel, equipment, telephone lines, consulting services,
account collection services, supplies, space and facilities,
including without limitation compute tape transmission facilities
and services and computer time, as shall in the good faith
judgment of OFS be necessary or desirable for the effective
performance of shareholder account servicing, redemption, receipt
and processing of the purchase of a Fund's shares, dividend or
distribution disbursing and transfer agency services for (a) all
investment companies (including each Fund) with which OFS or a
subsidiary has entered into a Service Contract and for which OFS,
or a subsidiary or affiliate of OFS, acts in the capacity of
-3-
<PAGE>
investment adviser, (b) the related unit investment trusts, if
any, of the foregoing investment companies, other than unit
investment trusts which operate as a separate account of an
insurance company, and (c) the principal underwriters of any such
investment companies or unit investment trust (hereinafter the
entities described in (a), (b), and (c) are jointly and severally
referred to as "Participants") as well as for the performance of
such data processing and administrative functions or services as
may be required by OFS or any subsidiary to perform the services
required hereunder. Reimbursable Expenses of OFS shall also
include without limitation:
(1) The cost, including without limitation the
personnel costs, of any computer modifications, amendments,
testing or monitoring of the computer data processing system used
by OFS for the performance of services for the Participants which
may be deemed by OFS to be necessary or desirable for the
maintenance or improvement of such data processing system; and
(2) Such general executive, internal audit and
administrative expenses of OFS as are properly apportioned, on a
basis capable of reasonable substantiation, to the functions set
forth above in this subparagraph B to be performed by OFS. Such
costs are costs of OFS which are allocated in accordance with
subparagraph C below.
C. DETERMINATION OF FUND'S SHARE OF REIMBURSABLE
EXPENSES. Each Fund's Share of the Reimbursable Expenses of OFS
-4-
<PAGE>
for all participants will be determined by the use of allocation
formulae set forth in subparagraph D below, which allocation
formulae shall be:
(1) No more or less advantageous to a Fund than to
any of the other of such Participants;
(2) Consistent with and governed by the provisions
of the Distributor's Agreement in effect, from time to time,
between a Fund and its general distributor relating to the
allocation of costs between that Fund and its general distributor;
(3) With the full cooperation of OFS, reviewed at
least annually by the auditors of the Company to determine the
appropriateness of the Reimbursable Expenses of OFS and the
allocation formulae used to determine each Fund's Share of such
Reimbursable Expenses; and
(4) In no event shall a Fund's Share include any
expense for services in connection with the distribution of that
Fund's shares which are or may hereafter be provided by broker-
dealers or financial institutions with respect to accounts for
their customers owning shares of any investment company.
D. COST ALLOCATION. Subject to the foregoing, each
Fund's Share of the Reimbursable Expenses of OFS shall be computed
in accordance with the allocation formulae and procedures set
forth in OFS's "Cost Accounting Manual and Job Procedures,"
compiled and maintained by OFS, as such document may be amended
from time to time by OFS, provided that OFS shall notify that Fund
-5-
<PAGE>
of any material changes which shall change the method of
allocation of the Fund's Share of Reimbursable Expenses, and such
changes shall be approved by the Board of the Company. Such
Manual shall be reviewed periodically by the Company's auditors in
connection with the annual review described in subparagraph
3(C)(3) above.
E. EXPENSE REPORTS. OFS shall submit to each Fund a
monthly report setting forth in reasonable detail the Reimbursable
Expenses that OFS has paid or incurred during such month (and on a
year-to-date basis) together with a statement of the Fund's Share
of such Reimbursable Expenses.
4. REIMBURSEMENT OF OTHER EXPENSES.
In addition to paying its Share of Reimbursable
Expenses, each Fund also will promptly reimburse OFS or prepay OFS
based on estimates by OFS if such prepayment arrangement is
approved by the Company's Board (such estimates to be verified and
adjusted monthly thereafter in accordance with actual allocated
costs), for the following:
(a) Out-of-pocket expenses, including without
limitation expenses for postage, the procurement and/or printing
of share certificates; shareholder statements; envelopes; labels;
dividend, distribution or redemption checks; notices; reports; tax
forms; letters; and all other forms or printed material which may
be required for the performance by OFS of the functions and
-6-
<PAGE>
services for each Fund pursuant to the provisions of this
Agreement.
(b) All direct telephone, telegraph, telecopier or
other communications expenses necessarily incurred by OFS in
connection with OFS's communications with each Fund's custodian,
investment adviser, shareholders or others which may be required
for the performance by OFS of the functions and services for that
Fund pursuant to the provisions of this Agreement;
(c) Delivery and bonding charges incurred by OFS in the
transmission of materials to and from a Fund and in delivering
certificates to shareholders;
(d) Premiums for insurance coverage as may be required
by Section 11 of this Agreement and for other coverage as may be
required to be maintained by OFS or OppenheimerFunds, Inc. for the
benefit of itself and each Fund with respect to services
performed, or the equipment or facilities utilized by OFS in
fulfilling its obligations under this Agreement; and
(e) The fees and costs of retaining auditors and legal
counsel for OFS in connection with its performance of transfer
agency functions.
5. EFFECTIVE DATE AND TERM.
This Agreement shall become effective on the date set
forth in the heading paragraph of this Agreement, shall supersede
any prior agreements among the parties hereto relating to the
subject matter hereof, and shall continue in full force and effect
-7-
<PAGE>
until terminated by any party upon six months' prior written
notice of termination addressed to all other parties.
6. STANDARD OF CARE.
OFS will make every reasonable effort and take all
reasonable available measures to assure the adequacy of its
personnel and facilities as well as the accurate performance of
all services to be performed by it hereunder within, at a minimum,
the time requirements of any statute, rule or regulation
pertaining to investment companies and any time requirements set
forth in the then-current prospectus of each Fund. OFS shall
promptly correct any error or omission made by it in the
performance of its duties hereunder provided that it shall have
received notice in writing of such error or omission and any
necessary substantiating data. In effecting any such corrections,
OFS shall take all reasonable steps necessary to trace and to
correct any related errors or omissions, including, without
limitation, those which might cause an over-issue of a Fund's
shares and/or the excess payment of dividends or distributions.
The allocable costs of corrections shall be charged to the
applicable Fund and the liability of OFS under this Section shall
be subject to the limitations provided in Section 12 hereof.
7. RECORDS RETENTION AND CONFIDENTIALITY.
OFS shall keep and maintain on behalf of each Fund all
records which that Fund or its transfer agent is, or may be
required, to keep and maintain pursuant to any applicable
-8-
<PAGE>
statutes, rules and regulations relating to the maintenance of
records in connection with the services to be performed hereunder.
OFS also shall maintain, for a period of at least 6 years, all
records and documents which may be needed or required to support
or document the actions taken by OFS in its performance of
services hereunder. OFS recognizes and agrees that all such
records and documents (but not the computer data processing
programs and any related documentation used or prepared by, or on
behalf of, OFS for the performance of its services hereunder) are
the property of the applicable Fund, shall be open to audit or
inspection by the Fund or its agents during OFS's normal business
hours, shall be maintained in such fashion as to preserve the
confidentiality thereof and to comply with applicable federal and/
or state laws and regulations, and shall, in whole or any
specified part, be surrendered and turned over to the Fund or its
duly authorized agents at any time upon OFS's receipt of an
appropriate written request.
8. CLEARING ACCOUNTS.
Each Fund shall open and/or maintain such bank account
or accounts as shall reasonably be required by OFS for controlling
payments, the disbursement of dividends, capital gains
distributions and share redemption payments pursuant to the
provisions hereof, and any other accounts deemed necessary by OFS
or a Fund to carry out the provisions of this Agreement, with a
bank or banks selected by OFS with the prior approval of the
-9-
<PAGE>
Company's Board. Such account may be an omnibus account used for
all funds for which OFS or one of its subsidiaries acts as
transfer agent. The Company shall authorize offices or employees
of the Company to act as authorized signatories to disburse funds
held in such accounts. OFS shall be accountable to the Company
and the applicable Fund for the management of such accounts by OFS
(and the funds at any time on deposit therein).
9. REPORTS.
OFS will furnish to each Fund, at the Fund's cost, and
to such other person or parties as are designated herein or shall
be designated in writing by an authorized officer of the Fund,
such reports at such times as are required for the performance of
the services referred to in Schedule A.
10. INDEMNIFICATION.
The Company shall indemnify OFS and OppenheimerFunds,
Inc. and hold OFS and OppenheimerFunds, their officers, directors,
employees and agents harmless from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and
from and against all judgments, liabilities, losses, damages,
costs, charges, counsel fees and other expenses arising from or
relating to any action taken or omitted to be taken by OFS in good
faith or as a result of ordinary negligence in reliance upon:
(A) The authenticity of any letter or any other
instrument or communication reasonably believed by it to be
genuine and to have been properly made or signed by an authorized
-10-
<PAGE>
officer or agent of a Fund or the Company or by a shareholder or
the authorized agent of a shareholder, as the case may be and
which complies with the terms of this Agreement which pertain
thereto;
(B) The accuracy of any records or information provided
to it by a Fund or the Company except to the extent the same may
contain patently obvious errors or omissions;
(C) Any certificate by an authorized officer of a Fund
or the Company or any other person authorized by the Company's
Board as conclusive proof of any fact or matter required to be
ascertained by OFS hereunder;
(D) Instructions at any time given by an authorized
officer of a Fund or the Company with respect to OFS's duties and
responsibilities hereunder, including, as to legal matters
pertaining to the performance of its duties hereunder, such advice
or instructions as may be given to OFS by a Fund's or the
Company's general counsel or any legal counsel appointed by such
counsel or by any authorized officer of the Fund or the Company;
(E) Instructions regarding redemptions, exchanges or
other treatment of the shares of a Fund, together with all
dividends and capital gain distributions thereon and any
reinvestment thereof, held or shown to the credit of any
shareholder account, if such instructions satisfy the requirements
of the Fund as contained in its then current prospectus, or the
-11-
<PAGE>
Fund's policies or as communicated in writing to OFS by the Fund;
or
(F) The advice or opinion of legal counsel furnished to
OFS pursuant to Section 13 hereof.
11. INSURANCE.
Unless otherwise obtained by the Fund, OFS or
OppenheimerFunds, Inc. shall use its best efforts to obtain and
keep in effect pursuant to binders with underwriters authorized to
do business in the State of Colorado or New York, or approved by
the Company's Board, certificates or policies naming itself and
the Company and each Fund as assureds and providing for
cancellation or termination only upon 30 days' prior written
notice to the Company and each Fund, as follows:
(i) A broad form of fidelity bond coverage in the
minimum amount of $1,000,000 covering theft, embezzlement, forgery
and other specified acts of malfeasance and misfeasance by OFS,
its agents and employees, with aggregate coverage for counterfeit
or stolen securities and forged signatures in the minimum amount
of $1 million and at least $300,000 for each loss;
(ii) A lost instrument bond permitting the replacement
of a share certificate which has been lost, stolen or destroyed
for a stated percentage of the then-current net asset value
thereof to be paid by the shareholder or party seeking replacement
thereof;
-12-
<PAGE>
(iii) Coverage of up to $5 million against loss of
securities transmitted by first class, certified or registered
mail and express or air express throughout the United States and
of up to $1 million against loss of securities transmitted by
registered mail or registered air mail, and express or air express
mail anywhere in the world; and
(iv) Data Processors' Professional Liability Insurance
against errors and omissions having aggregate coverage of at least
$1 million and a limitation of liability for each claim of not
less than $500,000.
The Board of the Company, from time to time may change
the amounts of any of the foregoing coverage or prescribe
additional coverage. In the event that OFS shall be unable to
obtain or keep in effect any of the insurance coverage herein
referred to, it shall promptly notify the Company in writing of
such inability and shall use its best efforts to obtain and keep
in effect such other insurance coverage as the Company shall
reasonably require in lieu of the coverage described above.
12 LIMITATIONS OF LIABILITY.
In addition to the limitations on OFS's and
OppenheimerFunds, Inc.'s liability stated in Sections 10 and 13
hereof, OFS and OppenheimerFunds, Inc. assume no liability
hereunder and shall not be liable hereunder for any damage, loss
of data, delay or other loss caused by circumstances or events
beyond its control which it could not reasonably have anticipated.
-13-
<PAGE>
OFS and OppenheimerFunds, Inc. shall not have any liability beyond
the insurance coverage referred to in Section 11 hereof for loss
or damage arising from its own errors or omissions except to the
extent such errors or omissions are attributable to gross
negligence or purposeful fault on the part of OFS, its officers,
directors, agents and/or employees, and in no event will OFS and
OppenheimerFunds, Inc. be liable to the Company or a Fund for
punitive damages. The Company and each Fund shall indemnify and
hold OFS and OppenheimerFunds, Inc. harmless from and against any
liabilities and defense expenses arising by reason of claims of
third parties, based on errors or omissions of OFS, which are
greater in amount than the limitations of liability described
above, except to the extent such errors or omissions are
attributable to gross negligence or purposeful fault on the part
of OFS, its officers, directors, agents and/or employees.
13. LEGAL ADVICE AND INSTRUCTIONS.
OFS at any time may request instructions from any
authorized officer of the Company or a Fund with respect to the
performance of its duties and responsibilities hereunder and may
consult with counsel for the Company or a Fund relative to any
such matter and shall not be liable hereunder for any action taken
or omitted by it in good faith in accordance with such
instructions or with an opinion of such counsel or of counsel
appointed by an authorized officer of the Company or a Fund to
deal with inquiries or requests for instructions by OFS.
-14-
<PAGE>
14. DOCUMENTS AND INFORMATION.
As soon as feasible prior to the effective date of the
Agreement, and if not heretofore provided, the Company will supply
to OFS a statement, certified by the treasurer of the Company,
stating the number of shares of each Fund authorized, issued, held
in treasury, outstanding and reserved as of such date, together
with copies of specimen signatures of the Company's or the Fund's
officers and such other documents and information, including
without limitation the then-current prospectus of the Fund, which
OFS may determine in its reasonable discretion to be necessary or
appropriate to enable it to perform the services to be performed
hereunder, and the Company or the Fund thereafter will supply all
amendments or supplemental documents with respect thereto as soon
as the same shall be effective or available for distribution. The
Company and each Fund assumes full responsibility for the
preparation, accuracy, content and clearance of its prospectus
under federal and/or state securities laws and any rules or
regulations thereunder. If a Fund shall make any change in its
prospectus affecting the services and functions to be performed by
OFS hereunder, such additional services and functions shall be
deemed to be incorporated in Schedule A.
15. TERMINATION.
This Agreement may be terminated by any party only upon
written notice as provided in Section 5 hereof, except that the
Company may terminate this Agreement without prior notice to
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<PAGE>
preserve the integrity of its shareholder records from material
and continuing errors and omissions on the part of OFS. In the
event of any termination, OFS will provide full cooperation,
assistance and documentation within its capabilities as shall be
necessary or desirable, in the reasonable judgment of the Company,
to ensure that any transfer of the duties and responsibilities of
OFS is accomplished with maximum efficiency and with minimum cost
and disruption to the Company's activities. Such cooperation will
include the delivery of all files, documents and records used,
kept or maintained by OFS in the performance of its services
hereunder (except records or documents destroyed when consistent
with the provisions hereof or with the approval of a Fund or the
Company or which relate solely to the documentation of the
computer data processing programs of OFS) together with, in
machine-readable form, such of a Fund's records as may be
maintained by OFS in a form other than written form, as well as
such summary and/or control data relating thereto used by or
available to OFS as may be requested by the Fund. The cost of all
such termination services on the part of OFS shall be paid by the
applicable Fund without prejudice, however, to the rights of the
Fund to recover any amounts so paid in the event that OFS shall be
liable to the Fund under Section 12 hereof. In the course of its
performance of the services set forth in Schedule A hereto, as
such services may from time to time be modified or amended, OFS
will enter into leases for equipment. If this Agreement is
-16-
<PAGE>
terminated by the Company, and if, as a result of such
termination, such equipment specifically leased by OFS to perform
such services can no longer be utilized economically by OFS in its
performance of services for any other entities with which OFS has
continuing transfer agency or other service contracts, OFS may in
its discretion cancel such leases. However, the Company shall not
have any responsibility for termination penalties, if any, which
may be payable under the terms of such equipment leases, unless
otherwise agreed by the Company prior to the time such lease is
entered into.
16. AVAILABILITY OF CONTINUED USE OF DATA PROCESSING SYSTEM.
In the event that the Company ceases to employ OFS
hereunder or after termination of this Agreement, the Company
shall have the right to use the computer data processing systems,
operating systems, computer programs, software and supporting
documentation then used by OFS for providing the services to the
Company contemplated hereby.
17. NOTICES.
Any notice hereunder shall be sufficiently given when
sent by registered or certified mail, return receipt requested to
any party hereto at the address of such party set forth above or
at such other address as such party may from time to time specify
in writing to the other parties.
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<PAGE>
18. CONSTRUCTION GOVERNING LAW.
The headings used in this Agreement are for convenience
only and shall not be deemed to constitute a part hereof. This
Agreement, and the rights and obligations of the parties
hereunder, shall be governed by and construed and interpreted
under and in accordance with the laws of the State of Colorado
applicable to contracts made and to be performed in that state.
19. ASSIGNMENT; DELEGATION.
This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto, their successors and assigns,
including without limitation, any successor to any party resulting
by reason of corporate merger or consolidation; provided, however,
that this Agreement and the rights and duties hereunder shall not
be assigned by any of the parties hereto except upon the specific
prior written consent of all parties hereto.
With the prior written consent of the Company, OFS may
delegate to others all or any portion of the services to be
rendered under this Agreement.
20. INTERPRETIVE PROVISIONS.
OFS and a Fund or the Company may agree from time to
time in writing on provisions interpretative of, or supplemental
to, the provisions of this Agreement.
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<PAGE>
21. OTHER AGREEMENTS.
This Agreement shall not preclude the Fund from entering
into transfer agency agreements or sub-transfer agency agreements
with others.
22. SEVERABILITY.
If any clause or provision of this Agreement is
determined to be illegal, invalid or unenforceable under present
or future laws effective during the term of this Agreement, then
such clause or provision shall be considered severed herefrom, and
the remainder of this Agreement shall continue in full force and
effect.
23. ENTIRE AGREEMENT.
Except as otherwise provided herein, this Agreement,
including Schedule A annexed hereto, constitutes the entire and
complete Agreement between the parties hereto relating to the
subject matter hereof, supersedes and merges all prior contracts
and discussions between the parties hereto, and may not be
modified or amended except by written document signed by all
parties hereto against whom such modification or amendment is to
be enforced.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first written
above.
OPPENHEIMERFUNDS SERVICES, a
division of OppenheimerFunds, Inc.
ATTEST:
/s/ R. Denis Molleur By: /s/ Barbara Hennigar
------------------------- -----------------------------
Barbara Hennigar, President
CONNECTICUT MUTUAL FINANCIAL
SERVICES SERIES FUND I, INC. on
behalf of its designated Series
ATTEST:
By: /s/ Robert G. Zack
---------------------------
/s/ R. Denis Molleur Name: Robert G. Zack
------------------------ -------------------------
Title: Assistant Secretary
------------------------
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<PAGE>
Exhibit 1
LIST OF CONNECTICUT MUTUAL FINANCIAL SERVICES
SERIES FUND I, INC. PORTFOLIOS FOR WHICH OFS
IS DESIGNATED TO ACT AS TRANSFER AGENT
Money Market Portfolio
Government Securities Portfolio
Income Portfolio
Total Return Portfolio
Growth Portfolio
International Equity Portfolio
Life Span Capital Appreciation Portfolio
Life Span Balanced Portfolio
Life Span Diversified Income Portfolio
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SCHEDULE A
SERVICE CONTRACT
SCHEDULE OF SERVICES
To the extent that a Fund's then-current Prospectus requires
the following services, and to the extent that such services are
not, or may not hereafter be, provided by broker-dealers or other
financial institutions with respect to accounts for which such
broker-dealer or financial institution provides services in
connection with the distribution of that Fund's shares,
OppenheimerFunds Services, ("OFS") shall do the following:
I. REGISTRAR OF FUND SHARES
1. Register and control the issuance of full and/or fractional
shares of each Class of Shares of the Fund either for payment of
applicable net asset value or upon surrender of an equivalent
number of shares for transfer, or for reinvestment of dividends or
capital gains distributions and, in connection therewith, maintain
appropriate records (which may include the shareholder accounts
referred to below) recording the issuance, transfer and redemption
of all outstanding shares of each Class of Shares of the Fund,
showing all shares of each Class of Shares of the Fund issued and
represented by outstanding certificates, and showing issuance of
all uncertificated shares of the Fund; but shall have no
obligation, when recording the issuance of shares, to monitor the
issuance of such shares or to take cognizance of any laws relating
to the issuance or sale of such shares, which factors shall be the
sole responsibility of the Fund; prepare entries to transfer
redeemed or repurchased shares to the Fund's treasury share
account or, if applicable, cancel such shares for retirement;
retain records of issuance of new certificates for lost or stolen
certificates or for cancellation of lost or stolen certificates,
and the indemnity bonds furnished by shareholders in connection
therewith.
2. Maintain daily balance controls for the issuance and
redemption of shares as well as all cash receipts and
disbursements handled on behalf of the Fund.
3. Furnish to the Fund such information as it may request for
preparation of filings with federal and state authorities.
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<PAGE>
II. SHAREHOLDER ACCOUNTS
1. Open new accounts and maintain current records for all new
and existing categories of shareholder accounts described in the
then-current Prospectus of the Fund, showing as to each registered
owner (to the extent such information is available or obtainable):
a. Name(s) and address(es) with zip code;
b. Category of account and taxpayer identification
number;
c. Dealer and/or any representative affiliated with
the account;
d. Number and shares and fractional shares currently
registered;
e. Account transaction history, including records of
initial and additional purchases, transfers and
redemptions, surrender of certificates, dividends
and other distributions, and related tax
information;
f. Identification of any certificate(s) issued and the
number of shares evidenced by each such
certificate;
g. Shares held in escrow against performance of any
obligation; and
h. Identification of account using the broker's
identification.
2. Maintain files containing account applications, requests or
other correspondence from or on behalf of shareholders, as well as
copies of all responses thereto.
3. Process all changes or corrections to a shareholder's
registration and address records authorized orally or in writing
by or on behalf of the shareholder.
4. Process such reinvestments of the proceeds of a redemption of
Fund shares as may properly have been elected by a shareholder
pursuant to a privilege described in the then-current Prospectus
of the Fund.
5. Process investments in shares of the Fund at its then-current
net asset value as may properly be requested by a shareholder of
any of the other investment companies having such privilege as
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<PAGE>
described in the then-current Prospectus of the Fund or
information supplied by OFS by the Fund.
6. Prepare and transmit by mail to the affected shareholder a
statement/confirmation of all transactions affecting the account
of such shareholder including initial and additional purchases,
reinvestments of dividends and distributions, adjustments,
exchanges, transfer to and from the account and redemptions of all
kinds.
7. Maintain records of special account instructions such as wire
redemption authorizations.
8. Retain records and amounts of payment items (including
dividends, distributions and redemption proceeds) that are
returned undelivered and undeliverable from investors' addresses
and maintain such records in accordance with applicable
regulations; and invest such amounts, in accordance with the terms
of the Fund's then-current Prospectus, for the benefit of the
shareholder(s) of record.
9. Reconcile account data for account information transmitted by
magnetic tape by broker-dealers or other financial institutions
maintaining shareholder accounts in nominee name and perform other
services enumerated hereunder to the extent required for such
accounts.
10. Process new and additional payments made by shareholders for
investment at their current offering price.
11. Maintain records required under Rule 17Ad-10(e) under the
Securities Exchange Act of 1934.
III. REDEMPTIONS
1. Adjust a shareholder's account to reflect the number of
shares redeemed.
2. Requisition from the Fund's custodian and remit the
properly-computed amount of the proceeds of each redemption to, or
as directed by, shareholders pursuant to appropriately-executed
written instructions or appropriately-submitted redemption request
by wire.
IV. PAYMENT OF DIVIDENDS AND DISTRIBUTIONS
1. Upon receipt of properly-executed instructions from the Fund
upon declaration of any dividend and/or distribution, compute and
credit the accounts of all shareholders with the proper number of
whole and fractional shares, computed as of the reinvestment date
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<PAGE>
and price specified by the relevant resolution of the Fund's
directors for such dividend or distribution.
2. Adjust the amount of dividend or distribution payments for
accounts having unsettled investments or repurchases as of the
record date with appropriate accounting adjustments to the Fund's
distribution accounts and remittances to its custodian.
3. Reconcile dividends and distributions with the Fund.
V. ISSUING AND ACCOUNTING FOR CERTIFICATES
1. Safekeep and account for blank certificate forms.
2. Prepare, issue and mail certificates for full shares on
request or according to permanent account instructions as provided
in the Fund's then-current Prospectus, provided that sufficient
deposit shares are available in the shareholder's account and
proper authorization is received.
3. Receive certificates properly endorsed for transfer which are
returned for deposit to a shareholder's account and, provided
there is no stop-transfer or cancellation order pending relative
to the specific certificate, make appropriate adjustments to the
shareholder's account.
4. Physically cancel and otherwise account for certificates
returned and deposited.
5. Keep and maintain certificate transcript records reflecting
the issuance and holder of all outstanding certificates as well as
all stop-transfers, cancellations and deposits of certificates.
6. Handle the replacement of lost certificates upon applications
meeting the requirements of the Fund's then-current insurance
coverage or, in the event such insurance is not obtainable, the
instructions of the officers of the Fund or its counsel.
7. Receive and deal with stop-transfer instructions in accord
with the generally-accepted practices of transfer agents.
VI. RECAPITALIZATION OR CAPITAL ADJUSTMENT
1. In the case of any negative share split, recapitalization or
other capital adjustment requiring a change in the form of share
certificates of any class, OFS will, in the case of accounts
represented by uncertificated shares, cause the account records to
be adjusted, as necessary, to reflect the number of shares held
for the account of each such shareholder as a result of such
change, or, in the case of shares represented by certificates,
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<PAGE>
will issue share certificates in the new form in exchange for, or
upon transfer of, outstanding share certificates in the old form,
in either case upon receiving:
a. A Certificate authorizing the issuance of share
certificates in the new form;
b. A certified copy of any amendment to the Company's
Articles of Incorporation with respect to the change;
c. Specimen share certificates for each class of shares in
the new form approved by the Board of the Company, with
a Certificate signed by the Secretary of the Company as
to such approval; and
d. An opinion of counsel for the Company or the Fund with
respect to such shares.
2. The Fund shall furnish OFS with a sufficient supply of blank
share certificates in the new form, and from time to time will
replenish such supply upon the request of OFS. Such blank share
certificates shall be properly signed by Officers of the Fund
authorized by law or the By-Laws to sign share certificates and,
if required, shall bear the Company's seal or facsimile thereof.
VI. TRANSFERS
1. Respond to or process transfer instructions received by or on
behalf of the registered owners of shares in accordance with the
generally-accepted practices of transfer agents and any
requirements set forth in the Fund's then-current Prospectus.
2. Pass upon the adequacy of documents submitted, prepare any
documents required, and effect the transfer of shares to a
shareholder account for the transferee, including the
establishment of the new account.
IX. EXCHANGES
1. Receive and process exchanges in accordance with
duly-executed or telephonic exchange authorizations which comply
with the provisions of the Fund's then-current Prospectus.
2. Establish, if necessary, a shareholder's account and register
the new shares in accordance with duly executed or telephonic
exchange instructions.
-26-
<PAGE>
X. SHAREHOLDER COMMUNICATIONS
1. Maintain appropriate logs and other controls of all
shareholder communications reflecting the promptness with which
they are handled and the number of unresolved questions, inquiries
and complaints outstanding at any time.
2. Receive and answer promptly all correspondence, telephone
calls, or other inquiries from or on behalf of shareholders
concerning the administration of their accounts. In the case of
individual inquiries with respect to shares held in broker
"street-name" accounts for the broker's customer, refer such
inquiry to the appropriate broker for response, providing such
information to such broker as OFS may reasonably ascertain from
its records with respect thereto.
3. Refer to the Company's investment adviser or Distributor
questions or matters related to their functions.
4. Prepare such reports and summaries of shareholder
communications as may be requested by the Fund's officers for the
preparation of reports to the Company's Board and appropriate
regulatory authorities.
5. Attempt to collect or engage other agents or attorneys to
collect on behalf of the Fund the amount of any over-payment or
erroneous payment to a shareholder or other person by the Fund.
XI. HANDLING OF PROXIES
1. In accordance with instructions by an officer of the Fund,
prepare proxy cards for each shareholder of record as of the date
specified by a resolution of the Company's Board providing for a
meeting of its shareholders.
2. Mail to each shareholder of record, at the address shown in
the shareholder records of the Fund kept pursuant hereto (or as
directed by the respective broker as to broker transmission
accounts), a completed proxy card together with such other written
material, including notices of the meeting and proxy statements,
as may be supplied for that purpose by the Fund.
3. Furnish to the Fund a list of shareholders eligible to vote
at the meeting, showing address of record and shares held together
with an affidavit or other appropriate certificate of the mailing
referred to above.
4. Receive and tabulate proxies, furnishing the Fund with a
properly-certified report of such tabulation.
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<PAGE>
XII. ANNUAL AND OTHER REPORTS
1. Process the mailing of such prospectuses and annual, semi-
annual, or quarterly reports as shall be received from the Fund
for that purpose and coordinate such mailings to appropriate
categories of shareholders.
2. Prepare and mail to shareholders appropriate periodic
statements of their accounts as contemplated by this Agreement.
3. Insert such other material with regular shareholder mailings
as may be requested and furnished by the Fund.
4. Prepare and forward to the Fund such daily periodic or
special reports concerning shareholder records and any other
functions performed pursuant to this schedule of services as may
be requested by an officer of the Company.
XIII. TAX MATTERS
1. Prepare and file with the I.R.S. such Federal information
returns with respect to Fund shareholders as may be specified by
the I.R.S. from time to time and mail copies thereof to
shareholders.
2. Prepare and file appropriate Federal information returns and
pay Federal income taxes withheld from distributions made to non-
resident aliens.
3. Prepare magnetic tapes for brokers, dealers and other
financial institutions to determine accruals as to transmission
accounts to enable brokers, dealers and other financial
institutions to prepare appropriate information returns.
4. Pay Federal income taxes withheld from dividends,
distributions and redemptions made to shareholders; process and
retain records of withholding exemption certificates filed by
shareholders.
5. Comply with backup withholding and taxpayer identification
requirements issued by the I.R.S. which are applicable to transfer
agents.
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<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
Registration Statement (Registration Statement File No. 2-73969) for the
following series of Connecticut Mutual Financial Services Series Fund I, Inc.:
Money Market Portfolio, Government Securities Portfolio, Income Portfolio, Total
Return Portfolio, Growth Portfolio, International Equity Portfolio, LifeSpan
Diversified Income Portfolio, LifeSpan Balanced Portfolio and LifeSpan Capital
Appreciation Portfolio.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
April 26, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> INCOME PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 106,392,555
<INVESTMENTS-AT-VALUE> 112,417,122
<RECEIVABLES> 2,467,852
<ASSETS-OTHER> 16,609
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 114,901,583
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 224,737
<TOTAL-LIABILITIES> 224,737
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 111,975,055
<SHARES-COMMON-STOCK> 93,081,273
<SHARES-COMMON-PRIOR> 90,571,852
<ACCUMULATED-NII-CURRENT> 65,693
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,388,469)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,024,567
<NET-ASSETS> 114,676,846
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,833,602
<OTHER-INCOME> 0
<EXPENSES-NET> 689,422
<NET-INVESTMENT-INCOME> 7,144,180
<REALIZED-GAINS-CURRENT> (1,786,886)
<APPREC-INCREASE-CURRENT> 12,718,321
<NET-CHANGE-FROM-OPS> 18,075,615
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,122,105)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 17,090,150
<NUMBER-OF-SHARES-REDEEMED> (20,375,036)
<SHARES-REINVESTED> 5,794,307
<NET-CHANGE-IN-ASSETS> 14,278,216
<ACCUMULATED-NII-PRIOR> 43,618
<ACCUMULATED-GAINS-PRIOR> (1,601,583)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 630,695
<INTEREST-EXPENSE> 58,727
<GROSS-EXPENSE> 689,422
<AVERAGE-NET-ASSETS> 106,909,112
<PER-SHARE-NAV-BEGIN> 1.11
<PER-SHARE-NII> .08
<PER-SHARE-GAIN-APPREC> .12
<PER-SHARE-DIVIDEND> (.08)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.23
<EXPENSE-RATIO> (.65)
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> SFI GROWTH PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 331,531,930
<INVESTMENTS-AT-VALUE> 410,954,296
<RECEIVABLES> 3,240,977
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 56,249
<TOTAL-ASSETS> 414,251,522
<PAYABLE-FOR-SECURITIES> 7,434,248
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 882,152
<TOTAL-LIABILITIES> 8,316,400
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 323,420,058
<SHARES-COMMON-STOCK> 160,736,718
<SHARES-COMMON-PRIOR> 116,659,150
<ACCUMULATED-NII-CURRENT> 57,646
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,035,052
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 79,422,366
<NET-ASSETS> 405,935,122
<DIVIDEND-INCOME> 6,331,213
<INTEREST-INCOME> 1,896,827
<OTHER-INCOME> 0
<EXPENSES-NET> 2,024,756
<NET-INVESTMENT-INCOME> 6,203,284
<REALIZED-GAINS-CURRENT> 23,356,603
<APPREC-INCREASE-CURRENT> 67,825,683
<NET-CHANGE-FROM-OPS> 97,385,570
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,148,312)
<DISTRIBUTIONS-OF-GAINS> (21,759,918)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 47,879,137
<NUMBER-OF-SHARES-REDEEMED> (14,920,252)
<SHARES-REINVESTED> 11,118,683
<NET-CHANGE-IN-ASSETS> 175,739,852
<ACCUMULATED-NII-PRIOR> 2,674
<ACCUMULATED-GAINS-PRIOR> 1,438,367
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,890,963
<INTEREST-EXPENSE> 133,793
<GROSS-EXPENSE> 2,024,756
<AVERAGE-NET-ASSETS> 308,266,099
<PER-SHARE-NAV-BEGIN> 1.97
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> .71
<PER-SHARE-DIVIDEND> (.04)
<PER-SHARE-DISTRIBUTIONS> (.15)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 2.53
<EXPENSE-RATIO> .66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> MONEY MARKET
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 70,556,161
<INVESTMENTS-AT-VALUE> 70,556,161
<RECEIVABLES> 388,729
<ASSETS-OTHER> 50,682
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 70,995,572
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 302,155
<TOTAL-LIABILITIES> 302,155
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 70,693,417
<SHARES-COMMON-STOCK> 66,116,270
<SHARES-COMMON-PRIOR> 70,693,417
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 70,693,417
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,037,199
<OTHER-INCOME> 0
<EXPENSES-NET> 387,956
<NET-INVESTMENT-INCOME> 3,649,243
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,649,243
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,649,243)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 53,290,457
<NUMBER-OF-SHARES-REDEEMED> (52,362,552)
<SHARES-REINVESTED> 3,649,242
<NET-CHANGE-IN-ASSETS> 4,577,147
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 337,460
<INTEREST-EXPENSE> 50,496
<GROSS-EXPENSE> 387,956
<AVERAGE-NET-ASSETS> 67,492,000
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .054
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.054)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> SFI TOTAL RETURN PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 880,628,346
<INVESTMENTS-AT-VALUE> 994,462,012
<RECEIVABLES> 0
<ASSETS-OTHER> 9,122
<OTHER-ITEMS-ASSETS> 8,201,868
<TOTAL-ASSETS> 1,002,673,002
<PAYABLE-FOR-SECURITIES> 7,389,637
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,357,214
<TOTAL-LIABILITIES> 8,746,851
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 876,800,232
<SHARES-COMMON-STOCK> 566,759,895
<SHARES-COMMON-PRIOR> 489,923,625
<ACCUMULATED-NII-CURRENT> 373,665
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,918,588
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 113,833,666
<NET-ASSETS> 993,926,151
<DIVIDEND-INCOME> 7,818,253
<INTEREST-INCOME> 35,975,950
<OTHER-INCOME> 0
<EXPENSES-NET> 5,084,709
<NET-INVESTMENT-INCOME> 38,709,494
<REALIZED-GAINS-CURRENT> 34,241,934
<APPREC-INCREASE-CURRENT> 115,223,776
<NET-CHANGE-FROM-OPS> 118,175,204
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (38,529,255)
<DISTRIBUTIONS-OF-GAINS> (31,137,474)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 92,416,138
<NUMBER-OF-SHARES-REDEEMED> (55,425,167)
<SHARES-REINVESTED> 39,845,299
<NET-CHANGE-IN-ASSETS> 251,791,492
<ACCUMULATED-NII-PRIOR> 193,426
<ACCUMULATED-GAINS-PRIOR> (185,872)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,780,029
<INTEREST-EXPENSE> 304,680
<GROSS-EXPENSE> 5,084,709
<AVERAGE-NET-ASSETS> 863,949,441
<PER-SHARE-NAV-BEGIN> 1.51
<PER-SHARE-NII> .07
<PER-SHARE-GAIN-APPREC> .30
<PER-SHARE-DIVIDEND> (.07)
<PER-SHARE-DISTRIBUTIONS> (.06)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.75
<EXPENSE-RATIO> .59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> GOVERNMENT PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 22,900,429
<INVESTMENTS-AT-VALUE> 23,858,787
<RECEIVABLES> 486,456
<ASSETS-OTHER> 364
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 24,345,607
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 36,999
<TOTAL-LIABILITIES> 36,999
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23,797,676
<SHARES-COMMON-STOCK> 22,754,263
<SHARES-COMMON-PRIOR> 19,706,497
<ACCUMULATED-NII-CURRENT> 13,793
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (461,219)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 958,358
<NET-ASSETS> 24,308,608
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,436,743
<OTHER-INCOME> 0
<EXPENSES-NET> 149,465
<NET-INVESTMENT-INCOME> 1,287,278
<REALIZED-GAINS-CURRENT> (111,999)
<APPREC-INCREASE-CURRENT> 2,348,269
<NET-CHANGE-FROM-OPS> 3,523,548
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,281,570)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,051,043
<NUMBER-OF-SHARES-REDEEMED> (3,025,837)
<SHARES-REINVESTED> 1,202,560
<NET-CHANGE-IN-ASSETS> 5,524,268
<ACCUMULATED-NII-PRIOR> 8,085
<ACCUMULATED-GAINS-PRIOR> (349,220)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<PER-SHARE-NAV-BEGIN> .95
<PER-SHARE-NII> .06
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<PER-SHARE-DIVIDEND> (.06)
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> SFI INTERNATIONAL EQUITY PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 41,294,024
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<ACCUMULATED-NII-CURRENT> (2,025,132)
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<DISTRIBUTIONS-OF-GAINS> (334,432)
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<NUMBER-OF-SHARES-REDEEMED> (4,839,804)
<SHARES-REINVESTED> 1,701,124
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<ACCUMULATED-NII-PRIOR> (1,023,381)
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<PER-SHARE-NAV-BEGIN> 1.09
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> .08
<PER-SHARE-DIVIDEND> (.04)
<PER-SHARE-DISTRIBUTIONS> (.01)
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> LIFESPAN DIVERSIFIED INCOME PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 20,096,477
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<ACCUMULATED-NII-CURRENT> 10,436
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 25,415
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 802,958
<NET-ASSETS> 21,175,915
<DIVIDEND-INCOME> 72,611
<INTEREST-INCOME> 377,031
<OTHER-INCOME> 0
<EXPENSES-NET> 102,100
<NET-INVESTMENT-INCOME> 347,542
<REALIZED-GAINS-CURRENT> 25,415
<APPREC-INCREASE-CURRENT> 802,958
<NET-CHANGE-FROM-OPS> 1,175,915
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<NUMBER-OF-SHARES-SOLD> 20,000,000
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<GROSS-EXPENSE> 102,100
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<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> .04
<PER-SHARE-DIVIDEND> (.02)
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<PER-SHARE-NAV-END> 1.04
<EXPENSE-RATIO> .50
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> LIFESPAN BALANCED PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 33,376,422
<INVESTMENTS-AT-VALUE> 35,260,242
<RECEIVABLES> 313,627
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<OTHER-ITEMS-ASSETS> 0
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<PAYABLE-FOR-SECURITIES> 121,006
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 74,249
<TOTAL-LIABILITIES> 195,255
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33,759,324
<SHARES-COMMON-STOCK> 33,743,194
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (9,802)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (186,996)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,904,703
<NET-ASSETS> 35,467,229
<DIVIDEND-INCOME> 109,946
<INTEREST-INCOME> 406,667
<OTHER-INCOME> 0
<EXPENSES-NET> 170,091
<NET-INVESTMENT-INCOME> 349,522
<REALIZED-GAINS-CURRENT> (186,996)
<APPREC-INCREASE-CURRENT> 1,904,703
<NET-CHANGE-FROM-OPS> 2,067,229
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<NUMBER-OF-SHARES-SOLD> 33,400,000
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<NET-CHANGE-IN-ASSETS> 35,467,229
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<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> .05
<PER-SHARE-DIVIDEND> (.01)
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<PER-SHARE-NAV-END> 1.05
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> LIFESPAN CAPITAL APPRECIATION
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 24,899,436
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<SENIOR-LONG-TERM-DEBT> 50,668
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 168,261
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,163,733
<SHARES-COMMON-STOCK> 25,154,663
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (16,721)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (215,118)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,836,589
<NET-ASSETS> 26,768,484
<DIVIDEND-INCOME> 106,835
<INTEREST-INCOME> 167,824
<OTHER-INCOME> 0
<EXPENSES-NET> 127,647
<NET-INVESTMENT-INCOME> 147,012
<REALIZED-GAINS-CURRENT> (215,118)
<APPREC-INCREASE-CURRENT> 1,836,590
<NET-CHANGE-FROM-OPS> 1,768,484
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<DISTRIBUTIONS-OF-INCOME> (163,733)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25,000,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 154,663
<NET-CHANGE-IN-ASSETS> 26,768,484
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 72,333
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<GROSS-EXPENSE> 127,647
<AVERAGE-NET-ASSETS> 25,670,086
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> .06
<PER-SHARE-DIVIDEND> (.01)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.06
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
