As filed with the Securities and Exchange Commission on July 27, 1995
Registration No. 2-75276
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. 23
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 24
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
(Exact name of Registrant as Specified in Charter)
140 Garden Street
Hartford, Connecticut 06154
(Address of Principal Executive Office)(Zip Code)
Registrant's Telephone Number, Including Area Code: (203) 987-5041
Ann F. Lomeli, Secretary
Connecticut Mutual Investment Accounts, Inc.
140 Garden Street
Hartford, Connecticut 06154
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
/X/ on October 1, 1995 pursuant to paragraph (a) of Rule 485.
Registrant has registered an indefinite number of securities
under the Securities Act of 1933 pursuant to Rule 24f-2 promulgated
under the Investment Company Act of 1940. The Rule 24f-2 Notice for
the fiscal year ended December 31, 1994 was filed for the Registrant's
following series on February 20, 1995 Connecticut Mutual Liquid Account;
Connecticut Mutual Government Securities Account; Connecticut Mutual
Government Securities Account; Connecticut Mutual Total Return Account;
and Connecticut Mutual Growth Account.
<PAGE>
CALCULATION OF REGISTRATION FEE
(Connecticut Mutual Income Account)
Proposed Proposed
Title of Amount of Maximum Maximum
Securities Shares Offering Aggregate Amount of
Being Being Price Offering Registration
Registered Registered Per Unit Price Fee
Shares of 189,141 $9.46 $1,789,274 $100.00*
Beneficial
Interest
*This calculation has been made pursuant to Rule 24e-2 under the Investment
Company Act of 1940. During its fiscal year ended December 31, 1994, the
Registrant, on behalf of Connecticut Mutual Income Account, redeemed or
repurchased 1,367,697 shares of beneficial interest, of which 1,209,211 were
utilized by the Registrant on its Rule 24f-2 Notice filed on behalf of
Connecticut Mutual Income Account on February 20, 1995 and 189,141 are
being used herein for purposes of reducing the filing fee payable herewith
under Rule 24e-2. No fee is required for the registration of such 189,141
shares.
CALCULATION OF REGISTRATION FEE
(Connecticut Mutual Liquid Account)
Proposed Proposed
Title of Amount of Maximum Maximum
Securities Shares Offering Aggregate Amount of
Being Being Price Offering Registration
Registered Registered Per Unit Price Fee
Shares of 15,512,726 $1.00 $15,512,726 $100.00*
Beneficial
Interest
*This calculation has been made pursuant to Rule 24e-2 under the Investment
Company Act of 1940. During its fiscal year ended December 31, 1994,
the Registrant, on behalf of Connecticut Mutual Liquid Account,
redeemed or repurchased 192,692,366 shares of beneficial interest, of which
177,469,640 were utilized by the Registrant on its Rule 24f-2 Notice
filed on behalf of Connecticut Mutual Liquid Account on February
20, 1995 and 15,512,726 are being used herein for purposes of reducing
the filing fee payable herewith under Rule 24e-2. No fee is required
for the registration of such 15,512,726 shares.
<PAGE>
CALCULATION OF REGISTRATION FEE
(Connecticut Mutual Government Securities Account)
Proposed Proposed
Title of Amount of Maximum Maximum
Securities Shares Offering Aggregate Amount of
Being Being Price Offering Registration
Registered Registered Per Unit Price Fee
Shares of 1,421,940 $10.38 $14,759,737 $100.00*
Beneficial
Interest
*This calculation has been made pursuant to Rule 24e-2 under the
Investment Company Act of 1940. During its fiscal year ended
December 31,1994, the Registrant, on behalf of Connecticut
Mutual Government Securities Account, redeemed or
repurchased 2,116,136 shares of beneficial interest, of which
722,134 were utilized by the Registrant on its Rule 24f-2 Notice
filed on behalf of Connecticut Mutual Government Securities
Account on February 20, 1995and 1,421,940 are being used
herein for purposes of reducing the filing fee payable herewith
under Rule 24e-2. No fee is required for the registration of
such 1,421,940 shares.
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
Connecticut Mutual Liquid Account, Connecticut Mutual Income
Account, Connecticut Mutual Government Securities Account,
Connecticut Mutual Total Return Account and Connecticut Mutual Growth
Account
Cross-Reference Sheet Showing Location in Prospectus and
Statement of Additional Information of Information Required by
Items of the Registration Form
Location in Prospectus
Form N-1A Item Number or Statement of Additional
and Caption Information
1. Cover Page.................................Cover Page.
2. Synopsis...................................Prospectus Summary.
3. Condensed Financial
Information..............................Financial Highlights.
4. General Description of
Registrant................................The Company; Management.
5. Management of the Fund.....................The Company; Management --
The Manager.
6. Capital Stock and Other
Securities...............................The Company; Dividends,
Capital Gains and Taxes.
7. Purchase of Securities
Being Offered............................Prospectus Summary -- Your
Shareholder Manual; Your
Account -- How to Buy
Shares, How to Exchange
Shares, Investor Services,
Transaction Details.
8. Redemption or Repurchase..................Prospectus Summary -- Your
Shareholder Manual; Your
Account -- How to Sell
Shares, How to Exchange
Shares, Investor Services,
Transaction Details.
9. Pending Legal Proceedings.................Not Applicable.
10. Cover Page................................Cover Page.
<PAGE>
Location in Prospectus
Form N-1A Item Number or Statement of Additional
and Caption Information
11. Table of Contents.........................Cover Page.
12. General Information and
History................................Cover Page; Management --
Other Information About the
Company.
13. Investment Objectives and
Policy................................. Investment Objectives and
Policies;Investment
Restrictions.
14. Management of the Fund................... Management; Investment
Advisory Arrangements;
Account Expenses.
15. Control Persons and Principal
Holders of Securities.................. Management.
16. Investment Advisory and
Other Services..........................Management; Investment
Advisory Arrangements;
Account Expenses;
Distribution Arrangements;
Distribution Financing
Plans; Custodian; Transfer
Agent Services; Independent
Certified Public Accountants.
17. Brokerage Allocation and
Other Practices....................... Portfolio Transactions and
Brokerage.
18. Capital Stock and Other
Securities........................... Management.
19. Purchase, Redemption and Pricing
of Securities Being Offered.......... Purchase and Redemption of
Shares; Determination of Net
Asset Value.
20. Tax Status............................. Taxes.
21. Underwriters........................... Distribution Arrangements.
22. Calculation of Performance
Data................................. Investment Performance.
23. Financial Statements................... Financial Statements.
- 2 -
<PAGE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
140 GARDEN STREET - HARTFORD, CONNECTICUT 06154
1-800-322-CMIA
OCTOBER 1, 1995
Connecticut Mutual Investment Accounts, Inc. (Company) is a management
investment company offering a broad range of investment alternatives through
thirteen distinct mutual funds, including the following funds (Accounts):
CONNECTICUT MUTUAL LIQUID ACCOUNT (LIQUID ACCOUNT) is a money market fund
offering a single class of shares. The Account seeks high current income
consistent with preservation of capital and maintenance of liquidity by
investing in money market instruments.
AN INVESTMENT IN THE LIQUID ACCOUNT IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THE LIQUID ACCOUNT SEEKS TO MAINTAIN A STABLE PRICE PER SHARE
OF $1.00, BUT THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO DO SO.
CLASS A AND CLASS B SHARES
CONNECTICUT MUTUAL INCOME ACCOUNT (INCOME ACCOUNT) is a short-term bond fund.
The Account seeks high current income consistent with prudent investment risk
and preservation of capital by investing primarily in fixed income debt
securities having maturities or effective maturities of five years or less.
CONNECTICUT MUTUAL GOVERNMENT SECURITIES ACCOUNT (GOVERNMENT SECURITIES ACCOUNT)
is a government securities fund. The Account seeks a high level of current
income with a high degree of safety of principal by investing primarily in
securities issued or guaranteed as to principal and interest by the U.S.
Government and its agencies and in obligations that are fully collateralized or
otherwise fully backed by U.S. Government securities.
CONNECTICUT MUTUAL TOTAL RETURN ACCOUNT (TOTAL RETURN ACCOUNT) is a balanced
fund. The Account seeks to maximize total investment return (achieved from both
capital appreciation and income) principally by allocating its assets among
stocks, corporate bonds, U.S. Government securities and money market
instruments.
CONNECTICUT MUTUAL GROWTH ACCOUNT (GROWTH ACCOUNT) is a growth fund. The Account
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.
PLEASE READ THIS PROSPECTUS BEFORE INVESTING AND KEEP IT ON FILE FOR FUTURE
REFERENCE. The Prospectus contains important information, including how the
Accounts invest and the services available to shareholders. A Statement of
Additional Information (SAI), dated October 1, 1995, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference (and
is legally considered a part of this prospectus). The SAI is available free upon
request by calling 1-800-322-CMIA.
For a Prospectus and information about other mutual funds offered by the
Company call 1-800-234-5606.
----------------
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.
----------------
SHARES OF THE ACCOUNTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER DEPOSITORY INSTITUTION, AND ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE ACCOUNTS INVOLVE
INVESTMENT RISKS, INCLUDING FLUCTUATIONS IN VALUE AND THE POSSIBLE LOSS OF
SOME OR ALL OF THE PRINCIPAL INVESTMENT.
1
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
---------------
PROSPECTUS
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.................................................... 3
YOUR INVESTMENT..................................................... 4
ALTERNATIVE PURCHASE PLAN........................................... 7
YOUR SHAREHOLDER MANUAL............................................. 9
SUMMARY OF INVESTOR EXPENSES........................................ 11
FINANCIAL HIGHLIGHTS.................................................. 13
INVESTMENT OBJECTIVES AND POLICIES.................................... 15
YOUR ACCOUNT.......................................................... 19
HOW TO BUY SHARES................................................... 19
HOW TO SELL SHARES.................................................. 24
HOW TO EXCHANGE SHARES.............................................. 26
INVESTOR SERVICES................................................... 27
TRANSACTION DETAILS................................................. 30
MANAGEMENT............................................................ 32
THE MANAGER......................................................... 32
BREAKDOWN OF EXPENSES............................................... 33
DIVIDENDS, CAPITAL GAINS AND TAXES.................................... 37
THE COMPANY........................................................... 38
PERFORMANCE......................................................... 39
RISK FACTORS, SECURITIES AND INVESTMENT TECHNIQUES.................... 41
APPENDIX A: DESCRIPTION OF SECURITIES RATINGS......................... A-1
APPENDIX B: CREDIT QUALITY DISTRIBUTION............................... B-1
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
CONNECTICUT MUTUAL LIQUID ACCOUNT
CONNECTICUT MUTUAL INCOME ACCOUNT
CONNECTICUT MUTUAL GOVERNMENT SECURITIES ACCOUNT
CONNECTICUT MUTUAL TOTAL RETURN ACCOUNT
CONNECTICUT MUTUAL GROWTH ACCOUNT
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING IN THE BODY OF THIS PROSPECTUS. CROSS-REFERENCES IN THIS
SUMMARY REFER TO HEADINGS IN THE BODY OF THE PROSPECTUS.
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES............... Liquid Account is a money market fund
and seeks high current income consistent
with preservation of capital and main-
tenance of liquidity. Income Account is a
short-term bond fund and seeks high
current income consistent with prudent
investment risk and preservation of
capital. Government Securities Account is
a government securities fund and seeks
a high level of current income with a
high degree of safety ofprincipal and
interest. Total Return Account is a
balanced fund seeking to maximize total
investment return. Growth Account is a
growth fund and seeks long-term growth
of capital.
INVESTMENT MANAGER.................. G.R. Phelps & Co., Inc. (G.R. Phelps), an
indirect subsidiary of Connecticut Mutual
Life Insurance Company (Connecticut
Mutual), with over $2.7 billion in assets
under management.
DISTRIBUTOR......................... Connecticut Mutual Financial Services,
L.L.C. (CMFS), an indirect subsidiary of
Connecticut Mutual.
ALTERNATIVE PURCHASE PLAN.......... Each Account, except the Liquid Account,
offers Class A and Class B shares, each
with different expense levels and a public
offering price that reflects different
sales charges. The Liquid Account offers
a single class of shares. CLASS A SHARES
Offered at net asset value plus any appli-
cable sales charge (maximum is 5.00% of
public offering price) and subject to
Rule 12b-1 fees at the rate of up to
0.25% of the average daily net assets of
the Class A shares.
CLASS B SHARES................... Offered at net asset value (a maximum
deferred sales charge of 5% of the lesser
of the shares' net asset value or the
original purchase price is imposed on
certain redemptions made within six years
of date of purchase) and subject to Rule
12b-1 fees at the rate of up to 1.00% of
the average daily net assets of the
Class B shares.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
LIQUID ACCOUNT SHARES............... Offered at net asset value and subject to
Rule 12b-1 fees at the rate of up to
0.10% of the average daily net assets of
the shares.
SHARES AVAILABLE THROUGH............ Many brokerage firms nationwide, or
directly through the Accounts' distri-
butor, CMFS.
EXCHANGE PRIVILEGES................. Shares of one Account (other than Liquid
Account) may be exchanged for shares of
the corresponding class of other Accounts
in the Company without a sales charge.
Exchanges of shares of Liquid Account for
shares of any other Account will be sub-
ject to the sales charge applicable to
such other Account.
DIVIDENDS AND OTHER DISTRIBUTIONS... Dividends will be paid semi-annually for
Growth Account and Total Return Account
and monthly for Government Securities
Account and Income Account from available
net investment income. Dividends from
net investment income of Liquid Account
are declared daily and paid monthly. All
realized net capital gains, if any,
will be distributed at least annually.
DIVIDEND REINVESTMENT............... Distributions may be reinvested in Ac-
count shares of the same class or in a
corresponding class of the other Accounts
(except Liquid Account) in the Company
automatically without a sales charge. See
"Investor Services" for a discussion of
Liquid Account dividend reinvestment
privileges.
FIRST PURCHASE....................... $1000 minimum ($250 for IRAs and reduced amounts for retirement plans). Automatic
Investment Plans may be established without regard to a minimum initial investment.
SUBSEQUENT PURCHASES................. $50 minimum.
OTHER FEATURES
CLASS A SHARES AND LIQUID
ACCOUNT SHARES................... Statement of Intent; Quantity Discounts; Rights of Accumulation; Reinstatement
Privilege; Systematic Withdrawal Plan; Automatic Investment Plan; Dollar Cost
Averaging Program; Automatic Dividend Diversification; Check Writing (Liquid Account
only).
CLASS B SHARES.................... Automatic Investment Plan; Dollar Cost Averaging Program; Automatic Dividend
Diversification; Systematic Withdrawal Plan.
</TABLE>
YOUR INVESTMENT
THE ACCOUNTS. Each Account is a diversified series of the Company, a
registered open-end management investment company. Each Account's shares are
available through broker/dealers that have entered into agreements to sell
4
<PAGE>
shares with the Accounts' distributor, CMFS. Shares also may be acquired
directly through CMFS or through exchanges of shares of the other accounts in
the Company. Shares of the Liquid Account may be acquired through the exchange
of either Class A or Class B shares of the other Accounts in the Company. See
"Your Shareholder Manual," "How to Buy Shares" and "How to Exchange Shares."
Shares may be redeemed either through broker/dealers or National Financial
Data Services (Transfer Agent). See "Your Shareholder Manual" and "How to
Sell Shares."
INVESTMENT MANAGER. G.R. Phelps is the investment manager (Manager) and
administrator for each of the Accounts. G.R. Phelps provides investment
management and/or administrative services to all of the accounts in the Company
as well as other mutual funds and institutional clients. G.R. Phelps is an
indirect subsidiary of Connecticut Mutual and has been a registered investment
adviser since 1976. Connecticut Mutual is the sixth oldest life insurance
company in the United States, and the oldest life insurance company in
Connecticut.
INVESTMENT OBJECTIVES, TECHNIQUES AND RISK FACTORS. Each Account has a
different investment objective and policies and is subject to certain risks. See
"Investment Objectives and Policies" and "Risk Factors, Securities and
Investment Techniques."
The LIQUID ACCOUNT seeks as high a level of current income as is consistent
with preservation of capital and maintenance of liquidity by investing
exclusively in money market instruments. These are high quality, short-term U.S.
dollar denominated securities and include U.S. Government obligations,
commercial paper, certificates of deposit, bankers' acceptances, bank deposits
and other corporate debt securities. The Account seeks to maintain a constant
net asset value of $1 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. There can be no assurance that the
Account will maintain a stable net asset value per share.
The INCOME ACCOUNT seeks high current income consistent with prudent
investment risk and preservation of capital. The Account invests primarily in
corporate debt securities with remaining maturities of five years or less or
mortgage debt securities with prepayment features which, in the judgment of the
Manager, will result in payment of interest and principal such that the
effective maturity of the securities is five years or less. The Account
anticipates maintaining an average dollar weighted portfolio maturity of
generally between two and three years. The Account 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, all of which are rated at least investment grade or, if unrated,
judged to be of equivalent quality by the Manager. The Account may invest up to
25% of its assets in lower quality debt securities (commonly referred to as junk
bonds) and preferred stocks. Consistent with these policies the Account may
invest up to 5% of its assets in non-dollar-denominated securities of foreign
issuers.
The GOVERNMENT SECURITIES ACCOUNT seeks a high level of current income with a
high degree of safety of principal. The Account invests primarily in U.S.
Government securities and U.S. Government-related securities, including
collateralized mortgage obligations. The remainder of its assets may be invested
in other investment grade debt obligations and private issuers. The Account may
enter into "mortgage dollar roll" transactions to enhance its yield.
5
<PAGE>
The TOTAL RETURN ACCOUNT seeks to maximize total investment return
principally by allocating its assets among stocks, bonds and money market
instruments. The Account's debt securities are expected to have a portfolio
maturity of 6 to 12 years. The Account may invest up to 25% 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. Consistent with these policies the
Account may invest to a limited extent in securities of foreign issuers.
The GROWTH ACCOUNT seeks long term growth of capital by investing primarily
in common stocks with low price earning ratios and better than anticipated
earnings. Realization of current income is a
secondary consideration. In selecting investments for the Growth Account, the
Manager uses a quantitative investment discipline in combination with
fundamental securities analysis. The Account may invest the remainder of its
assets in corporate and U.S. Government debt obligations including convertible
bonds rated below investment grade but not rated below B.
RISK FACTORS. There is no assurance that any Account will achieve its
investment objective. Each Account's net asset value (except, generally, Liquid
Account's net asset value) will change reflecting fluctuations in the market
value of its portfolio positions. Any Account's portfolio of fixed income
securities will generally fluctuate inversely with changes in interest rates.
Investments by the Income Account, Total Return Account and Growth Account in
lower rated securities involve greater risk of default and price volatility than
higher rated obligations. Also, investments by the Income Account, Total Return
Account and Growth Account in foreign securities involve risks not normally
associated with U.S. securities relating to political and economic developments
and differences in the regulations to which U.S. and foreign issuers are
subject. Foreign denominated foreign securities also involve risk of adverse
changes in foreign currency exchange rates. An Account's participation in
currency transactions, options and futures transactions and investment in
certain derivative instruments also involve special risks and transaction costs.
See "Risk Factors, Securities and Investment Techniques."
EXPENSES. Each Account pays G.R. Phelps an investment advisory fee based on
the average daily net assets of the Account, as described under "Management --
The Manager." As the Accounts' distributor, CMFS collects the sales charges
imposed on purchases of Class A shares, and reallows all or a portion of such
charges to broker/dealers that have made such sales. In addition, CMFS collects
any contingent deferred sales charges (CDSC) that may be imposed on certain
redemptions of Class A shares, on redemptions of Class B shares and on
redemptions of shares of the Liquid Account that were acquired in an exchange
from Class B shares of each other Account in the Company. CMFS also pays
broker/dealers upon their sales of Class B shares and pays broker/dealers and
other financial institutions ongoing commission payments for servicing
shareholder accounts. See "Your Account -- How to Buy Shares."
6
<PAGE>
Pursuant to separate distribution plans for the Liquid Account's shares and
for each of the other Account's Class A shares and Class B shares adopted in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended
(1940 Act), each Account may pay CMFS a fee at an annual rate that is a certain
percentage of the average daily net assets of the Liquid Account's shares or the
other Account's Class A shares or Class B shares (as appropriate) as
reimbursement for its expenditures incurred in distributing and servicing the
Liquid Account's shares or the other Account's Class A shares or Class B shares,
respectively.
Each Account pays all expenses not assumed by G.R. Phelps or other agents.
G.R. Phelps is required to limit each Account's portfolio expenses (exclusive of
brokerage commissions, taxes, interest and extraordinary items) to the maximum
annual level of 1.00% of the average daily net assets of the Liquid Account and
1.50% of such assets of the other Accounts. See "Management -- Breakdown of
Expenses."
ALTERNATIVE PURCHASE PLAN
Each Account except the Liquid Account offers investors two classes of
shares. The Liquid Account offers a single class of shares. The primary
distinction between the two classes of shares lies in their sales charge
structures and ongoing expenses. See "Summary of Investor Expenses." Each class
bears the separate expenses of its Rule 12b-1 plan and its transfer agency fees
and expenses. Each class has a separate exchange privilege. See "Your Account --
How to Exchange Shares" and "The Company." Class A and Class B shares of an
Account represent interests in the same portfolio of investments of that Account
and have the same rights, except as noted. Each class has exclusive voting
rights with respect to its Rule 12b-1 plan. Dividends and other distributions
paid by each Account with respect to its Class A and Class B shares are
calculated in the same manner and at the same time. The per share dividends on
Class B shares of an Account will be lower than those on Class A shares of that
Account as a result of the higher Rule 12b-1 fees applicable with respect to
Class B shares.
CLASS A SHARES. An investor who purchases Class A shares pays a sales
charge at the time of purchase. As a result, Class A shares are not subject to
any charges when they are redeemed except as described in "How To Buy Shares --
Contingent Deferred Sales Charge -- Class A Shares." Certain purchases of Class
A shares qualify for reduced sales charges. See "How To Buy Shares -- Reducing
or Eliminating Your Sales Charge -- Class A Shares." Class A shares currently
bear a Rule 12b-1 fee at an annual rate of up to 0.25% of the Fund's average net
assets attributable to Class A shares.
CLASS B SHARES. Class B shares are sold without an initial sales charge,
but are subject to a CDSC of up to 5.00% if redeemed within six years. Class B
shares also bear a higher Rule 12b-1 fee than Class A shares, currently at an
annual rate of up to 1.00% of the Fund's average net assets attributable to
Class B shares. Class B shares will automatically convert into Class A shares,
based on relative net asset value, eight years after purchase. See "How To Buy
Shares -- Purchasing Class B Shares."
CHOOSING AN ALTERNATIVE. Over time, the cumulative expense of the 1.00%
annual Rule 12b-1 fees of the Class B shares will approximate or exceed the
expense of the applicable 5.00% maximum initial sales charge plus the 0.25% Rule
12b-1 fees of the Class A shares. If you expect to maintain your investment in
an Account over the long-term but do not qualify for a reduced sales charge, you
might
7
<PAGE>
elect to purchase Class A shares. Class B investors, however, enjoy the benefit
of permitting all their dollars to work from the time the investments are made.
Any positive investment return on this additional invested amount would
partially or wholly offset the higher annual expenses borne by Class B shares.
Because the timing and amount of the Accounts future returns cannot be
predicted, however, there can be no assurance that such a positive return will
be achieved. Class B shareholders pay a CDSC if they are redeemed during the
first six years after purchase, unless a sales charge waiver applies. If you
expect to redeem Class B shares during this period, you should consider the cost
of the applicable CDSC in addition to the annual Class B Rule 12b-1 fees.
MAXIMUM INVESTMENTS. Class B share purchases over $250,000 will be treated
as purchases of Class A shares or declined.
REDUCED SALES CHARGES. Class A share purchases over $500,000 and Class A
share purchases made under an Account's reduced sales charge plans may be made
at a lower initial sales charge. See "How to Buy Shares" for a complete list of
reduced sales charges applicable to Class A purchases.
WAIVERS OF SALES CHARGES. The entire initial sales charge on Class A shares
of an Account may be waived for certain eligible purchasers and these
purchasers' entire purchase price would be immediately invested in an Account.
The CDSC may be waived upon redemption of certain Class B shares. If you are
eligible for complete waivers of the initial sales charge you should purchase
Class A shares. See "How to Buy Shares" for a complete list of initial sales
charge waivers applicable to Class A purchases and CDSC waivers applicable to
Class B purchases. A 1.00% CDSC is imposed on certain redemptions of Class A
shares on which no initial sales charge was assessed.
The CDSC on the Class B shares and the initial sales charge on the Class A
shares are both intended to compensate CMFS and selling broker/dealers for their
distribution services. Broker/ dealers may receive different levels of
compensation for selling a particular class of shares of an Account.
See "Your Account" for a more complete description of the sales charges, Rule
12b-1 fees and investor services applicable to shares of the Accounts.
8
<PAGE>
YOUR SHAREHOLDER MANUAL
MINIMUM INVESTMENTS
<TABLE>
<CAPTION>
INITIAL SUBSEQUENT
INVESTMENT* INVESTMENT
----------- ----------
<S> <C> <C>
- - Automatic Investment Plans $ 0 $ 50
- - IRAs and other tax qualified plans; deferred
compensation plans $ 250 $50
- - All other purchases $1,000 $50
</TABLE>
* Minimums may be waived for certain automated payroll deduction
plans.
<TABLE>
<CAPTION>
BUYING SHARES TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
<S> <C> <C>
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
BY MAIL - Complete and sign the - Make your check payable to
application. "CMIA." Indicate your
Make your check payable to account number on your
"CMIA." check and mail to the
Mail to CMIA, P.O. Box address printed on your
419694 account statement.
Kansas City, MO 64179-0938.
- Exchange by mail: call
1-800-322-CMIA (select
option "2") for
instructions.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
BY WIRE - Call 1-800-322-CMIA by 12:00 - Call 1-800-322-CMIA by
noon Eastern Time on the day 12:00 noon Eastern Time on
of investment to set up your the day of investment to
account and arrange a wire to arrange awire trans-
transaction. action.
- Wire by 4:00 p.m. Eastern - Wire by 4:00 p.m. Eastern
Time to: Time to:
State Street Bank and Trust State Street Bank and Trust
Company Company
Bank Routing # 011000028 Bank Routing # 011000028
NFDS Account # 99042129 NFDS Account # 99042129
Specify Account name, class Specify Account name, class
of shares and include your of shares and include your
name and account number. name and account number.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
BY PHONE - Exchange from another - Exchange from another
1-800-322-CMIA account in the same class account in the same class
(select option (or from the Liquid Account) (or from the Liquid Account)
"2") with the same registration, with the same registration,
including name, address and including name, address and
taxpayer ID number. taxpayer ID number.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
AUTOMATICALLY - You may not open an account - Establish an Automatic
automatically, but you may Investment Plan or Dollar
complete and sign an Cost Averaging Investment
application; make your check Program. Sign up for these
payable to CMIA; and mail to services when opening your
the address indicated on the account by completing
application. Section 9 on the enclosed
application, or call
1-800-322-CMIA for
information about adding
these services to your
account or complete an
Automatic Investment Plan
application.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
SELLING SHARES ACCOUNT TYPE SPECIAL REQUIREMENTS
<S> <C> <C>
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Individual, Joint Tenant, - The letter of instruction
Sole Proprietorship, must be signed by all
BY MAIL UGMA, UTMA persons required to sign for
EACH REDEMPTION transactions, exactly as
REQUEST IS LIMITED their names appear on the
account.
TO $50,000 UNLESS
YOU HAVE PROVIDED Retirement Account - The account owner should
A SIGNATURE complete a retirement
GUARANTEE. distribution form. Call
1-800-322-CMIA to request
one.
Trust - The trustee must sign the
letter indicating capacity
as trustee.If the trustee's
name is not in the account
registration, provide a
copy of the trust document
certified within the last
60 days.
Business or Organization - At least one person
authorized by corporate
resolution to act on the
account must sign the
letter. Include a corporate
resolution with corporate
seal or a signature
guarantee.
Executor, Administrator, - Call 1-800-322-CMIA for
Conservator, Guardian instructions.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
All account types except - Minimum request: $500,
retirement unless closing an
BY PHONE account. Limited to $50,000
per day.
1-800-322-CMIA
(select option
"2")
All account types - You may exchange to the
same class of other Ac-
counts (or to the Liquid
Account shares) if both
accounts are registered
with the same name(s),
address and taxpayer ID
number.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
BY WIRE All account types except - Minimum wire: $1,000.
retirement - Each redemption request is
limited to $50,000 unless
you have provided a
signature guarantee.
- A voided check and your
signature, which must be
signature guaranteed, must
accompany a wire redemption
request unless you elected
Telephone Redemption on the
initial application.
- Your wire redemption re-
quest must be received
before 4:00 p.m. Eastern
time for money to be
wired on the next busi-
ness day.
</TABLE>
10
<PAGE>
SUMMARY OF INVESTOR EXPENSES
The following table lists Shareholder Transaction Expenses and estimated
Annual Operating Expenses for the current fiscal year related to an investment
in shares of the Liquid Account and Class A and Class B shares of each of the
other Accounts. Annual Operating Expenses are based on expenses for shares of
the Liquid Account and Class A shares incurred in the fiscal year ended December
31, 1994. Annual operating expenses of Class B shares are based on estimated
expenses that would have been incurred during the previous fiscal year had Class
B shares been outstanding.
<TABLE>
<CAPTION>
GOVERNMENT
SECURITIES TOTAL RETURN GROWTH ACCOUNT
INCOME ACCOUNT ACCOUNT ACCOUNT
----------------- ---------------- ---------------- ----------------
LIQUID CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
ACCOUNT A B A B A B A B
------ ------- ------- ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).... None 4.00% None 4.00% None 5.00% None 5.00% None
Deferred Sales Load (as a percentage of
original purchase price or redemption
proceeds, as applicable)............... None(1) None(2) 5.00% None(2) 5.00% None(2) 5.00% None(2) 5.00%
Exchange Fee(3).......................... None None None None None None None None None
ANNUAL OPERATING EXPENSES OF EACH ACCOUNT
(as a percentage of average net assets)
Management Fees.......................... .50% .625% .625% .625% .625% .625% .625% .625% .625%
12b-1 Fees............................... .00(4) .00(5) 1.00 .00(5) 1.00 .25(5) 1.00 .25(5) 1.00
Other Expenses........................... .43 .00(6) .00(6) .285 .285 .335 .335 .395 .395
---- ----- ------ ----- ----- ----- ----- ----- -----
TOTAL ANNUAL OPERATING EXPENSES OF EACH
ACCOUNT................................ .93% .625% 1.625% .91% 1.91% 1.21% 1.96% 1.27% 2.02%
---- ----- ------ ----- ----- ----- ----- ----- -----
---- ----- ----- ----- ----- ----- ----- ----- -----
</TABLE>
- ---------
(1)
Shares of the Liquid Account acquired by exchange from Class A or Class B
shares of any other Account which are subject to a CDSC will be subject to a
CDSC if redeemed. The CDSC will be at a rate equal to the CDSC rate on the
original shares when exchanged. See "How To Sell Shares."
(2)
Purchases of $500,000 or more are not subject to an initial sales charge but
may be subject to a contingent deferred sales charge of 1% if the shares are
redeemed within 12 months after the calendar month of purchase. See "How to
Buy Shares -- Contingent Deferred Sales Charge -- Class A Shares."
(3)
All exchanges in excess of 12 exchanges in a 12-month period are subject to an
exchange fee of .75% of the net asset value of the shares redeemed. See
"Exchange Restrictions."
(4)
During the fiscal year ended December 31, 1994, the Account's distributor
agreed not to impose any reimbursement to which it would otherwise have been
entitled pursuant to Liquid Account's Rule 12b-1 distribution plan. Absent
such an agreement, the Liquid Account would have incurred distribution
expenses pursuant to its Rule 12b-1 Plan of .10% of the average daily net
assets of the Account and Total Annual Operating Expenses would have been
1.03% of such assets. The Liquid Account may pay, in 1995, a portion of the
maximum amount payable annually under the Rule 12b-1 plan, which is .10% of
the average daily net assets of the Account.
(5)
Each Account (other than Liquid Account) adopted a Class A Rule 12b-1 plan,
effective January 1, 1995, pursuant to which each such Account may pay CMFS up
to .25% annually of such Account's Class A related average net assets in
reimbursement for distribution and shareholder services. CMFS has temporarily
agreed not to impose any fees to which it would otherwise be entitled under
the Class A Rule 12b-1 plans for Income Account and Government Securities
Account for the current fiscal year. In the absence of such agreements by
CMFS, the Class A Rule 12b-1 fees of each such Account would have been .25% of
the average daily net assets of the Account attributable to its Class A shares
and the total annual operating expenses of Class A shares of Income Account
and Government Securities Account would have been .875% and 1.16%,
respectively. The Rule 12b-1 fees with respect to Class A shares for Total
Return Account and Growth Account have been restated to reflect the imposition
of the full .25% Class A Rule 12b-1 fee for each such Account as of May 1,
1995.
(6)
Until December 31, 1995, CMFS has temporarily agreed to limit the other
expenses (not including Rule 12b-1 fees and other class-specific expenses)
related to the Income Account. In the absence of such an agreement, the
estimated expenses related to Class A shares and Class B shares would be .315%
and .315%, respectively, and estimated Total Annual Operating Expenses of the
Account related to Class A shares and Class B shares for the current fiscal
year would be .94% and 1.94%, respectively.
11
<PAGE>
EXAMPLE: Assuming that an Account's (other than the Liquid Account's) annual
return is 5% and that its operating expenses are exactly as described above, if
you closed your account after the number of years indicated below, for every
$1,000 invested, your investment would bear the following amounts in total
expenses:
<TABLE>
<CAPTION>
GOVERNMENT TOTAL
INCOME SECURITIES RETURN GROWTH
ACCOUNT ACCOUNT ACCOUNT ACCOUNT
------- ---------- ------- -------
<S> <C> <C> <C> <C>
CLASS A SHARES
After 1 year.................................. $ 46 $ 49 $ 62 $ 62
After 3 years................................. 71 73 86 88
After 5 years................................. 98 99 113 116
After 10 years................................ 174 173 189 195
CLASS B SHARES
-- Assuming complete redemption at end of period
After 1 year.................................. $ 67 $ 69 $ 70 $ 71
After 3 years................................. 98 100 102 103
After 5 years................................. 122 123 126 129
After 10 years................................ 204 204 209 216
-- Assuming no redemption
After 1 year.................................. $ 17 $ 69 $ 20 $ 21
After 3 years................................. 58 100 62 63
After 5 years................................. 102 123 106 109
After 10 years................................ 204 204 209 216
</TABLE>
With respect to the Liquid Account, your investment, based on the same
assumptions as set forth in the paragraph above, would bear the following
amounts in total expenses:
<TABLE>
<S> <C> <C>
After 1 year........................ $ 9
After 3 years....................... 30
After 5 years....................... 51
After 10 years...................... 114
</TABLE>
The purpose of the above table and Example is to summarize the aggregate
expenses of Class A and Class B shares of each Account and the shares of the
Liquid Account and to assist investors in understanding the various costs and
expenses that investors in an Account will bear directly or indirectly. See
"Breakdown of Expenses." THESE EXAMPLES ILLUSTRATE THE EFFECT OF EXPENSES, AND
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES; ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Shareholders should be aware that the Accounts' payment of distribution fees
may result in long-term shareholders indirectly paying more than the economic
equivalent of the maximum front-end sales charge permitted by the National
Association of Securities Dealers, Inc. (NASD).
12
<PAGE>
FINANCIAL HIGHLIGHTS
The following information for the period ended December 31, 1994 has been
derived from audited financial statements together with the auditors' report for
the year ended December 31, 1994 which is included in the Statement of
Additional Information and incorporated herein by reference. The information for
the six months ended June 30, 1995 is unaudited. Additional information about
the performance of Class A shares of each Account and the Liquid Account shares
is contained in the Company's 1994 Annual Report to Shareholders which may be
obtained without charge by calling or writing the Company at the telephone
number or address on the cover page of this Prospectus. No financial highlights
exist for Class B shares.
Selected data for a Class A share and, with respect to the Liquid Account, a
Liquid Account share, of capital stock outstanding throughout the period:
<TABLE>
<CAPTION>
NET
REALIZED DISTRIBUTIONS NET NET
& FROM ASSET ASSET
UNREALIZED NET VALUE VALUE
DIVIDENDS GAIN REALIZED AT AT
NET FROM NET (LOSS) GAIN BEGINNING END
YEARS ENDED INVESTMENT INVESTMENT ON ON OF OF
DECEMBER 31 INCOME INCOME INVESTMENTS INVESTMENTS PERIOD PERIOD
- -------------- ------ -------- ------ ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
LIQUID ACCOUNT
1985 $.0729 $(.0729) $- $- $1.00 $1.00
1986 .0588 (.0588) - - 1.00 1.00
1987 .0581 (.0581) - - 1.00 1.00
1988 .0664 (.0664) - - 1.00 1.00
1989 .0822 (.0822) - - 1.00 1.00
1990 .0731 (.0731) - - 1.00 1.00
1991 .0522 (.0522) - - 1.00 1.00
1992 .0287 (.0287) - - 1.00 1.00
1993 .0227 (.0227) - - 1.00 1.00
1994 .0334 (.0334) - - 1.00 1.00
6/30/95
(unaudited)
GOVERNMENT SECURITIES ACCOUNT
1985(a) .24 (.21) .70 - 10.00 10.73
1986 .92 (.92) .28 (.11) 10.73 10.90
1987 .84 (.84) (.52) (.21) 10.90 10.17
1988 .84 (.85) (.05) (.05) 10.17 10.06
1989 .84 (.84) .52 - 10.06 10.58
1990 .84 (.84) .10 - 10.58 10.68
1991 .85 (.85) .68 - 10.68 11.36
1992 .77 (.77) (.12) (.05) 11.36 11.19
1993 .70 (.70) .36 (.64) 11.19 10.91
1994 .69 (.69) (1.14) (.01) 10.91 9.76
6/30/95
(unaudited)
INCOME ACCOUNT
1985(a) .24 (.23) .54 - 10.00 10.55
1986 .83 (.83) .57 (.08) 10.55 11.04
1987 .76 (.76) (.56) (.51) 11.04 9.97
1988 .84 (.85) (.19) - 9.97 9.77
1989 .88 (.88) .02 - 9.77 9.79
1990 .94 (.94) (.35) - 9.79 9.44
1991 .81 (.81) .47 - 9.44 9.91
1992 .79 (.79) (.16) - 9.91 9.75
1993 .65 (.65) .11 - 9.75 9.86
1994 .68 (.68) (.72) - 9.86 9.14
6/30/95
(unaudited)
<CAPTION>
RATIO OF
RATIO OF NET NET
OPERATING INVESTMENT ASSETS
EXPENSES INCOME AT END
TO TO OF
AVERAGE AVERAGE PERIOD ANNUAL
YEARS ENDED NET NET PORTFOLIO (IN TOTAL
DECEMBER 31 ASSETS ASSETS TURNOVER THOUSANDS) RETURN(C)
- -------------- -------- -------- --------- -------- -----
<S> <C> <C> <C> <C> <C>
LIQUID ACCOUNT
1985 1.00% 7.30% n/a $65,098 7.50%
1986 1.00 5.88 n/a 74,111 6.03
1987 1.00 5.81 n/a 68,908 5.97
1988 1.04 6.64 n/a 73,921 6.82
1989 1.06 8.22 n/a 87,264 8.53
1990 1.06 7.31 n/a 84,387 7.53
1991 1.01 5.22 n/a 69,932 5.31
1992 1.02 2.87 n/a 67,549 2.89
1993 .95 2.27 n/a 76,620 2.30
1994 .93 3.34 n/a 63,946 3.40
6/30/95
(unaudited)
GOVERNMENT SEC
1985(a) 1.50(b) 8.00(b) 468.56%(b) 12,890 9.40
1986 1.27 8.92 111.68 22,947 11.66
1987 1.24 8.12 207.67 24,703 3.33
1988 1.16 8.27 175.50 35,910 7.99
1989 1.19 8.14 68.14 41,561 14.10
1990 1.16 8.07 44.19 47,524 9.44
1991 1.07 7.83 27.50 55,332 15.03
1992 1.01 6.92 131.79 67,612 6.07
1993 .93 6.03 224.02 77,596 9.56
1994 .91 6.71 156.90 60,162 (4.18)
6/30/95
(unaudited)
INCOME ACCOUNT
1985(a) 1.50(b) 8.20(b) 242.68(b) 11,048 7.80
1986 1.29 7.69 164.13 14,620 13.54
1987 1.27 7.32 231.39 15,367 2.03
1988 1.24 8.43 150.04 16,789 6.70
1989 1.27 8.93 52.95 18,705 9.56
1990 1.24 9.78 90.20 19,809 6.33
1991 1.12 8.44 50.44 22,839 14.22
1992 .63 8.09 109.47 38,675 6.60
1993 .63 6.56 145.94 48,636 7.97
1994 .63 7.16 62.88 46,547 (0.42)
6/30/95
(unaudited)
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NET
REALIZED DISTRIBUTIONS NET NET
& FROM ASSET ASSET
UNREALIZED NET VALUE VALUE
DIVIDENDS GAIN REALIZED AT AT
NET FROM NET (LOSS) GAIN BEGINNING END
YEARS ENDED INVESTMENT INVESTMENT ON ON OF OF
DECEMBER 31 INCOME INCOME INVESTMENTS INVESTMENTS PERIOD PERIOD
- -------------- ------ -------- ------ ------ ----- -----
TOTAL RETURN ACCOUNT
<S> <C> <C> <C> <C> <C> <C>
1985(a) .13 (.12) .90 - 10.00 10.91
1986 .31 (.30) .99 (.04) 10.91 11.87
1987 .38 (.38) .13 (1.09) 11.87 10.91
1988 .53 (.53) .60 - 10.91 11.51
1989 .76 (.76) 1.81 (.63) 11.51 12.69
1990 .66 (.66) (.68) (.07) 12.69 11.94
1991 .54 (.54) 2.79 (.71) 11.94 14.02
1992 .50 (.50) .86 (1.07) 14.02 13.81
1993 .48 (.48) 1.70 (.97) 13.81 14.54
1994 .55 (.55) (.86) (.24) 14.54 13.44
6/30/95
(unaudited)
GROWTH ACCOUNT
1985(a) .11 (.11) .94 - 10.00 10.94
1986 .24 (.24) 1.11 (.08) 10.94 11.97
1987 .22 (.22) (.12) (2.05) 11.97 9.80
1988 .20 (.20) 1.20 - 9.80 11.00
1989 .51 (.51) 3.30 (1.25) 11.00 13.05
1990 .34 (.34) (1.36) (.07) 13.05 11.62
1991 .25 (.25) 4.00 (1.22) 11.62 14.40
1992 .26 (.26) 1.44 (1.64) 14.40 14.20
1993 .30 (.30) 2.64 (1.70) 14.20 15.14
1994 .22 (.22) (.32) (.62) 15.14 14.20
6/30/95
(unaudited)
<CAPTION>
RATIO OF
RATIO OF NET NET
OPERATING INVESTMENT ASSETS
EXPENSES INCOME AT END
TO TO OF
AVERAGE AVERAGE PERIOD ANNUAL
YEARS ENDED NET NET PORTFOLIO (IN TOTAL
DECEMBER 31 ASSETS ASSETS TURNOVER THOUSANDS) RETURN(C)
- -------------- -------- -------- --------- -------- -----
TOTAL RETURN A
<S> <C> <C> <C> <C> <C>
1985(a) 1.50(b) 4.46(b) 49.82(b) 12,083 10.34
1986 1.26 3.22 143.32 35,382 11.88
1987 1.08 3.15 197.79 44,770 3.92
1988 1.11 4.61 223.62 54,253 10.40
1989 1.20 5.90 149.22 65,071 22.61
1990 1.24 5.31 115.45 66,382 (0.21)
1991 1.20 4.02 122.40 86,455 28.21
1992 1.11 3.61 177.85 109,701 9.90
1993 1.02 3.40 155.16 171,205 15.89
1994 .96 3.80 115.01 177,904 (2.11)
6/30/95
(unaudited)
GROWTH ACCOUNT
1985(a) 1.50(b) 3.81(b) 57.58(b) 11,514 10.50
1986 1.31 2.21 163.15 19,469 12.25
1987 1.17 1.71 214.32 19,638 (0.29)
1988 1.23 1.95 246.14 26,285 14.32
1989 1.18 3.90 169.75 37,323 34.86
1990 1.19 2.73 143.95 35,202 (7.98)
1991 1.19 1.74 148.30 40,716 36.91
1992 1.12 1.74 141.69 45,600 11.99
1993 1.05 1.95 99.67 64,495 20.91
1994 1.02 1.50 98.46 78,390 (0.65)
6/30/95
(unaudited)
</TABLE>
(a) For the period from September 16, 1985 (inception) to December 31, 1985
(b) Annualized
(c) Annual total returns do not include the effect of sales charges
14
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Company offers a broad range of investment alternatives through a variety
of mutual funds, five of which are offered by means of this Prospectus
(Accounts). Each Account has its own investment objective and policies which are
designed to meet specific investment goals and can be changed without
shareholder approval. There can be no guarantee, however, that the Accounts will
meet their investment goals.
The Accounts are presented here in order of ascending risk. Generally,
investors seeking higher returns must assume greater risk determined according
to volatility of net asset value. Each Account invests in securities of
different issuers and industry classifications in an attempt to spread and
reduce the risks inherent in all investing.
The Manager of each Account is G.R. Phelps & Co. (G.R. Phelps), an indirect
subsidiary of Connecticut Mutual Life Insurance Company (Connecticut Mutual).
LIQUID ACCOUNT
-- A MONEY MARKET FUND
The Liquid Account 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. Money market instruments are high quality, short-term
securities that present minimal credit risk. They consist of 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 "Risk Factors, Securities and Investment Techniques."
The Account 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. There can be no assurance, however, that the Account will be able to
maintain a stable price per share of $1.00.
The Account may purchase only money market instruments that are within the
two highest rating categories of the major rating agencies (E.G., Moody's
Investors Service, Inc. (Moody's) or Standard and Poor's Ratings Group (S&P)).
The Account will not invest more than 5% of its total assets in securities that,
although of high quality, have not been rated in the highest short-term rating
category or, if unrated, have not been judged by the Manager to be of equivalent
quality. Within this 5% limitation, the Account 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.
The Account 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 the Account's portfolio; to increase yield; to maintain the
quality of the portfolio; or to maintain a stable share value.
15
<PAGE>
Securities in which the Liquid Account invests will generally not yield as
high a level of current income as lower quality and longer term securities. Such
lower quality and longer term securities, however, may have less liquidity and
greater credit and interest rate risk. AN INVESTMENT IN THE LIQUID ACCOUNT IS
NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
INCOME ACCOUNT
-- A SHORT-TERM BOND FUND
The Income Account seeks high current income consistent with prudent
investment risk and preservation of capital. The Account seeks to achieve its
objective by investing primarily in corporate debt securities with remaining
maturities of five years or less or mortgage debt securities with prepayment
features which in the judgment of the Manager will result in the payment of
interest and principal such that the effective maturity is five years or less.
The Account anticipates maintaining an average dollar-weighted portfolio
maturity of generally between two and three years. By restricting the maturities
of the Account's investments, the potential for dramatic changes in the value of
the Account's investments should be reduced, and the value of the Account's
shares should remain more stable than that of a longer-term bond fund. Investors
should be mindful, however, that the value of the Account's shares fluctuates
based on changes in interest rates and in the credit quality of the issuers
represented in its portfolio.
The Account invests at least 75% of its total assets in: U.S. Government and
U.S. Government-related securities (as defined below in "Government Securities
Account"), 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
Account's investments in short-term investments must be rated, or judged to be
the equivalent of, "Prime." Some of these 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 Account 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.
The Account 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. The lower rated securities (commonly called junk
bonds) in which the Account may invest may include obligations that are in
default. Unrated debt securities will not exceed 10% of the Account'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 Account 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 "Risk
Factors, Securities and Investment Techniques -- Debt Securities." Refer to
Appendix A for a description of the various rating categories. In addition,
Appendix B provides a summary of ratings assigned to debt holdings (not
including money market instruments) of the Account. These percentages are
historical and do not necessarily indicate the current or future debt holdings
of the Account.
16
<PAGE>
The Account may invest up to 20% of its total assets in mortgage dollar
rolls. The Account may also invest up to 5% of its total assets in inverse
floating rate instruments. See "Risk Factors, Securities and Investment
Techniques -- Inverse Floating Rate Instruments and -- Mortgage Dollar Rolls."
Consistent with the foregoing policies, the Account 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.
See "Risk Factors, Securities and Investment Techniques -- Foreign Securities."
GOVERNMENT SECURITIES ACCOUNT
-- A GOVERNMENT SECURITIES FUND
The Government Securities Account 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 (GNMA 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 Account's investments in privately issued CMOs will be limited to
those rated within the two highest rating categories by a nationally recognized
rating agency. The U.S. Government and U.S. Government-related securities in
which the Account 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 Account'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 Account'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
Account may also invest up to 20% of its total assets in mortgage dollar rolls.
The Account may invest up to 5% of its total assets in inverse floating rate
instruments. Additional characteristics and risks associated with the securities
in which the Account invests and the investment techniques it uses are described
under "Risk Factors, Securities and Investment Techniques -- U.S. Government
Securities, -- U.S. Government Related Securities and -- Mortgage Dollar Rolls."
Under normal circumstances, the Fund may invest the remainder of its assets
(up to 35%) in investment grade debt obligations of private issuers.
17
<PAGE>
Although the Government Securities Account 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
ACCOUNT IS NOT INSURED OR GUARANTEED.
TOTAL RETURN ACCOUNT
-- A BALANCED FUND
The Total Return Account seeks to maximize total investment return
(including both capital appreciation and income) principally 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. This allocation process utilizes quantitative
asset allocation tools, which measure the relationship among these three asset
categories, in combination with the judgment of the Manager concerning current
market dynamics. Allocating assets among different types of investments allows
the Account to take advantage of opportunities wherever they occur, but also
subjects the Account to the risks of a given investment type. Stock values
fluctuate in response to the activities of individual companies and general
market and economic conditions. The value of bonds and short-term instruments
fluctuates based on changes in the credit quality of the individual issuer and
changes in interest rates. The Account's debt securities are expected to have a
portfolio maturity of six to twelve years. Consistent with the foregoing, at
least 25% of the Account's total assets will be invested in fixed income senior
securities.
The Account may invest up to 25% of its total assets in the aggregate in debt
securities and preferred stocks rated below investment grade and unrated debt
securities determined by the Manager to be of comparable credit quality. These
lower quality securities (commonly called junk bonds) in which the Account may
invest may include obligations that are in default. Unrated debt securities will
not exceed 10% of the Account's total assets. Debt securities having low credit
quality involve greater price volatility and risk of loss of principal and
income. For a description of these and other risks associated with lower quality
debt securities, see "Risk Factors, Securities and Investment Techniques -- Debt
Securities." Refer to Appendix A of this Prospectus for a description of the
various ratings categories. In addition, Appendix B provides a summary of
ratings assigned to debt holdings (not including money market instruments) of
the Account. These percentages are historical and do not necessarily indicate
the current or future debt holdings of the Account.
The Account may invest up to 20% of its total assets in mortgage dollar
rolls. The Account may also invest up to 5% of its total assets in inverse
floating rate instruments. See "Risk Factors, Securities and Investment
Techniques -- Inverse Floating Rate Instruments and -- Mortgage Dollar Rolls."
Consistent with the foregoing policies, the Account may invest to a limited
degree in securities of foreign issuers. See "Risk Factors, Securities and
Investment Techniques -- Foreign Securities."
GROWTH ACCOUNT
-- A GROWTH FUND
The Growth Account seeks long term growth of capital by investing primarily
in common stocks with low price-earnings ratios and better-than-anticipated
earnings. A portion of the Account's investments may be held in cash, in
short-term instruments and investment grade corporate and U.S. Government debt
securities. Realization of current income is a secondary consideration.
18
<PAGE>
The Manager chooses investments for the Growth Account using a quantitative
investment discipline in combination with fundamental securities analysis. A low
price-earnings ratio (below the price-earnings ratio of the S&P 500 Index) often
accompanies a stock which is out-of-favor in the market. Stocks with low price-
earnings ratios have performed better than the market averages in most years of
recent decades. When an out-of- favor company demonstrates better earnings than
what most analysts were expecting, referred to as a favorable earnings surprise,
an upward revaluation of both earnings expectations and the price-earnings
multiple often results, generally causing the company's stock price to
outperform the market averages.
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 Growth Account. When the price- earnings ratio of a
stock held by the Growth Account moves significantly above the multiple of the
overall stock market, or the company reports a meaningful earnings
disappointment, the stock will normally be sold. The stock selection methodology
used in managing the Growth Account's portfolio may result in a high portfolio
turnover rate in certain market conditions. High portfolio turnover (greater
than 100%) may in turn result in higher transaction fees and brokerage
commissions and may result in realized capital gains.
Historically, common stocks have shown greater long-term growth potential
than other types of securities. However, stock values fluctuate in response to
the activities of individual companies and general market and economic
conditions. For a further discussion of common stocks, see "Risk Factors,
Securities and Investment Techniques."
The Account may invest the remainder of its assets (up to 10% under normal
circumstances) in corporate and U.S. Government debt obligations, including
convertible bonds which may be rated as low as B by Moody's or S&P. Debt
securities having low credit quality involve greater price volatility and risk
of loss of principal and income. For a description of these and other risks
associated with lower quality debt securities, see "Risk Factors, Securities and
Investment Techniques -- Debt Securities." Refer to Appendix A for a description
of the various ratings categories.
Consistent with the foregoing policies, the Account may invest to a limited
degree in securities of foreign issuers, including issuers in developing
countries. These investments are subject to special risks. See "Risk Factors,
Securities and Investment Techniques -- Foreign Securities."
INVESTMENT RESTRICTIONS. Each Account is subject to certain fundamental
investment restrictions that are enumerated in detail in the SAI and may not be
changed without shareholder approval. Each Accounts' investment objective and
certain other policies are non-fundamental and may be changed by the Company's
Board of Directors without shareholder approval. An Account's shareholders will
be given 30 days' advance written notice of a change to an Account's investment
objective.
YOUR ACCOUNT
HOW TO BUY SHARES
YOU MAY PURCHASE SHARES OF AN ACCOUNT AT THE PUBLIC OFFERING PRICE through
any securities broker-dealer having a sales agreement with CMFS or directly from
CMFS, the Accounts' distributor. Certain
19
<PAGE>
minimum investment requirements may apply as set forth above in Your Shareholder
Manual. All share purchase orders that fail to specify a class (except Liquid
Account) will be invested in Class A shares.
IF YOU ARE NEW TO CONNECTICUT MUTUAL, complete and sign an account
application and mail it along with your check. All orders to purchase shares are
subject to acceptance or rejection by the Company or CMFS. You may also open
your account by wire as described in Your Shareholder Manual. If there is no
application accompanying this prospectus, call 1-800-234-5606.
IF YOU ARE INVESTING THROUGH A TAX-SHELTERED RETIREMENT PLAN, such as an IRA,
for the first time, you will need a special application. Retirement investing
also involves its own investment procedures. Call 1-800-234-5606 for more
information and a retirement application.
PURCHASING CLASS A SHARES AND SHARES OF THE LIQUID ACCOUNT
Class A shares of each Account are sold at the share price next calculated
after receipt of your purchase order, plus a sales charge as follows:
<TABLE>
<CAPTION>
GROWTH ACCOUNT AND INCOME ACCOUNT AND
TOTAL RETURN ACCOUNT GOVERNMENT SECURITIES ACCOUNT
------------------------------------------ ------------------------------------------
SALES CHARGES AS % OF SALES CHARGES AS % OF
------------------------------------------ ------------------------------------------
DEALER DEALER
REALLOWANCE REALLOWANCE
AS A % AS A %
NET AMOUNT OFFERING OF OFFERING NET AMOUNT OFFERING OF OFFERING
INVESTED PRICE PRICE INVESTED PRICE PRICE
------------ ------------ -------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Less than $50,000....................... 5.26% 5.00% 4.50% 4.17% 4.00% 3.50%
$50,000 but less than $75,000........... 4.71% 4.50% 4.00% 4.17% 4.00% 3.50%
$75,000 but less than $100,000.......... 4.44% 4.25% 3.75% 4.17% 4.00% 3.50%
$100,000 but less than $250,000......... 3.36% 3.25% 3.00% 3.36% 3.25% 3.00%
$250,000 but less than $500,000......... 2.83% 2.75% 2.50% 2.83% 2.75% 2.50%
$500,000 or more........................ 0% 0% 0% 0%
</TABLE>
No sales charge is imposed on purchases of Class A shares of an Account paid
from automatic reinvestment of dividends and capital gain distributions made by
that Account. The sales charge on Class A shares may be reduced and/or
eliminated in certain cases as further described under "Reducing or Eliminating
Your Sales Charge -- Class A Shares."
The entire sales charge on Class A shares for CMFS retail sales is payable to
CMFS and is used for sales and other distribution expenses. Upon notice to
broker-dealers with whom it has sales agreements, CMFS may pay an amount up to
the full applicable sales charge. CMFS may from time to time, at its own
expense, provide promotional incentives to certain broker-dealers whose
representatives have sold or are expected to sell significant amounts of shares
of one or more of the Accounts. Broker-dealers to whom substantially the entire
sales charge is paid may be deemed to be underwriters as that term is defined
under the Securities Act of 1933.
Shares of the Liquid Account are sold at the share price next calculated
after receipt of your purchase order. There is no sales charge for direct
purchases of Liquid Account shares, but such shares may be subject to a
distribution fee. See "Management -- Distribution Plans."
20
<PAGE>
CONTINGENT DEFERRED SALES CHARGE -- CLASS A SHARES
Purchases of $500,000 or more of Class A shares are sold without an initial
sales charge, but a CDSC of 1% may be imposed if you sell (or redeem) your
shares within one year of purchase. The 1% charge will be assessed on an amount
equal to the current market value or the original purchase price of the Class A
shares sold, whichever is smaller. In determining whether a CDSC will be
charged, it will be assumed that those Class A shares in your account which are
not subject to a CDSC will be sold first. The CDSC may be waived on certain
redemptions of Class A shares subject to such charge as described below under
the caption "Purchasing Class B Shares -- Waiver of the CDSC."
CMFS may, in its discretion, pay a commission which may be up to the full
amount of the sales charge to its representatives or other broker-dealers who
initiate and are responsible for such purchases. Concessions will be paid for
sales in excess of $500,000 as follows:
<TABLE>
<CAPTION>
AMOUNT OF TRANSACTION AT OFFERING PRICE CONCESSIONS DEALER CONCESSION
- ---------------------------------------------------------------------------- ----------- -----------------
<S> <C> <C>
$500,000 up to $2,000,000................................................... 1.00% .90%
$2,000,000 to $3,000,000.................................................... .80% .75%
$3,000,000 to $5,000,000.................................................... .20% .15%
Over $5,000,000............................................................. .08% .075%
</TABLE>
REDUCING OR ELIMINATING YOUR SALES CHARGE -- CLASS A SHARES
REDUCING YOUR SALES CHARGE. There are various methods by which you may
qualify for a reduced sales charge on your investments in Class A shares.
You may qualify for a reduced sales charge on your investments in Class A
shares through COMBINED PURCHASES, STATEMENT OF INTENTION and RIGHTS OF
ACCUMULATION.
COMBINED PURCHASES. You may aggregate purchases of Class A shares of the
Accounts, shares of the Liquid Account and Class A shares of other accounts in
the Company with the purchases of the other persons listed below to achieve
discounts in the applicable sales charges. The sales charge applicable to a
current purchase of Class A shares of each Account by a person listed below is
determined by adding the value of Class A shares to be purchased to the
aggregate value (at current offering price) of Class A shares of any of the
other Accounts in the Company and shares of the Liquid Account previously
purchased and then owned, provided that CMFS is notified by you or your broker-
dealer each time a purchase is made which would qualify. For example, if you are
investing $75,000 in the Growth Account and your spouse owns Class A shares of
other Accounts in the Company with a value of $75,000, you would pay a sales
charge of 3.25% of the offering price of the new investment.
Qualifying investments include those by you, your spouse and your children
under the age of 21, if all parties are purchasing Class A shares for their own
account(s), which may include tax qualified plans, such as an IRA or single
participant Keogh-type plan, or by a company solely controlled by such
individuals as defined in the 1940 Act. Reduced sales charges also apply to
purchases by a trustee or other fiduciary if the investment is for a single
trust, estate or single fiduciary account, including pension, profit-sharing or
other employee benefit trust created pursuant to a plan qualified under the
Code. Reduced sales charges apply to combined purchases by or for qualified
employee benefit plans of a single corporation, or of corporations affiliated
with each other in accordance with the 1940 Act.
21
<PAGE>
STATEMENT OF INTENTION (SOI). You may combine the current value of all
Class A shares held in one or more Accounts and shares of the Liquid Account
with the investment amounts intended over the next 13-month period to qualify
for a reduced sales charge. The SOI may be backdated 90 days. The terms of the
SOI are set forth in more detail in the Accounts' SAI. You must identify on the
Application all Accounts whose values are to be combined. If the intended
investment is not made within the 13-month period, you must remit the additional
sales charges, or sufficient Class A shares or shares of the Liquid Account will
be redeemed from your account to cover the sales charge.
RIGHTS OF ACCUMULATION. The sales charge for new purchases of Class A
shares of an Account will be determined by aggregating the net asset value of
all the Accounts owned by the shareholder at the time of the new purchase. The
rules listed under Combined Purchases may apply. You must identify on the
Application all accounts to be linked for Rights of Accumulation.
ELIMINATING YOUR SALES CHARGE
There are various methods by which you may eliminate sales charges on your
investments in Class A shares.
Class A shares of an Account may be purchased without a sales charge by: (1)
any purchaser, provided the total initial amount invested in any Account or
Accounts totals $500,000 or more, including investments made pursuant to the
Combined Purchases, Statement of Intention and Rights of Accumulation features
described in this prospectus; (2) any participant in a qualified plan, provided
that the total initial amount invested by the plan in any Account or Accounts
totals $500,000 or more; (3) Directors of the Company and members of their
immediate families; (4) NASD registered representatives whose employer consents
to such purchases, and by the spouses and immediate family members of such
representatives; (5) employee benefit plans sponsored by CMFS and its affiliated
companies; (6) one or more members of a group of at least 1,000 persons (and
persons who are retirees from such group) engaged in a common business,
profession, civic or charitable endeavor or other activity, and the spouses and
minor dependent children of such persons, pursuant to a marketing program
between CMFS and such group; (7) any holder of a variable annuity contract
issued in New York State by Connecticut Mutual through the Panorama Separate
Account which is beyond the applicable surrender charge period and which is used
to fund a qualified plan, who exchanges the variable annuity contract for Class
A shares of the Company; and (8) an institution acting as a fiduciary on behalf
of an individual or individuals, where such institution is directly compensated
by the individual(s) for recommending the purchase of the shares of the Company,
provided the institution has an agreement with CMFS. Purchases of Class A shares
made pursuant to (1) and (2) above may be subject to a CDSC.
REINSTATEMENT PRIVILEGE
A shareholder, who has made a partial or complete redemption of Class A
shares from an Account, may reinvest all or part of the redemption proceeds in
Class A shares of the same Account without imposition of a sales charge with
respect to the amount invested, provided such reinvestment is effected within 60
days after the date of the redemption. National Financial Data Services (NFDS)
22
<PAGE>
must receive from the shareholder both a written request for reinvestment and a
check. The reinvestment will be made at the next calculated net asset value
after receipt. Redemptions are taxable transactions, and special tax rules may
apply if a reinvestment occurs. Each shareholder should consult his/her own tax
adviser as to the tax consequences of any redemption and/or reinvestment.
PURCHASING CLASS B SHARES
The public offering price of the Class B shares of each Account is the next
determined net asset value per share. No initial sales charge is imposed. A
CDSC, however, is imposed on certain redemptions of Class B shares. Since the
Class B shares are sold without an initial sales charge, the Account receives
the full amount of the investor's purchase payment. Orders for Class B shares
for $250,000 or more will be treated as orders for Class A shares or declined.
The amount of any applicable CDSC will be calculated by multiplying the
lesser of the original purchase price or the net asset value of such shares at
the time of redemption by the applicable percentage shown in the table below.
Accordingly, no CDSC is imposed on increases in net asset value above the
original purchase price.
<TABLE>
<CAPTION>
REDEMPTION DURING CDSC
- ---------------------------------------------------------------------------------------------------- ------
<S> <C>
1st Year Since Purchase............................................................................. 5%
2nd Year Since Purchase............................................................................. 5%
3rd Year Since Purchase............................................................................. 4%
4th Year Since Purchase............................................................................. 4%
5th Year Since Purchase............................................................................. 2%
6th Year Since Purchase............................................................................. 1%
Thereafter.......................................................................................... 0%
</TABLE>
In determining whether a CDSC is applicable to a redemption, the calculation
will be made in a manner that results in the lowest possible rate. It will be
assumed that the redemption is made first of amounts representing shares
acquired pursuant to the reinvestment of dividends and distributions; then of
amounts representing the cost of shares purchased seven years or more prior to
the redemption; and finally of amounts representing the cost of shares held for
the longest period of time within the applicable six-year period. Class B shares
of an Account that are redeemed will not be subject to a CDSC to the extent that
the value of such shares represents: (1) reinvestment of dividends or capital
gain distributions or (2) shares redeemed more than six years after their
purchase. Redemptions of most other Class B shares will be subject to a CDSC.
See "Waivers of the CDSC."
Proceeds from the CDSC are paid to CMFS and are used in whole or part to
defray CMFS' expenses related to providing distribution-related services to the
Accounts in connection with the sale of Class B shares, including the payment of
compensation to broker-dealers.
Class B shares will automatically convert into Class A shares on the first
day of the month that is eight years after the purchase date, except as noted
below. Class B shares acquired by exchange from Class B shares of another
Account in the Company will convert into Class A shares based on the date of the
initial purchase and the applicable CDSC. Class B shares acquired through
reinvestment of distributions will convert into Class A shares based on the date
of the initial purchase to which such
23
<PAGE>
shares relate. For this purpose, Class B shares acquired through reinvestment of
distributions will be attributed to particular purchases of Class B shares in
accordance with such procedures as the Directors may determine from time to
time. The conversion of Class B shares to Class A shares is subject to the
continuing availability of a ruling from the Internal Revenue Service, which the
Company has obtained, or an opinion of counsel that such conversions will not
constitute taxable events for federal tax purposes. There can be no assurance
that such ruling or opinion will continue to be in effect at the time any
particular conversion would occur. The conversion of Class B shares to Class A
shares will not occur if such ruling is no longer in effect and such an opinion
is not available and, therefore, Class B shares would continue to be subject to
higher expenses than Class A shares for an indeterminate period.
WAIVER OF THE CDSC. Except as otherwise noted, the CDSC is waived in the
case of redemptions of Class A shares subject to a CDSC, Class B shares or
Liquid Account shares subject to a CDSC made: (1) by the estate of the deceased
shareholder; (2) upon the disability of the shareholder, as defined in Section
72(m)(7) of the Internal Revenue Code of 1986, as amended (Code); (3) for
retirement distributions (or loans) to participants or beneficiaries from
retirement plans qualified under Sections 401(a) or 403(b)(7) of the Code, or
from IRAs, deferred compensation plans created under Section 457 of the Code, or
other employee benefit plans; (4) as tax-free returns of excess contributions to
such retirement or employee benefit plans; (5) in whole or in part, in
connection with shares sold to any state, county, or city, or any
instrumentality, department, authority, or agency thereof, that is prohibited by
applicable investment laws from paying a sales charge or commission in
connection with the purchase of shares of any registered investment management
company; (6) in connection with the redemption of shares of the Company due to a
combination with another investment company by virtue of a merger, acquisition
or similar reorganization transaction; (7) in connection with the Company's
right to involuntarily redeem or liquidate an Account; (8) in connection with
automatic redemptions of Liquid Account shares, Class A shares and Class B
shares in certain retirement plan accounts pursuant to a Systematic Withdrawal
Plan but limited to no more than 12% of the original value annually; and (9) as
involuntary redemptions of shares by operation of law, or under procedures set
forth in the Company's Articles of Incorporation, or as adopted by the Board of
Directors of the Company.
HOW TO SELL SHARES
You can arrange to take money out of your account(s) at any time by selling
(redeeming) some or all of your shares. Your shares will be sold at the next
share price calculated after your order is received in good form. Share price is
normally calculated at 4:00 p.m. Eastern Time. If you own both Class A and Class
B shares in an Account, the Class A shares will be redeemed first unless you
specify otherwise.
IF YOU SELL SHARES OF THE LIQUID ACCOUNT which were acquired by an exchange
from Class B shares or Class A shares, if applicable, of any of the other
Accounts in the Company, such shares of the Liquid Account are subject to the
CDSC rate of the original shares purchased minus a credit for the Rule 12b-1
fees paid while in the Liquid Account.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the methods
described below.
24
<PAGE>
TO SELL SHARES IN A RETIREMENT ACCOUNT, your request must be made in writing,
except for exchanges to other Accounts, which can be requested by phone or in
writing. Call 1-800-322-CMIA for a retirement distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least 100 shares
in the account to keep it open.
TO SELL SHARES BY WIRE, you must sign up for this service in advance by
completing the appropriate sections in the Application.
TO INITIATE A TELEPHONE REDEMPTION, call 1-800-322-CMIA (select option "2").
You must have your Account name, account number and the taxpayer identification
number of the account available. Telephone redemptions are limited to $50,000
per day unless prior authorization has been obtained through a signature
guaranteed letter of authorization. If you do not wish to have telephone
transaction privileges on your account, you must complete the appropriate
section on the Application.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. Signature guarantees are
designed to protect you and the Company from fraud. Your request to sell shares
must be made in writing and include a signature guarantee if any of the
following situations apply:
-You request in writing to redeem more than $50,000 worth of shares,
-Your account registration has changed within the last 30 days,
-The check is being mailed to a different address than the one on our
account (record address),
-The check is being made payable to someone other than the account owner, or
-The redemption proceeds are being transferred to an account with a
different registration.
You should be able to obtain a signature guarantee from a bank, broker,
dealer, credit union (if authorized under state law), securities exchange or
association, clearing agency or savings association. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
SELLING SHARES IN WRITING BY MAIL
Write a "letter of instruction" with:
-Your name,
-The Account's name,
-Your account number,
-The class of shares to be redeemed,
-The dollar amount or number of shares to be redeemed, and any other
applicable requirements listed above in Your Shareholder Manual.
25
<PAGE>
-Mail the letter of instruction to NFDS, the Company's transfer agent, at:
Connecticut Mutual Investment Accounts, Inc.
P.O. Box 419694
Kansas City, Missouri 64179-0948
-Unless otherwise instructed, the Company will send a check to the address
of record.
CHECK WRITING (LIQUID ACCOUNT ONLY)
Shareholders may redeem shares of the Liquid Account by check. See "Investor
Services -- Check Writing" below.
REDEMPTIONS OF CERTAIN SHAREHOLDER ACCOUNTS
In order to reduce the expense of maintaining numerous small accounts, the
Company reserves the right to involuntarily close any shareholder's account
(other than an IRA) that has been open at least 24 months and has fewer than 100
shares if, within 30 day's after notification by the Company, the affected
shareholder does not increase the size of his account to the required level. In
addition, the Board of Directors may cause the Company to redeem at their net
asset value shares held by a shareholder in any Account if the shareholder has
failed to supply a correct, certified social security or other taxpayer
identification number required to be obtained by the Company.
HOW TO EXCHANGE SHARES
YOU MAY EXCHANGE YOUR SHARES of an Account for shares of the same class of
any other Account in the Company or for shares of the Liquid Account. To obtain
a current prospectus for other Accounts, please call 1-800-322-CMIA (select
option "3"). You should consider the differences in investment objectives and
expenses of an Account as described in its prospectus before making an exchange.
Exchanges are taxable transactions and may be subject to special tax rules about
which you should consult your own tax adviser. All exchanges are subject to the
following exchange restrictions:
-The Account you are exchanging into must be registered for sale in your
state.
-You may exchange only between Accounts that are registered in the same
name, address and taxpayer identification number.
-You may only exchange for shares of the same class of another Account or
for shares of the Liquid Account (see below).
-The minimum amount you may exchange from one Account into another is $500
or the total value of the Account if less than $500.
-IF YOU WISH TO MAKE MORE THAN 12 EXCHANGES IN A 12-MONTH PERIOD, AN
EXCHANGE FEE OF .75% OF THE NET ASSET VALUE OF THE SHARES REDEEMED WILL BE
CHARGED. EXCHANGES MADE PURSUANT TO THE DCA PROGRAM (SEE "INVESTOR
SERVICES") ARE NOT SUBJECT TO THIS FEE.
-Exchanges of shares of the Liquid Account for shares of any other Account
which carry a front-end sales charge are subject to the sales charge
applicable to such other Account. Shares of the Liquid Account acquired by
exchange of shares of another Account on which a front-end sales
26
<PAGE>
charge was previously paid or which are subject to a CDSC are exchanged at
net asset value. However, shares of the Liquid Account acquired through an
exchange of shares which are subject to a CDSC will continue to be subject
to a CDSC upon redemption. The rate of this charge will be the rate in
effect for the original shares at the time of exchange without counting the
time such shares were held as Liquid Account shares minus a credit for the
Rule 12b-1 fees paid while in the Liquid Account.
-In addition to exchanges into and out of the Liquid Account, you may
exchange your shares of other Accounts for shares of the same class of any
other Account without the imposition of a sales charge. With respect to
Class B shares, if you exchange such shares for Class B shares of another
Account, the CDSC will be calculated based on the date on which you
acquired the original Class B shares.
-An Account reserves the right to refuse exchange purchases by any person or
group if, in the Manager's judgment, an Account would be unable to invest
the money effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
-Your exchanges may be restricted or refused if an Account receives or
anticipates simultaneous orders affecting significant portions of the
Account's assets. In particular, a pattern of exchanges that coincides with
a "market timing" strategy may be disruptive to the Account.
-Although an Account will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time.
Each Account reserves the right to terminate or modify the exchange
privilege in the future.
INVESTOR SERVICES
Connecticut Mutual provides a variety of services to help you manage your
account.
24-HOUR SERVICE
Call 1-800-322-CMIA (select option "1") for the following automated services.
After normal business hours, please leave a message and someone will return your
call during normal business hours.
-Account balance
-Last distribution
-Prices
-Account distributions
-Service representative
-Duplicate statement
-Order checks (Liquid Account only)
-Change PIN (Personal Identification Number)
-Duplicate tax forms
27
<PAGE>
INFORMATION SERVICES
Telephone representatives are available during normal business hours to
provide the information and services you need.
Statements and reports sent to you include the following:
-Confirmation statements (after every transaction, except reinvestments,
automatic investments and automatic payroll investments, that affects your
account balance or your account registration),
-Quarterly consolidated account statements which summarize all account
activity year-to-date, and
-Financial reports (every six months).
Call 1-800-322-CMIA (select option "2") if you need additional copies of
financial reports or historical account information.
INVESTOR SERVICES
One easy way to pursue your financial goals is to invest money regularly. The
Company offers convenient services that let you transfer money into your
account, or between accounts, automatically. While regular investment plans do
not guarantee a profit and will not protect you against loss in a declining
market, they can be an excellent way to invest for retirement, a home,
educational expenses and other long-term financial goals. Certain restrictions
apply. Call 1-800-322-CMIA for more information.
AUTOMATIC INVESTMENT PLAN lets you make regular monthly investments through
an automatic withdrawal from your bank account ($50 minimum per Account) and you
can enroll when you establish your account. Forms are available to initiate this
program on existing accounts from your registered representative, or by calling
1-800-322-CMIA.
DOLLAR COST AVERAGING (DCA) INVESTMENT PROGRAMS let you set up monthly
exchanges in amounts of $100 or more from one Account to the same class of
shares of any other Account or of the Liquid Account. Sales charges may apply.
Use of the DCA PROGRAM permits the purchase of shares of an Account on a
scheduled basis which disregards fluctuations in net asset value. All
shareholders accounts involved in a DCA Program must have like registrations.
AUTOMATIC DIVIDEND DIVERSIFICATION (ADD) lets you automatically reinvest
dividends and capital gain distributions paid by one Account into shares of the
same class of another Account or of the Liquid Account. The number of shares
reinvested will be determined using the price in effect for the receiving
Account on the dividend payment date for the Account whose dividend is to be
invested. Sales charges may apply to dividends from the Liquid Account investing
into Class A shares of another Account. All shareholder accounts involved in an
ADD program must have like registrations.
28
<PAGE>
EXCHANGE PRIVILEGE. You may exchange your shares of an Account for shares
of the same class of any other Account in the Company or of the Liquid Account.
You may exchange your shares of the Liquid Account for shares of any other
Account in the Company. To obtain a current prospectus for any Accounts in the
Company, please call 1-800-322-CMIA (select option "3"). You should consider the
differences in investment objectives and expenses of an Account as described in
its prospectus before making an exchange.
Exchanges are taxable transactions and may be subject to special tax rules
about which you should consult your own tax adviser. For complete policies and
restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see "How to
Exchange Shares."
SYSTEMATIC WITHDRAWAL PLANS let you set up monthly, quarterly, semi-annual or
annual redemptions of Class A shares and Liquid Account shares not subject to a
CDSC from any account with a value of $10,000 or more. You may direct the
Company to make regular payments in fixed dollar amounts of $50 or more, or in
an amount equal to the value of a fixed number of shares. Payments can be
directed to the shareholder or to someone other than the registered owner(s) of
the account. If this privilege is requested when the account is established, no
signature guarantee is needed. If this privilege is added to an existing account
and payments are directed to someone other than the registered owner(s) of the
account, a signature guarantee is required on the SYSTEMATIC WITHDRAWAL PLAN
application. The Company reserves the right to institute a charge for this
service. Systematic Withdrawal Plans for Class B shares of an Account and for
Liquid Account shares subject to a CDSC are permitted only for payments of
required distributions from retirement plan accounts for a shareholder who has
attained age 70 1/2. The CDSC will be waived with respect to such redemptions
but only if such redemptions are limited to no more than 12% of the original
value of the account.
MAINTAINING A SYSTEMATIC WITHDRAWAL PLAN AT THE SAME TIME REGULAR ADDITIONAL
INVESTMENTS ARE BEING MADE INTO ANY ACCOUNT EXCEPT THE LIQUID ACCOUNT, IS NOT
RECOMMENDED BECAUSE A SALES CHARGE WILL BE IMPOSED ON THE NEW SHARES AT THE SAME
TIME SHARES ARE BEING REDEEMED TO MAKE THE PERIODIC PAYMENTS UNDER THE
SYSTEMATIC WITHDRAWAL PLAN.
The Company may amend or terminate the Systematic Withdrawal Plan on 30 days'
prior written notice to any participating shareholders. Minimums may be waived
for the Liquid Account if used for payment of premiums due on any of the
Connecticut Mutual affiliated companies.
CHECK WRITING (LIQUID ACCOUNT ONLY). Shareholders may redeem shares of the
Liquid Account, for which certificates have not been issued, by writing checks
in an amount of $200 or more. The check is presented to NFDS for payment through
normal banking channels. These checks may be used in the same manner as any
other checks payable through NFDS (except that they may not be certified) and
are payable upon review. This check redemption service is not, however, the
equivalent of a checking account in the shareholder's name. All checks drawn by
Liquid Account shareholders electing this option are drawn on a single account
carried by NFDS in the Liquid Account's name. A shareholder's interest in the
Account is not covered by insurance provided by the Federal Deposit Insurance
Corporation or any other government agency.
29
<PAGE>
There is no charge to the shareholder for redemptions by use of checks.
Shareholders electing this option are subject to the procedures, rules and
regulations established by NFDS with respect to clearance and collection of
checks. NFDS will not honor checks which are in amounts exceeding the value of
the shares in the shareholder's account at the time the check is presented for
payment and will not honor checks drawn against uncollected funds. Since the
value of a shareholder's account changes daily, the total value of the account
may not be determined in advance. Therefore, shareholders should not attempt to
close their accounts by check. Any CDSC payable with respect to any Liquid
Account shares redeemed by check will be debited from the shareholder's account.
This service may be terminated at any time by the Company or by NFDS upon notice
to shareholders.
TRANSACTION DETAILS
THE COMPANY IS OPEN FOR BUSINESS each day that the New York Stock Exchange
(NYSE) is open. The Company normally calculates an Account's net asset value as
of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern Time.
AN ACCOUNT'S NET ASSET VALUE (NAV) PER SHARE is the value of a single share.
The NAV of a class of an Account is computed by adding the value of its
investments, cash, and other assets, subtracting the liabilities attributable to
the class, and then dividing the result by the number of shares of the class
outstanding. The NAV of the Liquid Account is calculated in the same manner
without regard to classes.
The assets of each Account (except the Liquid Account) are valued primarily
on the basis of market quotations. If quotations are not readily available,
assets are valued by a method that the Board of Directors believes accurately
reflects fair value. The assets of Liquid Account are valued at their amortized
cost pursuant to procedures established by the Board of Directors. Foreign
securities are valued on the basis of quotations from the primary market in
which they are traded, and are translated from the local currency into U.S.
dollars using current exchange rates.
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of regular trading on the NYSE. The values
of such securities used in computing the net asset value of an Account's shares
are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of regular trading on the NYSE.
Occasionally, events which affect the values of such securities and such
exchange rates may occur between the times at which they are determined and the
close of regular trading on the NYSE and will, therefore, not be reflected in
the computation of an Account's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities are
valued at their fair value using a method determined in good faith by the Board
of Directors.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or other taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report interest or
dividends to the IRS. If you are subject to backup withholding, the IRS can
require the Company to withhold 31% of your taxable distributions and, except
for Liquid Account if a constant NAV is maintained, the proceeds of redemptions
(including exchanges).
30
<PAGE>
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Telephone representatives
will request personalized security codes or other information and will also
record calls. If reasonable procedures such as those described in the Prospectus
are not followed, the Company may be liable for any loss due to unauthorized or
fraudulent telephone instructions. In all other cases, neither the Company nor
CMFS will be liable for acting upon telephone instructions made in accordance
with the telephone transaction procedures described in this Prospectus. You
should verify the accuracy of your confirmation statements immediately after you
receive them. IF YOU DO NOT WANT THE ABILITY TO REDEEM AND EXCHANGE BY
TELEPHONE, CALL 1-800-322-CMIA FOR INSTRUCTIONS. See the Account Application.
IF YOU ARE UNABLE TO REACH THE COMPANY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or overnight
mail.
EACH ACCOUNT RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a
period of time. Each Account also reserves the right to reject any specific
purchase order, including certain purchases by exchange. See "How to Exchange
Shares." Purchase orders may be refused if, in the Manager's opinion, they are
of a size that would disrupt management of an Account.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted. Note
the following:
-All of your purchases must be made in U.S. dollars and checks must be drawn
on U.S. banks. You may not purchase shares with a third party check.
-If you buy shares by check, and then redeem those shares by a method other
than by exchange to another Account in the CMIA Family of Accounts, mailing
the payment of the proceeds may be delayed for up to fifteen calendar days
to ensure that your check has cleared.
-If your check does not clear, your purchase will be cancelled and you could
be liable for any losses or fees the Account or its transfer agent has
incurred.
TO AVOID THE COLLECTION PERIOD associated with checks, consider buying shares
by bank wire, U.S. Postal money order, U.S. Treasury check, Federal Reserve
check, or direct deposit instead.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the next
NAV calculated after your request is received and accepted. Note the following:
-Normally, redemption proceeds will be mailed to you on the next business
day, but under unusual circumstances, it may take up to seven days to pay
you.
-As mentioned above, an Account may hold payment on redemptions until it is
reasonably satisfied that investments made by check have been collected,
which can take up to 15 calendar days.
-Redemptions may be suspended or payment dates postponed when the NYSE is
closed (other than weekends or holidays), when trading on the NYSE is
restricted, or as permitted by the SEC.
SHARE CERTIFICATES. Shares are credited to your account and certificates
are not issued unless specifically requested. You may request share certificates
by writing to the transfer agent, NFDS,
31
<PAGE>
P.O. Box 419694, Kansas City, Missouri, 64179-0948. There is no cost for issuing
share certificates. Transfers, exchanges and redemptions of shares will be more
complicated if certificates have been issued. If your share certificate is lost
or misplaced you will be required to pay a fee and furnish a bond satisfactory
to the Company's transfer agent (usually in the amount of 1.5% of the face value
of the lost certificate) before the shares can be transferred or redeemed, or a
replacement certificate issued.
MANAGEMENT
THE MANAGER
Each Account is managed by the Manager, which handles its business affairs
and chooses the investments for the Account. The principal business address of
the Manager is 10 State House Square, Hartford, Connecticut. The Manager's
mailing address is 140 Garden Street, Hartford, Connecticut 06154. The Manager
also manages the investments of Connecticut Mutual Financial Services Series
Fund I, Inc., a diversified investment management company offering its series of
common stock as funding vehicles for variable annuity contracts issued by
Connecticut Mutual and CM Life Insurance Company ("CM Life"). Connecticut Mutual
is the parent company for the Manager and CM Life.
The persons primarily responsible for the day-to-day management of each
Account are listed below.
<TABLE>
<CAPTION>
YEAR BECAME
ACCOUNT PORTFOLIO MANAGER PORTFOLIO MANAGER BUSINESS EXPERIENCE (LAST 5 YEARS)
- -------------- --------------------------------- ----------------- -------------------------------------
<S> <C> <C> <C>
Liquid Account John W. Powell, Jr. 1994 Portfolio Manager, Money Market --
G.R. Phelps (1994-present); Portfolio
Manager, Fixed Income -- CML
(1993-present); Investment Officer,
Fixed Income -- CML (1990-1993);
Registered Representative, Salesman
-- Prudential Securities, Inc. (prior
to 1990)
Income Account Stephen F. Libera, C.F.A. 1985 Vice President and Senior Portfolio
Manager, Fixed Income -- G.R. Phelps,
(1989-Present)
William H. Jefferis 1993 Portfolio Manager, Fixed Income --
CML (1993-present); Investment
Officer, Fixed Income -- CML
(1990-1993); Credit Analyst CIGNA
(1984-1990)
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
YEAR BECAME
ACCOUNT PORTFOLIO MANAGER PORTFOLIO MANAGER BUSINESS EXPERIENCE (LAST 5 YEARS)
- -------------- --------------------------------- ----------------- -------------------------------------
<S> <C> <C> <C>
Government Stephen F. Libera, C.F.A. 1985 Vice President and Senior Portfolio
Securities Manager, Fixed Income -- G.R. Phelps
Account (1989-Present)
William H. Jefferis 1993 Portfolio Manager, Fixed Income --
CML (1993-present); Investment
Officer, Fixed Income -- CML
(1990-1993); Credit Analyst CIGNA
(1984-1990)
Total Return Michael C. Strathearn, C.F.A. 1988 Portfolio Manager, Equities -- CML
Account (1988-Present)
Peter M. Antos, C.F.A. 1989 Vice President and Senior Portfolio
Manager, Equities -- G.R. Phelps
(1989-Present)
Stephen F. Libera, C.F.A. 1985 Vice President and Senior Portfolio
Manager, Fixed Income -- G.R. Phelps,
(1985-Present)
Growth Account Peter M. Antos, C.F.A. 1989 Vice President and Senior Portfolio
Manager, Equities -- G.R. Phelps
(1989-Present)
Michael C. Strathearn, C.F.A. 1988 Portfolio Manager, Equities -- CML
(1988-Present)
Kenneth B. White, C.F.A. 1992 Portfolio Manager, Equities -- CML
(1992-present); Senior Investment
Officer; Equities -- CML (1987-1992)
</TABLE>
CMFS distributes and markets the Accounts and their services. NFDS performs
transfer agent servicing and dividend disbursing functions for each Account.
BREAKDOWN OF EXPENSES
Like all mutual funds, each Account pays fees and expenses related to its
daily operations. These Account fees and expenses are neither billed directly to
shareholders nor deducted from individual shareholder accounts but are paid out
of an Account's assets and are reflected in its share price or dividends.
33
<PAGE>
Each Account has entered into an investment advisory agreement with the
Manager pursuant to which the Account pays a management fee to the Manager for
managing its investments and business affairs. The Manager provides
administrative services to each Account, including providing accounting,
administrative and clerical personnel and monitoring the activities of the
transfer agent, custodian and independent auditors of the Accounts. The Accounts
also pay other expenses, which are explained below.
MANAGEMENT FEES
LIQUID ACCOUNT
The Liquid Account pays a monthly fee to the Manager which is based on a
stated percentage of the Liquid Account's average daily net asset value as
follows:
<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>
The Investment Advisory Agreement provides that the Manager will reimburse
the Liquid Account if in any year its aggregate ordinary operating expenses
(including the advisory fee and 12b-1 fees, but excluding interest, taxes,
brokerage fees, commissions and extraordinary charges such as litigation costs)
exceed 1.0% of the Account's average net assets. For the fiscal year ended
December 31, 1994, the Liquid Account paid management fees equal to 0.50% of its
average daily net assets.
GOVERNMENT SECURITIES ACCOUNT, INCOME ACCOUNT, GROWTH ACCOUNT AND TOTAL
RETURN ACCOUNT
Each other Account pays a monthly fee to the Manager which is based on a
stated percentage of the Account's average daily net asset value as follows:
<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>
The Investment Advisory Agreement provides that the Manager will reimburse
any of these four Accounts if in any year its aggregate ordinary portfolio
operating expenses (including the advisory fee, but excluding interest, taxes,
brokerage fees, commissions and extraordinary charges such as litigation costs)
exceed 1.5% of average daily net assets of the Account. For the fiscal year
ended December 31, 1994, each of the Income Account, Government Securities
Account, Total Return Account and Growth Account paid management fees equal to
0.625% of its average daily net assets.
The Manager may, from time to time, temporarily agree to maintain the total
of the management fees and other expenses (including 12b-1 fees) of an Account
at no more than a specified limit. The
34
<PAGE>
Manager retains the ability to be repaid by an Account if expenses fall below
the specified limit prior to the end of the fiscal year. These expense
limitation arrangements, which may be terminated at any time without notice, can
decrease an Account's expenses and increase its performance.
OTHER EXPENSES
Each Account is also responsible for expenses not expressly stated to be
payable by the Manager under the Account's Investment Advisory Agreement. Each
Account pays other expenses, such as legal, audit and custodian fees, proxy
solicitation costs and the compensation of directors who are not affiliated with
Connecticut Mutual. State Street Bank and Trust Company provides custodian
services to each Account.
Each Account contracts with NFDS to perform many transaction and accounting
functions. These services include processing shareholder transactions, valuing
the Account's investments and handling securities loans. For the fiscal year
ended December 31, 1994, the Liquid Account, Income Account, Government
Securities Account, Total Return Account and Growth Account paid NFDS fees (as a
percentage of their average net assets) equal to 0.29%, 0.15%, 0.16%, 0.24%, and
0.26%, respectively.
DISTRIBUTION PLANS
Each Account has adopted a distribution plan for both Class A shares (Class A
Plan) and Class B shares (Class B Plan) and, with respect to the Liquid Account,
for its shares (Liquid Account Plan) designed to meet the requirements of Rule
12b-1 under the 1940 Act and the sales charge rules of the NASD.
Under the Class A Plan of each Account, each Account may make payments for
personal services and/or the maintenance of shareholder accounts to account
executives of CMFS and other broker-dealer firms with whom CMFS has agreements
in amounts not exceeding 0.25% of the average daily net assets of the Account's
Class A shares for any fiscal year. The Class A Plans for each Account became
effective on January 1, 1995, and no amounts were paid by such Accounts pursuant
to any Class A Plan during fiscal year 1994.
Under the Liquid Account Plan, the Liquid Account reimburses CMFS for its
actual expenses associated with the sale of shares of the Liquid Account. This
may include payments to third parties, such as banks or broker-dealers, that
provide shareholder support services or engage in the sale of shares of the
Liquid Account. However, payments to CMFS from the assets of the Liquid Account
cannot exceed 0.10% of the average daily net assets of the Liquid Account's
shares. In addition, the Liquid Account Plan provides that the Liquid Account
will not reimburse CMFS for expenses incurred in a given year if the Liquid
Account's aggregate expenses for that year exceed 1.0% of the value of its
aggregate daily net assets. CMFS temporarily agreed not to impose any
reimbursement to which it may be entitled pursuant to the Liquid Account Plan
during the years ended December 31, 1993 and 1994. The Liquid Account may pay,
in 1995, a portion of the maximum amount payable annually under the Liquid
Account Plan, which is 0.10% of the average daily net assets of the Liquid
Account.
Under each Account's Class B Plan, such Account may pay CMFS a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the
Account's Class B shares for its expenditures incurred in servicing and
maintaining shareholder accounts, and may pay CMFS a distribution fee at
35
<PAGE>
the annualized rate of up to 0.75% of the average daily net assets of the
Account's Class B shares for its expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
the Class B Plan continues in effect.
Each of the Class A Plans, Class B Plans and the Liquid Account Plan were
approved, on behalf of the respective Account, by a majority of the Company's
Directors who are not interested persons of the Company and who have no
financial interest in the respective Plan. Neither a Class A Plan, Class B Plan
nor the Liquid Account Plan may be amended to increase materially the annual
percentage limitation of average net assets that may be spent for the services
described in a Class A Plan or Class B Plan or the Liquid Account Plan without
the approval of the shareholders of the affected Account. Any unreimbursed
expenses under a Class A Plan or the Liquid Account Plan are not carried beyond
one year from the date of incurrence.
PORTFOLIO TURNOVER RATES
For the fiscal year ended December 31, 1994, the portfolio turnover rates for
the Income Account, Government Securities Account, Total Return Account and
Growth Account were 62.88%, 156.9%, 115.01% and 98.46%, respectively. High
portfolio turnover rates (above 100%) increase transaction costs and may
increase taxable capital gains. The Manager considers these effects when
evaluating the anticipated benefits of that turnover.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Manager is primarily responsible for placing orders for the portfolio
transactions of each Account. In placing orders, it is the policy of the Manager
to seek to obtain the most favorable net results, taking into account various
factors, including financial responsibility, quality of execution, price, dealer
spread or commissions, if any, size of the transaction, difficulty of execution,
the provision of research and other services rendered. As a result, while the
Manager seeks reasonably competitive spreads or commissions, the commissions
paid to a broker may be greater than the amount another firm might charge,
provided the Manager determines in good faith that the amount of such commission
is reasonable in relation to the value of the brokerage services and research
information provided by such broker. Such information may be used by the Manager
in managing all of its accounts and not all of such information may be used in
managing the Accounts. In selecting other brokers, each Account may also
consider the sale of its shares effected through such other brokers as a factor
in their selection, provided the Account obtains the best price and execution of
orders.
Money market securities and other fixed income securities in which the
Accounts may invest are traded primarily in the over-the-counter (OTC) market.
For transactions effected in the OTC market, the Accounts intend to deal with
the primary market-makers in the securities involved, unless a more favorable
result is obtainable elsewhere.
Commission rates on foreign exchanges are generally fixed and are generally
higher than negotiated commission rates available in the United States.
36
<PAGE>
DIVIDENDS, CAPITAL GAINS AND TAXES
It is the Company's intention to distribute all or substantially all the net
investment income and net realized capital gains, if any, of each Account for
each taxable year. For dividend purposes, net investment income of each Account
will consist of all payments of dividends received or interest accrued by such
Account less the estimated expenses of such Account (including fees payable to
the Manager).
Dividends from net investment income of the Growth Account and Total Return
Account are declared and paid semi-annually. Dividends from net investment
income of the Government Securities Account and Income Account are declared
monthly and paid monthly. Dividends from net investment income of the Liquid
Account are declared and accrued daily and paid monthly. Dividends for the
Liquid Account are not paid on shares until the day following the date on which
the shares are issued.
All realized net short-term capital gains in excess of net long-term capital
losses of an Account, if any, and all realized net long-term capital gains in
excess of net realized short-term capital losses of the Account, if any, are
declared and paid at least annually. Unless shareholders specify otherwise, all
dividends and distributions will be automatically reinvested in additional full
and fractional shares of each Account.
Dividends from each Account's net investment income, certain net foreign
exchange gains and net short-term capital gains are taxable as ordinary income,
and dividends from each Account's net long-term capital gains are taxable as
long-term capital gains. For federal income tax purposes, all dividends are
taxable as described above whether a shareholder takes them in cash or reinvests
them in additional shares of the Account. Certain dividends paid in January may
be treated as if they were received on December 31 of the prior year.
Information as to the federal tax status of dividends and distributions will be
provided annually.
Each Account has elected to be treated, has qualified and intends to continue
to qualify for treatment as a "regulated investment company" under Subchapter M
of the Code, so that it will not pay federal income taxes on income and capital
gains provided such income and capital gains are distributed to shareholders
within the time period prescribed by the Code.
Under the Code, an Account will be subject to a nondeductible 4% excise tax
on a portion of its undistributed income and capital gains if it fails to meet
certain distribution requirements with respect to each calendar year. Each
Account intends to make distributions in a timely manner and accordingly does
not expect to be subject to the excise tax.
A portion of any dividend income received by an Account from U.S. domestic
corporations and distributed as a dividend to its corporate shareholders may be
eligible for the 70% dividends-received deduction, subject to certain conditions
and limitations under the Code.
An Account may be subject to foreign withholding or other foreign taxes with
respect to income and, in some cases, capital gains from its foreign
investments. In some cases, it is possible that these taxes may be reduced under
applicable income tax treaties.
37
<PAGE>
A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent an Account's distributions are
derived from interest on (or, in the case of intangibles taxes, the value of its
assets is attributable to) certain U.S. Government obligations, provided in some
states that certain thresholds for holdings of such obligations and/or reporting
requirements are satisfied. Accordingly, each Account will report annually to
its shareholders the percentage of interest income earned from such securities
during the preceding year. Each shareholder is advised to consult his own tax
adviser regarding the exemption, if any, of such income under applicable state
and local law.
Redemptions (including exchanges and repurchases) of shares are taxable
transactions in which a shareholder may realize a gain or loss. No such gain or
loss would normally arise for transactions in shares of the Liquid Account,
provided that it maintains a stable $1.00 per share net asset value, except to
the extent a loss may result from the imposition of a CDSC. Special tax rules
may apply to the calculation of gains or losses and the deductibility of any
losses in particular circumstances.
Dividends and other distributions and, except for the Liquid Account if it
maintains a constant NAV, the proceeds of redemptions or repurchases of Account
shares paid to individuals and other non-exempt payees will be subject to a 31%
backup withholding of federal income tax if the Account is not provided with the
shareholder's correct taxpayer identification number and certification that the
number is correct and the shareholder is not subject to backup withholding or
the Account receives notice from the Internal Revenue Service (the "IRS") or a
broker that such withholding applies. Please refer to the Account Application
for additional information.
The description above relates only to U.S. federal income tax consequences
for shareholders who are U.S. persons, i.e., U.S. citizens or residents or U.S.
corporations, partnerships, trust or estates, and who are subject to U.S.
federal income tax. Shareholders should consult their own tax advisors regarding
state, local and other applicable tax laws.
THE COMPANY
Each Account is a mutual fund: an entity that pools shareholders' money and
invests it toward specified goals. In technical terms, each Account is a
separate diversified portfolio or "series" of the Company, an open-end
management investment company which was organized as a corporation under the
laws of Maryland on December 9, 1981.
The Company has authorized 3 billion shares of Common Stock, par value $0.001
per share and may create and classify the Common Stock into separate mutual
funds (or investment series or portfolios of shares) without further approval of
the Company's shareholders. As of the date of this prospectus, the Company has
established the five Accounts described in this Prospectus; the following five
municipal bond funds: CMIA National Municipals Account, CMIA California
Municipals Account, CMIA Massachusetts Municipals Account, CMIA New York
Municipals Account and CMIA Ohio Municipals Account (the "Municipals Accounts");
and the following three "LifeSpan" funds: CMIA LifeSpan Capital Appreciation
Account, CMIA LifeSpan Balanced Account and CMIA Life
38
<PAGE>
Span Diversified Income Account (the "LifeSpan Accounts"). The Municipal
Accounts and LifeSpan Accounts are offered by means of separate prospectuses.
Additional series of the Company may be added in the future.
The Board of Directors is authorized, without further shareholder approval,
to classify and reclassify the Accounts into one or more classes. Accordingly,
the Directors have authorized the issuance of two classes of shares of each of
the Accounts (except for the Liquid Account), designated as Class A shares and
Class B shares. The shares of each class represent an interest in the same
portfolio of investments of the Accounts and have equal rights as to voting,
redemption, dividends and liquidation. However, each class bears different
distribution and transfer agency fees and expenses and each class has exclusive
voting rights with respect to its respective Rule 12b-1 distribution plan.
As of June 30, 1995, Connecticut Mutual and its affiliates owned 29% of the
shares of the Company, including 39% of the shares of the Liquid Account, 15% of
the shares of the Government Securities Account, 31% of the shares of the Income
Account, 31% of the shares of the Growth Account, and 0% of the shares of the
Total Return Account.
The Company is governed by a Board of Directors which is responsible for
protecting your interests as a shareholder. The directors are experienced
executives who meet at least quarterly to oversee the activities of each
Account, review contractual arrangements with companies that provide services to
the Accounts and review each Account's performance. The majority of the
directors are not otherwise affiliated with Connecticut Mutual. The SAI contains
the names and general background of each director and executive officer of the
Company.
The Company does not hold annual meetings of shareholders. The Company may
hold shareholder meetings, however, to elect or remove directors, change the
fundamental policies of an Account, approve the management contract of an
Account or for other purposes. On matters affecting only one series, only the
shareholders of that series are entitled to vote. On matters relating to all of
the series but affecting the series differently, separate votes by each series
are required. On matters relating to a single class of shares of a series, only
the shareholders of that class are entitled to vote. Shareholders holding more
than 50% of the Company can elect all of the Company's directors if they so
choose. Each share is entitled to one vote within each series.
PERFORMANCE
From time to time the Company may advertise yields and total returns for the
Accounts. In addition, the Company may advertise the effective yield of the
Liquid Account. These figures will be based on historical performance and are
not intended to indicate future performance.
The yield of the Liquid Account refers to the annualized net income generated
by an investment in that Account over a specified seven-day period. The yield is
"annualized" by assuming that the income generated for that seven-day period is
generated each seven-day period over a 52-week period, and is shown as a
percentage of that investment. The effective yield is calculated similarly, but,
when annualized, the income earned by an investment in that Account is assumed
to be reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
39
<PAGE>
Performance data for the classes of the other Accounts may be calculated
pursuant to a standardized formula or in non-standardized manners. The
standardized yield of these other Accounts refer to the annualized net income
generated by an investment in a class of that Account over a specified 30-day
period. The yield is calculated by assuming that the income generated by the
investment during the 30-day period is generated each 30-day period over a
12-month period, and is shown as a percentage of the investment.
The standardized total return of a class of an Account refers to return
quotations assuming an investment has been held in the Account for various
periods of time including, but not limited to, one year, five years and ten
years (or any such shorter period from the Account's or the class's inception).
The total return quotations will represent the average annual compounded rates
of return that would equate an initial investment of $1,000 to the redemption
value of that investment as of the last day of each of the periods for which
total return quotations are provided. Accordingly, the total return quotations
will reflect not only income but also changes in principal value (that is,
changes in the net asset value per share of the class), whereas the yield
figures will only reflect income.
The standardized yield and total return quotations for the Class A shares of
Accounts will reflect the maximum sales charge imposed on purchases of Class A
shares of the Account. For Class B shares of an Account, these calculations
reflect the deduction of any applicable CDSC.
In addition, the Company may from time to time also disclose yield or total
return in non-standard formats, and cumulative total return for the classes of
the Accounts. The non-standard average annual total return and cumulative total
return may be based on net asset value per share of a class, rather than a
$1,000 investment. These non-standard return figures would not reflect the
initial sales charge on Class A shares or the CDSC on Class B shares, which, if
reflected, would lower the performance figures. In addition, non-standardized
yields figures may be advertised that also would not reflect the applicable
sales charge. The Company may from time to time also disclose yield, standard
total returns, and non-standard total returns for the classes of the Accounts
based on or covering periods of time other than those indicated above.
Non-standard performance data will only be disclosed if the standard performance
is also disclosed. For additional information regarding the calculation of
performance data, please refer to the SAI.
Also from time to time, in advertisements or in reports to shareholders, the
Company may compare the performance of the classes of the Accounts to that of
other mutual funds with similar investment objectives, and to other relevant
indices published by recognized mutual fund statistical rating services or
publications of general interest, such as FORBES or MONEY. The SAI contains a
list of publications which may contain comparative studies which the Company may
use in advertisements or shareholder materials. For example, the Company may
compare an Account's Class A or Class B performance to that of other mutual
funds with a similar investment objective as compiled by Lipper Analytical
Services, Inc. In addition, the Company may compare the performance to that of
recognized
40
<PAGE>
stock market indicators, including, but not limited to, the S&P 500 Stock Index
(which is a group of unmanaged securities widely regarded by investors as
representative of the stock market in general), and the Dow Jones Industrial
Average (which is a price-weighted average of 30 large, well-known industrial
stocks that are generally the leaders in their industry). Performance
comparisons should not be considered representative of the future performance of
an Account. The effects of compounding may also be discussed.
Performance data may also be calculated for shorter or longer base periods.
The Company may use various base periods as may be deemed necessary to provide
investors with the most informative yield or total return information, depending
on the then- current market conditions. Performance will vary from time to time,
and historical results will not be representative of future performance.
Performance information may not provide a basis for comparison with other
investments or other investment companies using a different method of
calculating performance. Current yield is not fixed and varies with changes in
investment income and net asset value per share. The yield of Class A or Class B
shares of an Account or the shares of the Liquid Account will be affected if it
experiences a net inflow of new money which is invested at interest rates
different from those being earned on its then-current investments. An investor's
principal in an Account and an Account's return are not guaranteed and will
fluctuate according to market conditions.
The investment results of an Account's Class A and Class B shares and of the
Liquid Account shares will vary from time to time depending on market
conditions, the composition of the Account's portfolio and operating expenses.
For further information about the calculation methods and uses of an Account's
Class A and Class B shares and of the Liquid Account's shares investment
results, see the SAI.
RISK FACTORS, SECURITIES AND INVESTMENT TECHNIQUES
The following discussions contain more detailed information about types of
instruments in which the Accounts may invest and strategies the Manager may
employ in pursuit of the Accounts' investment objectives. A summary of risks and
restrictions associated with these instrument types and investment practices is
included as well. Policies and limitations are considered at the time of
purchase; the sale of instruments is not required in the event of a subsequent
change in circumstances. Some of the restrictions described below are
fundamental and may be changed only with shareholder approval. These
restrictions are set forth in greater detail in the SAI.
The Manager may not buy all of these instruments or use all of these
techniques to the full extent permitted unless it believes that doing so will
help an Account achieve its goals. As a shareholder, you will receive financial
reports every six months detailing holdings of your Account(s) and describing
recent investment activities.
EQUITY SECURITIES
(TOTAL RETURN ACCOUNT AND GROWTH ACCOUNT)
Equity securities include common stocks, preferred stocks, convertible
securities and warrants. Common stocks represent an equity (ownership) interest
in a corporation. This ownership interest
41
<PAGE>
often gives an Account the right to vote on measures affecting the company's
organization and operations. Although common stocks have a history of long-term
growth in value, their prices tend to fluctuate in the short term, particularly
those of smaller capitalization companies. Preferred stocks represent a limited
equity interest in a corporation. Preferred stocks are often entitled only to
dividends at a specified rate, and have a preference over common stock,
dividends and on liquidation of assets. Preferred stocks generally have lesser
voting rights than common stocks. Because their dividends are often fixed, the
value of many preferred stocks fluctuates inversely with changes in interest
rates.
Convertible securities are bonds, preferred stocks and other securities that
pay a fixed rate of interest or dividend and offer the buyer the option of
converting the security into common stock. The value of convertible securities
depends partially on interest rate changes and the credit quality of the issuer.
The value of convertible securities is also sensitive to company, market and
other economic news, and will change based on the price of the underlying common
stock. For this reason, the Manager considers the growth potential of the
underlying stock when selecting an Account's investments. Convertible securities
generally have less potential for gain than common stock, but also less
potential for loss, since their income provides a cushion against the stock's
price declines. However, because the buyer is also exposed to the risk and
reward potential of the underlying stock, convertible securities generally pay
less income than similar non-convertible bonds.
DEBT SECURITIES
(ALL ACCOUNTS)
DEBT SECURITIES GENERALLY
Each Account may purchase debt securities consisting of corporate debt
obligations, U.S. Government securities, municipal obligations, 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. Bonds and other debt instruments are used by domestic and foreign
issuers to borrow money from investors. The issuer pays the investor a fixed or
variable rate of interest, and must repay the amount borrowed at maturity. Some
debt securities, such as zero coupon bonds, do not pay current interest, but are
purchased at a discount from their face values. Zero coupon bonds accrue income
for tax and accounting purposes and such income must be distributed to
shareholders. Because no cash is received at the time of such accruals, an
Account may be required to liquidate other securities to satisfy distribution
obligations. Debt securities have varying degrees of quality and varying levels
of sensitivity to changes in interest rates. A decrease in interest rates will
generally result in an increase in the value of an Account's portfolio of debt
securities, and, conversely, during periods of rising interest rates, the value
of an Account's portfolio of debt securities will generally decline. Longer-term
bonds are generally more sensitive to interest rate changes than shorter-term
bonds.
LOWER QUALITY AND UNRATED DEBT SECURITIES
Each Account, except Liquid Account and Government Account, may purchase
lower quality and unrated debt securities. No Account will purchase securities
rated below B by Moody's or S&P. Lower quality debt securities I.E., rated below
BBB or Baa, (commonly called "high yield bonds" or "junk
42
<PAGE>
bonds") are often considered to be speculative and involve greater risk of
default or price changes due to changes in the issuer's creditworthiness. The
market prices of these securities may fluctuate more than higher quality
securities and may decline significantly in periods of general economic
difficulty. An economic downturn could also disrupt the high yield bond market
generally and impair the ability of issuers to repay principal and interest. An
increase in interest rates would (as is the case with debt instruments
generally) reduce market values of a portfolio of lower rated fixed income
securities. The market price and liquidity of lower rated fixed income
securities generally responds to short-term corporate and market developments to
a greater extent than do higher rated securities because such developments are
perceived to have a more direct relationship to the ability of an issuer of such
lower rated securities to meet its ongoing debt obligations. The market prices
of zero coupon and payment-in-kind bonds are affected to a greater extent by
interest rate changes, and thereby tend to be more volatile, than securities
which pay interest periodically and in cash. Increasing rate note securities are
typically refinanced by the issuers within a short period of time. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of high yield obligations,
especially in a thinly traded market.
Reduced volume and liquidity in the high yield, high risk bond market or the
reduced availability of market quotations for such bonds will make it more
difficult to dispose of the bonds and to value accurately an Account's assets.
The reduced availability of reliable, objective pricing data may increase an
Account's reliance on management's judgment in valuing high yield, high risk
bonds.
The Manager does not rely on credit ratings assigned by rating agencies in
assessing investment opportunities in such bonds. Ratings by credit agencies
focus on safety of principal and interest payments and do not evaluate 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 conducting
intensive credit research, carefully selecting individual issues and
diversifying portfolio holdings by industry sector and issuer, the Manager
believes that the default risk of lower rated 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.
The Manager may retain securities whose ratings fall below B after purchase
until the Manager determines that disposing of such securities is in the best
interests of the respective Account.
DERIVATIVE INSTRUMENTS. Each of the Accounts may invest in derivative
instruments which are securities or contracts that provide for payments based on
or "derived" from the performance of an underlying asset, index or other
economic benchmark. Transactions in derivative instruments can be, but are not
necessarily, riskier than investments in conventional stocks, bonds and money
market instruments. The use of derivative instruments for non-hedging purposes
or to generate additional income may be considered a speculative investment
practice. A derivative instrument is more accurately viewed as a way of
reallocating risk among different parties or substituting one type of risk for
another. Transactions in derivative instruments often enable an Account to take
investment positions that more precisely reflect the portfolio manager's
expectations concerning the future performance of
43
<PAGE>
the various investments available to the Account. Derivative instruments can be
a legitimate and often cost-effective method of accomplishing the same
investment goals as could be achieved through other authorized investments in
conventional securities.
Derivative securities include collateralized mortgage obligations, stripped
mortgage backed securities, asset backed securities, structured notes and
floating interest rate securities. Derivative contracts include futures
contracts, forward contracts, forward commitment and when-issued securities
transactions, forward foreign currency exchange contracts and interest rate
swaps. The principal risks associated with derivative instruments are:
-Market risk: The instrument will decline in value or that an alternative
investment would have appreciated more, but this is no different from the
risk of investing in conventional securities.
-Leverage and associated price volatility: Leverage causes increased
volatility in the price and magnifies the impact of adverse market changes,
but this risk may be consistent with the investment objective of even a
conservative fund in order to achieve an average portfolio volatility that
is within the expected range for that type of fund. The SEC has taken the
position that the risk of leverage is not an appropriate risk for a money
market fund.
-Credit risk: The issuer of the instrument may default on its obligation to
pay interest and principal, but derivatives based on U.S. Government agency
mortgage securities may actually present less credit risk than some
conventional corporate debt securities.
-Liquidity and valuation risk: Many derivative instruments are traded in
institutional markets rather than on an exchange. Nevertheless, many
derivative instruments are actively traded and can be priced with as much
accuracy as conventional securities. Derivative instruments that are custom
designed to meet the specialized investment needs of a relatively narrow
group of institutional investors such as the Accounts are not readily
marketable and are subject to an Account's restrictions on illiquid
investments.
-Correlation risk: There may be imperfect correlation between the price of
the derivative and the underlying asset; for example, there may be price
disparities between the trading markets for the derivative contract and the
underlying asset.
FOREIGN SECURITIES
(ALL ACCOUNTS EXCEPT THE LIQUID ACCOUNT AND THE GOVERNMENT SECURITIES ACCOUNT)
Each Account (except the Liquid Account and Government Securities Account)
may purchase, as appropriate to its investment objective and policies, equity
and debt securities issued by foreign issuers, denominated in foreign currency
and traded primarily on foreign markets. (For this purpose Eurodollar and Yankee
dollar fixed income securities are not considered "foreign securities.")
Investments in foreign equity and debt securities involve risks different
from those encountered when investing in securities of domestic issuers. Such
risks include: the adverse impact of trade balances and imbalances and related
economic policies; currency exchange rate fluctuations; adverse foreign exchange
control policies; nationalization, expropriation or confiscatory taxation;
income tax withholding at the source; limitations on the removal of funds or
other assets; political or social
44
<PAGE>
instability; difficulty in obtaining and enforcing judgments abroad;
restrictions on foreign investments in other jurisdictions; price volatility;
problems arising from the diverse structure and illiquidity of securities
markets in various countries and regions; and other specific local, political
and economic considerations. See the SAI for additional discussion of the risks
of investing in foreign markets.
The value of foreign securities may be adversely affected by fluctuations in
the relative rates of exchange between the currencies of difference nations and
by exchange control regulations. The investment performance of an Account may be
significantly affected, either positively or negatively, by currency exchange
rates because the U.S. dollar value of securities denominated in a foreign
currency will increase or decrease in response to changes in the value of
foreign currencies in relation to the U.S. dollar.
Also, there may be higher transaction costs in foreign securities and less
government regulation of foreign stock exchanges, brokers, and issuers than is
present in the United States. Equity securities and debt instruments acquired in
foreign markets will not, as a rule, be subject to registration under the
Securities Act of 1933 or be under the jurisdiction of the SEC.
Most foreign securities of an Account are held outside the United States by
local foreign subcustodians that satisfy certain eligibility requirements.
However, foreign subcustodian arrangements are significantly more expensive than
domestic custody arrangements. In addition, foreign custody and settlement of
securities transactions is subject to local law and custom that is not,
generally, as well established or as reliable as U.S. regulation and custom
applicable to custody and settlements of securities transactions and,
accordingly, there is generally perceived to be a greater risk of loss in
connection with securities custody and securities transactions in many foreign
countries. Finally, there may be less publicly available information about
foreign issuers, and such issuers may not be subject to the same accounting and
auditing standards as publicly held domestic issuers.
The Accounts, other than Liquid Account and Government Securities Account,
may invest in companies located in emerging countries. Compared to the United
States and other developed countries, developing countries may have relatively
unstable governments, economies based on only a few industries, and securities
markets that are less liquid and trade a small number of securities. Prices on
these exchanges tend to be volatile and, in the past, securities in these
countries have offered greater potential for gain (as well as loss) than
securities of companies located in developed countries. See the SAI for
additional discussion of the risks of investing in securities of issuers in
emerging countries.
RESTRICTIONS: No Account may invest more than 10% of its total assets in
foreign securities, except the following securities, in which such Accounts 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 NYSE.
45
<PAGE>
FOREIGN CURRENCY TRANSACTIONS
Each Account (other than the Liquid Account and the Government Securities
Account) may enter into foreign currency transactions in order to protect the
U.S. dollar value of the Account's foreign currency-denominated portfolio
securities against the U.S. dollar effects of adverse changes in foreign
currency exchange rates (Base Currency Hedging). Normally, an Account will not
engage in cross-hedging (i.e., dealing in foreign exchange between currencies of
the different countries in which it has invested for the purpose of hedging
against possible variations in the foreign exchange rate between those
countries). Both Base Currency Hedging and cross-hedging may be accomplished
through direct purchases or sales of currency, purchases of options or futures
contracts with respect to currency, and contractual agreements to purchase or
sell a specified currency at a specified future date (up to one year) at a price
set at the time of contract.
Such contractual commitments may be forward contracts entered into directly
with another party or exchange-traded futures contracts. An Account may also
purchase and sell options on futures contracts, forward contracts, or futures
contracts which are denominated in a particular currency to hedge the risk of
fluctuations in the value of another currency. An Account's dealings in foreign
exchange will be limited to hedging involving either specific transactions or
portfolio positions. Transaction hedging is the purchase or sale of currency
with respect to specific receivables or payables of the Account accruing in
connection with the purchase or sale of its portfolio securities. Position
hedging is the purchase or sale of currency with respect to portfolio security
positions denominated or quoted in a foreign currency. No Account will speculate
in foreign exchange.
If an Account enters into a forward foreign currency exchange contract to buy
foreign currency, the Account will be required to place and maintain in a
segregated account with the Account's custodian for the duration of the contract
an amount of cash or liquid, high grade debt securities equal to the Account's
obligations under the contract.
U.S. GOVERNMENT SECURITIES
(ALL ACCOUNTS)
Each Account may purchase U.S. Government securities. Government Securities
include: (1) U.S. Treasury obligations, which differ only in their interest
rates, maturities and times of issuance, U.S. Treasury bills (maturity of one
year or less), U.S. Treasury notes (maturities of one to 10 years), and U.S.
Treasury bonds (generally maturities of greater than 10 years), all of which are
backed by the full faith and credit of the United States, and (2) obligations
issued or guaranteed by U.S. Government agencies or instrumentalities, some of
which are backed by the full faith and credit of the U.S. Treasury, such as
direct pass-through certificates of the Government National Mortgage Association
(GNMA); some of which are supported by the right of the issuer to borrow from
the U.S. Government, such as obligations of Federal Home Loan Banks; and some of
which are backed only by the credit of the issuer itself, such as obligations of
the Student Loan Marketing Association.
A large percentage of the assets of the Government Securities Account have at
times been invested in GNMA certificates of the modified pass-through type. GNMA
certificates are debt securities issued by a mortgage banker or other mortgagee,
and represent an interest in a pool of mortgages insured by the Federal Housing
Administration or the Farmers Home Administration, or guaranteed
46
<PAGE>
by the Veterans Administration. GNMA guarantees the timely payment of monthly
installments of principal and interest on modified pass-through certificates at
the time such payments are due, whether or not such amounts are collected by the
issuer of these certificates on the underlying mortgages.
Mortgages included in single-family residential mortgage pools backing an
issue of GNMA certificates have a maximum maturity of 30 years. Scheduled
payments of principal and interest are made to the registered holders of GNMA
certificates (such as the Account) each month. Unscheduled prepayments of
mortgages included in these pools occur as a result of the prepayment or
refinancing of such mortgages by homeowners, or as a result of the foreclosure
of such mortgages. Such prepayments are passed through to the registered holders
of GNMA certificates with the regular monthly payments of principal and
interest, which has the effect of reducing future payments on such certificates.
That portion of monthly payments received by an Account which represents
interest and discount will be included in an Account's net income. Principal
payments on GNMA certificates will be reinvested by an Account. Prepayments and
scheduled payments of principal on GNMA certificates will be reinvested at
prevailing interest rates, which may be less than the rate of interest payable
on the GNMA certificates on which such prepayment and payments are made.
U.S. GOVERNMENT-RELATED SECURITIES
(GOVERNMENT SECURITIES ACCOUNT, INCOME ACCOUNT AND TOTAL RETURN ACCOUNT)
Government-related Securities include collateralized mortgage obligations
(CMOs). CMOs are debt obligations issued by U.S. government agencies, or by
financial institutions and other mortgage lenders, and collateralized by
mortgage pass-through securities, such as GNMA, Federal National Mortgage
Association and Federal Home Loan Mortgage Corporation certificates. Payments of
principal and interest on the underlying collateral and any reinvestment income
thereon provide the funds to pay debt service obligations to the CMOs. CMOs are
issued in a number of classes or series, each with its own maturity and interest
rate. While the classes or series are often retired in sequence as the
underlying mortgages are repaid, payments of principal and interest on the
underlying mortgages may be allocated among the different series or classes in
innumerable ways. As with any mortgage-related security, principal prepayment on
the collateral may cause the CMOs to be retired substantially earlier than the
stated maturities or final distribution dates. Prepayment may thus shorten the
stated maturity of the obligation and can result in the loss of premium if any
has been paid. Certain of these securities may have variable or floating
interest rates and others may be stripped (securities which provide only the
principal or only the interest feature of the underlying security). Stripped
mortgage backed securities are derivative multiple-class mortgage-backed
securities. Stripped mortgage backed securities are usually structured with two
classes that receive different proportions of interest and principal
distributions on a pool of mortgage assets. A typical stripped mortgage backed
security will have one class receiving some of the interest and most of the
principal, while the other class will receive most of the interest and the
remaining principal. In the most extreme case, one class will receive all of the
interest (the "interest only" class) while the other class will receive all of
the principal (the "principal only" class). The yields and market risk of
interest only and principal only stripped mortgage backed securities,
respectively, may be more volatile than those of other fixed-income securities.
The staff of the SEC considers privately issued stripped mortgage backed
securities to be illiquid.
47
<PAGE>
ASSET-BACKED SECURITIES
(INCOME ACCOUNT, GOVERNMENT ACCOUNT AND TOTAL RETURN ACCOUNT)
The Income Account, Government Account and Total Return Account may invest in
asset-backed securities, which represent participations in, or are secured by
and payable from, pools of assets such as motor vehicle installment sale
contracts, installment loan contracts, leases of various types of real and
personal property, receivables from revolving credit (credit card) agreements
and other categories of receivables. Asset-backed securities may also be
collateralized by a portfolio of U.S. Government securities, but are not direct
obligations of the U.S. Government, its agencies or instrumentalities. Such
asset pools are securitized through the use of privately-formed trusts or
special purpose corporations. Payments or distributions of principal and
interest on asset-backed securities may be guaranteed up to certain amounts and
for a certain time period by a letter of credit or a pool insurance policy
issued by a financial institution unaffiliated with the trust or corporation, or
other credit enhancements may be present; however privately issued obligations
collateralized by a portfolio of privately issued asset-backed securities do not
involve any government-related guarantee or insurance. In addition to the risks
similar to those associated with mortgage-backed securities (see "-- U.S.
Government Securities," above), asset-backed securities present further risks
that are not presented by the mortgage-backed securities because asset-backed
securities generally do not have the benefit of a security interest in
collateral that is comparable to mortgage assets.
STRUCTURED NOTES
(INCOME ACCOUNT, GOVERNMENT ACCOUNT AND TOTAL RETURN ACCOUNT)
The Income Account, Government Account and Total Return Account may invest in
structured notes. The distinguishing feature of a structured note is that the
amount of interest and/or principal payable on the notes is based on the
performance of a benchmark asset or market other than fixed-income securities or
interest rates. Examples of these benchmarks include stock prices, currency
exchange rates and physical commodity prices. Investing in a structured note
allows an Account to gain exposure to the benchmark market while fixing the
maximum loss that the Account may experience in the event that market does not
perform as expected. Depending on the terms of the note, the Account may forego
all or part of the interest and principal that would be payable on a comparable
conventional note; the Account's loss cannot exceed this foregone interest
and/or principal. An investment in structured notes involves risks similar to
those associated with a direct investment in the benchmark asset.
INVERSE FLOATING RATE INSTRUMENTS
(INCOME ACCOUNT, GOVERNMENT ACCOUNT AND TOTAL RETURN ACCOUNT)
The Income Account, Government Account and Total Return Account may invest in
inverse floating rate debt instruments ("inverse floaters"), including leveraged
inverse floaters and inverse floating rate mortgage-backed securities, such as
inverse floating rate "interest only" stripped mortgage-backed securities. The
interest rate on inverse floaters resets in the opposite direction from the
market rate of interest to which the inverse floater is indexed. An inverse
floater may be considered to
48
<PAGE>
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 ACCOUNT, GOVERNMENT ACCOUNT AND TOTAL RETURN ACCOUNT)
The Income Account, Government Account and Total Return Account may each
invest up to 20% of their respective assets in mortgage dollar rolls in which
the Government Account 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 Account foregoes principal and interest paid on the
mortgage-backed securities. The Account 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 the Account will be covered rolls.
Covered rolls are not treated as a borrowing or other senior security and will
be excluded from the calculation of the Account's borrowings and other senior
securities. The Manager 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 Accounts treat mortgage rolls as two separate
transactions: one involving the purchase of securities and a separate
transaction involving a sale. The Accounts do not currently intend to enter into
mortgage dollar transactions that are accounted for as a financing.
LENDING OF PORTFOLIO SECURITIES
(ALL ACCOUNTS)
Subject to its investment policies and restrictions, each Account may also
seek to increase its income by lending portfolio securities. Such loans may be
made to qualified institutions, such as certain broker-dealers, and are required
to be secured continuously by collateral in cash, cash equivalents, or U.S.
Government securities maintained on a current basis at an amount at least equal
to the market value of the securities loaned. The value of the securities loaned
will not exceed 33 1/3% of the value of the total assets of the Account. An
Account may experience a loss or delay in the recovery of its securities if the
borrowing institution breaches its agreement with the Account.
FORWARD COMMITMENTS
(ALL ACCOUNTS EXCEPT THE LIQUID ACCOUNT)
Securities may be purchased by all Accounts (other than the Liquid Account)
on a "when-issued" or on a "forward commitment" basis, which means it may take
60 days or more before the securities are delivered to an Account. Securities
purchased on a "when-issued" or "forward commitment" basis involve a risk that
the value of the security to be purchased may decline prior to the settlement
date. Also, if the dealer through which the trade is made fails to consummate
the transaction, the Account may lose an advantageous yield or price.
49
<PAGE>
COVERED CALL OPTIONS
(ALL ACCOUNTS EXCEPT THE LIQUID ACCOUNT)
Each Account (other than the Liquid Account) may write 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 anticipated portfolio securities. A call option on a security gives
the holder (purchaser) the right to buy, and obligates the writer (seller) to
sell (if the option is exercised), in return for a premium paid, the underlying
security at a specified exercise price during the option period. A call option
on a currency operates in a similar manner, except that delivery is made of the
specified currency. A call option on an index is also similar except that the
value of the option depends on the weighted value of the group of securities in
the index and settlement of the option is made in the form of cash rather than
the delivery of a security.
Because call options may be used to generate additional income and to attempt
to reduce the effect of any adverse price movement in the securities or currency
subject to the option, they do involve certain risks that are different in some
respects from investment risks associated with similar funds which do not engage
in such activities. The risk of writing covered call options includes the
inability to participate in the appreciation of the underlying securities or
currencies above the exercise price. In addition, the effectiveness of hedging
through the purchase or sale of securities index options, including options on
the S&P 500 Index, will depend upon the extent to which price movements in the
portion of the securities portfolio being hedged correlate with the price
movements in the selected securities index. Perfect correlation may not be
possible because the securities held or to be acquired by an Account may not
exactly match the composition of the securities index on which options are
written. If the forecasts of the Manager regarding movements in securities
prices, interest rates, or currency exchange rates are incorrect, an Account's
investment results may have been better without the hedge transactions.
INTEREST RATE SWAPS
(INCOME ACCOUNT, GOVERNMENT ACCOUNT AND TOTAL RETURN ACCOUNT)
The Income Account, Government Account and Total Return Account may enter
into interest rate swaps both for hedging and to seek to increase total return.
Each Account will typically use interest rate swaps to adjust the effective
duration of its portfolio. Interest rate swaps involve the exchange by an
Account with another party of their respective commitments to pay or receive
interest, such as an exchange of fixed rate payments for floating rate payments.
Since interest rate swaps are individually negotiated, an Account expects to
achieve an acceptable degree of correlation between its portfolio investments
and its interest rate swap positions.
An Account will enter into interest rate swaps only on a net basis, which
means that the two payment streams are netted out, with the Account receiving or
paying, as the case may be, only the net amount of the two payments. Interest
rate swaps do not involve the delivery of securities, other underlying assets or
principal. Accordingly, the risk of loss with respect to interest rate swaps is
limited to the net amount of interest payments that an Account is contractually
obligated to make. If the other party to an interest rate swap defaults, an
Account's risk of loss consists of the net amount of interest
50
<PAGE>
payments that the Account is contractually entitled to receive. An Account will
maintain in a segregated account with the Account's custodian cash and liquid
high grade debt securities equal to the net amount, if any, of the excess of the
Account's obligations over its entitlements with respect to swap transactions.
To the extent that the net amount of a swap is held in a segregated account
consisting of cash and high liquid grade debt securities, the Accounts and the
Manager believe that swaps do not constitute senior securities under the Act
and, accordingly, will not treat them as being subject to an Account's borrowing
restriction.
The use of interest rate swaps is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If the Manager is incorrect in its
forecasts of market values and interest rates, the investment performance of the
Accounts would be less favorable than it would have been if this investment
technique were not used.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS.
(ALL ACCOUNTS OTHER THAN LIQUID ACCOUNT)
To hedge against changes in interest rates, securities prices or currency
exchange rates or for non-hedging purposes, each Account (other than Liquid
Account) may, subject to its investment objectives and policies, purchase and
sell various kinds of futures contracts, and purchase and write call and put
options on any of such futures contracts. An Account may also enter into closing
purchase and sale transactions with respect to any of such 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 Account and Total Return Account
may purchase and sell futures contracts on stock indices and purchase and sell
options on such futures. The Income Account and Total Return Account may
purchase and sell interest rate futures and purchase and sell options on such
futures. In addition, each Account that may invest in securities that are
denominated in foreign currency may purchase and sell futures on currencies and
purchase and sell options on such futures. An Account will engage in futures and
related options transactions only for bona fide hedging purposes as permitted in
regulations of the Commodity Futures Trading Commission. The aggregate initial
margin and premiums required to establish positions in futures contracts and
options on futures may not exceed 5 percent of the market value of the Account's
total assets 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.
The use of futures contracts entails certain risks, including but not limited
to the following: no assurance that futures contracts transactions can be offset
at favorable prices; possible reduction of the Account's income due to the use
of hedging; possible reduction in value of both the securities hedged and the
hedging instrument; possible lack of liquidity due to daily limits on price
fluctuations; imperfect correlation between the contract and the securities
being hedged; and potential losses in excess of the amount initially invested in
the futures contracts themselves. If the expectations of the Manager regarding
movements in securities prices or interest rates are incorrect, an Account may
have experienced better investment results without hedging. The use of futures
contracts and options on futures contracts requires special skills in addition
to those needed to select portfolio securities. A further discussion of futures
contracts is set forth in the Accounts' SAI.
51
<PAGE>
MONEY MARKET INSTRUMENTS
(ALL ACCOUNTS)
All Accounts may in the judgment of the Manager hold cash or invest without
limit in money market instruments. All Accounts (other than the Liquid Account
and Government Securities Account) may invest in banker's acceptances,
certificates of deposit, time deposits and commercial paper denominated in
foreign currency but within the limitations described above under "--Foreign
Securities." These Accounts will purchase only money market instruments
denominated in a foreign currency whose issuers have at least one billion
dollars (U.S.) of assets.
Banker's acceptances are bills of exchange or time drafts drawn on and
accepted by a commercial bank. They are used by corporations to finance the
shipment and storage of goods and to furnish dollar exchanges. Banker's
acceptances generally mature in six months or less. Certificates of deposit are
negotiable interest-bearing instruments with specific maturities. Certificates
of deposit are issued by banks and savings and loan institutions in exchange for
the deposit of funds and normally can be traded in the secondary market, prior
to maturity. Time deposits are nonnegotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time. Time deposits cannot
be traded in the secondary market. Commercial paper is the term used to
designate unsecured short-term promissory notes issued by corporations and other
entities. Maturities on commercial paper vary from a few days to nine months.
Each Account may invest in obligations of foreign branches of U.S. banks
(Eurodollars) and U.S. branches of foreign banks (Yankee dollars). These
investments involve risks that are different from investments in securities of
U.S. banks or U.S. branches of U.S. banks, including potential unfavorable
political and economic developments, different tax provisions, seizure of
foreign deposits, currency controls, interest limitations or other governmental
restrictions which might affect payment of principal or interest.
REPURCHASE AGREEMENTS
(ALL ACCOUNTS)
Each Account may enter into repurchase agreements. In a repurchase agreement,
an Account buys a security at one price and simultaneously agrees to sell it
back at a higher price. Delays or losses could result if the other party to the
agreement defaults or becomes insolvent.
RESTRICTIONS: An Account will not invest more than 10% of its net assets in
repurchase agreements maturing in more than seven days and securities which are
not readily marketable.
RESTRICTED AND ILLIQUID SECURITIES
(ALL ACCOUNTS)
Each Account may invest up to 10% of its net assets in illiquid investments,
which includes repurchase agreements maturing in more than seven days,
restricted securities and securities not readily marketable. Each Account may
also invest in restricted securities eligible for resale to certain
institutional investors pursuant to Rule 144A under the Securities Act of 1933.
52
<PAGE>
WARRANTS
(ALL ACCOUNTS EXCEPT THE LIQUID ACCOUNT AND THE GOVERNMENT SECURITIES ACCOUNT)
Each Account (except the Liquid Account and the Government Securities
Account) may purchase rights and warrants, which represent rights to purchase
the common stock of companies at designated prices. Each Account will not
purchase such rights and warrants if the Accounts' holding of warrants (valued
at the lower of cost or market) would exceed 5% of the value of the Account's
total assets as a result of the purchase. In addition, each Account will not
purchase a warrant or right which is not listed on the New York or American
Stock Exchanges if the purchase would result in the Account's owning unlisted
warrants in an amount exceeding 2% of its total assets.
53
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
As described in the Prospectus, the debt securities purchased by an Account
may include securities in the lower rating categories (that is, rated below Baa
by Moody's or below BBB by S&P, or unrated).
MOODY'S DESCRIBES ITS LOWER RATINGS FOR CORPORATE BONDS AS FOLLOWS:
Bonds which are rated Baa are considered as medium grade obligations,
i.e. 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 in fact have speculative characteristics
as well.
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
Bonds which are rated B generally lack characteristics of the 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.
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
S&P DESCRIBES ITS LOWER RATINGS FOR CORPORATE BONDS AS FOLLOWS:
Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
Debt rated BB, B, CCC, or CC is 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 obligations. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions.
A-1
<PAGE>
MOODY'S DESCRIBES ITS THREE HIGHEST RATINGS FOR COMMERCIAL PAPER AS
FOLLOWS:
Issuers rated P-1 (Prime-1) (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
P-1 repayment capacity will normally be evidenced by the following
characteristics: (1) leading market positions in well-established
industries; (2) high rates of return on funds employed; (3) conservative
capitalization structures and moderate reliance on debt and ample asset
protection; (4) broad margins in earnings coverage of fixed financial
charges and high internal cash generation; and (5) well-established
access to a range of financial markets and assured sources of alternate
liquidity.
Issuers rated P-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to
a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
Issuers rated P-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the
level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
S&P DESCRIBES ITS THREE HIGHEST RATINGS FOR COMMERCIAL PAPER AS FOLLOWS:
A-1. This designation indicates that the degree of safety regarding
timely payment is very strong.
A-2. Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as overwhelming as
for issues designated A-1.
A-3. Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying
the higher designations.
A-2
<PAGE>
APPENDIX B
CREDIT QUALITY DISTRIBUTION
INCOME ACCOUNT
The average quality distribution of the portfolio of Income Account during
the year ended December 31, 1994 was as follows:
<TABLE>
<CAPTION>
QUALITY DISTRIBUTION % OF
AS ASSIGNED BY SERVICE AVERAGE VALUE PORTFOLIO
- ---------------------------------------------------- ------------- ----------
<S> <C> <C>
AAA $ 10,899,567 22.9%
AA 2,601,601 5.5
A 14,889,330 31.3
BBB 13,090,718 27.4
BB 2,061,858 4.3
B 288,235 0.6
Unrated 877,239 1.8
Debt Securities 44,708,548 93.8
Short-Term Securities 2,936,465 6.2
Total Portfolio 47,645,465 100.0
</TABLE>
TOTAL RETURN ACCOUNT
The average quality distribution of the portfolio of Total Return Account
during the year ended December 31, 1994 was as follows:
<TABLE>
<CAPTION>
QUALITY DISTRIBUTION % OF
AS ASSIGNED BY SERVICE AVERAGE VALUE PORTFOLIO
- --------------------------------------------------- -------------- ---------
<S> <C> <C>
AAA $ 48,259,445 25.7%
AA 3,578,850 1.9
A 12,772,383 6.8
BBB 14,352,761 7.6
BB 3,351,301 1.8
B 44,269 0
Unrated 1,418,350 0.8
Debt Securities 83,777,359 44.6
Equity Securities 85,156,418 45.3
Short-Term Securities 18,883,627 10.1
Total Portfolio 187,817,404 100.0
</TABLE>
B-1
<PAGE>
CMIA SHAREHOLDER SERVICES AGENT
National Financial Data Services
P.O. Box 419694
Kansas City, Missouri 64179-0948
1-800-322-CMIA
YOUR REPRESENTATIVE IS:
National Distributor
Connecticut Mutual Financial Services, L.L.C.
A subsidiary of
CONNECTICUT MUTUAL
The Blue Chip Company
Connecticut Mutual
Life Insurance Company
140 Garden Street
Hartford, CT 06154
800-234-5606
C M I A
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
Prospectus dated October 1, 1995
PROSPECTUS
&
APPLICATION
CONNECTICUT MUTUAL
The Blue Chip Company
Connecticut Mutual Life Insurance Company
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
CMIA LifeSpan Capital Appreciation Account, CMIA LifeSpan
Balanced Account, CMIA LifeSpan Diversified Income Account
Cross-Reference Sheet Showing Location in Prospectus and
Statement of Additional Information of Information Required by
Items of the Registration Form
Location in Prospectus
Form N-1A Item Number or Statement of Additional
and Caption Information
1. Cover Page..................................... Cover Page.
2. Synopsis....................................... Prospectus Summary.
3. Condensed Financial
Information.................................. Financial Highlights.
4. General Description of
Registrant................................... The Company; Management.
5. Management of the Fund......................... The Company; Management --
The Manager and the
Subadvisers.
6. Capital Stock and Other
Securities.................................... The Company; Dividends,
Capital Gains and Taxes.
7. Purchase of Securities
Being Offered................................. Prospectus Summary --Your
Shareholder Manual; Your
Account-- How to Buy
Shares, How to Exchange
Shares,Investor Services,
Transaction Details.
8. Redemption or Repurchase........................ Prospectus Summary -- Your
Shareholder Manual; Your
Account -- How to Sell
Shares, How to Exchange
Shares,Investor Services,
Transaction Details.
9. Pending Legal Proceedings........................ Not Applicable.
10. Cover Page....................................... Cover Page.
11. Table of Contents................................ Cover Page.
<PAGE>
Form N-1A Item Number Location in Statement of
and Caption Additional Information
12. General Information and
History........................................ Cover Page; Management -
Other Information About
the Company.
13. Investment Objectives and
Policy........................................ Investment Objectives and
Policies; Investment
Restrictions.
14. Management of the Fund.......................... Management; Investment
Advisory Arrangements;
Account Expenses.
15. Control Persons and Principal
Holders of Securities......................... Management.
16. Investment Advisory and
Other Services................................ Management; Investment
Advisory Arrangements;
Account Expenses; Distri-
bution Arrangements; Dis-
tribution Financing
Plans; Custodian;
Transfer Agent Services;
Independent Certified
Public Accountants.
17. Brokerage Allocation and
Other Practices............................... Portfolio Transactions
and Brokerage.
18. Capital Stock and Other
Securities.................................... Management.
19. Purchase, Redemption and Pricing
of Securities Being Offered.................. Purchase and Redemption of
Shares; Determination of
Net Asset Value.
20. Tax Status..................................... Taxes.
21. Underwriters................................... Distribution Arrangements.
22. Calculation of Performance
Data........................................ Investment Performance.
23. Financial Statements.......................... Financial Statements.
- 2 -
<PAGE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
140 GARDEN STREET - HARTFORD, CONNECTICUT 06154
1-800-322-CMIA
October 1, 1995
CLASS A AND CLASS B SHARES
Connecticut Mutual Investment Accounts, Inc. (Company) is an open-end
management investment company offering a broad range of investment alternatives
through thirteen distinct mutual funds, including the following three "life
span" accounts (CMIA LifeSpan Accounts or Accounts):
CMIA LIFESPAN CAPITAL APPRECIATION ACCOUNT (CAPITAL APPRECIATION ACCOUNT) is
designed for the investor seeking capital appreciation. The Capital Appreciation
Account seeks long-term capital appreciation through a strategically allocated
portfolio consisting primarily of equity securities. Current income is not a
primary consideration.
CMIA LIFESPAN BALANCED ACCOUNT (BALANCED ACCOUNT) is designed for the investor
seeking a blend of capital appreciation and income. The Balanced Account seeks a
blend of capital appreciation and income through a strategically allocated
portfolio of equity securities and fixed-income securities with a slightly
stronger emphasis on equity securities.
CMIA LIFESPAN DIVERSIFIED INCOME ACCOUNT (DIVERSIFIED INCOME ACCOUNT) is
designed for the investor with a relatively low tolerance for risk who is
seeking current income with some long-term inflation protection. The Diversified
Income Account seeks high current income, with opportunities for capital
appreciation, through a strategically allocated portfolio consisting primarily
of fixed-income securities.
PLEASE READ THIS PROSPECTUS BEFORE INVESTING AND KEEP IT ON FILE FOR FUTURE
REFERENCE. The Prospectus contains important information, including how the
Accounts invest and the services available to shareholders. A Statement of
Additional Information (SAI), dated October 1, 1995, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference (and
is legally considered a part of this Prospectus). The SAI is available free upon
request by calling 1-800-322-CMIA.
For a prospectus and information about other mutual funds offered by the
Company call 1-800-234-5606.
----------------
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.
----------------
SHARES OF THE ACCOUNTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER DEPOSITORY INSTITUTION,
AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. SHARES OF THE ACCOUNTS INVOLVE
INVESTMENT RISKS, INCLUDING FLUCTUATIONS IN VALUE
AND THE POSSIBLE LOSS OF SOME OR ALL OF THE
PRINCIPAL INVESTMENT.
1
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
---------------
PROSPECTUS
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
PROSPECTUS SUMMARY......................................................................................... 3
YOUR INVESTMENT.......................................................................................... 4
ALTERNATIVE PURCHASE PLAN................................................................................ 5
YOUR SHAREHOLDER MANUAL.................................................................................. 7
SUMMARY OF INVESTOR EXPENSES............................................................................. 9
FINANCIAL HIGHLIGHTS....................................................................................... 11
INVESTMENT OBJECTIVES AND POLICIES......................................................................... 12
YOUR ACCOUNT............................................................................................... 18
HOW TO BUY SHARES........................................................................................ 18
HOW TO SELL SHARES....................................................................................... 21
HOW TO EXCHANGE SHARES................................................................................... 22
INVESTOR SERVICES........................................................................................ 23
TRANSACTION DETAILS...................................................................................... 25
MANAGEMENT................................................................................................. 26
THE MANAGER AND THE SUBADVISERS.......................................................................... 26
BREAKDOWN OF EXPENSES.................................................................................... 28
DIVIDENDS, CAPITAL GAINS AND TAXES......................................................................... 30
THE COMPANY................................................................................................ 31
PERFORMANCE.............................................................................................. 31
RISK FACTORS, SECURITIES AND INVESTMENT TECHNIQUES......................................................... 33
APPENDIX A: DESCRIPTION OF SECURITIES RATINGS.............................................................. A-1
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
CMIA LIFESPAN CAPITAL APPRECIATION ACCOUNT
CMIA LIFESPAN BALANCED ACCOUNT
CMIA LIFESPAN DIVERSIFIED INCOME ACCOUNT
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING IN THE BODY OF THIS PROSPECTUS. CROSS-REFERENCES IN THIS
SUMMARY REFER TO HEADINGS IN THE BODY OF THE PROSPECTUS.
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES:..................... The Capital Appreciation Account seeks long-term capital appreciation. The Balanced
Account seeks a blend of capital appreciation and income. The Diversified Income
Account seeks high current income, with opportunities for capital appreciation.
PRINCIPAL INVESTMENTS:..................... Each LifeSpan Account is a carefully selected and professionally managed diversified
mix of equity (stock) and fixed-income (bond) Components that are structured to
achieve specific risk and return objectives.
INVESTMENT MANAGER:........................ G.R. Phelps & Co., Inc. (G.R. Phelps), an indirect subsidiary of Connecticut Mutual
Life Insurance Company (Connecticut Mutual), with over $2.7 billion in assets under
management.
DISTRIBUTOR:............................... Connecticut Mutual Financial Services, L.L.C. (CMFS), an indirect subsidiary of
Connecticut Mutual.
ALTERNATIVE PURCHASE PLAN:................. Each Account offers Class A and Class B shares, each with different expense levels
and a public offering price that reflects different sales charges.
CLASS A SHARES........................... Offered at net asset value plus any applicable sales charge (maximum is 5.00% of
public offering price) and subject to Rule 12b-1 fees at the rate of up to 0.25% of
the average daily net assets of the Class A shares.
CLASS B SHARES........................... Offered at net asset value (a maximum deferred sales charge of 5% of the lesser of
the shares' net asset value or the original purchase price is imposed on certain
redemptions made within six years of date of purchase) and subject to Rule 12b-1 fees
at the rate of up to 1.00% of the average daily net assets of the Class B shares.
SHARES AVAILABLE THROUGH:.................. Many brokerage firms nationwide, or directly through the Accounts' distributor CMFS.
EXCHANGE PRIVILEGES:....................... Shares of each CMIA LifeSpan Account may be exchanged for shares of the corresponding
class of other Accounts in the Company without a sales charge.
DIVIDENDS AND OTHER
DISTRIBUTIONS:............................ Dividends will be paid semi-annually for the Capital Appreciation and Balanced
Accounts and monthly for the Diversified Income Account from available net investment
income. All realized net capital gains, if any, will be distributed at least
annually.
DIVIDEND REINVESTMENT:..................... Distributions may be reinvested in shares of the same class of an Account or of the
corresponding class of other accounts in the Company (except Connecticut Mutual
Liquid Account) automatically without a sales charge.
FIRST PURCHASE:............................ $1000 minimum ($250 for IRAs and reduced amounts for certain other retirement plans).
Automatic Investment Plans may be established without regard to a minimum initial
investment.
SUBSEQUENT PURCHASES:...................... $50 minimum.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
OTHER FEATURES:
CLASS A SHARES........................... Statement of Intent; Quantity Discounts; Rights of Accumulation; Reinstatement
Privilege; Systematic Withdrawal Plan; Automatic Investment Plan; Dollar Cost
Averaging Program; Automatic Dividend Diversification.
CLASS B SHARES........................... Automatic Investment Plan; Dollar Cost Averaging Program; Automatic Dividend
Diversification; Systematic Withdrawal Plan.
</TABLE>
YOUR INVESTMENT
THE ACCOUNTS. Each LifeSpan Account is a diversified series of the Company,
a registered open-end management investment company. Each Account's shares are
available through broker/dealers that have entered into agreements to sell
shares with the Accounts' distributor, CMFS. Shares also may be acquired
directly through CMFS or through exchanges of shares of the other Accounts in
the Company. See "Your Shareholder Manual," "Your Account -- How to Buy Shares
and -- How to Exchange Shares." Shares may be redeemed either through
broker/dealers or National Financial Data Services (Transfer Agent). See "Your
Shareholder Manual" and "How to Sell Shares."
INVESTMENT MANAGER. G.R. Phelps (Manager) is the investment manager and
administrator for each of the Accounts. G.R. Phelps provides investment
management and/or administrative services to all of the Accounts in the Company
as well as other mutual funds and institutional clients. G.R. Phelps is an
indirect subsidiary of Connecticut Mutual Life Insurance Company (Connecticut
Mutual) and has been a registered investment adviser since 1976. Connecticut
Mutual is the sixth oldest life insurance company in the United States, and the
oldest life insurance company in Connecticut.
The Manager has engaged three Subadvisers to assist in the selection of
portfolio investments for three of the Components. Scudder, Stevens & Clark,
Inc. (Scudder, Stevens), the Sub-adviser to the International Component, has
been providing investment counseling services for over 70 years and had over $90
billion in assets under management as of May 31, 1995. BEA Associates, the
Subadviser to the High Yield Bond Component, has been providing fixed income and
equity management services to institutional clients since 1984. As of May 31,
1995, BEA Associates had over $25 billion in assets under management. Pilgrim
Baxter & Assoc. Ltd. (Pilgrim Baxter), the Subadviser to the Small Cap
Component, was established in 1982 and had over $4 billion in assets under
management as of May 31, 1995. See "Management."
INVESTMENT STRATEGY OF THE LIFESPAN ACCOUNTS. Each LifeSpan Account is a
carefully selected and professionally managed diversified mix of equity (stock)
and fixed-income (bond) Components that are structured to achieve certain risk
and return objectives. There is a normal percentage of each LifeSpan Account
that is allocated between the broad equity class of investments and the broad
fixed-income class of investments. The Accounts' normal allocations generally
correlate to different levels of investment risk and return. In determining
normal asset allocations, the Manager has looked at broad market and economic
variables such as inflation and interest rates and has used the information to
determine the overall mix of each Account's assets between the two general asset
classes: broad equity class and broad fixed-income class. Equity securities have
the potential to outperform fixed-income securities over the long-term. Equity
securities have the greatest potential for growth of capital, yet are generally
the most volatile of the two broad asset types. Fixed-income securities
sometimes move in the opposite direction of equity securities and may provide
investment balance to an Account. Additionally, fixed-income securities can
provide regular income to investors. The risks of each broad asset class will
vary.
The Manager will diversify the broad equity class of each Account by
allocating the Account's portfolio of equity securities among four Components:
international stocks, value/growth stocks, growth and income stocks, and
small-capitalized growth stocks. Each Component in the broad equity class is
also permitted to invest a portion of its assets in fixed-income securities when
the Subadviser determines that increased flexibility in portfolio management is
required to enhance appreciation or income. The Manager will diversify an
Account's broad fixed-income class by allocating an Account's portfolio of
fixed-income securities among three Components: government and corporate bonds,
high yield/high risk bonds and short-term
4
<PAGE>
bonds. These Components have been selected because the Manager believes that
this additional level of asset diversification will provide each Account with
the potential for higher returns with lower overall volatility.
RISK FACTORS. There is no assurance that any Account will achieve its
investment objective. Each Account's net asset value will change reflecting
fluctuations in the market value of its portfolio positions. Each Account's
portfolio of fixed income securities will generally fluctuate inversely with
changes in interest rates. Investments by an Account in lower rated securities
involve greater risk of default and price volatility than higher rated
obligations. Also, investments by an Account in foreign securities involve risks
not normally associated with U.S. securities relating to political and economic
developments and differences in the regulations to which U.S. and foreign
issuers are subject. Foreign denominated foreign securities also involve risk of
adverse changes in foreign currency exchange rates. An Account's participation
in currency transactions, options and futures transactions and investment in
certain derivative instruments also involve special risks and transaction costs.
For additional information about the risks of investing in the Accounts, see
"Risk Factors, Securities and Investment Techniques."
EXPENSES. The Capital Appreciation Account, the Balanced Account and the
Diversified Income Account each pay G.R. Phelps an investment management fee
based on the average daily net assets of the Account, at the annualized rate of
.85%, .85% and .75%, respectively. The Manager pays out of its own assets the
fees to the Subadvisers for the services they provide to the Manager in managing
certain Components. See "Management--The Manager and Subadvisers."
As the Accounts' distributor, CMFS collects the sales charges imposed on
purchases of Class A shares and reallows all or a portion of such charges to
broker/dealers that have made such sales. In addition, CMFS collects any
contingent deferred sales charges (CDSC) that may be imposed on certain
redemptions of Class A shares and on redemptions of Class B shares. CMFS also
pays broker/dealers upon their sales of Class B shares and pays broker/dealers
and other financial institutions ongoing commission payments for servicing
shareholder accounts. See "Your Account--How to Buy Shares." Pursuant to
separate distribution plans for each of the Account's Class A and Class B shares
adopted in accordance with Rule 12b-1 under the Investment Company Act of 1940,
as amended (1940 Act), each Account may pay CMFS a fee at an annual rate that is
a certain percentage of the average daily net assets of the Account's Class A
and Class B shares as appropriate, as reimbursement for its expenditures
incurred in distributing and servicing Class A shares or Class B shares,
respectively.
Each Account pays all expenses not assumed by G.R. Phelps or other agents.
G.R. Phelps has undertaken to limit each Account's expenses (exclusive of
brokerage commissions, taxes, interest and extraordinary items) to the maximum
annual level of 1.55% of the average daily net assets of the Capital
Appreciation and Balanced Accounts and 1.50% of such assets of the Diversified
Income Account. See "Management-- Breakdown of Expenses."
ALTERNATIVE PURCHASE PLAN
Each Account offers investors two classes of shares. The primary distinction
between the two classes of shares lies in their sales charge structures and
ongoing expenses. See "Summary of Investor Expenses." Each class bears the
separate expenses of its Rule 12b-1 plan and its transfer agency fees and
expenses. Each class has a separate exchange privilege. See "How to Exchange
Shares" and "The Company." Class A and Class B shares of an Account represent
interests in the same portfolio of investments of that Account and have the same
rights, except as noted. Each class has exclusive voting rights with respect to
its Rule 12b-1 plan. Dividends and other distributions paid by each Account with
respect to its Class A and Class B shares are calculated in the same manner and
at the same time. The per share dividends on Class B shares of an Account will
be lower than those on Class A shares of that Account as a result of the higher
Rule 12b-1 fees applicable with respect to Class B shares.
CLASS A SHARES. An investor who purchases Class A shares pays a sales
charge at the time of purchase. As a result, Class A shares are not subject to
any charges when they are redeemed except as described in "How To Buy Shares --
Contingent Deferred Sales Charge -- Class A Shares." Certain purchases of Class
A
5
<PAGE>
shares qualify for reduced sales charges. See "How To Buy Shares -- Reducing or
Eliminating Your Sales Charge -- Class A Shares." Class A shares currently bear
a Rule 12b-1 fee at an annual rate of up to 0.25% of the Fund's average net
assets attributable to Class A shares.
CLASS B SHARES. Class B shares are sold without an initial sales charge,
but are subject to a CDSC of up to 5.00% if redeemed within six years. Class B
shares also bear a higher Rule 12b-1 fee than Class A shares, currently at an
annual rate of up to 1.00% of the Fund's average net assets attributable to
Class B shares. Class B shares will automatically convert into Class A shares,
based on relative net asset value, eight years after purchase. See "How To Buy
Shares -- Purchasing Class B Shares."
CHOOSING AN ALTERNATIVE. Over time, the cumulative expense of the 1.00%
annual Rule 12b-1 fees of the Class B shares will approximate or exceed the
expense of the applicable 5.00% maximum initial sales charge plus the 0.25% Rule
12b-1 fees of the Class A shares. If you expect to maintain your investment in
an Account over the long-term but do not qualify for a reduced sales charge, you
might elect to purchase Class A shares. Class B investors, however, enjoy the
benefit of permitting all their dollars to work from the time the investments
are made. Any positive investment return on this additional invested amount
would partially or wholly offset the higher annual expenses borne by Class B
shares. Because the timing and amount of the Accounts, future returns cannot be
predicted, however, there can be no assurance that such a positive return will
be achieved. Class B shareholders pay a CDSC if their shares are redeemed during
the first six years after purchase, unless a sales charge waiver applies. If you
expect to redeem Class B shares during this period, you should consider the cost
of the applicable CDSC in addition to the annual Class B Rule 12b-1 fees.
MAXIMUM INVESTMENTS. Class B share purchases over $250,000 will be treated
as purchases of Class A shares or declined.
REDUCED SALES CHARGES. Class A share purchases over $500,000 and Class A
share purchases made under an Account's reduced sales charge plans may be made
at a lower initial sales charge. See "Your Account -- How to Buy Shares" for a
complete list of reduced sales charges applicable to Class A purchases.
WAIVERS OF SALES CHARGES. The entire initial sales charge on Class A shares
of an Account may be waived for certain eligible purchasers and these
purchasers' entire purchase price would be immediately invested in an Account.
The CDSC may be waived upon redemption of certain Class B shares. If you are
eligible for complete waivers of the initial sales charge you should purchase
Class A shares. See "Your Account -- How to Buy Shares" for a complete list of
initial sales charge waivers applicable to Class A purchases and CDSC waivers
applicable to Class B purchases. A 1.00% CDSC is imposed on certain redemptions
of Class A shares on which no initial sales charge was assessed.
The CDSC on the Class B shares and the initial sales charge on the Class A
shares are both intended to compensate CMFS and selling broker/dealers for their
distribution services. Broker/dealers may receive different levels of
compensation for selling a particular class of shares of an Account.
See "Your Account" for a more complete description of the sales charges, Rule
12b-1 fees and investor services applicable to shares of the Accounts.
6
<PAGE>
YOUR SHAREHOLDER MANUAL
MINIMUM INVESTMENTS
<TABLE>
<CAPTION>
INITIAL SUBSEQUENT
INVESTMENT* INVESTMENT
----------- ----------
<S> <C> <C>
- - Automatic Investment Plans $ 0 $50
- - IRAs and other tax qualified plans; deferred
compensation plans $ 250 $50
- - All other purchases $1,000 $50
</TABLE>
* Minimums may be waived for certain automated payroll deduction plans.
<TABLE>
<CAPTION>
BUYING SHARES TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
<S> <C> <C>
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
BY MAIL - Complete and sign the - Make your check payable to
application. "CMIA." Indicate your
Make your check payable to account number on your check
"CMIA." and mail to the address
Mail to CMIA, P.O. Box printed on your account
419694 statement.
Kansas City, MO 64179-0938.
- Exchange by mail: call
1-800-322-CMIA (select
option "2") for
instructions.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
BY WIRE - Call 1-800-322-CMIA by 12:00 - Call 1-800-322-CMIA by 12:00
noon Eastern Time on the day noon Eastern Time on the day
of investment to set up your of investment to arrange a
account and arrange a wire wire transaction.
transaction.
- Wire by 4:00 p.m. Eastern - Wire by 4:00 p.m. Eastern
Time to: Time to:
State Street Bank and Trust State Street Bank and Trust
Company Company
Bank Routing # 011000028 Bank Routing # 011000028
NFDS Account # 99042129 NFDS Account # 99042129
Specify Account name, class Specify Account name, class
of shares and include your of shares and include your
name and account number. name and account number.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
BY PHONE - Exchange from another - Exchange from another
1-800-322-CMIA account in the same class account in the same class
(select option with the same registration, with the same registration,
"2") including name, address and including name, address and
taxpayer ID number. taxpayer ID number.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
AUTOMATICALLY - You may not open an account - Establish an Automatic
automatically, but you may Investment Plan or Dollar
complete and sign an Cost Averaging Investment
application; make your check Program. Sign up for these
payable to CMIA; and mail to services when opening your
the address indicated on the account by completing
application. Section 9 on the enclosed
application, or call
1-800-322-CMIA for
information about adding
these services to your
account or complete an
Automatic Investment Plan
application.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
SELLING SHARES ACCOUNT TYPE SPECIAL REQUIREMENTS
<S> <C> <C>
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Individual, Joint Tenant, - The letter of instruction
Sole Proprietorship, must be signed by all
BY MAIL UGMA, UTMA persons required to sign for
EACH REDEMPTION transactions, exactly as
REQUEST IS LIMITED their names appear on the
account.
TO $50,000 UNLESS
YOU HAVE PROVIDED Retirement Account - The account owner should
A SIGNATURE complete a retirement
GUARANTEE. distribution form. Call
1-800-322-CMIA to request
one.
Trust - The trustee must sign the
letter indicating capacity
as trustee. If the trustee's
name is not in the account
registration, provide a copy
of the trust document
certified within the last 60
days.
Business or Organization - At least one person
authorized by corporate
resolution to act on the
account must sign the
letter. Include a corporate
resolution with corporate
seal or a signature
guarantee.
Executor, Administrator, - Call 1-800-322-CMIA for
Conservator, Guardian instructions.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
All account types except - Minimum request: $500,
retirement unless closing an
BY PHONE account. Limited to $50,000
per day.
1-800-322-CMIA
(select option
"2")
All account types - You may exchange to the same
class of other Accounts if
both accounts are registered
with the same name(s),
address and taxpayer ID
number.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
BY WIRE All account types except - Minimum wire: $1,000.
retirement - Each redemption request is
limited to $50,000 unless
you have provided a
signature guarantee.
- A voided check and your
signature, which must be
signature guaranteed, must
accompany a wire redemption
request unless you elected
Telephone Redemption on the
initial application.
- Your wire redemption request
must be received before 4:00
p.m. Eastern time for money
to be wired on the next
business day.
</TABLE>
8
<PAGE>
SUMMARY OF INVESTOR EXPENSES
The following table lists Shareholder Transaction Expenses and estimated
Annual Operating Expenses for the current fiscal year related to an investment
in Class A and Class B shares of each Account.
<TABLE>
<CAPTION>
CAPITAL
APPRECIATION DIVERSIFIED
ACCOUNT BALANCED ACCOUNT INCOME ACCOUNT
----------------- ----------------- -----------------
CLASS CLASS CLASS CLASS CLASS CLASS
A B A B A B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)...... 5.00% None 5.00% None 5.00% None
Deferred Sales Load
(as a percentage of original purchase
price or redemption proceeds, as
applicable).............................. None(1) 5.00% None(1) 5.00% None(1) 5.00%
Exchange Fee (2).......................... None None None None None None
ANNUAL OPERATING EXPENSES OF EACH ACCOUNT
(estimated as a percentage of average net
assets)
Management Fees........................... .85% .85% .85% .85% .75% .75%
12b-1 Fees................................ .25% 1.00% .25% 1.00% .25% 1.00%
Other Expenses (3)........................ .45% .45% .45% .45% .50% .50%
TOTAL ANNUAL OPERATING EXPENSES OF EACH
ACCOUNT.................................. 1.55% 2.30% 1.55% 2.30% 1.50% 2.25%
</TABLE>
- -------
(1) Purchases in amounts of $500,000 or more are not subject to an initial sales
charge but may be subject to a contingent deferred sales charge of 1.00% if
such shares are redeemed within 12 months after the calendar month of
purchase. See "How to Buy Shares -- Contingent Deferred Sales Charge --
Class A Shares."
(2) All exchanges in excess of 12 exchanges in a 12-month period are subject to
an exchange fee of 0.75% of the net asset value of the shares redeemed. See
"How to Exchange Shares."
(3) G.R. Phelps has temporarily agreed to limit or otherwise absorb each
Account's operating expenses except taxes and interest on borrowed money, if
any, to limit the operating expenses of the Capital Appreciation and
Balanced Accounts to 1.55% and 2.30% of each of such Account's average daily
net assets attributable to Class A shares and Class B shares, respectively,
and to 1.50% and 2.25% of such assets of the Diversified Income Account. In
the absence of such an agreement by G.R. Phelps, the estimated Total Annual
Operating Expenses of the Capital Appreciation Account, Balanced Account and
Diversified Income Account for the current fiscal year would be 2.50%,
3.25%, 1.74%, 2.49%, 1.71% and 2.46% of net assets attributable to Class A
and Class B shares, respectively.
9
<PAGE>
EXAMPLE: Assuming that an Account's annual return is 5% and that its
operating expenses are exactly as described above, if you closed your account
after the number of years indicated below, for every $1,000 invested, your
investment would bear the following amounts in total expenses:
<TABLE>
<CAPTION>
CAPITAL DIVERSIFIED
APPRECIATION BALANCED INCOME
ACCOUNT ACCOUNT ACCOUNT
------------ -------- -----------
<S> <C> <C> <C>
CLASS A SHARES
After 1 year................................................... $ 65 $ 65 $ 65
After 3 years.................................................. $ 96 $ 96 $ 95
CLASS B SHARES
-- Assuming complete redemption at end of period
After 1 year................................................... $ 73 $ 73 $ 72
After 3 years.................................................. $112 $112 $110
-- Assuming no redemption
After 1 year................................................... $ 23 $ 23 $ 23
After 3 years.................................................. $ 25 $ 25 $ 24
</TABLE>
The purpose of the above table and Example is to summarize the aggregate
expenses of Class A and Class B shares of each Account and to assist investors
in understanding the various costs and expenses that investors in an Account
will bear directly or indirectly. See "Breakdown of Expenses." THESE EXAMPLES
ILLUSTRATE THE EFFECT OF EXPENSES AND SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
Shareholders should be aware that an Account's payment of distribution fees
may result in long-term shareholders indirectly paying more than the economic
equivalent of the maximum front-end sales charge permitted by the National
Association of Securities Dealers, Inc. (NASD).
10
<PAGE>
FINANCIAL HIGHLIGHTS
For the period from May 1, 1995 (Inception) to August 31, 1995 (Unaudited).
The following information relates to Class A shares and has been derived from
the Accounts' unaudited financial statements as of August 31, 1995 which are
included in the Statement of Additional Information. No financial highlights
exist for Class B shares.
Selected data for a Class A share of capital stock outstanding throughout the
period:
<TABLE>
<CAPTION>
DISTRIBUTIONS RATIO OF RATIO OF
DIVIDENDS NET REALIZED FROM NET NET ASSET NET ASSET OPERATING INTEREST
NET FROM NET & UNREALIZED REALIZED VALUE AT VALUE AT EXPENSES TO EXPENSES TO
PERIOD ENDED INVESTMENT INVESTMENT GAIN (LOSS) GAIN ON BEGINNING END AVERAGE AVERAGE
AUGUST 1 INCOME INCOME ON INVESTMENTS INVESTMENTS OF PERIOD OF PERIOD NET ASSETS(B) NET ASSETS(B)
- -------------- ---------- ---------- --------------- --------------- ----------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CAPITAL
APPRECIATION
ACCOUNT
1995(a) $ $ $ $ $ $ % %
BALANCED
ACCOUNT
1995(a) $ $ $ $ $ $ % %
DIVERSIFIED
INCOME
ACCOUNT
1995(a) $ $ $ $ $ $ % %
<CAPTION>
RATIO OF NET NET ASSETS
INVESTMENT AT END OF
INCOME TO PERIOD ANNUAL
PERIOD ENDED AVERAGE (IN TOTAL
AUGUST 1 NET ASSETS(B) THOUSANDS) RETURN(C)
- -------------- -------------- ----------- -------------
<S> <C> <C> <C>
CAPITAL
APPRECIATION
ACCOUNT
1995(a) % % %
BALANCED
ACCOUNT
1995(a) % % %
DIVERSIFIED
INCOME
ACCOUNT
1995(a) % % %
</TABLE>
(a)_For the period from May 1, 1995 (Inception) to August 31, 1995
(b)_Annualized
(c)_Annual total returns do not include the effect of sales charges
11
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Company offers a broad range of investment alternatives through a variety
of mutual funds, three of which are offered by means of this Prospectus
(Accounts or CMIA LifeSpan Accounts). Each CMIA LifeSpan Account has its own
investment objective and policies which are designed to meet specific investment
goals. There can be no guarantee, however, that the CMIA LifeSpan Accounts will
meet their investment goals. The Manager of each CMIA LifeSpan Account is G.R.
Phelps, an indirect subsidiary of Connecticut Mutual Life Insurance Company
(Connecticut Mutual). The Manager has engaged Scudder, Stevens & Clark, Inc.
(Scudder, Stevens), Pilgrim Baxter & Assoc. Ltd. (Pilgrim Baxter) and BEA
Associates as subadvisers to assist in the investment management of three
components of these CMIA LifeSpan Accounts. See "Management--The Manager and
Subadvisers."
CAPITAL APPRECIATION ACCOUNT SEEKS LONG-TERM CAPITAL APPRECIATION.
BALANCED ACCOUNT SEEKS A BLEND OF CAPITAL APPRECIATION AND INCOME.
DIVERSIFIED INCOME ACCOUNT SEEKS HIGH CURRENT INCOME, WITH OPPORTUNITIES
FOR CAPITAL
APPRECIATION.
THE CMIA LIFESPAN ACCOUNTS
The CMIA LifeSpan Accounts are each asset allocation funds. Such funds have
been a basic tool of investment professionals and are differentiated by the use
of investment management strategies and techniques that range from the least
aggressive to the most aggressive. The CMIA LifeSpan Accounts offer you a
convenient way to own a diversified professionally managed portfolio tailored to
your specific investment goals. While your age is a factor, it is not
necessarily the determinative factor in choosing to invest in one of the CMIA
LifeSpan Accounts. Your investment goals, such as buying a home, educating your
children, caring for aging parents or saving for retirement all determine the
appropriate asset allocation that you seek and the associated expectation of
risk and return.
The CAPITAL APPRECIATION ACCOUNT is designed for the investor willing and
able to take higher risks in the pursuit of long-term capital appreciation. Such
investors generally have many years until retirement, are relatively young and
have a long-term investment plan and/or discretionary assets. The BALANCED
ACCOUNT offers a blend of capital appreciation and income for the investor
seeking diversification while maintaining a balance between growth and income.
Investors in the Balanced Account tend to have a middle career profile or are
mid-life in the life cycle and may be saving for their children's education,
their elderly parents' care or both. The DIVERSIFIED INCOME ACCOUNT is expected
to be the least volatile of the three CMIA LifeSpan Accounts designed for the
investor with a lower tolerance for risk. Investment in the Diversified Income
Account is intended for those further along in the life cycle or closer to
retirement and seeking higher income from their investments. This Account may
also be a suitable investment for young adults saving for a home or others who
have cash flow requirements over a short-term time horizon.
INVESTMENT STRATEGY OF THE LIFESPAN ACCOUNTS
Each LifeSpan Account is a carefully selected and professionally managed
diversified mix of equity (stock) and fixed-income (bond) Components that are
structured to achieve certain risk and return objectives. There is a normal
percentage of each LifeSpan Account that is allocated between the broad equity
class of investments and the broad fixed-income class of investments. See the
chart on page 10. This allocation or asset mix is determined by the Manager to
be the optimal combination of stocks and bonds that produces diversification of
risk and potential return for three distinct investment objectives: capital
appreciation, a blend of capital appreciation and current income, or high
current income with lesser opportunities for capital appreciation.
The Accounts' normal allocations generally correlate to different levels of
investment risk and return. In determining normal asset allocations, the Manager
has looked at broad market and economic variables such as inflation and interest
rates and has used the information to determine the overall mix of each
Account's assets between the two general asset classes: broad equity class and
broad fixed-income class. Equity securities have the potential to outperform
fixed-income securities over the long-term. Equity securities have
12
<PAGE>
the greatest potential for growth of capital, yet are generally the most
volatile of the two broad asset types. Fixed-income securities sometimes move in
the opposite direction of equity securities and may provide investment balance
to an Account. Additionally, fixed-income securities can provide regular income
to investors. The risks of each broad asset class will vary.
The normal asset allocation represents the way each Account's investments
will generally be allocated over the long-term. As market and economic
conditions change, however, the Manager may adjust the asset mix between the
broad equity and broad fixed-income classes within a normal asset allocation
range as long as the relative risk and return characteristics of the three
Accounts remain distinct and each Account's investment objective is preserved.
The Manager will review normal allocations between broad equity and broad
fixed-income investments quarterly and will rebalance, if necessary, at that
time. Additional adjustments may be made if an asset allocation shift of 5% or
more is warranted.
The Manager will diversify the broad equity class of each Account by
allocating the Account's portfolio of equity securities among four Components:
international stocks, value/growth stocks, growth and income stocks and
small-capitalized growth stocks (Small Cap). Each Component in the broad equity
class is also permitted to invest a portion of its assets in fixed-income
securities when the Subadviser determines that increased flexibility in
portfolio management is required to enhance appreciation or income. The Manager
will diversify an Account's broad fixed-income class by allocating an Account's
portfolio of fixed-income securities among three Components: government and
corporate bonds, high yield/high risk bonds and short-term bonds. There is no
requirement that the Manager allocate an Account's assets among all Components
at all times. These Components have been selected because the Manager believes
that this additional level of asset diversification will provide each Account
with the potential for higher returns with lower overall volatility. Each
Account's normal allocation is shown in the chart below.
<TABLE>
<CAPTION>
CAPITAL APPRECIATION DIVERSIFIED INCOME
ACCOUNT BALANCED ACCOUNT ACCOUNT
-------------------------- ---------------------- ------------------------
NORMAL NORMAL NORMAL
ASSET CLASS ALLOCATION RANGE ALLOCATION RANGE ALLOCATION RANGE
- ---------------------------------------- --------------- --------- ----------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
BROAD EQUITY 80% 70-90% 60% 50-70% 25% 15-35%
COMPONENT
- 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%
FIXED-INCOME 20% 10-30% 40% 30-50% 75% 65-85%
COMPONENT
- Government/Corporate 10% 5-15% 15% 10-25% 35% 30-45%
- 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. 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 general
asset classes and the Components of each Account, the Manager or the respective
Subadviser will then select the individual securities to be included in each
Component. Each Subadviser will manage the portion of an Account's assets in the
particular Component assigned to it by the Manager. As of the date of this
Prospectus, the Manager has assigned the management of the Components as
follows:
<TABLE>
<CAPTION>
SUBADVISER COMPONENT OF INVESTMENTS
- ------------------- --------------------------------
<S> <C>
Scudder, Stevens International Stocks
Pilgrim Baxter Small Cap Stock
BEA Associates High Yield/High Risk Bonds
</TABLE>
The Manager will manage the remaining Components using its own investment
management personnel. See "Management--The Manager and Subadvisers" for
additional information.
13
<PAGE>
THE BROAD EQUITY CLASS
Each CMIA LifeSpan Account will invest those assets which are allocated to
the broad equity class among four Components each of which invests principally
in equity securities but which differ with respect to capitalization, country
and investment style. The four Components in the broad equity class are expected
from time to time to have a portion of their assets in fixed-income securities.
EQUITY SECURITIES GENERALLY. While equity securities have historically
experienced a higher level of volatility risk than fixed-income securities, they
have also historically produced higher levels of total return. Longer term,
investors with diversified stock portfolios have a higher probability of
achieving their investment goals with lower levels of volatility than those who
have not diversified. Diversification can be achieved through active equity
management strategies. A growth oriented strategy generally involves buying
companies with rapidly growing sales, earnings or cash flows which are enhancing
their value by reinvesting profits in the company. A value oriented strategy
focuses on securities selling at low prices relative to current, normal or
discounted future earnings. A value strategy could also focus on companies with
above-average yields, or those that are able to maintain and increase dividend
payments. A growth and income strategy generally seeks to achieve returns
through price appreciation and dividend income of companies with a higher than
average market dividend yield and a history of stable and growing dividend
payments.
Diversification across the broad equity class will be achieved using a series
of Components, whose management strategies and investments are noted as follows.
INTERNATIONAL COMPONENT. This Component seeks long-term growth of
capital primarily through a diversified portfolio of marketable
international equity securities. The international Component invests in
companies based outside of the United States. The international Component
intends to allocate investments among several countries (usually between
8-12), primarily those included in the Morgan Stanley Capital International
(MSCI) Europe, Australia and Far East (EAFE) Index and Canada. In addition,
the Component may invest up to 25% of its assets in equity and debt
securities of companies based in emerging countries. The Subadviser
considers emerging countries to include 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. Stocks are purchased on
the basis of fundamental and valuation criteria, which include the
integration of three analytical disciplines. Global themes, identifying
attractive economic sectors and industries; country analysis, assessing
opportunities through quantitative and qualitative analysis; and unique
situations, are used to identify companies with exceptional growth
opportunities. Issues are sold because of changing fundamentals,
overvaluation, performance issues, or better relative opportunities.
International securities further diversify a portfolio's equity holdings and
can help to reduce overall portfolio volatility. The U.S. investor benefits
from exposure to international equity securities and foreign economies,
which may be influenced by distinctly different factors impacting a
country's rate of economic growth, interest rate structure, currency,
industry and local stock market environment. In addition, investments in the
non-U.S. equity markets allow for further diversification as many countries
and regions have risk/reward characteristics and market performance that are
not highly correlated to each other or to the U.S. market. International
investments, however, particularly in emerging countries, are subject to
special risks not generally present in domestic equity investments. See
"Risk Factors, Securities and Investment Techniques--International
Securities." In appropriate circumstances, such as when a direct investment
by the Component in the securities of a particular country cannot be made or
when the securities of an investment company are more liquid than the
underlying portfolio securities, the Component may, consistent with the
provisions of the Investment Company Act of 1940, as amended (1940 Act),
invest in the securities of closed-end investment companies that invest in
foreign securities. Since the Component's shareholders would be subject to
additional fees, including management fees, for any assets so invested, the
Subadviser will invest in such closed-end investment companies only where,
in its opinion, the potential returns justify incurring the additional
expense. A portion of the Component's investments may be held in cash and
short-term instruments. Current income is not a primary consideration but
income may be enhanced from time to time by investing a portion of the
Component's assets in corporate bonds and government securities of foreign
issuers.
14
<PAGE>
VALUE/GROWTH COMPONENT. This Component seeks to achieve 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 not a primary consideration in stock selection.
Investments for the value/growth Component are chosen using a highly
disciplined and quantitatively oriented investment management strategy in
combination with fundamental securities analysis. Stocks with low price-
earnings ratios are often out of favor in the market. When an out-of-favor
company demonstrates better earnings than what most analysts were expecting
(referred to as a favorable earnings surprise), an upward revaluation of
both earnings expectations and the price-earnings multiple often results,
causing the stock price to outperform the market averages. 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 meaningful earnings disappointment, the stock becomes a candidate
for sale. The Subadviser to the value/growth Component may also invest a
portion of the Component's assets in international equities when the
Subadviser determines that opportunities exist in the international markets
that will assist in achieving the Component's investment objective. Such
investments will be limited to 15% of the Subaccount's total assets and to
those issuers which generally have a substantial portion of their business
in the United States, and to ADRs. See "Risk Factors, Securities and
Investment Techniques--International Securities" for a discussion of the
risks of investing in international securities. 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 each Account's
total return through capital appreciation and dividend income by investing
primarily in common stocks with low price-earnings ratios, better-
than-anticipated earnings and better than market average dividend yields.
Investments are selected using a highly disciplined and quantitatively
oriented investment management strategy. Stocks with low price-earnings
ratios (below the price-earnings ratio of the S&P 500 Index), favorable
earnings surprises and above-average yields are identified by the Manager
who uses fundamental securities analysis to select individual stocks for
purchase in 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 meaningful earnings disappointment, or when
the yield drops significantly below the market yield, stocks in this
Component will normally be sold. The Subadviser to the growth/income
Component may also invest a portion of the Component's assets in
international equities when the Subadviser determines that opportunities
exist in the international markets that will assist in achieving the
Component's investment objective. Such investments will be limited to 15% of
the Subaccount's total assets and to those issuers which generally have a
substantial portion of their business in the United States, and to ADRs. See
"Risk Factors, Securities and Investment Techniques-- International
Securities" for a discussion of the risks of investing in international
equity securities. In order to enhance the growth/income Component's
potential for total return by providing maximum investment flexibility to
the Subadviser, a portion of the growth/income Component's investments may
be held in investment grade or below investment grade convertible securities
and in corporate bonds and U.S. Government securities. A portion of the
Component's assets may also be held in cash and short-term instruments.
SMALL CAP COMPONENT. This Component seeks long-term growth of capital
by investing primarily in equity securities of companies with relatively
small market capitalizations, typically between $250 million to $1.5
billion. Current income is a secondary consideration. When selecting
individual securities for the Component's portfolio, the Subadviser seeks
companies which 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. Historical results tend
to confirm the benefits of investing in companies with small
capitalizations. Capitalization is the aggregate value of a company's stock,
or its price per share times the number of shares outstanding. Smaller
capitalization companies are generally represented in new or rapidly
changing industries. They may offer more profit opportunity in growing
industries and during certain economic conditions than do large and medium
sized companies. However, smaller capitalization companies also involve
special risks. Often, liquidity
15
<PAGE>
and overall business stability of a small capitalization company may be less
than that associated with larger capitalized companies. Small capitalization
stocks frequently involve smaller, rapidly growing companies with high
growth rates, negligible dividend yields and extremely high levels of
volatility. However, diversification by market capitalization improves
profit potential, and serves as a means for reducing volatility of equity
securities overall. A portion of the small cap Component's investments may
also be held in cash and short-term instruments.
THE BROAD FIXED-INCOME CLASS
Each CMIA LifeSpan Account will invest those assets which are allocated to
the broad fixed-income class among three Components each of which invests in an
array of fixed-income securities.
FIXED-INCOME SECURITIES GENERALLY. Fixed-income securities, in general,
offer a fixed stream of cash flow and may provide good to moderate relative
total return benefits over time. The diversified approaches to bond management
are partly, but not completely, analogous to strategies in managing equities.
Most bond investments focus on generating income, while the potential for
capital appreciation is a secondary objective. The bond markets provide
diversification benefits to a holder of equity securities depending upon the
characteristics of the bonds comprising the broad fixed-income class of each
Account. In addition to sector and quality characteristics, the bond market
allows for diversification by maturity across the yield curve, I.E., short term
(0 to 3 years); intermediate term (3 to 10 years); and long term (10+ years).
The value of fixed-income securities generally fluctuates inversely with changes
in interest rates and other market and credit factors as well. See "Risk
Factors, Securities and Investment Techniques--Fixed-Income Securities--
General."
U.S. GOVERNMENT SECURITIES. U.S. Government securities may provide
opportunities for income with minimal credit risk. U.S. Treasury securities are
considered the safest of all Government securities. U.S. Government securities
are high quality instruments issued or guaranteed as to principal and interest
by the U.S. Government or by an agency or instrumentality of the U.S.
Government. U.S. government securities are, however, not immune from the market
risk of principal fluctuation associated with rising interest rates. See "Risk
Factors, Securities and Investment Techniques--U.S. Government Securities" for a
discussion of the types of securities, including mortgage-backed securities, in
which the Accounts may invest.
CORPORATE BONDS. Investment in corporate bonds may provide relatively
higher levels of current income. These bonds are used by U.S. and foreign
corporate issuers to borrow money from investors. Corporate bonds have varying
degrees of quality and varying degrees of sensitivity to changes in interest
rates. The value of these investments fluctuates based on changes in interest
rates and in the underlying credit quality of the bond issuers represented in
the portfolio.
HIGH YIELD/HIGH RISK BONDS. These corporate and government obligations are
included in the broad fixed-income class to provide opportunities for higher
levels of current income. High yield/high risk bonds (often called junk bonds)
are generally regarded as those rated below Baa by Moody's Investor Service,
Inc. (Moody's) or BBB by Standard & Poor's Rating Group (S&P) or, if unrated,
determined by the Subadviser to be of comparable credit quality. High yield
bonds are also considered "hybrid" securities because they can be constructed
with a bias toward income or with an orientation toward appreciation. High yield
bonds of small, young, growing companies emerging from bankruptcy or
reorganization may tend to exhibit characteristics of growth stocks. See "Risk
Factors, Securities and Investment Techniques--Fixed-Income Securities--High
Yield/High Risk Bonds" for a discussion of the risks of investing in these
securities.
Diversification across the broad fixed-income class will be achieved through
a series of Components, whose investment and management strategies are noted as
follows:
GOVERNMENT/CORPORATE COMPONENT. This Component seeks current income and
the potential for capital appreciation by investment primarily 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 and by foreign
governments. Though the government/corporate Component may invest in
securities with maturities across the entire slope of the yield curve,
including long bonds (10+ years), intermediate notes (3 to 10 years) and
short term notes (1 to 3 years), the
16
<PAGE>
Manager expects to maintain characteristics of an intermediate average
maturity and duration. In assessing maturity, the Manager may take into
account pre-payment features. The Manager's investment strategy includes the
purchase of bonds that are underpriced relative to other debt securities
having similar risk profiles. The Manager utilizes a systematic and
disciplined evaluation of a broad array of factors, including maturity,
creditworthiness, cash flow certainty and interest rate volatility, and
examines yield relationships in relation to trends in the economy, the
financial and commodity markets and 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. See "Risk Factors, Securities and Investment
Techniques--Fixed-Income Securities--High Yield Bonds." The Component's
assets are invested primarily in bonds that are rated BB or lower by S&P or
Ba or lower by Moody's or, if not rated, that are deemed by the Subadviser
to be of comparable quality. 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 credits. The Subadviser will screen
individual securities for such characteristics as minimum yield and issue
size, issue liquidity and financial and operational strength. In-depth
credit research will then be conducted to arrive at a core group of
securities within the high yield universe from which the Component will be
constructed. Continuous credit monitoring and adherence to sell disciplines
associated with both price appreciation and depreciation will be utilized to
achieve 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.
SHORT-TERM BOND COMPONENT. This Component seeks to obtain 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. In doing so, this Component
will invest primarily in fixed-income securities generally maturing within
five years of date of purchase, or with prepayment or similar features
which, in the view of the Manager, give the instrument an average life of
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, particularly in
the Manager's internal fixed-income analysis. The Manager conducts intensive
credit research, and carefully selects individual issues and broadly
diversifies portfolio holdings by industry sector and issuer. The Manager
believes that determination of an issue's attractiveness relative to
alternative issues and/or 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.
INVESTMENT RESTRICTIONS. Each Account is subject to certain fundamental
investment restrictions that are enumerated in detail in the SAI and may not be
changed without shareholder approval. Each Account's investment objective and
policies are non-fundamental and may be changed by the Company's Board of
Directors without shareholder approval. An Account's shareholders will be given
30 days' advance written notice of a change to an Account's investment
objective.
17
<PAGE>
YOUR ACCOUNT
HOW TO BUY SHARES
YOU MAY PURCHASE SHARES OF AN ACCOUNT AT THE PUBLIC OFFERING PRICE through
any securities broker-dealer having a sales agreement with CMFS or directly from
CMFS, the Accounts' distributor. Certain minimum investment requirements may
apply as set forth in your Shareholder Manual above. All share purchase orders
that fail to specify a class will be invested in Class A shares.
IF YOU ARE NEW TO CONNECTICUT MUTUAL, complete and sign an account
application and mail it along with your check. All orders to purchase shares are
subject to acceptance or rejection by the Company or CMFS. You may also open
your account by wire as described in Your Shareholder Manual. If there is no
application accompanying this prospectus, call 1-800-234-5606.
IF YOU ARE INVESTING THROUGH A TAX-SHELTERED RETIREMENT PLAN, such as an IRA,
for the first time, you will need a special application. Retirement investing
also involves its own investment procedures. Call 1-800-234-5606 for more
information and a retirement application.
PURCHASING CLASS A SHARES
Class A shares of each Account are sold at the share price next computed
after receipt of your purchase order, plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS
PERCENT OF
-------------------- DEALER
NET NET REALLOWANCE AS
AMOUNT OFFERING PERCENT OF
AMOUNT OF PURCHASE INVESTED PRICE OFFERING PRICE
- ------------------------------------------------------------------ --------- --------- --------------
<S> <C> <C> <C>
Less than $50,000................................................. 5.26% 5.00% 4.50%
$50,000 but less than $75,000..................................... 4.71% 4.50% 4.00%
$75,000 but less than $100,000.................................... 4.44% 4.25% 3.75%
$100,000 but less than $250,000................................... 3.36% 3.25% 3.00%
$250,000 but less than $500,000................................... 2.83% 2.75% 2.50%
$500,000 or more.................................................. 0% 0%
</TABLE>
No sales charge is imposed on purchases of Class A shares of an Account paid
from automatic reinvestment of dividends and capital gain distributions made by
that Account. The sales charge on Class A shares may be reduced and/or
eliminated in certain cases as further described under "Reducing or Eliminating
Your Sales Charge--Class A Shares."
The entire sales charge on Class A shares for CMFS retail sales is payable to
CMFS and is used for sales and other distribution expenses. Upon notice to
broker-dealers with whom it has sales agreements, CMFS may pay to such
broker-dealer an amount up to the full applicable sales charge. CMFS may from
time to time, at its own expense, provide promotional incentives to certain
broker-dealers whose representatives have sold or are expected to sell
significant amounts of shares of one or more of the Accounts. Broker-dealers to
whom substantially the entire sales charge is paid may be deemed to be
underwriters as that term is defined under the Securities Act of 1933.
CONTINGENT DEFERRED SALES CHARGE -- CLASS A SHARES
Purchases of $500,000 or more of Class A shares are sold without an initial
sales charge, but a CDSC of 1.00% may be imposed if you sell (or redeem) such
shares within one year of purchase. The CDSC of 1.00% will be assessed on an
amount equal to the current market value or the original purchase price of the
Class A shares sold, whichever is smaller. In determining whether a CDSC will be
charged, it will be assumed that those Class A shares in your account which are
not subject to a CDSC will be sold first. The CDSC may be waived on certain
redemptions of Class A shares subject to such charge as described below under
the caption "Purchasing Class B Shares--Waiver of the CDSC."
18
<PAGE>
CMFS may, in its discretion, pay a commission which may be up to the full
amount of the sales charge to its representatives or other broker-dealers who
initiate and are responsible for such purchases. Concessions will be paid for
sales in excess of $500,000 as follows:
<TABLE>
<CAPTION>
AMOUNT OF TRANSACTION AT OFFERING PRICE CONCESSIONS DEALER CONCESSION
- ------------------------------------------------------------------------ ----------- -----------------
<S> <C> <C>
$500,000 up to $2,000,000............................................... 1.00% .90%
$2,000,000 to $3,000,000................................................ .80% .75%
$3,000,000 to $5,000,000................................................ .20% .15%
Over $5,000,000......................................................... .08% .075%
</TABLE>
REDUCING OR ELIMINATING YOUR SALES CHARGE -- CLASS A SHARES
REDUCING YOUR SALES CHARGE. THERE ARE VARIOUS METHODS BY WHICH YOU MAY
QUALIFY FOR A REDUCED SALES CHARGE ON YOUR INVESTMENTS IN CLASS A SHARES.
You may qualify for a reduced sales charge on your investments in Class A
shares through COMBINED PURCHASES, STATEMENT OF INTENTION and RIGHTS OF
ACCUMULATION.
COMBINED PURCHASES. You may aggregate purchases of Class A shares of the
Accounts and Class A shares of other Accounts in the Company with the purchases
of the other persons listed below to achieve discounts in the applicable sales
charges. The sales charge applicable to a current purchase of Class A shares of
each Account by a person listed below is determined by adding the value of the
Class A shares to be purchased to the aggregate value (at current offering
price) of Class A shares of any of the other Accounts in the Company previously
purchased and then owned, provided that CMFS is notified by you or your broker-
dealer each time a purchase is made which would qualify. For example, if you are
investing $75,000 in the Capital Appreciation Account and your spouse owns Class
A shares of other Accounts in the Company with a value of $75,000, you would pay
a sales charge of 3.25% of the offering price of the new investment.
Qualifying investments include those by you, your spouse and your children
under the age of 21, if all parties are purchasing Class A shares for their own
account(s), which may include tax qualified plans, such as an IRA or single
participant Keogh-type plan, or by a company solely controlled (as defined in
the 1940 Act) by such individuals. Reduced sales charges also apply to purchases
of Class A shares in more than one Account by a trustee or other fiduciary if
the investment is for a single trust, estate or single fiduciary account,
including pension, profit-sharing or other employee benefit trust created
pursuant to a plan qualified under the Code. Reduced sales charges apply to
combined purchases by or for qualified employee benefit plans of a single
corporation, or of corporations affiliated (as defined in the 1940 Act) with
each other.
STATEMENT OF INTENTION (SOI). You may combine the current value of all
Class A shares held in one or more Accounts with the investment amounts intended
over the next 13-month period to qualify for a reduced sales charge. The SOI may
be backdated 90 days. The terms of the SOI are set forth in more detail in the
Accounts' SAI. You must identify on the Application all Accounts whose values
are to be combined. If the intended investment is not made within the 13-month
period, you must remit the additional sales charges, or sufficient Class A
shares will be redeemed from your account to cover the sales charge.
RIGHTS OF ACCUMULATION. The sales charge for new purchases of Class A
shares of an Account will be determined by aggregating the net asset value of
all the Accounts owned by the shareholder at the time of the new purchase. The
rules listed under COMBINED PURCHASES may apply. You must identify on the
Application all Accounts to be linked for RIGHTS OF ACCUMULATION.
ELIMINATING YOUR SALES CHARGE. THERE ARE VARIOUS METHODS BY WHICH YOU
MAY ELIMINATE SALES CHARGES ON YOUR INVESTMENTS IN CLASS A SHARES.
Class A shares of an Account may be purchased without a sales charge by (1)
any purchaser, provided the total initial amount invested in any Account or
Accounts totals $500,000 or more, including investments made pursuant to the
COMBINED PURCHASES, STATEMENT OF INTENTION and RIGHTS OF ACCUMULATION features
described in this prospectus; (2) any participant in a qualified plan, provided
that the total initial amount invested by the plan in any Account or Accounts
totals $500,000 or more; (3) Directors of the Company and
19
<PAGE>
members of their immediate families; (4) NASD registered representatives whose
employer consents to such purchases, and by the spouses and immediate family
members of such representatives; (5) employee benefit plans sponsored by CMFS
and its affiliated companies; (6) one or more members of a group of at least
1,000 persons (and persons who are retirees from such group) engaged in a common
business, profession, civic or charitable endeavor or other activity, and the
spouses and minor dependent children of such persons, pursuant to a marketing
program between CMFS and such group; and (7) any holder of a variable annuity
contract issued in New York state by Connecticut Mutual through the Panorama
Separate Account which is beyond the applicable surrender charge period and is
used to fund a qualified plan, who exchange the variable annuity contract for
Class A shares of the Company; and (8) an institution acting as a fiduciary on
behalf of an individual or individuals, where such institution is directly
compensated by the individual(s) for recommending the purchase of the shares of
the Company, provided the institution has an agreement with CMFS. Purchases of
Class A shares made pursuant to (1) and (2) above may be subject to a CDSC.
REINSTATEMENT PRIVILEGE
A shareholder who has made a partial or complete redemption of Class A shares
from an Account may reinvest all or part of the redemption proceeds in Class A
shares of the same Account without imposition of a sales charge with respect to
the amount invested, provided such reinvestment is effected within 60 days after
the date of the redemption. National Financial Data Services (NFDS), the
Accounts' transfer agent, must receive from the shareholder both a written
request for reinvestment and a check. The reinvestment will be made at the next
calculated net asset value after receipt. Redemptions are taxable transactions,
and special tax rules may apply if a reinvestment occurs. Each shareholder
should consult his/her own tax adviser as to the tax consequences of any
redemption and/or reinvestment.
PURCHASING CLASS B SHARES
The public offering price of the Class B shares of each Account is the next
determined net asset value per share. No initial sales charge is imposed. A
CDSC, however, is imposed on certain redemptions of Class B shares. Since the
Class B shares are sold without an initial sales charge, the Account receives
the full amount of the investor's purchase payment. Orders for Class B shares
for $250,000 or more will be treated as orders for Class A shares or declined.
The amount of any applicable CDSC will be calculated by multiplying the
lesser of the original purchase price or the net asset value of such shares at
the time of redemption by the applicable percentage shown in the table below.
Accordingly, no CDSC is imposed on increases in net asset value above the
original purchase price.
<TABLE>
<CAPTION>
REDEMPTION DURING CDSC
- ---------------------------------------------------------------------------------------------------------- ------
<S> <C>
1st Year Since Purchase................................................................................... 5%
2nd Year Since Purchase................................................................................... 5%
3rd Year Since Purchase................................................................................... 4%
4th Year Since Purchase................................................................................... 4%
5th Year Since Purchase................................................................................... 2%
6th Year Since Purchase................................................................................... 1%
Thereafter................................................................................................ 0%
</TABLE>
In determining whether a CDSC is applicable to a redemption, the calculation
will be made in a manner that results in the lowest possible rate. It will be
assumed that the redemption is made first of amounts representing shares
acquired pursuant to the reinvestment of dividends and distributions; then of
amounts representing the cost of shares purchased seven years or more prior to
the redemption; and finally of amounts representing the cost of shares held for
the longest period of time within the applicable six-year period. Class B shares
of an Account that are redeemed will not be subject to a CDSC to the extent that
the value of such shares represents: (1) reinvestment of dividends or capital
gain distributions or (2) shares redeemed more than six years after their
purchase. Redemptions of most other Class B shares will be subject to a CDSC.
See "Waivers of the CDSC."
20
<PAGE>
Proceeds from the CDSC are paid to CMFS and are used in whole or part to
defray CMFS' expenses related to providing distribution-related services to the
Accounts in connection with the sale of Class B shares, including the payment of
compensation to broker-dealers.
Class B shares will automatically convert into Class A shares on the first
day of the month that is eight years after the purchase date, except as noted
below. Class B shares acquired by exchange from Class B shares of another
Account in the Company will convert into Class A shares based on the date of the
initial purchase and the applicable CDSC. Class B shares acquired through
reinvestment of distributions will convert into Class A shares based on the date
of the initial purchase to which such shares relate. For this purpose, Class B
shares acquired through reinvestment of distributions will be attributed to
particular purchases of Class B shares in accordance with such procedures as the
Directors may determine from time to time. The conversion of Class B shares to
Class A shares is subject to the continuing availability of a ruling from the
Internal Revenue Service, which the Company has obtained, or an opinion of
counsel that such conversions will not constitute taxable events for federal tax
purposes. There can be no assurance that such ruling or opinion will continue to
be in effect at the time any particular conversion would occur. The conversion
of Class B shares to Class A shares will not occur if such ruling is no longer
in effect and such an opinion is not available and, therefore, Class B shares
would continue to be subject to higher expenses than Class A shares for an
indeterminate period.
WAIVER OF THE CDSC. Except as otherwise noted, the CDSC is waived in the
case of redemptions of Class A shares subject to a CDSC or Class B shares made:
(1) by the estate of the deceased shareholder; (2) upon the disability of the
shareholder, as defined in Section 72(m)(7) of the Internal Revenue Code of
1986, as amended (Code); (3) for retirement distributions (or loans) to
participants or beneficiaries from retirement plans qualified under Sections
401(a) or 403(b)(7) of the Code, or from IRAs, deferred compensation plans
created under Section 457 of the Code, or other employee benefit plans; (4) as
tax-free returns of excess contributions to such retirement or employee benefit
plans; (5) in whole or in part, in connection with shares sold to any state,
county, or city, or any instrumentality, department, authority, or agency
thereof, that is prohibited by applicable investment laws from paying a sales
charge or commission in connection with the purchase of shares of any registered
investment management company; (6) in connection with the redemption of shares
of the Company due to a combination with another investment company by virtue of
a merger, acquisition or similar reorganization transaction; (7) in connection
with the Company's right to involuntarily redeem or liquidate an Account; (8) in
connection with automatic redemptions of Class A shares and Class B shares in
certain retirement plan accounts pursuant to a SYSTEMATIC WITHDRAWAL PLAN but
limited to no more than 12% of the original value annually; and (9) as
involuntary redemptions of shares by operation of law, or under procedures set
forth in the Company's Articles of Incorporation, or as adopted by the Board of
Directors of the Company.
HOW TO SELL SHARES
You can arrange to take money out of your account(s) at any time by selling
(redeeming) some or all of your shares. Your shares will be sold at the next
share price calculated after your order is received in good form. Share price is
normally calculated at 4:00 p.m. Eastern Time. If you own both Class A and Class
B shares in an Account, the Class A shares will be redeemed first unless you
specify otherwise.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the methods
described above in Your Shareholder Manual.
TO SELL SHARES IN A RETIREMENT ACCOUNT, your request must be made in writing,
except for exchanges to other Accounts, which can be requested by phone or in
writing. Call 1-800-322-CMIA for a retirement distribution form.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least 100 shares
in the account to keep it open.
TO SELL SHARES BY WIRE, you must sign up for this service in advance by
completing the appropriate sections in the Application.
21
<PAGE>
TO INITIATE A TELEPHONE REDEMPTION, call 1-800-322-CMIA (select option "2").
You must have your Account name, account number and the taxpayer identification
number of your account available. Telephone redemptions are limited to $50,000
per day unless prior authorization has been obtained through a signature
guaranteed letter of authorization. If you do not wish to have telephone
transaction privileges on your account, you must complete the appropriate
section of the application.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. Signature guarantees are
designed to protect you and the Company from fraud. Your request to sell shares
must be made in writing and include a signature guarantee if any of the
following situations apply:
-You request in writing to redeem more than $50,000 worth of shares,
-Your account registration or address has changed within the last 30 days,
-The check is being mailed to a different address than the one on our
account (record address),
-The check is being made payable to someone other than the account owner, or
-The redemption or exchange proceeds are being transferred to an account
with a different registration.
You should be able to obtain a signature guarantee from a bank, broker,
dealer, credit union (if authorized under state law), securities exchange or
association, clearing agency or savings association. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
SELLING SHARES IN WRITING BY MAIL
- Write a "letter of instruction" with:
- Your name,
- The Account's name,
- Your account number,
- The class of shares to be redeemed,
- The dollar amount or number of shares to be redeemed, and
- Any other applicable requirements listed above in Your Shareholder Manual.
- Mail the letter of instruction to NFDS, the Company's transfer agent, at:
Connecticut Mutual Investment Accounts, Inc.
P.O. Box 419694
Kansas City, Missouri 64179-0948
Unless otherwise instructed, the Company will send a check to the address of
record.
REDEMPTIONS OF CERTAIN SHAREHOLDER ACCOUNTS
In order to reduce the expense of maintaining numerous small accounts, the
Company reserves the right to involuntarily close any shareholder's account
(other than an IRA) that has been open at least 24 months and which has fewer
than 100 shares if within 30 day's after notification by the Company, the
affected shareholder does not increase the size of his account to the required
level. In addition, the Board of Directors may cause the Company to redeem at
their net asset value shares held by a shareholder in any Account if the
shareholder has failed to supply a correct, certified social security or other
taxpayer identification number required to be obtained by the Company.
HOW TO EXCHANGE SHARES
YOU MAY EXCHANGE YOUR SHARES of a CMIA LifeSpan Account for shares of the
same class of any other Account in the Company. To obtain a current prospectus
for other Accounts, please call 1-800-322-CMIA (select option "3"). You should
consider the differences in investment objectives and expenses of an Account
22
<PAGE>
as described in its prospectus before making an exchange. Exchanges are taxable
transactions and may be subject to special tax rules about which you should
consult your own tax adviser. All exchanges are subject to the following
exchange restrictions:
-The Account you are exchanging into must be registered for sale in your
state.
-You may exchange only between Accounts that are registered in the same
name, address and taxpayer identification number.
-You may only exchange for shares of the same class of another Account.
-The minimum amount you may exchange from one Account into another Account
is $500 or the total value of the Account if less than $500.
-IF YOU WISH TO MAKE MORE THAN 12 EXCHANGES IN A 12-MONTH PERIOD, AN
EXCHANGE FEE OF .75% OF THE NET ASSET VALUE OF THE SHARES REDEEMED WILL BE
CHARGED. EXCHANGES MADE PURSUANT TO THE DCA PROGRAM (SEE "INVESTOR
SERVICES") ARE NOT SUBJECT TO THIS FEE.
-You may exchange your shares of a CMIA LifeSpan Account for shares of the
same class of any other account in the Company without the imposition of a
sales charge at the time of the exchange. With respect to Class B shares,
if you exchange such shares of a CMIA LifeSpan Account for Class B shares
of another account in the Company, the CDSC will be calculated based on the
date on which you acquired the original Class B shares.
-An Account reserves the right to refuse exchange purchases by any person or
group if, in the Manager's judgment, an Account would be unable to invest
the money effectively in accordance with its investment objective and
policies, or would otherwise potentially be adversely affected.
-Your exchanges may be restricted or refused if an Account receives or
anticipates simultaneous orders affecting significant portions of the
Account's assets. In particular, a pattern of exchanges that coincides with
a "market timing" strategy may be disruptive to the Account.
-Although an Account will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time.
Each Account reserves the right to terminate or modify the exchange
privilege in the future.
INVESTOR SERVICES
Connecticut Mutual provides a variety of services to help you manage your
account.
24-HOUR SERVICE
Call 1-800-322-CMIA (select option "1") for the following automated services.
After normal business hours, please leave a message and someone will return your
call during normal business hours.
-Account balance
-Last distribution
-Prices
-Account distributions
-Service representative
-Duplicate statement
-Change PIN (Personal Identification Number)
-Duplicate tax forms
INFORMATION SERVICES
TELEPHONE REPRESENTATIVES are available during normal business hours to
provide the information and services you need.
23
<PAGE>
STATEMENTS AND REPORTS sent to you include the following:
-Confirmation statements (after every transaction, except reinvestments,
automatic investments and automatic payroll investments, that affects your
account balance or your account registration),
-Quarterly consolidated account statements which summarize all account
activity year-to-date, and
-Financial reports (every six months).
Call 1-800-322-CMIA (select option "2") if you need additional copies of
financial reports or historical account information.
INVESTOR SERVICES
One easy way to pursue your financial goals is to invest money regularly. The
Company offers convenient services that let you transfer money into your
account, or between accounts, automatically. While regular investment plans do
not guarantee a profit and will not protect you against loss in a declining
market, they can be an excellent way to invest for retirement, a home,
educational expenses and other long-term financial goals. Certain restrictions
apply. Call 1-800-322-CMIA for more information.
AUTOMATIC INVESTMENT PLAN lets you make regular monthly investments through
an automatic withdrawal from your bank account ($50 minimum per Account) and you
can enroll when you establish your account. Forms are available to initiate this
program on existing accounts from your registered representative, or by calling
1-800-322-CMIA.
DOLLAR COST AVERAGING (DCA) INVESTMENT PROGRAMS let you set up monthly
exchanges in amounts of $100 or more from one Account to the same class of
shares of any other Account. Sales charges may apply. Use of the DCA Program
permits the purchase of shares of an Account on a scheduled basis which
disregards fluctuations in net asset value. All shareholder accounts involved in
a DCA Program must have like registrations.
AUTOMATIC DIVIDEND DIVERSIFICATION (ADD) lets you automatically reinvest
dividends and capital gain distributions paid by one Account into shares of the
same class of another Account. The number of shares reinvested will be
determined using the price in effect for the receiving Account on the dividend
payment date for the Account whose dividend is to be invested. Sales charges may
apply. All shareholder accounts involved in an ADD program must have like
registrations.
EXCHANGE PRIVILEGE. You may exchange your shares of a CMIA LifeSpan Account
for shares of the same class of any other Account in the Company. To obtain a
current prospectus for any Accounts in the Company, please call 1-800-322-CMIA
(select option "3"). You should consider the differences in investment
objectives and expenses of an Account as described in its prospectus before
making an exchange.
Exchanges are taxable transactions and may be subject to special tax rules
about which you should consult your own tax adviser. For complete policies and
restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see "How to
Exchange Shares."
SYSTEMATIC WITHDRAWAL PLANS let you set up monthly, quarterly, semi-annual
or annual redemptions with respect to Class A shares only from any account with
a value of $10,000 or more. You may direct the Company to make regular payments
in fixed dollar amounts of $50 or more, or in an amount equal to the value of a
fixed number of shares. Payments can be directed to the shareholder or to
someone other than the registered owner(s) of the account. If this privilege is
requested when the account is established, no signature guarantee is needed. If
this privilege is added to an existing account and payments are directed to
someone other than the registered owner(s) of the account, a signature guarantee
is required on the SYSTEMATIC WITHDRAWAL PLAN application. The Company reserves
the right to institute a charge for this service. Systematic Withdrawal Plans
for Class B shares of an Account are permitted only for payments of required
distributions from retirement plan accounts for a shareholder who has attained
age 70 1/2. The CDSC will be waived with respect to such redemptions but only if
such redemptions are limited to no more than 12% of the original value of the
account.
24
<PAGE>
MAINTAINING A SYSTEMATIC WITHDRAWAL PLAN AT THE SAME TIME REGULAR ADDITIONAL
INVESTMENTS ARE BEING MADE INTO ANY ACCOUNT IS NOT RECOMMENDED BECAUSE A SALES
CHARGE WILL BE IMPOSED ON THE NEW SHARES AT THE SAME TIME SHARES ARE BEING
REDEEMED TO MAKE THE PERIODIC PAYMENTS UNDER THE SYSTEMATIC WITHDRAWAL PLAN.
The Company may amend or terminate the SYSTEMATIC WITHDRAWAL PLAN on 30
days' prior written notice to any participating shareholders.
TRANSACTION DETAILS
THE COMPANY IS OPEN FOR BUSINESS each day that the New York Stock Exchange
(NYSE) is open. The Company normally calculates an Account's net asset value as
of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern Time.
AN ACCOUNT'S NET ASSET VALUE (NAV) PER SHARE is the value of a single share.
The NAV of a class of an Account is computed by adding the value of its
investments, cash, and other assets, subtracting the liabilities attributable to
the class, and then dividing the result by the number of shares of the class
outstanding. The sale of shares of any Account will be suspended during any
period when the determination of its net asset value is suspended pursuant to
rules or orders of the SEC.
The assets of each Account are valued primarily on the basis of market
quotations. If quotations are not readily available, assets are valued by a
method that the Board of Directors believes accurately reflects fair value.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded, and are translated from the local currency into U.S.
dollars using current exchange rates. Generally, trading in foreign securities
is substantially completed each day at various times prior to the close of
regular trading on the NYSE. The values of such securities used in computing the
net asset value of an Account's shares are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of
regular trading on the NYSE. Events which affect the values of such securities
and such exchange rates may occur between the times at which they are determined
and the close of regular trading on the NYSE and will, therefore, not be
reflected in the computation of an Account's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities are valued at their fair value using a method determined in
good faith by the Board of Directors.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that
your Social Security or other taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failing to report interest or
dividends to the IRS. If you are subject to backup withholding, the IRS can
require the Company to withhold 31% of your dividends, capital gain
distributions, and the proceeds of redemptions (including exchanges).
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Telephone representatives
will request personalized security codes or other information and will also
record calls. If reasonable procedures such as those described in the Prospectus
are not followed, the Company may be liable for any loss due to unauthorized or
fraudulent telephone instructions. In all other cases, neither the Company nor
CMFS will be liable for acting upon telephone instructions made in accordance
with the telephone transaction procedures described in this Prospectus. You
should verify the accuracy of your confirmation statements immediately after you
receive them. If you do not want the ability to redeem and exchange by
telephone, call 1-800-322-CMIA for instructions. See the Account Application.
IF YOU ARE UNABLE TO REACH THE COMPANY BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail or overnight
mail.
EACH ACCOUNT RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a
period of time. Each Account also reserves the right to reject any specific
purchase order, including certain purchases by exchange. See "How to Exchange
Shares." Purchase orders may be refused if, in the Manager's opinion, they are
of a size that would disrupt management of an Account.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the
next offering price calculated after your order is received and accepted. Note
the following:
25
<PAGE>
-All of your purchases must be made in U.S. dollars and checks must be drawn
on U.S. banks. Checks are accepted subject to cancellation at full value.
You may not purchase shares for a new account or an existing account with a
third party check.
-If you buy shares by check, and then redeem those shares by a method other
than by exchange to another Account in the Connecticut Mutual Family of
Accounts, mailing the payment of the proceeds may be delayed for up to
fifteen calendar days to ensure that your check has cleared.
-If your check does not clear, your purchase will be cancelled and you could
be liable for any losses or fees the Account or its transfer agent has
incurred. There will be a $20.00 fee for any check returned for any reason.
TO AVOID THE COLLECTION PERIOD associated with checks, consider buying
shares by bank wire of federal funds, U.S. Postal money order, U.S. Treasury
check, Federal Reserve check, or direct deposit instead. "Wiring federal funds"
means that your bank sends money to the Company's bank through the Federal
Reserve System. To wire funds see "By Wire" in Your Account Manual.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the next
NAV calculated after your request is received and accepted. Note the following:
-Normally, redemption proceeds will be mailed to you on the next business
day, but if making immediate payment could adversely affect an Account, it
may take up to seven days to pay you.
-As mentioned above, an Account may hold payment on redemptions until it is
reasonably satisfied that investments made by check have been collected,
which can take up to 15 calendar days.
-Redemptions may be suspended or payment dates postponed when the NYSE is
closed (other than weekends or holidays), when trading on the NYSE is
restricted, or as permitted by the SEC.
SHARE CERTIFICATES. Shares are credited to your account and certificates are
not issued unless specifically requested. You may request share certificates by
writing to the transfer agent, NFDS, P.O. Box 419694, Kansas City, Missouri,
64179-0948. There is no cost for issuing share certificates. Transfers,
exchanges and redemptions of shares will be more complicated if certificates
have been issued. If your share certificate is lost or misplaced you will be
required to pay a fee and furnish a bond satisfactory to the Company's transfer
agent (usually in the amount of 1.5% of the face value of the lost certificate)
before the shares can be transferred or redeemed, or a replacement certificate
issued.
MANAGEMENT
THE MANAGER AND THE SUBADVISERS
Each Account is managed by G.R. Phelps, the Manager, who handles their
business and administrative affairs. The Manager is responsible for the overall
management of the Accounts' investments, including the allocation of the
Accounts' assets both between and within asset classes for each Component. The
Manager is also responsible for the selection of portfolio investments for the
following Components: value/growth; growth/income; government/corporate bonds;
and short-term bond. The Manager has engaged Subadvisers to manage the other
Components.
The principal business address of the Manager is 10 State House Square,
Hartford, Connecticut. The Manager's mailing address is 140 Garden Street,
Hartford, Connecticut 06154. The Manager also manages the investments of
Connecticut Mutual Financial Services Series Fund I, Inc. (Series Fund I), a
diversified investment management company offering its series of common stock as
funding vehicles for variable annuity and variable life contracts issued by
Connecticut Mutual and CM Life Insurance Company (CM Life). Connecticut Mutual
is the parent company for the Manager and CM Life.
The Manager has engaged three Subadvisers to assist in the selection of
portfolio investments for certain Components. Scudder, Stevens, 345 Park Avenue,
New York, NY 10154, the Subadviser to the international Component, has been
providing investment counseling services for over 70 years, since its founding
in 1919. Scudder, Stevens supervises assets for institutional clients,
investment companies and
26
<PAGE>
individuals and had over $90 billion in assets under management as of May 31,
1995. BEA Associates, Citicorp Center, 153 East 53rd Street, 57th Floor, New
York, NY 10022, the Subadviser to the high yield/high risk bond Component, has
been providing fixed-income and equity management services to institutional
clients since 1984. As of May 31, 1995, BEA Associates, together with its global
affiliate, had $25 billion in assets under management. Pilgrim 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. As of May 31, 1995, Pilgrim
Baxter had over $4.0 billion in assets under management.
The Manager provides supervision for the portfolio management of the CMIA
LifeSpan Accounts through the Asset Allocation Committee, which consists of four
members who meet quarterly to evaluate, among other things, the asset allocation
between the broad asset classes of the CMIA LifeSpan Accounts. The persons
primarily responsible for the day-to-day management of each Component in the
primary asset classes of each Account are listed below.
<TABLE>
<CAPTION>
COMPONENT PORTFOLIO MANAGER BUSINESS EXPERIENCE (LAST 5 YEARS)
- ---------------------- ------------------------- --------------------------------------------------------------
<S> <C> <C>
International Nicholas Bratt Managing Director and Director, Global Equity Group, Scudder,
(Scudder, Stevens) Stevens (since 1976)
Joan Gregory Vice President, Scudder, Stevens (since 1992); Assistant
Portfolio Manager, U.S. Trust Company (1989-1992)
Value/Growth Peter Antos, C.F.A. Vice President and Senior Portfolio Manager, Equities, G.R.
(G.R. Phelps) Phelps (since 1989)
Michael C. Portfolio Manager, Equities - CML (1988-Present)
Strathearn, C.F.A.
Kenneth B. White, C.F.A. Portfolio Manager, Equities - CML (1992-Present), Senior
Investment Officer, Equities - CML (1987-1992)
Growth/Income Kenneth B. White, C.F.A. Portfolio Manager, Equities - CML (1992-Present), Senior
(G.R. Phelps) Investment Officer, Equities - CML (1987-1992)
Peter M. Antos, C.F.A. Vice President and Senior Portfolio Manager, Equities, G.R.
Phelps (since 1989)
Small Cap Gary L. Pilgrim Director, Member of Executive Committee, President and Chief
(Pilgrim Baxter) Investment Officer, Pilgrim Baxter (1985 to Present)
John F. Force Portfolio Manager/Analyst, Pilgrim Baxter (since 1993); and
Vice President/Portfolio Manager, Fiduciary Management
Associates (1989 to 1993)
James M. Smith Portfolio Manager/Analyst, Pilgrim Baxter (since 1993); Senior
Vice President/Portfolio Manager, Selected Financial Services
(1992 to 1993); and Vice President, Sears Investment
Management Company (Prior to 1992)
Michael D. Jones Portfolio Manager/Analyst, Pilgrim Baxter (since 1995); Vice
President/Portfolio Manager, Bank of New York (1990 to 1995)
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
COMPONENT PORTFOLIO MANAGER BUSINESS EXPERIENCE (LAST 5 YEARS)
- ---------------------- ------------------------- --------------------------------------------------------------
<S> <C> <C>
Government Stephen F. Libera, Vice President and Senior Portfolio Manager,
Securities/ Corporate C.F.A. Fixed-income, G.R. Phelps
Bonds
(G.R. Phelps) William H. Jefferis Portfolio Manager, Fixed-income - CML, (1993-Present),
Investment Officer, Fixed-income - CML (1990-1993); Credit
Analyst - CIGNA (1984-1990)
High Yield Bonds Richard J. Lindquist Managing Director and High Yield Portfolio Manager, BEA
(BEA Associates) Associates (1995); CS First Boston (1989-1995)
Short-Term Bond Stephen F. Libera, C.F.A. Vice President and Senior Portfolio Manager, Fixed- income -
(G.R. Phelps) G.R. Phelps (1989-Present)
William H. Jefferis Portfolio Manager, Fixed-income - CML, (1993-Present),
Investment Officer, Fixed-income - CML (1990-1993); Credit
Analyst - CIGNA (1984-1990)
</TABLE>
CMFS distributes and markets the Accounts and their services. NFDS performs
transfer agent servicing and dividend disbursing functions for each Account.
BREAKDOWN OF EXPENSES
Like all mutual funds, each Account pays fees and expenses related to its
daily operations. These Account fees and expenses are neither billed directly to
shareholders nor deducted from individual shareholder accounts but are paid out
of an Account's assets and are reflected in its share price or dividends.
Each Account has entered into an investment advisory agreement with the
Manager pursuant to which the Account pays a management fee to the Manager for
managing its investments and business affairs. The Manager provides
administrative services to each Account, including providing accounting,
administrative and clerical personnel and monitoring the activities of the
transfer agent, custodian and independent auditors of the Accounts. The Accounts
also pay other expenses, which are explained below.
MANAGEMENT AND SUBADVISORY FEES
The Capital Appreciation Account, Balanced Account and Diversified Income
Account each pay monthly to the Manager a fee equal on an annual basis to .85%,
.85% and .75%, respectively, of the respective Account's average daily net asset
value up to $250 million and .75%, .75% and .65%, respectively, on such assets
over $250 million. While higher than advisory fees paid by most mutual funds,
these fees are comparable to those paid by mutual funds with similar objectives
and investment strategies.
SUBADVISORY FEES. The Manager pays out of its own assets the fees to the
Subadvisers for the services they provide to the Manager in managing certain
Components. The Manager pays Scudder, Stevens a subadvisory fee equal on an
annual basis to .75% of the first $10 million of assets under management; .70%
on the next $15 million of such assets; .65% on the next $15 million of such
assets; .50% on the next $60 million of such assets; and .35% on such assets
over $100 million. The Manager pays BEA Associates a subadvisory fee equal on an
annual basis to .45% of the first $25 million of assets under management; .40%
on the next $25 million of such assets; .35% on the next $50 million of such
assets; and .25% on all such assets over $100 million. The Manager pays Pilgrim
Baxter a subadvisory fee equal on an annual basis to 0.60% of assets under
management. For purposes of determining the applicable rate of the subadvisory
fee for Pilgrim Baxter and BEA Associates, assets under management include all
assets described above and the assets of Series Fund I managed by the
Subadviser.
The Manager may, from time to time, agree to maintain the total of the
management fees and other expenses (including Rule 12b-1 fees) of an Account at
no more than a specified limit. The Manager retains the ability to be repaid by
an Account if expenses fall below the specified limit prior to the end of the
fiscal year. These expense limitation arrangements, which may be terminated at
any time without notice, can decrease an Account's expenses and increase its
performance.
28
<PAGE>
OTHER EXPENSES
Each Account is also responsible for expenses not expressly stated to be
payable by the Manager under the Account's Investment Advisory Agreement. Each
Account pays other expenses, such as legal, audit and custodian fees, proxy
solicitation costs and the compensation of directors who are not affiliated with
Connecticut Mutual. State Street Bank & Trust Company (State Street) provides
custodian services to each Account. Each Account contracts with NFDS, a
subsidiary of State Street, to perform many transaction and accounting
functions. These services include processing shareholder transactions, valuing
the Account's investments and handling securities loans.
DISTRIBUTION PLANS
Each Account has adopted a distribution plan for both Class A shares (Class A
Plan) and Class B shares (Class B Plan) designed to meet the requirements of
Rule 12b-1 under the 1940 Act and the sales charge rules of the NASD.
Under the Class A Plan of each Account, each Account may make payments for
personal services and/or the maintenance of shareholder accounts to account
executives of CMFS and other broker-dealer firms with whom CMFS has agreements
in amounts not exceeding 0.25% of the Account's average daily net assets for any
fiscal year.
Under each Account's Class B Plan, such Account may pay CMFS a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the
Account's Class B shares for its expenditures incurred in servicing and
maintaining shareholder accounts, and may pay CMFS a distribution fee at the
annualized rate of up to 0.75% of the average daily net assets of the Account's
Class B shares for its expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
the Class B Plan continues in effect.
Each of the Class A Plans and Class B Plans were approved, on behalf of the
respective Account, by a majority of the Company's Directors who are not
interested persons of the Company and who have no financial interest in the
respective Plans. Neither a Class A Plan nor a Class B Plan may be amended to
increase materially the annual percentage limitation of average net assets that
may be spent for the services described in a Class A Plan or Class B Plan
without the approval of the shareholders of the affected Account. Any
unreimbursed expenses under a Class A Plan are not carried beyond one year from
the date of incurrence.
PORTFOLIO TURNOVER RATES
Each Account's portfolio securities in each Component may be changed without
regard to the holding period of such securities (subject to certain tax
restrictions) when the Manager deems it appropriate to do so in order to achieve
each Account's normal allocation between the primary asset classes and the
Components in view of a change in the financial or business operations of an
issuer or changes in general market conditions. Under normal market conditions,
the portfolio turnover rates of the Capital Appreciation Account and the
Diversified Income Account are each expected to be 75%. The turnover rates of
the fixed income portion and the equity portion of the Balanced Account are
expected to be 70% and 85%, respectively. High portfolio turnover rates, I.E.,
in excess of 100%, increase transaction costs and may increase taxable capital
gains. The Manager considers these effects when evaluating the anticipated
benefits of rebalancing an Account's normal allocation.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Manager and the Subadvisers are primarily responsible for placing orders
for the portfolio transactions of each Account. In placing orders, it is the
policy of each Account to obtain the most favorable net results, taking into
account various factors, including price, dealer spread or commissions, if any,
size of the transaction, difficulty of execution and other services rendered.
While the Manager and Subadvisers seek reasonably competitive spreads or
commissions, an Account will not necessarily be paying the lowest spread
29
<PAGE>
or commissions available. Subject to the requirements of best execution,
brokerage transactions may be directed to broker/dealers who also sell shares of
the Accounts. Commission rates on foreign exchanges are generally fixed and are
generally higher than negotiated commission rates available in the United
States.
DIVIDENDS, CAPITAL GAINS AND TAXES
It is the Company's intention to distribute all or substantially all the net
investment income and net realized capital gains, if any, of each Account for
each taxable year. For dividend purposes, net investment income of each Account
will consist of all payments of dividends received or interest accrued by such
Account less the estimated expenses of such Account (including fees payable to
the Manager). Dividends from the net investment income of the Capital
Appreciation and Balanced Accounts are declared and paid semi-annually and
dividends from the net investment income of the Diversified Income Account are
declared and paid monthly. All realized net short-term capital gains in excess
of net long-term capital losses of an Account, if any, and all realized net
long-term capital gains in excess of net realized short-term capital losses of
the Account, if any, are declared and paid at least annually. Unless
shareholders specify otherwise, all dividends and distributions will be
automatically reinvested in additional full and fractional shares of each
Account.
Dividends from each Account's net investment income, certain net foreign
exchange gains and net short- term capital gains are taxable as ordinary income,
and dividends from each Account's net long-term capital gains are taxable as
long-term capital gains. For federal income tax purposes, all dividends are
taxable as described above whether a shareholder takes them in cash or reinvests
them in additional shares of the Account. Certain dividends paid in January may
be treated as if they were received on December 31 of the prior year.
Information as to the federal tax status of dividends and distributions will be
provided annually.
Each Account intends to elect to be treated and qualify each year for
treatment as a "regulated investment company" under Subchapter M of the Code, so
that it will not pay federal income taxes on income and capital gains provided
such income and capital gains are distributed to shareholders within the time
period prescribed by the Code.
Under the Code, an Account will be subject to a nondeductible 4% excise tax
on a portion of its undistributed income and capital gains if it fails to meet
certain distribution requirements with respect to each calendar year. Each
Account intends to make distributions in a timely manner and accordingly does
not expect to be subject to the excise tax.
A portion of any dividend income received by an Account from U.S. domestic
corporations and distributed as a dividend to its corporate shareholders may be
eligible for the 70% dividends-received deduction, subject to certain conditions
and limitations under the Code.
An Account may be subject to foreign withholding or other foreign taxes with
respect to income and, in some cases, capital gains from its foreign
investments. In some cases it is possible that these taxes may be reduced under
applicable income tax treaties.
A state income (and possibly local income and/or intangible property) tax
exemption is generally available to the extent an Account's distributions are
derived from interest on (or, in the case of intangible taxes, the value of its
assets is attributable to) certain U.S. Government obligations, provided in some
states that certain thresholds for holdings of such obligations and/or reporting
requirements are satisfied. Accordingly, each Account will report annually to
its shareholders the percentage of interest income earned from such securities
during the preceding year. Each shareholder is advised to consult his own tax
adviser regarding the exemption, if any, of such income under applicable state
and local law.
Redemptions (including exchanges and repurchases) of shares are taxable
transactions on which a shareholder may realize a gain or loss. Special tax
rules may apply to the calculation of gains or losses and the deductibility of
any losses in particular circumstances.
Dividends and other distributions and the proceeds of redemptions or
repurchases of Account shares paid to individuals and other non-exempt payees
will be subject to a 31% backup withholding of federal
30
<PAGE>
income tax if the Account is not provided with the shareholder's correct
taxpayer identification number and certification that the number is correct and
the shareholder is not subject to backup withholding or the Account receives
notice from the Internal Revenue Service (the "IRS") or a broker that such
withholding applies. Please refer to the Account Application for additional
information.
The description above relates only to U.S. federal income tax consequences
for shareholders who are U.S. persons, I.E., U.S. citizens or residents or U.S.
corporations, partnerships, trust or estates, and who are subject to U.S.
federal income tax. Shareholders should consult their own tax advisers regarding
state, local and other applicable tax laws.
THE COMPANY
Each Account is a mutual fund: an entity that pools shareholders' money and
invests it toward specified goals. In technical terms, each Account is a
separate diversified portfolio or "series" of the Company, an open-end
management investment company which was organized as a corporation under the
laws of Maryland on December 9, 1981. The Company may create and classify the
Common Stock, par value $0.001 per share, into separate mutual funds (or
investment series or portfolios of shares), without further approval of the
Company's shareholders. As of the date of this prospectus, the Company has
established the three CMIA LifeSpan Accounts described in this prospectus; the
following five municipal bond accounts, which are offered by means of a separate
prospectus, CMIA National Municipals Account, CMIA California Municipals
Account, CMIA Massachusetts Municipals Account, CMIA New York Municipals Account
and CMIA Ohio Municipals Account; and five other accounts which are offered by
means of a separate prospectus, Connecticut Mutual Liquid Account, Connecticut
Mutual Government Securities Account, Connecticut Mutual Income Account,
Connecticut Mutual Total Return Account and Connecticut Mutual Growth Account.
The Board of Directors is authorized, without shareholder approval, to establish
additional series of the Company. As of June 30, 1995, Connecticut Mutual and
its affiliates owned 29% of the shares of the Company, including 98% of the
shares of the Diversified Income Account, 99% of the shares of the Capital
Appreciation Account and 99% of the shares of the Balanced Account.
The Board of Directors is authorized, without further shareholder approval,
to classify and reclassify the Accounts into one or more classes. Accordingly,
the Directors have authorized the issuance of two classes of shares of each of
the Accounts, designated as Class A shares and Class B shares. The shares of
each class represent an interest in the same portfolio of investments of the
Accounts and have equal rights as to voting, redemption, dividends and
liquidation. However, each class bears different distribution and transfer
agency fees and expenses and each class has exclusive voting rights with respect
to its respective Rule 12b-1 distribution plan.
The Company is governed by a Board of Directors which is responsible for
protecting your interests as a shareholder. The directors are experienced
executives who meet at least quarterly to oversee the activities of each
Account, review contractual arrangements with companies that provide services to
the Accounts and review each Account's performance. The majority of the
directors are not otherwise affiliated with Connecticut Mutual. The SAI contains
the names and general background of each director and executive officer of the
Company.
The Company does not hold annual meetings of shareholders. The Company may
hold shareholder meetings, however, to elect or remove directors, change the
fundamental policies of an Account, approve the management contract of an
Account or for other purposes. On matters affecting only one series, only the
shareholders of that series are entitled to vote. On matters relating to all of
the series but affecting the Accounts differently, separate votes by each series
are required. Shareholders holding more than 50% of the shares of the Company
can elect all of the Company's directors if they so choose. Each share is
entitled to one vote within each series.
PERFORMANCE
From time to time the Company may advertise yields and total returns for the
Accounts. These figures will be based on historical performance and are not
intended to indicate future performance.
31
<PAGE>
Performance data for the classes of the Accounts may be calculated pursuant
to a standardized formula or in non-standardized manners. The standardized yield
refers to the annualized net income generated by an investment in a class of an
Account over a specified 30-day period. The yield is calculated by assuming that
the income generated by the investment during the 30-day period is generated
each 30-day period over a 12-month period, and is shown as a percentage of the
investment.
The standardized total return of a class of an Account refers to return
quotations assuming an investment has been held in the Account for various
periods of time including, but not limited to, one year, five years and ten
years (or any such shorter period from the Account's or that class's inception).
The total return quotations will represent the average annual compounded rates
of return that would equate an initial investment of $1,000 to the redemption
value of that investment as of the last day of each of the periods for which
total return quotations are provided. Accordingly, the total return quotations
will reflect not only income but also changes in principal value (that is,
changes in the net asset value per share), whereas the yield figures will only
reflect income. The standardized yield and total return quotations for the Class
A shares of Accounts will reflect the maximum sales charge imposed on purchases
of such shares. For Class B shares of an Account, these calculations reflect the
deduction of any applicable CDSC.
In addition, the Company may from time to time also disclose yield or total
return in non-standard formats, and cumulative total return for the classes of
the Accounts. The non-standard average annual total return and cumulative total
return may be based on net asset value per share of a class, rather than a
$1,000 investment. These non-standard return figures would not reflect the
initial sales charge on Class A shares or the CDSC on Class B shares, which, if
reflected, would lower the performance figures. In addition, non-standardized
yield figures may be advertised that also would not reflect the applicable sales
charge. The Company may from time to time also disclose yield, standard total
returns and non-standard total returns for the classes of the Accounts based on
or covering periods of time other than those indicated above. Non-standard
performance data will only be disclosed if the standard performance is also
disclosed. For additional information regarding the calculation of performance
data, please refer to the SAI.
From time to time, in advertisements or in reports to shareholders, the
Company may compare the performance of the classes of the Accounts to that of
other mutual funds with similar investment objectives, and to other relevant
indices published by recognized mutual fund statistical rating services or
publications of general interest, such as FORBES or MONEY. The SAI contains a
list of publications which may contain comparative studies which the Company may
use in advertisements or shareholder materials. For example, the Company may
compare an Account's Class A or Class B performance to that of other mutual
funds with a similar investment objective as compiled by Lipper Analytical
Services, Inc. In addition, the Company may compare the performance to that of
recognized stock market indicators, including, but not limited to, the Standard
& Poor's 500 Stock Index (which is a group of unmanaged securities widely
regarded by investors as representative of the stock market in general), and the
Dow Jones Industrial Average (which is a price-weighted average of 30 large,
well-known industrial stocks that are generally the leaders in their industry).
Performance comparisons should not be considered representative of the future
performance of an Account. The effects of compounding may also be discussed.
Performance data may also be calculated for shorter or longer base periods.
The Company may use various base periods as may be deemed necessary to provide
investors with the most informative yield or total return information, depending
on the then-current market conditions. Performance will vary from time to time,
and historical results will not be representative of future performance.
Performance information may not provide a basis for comparison with other
investments or other investment companies using a different method of
calculating performance. Current yield is not fixed and varies with changes in
investment income and net asset value per share. The yield of Class A or Class B
shares of an Account will be affected if it experiences a net inflow of new
money which is invested at interest rates different from those being earned on
its then-current investments. Your principal in an Account and an Account's
return are not guaranteed and will fluctuate according to market conditions.
32
<PAGE>
The investment results of an Account's Class A and Class B shares will vary
from time to time depending on market conditions, the composition of the
Account's portfolio and operating expenses. For further information about the
calculation methods and uses of an Account's Class A and Class B shares
investment results, see the SAI.
RISK FACTORS, SECURITIES AND INVESTMENT TECHNIQUES
The following discussions contain more detailed information about types of
instruments in which the Accounts may invest and strategies the Manager and
Subadvisers may employ in pursuit of the Accounts' investment objectives. A
summary of risks and restrictions associated with these instrument types and
investment practices is included as well. Policies and limitations are
considered at the time of purchase; the sale of instruments is not required in
the event of a subsequent change in circumstances. Some of the restrictions
described below are fundamental, I.E., subject to change only by shareholder
approval. These fundamental restrictions are set forth in greater detail in the
SAI. The Manager and Subadvisers may not buy all of these investments or use all
of these techniques to the full extent permitted unless it is believed that
doing so will help an Account achieve its goals.
EQUITY SECURITIES. Each Account may hold equity securities. Equity
securities may include common stocks, preferred stocks, convertible securities
and warrants. Common stocks represent an equity (ownership) interest in a
corporation. This ownership interest often gives an Account the right to vote on
measures affecting the company's organization and operations. Although common
stocks generally have a history of long-term growth in value, their prices tend
to fluctuate in the short term, particularly those of smaller capitalization
companies. Preferred stocks represent a limited equity interest in a
corporation. Preferred stocks are often entitled only to dividends at a
specified rate, and have a preference over common stock, with respect to
dividends and on liquidation of assets. Preferred stocks generally have lesser
voting rights than common stocks. Because their dividends are often fixed, the
value of many preferred stocks fluctuates inversely with changes in interest
rates.
Convertible securities are bonds, preferred stocks and other securities that
pay a fixed rate of interest or dividends. As an additional feature, however,
they offer the buyer the option of converting the security into common stock.
The value of convertible securities depends partially on interest rate changes
and the credit quality of the issuer. The value of convertible securities is
also sensitive to company, market and other economic news, and will change based
on the price of the underlying common stock. For this reason, the Manager and
the Subadvisers consider the growth potential of the underlying stock when
selecting an Account's investments. Convertible securities generally have less
potential for gain than common stock, but also less potential for loss, since
their income provides a cushion against the stock's price declines. However,
because the buyer is also exposed to the risk and reward potential of the
underlying stock, convertible securities generally pay less income than similar
non-convertible bonds.
FIXED-INCOME SECURITIES. GENERAL. Each Account may purchase fixed-income
securities. Bonds and other fixed-income instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or variable
rate of interest, and must repay the amount borrowed at maturity. Some fixed-
income securities, such as zero coupon bonds, do not pay current interest, but
are purchased at a discount from their face values. Fixed-income securities have
varying degrees of quality and varying levels of sensitivity to changes in
interest rates. A decrease in interest rates will generally result in an
increase in the value of an Account's portfolio of fixed-income securities, and,
conversely, during periods of rising interest rates, the value of an Account's
portfolio of fixed-income securities will generally decline. Longer-term bonds
are generally more sensitive to interest rate changes than shorter-term bonds.
Changes by recognized agencies in the rating of any fixed-income security and in
the ability of an issuer to make payments of interest and principal will also
affect the value of these investments.
33
<PAGE>
HIGH YIELD/HIGH RISK BONDS. Each Account may purchase lower quality and
unrated bonds. Bonds rated below investment grade (I.E., below Baa by Moody's
and BBB by S&P) (commonly called junk bonds) are often considered to be
speculative and involve greater risk of default or price changes than investment
grade bonds due to changes in the issuer's creditworthiness and the outlook for
economic growth. Obligations rated below investment grade may provide greater
opportunities for investment income and higher yield than higher rated
obligations but are subject to risks not generally associated with an investment
in investment grade obligations. The market prices of these securities may
fluctuate more than higher quality securities and may decline significantly in
periods of general economic difficulty. An economic downturn could also disrupt
the high yield bond market generally and impair the ability of issuers to repay
principal and interest. An increase in interest rates would (as is the case with
fixed-income instruments generally) reduce market values of a portfolio of lower
rated fixed-income securities. The market price and liquidity of lower rated
fixed-income securities generally responds to short term corporate and market
developments to a greater extent than do higher rated securities because such
developments are perceived to have a more direct relationship to the ability of
an issuer of such lower rated securities to meet its ongoing debt obligations.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of high yield bonds, especially
in a thinly traded market.
Reduced volume and liquidity in the high yield/high risk bond market or the
reduced availability of market quotations for such bonds may make it more
difficult to dispose of the bonds and to value accurately an Account's assets.
The reduced availability of reliable, objective pricing data may increase an
Account's reliance on management's judgment in valuing high yield bonds. Prices
for high yield securities may be affected by legislative and regulatory
developments. These laws could adversely affect the Account's net asset value
and investment practices, the secondary market for high yield securities, the
financial condition of issuers of these securities and the value of outstanding
high yield securities. For example, federal legislation requiring the
divestiture by federally insured savings and loan associations for the
investments in high yield bonds and limiting the deductibility of interest by
certain corporate issuers of high yield bonds adversely affected the market in
recent years. Lower rated or unrated debt obligations also present risks based
on payment expectations. If an issuer calls the obligations for redemption, the
Account may have to replace the security with a lower yielding security,
resulting in a decreased return for investors. If an Account experiences
unexpected net redemptions, it may be forced to sell its higher rated
securities, resulting in a decline in the overall credit quality of the
Account's investment portfolio and increasing the exposure of the portfolio to
the risks of high yield securities.
Ratings by credit agencies focus on safety of principal and interest
payments and do not evaluate 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 conducting intensive credit research, carefully
selecting individual issues and broadly diversifying portfolio holdings by
industry sector and issuer, the Subadviser believes that the default risk of
lower rated securities can be reduced. Emphasis on credit risk management
involves the Subadviser'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 Subadviser's
rating helps it determine the attractiveness of specific issues relative to the
valuation by the marketplace of similarly rated credits.
DERIVATIVE INSTRUMENTS. Each of the Accounts may invest in derivative
instruments which are securities or contracts that provide for payments based on
or "derived" from the performance of an underlying asset, index or other
economic benchmark. Transactions in derivative instruments can be, but are not
necessarily, riskier than investments in conventional stocks, bonds and money
market instruments. The use of derivative instruments for non-hedging purposes
or to generate additional income may be considered a speculative investment
practice. A derivative instrument is more accurately viewed as a way of
reallocating risk among different parties or substituting one type of risk for
another. Transactions in derivative instruments often enable an Account to take
investment positions that more precisely reflect the portfolio manager's
expectations concerning the future performance of the various investments
available to the Account. Derivative instruments can be a legitimate and often
cost-effective method of accomplishing the same investment goals as could be
achieved through other authorized investments in conventional securities.
34
<PAGE>
Derivative securities include collateralized mortgage obligations, stripped
mortgage backed securities, asset backed securities, structured notes and
floating interest rate securities. Derivative contracts include futures
contracts, forward contracts, forward commitment and when-issued securities
transactions, forward foreign currency exchange contracts and interest rate
swaps. The principal risks associated with derivative instruments are:
-Market risk: The instrument will decline in value or that an alternative
investment would have appreciated more, but this is no different from the
risk of investing in conventional securities.
-Leverage and associated price volatility: Leverage causes increased
volatility in the price and magnifies the impact of adverse market changes,
but this risk may be consistent with the investment objective of even a
conservative fund in order to achieve an average portfolio volatility that
is within the expected range for that type of fund. The SEC has taken the
position that the risk of leverage is not an appropriate risk for a money
market fund.
-Credit risk: The issuer of the instrument may default on its obligation to
pay interest and principal, but derivatives based on U.S. Government agency
mortgage securities may actually present less credit risk than some
conventional corporate debt securities.
-Liquidity and valuation risk: Many derivative instruments are traded in
institutional markets rather than on an exchange. Nevertheless, many
derivative instruments are actively traded and can be priced with as much
accuracy as conventional securities. Derivative instruments that are custom
designed to meet the specialized investment needs of a relatively narrow
group of institutional investors such as the Accounts are not readily
marketable and are subject to an Account's restrictions on illiquid
investments.
-Correlation risk: There may be imperfect correlation between the price of
the derivative and the underlying asset; for example, there may be price
disparities between the trading markets for the derivative contract and the
underlying asset.
INTERNATIONAL SECURITIES. Each Account may purchase securities issued by
foreign issuers, denominated in foreign currency and traded primarily on foreign
markets. Investments in non-U.S. equity securities involve risks different from
those encountered when investing in securities of domestic issuers. Such risks
include: the adverse impact of trade balances and imbalances and related
economic policies; currency exchange rate fluctuations; adverse foreign exchange
control policies; nationalization, expropriation or confiscatory taxation;
income tax withholding at the source; limitations on the removal of funds or
other assets; political or social instability; difficulty in obtaining and
enforcing judgments abroad; restrictions on foreign investments in other
jurisdictions; price volatility; problems arising from the diverse structure and
illiquidity of securities markets in various countries and regions; and other
specific local, political and economic considerations. See the SAI for
additional discussion of the risks of investing in foreign markets.
The value of non-U.S. securities may be adversely affected by fluctuations
in the relative rates of exchange between the currencies of different nations
and by exchange control regulations. The investment performance of an Account
may be affected depending on the extent to which it is invested in foreign
securities, either positively or negatively, by currency exchange rates because
the U.S. dollar value of securities denominated in a foreign currency will
increase or decrease in response to changes in the value of foreign currencies
in relation to the U.S. dollar. Also, there may be higher transaction costs in
foreign securities and less government regulation of foreign stock exchanges,
brokers, and issuers than is present in the United States. Equity securities
acquired in foreign markets will not, as a rule, be subject to registration
under the Securities Act of 1933 or be under the jurisdiction of the SEC.
Most foreign securities of an Account are held outside the United States by
local foreign subcustodians that satisfy certain eligibility requirements.
However, foreign subcustodian arrangements are significantly more expensive than
domestic custody. In addition, foreign custody and settlement of securities
transactions is subject to local law and custom that is not, generally, as well
established or as reliable as U.S. regulation and custom applicable to custody
and settlements of securities transactions and, accordingly, there is
35
<PAGE>
generally perceived to be a greater risk of loss in connection with securities
custody and securities transactions in many foreign countries. Finally, there
may be less publicly available information about foreign issuers, and such
issuers may not be subject to the same accounting and auditing standards as
publicly held domestic issuers.
Scudder, Stevens, as the Subadviser to the international Component, may
invest a portion of an Account's assets in companies located in emerging
countries as described under "Investment Objectives and Policies." Compared to
the United States and other developed countries, emerging countries may have
relatively unstable governments, economies based on only a few industries, and
securities markets that are less liquid and trade a small number of securities.
Prices on these exchanges tend to be volatile and, in the past, securities in
these countries have offered greater potential for gain (as well as loss) than
securities of companies located in developed countries. All of the risks of
investing in international equity securities are present (and, in fact, may be
exacerbated) when investing in issuers in developing countries. See the SAI for
additional information about the risks of investing in emerging countries.
Each Account may invest in ADRs, EDRs and GDRs. ADRs are receipts issued by
a U.S. bank or trust company which evidence ownership of underlying securities
of foreign 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
the Account acquires ADRs through 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 Account
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. The Account may also invest in EDRs and GDRs,
which 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.
Accounts may also invest in obligations of foreign branches of U.S. banks
(Eurodollars) 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 investments in securities of U.S. banks, including potential
unfavorable political and economic developments, different tax provisions,
seizure of foreign deposits, currency controls, interest limitations or other
governmental restrictions which might affect payment of principal or interest.
COVERED CALL OPTIONS. Each Account may purchase and write 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 anticipated portfolio securities. A call option on a
security gives the holder (purchaser) the right to buy, and obligates the writer
(seller) to sell (if the option is exercised), in return for a premium paid, the
underlying security at an exercise price during the option period. A call option
on a currency operates in a similar manner, except that delivery is made of the
specified currency. A call option on an index is also similar except that the
value of the option depends on the weighted value of the group of securities in
the index and settlement of the option is made in the form of cash rather than
the delivery of a security.
Because call options will be used to generate additional income and to
attempt to reduce the effect of any adverse price movement in the securities or
currency subject to the option, they do involve certain risks that are different
in some respects from investment risks associated with similar funds which do
not engage in such activities. These risks include the following: for writing
covered call options, the inability to participate in the appreciation of the
underlying securities or currencies above the exercise price; and for purchasing
call options, possible loss of the entire premium paid. In addition, the
effectiveness of hedging through the purchase or sale of securities index
options, including options on the S&P 500 Index, will depend upon the extent to
which price movements in the portion of the securities portfolio being hedged
correlate with the price movements in the selected securities index. Perfect
correlation may not be possible because the securities held or to be acquired by
an Account may not exactly match the composition of the securities index on
which options are written. If the forecasts of the Manager or Subadviser
regarding movements in
36
<PAGE>
securities prices, interest rates, or current exchange rates are incorrect, an
Account's investment results may have been better without the hedge
transactions. A further discussion of covered call options is contained in the
SAI.
INTEREST RATE SWAPS. Each Account may enter into interest rate swaps both
for hedging and to seek to increase total return. An Account will typically use
interest rate swaps to shorten the effective duration of its portfolio. Interest
rate swaps involve the exchange by the Account with another party of their
respective commitments to pay or receive interest, such as an exchange of fixed
rate payments for floating rate payments. Since interest rate swaps are
individually negotiated, each Account expects to achieve an acceptable degree of
correlation between its portfolio investments and its interest rate swap
positions.
An Account will enter into interest rate swaps only on a net basis, which
means that the two payment streams are netted out, with the Account receiving or
paying, as the case may be, only the net amount of the two payments. Interest
rate swaps do not involve the delivery of securities, other underlying assets or
principal. Accordingly, the risk of loss with respect to interest rate swaps is
limited to the net amount of interest payments that an Account is contractually
obligated to make. If the other party to an interest rate swap defaults, an
Account's risk of loss consists of the net amount of interest payments that the
Account is contractually entitled to receive. An Account will maintain in a
segregated account with the Account's custodian cash and liquid high grade debt
securities equal to the net amount, if any, of the excess of the Account's
obligations over its entitlements with respect to swap transactions. To the
extent that the net amount of a swap is held in a segregated account consisting
of cash and high liquid grade debt securities, the Accounts and the Manager and
Subadviser believe that swaps do not constitute senior securities under the Act
and, accordingly, will not treat them as being subject to an Account's borrowing
restriction.
The use of interest rate swaps is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If the Manager of Subadviser is
incorrect in its forecasts of market values and interest rates, the investment
performance of the Accounts would be less favorable than it would have been if
this investment technique were not used.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. To hedge against
changes in interest rates, securities prices or currency exchange rates or for
non-hedging purposes, each Account may, subject to its investment objectives and
policies, purchase and sell various kinds of futures contracts, and purchase and
write call and put options on any of such futures contracts. An Account may also
enter into closing purchase and sale transactions with respect to any of such
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. Each Account may purchase and sell
futures contracts on stock indices and purchase and sell options on such
futures. Each Account may purchase and sell interest rate futures and purchase
and sell options on such futures. In addition, each Account that may invest in
securities that are denominated in foreign currency may purchase and sell
futures on currencies and purchase and sell options on such futures. An Account
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 Account 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 Account'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.
The use of futures contracts entails certain risks, including but not
limited to the following: no assurance that futures contracts transactions can
be offset at favorable prices; possible reduction of the Account's income due to
the use of hedging; possible reduction in value of both the securities hedged
and the hedging instrument; possible lack of liquidity due to daily limits on
price fluctuations; imperfect correlation between the contract and the
securities being hedged; and potential losses in excess of the amount initially
invested in the futures contracts themselves. If the expectations of the Manager
or the Subadviser regarding movements in securities prices or interest rates are
incorrect, an Account may have experienced better investment results
37
<PAGE>
without hedging. The use of futures contracts and options on futures contracts
requires special skills in addition to those needed to select portfolio
securities. A further discussion of futures contracts is set forth in the
Accounts' SAI.
FOREIGN CURRENCY TRANSACTIONS. Each Account may, to the extent it invests
in foreign securities, enter into foreign currency transactions in order to
protect the U.S. dollar value of the Account's foreign currency-denominated
portfolio securities against adverse changes in foreign currency exchange rates
between the U.S. dollar and any other foreign currency. An Account may engage in
cross-hedging (I.E., dealing in foreign exchange between currencies of different
countries in which it has invested for the purpose of hedging against possible
variations in the foreign exchange rate between those countries) if Scudder
determines that there is a pattern of correlation between the two currencies.
Such contractual commitments may be forward contracts entered into directly
with another party or exchange-traded futures contracts. An Account may also
purchase and sell options on futures contracts, forward contracts, or futures
contracts which are denominated in a particular currency to hedge the risk of
fluctuations in the value of another currency. An Account's dealings in foreign
exchange will be limited to hedging involving either specific transactions or
portfolio positions. Transaction hedging is the purchase or sale of currency
with respect to specific receivables or payables of the Account accruing in
connection with the purchase or sale of its portfolio securities. Position
hedging is the purchase or sale of currency with respect to portfolio security
positions denominated or quoted in a foreign currency. No Account will speculate
in foreign exchange.
If an Account enters into a forward foreign currency exchange contract to
buy foreign currency, the Account will be required to place an amount of cash or
liquid, high grade debt securities equal to the Account's obligations under the
contract in a segregated account with the Account's custodian.
U.S. GOVERNMENT SECURITIES. Each Account may purchase U.S. Government
securities. Government Securities include: (1) U.S. Treasury obligations, which
differ only in their interest rates, maturities and times of issuance, U.S.
Treasury bills (maturity of one year or less), U.S. Treasury notes (maturities
of one to 10 years), and U.S. Treasury bonds (generally maturities of greater
than 10 years), all of which are backed by the full faith and credit of the
United States, and (2) obligations issued or guaranteed by U.S. Government
agencies or instrumentalities, some of which are backed by the full faith and
credit of the U.S. Treasury, such as direct pass-through certificates of the
Government National Mortgage Association; some of which are supported by the
right of the issuer to borrow from the U.S. Government, such as obligations of
Federal Home Loan Banks; and some of which are backed only by the credit of the
issuer itself, such as obligations of the Student Loan Marketing Association.
MORTGAGE-BACKED SECURITIES. The Accounts may invest in mortgage
pass-through certificates and multiple- class pass-through securities, such as
real estate mortgage investment conduits ("REMIC") pass-through certificates,
collateralized mortgage obligations ("CMOs") and stripped mortgage-backed
securities ("SMBS"), and other types of "Mortgage-Backed Securities" that may be
available in the future.
GUARANTEED MORTGAGE PASS-THROUGH SECURITIES. Guaranteed mortgage
pass-through securities represent participation interests in pools of
residential mortgage loans and are issued by U.S. Governmental or private
lenders and guaranteed by the U.S. Government or one of its agencies or
instrumentalities, including but not limited to the Government National Mortgage
Association ("Ginnie Mae"), the Federal National Mortgage Association ("Fannie
Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"). Ginnie Mae
certificates are guaranteed by the full faith and credit of the United States
government for timely payment of principal and interest on the certificates.
Fannie Mae certificates are guaranteed by Fannie Mae, a federally chartered and
privately owned corporation, for full and timely payment of principal and
interest on the certificates. Freddie Mac certificates are guaranteed by Freddie
Mac, a corporate instrumentality of the United States government, for timely
payment of interest and the ultimate collection of all principal of the related
mortgage loans. Guarantees do not extend to the value of the securities.
MULTIPLE-CLASS PASS-THROUGH SECURITIES AND COLLATERALIZED MORTGAGE
OBLIGATIONS. CMOs and REMIC pass-through or participation certificates may be
issued by, among others, U.S. Government agencies and instrumentalities as well
as private lenders. CMOs and REMIC certificates are issued in
38
<PAGE>
multiple classes and the principal of and interest on the mortgage assets may be
allocated among the several classes of CMOs or REMIC certificates in various
ways. Each class of CMOs or REMIC certificates, often referred to as a
"tranche," is issued at a specific adjustable or fixed interest rate and must be
fully retired no later than its final distribution date. Generally, interest is
paid or accrues on all classes of CMOs or REMIC certificates on a monthly basis.
Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie Mac
certificates but also may be collateralized by other mortgage assets such as
whole loans or private mortgage pass-through securities. Debt service on CMOs is
provided from payments of principal and interest on mortgaged assets and any
reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts although the Accounts do
not intend to invest in residual interests.
STRIPPED MORTGAGE-BACKED SECURITIES. SMBS are derivative multiple-class
mortgage-backed securities. SMBS are usually structured with two classes that
receive different proportions of interest and principal distributions on a pool
of mortgage assets. A typical SMBS will have one class receiving some of the
interest and most of the principal, while the other class will receive most of
the interest and the remaining principal. In the most extreme case, one class
will receive all of the interest (the "interest only" class) while the other
class will receive all of the principal (the "principal only" class). The yields
and market risk of interest only and principal only SMBS, respectively, may be
more volatile than those of other fixed-income securities. The staff of the SEC
considers privately issued SMBS to be illiquid.
RISK FACTORS ASSOCIATED WITH MORTGAGE-BACKED SECURITIES. Investing in
Mortgage-Backed Securities involves certain risks, including the failure of a
counter-party to meet its commitments, adverse interest rate changes and the
effects of prepayments on mortgage cash flows. In addition, investing in the
lowest tranche of CMOs and REMIC certificates involves risks similar to those
associated with investing in equity securities. Further, the yield
characteristics of Mortgage-Backed Securities differ from those of traditional
fixed-income securities. The major differences typically include more frequent
interest and principal payments (usually monthly), the adjustability of interest
rates, and the possibility that prepayments of principal may be made
substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Under certain interest
rate and prepayment rate scenarios, a Account may fail to recoup fully its
investment in Mortgage-Backed Securities notwithstanding any direct or indirect
governmental or agency guarantee. When an Account reinvests amounts representing
payments and unscheduled prepayment of principal, it may receive a rate of
interest that is lower than the rate on existing adjustable rate mortgage
pass-through securities. Thus, Mortgage-Backed Securities, and adjustable rate
mortgage pass-through securities in particular, may be less effective than other
types of U.S. Government securities as a means of "locking in" interest rates.
Conversely, in a rising interest rate environment, a declining prepayment
rate will extend the average life of many Mortgage-Backed Securities. This
possibility is often referred to as extension risk. Extending the average life
of a Mortgage-Backed Security increases the risk of depreciation due to future
increases in market interest rates.
ASSET-BACKED SECURITIES. The Accounts may invest in asset-backed
securities, which represent participations in, or are secured by and payable
from, pools of assets such as motor vehicle installment sale contracts,
installment loan contracts, leases of various types of real and personal
property, receivables from revolving credit (credit card) agreements and other
categories of receivables. Asset-backed securities may also be collateralized by
a portfolio of U.S. Government securities, but are not direct obligations of the
U.S. Government, its agencies or instrumentalities. Such asset pools are
securitized through the use of privately-
39
<PAGE>
formed trusts or special purpose corporations. Payments or distributions of
principal and interest on asset-backed securities may be guaranteed up to
certain amounts and for a certain time period by a letter of credit or a pool
insurance policy issued by a financial institution unaffiliated with the trust
or corporation, or other credit enhancements may be present; however privately
issued obligations collateralized by a portfolio of privately issued
asset-backed securities do not involve any government-related guarantee or
insurance. In addition to the risks similar to those associated with
Mortgage-Backed Securities, asset-backed securities present further risks that
are not presented by the Mortgage-Backed Securities because asset-backed
securities generally do not have the benefit of a security interest in
collateral that is comparable to mortgage assets.
INVERSE FLOATING RATE INSTRUMENTS. The Accounts may invest in inverse
floating rate debt instruments ("inverse floaters"), including leveraged inverse
floaters and inverse floating rate Mortgage-Backed Securities, such as inverse
floating rate "interest only" stripped Mortgage-Backed Securities. The interest
rate on inverse floaters resets in the opposite direction from the market rate
of interest to which the inverse floater is indexed. An inverse floater may be
considered to be leveraged to the extent that its interest rate varies by a
magnitude that exceeds the magnitude of the change in the index rate of
interest. The higher degree of leverage inherent in inverse floaters is
associated with greater volatility in their market values.
STRUCTURED NOTES. The Accounts may invest in structured notes. The
distinguishing feature of a structured note is that the amount of interest
and/or principal payable on the notes is based on the performance of a benchmark
asset or market other than fixed-income securities or interest rates. Examples
of these benchmarks include stock prices, currency exchange rates and physical
commodity prices. Investing in a structured note allows an Account to gain
exposure to the benchmark market while fixing the maximum loss that the Account
may experience in the event that market does not perform as expected. Depending
on the terms of the note, the Account may forego all or part of the interest and
principal that would be payable on a comparable conventional note; the Account's
loss cannot exceed this foregone interest and/or principal. An investment in
structured notes involves risks similar to those associated with a direct
investment in the benchmark asset.
FORWARD COMMITMENTS. Securities may be purchased by all Accounts on a
"when-issued" or on a "forward commitment" basis which means it may take 60 days
or more before the securities are delivered to an Account. Securities purchased
on a "when-issued" or "forward commitment" basis involve a risk that the value
of the security to be purchased may decline prior to the settlement date. Also,
if the dealer through which the trade is made fails to consummate the
transaction, the Account may lose an advantageous yield or price.
MONEY MARKET INSTRUMENTS. All Accounts may invest in banker's acceptances,
certificates of deposit, time deposits and commercial paper. Banker's
acceptances are bills of exchange or time drafts drawn on and accepted by a
commercial bank. They are used by corporations to finance the shipment and
storage of goods and to furnish dollar exchanges. Banker's acceptances generally
mature in six months or less. Certificates of deposit are negotiable
interest-bearing instruments with specific maturities. Certificates of deposit
are issued by banks and savings and loan institutions in exchange for the
deposit of funds and normally can be traded in the secondary market, prior to
maturity. Time deposits are nonnegotiable receipts issued by a bank in exchange
for the deposit of funds. Like a certificate of deposit, it earns a specified
rate of interest over a definite period of time. Time deposits cannot be traded
in the secondary market. Commercial paper is the term used to designate
unsecured short-term promissory notes issued by corporations and other entities.
Maturities on commercial paper vary from a few days to nine months. Capital
Appreciation and Balanced Accounts will only purchase money market instruments
denominated in a foreign currency whose issuers have at least one billion
dollars (U.S.) of assets.
REPURCHASE AGREEMENTS. In a repurchase agreement, an Account buys a
security at one price and simultaneously agrees to sell it back at a higher
price. Delays or losses could result if the other party to the agreement
defaults or becomes insolvent.
LENDING OF SECURITIES. For the purpose of realizing additional income, each
Account may lend to broker-dealers portfolio securities amounting to not more
than 33 1/3% of its total assets taken at current value. These loans must be
fully collateralized at all times. The Accounts may reinvest any cash collateral
in
40
<PAGE>
short-term highly liquid debt securities. However, lending of securities may
involve some credit risk to the Account if the other party should default on its
obligation and the Account is delayed in or prevented from recovering the
collateral. Securities loaned by the Account will remain subject to fluctuations
of market value.
RESTRICTED AND ILLIQUID SECURITIES. Each Account may invest up to 15% of
its net assets in illiquid investments, which includes repurchase agreements
maturing in more than seven days, certain restricted securities and securities
not readily marketable. Each Account may also invest in restricted securities
eligible for resale to certain institutional investors pursuant to Rule 144A
under the Securities Act of 1933.
WARRANTS. Each Account may purchase rights and warrants, which represent
rights to purchase the common stock of companies at designated prices. Each
Account will not purchase such rights and warrants if the Accounts' holding of
warrants (valued at the lower of cost or market) would exceed 5% of the value of
the Account's total assets as a result of the purchase. In addition, each
Account will not purchase a warrant or right which is not listed on the New York
or American Stock Exchanges if the purchase would result in the Account's owning
unlisted warrants in an amount exceeding 2% of its total assets.
TEMPORARY DEFENSIVE POSITION. When, in the opinion of the Manager and the
Subadvisers, market conditions warrant, each Account may invest substantially
all of its assets in cash or short-term money market instruments for temporary
defensive purposes.
41
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
As described in the Prospectus, the high yield bonds offering the high
current income sought by an Account are ordinarily in the lower rating
categories (that is, rated Baa or lower by Moody's or BBB or lower by S&P, or
are unrated).
MOODY'S DESCRIBES ITS LOWER RATINGS FOR CORPORATE BONDS AS FOLLOWS:
Bonds which are rated Baa are considered as medium grade obligations,
i.e. 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 in fact have speculative characteristics
as well.
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
Bonds which are rated B generally lack characteristics of the 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.
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
S&P DESCRIBES ITS LOWER RATINGS FOR CORPORATE BONDS AS FOLLOWS:
Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
Debt rated BB, B, CCC, or CC is 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 obligations. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions.
MOODY'S DESCRIBES ITS THREE HIGHEST RATINGS FOR COMMERCIAL PAPER AS FOLLOWS:
Issuers rated P-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. P-1
repayment capacity will normally be evidenced by the following
characteristics: (1) leading market positions in well-established
industries; (2) high rates of return on funds employed; (3) conservative
capitalization structures and moderate reliance on debt and ample asset
protection; (4) broad margins in earnings coverage of fixed financial
charges and high internal cash generation; and (5) well-established
access to a range of financial markets and assured sources of alternate
liquidity.
Issuers rated P-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited
A-1
<PAGE>
above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Issuers rated P-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the
level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
S&P DESCRIBES ITS THREE HIGHEST RATINGS FOR COMMERCIAL PAPER AS FOLLOWS:
A-1. This designation indicates that the degree of safety regarding
timely payment is very strong.
A-2. Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as overwhelming as
for issues designated A-1.
A-3. Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying
the higher designations.
A-2
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
(the Company)
Connecticut Mutual Liquid Account
Class A and Class B Shares
Connecticut Mutual Government Securities Account
Connecticut Mutual Income Account
Connecticut Mutual Total Return Account
Connecticut Mutual Growth Account
(collectively, the CMIA Accounts)
CMIA LifeSpan Capital Appreciation Account
CMIA LifeSpan Balanced Account
CMIA LifeSpan Diversified Income Account
(collectively, the LifeSpan Accounts)
(each, an Account and collectively, the Accounts)
140 Garden Street
Hartford, Connecticut 06154
1-800-322-CMIA
STATEMENT OF ADDITIONAL INFORMATION
Class A and Class B Shares
October 1, 1995
This Statement of Additional Information (SAI) (Part B of the
Registration Statement) is not a prospectus, but should be read in
conjunction with the Company's Prospectus for the Connecticut
Mutual Liquid Account and the Class A and Class B Shares
Prospectus for the other CMIA Accounts and the Class A and Class B
Shares Prospectus for the LifeSpan Accounts, each dated October 1,
1995 (together, the Prospectuses). Copies of the Prospectuses can
be obtained free of charge by calling or writing the Company at
the number or address noted above.
<PAGE>
TABLE OF CONTENTS Page
1. General Information............................................... 1
2. Investment Objectives and Policies................................ 1
3. Investment Restrictions............................................ 25
4. Management......................................................... 36
5. Investment Advisory Arrangements................................... 42
6. Account Expenses................................................... 47
7. Distribution Arrangements.......................................... 47
8. Distribution Financing Plans....................................... 48
9. Portfolio Transactions and Brokerage............................... 51
10. Determination of Net Asset Value................................... 53
11. Purchase and Redemption of Shares.................................. 55
12. Investment Performance............................................. 56
13. Taxes.............................................................. 63
14. Custodian.......................................................... 68
15. Transfer Agent Services............................................ 68
16. Independent Certified Public Accountants........................... 69
17. Other Information.................................................. 69
18. Financial Statements............................................... 69
<PAGE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
GENERAL INFORMATION
Connecticut Mutual Investment Accounts, Inc. (the Company) is
an open-end management investment company consisting of thirteen
separate accounts. This Statement of Additional Information (SAI)
relates to the single class of shares of the Connecticut Mutual
Liquid Account (Liquid Account) and to Class A and Class B shares
of seven accounts including: the following four accounts --
Connecticut Mutual Government Securities Account (Government
Securities Account), Connecticut Mutual Income Account (Income
Account), Connecticut Mutual Total Return Account (Total Return
Account) and Connecticut Mutual Growth Account (Growth Account)
(collectively with Liquid Account, the CMIA Accounts); and three
"life span" accounts -- CMIA LifeSpan Capital Appreciation Account
(Capital Appreciation Account), CMIA LifeSpan Balanced Account
(Balanced Account) and CMIA LifeSpan Diversified Income Account
(Diversified Income Account) (collectively, the LifeSpan
Accounts). Each CMIA Account and each LifeSpan Account is
referred to herein individually as an Account and collectively as
the Accounts. Each Account is managed for investment purposes as
if it were a separate fund issuing its own shares.
G.R. Phelps & Co. (G.R. Phelps or the Manager) is the
investment manager for each of the Accounts. In the case of the
LifeSpan Accounts, G.R. Phelps has engaged Scudder, Stevens &
Clark, Inc. (Scudder), BEA Associates and Pilgrim, Baxter & Assoc.
Ltd. (Pilgrim) as subadvisers to assist in the management of the
LifeSpan Accounts. Scudder, BEA Associates and Pilgrim are
sometimes referred to herein individually as a "Subadviser" and
collectively as the "Subadvisers."
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each of the Accounts is set forth
as appropriate in either the Prospectus for the Liquid Account or
the Class A and Class B Shares Prospectus for the other CMIA
Accounts or the Class A and Class B Shares Prospectus for the
LifeSpan Accounts, each dated October 1, 1995 (collectively, the
Prospectuses). A further description of certain of the policies
described in the Prospectuses is set forth below.
Foreign Securities and Emerging Countries
(All Accounts except the Liquid Account and the Government
Securities Account)
Each Account (other than the Liquid Account and the
Government Securities Account) may invest in securities of foreign
issuers. Each Account (other than the Liquid Account and the
Government Securities Account) may also invest in debt and equity
B-1
<PAGE>
securities of corporate and governmental issuers of countries with
emerging economies or securities markets.
Investing in securities of non-U.S. issuers, and in
particular in emerging countries, may entail greater risks than
investing in securities of issuers in the United States. These
risks include (i) less social, political and economic stability;
(ii) the small current size of the markets for many such securi-
ties and the currently low or nonexistent volume of trading, which
result in a lack of liquidity and in greater price volatility;
(iii) certain national policies which may restrict an Account's
investment opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national interests;
(iv) foreign taxation; and (v) the absence of developed structures
governing private or foreign investment or allowing for judicial
redress for injury to private property.
Investing in securities of non-U.S. companies may entail
additional risks due to the potential political and economic
instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on
foreign investment and on repatriation of capital invested. In
the event of such expropriation, nationalization or other
confiscation by any country, an Account could lose its entire
investment in any such country.
In addition, even though opportunities for investment may
exist in foreign countries, and in particular emerging markets,
any change in the leadership or policies of the governments of
those countries or in the leadership or policies of any other
government which exercises a significant influence over those
countries, may halt the expansion of or reverse the liberalization
of foreign investment policies now occurring and thereby eliminate
any investment opportunities which may currently exist.
Investors should note that upon the accession to power of
authoritarian regimes, the governments of a number of emerging
countries previously expropriated large quantities of real and
personal property similar to the property which may be represented
by the securities purchased by the Accounts. The claims of
property owners against those governments were never finally
settled. There can be no assurance that any property represented
by foreign securities purchased by an Account will not also be
expropriated, nationalized, or otherwise confiscated. If such
confiscation were to occur, an Account could lose a substantial
portion of its investments in such countries. An Account's
investments would similarly be adversely affected by exchange
control regulation in any of those countries.
Certain countries in which the Accounts may invest may have
vocal minorities that advocate radical religious or revolutionary
B-2
<PAGE>
philosophies or support ethnic independence. Any disturbance on
the part of such individuals could carry the potential for
wide-spread destruction or confiscation of property owned by
individuals and entities foreign to such country and could cause
the loss of an Account's investment in those countries.
Certain countries prohibit or impose substantial restrictions
on investments in their capital markets, particularly their equity
markets, by foreign entities such as the Accounts. As
illustrations, certain countries require governmental approval
prior to investments by foreign persons, or limit the amount of
investment by foreign persons in a particular company, or limit
the investment by foreign persons to only a specific class of
securities of a company that may have less advantageous terms than
securities of the company available for purchase by nationals.
Moreover, the national policies of certain countries may restrict
investment opportunities in issuers or industries deemed sensitive
to national interests. In addition, some countries require
governmental approval for the repatriation of investment income,
capital or the proceeds of securities sales by foreign investors.
An Account could be adversely affected by delays in, or a refusal
to grant, any required governmental approval for repatriation, as
well as by the application to it of other restrictions on
investments.
Foreign companies are subject to accounting, auditing and
financial standards and requirements that differ, in some cases
significantly, from those applicable to U.S. companies. In
particular, the assets, liabilities and profits appearing on the
financial statements of such a company may not reflect its
financial position or results of operations in the way they would
be reflected had such financial statements been prepared in
accordance with U.S. generally accepted accounting principles.
Most foreign securities held by the Accounts will not be
registered with the Securities and Exchange Commission (SEC) and
such issuers thereof will not be subject to the SEC's reporting
requirements. Thus, there may be less available information
concerning foreign issuers of securities held by the Accounts than
is available concerning U.S. issuers. In instances where the
financial statements of an issuer are not deemed to reflect
accurately the financial situation of the issuer, the Manager or
the relevant Subadviser will take appropriate steps to evaluate
the proposed investment, which may include on-site inspection of
the issuer, interviews with its management and consultations with
accountants, bankers and other specialists. There is
substantially less publicly available information about many
foreign companies than there are reports and ratings published
about U.S. companies and the U.S. government. In addition, where
public information is available, it may be less reliable than such
information regarding U.S. issuers.
B-3
<PAGE>
Because the Accounts may invest a portion of their total
assets in securities which are denominated or quoted in foreign
currencies, the strength or weakness of the U.S. dollar against
such currencies may account for part of the Accounts' investment
performance. A decline in the value of any particular currency
against the U.S. dollar will cause a decline in the U.S. dollar
value of an Account's holdings of securities denominated in such
currency and, therefore, will cause an overall decline in the
Account's net asset value and any net investment income and
capital gains to be distributed in U.S. dollars to shareholders of
the Account.
The rate of exchange between the U.S. dollar and other
currencies is determined by several factors including the supply
and demand for particular currencies, central bank efforts to
support particular currencies, the movement of interest rates, the
pace of business activity in certain other countries and the U.S.,
and other economic and financial conditions affecting the world
economy.
Although the Accounts value their respective assets daily in
terms of U.S. dollars, the Accounts do not intend to convert their
holdings of foreign currencies into U.S. dollars on a daily basis.
However, the Accounts may do so from time to time, and investors
should be aware of the costs of currency conversion. Although
currency dealers do not charge a fee for conversion, they do
realize a profit based on the difference (spread) between the
prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to an Account
at one rate, while offering a lesser rate of exchange should the
Account desire to sell that currency to the dealer.
Securities of foreign issuers, and in particular many
emerging country issuers, may be less liquid and their prices more
volatile than securities of comparable U.S. issuers. In addition,
foreign securities exchanges and brokers are generally subject to
less governmental supervision and regulation than in the U.S., and
foreign securities exchange transactions are usually subject to
fixed commissions, which are generally higher than negotiated
commissions on U.S. transactions. In addition, foreign securities
exchange transactions may be subject to difficulties associated
with the settlement of such transactions. Delays in settlement
could result in temporary periods when assets of an Account are
uninvested and no return is earned thereon. The inability of an
Account to make intended security purchases due to settlement
problems could cause the Account to miss attractive investment
opportunities. Inability to dispose of a portfolio security due
to settlement problems could either result in losses to an Account
due to subsequent declines in value of the portfolio security or,
if the Account has entered into a contract to sell the security
could result in possible liability to the purchaser.
B-4
<PAGE>
The Accounts' investment income or, in some cases, capital
gains from foreign issuers may be subject to foreign withholding
or other foreign taxes, thereby reducing the Accounts' net
investment income and/or net realized capital gains. See "Taxes."
Foreign Currency Exchange Contracts
(All Accounts except the Liquid Account and the Government
Securities Account)
Each Account (other than the Liquid Account and the
Government Securities Account) may exchange currencies in the
normal course of managing its investments and may incur costs in
doing so because a foreign exchange dealer will charge a fee for
conversion. An Account may conduct foreign currency exchange
transactions on a "spot" basis (i.e., for prompt delivery and
settlement) at the prevailing spot rate for purchasing or selling
currency in the foreign currency exchange market. An Account also
may enter into forward currency exchange contracts or other
contracts to purchase and sell currencies for settlement at a
future date. A foreign exchange dealer, in that situation, will
expect to realize a profit based on the difference between the
price at which a foreign currency is sold to the Account and the
price at which the dealer will cover the purchase in the foreign
currency market. Foreign exchange transactions are entered into
at prices quoted by dealers, which may include a mark-up over the
price that the dealer must pay for the currency.
A forward currency exchange contract involves an obligation
to purchase or 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 of the
contract. These contracts are traded in the interbank market
conducted directly between currency traders (usually large
commercial banks) and their customers. A forward currency
exchange contract generally has no deposit requirement, and no
commissions are generally charged at any stage for trades.
At the maturity of a forward currency exchange contract an
Account may either accept or make delivery of the currency
specified in the contract or, at or prior to maturity, enter into
a closing purchase transaction involving the purchase or sale of
an offsetting contract. Closing purchase transactions with
respect to forward currency exchange contracts are usually
effected with the currency trader who is a party to the original
forward currency exchange contract.
The Accounts may enter into forward currency exchange
contracts in several circumstances for hedging and non-hedging
purposes. First, when an Account enters into a contract for the
purchase or sale of a security denominated in a foreign currency,
or when an Account anticipates the receipt in a foreign currency
B-5
<PAGE>
of dividend or interest payments on such a security which it
holds, the Account may desire to "lock in" the U.S. dollar price
of the security or the U.S. dollar equivalent of such dividend or
interest payment, as the case may be. By entering into a forward
currency exchange contract for the purchase or sale, for a fixed
amount of dollars, of the amount of foreign currency involved in
the underlying transactions, an Account will attempt to protect
itself against an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the period
between the date on which the security is purchased or sold, or on
which the dividend or interest payment is declared, and the date
on which such payments are made or received.
Additionally, when management of an Account believes that the
currency of a particular foreign country may suffer a substantial
decline against the U.S. dollar, it may enter into a forward
currency exchange contract to sell, for a fixed amount of dollars,
the amount of foreign currency approximating the value of some or
all of the Account's portfolio securities denominated in such
foreign currency. The precise matching of the forward currency
exchange 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 those securities between the date
on which the contract is entered into and the date it matures.
Using forward currency exchange contracts to protect the value of
an Account's portfolio securities against a decline in the value
of a currency does not eliminate fluctuations in the underlying
prices of the securities. It simply establishes a rate of
exchange which an Account can achieve at some future point in
time. The precise projection of short-term currency market
movements is not possible, and short-term hedging provides a means
of fixing the dollar value of only a portion of an Account's
foreign assets.
An Account's custodian will place cash or liquid, high grade
debt securities (High Grade Debt Securities) (i.e., securities
rated in one of the top three ratings categories by Moody's
Investors Service, Inc. (Moody's), Standard & Poor's Ratings Group
(Standard & Poor's), or a comparable rating agency, or, if
unrated, deemed by the Manager or relevant Subadviser to be of
comparable credit quality) into a segregated account of the
Account in an amount equal to the value of the Account's total
assets committed to the consummation of forward currency exchange
contracts requiring the Account to purchase foreign currencies or
forward currency exchange contracts entered into for non-hedging
purposes. If the value of the securities placed in the segregated
account declines, additional cash or securities will be placed in
the account on a daily basis so that the value of the account will
equal the amount of an Account's commitments with respect to such
contracts. The segregated account will be marked-to-market on a
B-6
<PAGE>
daily basis. Although the contracts are not presently regulated
by the Commodity Futures Trading Commission (CFTC), the CFTC may
in the future assert authority to regulate these contracts. In
such event, the Accounts' ability to utilize forward currency
exchange contracts may be restricted.
The Accounts generally will not enter into a forward currency
exchange contract with a term of greater than one year.
While the Accounts will enter into forward currency exchange
contracts to reduce currency exchange rate risks, transactions in
currency contracts involve certain other risks. Thus, while the
Accounts may benefit from currency transactions, unanticipated
changes in currency prices may result in a poorer overall
performance for an Account than if it had not engaged in any such
transactions. Moreover, there may be an imperfect correlation
between an Account's portfolio holdings of securities denominated
in a particular currency and forward currency exchange contracts
entered into by the Account. Such imperfect correlation may cause
an Account to sustain losses which will prevent the Account from
achieving a complete hedge or expose the Account to risk of
foreign exchange loss.
Covered Call Options on Securities, Securities Indices and Foreign
Currencies
(All Accounts except the Liquid Account)
Each CMIA Account (other than the Liquid Account) may write
covered call options. Each LifeSpan Account may purchase and
write 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. The Accounts may
purchase and write, as the case may be, call options which are
issued by the Options Clearing Corporation (OCC) or which are
traded on U.S. and non-U.S. exchanges. Capital Appreciation
Account and Balanced Account (with respect to the international
Component) may purchase options on currency in the over-the-
counter (OTC) markets.
An option on a securities index provides the holder with the
right to receive a cash payment upon exercise of the option if the
market value of the underlying index exceeds the option's exercise
price. The amount of this payment will be equal to the difference
between the closing price of the index at the time of exercise and
the exercise price of the option expressed in U.S. dollars or a
foreign currency, times a specified multiple. A call option on a
currency gives its holder the right to purchase an amount
(specified in units of the underlying currency) of the underlying
currency at the stated exercise price at any time prior to the
option's expiration.
B-7
<PAGE>
Capital Appreciation Account and Balanced Account will engage
in over-the-counter (OTC) options only with broker-dealers deemed
creditworthy by the Account's Manager or relevant Subadviser.
Closing transactions in certain options are usually effected
directly with the same broker-dealer that effected the original
option transaction. An Account bears the risk that the broker-
dealer may fail to meet its obligations. There is no assurance
that an Account will be able to close an unlisted option position.
Furthermore, unlisted options are not subject to the protections
afforded purchasers of listed options by the OCC, which performs
the obligations of its members who fail to do so in connection
with the purchase or sale of options. OTC options will be deemed
illiquid for purposes of an Account's limitation on investments in
illiquid securities, except that with respect to options written
with primary dealers in U.S. Government securities pursuant to an
agreement requiring a closing purchase transaction at a formula
price, the amount of illiquid securities may be calculated with
reference to a formula approved by the staff of the SEC.
An Account will write call options only if they are
"covered." In the case of a call option on a security, the option
is "covered" if a portfolio owns the security underlying the call
or has an absolute and immediate right to acquire that security
without additional cash consideration (or, if additional cash
consideration is required, cash or High Grade Debt Securities in
such amount as are held in a segregated account by the Account's
custodian) upon conversion or exchange of other securities held by
the portfolio. For a call option on an index, the option is
covered if the Account maintains cash or cash equivalents equal to
the contract value with the Account's custodian. A call option on
a security or an index is also covered if the Account holds a call
on the same security or index as the call written by the Account
where the exercise price of the call held is (i) equal to or less
than the exercise price of the call written, or (ii) greater than
the exercise price of the call written provided the difference is
maintained by the Account in cash or cash equivalents in a
segregated account with the Account's custodian. A call option on
currency written by an Account is covered if the Account owns an
equal amount of the underlying currency.
When an Account purchases or writes an option, an amount
equal to the net premium (the premium less the commission paid by
the Account) received by the Account is included in the liability
section of the Account's statement of assets and liabilities as a
deferred credit. The amount of this asset or deferred credit will
be marked-to-market on an ongoing basis to reflect the current
value of the option purchased or written. The current value of a
traded option is the last sale price or, in the absence of a sale,
the average of the closing bid and asked prices. If an option
purchased by the Account expires unexercised, the Account realizes
a loss equal to the premium paid. If the Account enters into a
B-8
<PAGE>
closing sale transaction on an option purchased by it, the Account
will realize a gain if the premium received by the Account on the
closing transaction is more than the premium paid to purchase the
option, or a loss if it is less. If an option written by the
Account expires on the stipulated expiration date or if the
Account enters into a closing purchase transaction, it will
realize a gain (or loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is
sold) and the deferred credit related to such option will be
eliminated. If an option written by the Account is exercised, the
proceeds to the Account from the exercise will be increased by the
net premium originally received, and the Account will realize a
gain or loss.
There are several risks associated with transactions in
options on securities, securities indices and currencies. For
example, there are significant differences between the securities
markets, currency markets and the corresponding options markets
that could result in imperfect correlations, causing a given
option transaction not to achieve its objectives. In addition, a
liquid secondary market for particular options, whether traded OTC
or on a U.S. or non-U.S. securities exchange may be absent for
reasons which include the following: there may be insufficient
trading interest in certain options; restrictions may be imposed
by an exchange on opening transactions or closing transactions or
both; trading halts, suspensions or other restrictions may be
imposed with respect to particular classes or series of options or
underlying securities; unusual or unforeseen circumstances may
interrupt normal operations on an exchange; the facilities of an
exchange or the OCC may not at all times be adequate to handle
current trading volume; or one or more exchanges could, for
economic or other reasons, decide or be compelled at some future
date to discontinue the trading of options (or a particular class
or series of options), in which event the secondary market on that
exchange (or in that class or series of options) would cease to
exist, although outstanding options that had been issued by the
OCC as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.
No Account shall write a covered call option if as a result
thereof the assets underlying calls outstanding (including the
proposed call option) would exceed 20% of the value of the assets
of the Account.
Futures Contracts and Related Options
(All Accounts except the Liquid Account)
To hedge against changes in interest rates, securities prices
or currency exchange rates or for certain non-hedging purposes,
each Account (other than the Liquid Account) may, subject to its
investment objectives and policies, purchase and sell various
B-9
<PAGE>
kinds of futures contracts, and purchase and write call and put
options on any of such futures contracts. An Account may also
enter into closing purchase and sale transactions with respect to
any of such contracts and options. The futures contracts may be
based on various securities (such as U.S. Government securities),
securities indices, currencies and other financial instruments and
indices. The Growth Account and Total Return Account may purchase
and sell futures contracts on stock indices and sell options on
such futures. The Income Account and Total Return Account may
purchase and sell interest rate futures and sell options on such
futures. In addition, each Account that may invest in securities
that are denominated in a foreign currency may purchase and sell
futures on currencies and sell options on such futures. An
Account will engage in futures and related options transactions
only for bona fide hedging or other non-hedging purposes as
defined in regulations promulgated by the CFTC. All futures
contracts entered into by the Accounts 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.
Futures Contracts. A futures contract may generally be
described as an agreement between two parties to buy and sell a
particular financial instrument for an agreed price during a
designated month (or to deliver the final cash settlement price,
in the case of a contract relating to an index or otherwise not
calling for physical delivery at the end of trading in the
contract). Futures contracts obligate the long or short holder to
take or make delivery of a specified quantity of a commodity or
financial instrument, such as a security or the cash value of a
securities index, during a specified future period at a specified
price.
When interest rates are rising or securities prices are
falling, an account can seek to offset a decline in the value of
its current portfolio securities through the sale of futures
contracts. When interest rates are falling or securities prices
are rising, an Account, through the purchase of futures contracts,
can attempt to secure better rates or prices than might later be
available in the market when it effects anticipated purchases.
Positions taken in the futures markets are not normally held
to maturity but are instead liquidated through offsetting
transactions which may result in a profit or a loss. While
futures contracts on securities will usually be liquidated in this
manner, the Accounts may instead make, or take, delivery of the
underlying securities whenever it appears economically
advantageous to do so. A clearing corporation associated with the
exchange on which futures on securities are traded guarantees
that, if still open, the sale or purchase will be performed on the
settlement date.
B-10
<PAGE>
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 an
Account proposes to acquire. The Accounts 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 an Account's portfolio securities. Such
futures contracts may include contracts for the future delivery of
securities held by the Account or securities with characteristics
similar to those of the Account's portfolio securities. If, in
the opinion of the Account's Manager or the relevant Subadviser,
there is a sufficient degree of correlation between price trends
for an Account's portfolio securities and futures contracts based
on other financial instruments, securities indices or other
indices, the Account may also enter into such futures contracts as
part of its hedging strategy. Although under some circumstances
prices of securities in an Account's portfolio may be more or less
volatile than prices of such futures contracts, the Manager or 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 Account enter into a
greater or lesser number of futures contracts or by attempting to
achieve only a partial hedge against price changes affecting an
Account'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 an Account's portfolio securities
would be substantially offset by a decline in the value of the
futures position.
On other occasions, the Accounts may take a "long" position
by purchasing futures contracts. This would be done, for example,
when an Account 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.
Options on Futures Contracts. The acquisition of put and
call options on futures contracts will give the Accounts the right
(but not the obligation) for a specified price to sell or to
purchase, respectively, the underlying futures contract at any
time during the option period. As the purchaser of an option on a
futures contract, an Account obtains the benefit of the futures
position if prices move in a favorable direction but limits its
risk of loss in the event of an unfavorable price movement to the
loss of the premium and transaction costs.
B-11
<PAGE>
The writing of a call option on a futures contract generates
a premium which may partially offset a decline in the value of an
Account's assets. By writing a call option, an Account 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 an Account intends to
purchase. However, an Account 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
an Account in writing options on futures is potentially unlimited
and may exceed the amount of the premium received. The Accounts
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 Accounts' ability to
establish and close out positions on such options will be subject
to the development and maintenance of a liquid market.
The Accounts may use options on futures contracts solely for
bona fide hedging or other non-hedging purposes as described
below.
Other Considerations. The Accounts will engage in futures
and related options transactions only for bona fide hedging or
non-hedging purposes as permitted by CFTC regulations which permit
principals of an investment company registered under the
Investment Company Act of 1940, as amended (the Investment Company
Act), to engage in such transactions without registering as
commodity pool operators. An Account will determine that the
price fluctuations in the futures contracts and options on futures
used for hedging purposes are substantially related to price
fluctuations in securities or instruments held by the Account or
securities or instruments which they expect to purchase. Except
as stated below, the Accounts' futures transactions will be
entered into for traditional hedging purposes -- i.e., futures
contracts will be sold to protect against a decline in the price
of securities (or the currency in which they are denominated) that
an Account owns or futures contracts will be purchased to protect
an Account against an increase in the price of securities (or the
currency in which they are denominated) that an Account intends to
purchase. As evidence of this hedging intent, each Account
expects that, on 75% or more of the occasions on which it takes a
long futures or option position (involving the purchase of futures
contracts), the Account will have purchased, or will be in the
process of purchasing, equivalent amounts of related securities
(or assets denominated in the related currency) in the cash market
B-12
<PAGE>
at the time when the futures or option position is closed out.
However, in particular cases, when it is economically advantageous
for an Account to do so, a long futures position may be terminated
or an option may expire without the corresponding purchase of
securities or other assets.
As an alternative to compliance with the bona fide hedging
definition, a CFTC regulation now permits an Account to elect to
comply with a different test under which the aggregate initial
margin and premiums required to establish non-hedging positions in
futures contracts and options on futures will not exceed 5% of the
net asset value of an Account'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. An Account will engage in transactions in
futures contracts and related options only to the extent such
transactions are consistent with the requirements of the Internal
Revenue Code for maintaining its qualification as a regulated
investment company for federal income tax purposes. See "Taxes."
An Account will be required, in connection with transactions
in futures contracts and the writing of options on futures
contracts, to make margin deposits, which will be held by the
Company's custodian for the benefit of the futures commission
merchant through whom the Account engages in such futures
contracts and option transactions. These transactions involve
brokerage costs, require margin deposits and, in the case of
futures contracts and options obligating an Account to purchase
securities, require an Account to segregate cash or High Grade
Debt Securities in an account maintained with the Company's
custodian to cover such contracts and options.
While transactions in futures contracts and options on
futures may reduce certain risks, such transactions themselves
entail certain other risks. Thus, unanticipated changes in
interest rates or securities prices may result in a poorer overall
performance for an Account than if it had not entered into any
futures contracts or options transactions. The other risks
associated with the use of futures contracts and options thereon
are (i) imperfect correlation between the change in market value
of the securities held by an Account and the prices of the futures
and options and (ii) the possible absence of a liquid secondary
market for a futures contract or option and the resulting
inability to close a futures position prior to its maturity date.
In the event of an imperfect correlation between a futures
position and portfolio position which is intended to be protected,
the desired protection may not be obtained and the Account may be
exposed to risk of loss. The risk of imperfect correlation may be
minimized by investing in contracts whose price behavior is
expected to resemble that of an Account's underlying securities.
B-13
<PAGE>
The risk that the Accounts will be unable to close out a futures
position will be minimized by entering into such transactions on a
national exchange with an active and liquid secondary market.
"When-Issued" Purchases and Forward Commitments
(All Accounts except the Liquid Account)
Securities may be purchased by all Accounts (other than the
Liquid Account) on a "when-issued" or on a "forward commitment"
basis. These transactions, which involve a commitment by an
Account to purchase or sell particular securities with payment and
delivery taking place at a future date, permit the Account to lock
in a price or yield on a security, regardless of future changes in
interest rates. An Account 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 relevant Subadviser,
however, an Account 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 Account
on the settlement date. In these cases the Account may realize a
gain or loss.
When an Account agrees to purchase securities on a "when-
issued" or forward commitment basis, the Account'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 Account 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 Account's commitments. The market value of an
Account'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 an Account'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 Account 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 an Account 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 Account 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 an Account starting
on the day the Account agrees to purchase the securities. The
B-14
<PAGE>
Account does not earn interest or dividends on the securities it
has committed to purchase until the settlement date.
Debt Securities
(All Accounts)
Variable and Floating Rate Instruments. Debt instruments
purchased by an Account may be structured to have variable or
floating interest rates. These instruments may include variable
amount master demand notes that permit the indebtedness to vary in
addition to providing for periodic adjustments in the interest
rates. The Manager and the Subadvisers will consider the earning
power, cash flows and other liquidity ratios of the issuers and
guarantors of such instruments and, if the instrument is subject
to a demand feature, will continuously monitor their financial
ability to meet payment on demand. If deemed necessary by the
manager or relevant Subadvisers to ensure that a variable or
floating rate instrument is equivalent to the quality standards
applicable to an Account's fixed income investments, the issuer's
obligation to pay the principal of the instrument may be backed by
an unconditional bank letter or line of credit, guarantee or
commitment to lend. Any bank providing such a bank letter, line
of credit, guarantee or loan commitment will meet the Account's
investment quality standards relating to investments in bank
obligations. An Account will invest in variable and floating rate
instruments only when the Manager or the relevant Subadviser deems
the investment to meet the investment guidelines applicable to the
Account. The Manager or the relevant Subadviser will also
continuously monitor the creditworthiness of issuers of such
instruments to determine whether an Account 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 an Account could suffer a loss if
the issuer defaults or during periods in which an Account is not
entitled to exercise its demand rights.
Variable and floating rate instruments held by an Account
will be subject to the Account's limitation on investments in
illiquid securities when a reliable trading market for the
instruments does not exist and the Account may not demand payment
of the principal amount of such instruments within seven days.
Yields and Ratings. The yields on certain obligations,
including the money market instruments in which each Account may
invest (such as commercial paper, bank obligations and corporate
debt securities), are dependent on a variety of factors, including
general money market conditions, conditions in the particular
market for the obligation, the financial condition of the issuer,
the size of the offering, the maturity of the obligation and the
B-15
<PAGE>
ratings of the issue. The ratings of Standard and Poor's, Moody's
and other nationally and internationally recognized rating service
organizations represent their respective opinions as to the
quality of the obligations they undertake to rate. Ratings,
however, are general and are not absolute standards of quality or
value. Consequently, obligations with the same rating, maturity
and interest rate may have different market prices. See the
Appendices to the Prospectuses for a description of the ratings
provided by recognized statistical ratings organizations.
Subsequent to its purchase by an Account, a rated security
may cease to be rated or its rating may be reduced below the
minimum rating required for purchase by the Account. The Board of
Directors, or the Account's Manager or relevant Subadviser,
pursuant to guidelines established by the Board of Directors, will
consider such an event in determining whether the Account should
continue to hold the security in accordance with the interests of
the Account and applicable regulations of the SEC.
Interest Rate Swaps. The Accounts may enter into interest
rate swaps. Inasmuch as these transactions are entered into for
good faith hedging purposes or are offset by a segregated account,
the Accounts, the Manager and the Subadvisers believe that such
obligations do not constitute senior securities as defined in the
Investment Company Act and, accordingly, will not treat them as
being subject to the Accounts' borrowing restrictions.
An Account will not enter into any interest rate swap
transaction unless the unsecured commercial paper, senior debt or
the claims-paying ability of the other party thereto is considered
to be investment grade by the Account's Manager or the relevant
Subadviser. If there is a default by the other party to such a
transaction, an Account will have contractual remedies pursuant to
the agreements related to the transaction. 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 takes the
position that swaps, caps and floors are illiquid investments that
are subject to the Accounts' limitation on such investments.
Zero Coupon and Deferred Interest Bonds. The Accounts may
invest in zero coupon bonds and deferred interest bonds. Zero
coupon and deferred interest bonds are debt obligations which are
issued at a significant discount from face value. The original
discount approximates the total amount of interest the bonds will
accrue and compound over the period until maturity or the first
interest accrual date at a rate of interest reflecting the market
rate of the security at the time of issuance. While zero coupon
B-16
<PAGE>
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. The market price of zero coupon and deferred interest
bonds are more volatile than instruments that pay interest
regularly.
High Yield/High Risk Debt Obligations. Each Account (other
than the Liquid Account and Government Securities Account) may
invest in high yield/high risk, fixed income securities (commonly
called junk bonds) rated Ba or lower by Moody's, BB or lower by
Standard & Poor's, or an equivalent rating, or unrated securities.
The CMIA Accounts may invest in debt securities rated as low as
"B" by Moody's or Standard & Poor's. The LifeSpan Accounts may
invest in securities rated as low as "C" by Moody's or "D" by
Standard & Poor's which indicate that the obligations are
speculative and may be in default. Ratings are based largely on
the historical financial condition of the issuer. Consequently,
the rating assigned to any particular security is not necessarily
a reflection of the issuer's current financial condition, which
may be better or worse than the rating would indicate.
High yield obligations are subject to risks not generally
associated with an investment in investment grade bonds. The
market for high yield obligations is relatively new and has not
been exposed for a long period of time to the effects of cyclical
and sometimes adverse changes in the economy. The prices of high
yield obligations have been less sensitive to interest rate
changes than higher rated investments, but are more sensitive to
adverse economic changes or individual corporate developments.
During an economic downturn or substantial period of rising
interest rates, issuers may experience financial stress that
adversely affects their ability to meet principal and interest
payment obligations. If an issuer of a high yield obligation
defaulted on its obligation to pay principal or interest or
entered into bankruptcy proceedings, an Account may incur
additional expense to seek recovery of its investment. In
addition, periods of uncertainty and change can be expected to
result in increased volatility of market prices of high yield,
high risk bonds and an Account's net asset value. High yield
obligations may contain redemption or call provisions that, if
exercised, may require the Account to replace the security with a
lower yielding security, resulting in a decreased return for
investors. The market for high yield obligations is likely to be
less liquid than the market for higher rated obligations and the
Manager or Subadviser's judgment may play a greater role in the
B-17
<PAGE>
valuation of high yield obligations. Market conditions may
restrict the availability of high yield obligations and may affect
the choice of securities to be sold when an Account attempts to
meet redemption requests.
Each Account is dependent on its Manager's or Subadviser's
judgment, analysis and experience in evaluating the quality of
high yield obligations. In evaluating the credit quality of a
particular issue, whether rated or unrated, the Manager and
Subadviser will normally take into consideration, among other
things, the financial resources of the issuer (or, as appropriate,
of the underlying source of funds for debt service), its
sensitivity to economic conditions and trends, any operating
history of and the community support for the facility financed by
the issuer, the ability of the issuer's management and regulatory
matters. The Manager and Subadviser will attempt to reduce the
risks of investing in high yield obligations through active
portfolio management, credit analysis and attention to current
developments and trends in the economy and the financial markets.
The Accounts may invest in pay-in-kind (PIK) securities,
which pay interest in either cash or additional securities, at the
issuer's option, for a specified period. PIKs may be more
speculative and subject to greater fluctuations in value than
securities which pay interest periodically and in cash, due to
changes in interest rates.
The Accounts' purchase of debt securities that have original
issue discount, including zero coupon, deferred interest and PIK
securities, present special tax issues. See "Taxes."
Preferred Stock
(All Accounts except the Liquid Account and Government Securities
Account)
Each of the Accounts (other than the Liquid Account and the
Government Securities Account), subject to its investment
objectives, may purchase preferred stock. 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.
B-18
<PAGE>
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
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.
Warrants
(All Accounts except the Liquid Account and Government Securities
Account)
Each of the Accounts (other than the Liquid Account and the
Government Securities Account) may purchase warrants, which are
privileges issued by corporations enabling the owners to subscribe
to and purchase a specified number of shares of the corporation at
a specified price during a specified period of time. The purchase
of warrants involves a risk that an Account could lose the
purchase value of a warrant if the right to subscribe to
additional shares is not exercised prior to the warrant's
expiration. Also, the purchase of warrants involves the risk that
the effective price paid for the warrant added to the subscription
price of the related security may exceed the value of the
subscribed security's market price such as when there is no
movement in the level of the underlying security. An Account will
not invest more than 5% of its net assets, taken at market value,
in warrants, or more than 2% of its net assets, taken at market
value, in warrants not listed on a recognized securities exchange.
Warrants acquired by an Account in units or attached to other
securities shall not be included in determining compliance with
these percentage limitations.
Mortgage-Backed Securities
(All Accounts)
Each Account may invest in mortgage-backed securities.
Mortgage-backed securities represent direct or indirect
participations in or obligations collateralized by and payable
from mortgage loans secured by real property. Each mortgage pool
underlying mortgage-backed securities will consist of mortgage
loans evidenced by promissory notes secured by first mortgages or
first deeds of trust or other similar security instruments
creating a first lien on owner and non-owner occupied one-unit to
four-unit residential properties, multifamily residential
properties, agricultural properties, commercial properties and
mixed use properties.
Agency Mortgage Securities. Each Account may invest in
mortgage backed securities issued or guaranteed by the U.S.
Government, foreign governments or any of their agencies,
B-19
<PAGE>
instrumentalities or sponsored enterprises. Agencies,
instrumentalities or sponsored enterprises of the U.S. Government
include but are not limited to the Government National Mortgage
Association (Ginnie Mae), Federal National Mortgage Association
(Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie
Mac). Ginnie Mae securities are backed by the full faith and
credit of the U.S. Government, which means that the U.S.
Government guarantees that the interest and principal will be paid
when due. Fannie Mae securities and Freddie Mac securities are
not backed by the full faith and credit of the U.S. Government;
however, these enterprises have the ability to obtain financing
from the U.S. Treasury. There are several types of agency
mortgage securities currently available, including, but not
limited to, guaranteed mortgage pass-through certificates and
multiple class securities.
Privately Issued Mortgage-Backed Securities. Each Account
may also invest in mortgage-backed securities 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 representing custodial
arrangements administered by such 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 Ginnie Mae, Fannie Mae or Freddie Mac, 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, though various means of structuring the transaction or
through a combination of such approaches.
Mortgage Pass-Through Securities. Each Account may invest in
mortgage pass-through securities, which are fixed or adjustable
rate mortgage-backed securities that provide for monthly payments
that are a "pass-through" of the monthly interest and principal
payments (including any prepayments) made by the individual
B-20
<PAGE>
borrowers on the pooled mortgage loans, net of any fees or other
amounts paid to any guarantor, administrator and/or services of
the underlying mortgage loans.
Multiple Class Mortgage-Backed Securities and Collateralized
Mortgage Obligations. The Government Securities Account, Income
Account, Total Return Account and each of the LifeSpan Accounts
may invest in collateralized mortgage obligations (CMOs), which
are multiple class mortgage-backed securities. CMOs provide an
investor with a specified interest in the cash flow from a pool of
underlying mortgages or of other mortgage-backed securities. CMOs
are issued in multiple classes, each with a specified fixed or
adjustable interest rate and a final distribution date. In most
cases, payments of principal are applied to the CMO classes in the
order of their respective stated maturities, so that no principal
payments will be made on a CMO class until all other classes
having an earlier stated maturity date are paid in full.
Sometimes, however, CMO classes are "parallel pay" (i.e., payments
of principal are made to two or more classes concurrently).
Stripped Mortgage-Backed Securities. The Government
Securities Account Income Account, Total Return Account and each
of the LifeSpan Accounts may also invest in stripped mortgage-
backed securities (SMBS), which are derivative multiple class
mortgage-backed securities. SMBS are usually structured with two
classes that receive different proportions of the interest and
principal distributions from a pool of mortgage loans. If the
underlying mortgage loans experience greater than anticipated
prepayments of principal, an Account may fail to fully recoup its
initial investment in these securities.
A common type of SMBS will have one class receiving all of
the interest from a pool of mortgage loans (IOs), while the other
class will receive all of the principal (POs). The market value
of POs generally is unusually volatile in response to changes in
interest rates. The yields on IOs are generally higher than
prevailing market yields on other mortgage-backed securities
because the cash flow patterns of IOs are more volatile and there
is a greater risk that the initial investment will not be fully
recouped. Because an investment in an IO consists entirely of a
right to an interest income stream and prepayments of mortgage
loan principal amounts can reduce or eliminate such income stream,
the value of IO's can be severely adversely affected by
significant prepayments of underlying mortgage loans. In
accordance with a requirement imposed by the staff of the SEC, the
Manager and the Subadvisers will consider privately-issued fixed
rate IOs and POs to be illiquid securities for purposes of
Accounts' 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
B-21
<PAGE>
is liquid, management will also consider these IOs and POs to be
illiquid.
Custodial Receipts
(All Accounts)
Each of the Accounts 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 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 Accounts.
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
Accounts. The Company is not aware of any binding legislative,
judicial or administrative authority on this issue.
Commercial Paper
(All Accounts)
Commercial paper is a short-term, unsecured negotiable
promissory note of a U.S or non-U.S issuer. Each of the Accounts
may purchase commercial paper for temporary defensive purposes as
described in the Prospectuses. An Account may also invest in
variable rate master demand notes which typically are issued by
large corporate borrowers providing for variable amounts of
principal indebtedness and periodic adjustments in the interest
rate according to the terms of the instrument. Demand notes are
direct lending arrangements between an Account and an issuer, and
are not normally traded in a secondary market. An Account,
however, may demand payment of principal and accrued interest at
B-22
<PAGE>
any time. In addition, while demand notes generally are not
rated, their issuers must satisfy the same criteria as those set
forth above for issuers of commercial paper. The Manager and the
Subadvisers will consider the earning power, cash flow and other
illiquidity ratios of issuers of demand notes and continually will
monitor their financial ability to meet payment on demand.
Bank Obligations
(All Accounts)
Certificates of Deposit (CDs) are short-term negotiable
obligations of commercial banks. Time Deposits (TDs) are
non-negotiable deposits maintained in banking institutions for
specified periods of time at stated interest rates. Bankers'
acceptances are time drafts drawn on commercial banks by borrowers
usually in connection with international transactions.
U.S. commercial banks organized under federal law are
supervised and examined by the Comptroller of the Currency and are
required to be members of the Federal Reserve System and to be
insured by the Federal Deposit Insurance Corporation (FDIC). U.S.
banks organized under state law are supervised and examined by
state banking authorities but are members of the Federal Reserve
System only if they elect to join. Most state banks are insured
by the FDIC (although such insurance may not be of material
benefit to an Account, depending upon the principal amount of CDs
of each bank held by the Account) and are subject to federal
examination and to a substantial body of federal law and
regulation. As a result of governmental regulations, U.S.
branches of U.S. banks, among other things, generally are required
to maintain specified levels of reserves, and are subject to other
supervision and regulation designed to promote financial
soundness.
U.S. savings and loan associations, the CDs of which may be
purchased by the Accounts, are supervised and subject to
examination by the Office of Thrift Supervision. U.S. savings and
loan associations are insured by the Savings Association Insurance
Account which is administered by the FDIC and backed by the full
faith and credit of the U.S. Government.
Repurchase Agreements
(All Accounts)
Each of the Accounts may enter into repurchase agreements as
described in the Prospectuses. For purposes of the Investment
Company Act and, generally, for tax purposes, a repurchase
agreement is considered to be a loan from the Account to the
seller of the obligation. For other purposes, it is not clear
whether a court would consider such an obligation as being owned
by the Account or as being collateral for a loan by the Account to
B-23
<PAGE>
the seller. In the event of the commencement of bankruptcy or
insolvency proceedings with respect to the seller of the
obligation before its repurchase, under the repurchase agreement,
the Account may encounter delay and incur costs before being able
to sell the security. Such delays may result in a loss of
interest or decline in price of the obligation. If the court
characterizes the transaction as a loan and the Account has not
perfected a security interest in the obligation, the Account may
be treated as an unsecured creditor of the seller and required to
return the obligation to the seller's estate. As an unsecured
creditor, the Account would be at risk of losing some or all of
the principal and income involved in the transaction. As with any
unsecured debt instrument purchased for the Accounts, the Manager
and the Subadvisers seek to minimize the risk of loss from
repurchase agreements by analyzing the creditworthiness of the
obligor, in this case, the seller of the obligation. In addition
to the risk of bankruptcy or insolvency proceedings, there is the
risk that the seller may fail to repurchase the security.
However, if the market value of the obligation falls below the
repurchase price (including accrued interest), the seller of the
obligation will be required to deliver additional securities so
that the market value of all securities subject to the repurchase
agreement equals or exceeds the repurchase price.
Restricted and Illiquid Securities
Each Account (other than Liquid Account) may invest in
restricted securities eligible for resale to certain institutional
investors pursuant to Rule 144A under the Securities Act of 1933,
as amended (the "1933 Act"), and foreign securities acquired in
accordance with Regulation S under the 1933 Act. No Account
(except each of the LifeSpan Accounts) will invest more than 10%
of its net assets in illiquid investments, which include
repurchase agreements maturing in more than seven days, securities
that are not readily marketable, restricted securities, purchased
over-the-counter (OTC) options, certain assets used to cover
written OTC options, and privately issued stripped mortgage-backed
securities. Each of the LifeSpan Accounts will not invest more
than 15% of its net assets in such illiquid investments. If the
Board of Directors determines, based upon a continuing review of
the trading markets for specific Rule 144A securities, that such
securities are liquid, then these securities may be purchased
without regard to the Accounts' 10% or 15% limit on illiquid
investments, as the case may be. However, each LifeSpan Account
has undertaken to limit investments in restricted securities
including those eligible for resale pursuant to Rule 144A to 15%
of total assets. The Board of Directors may adopt guidelines and
delegate to the Manager or relevant Subadviser the daily function
of determining and monitoring the liquidity of restricted
securities. The Board of Directors, however, will retain
sufficient oversight and be ultimately responsible for the
B-24
<PAGE>
determinations. The Board of Directors will carefully monitor
each Account's investments in these securities, focusing on such
important factors, among others, as valuation, liquidity and
availability of information. This investment practice could have
the effect of increasing the level of illiquidity in the Accounts
if qualified institutional buyers become for a time uninterested
in purchasing these restricted securities.
Portfolio Turnover
Each Account'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 Account'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 Accounts 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 Account and do
not generally reflect trading for short-term profits.
INVESTMENT RESTRICTIONS
A. Fundamental Investment Restrictions.
Each Account has adopted the following fundamental investment
restrictions which may not be changed without approval of a
majority of the applicable Account's outstanding voting
securities. Under the Investment Company Act, and as used in the
Prospectuses and this SAI, a "majority of the outstanding voting
securities" requires the approval of the lesser of (1) the holders
of 67% or more of the shares of an Account represented at a
meeting if the holders of more than 50% of the outstanding shares
of the Account are present in person or by proxy or (2) the
holders of more than 50% of the outstanding shares of the Account.
The Income, Growth and Total Return Accounts of the Company
each may not:
1. Issue senior securities, except as permitted by
paragraphs 7, 8, 9 and 11 below. For purposes of this
restriction, the issuance of shares of common stock in multiple
classes or series, the purchase or sale of options, futures
contracts and options on futures contracts, forward commitments,
and repurchase agreements entered into in accordance with the
Account's investment policies, and the pledge, mortgage or
hypothecation of the Account's assets are not deemed to be senior
securities.
B-25
<PAGE>
2. (a) Invest more than 5 percent of its total assets
(taken at market value at the time of each investment) in the
securities (other than United States Government or Government
agency securities) of any one issuer (including repurchase
agreements with any one bank or dealer) or more than 15 percent of
its total assets in the obligations of any one bank; and
(b) purchase more than either (i) 10 percent in principal amount
of the outstanding debt securities of an issuer, or (ii) 10
percent of the outstanding voting securities of an issuer, except
that such restrictions shall not apply to securities issued or
guaranteed by the United States Government or its agencies, bank
money instruments or bank repurchase agreements.
3. Invest more than 25 percent of the value of its total
assets in the securities of issuers in any single industry,
provided that this limitation shall not apply to the purchase of
obligations issued or guaranteed by the United States Government,
its agencies or instrumentalities. For the purpose of this
restriction, each utility that provides a separate service (e.g.,
gas, gas transmission, electric or telephone) shall be considered
to be a separate industry. This test shall be applied on a
proforma basis using the market value of all assets immediately
prior to making any investment.
4. Alone, or together with any other portfolio or
portfolios, make investments for the purpose of exercising control
over, or management of, any issuer.
5. Purchase securities of other investment companies,
except in connection with a merger, consolidation, acquisition or
reorganization, or by purchase in the open market of securities of
closed-end investment companies where no underwriter or dealer's
commission or profit, other than the customary broker's commission
is involved and only if immediately thereafter not more than 10
percent of such portfolio's total assets, taken at market value,
would be invested in such securities.
6. Purchase or sell interests in oil, gas or other mineral
exploration or development programs, commodities, commodity
contracts or real estate, except that such portfolio may: (1)
purchase securities of issuers which invest or deal an any of the
above and (2) invest for hedging purposes in futures contracts on
securities, financial instruments and indices, and foreign
currency, as are approved for trading on a registered exchange.
7. Purchase any securities on margin (except that the
Company may obtain such short-term credits as may be necessary for
the clearance of purchases and sales of portfolio securities) or
make short sales of securities or maintain a short position. The
deposit or payment by the Account of initial or maintenance margin
in connection with futures contracts or related options
B-26
<PAGE>
transactions is not considered the purchase of a security on
margin.
8. Make loans, except that the Account (1) may lend
portfolio securities in accordance with the Account's investment
policies up to 33 1/3% of the Account's total assets taken at
market value, (2) enter into repurchase agreements, and (3)
purchase all or a portion of an issue of publicly distributed debt
securities, bank loan participation interests, bank certificates
of deposit, bankers' acceptances, debentures or other securities,
whether or not the purchase is made upon the original issuance of
the securities.
9. Borrow amounts in excess of 10 percent of its total
assets, taken at market value at the time of the borrowing, and
then only from banks as a temporary measure for extraordinary or
emergency purposes, or make investments in portfolio securities
while such outstanding borrowings exceed 5 percent of its total
assets.
10. Allow its current obligations under reverse repurchase
agreements, together with borrowings, to exceed 1/3 of the value
of its total assets (less all its liabilities other than the
obligations under borrowings and such agreements).
11. Mortgage, pledge, hypothecate or in any manner transfer,
as security for indebtedness, any securities owned or held by such
Account except as may be necessary in connection with borrowings
as mentioned in investment restriction (9) above, and then such
mortgaging, pledging or hypothecating may not exceed 10 percent of
such Account's total assets, taken at market value at the time
thereof. In order to comply with certain state statutes, such
Account will not, as a matter of operating policy, mortgage,
pledge or hypothecate its portfolio securities to the extent that
at any time the percentage of the value of pledged securities plus
the maximum sales charge will exceed 10 percent of the value of
such Account's shares at the maximum offering price. The deposit
of cash, cash equivalents and liquid debt securities in a
segregated account with the custodian and/or with a broker in
connection with futures contracts or related options transactions
and the purchase of securities on a "when-issued" basis is not
deemed to be a pledge.
12. Underwrite securities of other issuers except insofar as
the Company may be deemed an underwriter under the 1933 Act in
selling portfolio securities.
13. Write, purchase or sell puts, calls or combinations
thereof, except that covered call options may be written.
B-27
<PAGE>
14. Invest in securities of foreign issuers if at the time
of acquisition more than 10 percent of its total assets, taken at
market value at the time of the investment, would be invested in
such securities. However, up to 25 percent of the total assets of
such portfolio may be invested in the aggregate in such securities
(i) issued, assumed or guaranteed by foreign governments, or
political subdivisions or instrumentalities thereof, (ii) assumed
or guaranteed by domestic issuers, including Eurodollar
securities, or (iii) issued, assumed or guaranteed by foreign
issuers having a class of securities listed for trading on the New
York Stock Exchange.
15. Invest more than 10 percent in the aggregate of the
value of its total assets in repurchase agreements maturing in
more than seven days, time deposits maturing in more than 2 days,
portfolio securities which do not have readily available market
quotations and all other illiquid assets.
The Government Securities Account may not:
1. Issue senior securities, except as permitted by para-
graphs 3, 4, 5 and 15 below. For purposes of this restriction,
the issuance of shares of common stock in multiple classes or
series, the purchase or sale of options, futures contracts and
options on futures contracts, forward commitments, and repurchase
agreements entered into in accordance with the Account's
investment policies, and the pledge, mortgage or hypothecation of
the Account's assets are not deemed to be senior securities.
2. Purchase equity securities (e.g., common stocks,
preferred stocks), voting securities or local or state government
securities (e.g., municipal bonds, state bonds).
3. Borrow money, except from banks for temporary or emer-
gency purposes, including the meeting of redemption requests which
might otherwise require the untimely disposition of securities,
borrow in the aggregate more than 10 percent of the value of its
total assets, or invest in portfolio securities while outstanding
borrowings exceed 5 percent of the value of its total assets.
4. Pledge, hypothecate, mortgage or otherwise encumber its
assets, except in an amount of not more than 10 percent of the
value of its net assets to secure borrowings for temporary or
emergency purposes and except as may be necessary in connection
with securities lending as provided in investment restriction (10)
below. The deposit of cash, cash equivalents and liquid debt
securities in a segregated account with the custodian and/or with
a broker in connection with futures contracts or related options
transactions and the purchase of securities on a "when-issued"
basis is not deemed to be a pledge.
B-28
<PAGE>
5. Sell securities short or purchase securities on margin.
The deposit or payment by the Account of initial or maintenance
margin in connection with futures contracts or related options
transactions is not considered the purchase of a security on
margin.
6. Write or purchase put or call options, except that the
Account may engage in covered call option writing.
7. Underwrite the securities of other issuers or purchase
restricted securities.
8. Purchase or sell real estate, real estate investment
trust securities, commodities or commodity contracts, or oil and
gas interests, except that the Account may invest for hedging
purposes in futures contracts on securities, financial
instruments, and indices as are approved for trading on a
registered exchange.
9. Make loans, except that the Account (1) may lend
portfolio securities in accordance with the Account's investment
policies up to 33 1/3 percent of the Account'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.
10. Invest more than 15 percent of the value of its total
assets in the obligations of any one bank, or invest more than
5 percent of the value of its total assets in the commercial paper
of any one issuer.
11. Invest more than 25 percent of the value of its total
assets in the securities of issuers in any single industry,
provided that this limitation shall not apply to the purchase of
obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, certificates of deposit issued by
domestic banks and domestic bankers' acceptances (excluding
foreign branches of domestic banks).
12. Invest more than 10 percent in the aggregate of the
value of its total assets in repurchase agreements maturing in
more than 7 days, time deposits maturing in more than 2 days and
portfolio securities which do not have readily available market
quotations.
13. Invest in companies for the purpose of exercising
control.
B-29
<PAGE>
14. Invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation
or acquisition of assets.
15. Allow its current obligations under reverse repurchase
agreements, together with borrowings, to exceed one-third of the
value of its total assets (less all its liabilities other than the
obligations under borrowings and such agreements).
The Liquid Account may not:
1. Issue senior securities, except as permitted by para-
graphs 3, 4, 5 and 15 below. For purposes of this restriction,
the issuance of shares of common stock in multiple classes or
series, the purchase or sale of options, futures contracts and
options on futures contracts, forward commitments, and repurchase
agreements entered into in accordance with the Account's
investment policies, and the pledge, mortgage or hypothecation of
the Account's assets are not deemed to be senior securities.
2. Purchase equity securities (e.g., common stocks,
preferred stocks), voting securities or local or state government
securities (e.g., municipal bonds, state bonds).
3. Borrow money, except from banks for temporary or emer-
gency purposes, including the meeting of redemption requests which
might otherwise require the untimely disposition of securities,
borrow in the aggregate more than 10 percent of the value of its
total assets, or invest in portfolio securities while outstanding
borrowings exceed 5 percent of the value of its total assets.
4. Pledge, hypothecate, mortgage or otherwise encumber its
assets, except in an amount of not more than 10 percent of the
value of its net assets to secure borrowings for temporary or
emergency purposes and except as may be necessary in connection
with securities lending as provided in investment restriction (10)
below. The deposit of cash, cash equivalents and liquid debt
securities in a segregated account with the custodian and/or with
a broker in connection with futures contracts or related options
transactions and the purchase of securities on a "when-issued"
basis is not deemed to be a pledge.
5. Sell securities short or purchase securities on margin.
The deposit or payment by the Account of initial or maintenance
margin in connection with futures contracts or related options
transactions is not considered the purchase of a security on
margin.
6. Write or purchase put or call options.
B-30
<PAGE>
7. Underwrite the securities of other issuers or purchase
restricted securities.
8. Purchase or sell real estate, real estate investment
trust securities, commodities or commodities contracts, or oil and
gas interests.
9. Make loans, except that the Account (1) may lend
portfolio securities in accordance with the Account's investment
policies up to 33 1/3 percent of the Account'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.
10. Invest more than 15 percent of the value of its total
assets in the obligations of any one bank or invest more than
5 percent of the value of its total assets in the commercial paper
of any one issuer.
11. Invest more than 25 percent of the value of its total
assets in the securities of issuers in any single industry,
provided that this limitation shall not apply to the purchase of
obligations issued or guaranteed by the United States Government,
its agencies or instrumentalities, certificates of deposit issued
by domestic banks and domestic bankers' acceptances (excluding
foreign branches of domestic banks).
12. Invest more than 10 percent in the aggregate of the
value of its total assets in repurchase agreements maturing in
more than 7 days, time deposits maturing in more than 2 days and
portfolio securities which are not readily marketable.
13. Invest in companies for the purpose of exercising
control.
14. Invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation
or acquisition of assets.
15. Enter into a reverse repurchase agreement if as a result
its current obligations under such agreement would exceed
one-third of the value of its total assets (less all its
liabilities other than the obligations under such agreements).
16. Invest in any security with a maturity in excess of one
year.
B-31
<PAGE>
For purposes of the fundamental investment restrictions, the
term "borrow" does not include mortgage dollar rolls, reverse
repurchase agreements or lending portfolio securities and the
terms "illiquid securities" and "portfolio securities which do not
have readily available market quotations" shall include restricted
securities. However, as non-fundamental policies, the Company
will treat reverse repurchase agreements as borrowings, master
demand notes as illiquid securities and mortgage dollar rolls as
sales transactions and not as a financing.
For purposes of the restriction on investing more than 25% of
an Account's assets in the securities of issuers in any single
industry, the category Financial Services as used in the Financial
Statements may include several different industries such as
mortgage-backed securities, brokerage firms and other financial
institutions.
Each of the LifeSpan Accounts each 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 entered into in accordance with the Account'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 the Account of initial or maintenance margin
in connection with futures contracts or related options trans-
actions 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 Account's total assets
(including the amount borrowed) taken at market value, (ii) in
connection with the redemption of Account 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.
B-32
<PAGE>
4. Act as an underwriter, except to the extent that in
connection with the disposition of portfolio securities, the
Account may be deemed to be an underwriter for purposes of the
1933 Act.
5. Purchase or sell real estate except that the Account 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 Account as a result of the ownership of securities.
6. Invest in commodities, except the Account 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
warrants and repurchase agreements entered into in accordance with
the Account's investment policies.
7. Make loans, except that the Account (1) may lend
portfolio securities in accordance with the Account's investment
policies up to 33 1/3% of the Account'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 Account'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 Account.
B-33
<PAGE>
B. Non-Fundamental Investment Restrictions.
The following restrictions are designated as non-fundamental
and may be changed by the Board of Directors without the approval
of shareholders.
The LifeSpan Accounts each 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
Account's total assets taken at market value. Collateral
arrangements with respect to margin, option and other risk
management and when-issued and forward commitment transac-
tions 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
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 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
Account'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 Account or
(iii) more than 5% of the Account's assets would be invested
in any one such investment company. The Account 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 Account has no current
intention of investing in other investment companies.
B-34
<PAGE>
(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 Account'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 Account'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 Account 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 Account 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 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
than 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
Account at any time will not exceed 20% of the Account's
total assets.
(13) Invest for the purpose of exercising control over or
management of any company.
B-35
<PAGE>
If a percentage restriction on investment or utilization of
assets as set forth above is adhered to at the time an investment
is made, a later change in percentage resulting from changes in
the values of an Account's assets will not be considered a
violation of the restriction.
In order to permit the sale of shares of the Accounts 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 an Account and its shareholders,
the Account 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 such policy.
MANAGEMENT
The Company's Board of Directors provides broad supervision
over the affairs of the Company. The officers of the Company are
responsible for the day-to-day operations of the Company. The
Directors of the Company and the officers of the Company are
listed below. Except as indicated, each individual has held the
office shown or other offices in the same company for the last
five years. Unless otherwise noted, the business address of each
Director and officer of the Company is 140 Garden Street,
Hartford, Connecticut 06154. Those Directors and officers who are
"interested persons" of the Company, as defined in the Investment
Company Act, by virtue of their affiliation with the Company, are
indicated by an asterisk(*).
Directors and Officers of the Company.
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
B-36
<PAGE>
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
DONALD H. POND, JR., 52, Director and President*
Executive Vice President, Connecticut Mutual Life Insurance
Company (CML) (1988-present).
DAVID E. SAMS, JR., 52, Director*
President and Chief Executive Officer, CML (1993-present);
President and Chief Executive Officer, Agency Group, Capital
Holdings Corporation (1987-1993).
LINDA M. NAPOLI, 38, Treasurer and Controller*
Assistant Vice President, CML (1987-present); Associate Director,
CML (1988-1993).
LOUIS A. LACCAVOLE, 46, General Auditor*
Vice President and General Auditor, CML (1990-Present); Assistant
Vice President and General Auditor, CML (1981-1990).
ANN F. LOMELI, 39, Secretary*
Secretary of the Company; Corporate Secretary, CML (1988-present).
All Board members of the Company are board members of,
Mr. Pond is a board member and President of, and Ms. Lomeli is
Secretary, Ms. Napoli is Treasurer and Mr. Laccavole is General
Auditor of, Connecticut Mutual Financial Services Series Fund I,
Inc. ("CMFS Fund"), an investment company for which the Manager
acts as investment adviser. Each of the Directors and principal
officers affiliated with the Company who is also an affiliated
person of the Manager or any Subadviser is named above, together
with the capacity in which such person is affiliated with the
Company, the Manager or Subadviser. As of June 30, 1995, the
Directors and officers of the Company owned, in the aggregate,
less than 1% of the outstanding securities of the Company.
Compensation of Officers and Directors. The Accounts pay no
salaries or compensation to any of their officers. The chart
below sets forth the fees paid or expected to be paid by each
Account to the Directors and certain other information:
B-37
<PAGE>
Richard M. Donald E. A. Richard W. Beverly L. Donald H. David E.
Ayers Carson Greene Hamilton Pond, Jr. Sams, Jr.
Compensation
Received from
Account
Liquid Account* $1,000 $962.50 $1,100 $1,000 $-0- $-0-
Government
Securities
Account* 1,000 962.50 1,100 1,000 -0- -0-
Income Account* 1,000 962.50 1,100 1,000 -0- -0-
Total Return
Account* 1,000 962.50 1,100 1,000 -0- -0-
Growth Account* 1,000 962.50 1,100 1,000 -0- -0-
Diversified
Income Account** 275 275 275 275 -0- -0-
Balanced Account** 275 275 275 275 -0- -0-
Capital
Appreciation
Account** 275 275 275 275 -0- -0-
Pension or Retirement
Benefits Accrued as
Account Expense*
Liquid Account -0- -0- -0- -0- -0- -0-
Government
Securities
Account -0- -0- -0- -0- -0- -0-
Income Account -0- -0- -0- -0- -0- -0-
Total Return
Account -0- -0- -0- -0- -0- -0-
Growth Account -0- -0- -0- -0- -0- -0-
______________________
* As of most recently completed fiscal year.
** Estimated for current fiscal year.
B-38
<PAGE>
Diversified
Income Account -0- -0- -0- -0- -0- -0-
Balanced Account -0- -0- -0- -0- -0- -0-
Capital
Appreciation
Account -0- -0- -0- -0- -0- -0-
Total Compensation
from Company and
Complex Paid to
Directors*** 9,250 9,063 10,250 9,250 -0- -0-
Other Information about the Company. The Company was incorporated
in Maryland on December 9, 1981. The authorized capital stock of
the Company consists of 3 billion shares of common stock, par
value $0.001 per share (Common Stock). The shares of common stock
are divided into thirteen series accounts: Government Securities
Account (200,000,000 shares); Income Account (200,000,000 shares);
Total Return Account (200,000,000 shares); Growth Account
(200,000,000 shares); Liquid Account (600,000,000 shares); Capital
Appreciation Account (200,000,000 shares); Balanced Account
(200,000,000 shares); Diversified Income Account (200,000,000
shares); CMIA National Municipals Account (200,000,000 shares);
CMIA California Municipals Account (200,000,000 shares); CMIA
Massachusetts Municipals Account (200,000,000 shares); CMIA New
York Municipals Account 200,000,000 shares); and CMIA Ohio
Municipals Account (200,000,000 shares). The Board of Directors
may reclassify authorized shares to add to one or more of the
accounts described above or to add any new accounts to the
Company. The Board of Directors is also authorized, without
further shareholder approval, to classify and reclassify existing
and new accounts into one or more classes. Accordingly, the
Directors have authorized the issuance of two classes of shares of
each of the CMIA Accounts, except for the Liquid Account, and each
of the LifeSpan Accounts, designated in each instance as Class A
shares and Class B shares. The Directors have authorized only one
class of shares for the Liquid Account.
______________________
*** As of the calendar year ended December 31, 1994, there were
sixteen investment companies in the Complex (including the
Accounts).
As of June 30, 1995, CML and its affiliates owned shares of
certain accounts as follows: Government Securities Account
(725,035 shares) (15% of shares outstanding); Income Account
(1,533,159 shares) (31% of shares outstanding); Total Return
Account (210 shares) (0% of shares outstanding); Growth Account
(1,838,894 shares) (31% of shares outstanding); and Liquid
B-39
<PAGE>
Account (25,026,814 shares) (39% of shares outstanding). CML is
incorporated under the laws of the state of Connecticut. CML and
its affiliates are deemed to be controlling persons of any account
of the Company of which they own more than 25% of the shares
outstanding. As such, the exercise by CML and its affiliates of
their voting rights may diminish the voting power of other
shareholders.
As of June 30, 1995, no other shareholder of the Company owns
of record or beneficially 5% or more of the shares outstanding of
any Account.
As of June 30, 1995, the following persons held an interest
in the following accounts equal to 5% or more of such account's
outstanding shares:
Shareholder Percentage Ownership
CMIA National Municipal Account
Claud J. Jacobs 5%
Yoakum, TX
Julius and Deanna Staatz 6%
Yoakum, TX
James A. Jones 14%
Bettendorf, IA
CMIA California Municipal Account
Frank J. Edwards IV 18%
Houston, TX
Archie and Winifred Dingwall 22%
Fresno, CA
Frank E. Blakeley 56%
Fresno, CA
CMIA Massachusetts Municipal Account
David T. Beaulieu 6%
Amherst, NH
CML 26%
Hartford, CT
Martin J. Healey 66%
Lynn, MA
B-40
<PAGE>
CMIA New York Municipal Account
Robert W. Lang 5%
Gloversville, NY
Michael Nicoletto 6%
Huntington, NY
Herbert F. Ross 6%
Rochester, NY
Shirley M. Baker 9%
Elma, NY
Arnold and Ellen Ostrower 17%
New York, NY
Salvatore J. Bellavia 28%
Syracuse, NY
CMIA Ohio Municipal Account
Martha L. Lanter 5%
Springfield, OH
Lawrence H. Stookey, Jr. 5%
Sandusky, OH
Hardy & Hardy Co. 6%
Lima, OH
Lawrence A. Walborn 6%
Sylvania, OH
Dorothy H. Armogan 11%
Cincinnati, OH
Friddle Trust 17%
Mason, OH
Warren and Mary Copeland 21%
Lima, OH
Any shareholder with an interest in any of the above accounts
exceeding 25% of such accounts' outstanding shares is deemed to be
a controlling person of such account. As such, the exercise by a
greater than 25% shareholder of his or her voting rights may
diminish the voting power of other shareholders.
B-41
<PAGE>
The shares of the Accounts are entitled to vote separately to
approve investment advisory agreements or changes in investment
restrictions, but shareholders of all series vote together in the
election and selection of Directors and accountants. Shares of an
Account vote together as a class on matters that affect the
Account in substantially the same manner. As to matters affecting
a single class, shares of such class will vote separately. Shares
of the Company do not have cumulative voting rights. The Company
does not intend to hold annual meetings of shareholders unless
required to do so by the Investment Company Act or the Maryland
statute under which the Company is organized. Although Directors
are not elected annually by the shareholders, shareholders have
under certain circumstances the right to remove one or more
Directors. Each Account's shares are fully paid and nonassessable
when issued and have no preference, preemptive, conversion or
similar rights and are freely transferable.
The Company's Articles of Incorporation provide that the
Directors, officers and employees of the Company may be
indemnified by the Company to the fullest extent permitted by
Maryland law. The Company's Bylaws provide that the Company shall
indemnify each of its Directors, officers and employees against
liabilities and expenses reasonably incurred by them, in
connection with, or resulting from, any claim, action, suit or
proceeding, threatened against or otherwise involving such
Director, officer or employee, directly or indirectly, by reason
of being or having been a Director, officer or employee of the
Company. Neither the Articles of Incorporation nor the Bylaws
authorize the Company to indemnify any Director or officer against
any liability to which he or she would otherwise be subject by
reason of or for willful misfeasance, bad faith, gross negligence
or reckless disregard of such person's duties.
INVESTMENT ADVISORY ARRANGEMENTS
The Company, on behalf of each Account, has entered into an
investment advisory agreement with G.R. Phelps & Co. (the
Manager). The investment advisory agreement provides that the
Manager, subject to the supervision and approval of the Company's
Board of Directors, is responsible for the actual management of
each Account. The Manager is responsible for the selection of
portfolio investments for each Account (other than the
international Component, the small-cap Component and the high
yield/high risk bond Component for the LifeSpan Accounts). In
connection therewith, the Manager provides investment research and
supervision of the investments held by an Account and conducts a
continuous program of investment, evaluation and, if appropriate,
sale and reinvestment of the Account's assets, in accordance with
the investment objectives and policies of the Account. The
Manager also furnishes the Company such statistical information,
B-42
<PAGE>
with respect to the investments which the Accounts may hold or
contemplate purchasing, as the Company may reasonably request.
The Manager will apprise the Company of important developments
materially affecting any of the Accounts and furnish the Company
from time to time with such information as the Manager may believe
appropriate for this purpose. In addition, the Manager agrees to
furnish the Board of Directors such periodic and special reports
as the Board may reasonably request and to provide persons
satisfactory to the Board of Directors to serve as the Company's
officers. The Manager will also, without charge, render such
clerical, accounting, administrative and other services as the
Manager may believe appropriate or as the Company may reasonably
request.
With respect to the international Component for LifeSpan
Capital Appreciation and Balanced Account, the Manager has entered
into subadvisory investment agreements with Scudder. With respect
to the small cap Component of each LifeSpan Account, the Manager
has entered into subadvisory investment agreements with Pilgrim.
With respect to the high yield/high risk bond Component for each
LifeSpan Account, the Manager has entered into subadvisory
investment agreements with BEA Associates. Under the respective
subadvisory investment agreement, the corresponding Subadviser,
subject to the review of the Board of Directors and the over-all
supervision of the Manager, is responsible for managing the
investment operations of the corresponding LifeSpan Account
Component and the composition of the Component's portfolio and
furnishing the LifeSpan Account with advice and recommendations
with respect to investments and the purchase and sale of
securities for the respective Component.
As provided by the investment advisory agreement, each
Account pays the Manager an investment management fee, which is
accrued daily and paid monthly, equal on an annual basis to a
stated percentage of the respective Account's average daily net
asset value. The Manager, not any Account, pays the subadvisory
fees as described in the Prospectuses. See "The Manager and the
Subadvisers" and "Breakdown of Expenses" in the Prospectuses for
additional description of the management and subadvisory fees and
certain other information concerning each Account's investment
advisory agreement and the subadvisory investment agreements of
the LifeSpan Accounts.
No person other than the Manager and the corresponding
Subadviser and their directors and employees regularly furnishes
advice to the Accounts with respect to the desirability of the
Accounts investing in, purchasing or selling securities. The
Manager and Subadvisers may from time to time receive statistical
or other similar factual information, and information regarding
general economic factors and trends, from CML and its affiliates.
B-43
<PAGE>
Under the terms of the investment advisory agreement with the
Company on behalf of each Account, the Manager provides each
Account with office space, supplies and other facilities required
for the business of the Account. The Manager pays the
compensation of all officers and employees of the Company and
Directors of the Company affiliated with the Manager, the office
expenses of the Accounts and other expenses incurred by the
Manager in connection with the performance of its duties. All
other expenses which are not specifically paid by the Manager and
which are incurred in the operation of the Accounts including fees
of directors who are not "interested persons," as such term is
defined in the Investment Company Act, of the Company or CML and
the continuous public offering of the shares of the Accounts are
borne by the Accounts.
Securities held by any Account may also be held by other
portfolios for which the Manager, the Subadvisers or their
respective affiliates provides investment advice. Because of
different investment objectives or other factors, a particular
security may be bought by the Manager or a Subadviser for one or
more clients when one or more clients are selling the same
security. If purchases or sales of securities arise for
consideration at or about the same time for any Account or other
funds for which the Manager or a Subadviser acts as an investment
adviser or for their advisory clients, transactions in such
securities will be made, insofar as feasible, for the respective
funds and clients in a manner deemed equitable to all. To the
extent that transactions on behalf of more than one client of the
Manager, the Subadvisers or their respective affiliates during the
same period may increase the demand for securities being purchased
or the supply of securities being sold, there may be an adverse
effect on price.
The advisory fees paid by the following Accounts for the last
three fiscal years were:
1992 1993 1994
Liquid Account $ 344,999 $ 357,506 $ 385,774
Government Securities Account $ 392,761 $ 465,806 $ 460,523
Income Account $ 187,813 $ 277,291 $ 304,391
Total Return Account $ 601,883 $ 867,544 $1,173,401
Growth Account $ 264,629 $ 342,082 $ 447,812
Total All Accounts $1,792,085 $2,310,229 $2,771,901
B-44
<PAGE>
The LifeSpan Accounts commenced operations in fiscal 1995 and
therefore paid no advisory fees during the periods listed above.
The investment advisory agreement provides that the Manager
will limit the aggregate ordinary operating expenses (including
the advisory fee and 12b-1 fees, but excluding interest, taxes,
brokerage fees, commissions and extraordinary charges such as
litigation costs) of the Liquid Account to no more than 1.0% of
the Account's average net assets. The investment advisory
contract provides that the Manager will limit the aggregate
ordinary operating expenses (including the advisory fee, but
excluding interest, taxes, brokerage fees, commissions and
extraordinary charges such as litigation costs) of each of the
Government Securities Account, Income Account, Growth Account and
Total Return Account to no more than 1.5% of the average daily net
assets of the respective Account.
The Manager has voluntarily and temporarily agreed to limit
the expenses of each of the Capital Appreciation Account and the
Balanced Account to 1.55% and of the Diversified Income Account to
1.50% of such Account's average daily net assets.
Pursuant to the investment advisory agreement and, where
applicable, each subadvisory investment agreement, neither the
Manager nor any Subadviser is liable to the Accounts or their
shareholders for any error of judgment or mistake of law or for
any loss suffered by the Accounts in connection with the matters
to which their respective agreement relate, except a loss
resulting from willful misfeasance, bad faith or gross negligence
on the part of the Manager or Subadviser in the performance of
their duties or from their reckless disregard of the obligations
and duties under the applicable agreement. Each Subadviser has
agreed to indemnify the Manager 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 Manager to
the extent resulting in whole or in part from any of the
respective Subadviser's acts or omissions related to the
performance of its duties as set forth specifically in the
respective subadvisory investment agreement or otherwise from the
respective Subadviser's willful misfeasance, bad faith or gross
negligence.
The Manager, whose principal business address is at 10 State
House Square, Hartford, Connecticut and whose mailing address is
140 Garden Street, Hartford, Connecticut 06154, was organized in
1976 and has over $2.7 billion in assets under management in its
capacity as investment adviser to the Accounts and the other
mutual funds in the Connecticut Mutual group of funds having a
combined total of over 30,000 shareholders. The Manager is a
wholly owned subsidiary of DHC, which is in turn a wholly owned
subsidiary of CML.
B-45
<PAGE>
Scudder, 345 Park Avenue, New York, NY 10154, is a Delaware
corporation and has been providing investment counseling services
for over 70 years, since its founding in 1919. Scudder supervises
assets for institutional clients, mutual funds and individuals and
had $90 billion in assets under management as of May 31, 1995.
All of the outstanding voting and non-voting securities of Scudder
are held of record by the Managing Directors, Daniel Pierce,
Edmond D. Villani, Stephen R. Beckwith, and Juris Padegs, in their
capacity as the Representatives of the beneficial owners of such
securities pursuant to a Security Holders Agreement, under which
such Representatives have the right to reallocate shares among the
beneficial owners from time to time, at net book value in cash
transactions. BEA Associates, Citicorp Center, 153 E. 53rd
Street, 57th Floor, New York, NY 10022, is a partnership between
Credit Suisse Capital Corporation and BEA Associate's employee
shareholders. BEA Associates has been providing domestic and
global fixed income and equity investment management services for
institutional clients and mutual funds since 1984 and, together
with its global affiliate, had $25 billion in assets under
management as of May 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 May 31, 1995, Pilgrim
had over $4 billion in assets under management.
The investment advisory agreement and subadvisory investment
agreements continue in effect from year to year if approved
annually by a vote of a majority of the Directors of the Company
who are not interested persons of one of the parties to the
contract, cast in person at a meeting called for the purpose of
voting on such approval, or by either the Directors or the holders
of a majority of the applicable Account's outstanding voting
securities. Each contract automatically terminates upon assign-
ment. The investment advisory agreement may be terminated without
penalty on 60 days' notice at the option of either party to the
respective contract or by vote of the holders of a majority of the
outstanding voting securities of the applicable Account. Each
subadvisory investment agreement may be terminated at any time
without the payment of any penalty by the Board of Directors or by
vote of a majority of the outstanding voting securities of the
Account upon 60 days' notice to the Manager and respective
Subadviser, by the Manager upon 60 days' written notice to the
Account and the Subadviser and by the Subadvisor upon 90 days'
written notice to the Account and the Manager (with respect to
that Account only). Each subadvisory investment agreement
terminates automatically upon the termination of the corresponding
investment advisory agreement.
B-46
<PAGE>
ACCOUNT EXPENSES
Expenses of the Accounts. Each Account pays its own expenses
including, without limitation: (i) expenses of maintaining the
Account and continuing its existence, (ii) registration of the
Company under the Investment Company Act, (iii) auditing,
accounting and legal expenses, (iv) taxes and interest,
(v) governmental fees, (vi) expenses of issue, sale, repurchase
and redemption of Account shares, (vii) expenses of registering
and qualifying the Account and its shares under federal and state
securities laws and of preparing and printing prospectuses for
such purposes and for distributing the same to shareholders and
investors, and fees and expenses of registering and maintaining
registrations of the Account and of the Account's principal
underwriter, if any, as broker-dealer or agent under state
securities laws, (viii) expenses of reports and notices to share-
holders and of meetings of shareholders and proxy solicitations
therefor, (ix) expenses of reports to governmental officers and
commissions, (x) insurance expenses, (xi) association membership
dues, (xii) fees, expenses and disbursements of custodians for all
services to the Account, (xiii) fees, expenses and disbursements
of transfer agents, dividend disbursing agents, shareholder
servicing agents and registrars for all services to the Account,
(xiv) expenses for servicing shareholder accounts, (xv) any direct
charges to shareholders approved by the Directors of the Company,
(xvi) compensation and expenses of Directors of the Company who
are not "interested persons" of the Account, and (xvii) such
non-recurring items as may arise, including expenses incurred in
connection with litigation, proceedings and claims and the
obligation of the Company to indemnify its Directors and officers
with respect thereto.
DISTRIBUTION ARRANGEMENTS
Connecticut Mutual Financial Services, L.L.C. ("CMFS") serves
as the principal underwriter for each Account pursuant to an
Underwriting Agreement initially approved by the Board of
Directors of the Company. CMFS is a registered broker/dealer and
member of the National Association of Securities Dealers, Inc.
(NASD). Shares of each Account will be continuously offered and
will be sold by registered representatives of CMFS and selected
broker-dealers who have executed selling agreements with CMFS.
CMFS bears all the expenses of providing services pursuant to the
Underwriting Agreement including the payment of all sales
commissions for sales of the Company shares and the printing and
distribution of prospectuses to non-shareholders as well as of any
advertising or sales literature. The Company bears the expenses
of registering its shares with the SEC and qualifying them with
state regulatory authorities. CMFS has also agreed to assume
certain expenses relating to the operations of the Accounts as
B-47
<PAGE>
necessary to comply with expense limitations imposed by certain
states in which shares of one or more of the Accounts may be
registered and also as otherwise described in the Accounts'
Prospectuses. The Underwriting Agreement continues in effect for
successive one-year periods, provided that each such continuance
is specifically approved (i) by the vote of a majority of the
Directors who are not interested persons, as such term is defined
in the Investment Company Act, of the Company (non-interested
Directors) or parties to the Agreement and (ii) either (a) by the
vote of a majority of the outstanding voting securities of each
Account or (b) by the vote of a majority of the Board of
Directors.
The compensation paid by the following Accounts to
G.R. Phelps, the prior distributor of the Accounts' shares, for
underwriting fees for the last three fiscal years was:
1992 1993 1994
Liquid Account 0 0 0
Government Securities Account $ 547,446 $ 365,583 $ 189,799
Income Account $ 237,717 $ 203,149 $ 127,640
Total Return Account $1,101,367 $1,790,711 $1,671,181
Growth Account $ 244,985 $ 416,056 $ 513,544
Each of the LifeSpan Accounts commenced operations in fiscal
1995 and therefore paid no underwriting fees during the periods
listed above.
CMFS's principal business address is at Ten State House
Square, Hartford, Connecticut 06103 and its mailing address is at
140 Garden Street, Hartford, Connecticut 06154. CMFS was
organized as a limited liability company in Connecticut on
November 10, 1994, and is a direct subsidiary of CML.
DISTRIBUTION FINANCING PLANS
The Company on behalf of each Account has adopted plans of
distribution designed to meet the requirements of Rule 12b-1 (the
Rule) under the Investment Company Act and the requirements of the
revised sales charge rule of the NASD with respect to the Class A
shares (the Class A Plan) and a plan of distribution with respect
to the Class B shares (the Class B Plan) and a plan of
distribution with respect to the Liquid Account (the Liquid
Account Plan and, collectively with the Class A Plan and the
Class B Plan, the Plans).
B-48
<PAGE>
Class A Plan
Pursuant to the Class A Plan, an Account may reimburse CMFS
for its expenditures in financing any activity primarily intended
to result in the sale of Account shares. Certain categories of
such expenditures have been approved by the Board of Directors and
are set forth in the Prospectuses. See "Breakdown of Expenses --
Distribution Plans" in the Prospectuses. The expenses of an
Account pursuant to the Class A Plan are accrued on a fiscal year
basis and may not exceed, with respect to the Class A shares of
each Account, the annual rate of 0.25% of the Account's average
annual net assets attributable to Class A. No Class A Plan was in
effect during the most recently completed fiscal year with respect
to the Accounts.
Class B Plan
The Class B Plan for each Account provides that each Account
shall pay CMFS, as the Account's distributor for its Class B
shares, a daily distribution fee equal on an annual basis to 0.75%
of the Account's average daily net assets attributable to Class B
shares and will pay CMFS a service fee equal to 0.25% of the
Account's average daily net assets attributable to Class B shares
(which CMFS will in turn pay to securities dealers which enter
into a sales agreement with CMFS at a rate of up to 0.25% of the
Account's average daily net assets attributable to Class B shares
owned by investors for whom that securities dealer is the holder
or dealer of record). This service fee is intended to be in
consideration of personal services and/or account maintenance
services rendered by the dealer with respect to Class B shares.
CMFS will advance to dealers the first-year service fee at a rate
equal to 0.25% of the amount invested. As compensation for such
advance, CMFS may retain the service fee paid by an Account with
respect to such shares for the first year after purchase. Dealers
will become eligible for additional service fees with respect to
such shares commencing in the thirteenth month following purchase.
Dealers may from time to time be required to meet certain other
criteria in order to receive service fees. CMFS or its affiliates
are entitled to retain all service fees payable under the Class B
Plan for which there is no dealer of record or for which
qualification standards have not been met as partial consideration
for personal services and/or account maintenance services
performed by CMFS or its affiliates for shareholder accounts.
The purpose of distribution payments to CMFS under the
Class B Plan is to compensate CMFS for its distribution services
to the Account. CMFS pays commissions to dealers as well as
expenses of printing prospectuses and reports used for sales
purposes, expenses with respect to the preparation and printing of
sales literature and other distribution related expenses,
including without limitation, the cost necessary to provide
B-49
<PAGE>
distribution-related services, or personnel, travel office
expenses and equipment. The Class B Plan also provides that CMFS
will receive all CDSC's attributable to Class B shares. (See
"Distribution Plans" in the Prospectuses.)
Liquid Account Plan
Under the Liquid Account Plan, the amount of compensation
paid by the Liquid Account for expenses shall not exceed 0.10% of
the average daily net assets of the Account, provided, however,
that the Liquid Account will make no payment with respect to a
particular year if the Liquid Account's aggregate expenses for
that year (including payments made to CMFS pursuant to the Liquid
Account Plan, but excluding interest, taxes, brokerage
commissions, and extraordinary expenses) exceed 1.0% of the value
of the Liquid Account's aggregate daily net assets.
General
In accordance with the terms of the Plans, CMFS provides to
each Account, for review by the Board of Directors, a quarterly
written report of the amounts expended under the respective Plans
and the purpose for which such expenditures were made. In the
Board of Directors' quarterly review of the Plans, they will
consider the continued appropriateness and the level of
reimbursement or compensation the Plans provide.
The Plans were adopted by a majority vote of the Board of
Directors, including all of the Directors who are not, and were
not at the time they voted, interested persons of the Company, as
defined in the Investment Company Act (none of whom had or have
any direct or indirect financial interest in the operation of the
Plans), cast in person at a meeting called for the purpose of
voting on the Plans. In approving the Plans, the Directors
identified and considered a number of potential benefits which the
Plans may provide. The Board of Directors believes that there is
a reasonable likelihood that the Plans will benefit each Account
and its current and future shareholders. Under their terms, the
Plans remain in effect from year to year provided such continuance
is approved annually by vote of the Directors in the manner
described above. The Plans may not be amended to increase
materially the annual percentage limitation of average net assets
which may be spent for the services described therein without
approval of the shareholders of the Account affected thereby, and
material amendments of the Plans must also be approved by the
Board of Directors in the manner described above. A Plan may be
terminated at any time, without payment of any penalty, by vote of
the majority of the Directors who are not interested persons of
the Company and have no direct or indirect financial interest in
the operations of the Plan, or by a vote of a "majority of the
outstanding voting securities" (as defined in the Investment
B-50
<PAGE>
Company Act) affected thereby. A Plan will automatically
terminate in the event of its assignment (as defined in the
Investment Company Act).
During the fiscal year ended December 31, 1994, the Liquid
Account made no payments to G.R. Phelps under its Plan as a result
of G.R. Phelps's agreement not to impose such expenses to which it
would otherwise be entitled. During this period, no Class A Plans
were in effect for the other Accounts and no Class B shares were
outstanding.
PORTFOLIO TRANSACTIONS AND BROKERAGE
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 Subadvisers (if applicable) are
primarily responsible for the investment decisions of each Account
and the placing of its portfolio transactions. In placing orders,
it is the policy of each Account 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
Accounts will not necessarily be paying the lowest spread or
commission available. The Manager and the Subadvisers may direct
brokerage transactions to broker/dealers who also sell shares of
the Company and the sale of shares of the Company may be taken
into account by the Manager and the Subadvisers when allocating
brokerage transactions.
The Manager and the Subadvisers will generally deal directly
with the dealers who make a market in the securities involved
(unless better prices and execution are available elsewhere) if
the securities are traded primarily in the over-the-counter
market. Such dealers usually act as principals for their own
account. On occasion, securities may be purchased directly from
the issuer. Bonds and money market securities are generally
traded on a net basis and do not normally involve either brokerage
commissions or transfer taxes. Portfolio securities in the Liquid
Account normally are purchased directly from, or sold directly to,
the issuer, an underwriter or market maker for the securities.
There usually will be no brokerage commissions paid by the Liquid
Account for such purchases or sales and, in 1992, 1993 and 1994,
no such commissions were paid. Similarly, no brokerage
commissions were paid by the Government Securities Account or the
Income Account during those three years. Each of the LifeSpan
Accounts commenced operations in fiscal 1995, and accordingly paid
no brokerage commissions during the last three years.
B-51
<PAGE>
Brokerage commissions for the most recent three year period
for the Growth Account and the Total Return Account were as
follows:
1992 1993 1994
Brokerage Brokerage Brokerage
Account Commissions Commissions Commissions
Growth Account $201,111 $187,654 $249,665
Total Return Account $277,519 $297,403 $379,734
While the Manager and the Subadvisers seek to obtain the most
favorable net results in effecting transactions in an Account's
portfolio securities, dealers who provide supplemental investment
research to the Manager or a Subadviser may receive orders for
transactions from the Manager or the relevant Subadviser. Such
supplemental research services ordinarily consist of assessments
and analyses of the business or prospects of a company, industry,
or economic sector. If, in the judgment of the Manager or the
corresponding Subadviser, an Account will be benefited by such
supplemental research services, the Manager and the corresponding
Subadviser are authorized to pay spreads or commissions to brokers
or dealers furnishing such services which are in excess of spreads
or commissions which another broker or dealer may charge for the
same transaction. Information so received will be in addition to
and not in lieu of the services required to be performed by the
Manager and the corresponding Subadviser under the investment
advisory agreement or the sub-investment advisory agreement. The
expenses of the Manager and the Subadvisers will not necessarily
be reduced as a result of the receipt of such supplemental
information. The Manager and the Subadvisers may use such
supplemental research in providing investment advice to portfolios
other than those for which the transactions are made. Similarly,
the Accounts may benefit from such research obtained by the
Manager and the Subadvisers for portfolio transactions for other
clients.
Investment decisions for the Accounts will be made
independently from those of any other clients that may be or
become managed by the Manager, any Subadviser or their affiliates.
If, however, accounts managed by the Manager or any Subadviser are
simultaneously engaged in the purchase of the same security, then,
pursuant to the authorization of the Company's Board of Directors,
available securities may be allocated to each account and may be
averaged as to price in whatever manner the Manager or the
corresponding Subadviser deems to be fair. In some cases, this
system might adversely affect the price paid by an Account (for
example, during periods of rapidly rising or falling interest
rates) or limit the size of the position obtainable for an Account
(for example, in the case of a small issue).
B-52
<PAGE>
Scudder, or its affiliate, Scudder Investor Services Inc.
("SIS"), shall arrange for the placing of all orders for the
purchase and sale of securities for the international Component of
Capital Appreciation and Balanced Account with brokers or dealers
selected by SIS, provided that neither Scudder nor SIS shall be
responsible for payment of brokerage commissions. In the
selection of such brokers or dealers and the placing of such
orders, SIS is directed at all times to seek for the international
Component of Capital Appreciation Account and Balanced Account the
best execution available. Neither Scudder nor any affiliate of
Scudder will act as principal or receive directly or indirectly
any compensation in connection with the purchase or sale of
investment securities by the international Components of Capital
Appreciation Account and Balanced Account, other than compensation
provided for in the Subadvisory Investment Agreements with
Scudder, and such brokerage commissions as are permitted by the
Investment Company Act. If and to the extent authorized to act as
broker in the relevant jurisdiction, Scudder or any of its
affiliates may act as broker for the international Components of
Capital Appreciation Account and Balanced Account, in the purchase
and sale of securities. Scudder agrees that all transactions
effected through Scudder or brokers affiliated with Scudder will
be effected in compliance with Section 17(e) of the Investment
Company Act and written procedures established from time to time
by the Board of Directors of the Company pursuant to Rule 17e-1
under the Investment Company Act. (SIS does not receive any
compensation for performing this service).
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of each Account is
determined by State Street Bank and Trust Company (State Street)
(as dividend paying agent and custodian for the Accounts) in the
manner described under "Your Account--Transaction Details" in the
Accounts' Prospectuses. The Accounts will be closed for business
and will not price their shares on the following business holi-
days: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Securities held by each Account other than Liquid Account will be
valued as follows: portfolio securities which are traded on stock
exchanges are valued at the last sale price on the principal
exchange as of the close of business on the day the securities are
being valued, or, lacking any sales, at the last bid price.
Securities traded in the over-the-counter market and included in
the National Market System are valued at the most recent bid price
which may be based on valuations furnished by a pricing service or
from independent securities dealers. Otherwise, over-the-counter
securities are valued at the mean between the bid and asked prices
or yield equivalent as obtained from one or more dealers that make
markets in the securities. Portfolio securities which are traded
B-53
<PAGE>
both in the over-the-counter market and on an exchange are valued
according to the broadest and most representative market, and it
is expected that for debt securities this ordinarily will be the
over-the-counter market. Securities with remaining maturities of
less than 60 days are valued at amortized cost, which approximates
market value. Securities and assets for which market quotations
are not readily available are valued at fair value as determined
in good faith by or under the direction of the Board of Directors,
including valuations furnished by a pricing service retained by
the Custodian.
The net asset value per share of the Liquid Account is
determined by using the amortized cost method of valuing its
portfolio instruments (including master demand notes). Under the
amortized cost method of valuation, an instrument is valued at
cost and the interest payable at maturity upon the instrument is
accrued as income, on a daily basis, over the remaining life of
the instrument. Neither the amount of daily income nor the net
asset value is affected by unrealized appreciation or depreciation
of the portfolio's investments. In periods of declining interest
rates, the indicated daily yield on shares of the portfolio
computed using amortized cost may tend to be higher than a similar
computation made using a method of valuation based upon market
prices and estimates. In periods of rising interest rates, the
indicated daily yield on shares of the portfolio computed using
amortized cost may tend to be lower than a similar computation
made using a method of valuation based upon market prices and
estimates.
The amortized cost method of valuation permits the Liquid
Account to maintain a stable $1.00 net asset value per share. The
Company's Board of Directors periodically reviews the extent of
any deviation from the $1.00 per share value that would occur if a
method of valuation based on market prices and estimates were
used. In the event such a deviation would exceed one-half of
one percent, the Board of Directors will promptly consider any
action that reasonably should be initiated to eliminate or reduce
material dilution or other unfair results to shareholders. Such
action may include selling portfolio securities prior to maturity,
not declaring earned income dividends, valuing portfolio
securities on the basis of current market prices, if available,
or, if not available, at fair market value as determined in good
faith by the Board of Directors, and (considered highly unlikely
by management of the Company) redemption of shares in kind (i.e.,
portfolio securities).
An Account's maximum offering price per Class A share is
determined by adding the maximum sales charge to the net asset
value per share. Class B shares and Liquid Account shares are
offered at net asset value without the imposition of a sales
charge.
B-54
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
For information regarding the purchase of Account shares, see
"Your Account--How to Buy Shares" in the Accounts' Prospectuses.
For a description of how a shareholder may have an Account
redeem his/her shares, or how he/she may sell shares, see "Your
Account--How to Sell Shares" in the Accounts' Prospectuses.
Rights of Accumulation. Each Account and each of the other
mutual funds of the Company offer to all qualifying investors
Rights of Accumulation under which investors are permitted to
purchase Class A shares of other Accounts of the Company at the
offering price applicable to the total of (a) the dollar amount
then being purchased plus (b) an amount equal to the then current
net asset value of the purchaser's holdings of Class A shares of
other Accounts of the Company. Acceptance of the purchase order
is subject to confirmation of qualification. The rights of
accumulation may be amended or terminated at any time as to
subsequent purchases.
Statement of Intention. Any person may qualify for a reduced
sales charge on purchases of Class A shares made within a
thirteen-month period pursuant to a Statement of Intention (SOI).
Class A shares acquired through the reinvestment of distributions
do not constitute purchases for purposes of the SOI. A Class A
shareholder may include, as an accumulation credit towards the
completion of such SOI, the value of all Class A shares of all
Accounts of the Company owned by the shareholder. Such value is
determined based on the public offering price on the date of the
SOI. During the term of a SOI, National Financial Data Services
("NFDS"), the Company's transfer agent, will hold shares in escrow
to secure payment of the higher sales charge applicable for shares
actually purchased if the indicated amount on the SOI is not
purchased. Dividends and capital gains will be paid on all
escrowed shares and these shares will be released when the amount
indicated on the SOI has been purchased. An SOI does not obligate
the investor to buy or the Company to sell the indicated amount of
the SOI. If a Class A shareholder exceeds the specified amount of
the SOI and reaches an amount which would qualify for a further
quantity discount, a retroactive price adjustment will be made at
the time of the expiration of the SOI. The resulting difference
in offering price will purchase additional Class A shares for the
shareholder's account at the applicable offering price. If the
specified amount of the SOI is not purchased, the shareholder
shall remit to NFDS an amount equal to the difference between the
sales charge paid and the sales charge that would have been paid
had the aggregate purchases been made at a single time. If the
Class A shareholder does not within twenty days after a written
request by NFDS pay such difference in sales charge, NFDS will
redeem an appropriate number of escrowed shares in order to
B-55
<PAGE>
realize such difference. Additional information about the terms
of the Statement of Intention are available from your registered
representative or from NFDS at 1-800-322-CMIA.
Systematic Withdrawal Plan. The Systematic Withdrawal Plan
("SWP") is designed to provide a convenient method of receiving
fixed payments at regular intervals from Class A shares and Liquid
Account shares not subject to a CDSC only (except as noted below)
of an Account deposited by the applicant under this SWP. The
applicant must deposit or purchase for deposit shares of the
Account having a total value of not less than $10,000. Periodic
checks of $50 or more will be sent to the applicant, or any person
designated by him, monthly or quarterly. SWP's for Class B shares
of an Account and Liquid Account shares subject to a CDSC are
permitted only for payments of required distributions from
retirement plan accounts for a shareholder who has attained the
age of 70 . The CDSC will be waived with respect to such
redemptions but only if such redemptions are limited to no more
than 12% of the original value of the Account.
Any income dividends or capital gains distributions on shares
under the SWP will be credited to the SWP account on the payment
date in full and fractional shares at the net asset value per
share in effect on the record date.
SWP payments are made from the proceeds of the redemption of
shares deposited in a SWP account. Redemptions are potentially
taxable transactions to shareholders. To the extent that such
redemptions for periodic withdrawals exceed dividend income
reinvested in the SWP account, such redemptions will reduce and
may ultimately exhaust the number of shares deposited in the SWP
account. In addition, the amounts received by a shareholder
cannot be considered as an actual yield or income on his or her
investment because part of such payments may be a return of his or
her capital.
The SWP may be terminated at any time (1) by written notice
to the Account or from the Account to the shareholder; (2) upon
receipt by the Account of appropriate evidence of the
shareholder's death; or (3) when all shares under the SWP have
been redeemed. The fees of the Account for maintaining SWPs are
paid by the Account.
INVESTMENT PERFORMANCE
Each Account's average annual total return quotations and
yield quotations as they may appear in the Prospectuses, this SAI
or in advertising are calculated by standard methods prescribed by
the SEC.
B-56
<PAGE>
Liquid Account
In accordance with regulations prescribed by the SEC, the
Company is required to compute the Liquid Account's current
annualized yield for a seven-day period in a manner which does not
take into consideration any realized or unrealized gains or losses
on its portfolio securities. This current annualized yield is
computed by determining the net change (exclusive of realized
gains and losses on the sale of securities and unrealized
appreciation and depreciation) in the value of a hypothetical
account having a balance of one share of the Liquid Account at the
beginning of such seven-day period, dividing such net change in
account value by the value of the account at the beginning of the
period to determine the base period return and annualizing this
quotient on a 365-day basis.
The SEC also permits the Company to disclose the effective
yield of the Liquid Account for the same seven-day period,
determined on a compounded basis. The effective yield is
calculated by compounding the unannualized base period return by
adding one to the base period return, raising the sum to a power
equal to 365 divided by 7, and subtracting one from the result.
For the seven day period ending June 30, 1995, the Liquid
Account's annualized yield was 5.11%. For the same period, the
effective yield was 5.24%.
The yield on amounts held in the Liquid Account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for
any given past period is not an indication or representation of
future yields or rates of return. The Liquid Account's actual
yield is affected by changes in interest rates on money market
securities, average portfolio maturity of the Liquid Account, the
types and quality of portfolio securities held by the Liquid
Account, and its operating expenses.
Other Accounts
Standardized Average Annual Total Return Quotations. Average
annual total return quotations for Class A and Class B shares are
computed by finding the average annual compounded rates of return
that would cause a hypothetical investment made on the first day
of a designated period to equal the ending redeemable value of
such hypothetical investment on the last day of the designated
period in accordance with the following formula:
P(1+T) n = ERV
Where: P = a hypothetical initial payment of $1,000, less
the maximum sales load applicable to an
Account
B-57
<PAGE>
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical
$1,000 initial payment made at the beginning
of the designated period (or fractional
portion thereof)
The computation above assumes that all dividends and distributions
made by an Account are reinvested at net asset value during the
designated period. The average annual total return quotation is
determined to the nearest 1/100 of 1%.
One of the primary methods used to measure performance is
"total return." "Total return" will normally represent the
percentage change in value of a class of an Account, or of a
hypothetical investment in a class of an Account, over any period
up to the lifetime of the class. Unless otherwise indicated,
total return calculations will assume the deduction of the maximum
sales charge (5.00% for the Growth Account, the Total Return
Account and each of the LifeSpan Accounts, 4.00% for the
Government Securities Account and the Income Account) and usually
assume the reinvestment of all dividends and capital gains
distributions and will be expressed as a percentage increase or
decrease from an initial value, for the entire period or for one
or more specified periods within the entire period. Total return
calculations that do not reflect the reduction of sales charges
will be higher than those that do reflect such charges. All non-
standardized performance will be advertised only if the standard
performance data for the same period, as well as for the required
periods, is also presented.
Total return percentages for periods longer than one year
will usually be accompanied by total return percentages for each
year within the period and/or by the average annual compounded
total return for the period. The income and capital components of
a given return may be separated and portrayed in a variety of ways
in order to illustrate their relative significance. Performance
may also be portrayed in terms of cash or investment values,
without percentages. Past performance cannot guarantee any
particular future result. In determining the average annual total
return (calculated as provided above), recurring fees, if any,
that are charged to all shareholder accounts are taken into
consideration. For any account fees that vary with the size of
the account, the account fee used for purposes of the above
computation is assumed to be the fee that would be charged to the
mean account size of a class of the Account.
B-58
<PAGE>
The charts below set forth certain performance information
for the Class A shares of the Accounts as of June 30, 1995,
adjusted to reflect the maximum sales charge (5.00% for the Growth
Account, the Total Return Account and 4.00% for the Government
Securities Account and the Income Account) and the account fees of
the Class A shares. Total return percentages do not include the
effect of the Rule 12b-1 fees to which the Class A shares of Total
Return and Growth Accounts will be subject in 1995. Past
performance of the Class A shares is no guarantee and is not
necessarily indicative of future performance of the Class A
shares. The actual annual returns for Class A shares of an
Account may vary significantly from the past and future
performance of Class A shares of the Account. Investment returns
and the value of the Class A shares of the Accounts will fluctuate
in response to market and economic conditions as well as other
factors and shares, when redeemed, may be worth more or less than
their original cost. Total returns are based on capital changes
plus reinvestment of all distributions for the time periods noted
in the charts below. Total return of the Class A shares of the
Income Account would have been lower without the expense
limitation effected by the Manager.
Value of a $1,000 Investment in the Class A shares of the
Government Securities Account:
Total Return Total Return
Annualized Annualized
Investment Investment (excluding 4% (including 4%
Period Date sales charge) sales charge)
Life of Account 9/16/85 9.43% 8.98%
to 6/30/95
5 Years Ended 6/30/90 8.62% 7.73%
6/30/95
1 Year Ended 6/30/94 11.65% 7.18%
6/30/95
Value of a $1,000 Investment in the Class A shares of the
Income Account:
B-59
<PAGE>
Total Return Total Return
Annualized Annualized
Investment Investment (excluding 4% (including 4%
Period Date sales charge) sales charge)
Life of Account 9/16/85* 8.26% 7.81%
to 6/30/95
5 Years Ended 6/30/90 7.48% 6.61%
6/30/95
1 Year Ended 6/30/94 8.06% 3.74%
6/30/95
*Date of Inception
Value of a $1,000 Investment in the Class A shares of the
Total Return Account:
Total Return Total Return
Annualized Annualized
Investment Investment (excluding 5% (including 5%
Period Date sales charge) sales charge)
Life of Account 9/16/85* 12.37% 11.78%
to 6/30/95
5 Years Ended 6/30/95 11.86% 10.72%
6/30/95
1 Year Ended 6/30/94 15.53% 9.75%
6/30/95
*Date of Inception
Value of a $1,000 Investment in the Class A shares of the
Growth Account:
Total Return Total Return
Annualized Annualized
Investment Investment (excluding 5% (including 5%
Period Date sales charge) sales charge)
Life of Account 9/16/85* 14.66% 14.06%
to 6/30/95
5 Years Ended 6/30/90 14.06% 12.89%
6/30/95
1 Year Ended 6/30/94 22.43% 16.31%
6/30/95
*Date of Inception
B-60
<PAGE>
No shares of any of the LifeSpan Accounts were outstanding
during those periods. No Class B shares of any of the Accounts
were outstanding during the periods.
Each Account may also publish its distribution rate and/or
its effective distribution rate. An Account's distribution rate
is computed by dividing the most recent monthly distribution per
share annualized, by the current net asset value per share. An
Account's effective distribution rate is computed by dividing the
distribution rate by the ratio used to annualize the most recent
monthly distribution and reinvesting the resulting amount for a
full year on the basis of such ratio. The effective distribution
rate will be higher than the distribution rate because of the
compounding effect of the assumed reinvestment. An Account's
yield is calculated using a standardized formula, the income
component of which is computed from the yields to maturity of all
debt obligations held by the Account based on prescribed methods
(with all purchases and sales of securities during such period
included in the income calculation on a settlement date basis),
whereas the distribution rate is based on an Account's last
monthly distribution. An Account's monthly distribution tends to
be relatively stable and may be more or less than the amount of
net investment income and short-term capital gain actually earned
by the Account during the month (see "Dividends, Capital Gains and
Taxes" in the Accounts' Prospectuses).
Other data that may be advertised or published about each
Account include the average portfolio quality, the average
portfolio maturity and the average portfolio duration.
Standardized Yield Quotations. The yield of a class is
computed by dividing the class's net investment income per share
during a base period of 30 days, or one month, by the maximum
offering price per share of the class on the last day of such base
period in accordance with the following formula:
YIELD = 2[ (a-b +1 ) 6 -1]
cd
Where: a = net investment income earned during the period
attributable to the subject class
b = net expenses accrued for the period
attributable to the subject class
B-61
<PAGE>
c = the average daily number of shares of the
subject class outstanding during the period
that were entitled to receive dividends
d = the maximum offering price per share of the
subject class on the last day of the period
Net investment income will be determined in accordance with rules
established by the SEC. The price per share of Class A shares
will include the maximum sales charge (5.00% for the Growth
Account, the Total Return Account and each of the LifeSpan
Accounts and 4.00% for the Government Securities Account and for
the Income Account) imposed on purchases of Class A shares which
decreases with the amount of shares purchased.
General Information. The following publications and other
newspapers and business and financial publications, may be cited
in each Account's advertising and in shareholder materials which
contain articles describing investment results or other data
relative to one or more of the Accounts.
Broker World Value Line
Across the Board Financial World
American Banker Advertising Age
Best's Review Barron's
Business Month Business Insurance
Changing Times Business Week
Economist Consumer Reports
Forbes Financial Planning
Inc. Fortune
Insurance Forum Institutional Investor
Insurance Week Insurance Sales
Journal of the American Society Journal of Accountancy
of CLU & ChFC Journal of Commerce
Life Insurance Selling Life Association News
Lipper Analytical Services, Inc. Manager's Magazine
MarketFacts Money
National Underwriter Nation's Business
New Choices (formerly 50 Plus) New York Times
Pension World Pensions & Investments
Rough Notes Round the Table
U.S. Banker Wall Street Journal
Working Woman Morningstar, Inc.
Financial Services Week Wiesenberger Investment
Kiplinger's Personal Finance Service
Registered Representative Medical Economics
U.S. News & World Report Investment Advisor
CDA Tillinghast
Financial Times American Agent and Broker
Insurance Product News Insurance Times
LIMRA's Marketfacts Professional Insurance Agents
B-62
<PAGE>
Investment Dealers Digest Insurance Review Investor's
Business Daily Insurance Advocate Independent
Agent Professional Agent
California Broker Life Times
Hartford Courant New England Business
Entrepreneur Entrepreneurial Woman
USA Today Business Marketing
Adweek Independent Business
Newsweek Time
Success The Standard
The Boston Globe Crain's
The Washington Post United Press International
Associated Press Bloomberg
Reuter's Business News Features
Business Wire Knight-Ridder
Dow Jones News Service Consumer Digest
From time to time the Company may publish the sales of shares
of one or more of the Accounts on a gross or net basis and for
various periods of time, and compare such sales with sales
similarly reported by other investment companies.
TAXES
Each Account is treated as a separate entity for accounting
and tax purposes. Each Account has qualified and elected or
intends to qualify and elect to be treated as a "regulated
investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), and intends to continue to
so qualify in the future. As such and by complying with the
applicable provisions of the Code regarding the sources of its
income, the timing of its distributions, and the diversification
of its assets, each Account will not be subject to federal income
tax on taxable income (including net short-term and long-term
capital gains) which is distributed to shareholders at least
annually in accordance with the timing requirements of the Code.
Each Account will be subject to a 4% non-deductible federal
excise tax on certain amounts not distributed (and not treated as
having been distributed) on a timely basis in accordance with
annual minimum distribution requirements. Each Account intends
under normal circumstances to avoid liability for such tax by
satisfying such distribution requirements.
Distributions from an Account's current or accumulated
earnings and profits ("E&P"), as computed for federal income tax
purposes, will be taxable as described in the Accounts'
prospectuses whether taken in shares or in cash. Distributions,
if any, in excess of E&P will constitute a return of capital,
which will first reduce an investor's tax basis in an Account's
B-63
<PAGE>
shares and thereafter (after such basis is reduced to zero) will
generally give rise to capital gains. Shareholders electing to
receive distributions in the form of additional shares will have a
cost basis for federal income tax purposes in each share so
received equal to the amount of cash they would have received had
they elected to receive the distributions in cash, divided by the
number of shares received.
If an Account 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"), that Account 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
Account is timely distributed to its shareholders. The Account
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 applicable Account to recognize taxable income
or gain without the concurrent receipt of cash. Any Account that
is permitted to acquire stock in foreign corporations may limit
and/or manage its holdings in passive foreign investment companies
to minimize its tax liability or maximize its return from these
investments.
Foreign exchange gains and losses realized by an Account in
connection with certain transactions involving foreign currency-
denominated debt securities, certain foreign currency futures and
options, foreign currency forward 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 an Account's investment in stock or securities, possibly
including speculative currency positions or currency derivatives
not used for hedging purposes, may increase the amount of gain it
is deemed to recognize from the sale of certain investments held
for less than three months, which gain is limited under the Code
to less than 30% of its annual gross income, and could under
future Treasury regulations produce income not among the types of
"qualifying income" from which the Account must derive at least
90% of its annual gross income.
Some Accounts 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 Accounts
B-64
<PAGE>
anticipate that they generally will not qualify to pass such
foreign taxes and any associated tax deductions or credits through
to their shareholders, who therefore generally will not report
such amounts on their own tax returns.
At the time of an investor's purchase of shares of an Account
(other than Liquid Account), a portion of the purchase price is
often attributable to realized or unrealized appreciation in the
Account's portfolio or undistributed taxable income of the
Account. Consequently, subsequent distributions from such
appreciation or income may be taxable to such investor even if the
net asset value of the investor's shares is, as a result of the
distributions, reduced below the investor's cost for such shares,
and the distributions in reality represent a return of a portion
of the purchase price.
Upon a redemption of shares of an Account, other than Liquid
Account, (including by exercise of the exchange privilege) a
shareholder may realize a taxable gain or loss depending upon his
basis in his shares. Such gain or loss will be treated as capital
gain or loss if the shares are capital assets in the shareholder's
hands and will be long-term or short-term, depending upon the
shareholder's tax holding period for the shares. A sales charge
paid in purchasing shares of an Account cannot be taken into
account for purposes of determining gain or loss on the redemption
or exchange of such shares within 90 days after their purchase to
the extent shares of the Account or another CMIA Account are
subsequently acquired without payment of a sales charge pursuant
to the reinvestment or exchange privilege. Such disregarded load
will result in an increase in the shareholder's tax basis in the
shares subsequently acquired. Also, any loss realized on a
redemption or exchange will be disallowed to the extent the shares
disposed of are replaced with shares of the same Account within a
period of 61 days beginning 30 days before and ending 30 days
after the shares are disposed of, such as pursuant to an election
to reinvest dividends or capital gain distributions automatically.
In such a case, the basis of the shares acquired will be adjusted
to reflect the disallowed loss. Any loss realized upon the
redemption of shares with a tax holding period of six months or
less will be treated as a long-term capital loss to the extent of
any amounts treated as distributions of long-term capital gain
with respect to such shares.
For Federal income tax purposes, each Account is permitted to
carry forward a net capital loss in any year to offset its own
capital gains, if any, during the eight years following the year
of the loss. To the extent subsequent capital gains are offset by
such losses, they would not result in federal income tax liability
to the applicable Account and would not be distributed as such to
shareholders.
B-65
<PAGE>
For purposes of the dividends received deduction available to
corporations, dividends received by an Account, if any, from U.S.
domestic corporations in respect of the stock of such corporations
held by the Account, for federal income tax purposes, for at least
46 days (91 days in the case of certain preferred stock) and
distributed and designated by the Account may be treated as
qualifying dividends. Corporate shareholders must meet the
minimum holding period requirement stated above (46 or 91 days)
with respect to their shares of the applicable Account in order to
qualify for the deduction and, if they borrow to acquire such
shares, may be denied a portion of the dividends received
deduction. The entire qualifying dividend, including the
otherwise deductible amount, will be included in determining the
excess (if any) of a corporate shareholder's adjusted current
earnings over its alternative minimum taxable income, which may
increase its alternative minimum tax liability. Additionally, any
corporate shareholder should consult its tax adviser regarding the
possibility that its basis in its shares may be reduced, for
federal income tax purposes, by reason of "extraordinary
dividends" received with respect to the shares, for the purpose of
computing its gain or loss on redemption or other disposition of
the shares.
Each Account that invests in certain PIKs, zero coupon
securities or certain deferred interest securities (and, in
general, any other securities with original issue discount or with
market discount if the Account elects to include market discount
in income currently) must accrue income on such investments prior
to the receipt of the corresponding cash payments. However, each
Account must distribute, at least annually, all or substantially
all of its net income, including such accrued income, to
shareholders to qualify as a regulated investment company under
the Code and avoid federal income and excise taxes. Therefore, an
Account may have to dispose of its portfolio securities under
disadvantageous circumstances to generate cash, or may have to
leverage itself by borrowing the cash, to satisfy distribution
requirements.
Investment in debt obligations that are at risk of or in
default presents special tax issues for any Account that may hold
such obligations. Tax rules are not entirely clear about issues
such as when the Account may cease to accrue interest, original
issue discount, or market discount, when and to what extent
deductions may be taken for bad debts or worthless securities, how
payments received on obligations in default should be allocated
between principal and income, and whether exchanges of debt
obligations in a workout context are taxable. These and other
issues will be addressed by any Account that may hold such
obligations in order to reduce the risk of distributing
insufficient income to preserve its status as a regulated
B-66
<PAGE>
investment company and seek to avoid becoming subject to federal
income or excise tax.
Different tax treatment, including penalties on certain
excess contributions and deferrals, certain pre-retirement and
post-retirement distributions and certain prohibited transactions,
is accorded to shareholder accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers
for more information.
Limitations imposed by the Code on regulated investment
companies like the Accounts may restrict an Account's ability to
enter into futures, options, and forward transactions.
Certain options, futures and forward foreign currency
transactions undertaken by an Account may cause the Account to
recognize gains or losses from marking to market even though its
positions have not been sold or terminated and affect the
character as long-term or short-term (or, in the case of certain
currency forwards, options and futures, as ordinary income or
loss) and timing of some capital gains and losses realized by the
Account. Also, certain of an Account's losses on its transactions
involving options, futures or forward contracts and/or offsetting
portfolio positions may be deferred rather than being taken into
account currently in calculating the Account's taxable income.
Certain of the applicable tax rules may be modified if an Account
is eligible and chooses to make one or more of certain tax
elections that may be available. These transactions may therefore
affect the amount, timing and character of an Account's
distributions to shareholders. The Accounts will take into
account the special tax rules (including consideration of
available elections) applicable to options, futures or forward
contracts in order to minimize any potential adverse tax
consequences.
The federal income tax rules applicable to interest rate
swaps, caps and floors are unclear in certain respects, and an
Account may be required to account for these transactions in a
manner that, in certain circumstances, may limit the degree to
which it may utilize these transactions.
The foregoing discussion relates solely to U.S. Federal
income tax law as applicable to U.S. persons (i.e., U.S. citizens
or residents and U.S. domestic corporations, partnerships, trusts
or estates) subject to tax under such law. The discussion does
not address special tax rules applicable to certain classes of
investors, such as tax-exempt entities, insurance companies, and
financial institutions. Dividends, capital gain distributions,
and ownership of or gains realized on the redemption (including an
exchange) of the shares of an Account may also be subject to state
and local taxes. Shareholders should consult their own tax
B-67
<PAGE>
advisers as to the federal, state or local tax consequences of
ownership of shares of, and receipt of distributions from, the
Accounts in their particular circumstances.
Non-U.S. investors not engaged in a U.S. trade or business
with which their investment in an Account is effectively connected
will be subject to U.S. Federal income tax treatment that is
different from that described above. These investors may be
subject to nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable tax treaty) on amounts
treated as ordinary dividends from an Account and, unless an
effective IRS Form W-8 or authorized substitute is on file, to 31%
backup withholding on certain other payments from the Account.
Non-U.S. investors should consult their tax advisers regarding
such treatment and the application of foreign taxes to an
investment in any Account.
State and Local. Each Account may be subject to state or
local taxes in jurisdictions in which such Account may be deemed
to be doing business. In addition, in those states or localities
which have income tax laws, the treatment of such Account and its
shareholders under such laws may differ from their treatment under
federal income tax laws, and investment in such Account may have
different tax consequences for shareholders than would direct
investment in such Account's portfolio securities. Shareholders
should consult their own tax advisers concerning these matters.
CUSTODIAN
Portfolio securities of each Account are held pursuant to a
Custodian Agreement between the Manager and State Street,
225 Franklin Street, Boston, Massachusetts 02110. Under the
Custodian Agreement, State Street performs custody, portfolio and
fund accounting services for the Accounts.
TRANSFER AGENT SERVICES
NFDS, P.O. Box 419694, Kansas City, Missouri 64179-0948, is
the transfer agent for each Account. NFDS is an indirect wholly
owned subsidiary of State Street Bank and Trust Company. From
May 1, 1994 to December 31, 1994, each Account paid NFDS an annual
fee as a percentage of average net assets accrued daily as
follows: Liquid Account (0.16%); Government Securities Account
(0.08%); Income Account (0.08%); Total Return Account (0.12%); and
Growth Account (0.13%); plus certain out-of-pocket expenses. For
the period from January 1, 1994 to April 30, 1994, each Account
paid to Citadel Service Company, Inc. (the Accounts' transfer
agent prior to May 1, 1994) an annual fee as a percentage of
average net assets accrued daily as follows: Liquid Account
B-68
<PAGE>
(0.10%); Government Securities Account (0.07%); Income Account
(0.06%); Total Return Account (0.10%); and Growth Account (0.10%);
plus certain out-of-pocket expenses.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Arthur Andersen LLP, has been selected as the independent
certified public accountants of the Company to provide audit
services and assistance and consultation with respect to the
preparation of filings with the SEC.
OTHER INFORMATION
CML has granted the Company the right to use the name,
"Connecticut Mutual," and has reserved the right to withdraw its
consent to the use of such name by the Company at any time, or to
grant the use of such name to any other company. CML was founded
in 1846 and is one of the nation's largest mutual life insurance
companies with nearly 150 years of experience and assets of
$11.5 billion and $105 billion of life insurance in force. CML
has over 1.2 million policyholders and offers a broad range of
insurance, retirement and investment products in all 50 states,
Puerto Rico and the District of Columbia through a network of
general agents and more than 3,000 career agents and brokers.
FINANCIAL STATEMENTS
Each of the CMIA Account's audited financial statements as of
December 31, 1994, together with the notes thereto and the report
of Arthur Andersen LLP are attached to this SAI. Each of the CMIA
Account's unaudited semi-annual financial statements as of June
30, 1995, together with the notes thereto are also attached to
this SAI. In addition, unaudited financial statements as of
August 31, 1995, together with the notes thereto for each of the
LifeSpan Accounts are attached to this SAI. Each of the attached
unaudited financial statements reflect all adjustments which are,
in the opinion of management, necessary to a fair statement of the
results for the interim periods presented. All such adjustments
are of a normal recurring nature.
B-69
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements.
(1) Included in Part A with respect to Connecticut
Mutual Liquid Account, Connecticut Mutual Income Account,
Connecticut Mutual Government Securities Account, Connecticut
Mutual Total Return Account, Connecticut Mutual Growth Account,
CMIA LifeSpan Capital Appreciation Account, CMIA LifeSpan Balanced
Account and CMIA Diversified Income Account:
To be filed by amendment.
(2) Included in Part B with respect to Connecticut
Mutual Liquid Account, Connecticut Mutual Income Account,
Connecticut Mutual Government Securities Account, Connecticut
Mutual Total Return Account, Connecticut Mutual Growth Account,
CMIA LifeSpan Capital Appreciation Account, CMIA LifeSpan Balanced
Account and CMIA Diversified Income Account:
To be filed by amendment.
(b) Exhibits
99.B1 Articles of Incorporation*
99.B1.1 Amendment to Articles of Incorporation
99.B1.2 Amended and Restated Articles of Incorporation
99.B2 By-Laws*
99.B3 Not Applicable
99.B4 Share Certificate*
99.B5 Amendment to Investment Advisory Agreement
between the Registrant, on behalf of each series,
and G.R. Phelps & Co., Inc. to add LifeSpan
Accounts****
99.B5.1 Subadvisory Agreement among the Registrant, on
behalf of respective LifeSpan Account, G.R.
Phelps & Co., Inc. and the respective Subadvisor
and schedule of omitted substantially similar
documents****
<PAGE>
99.B6 Underwriting Agreement between Registrant and
G.R. Phelps & Co., Inc.*
99.B6.1 Amendment (Municipal Accounts) to Amended
Underwriting Agreement between Registrant and
G.R. Phelps & Co., Inc.***
99.B6.2 Amendment (LifeSpan Accounts) to Amended
Underwriting Agreement between Registrant and
G.R. Phelps & Co., Inc.****
99.B6.3 Dealer Agreement with G.R. Phelps & Co., Inc.*
99.B6.4 Underwriting Agreement between Registrant and
Connecticut Mutual Financial Services, L.L.C.
99.B7 Not Applicable
99.B8 Form of Master Custodian Agreement between
Registrant and Investors' Bank & Trust Company***
99.B8.1 Amendment (LifeSpan Accounts) to Custodian
Agreement between Registrant and State Street
Bank and Trust Company****
99.B9 Transfer Agency and Service Agreement between
Registrant and State Street Bank and Trust Co.*
99.B9.1 Amendment (Municipal Accounts) to Transfer Agency
and Service Agreement between Registrant and
State Street Bank and Trust Co.***
99.B9.2 Amendment (LifeSpan Accounts) to Transfer Agency
and Service Agreement between Registrant and
State Street Bank and Trust Co.****
99.B9.3 Form of Subscription Agreement among G.R.
Phelps & Co., Inc., the Registrant, on behalf of
CMIA National Municipals Account, National Tax
Free Portfolio and Eaton Vance Management***
99.B9.4 Form of Subscription Agreement among G.R.
Phelps & Co., Inc., the Registrant, on behalf of
CMIA California Municipals Account, California
Tax Free Portfolio and Eaton Vance Management***
99.B9.5 Form of Subscription Agreement among G.R.
Phelps & Co., Inc., the Registrant, on behalf of
CMIA Massachusetts Municipals Account,
Massachusetts Tax Free Portfolio and Eaton Vance
Management***
C-2
<PAGE>
99.B9.6 Form of Subscription Agreement among G.R.
Phelps & Co., Inc., the Registrant, on behalf of
CMIA New York Municipals Account, New York Tax
Free Portfolio and Eaton Vance Management***
99.B9.7 Form of Subscription Agreement among G.R.
Phelps & Co., Inc., the Registrant, on behalf of
CMIA Ohio Municipals Account, Ohio Tax Free
Portfolio and Eaton Vance Management***
99.B9.8 Form of Administrative Services Agreement between
Registrant, on behalf of CMIA National Municipals
Account, and G.R. Phelps & Co., Inc.***
99.B9.9 Form of Administrative Services Agreement between
the Registrant, on behalf of CMIA California
Municipals Account, and G.R. Phelps & Co.,
Inc.***
99.B9.10 Form of Administrative Services Agreement between
the Registrant, on behalf of CMIA Massachusetts
Municipals Account, and G.R. Phelps & Co.,
Inc.***
99.B9.11 Form of Administrative Services Agreement between
the Registrant, on behalf of CMIA New York
Municipals Account, and G.R. Phelps & Co.,
Inc.***
99.B9.12 Form of Administrative Services Agreement between
the Registrant, on behalf of CMIA Ohio Municipals
Account, and G.R. Phelps & Co., Inc.***
99.B10 Opinion and Consent of Counsel**
99.B10.1 Consent of Counsel in California and New York***
99.B10.2 Consent of Counsel in Ohio***
99.B10.3 Opinion and Consent of Counsel(Rule 24e-2 shares)
99.B10.4. Opinion and Consent of Counsel (Class B shares)
(to be filed with Rule 24f-2 Notice)
99.B11 Not applicable
99.B12 Not applicable
99.B13 Not Applicable
99.B14 Not Applicable
C-3
<PAGE>
99.B15 Form of CMIA National Municipals Account
Rule 12b-1 Plan***
99.B15.1 Form of CMIA California Municipals Account
Rule 12b-1 Plan***
99.B15.2 Form of CMIA Massachusetts Municipals Account
Rule 12b-1 Plan***
99.B15.3 Form of CMIA New York Municipals Account
Rule 12b-1 Plan***
99.B15.4 Form of CMIA Ohio Municipals Account Rule 12b-1
Plan***
99.B15.5 Class A Rule 12b-1 Distribution Plans for the
respective Accounts and Schedule of Substantially
Similar Omitted Documents****
99.B15.6 Class B Rule 12b-1 Distribution Plan for the
respective Accounts and Schedule of Substantially
Similar Omitted Documents
99.B16 Schedule of Computation for Performance
Quotations (CMIA Municipal Accounts)***
99.B17 Not Applicable
99.B18 Rule 18f-3 Multiple Class Plan for the respective
Accounts and Schedule of Substantially Similar
Omitted Documents
99.B19 Powers of Attorney***
____________
* Previously filed as exhibit to Registrant's Registration
Statement and incorporated by reference herein.
** Filed with Registrant's Rule 24f-2 Notice.
*** Previously filed with post-effective amendment no. 19 to the
Registration Statement (File No. 2-75276) (the "Registration
Statement") on July 27, 1994 and incorporated by reference
herein.
**** Previously filed with post-effective amendment No. 20 to the
Registration Statement on February 10, 1995 and incorporated
by reference herein.
C-4
<PAGE>
Item 25. Persons Controlled by or Under Common Control with
Registrant.
The discussion that follows indicates those entities owned directly or
indirectly by Connecticut Mutual Life Insurance Company:
CONNECTICUT MUTUAL LIFE INSURANCE COMPANY
SUBSIDIARIES
AS OF 06/27/95
CM ADVANTAGE, INC.
This is a Connecticut corporation incorporated February 27, 1984. Its
business is acting as general partner in real estate limited
partnerships.
DHC, Inc. owns all the outstanding stock.
CM ASSURANCE COMPANY
This is a Connecticut corporation incorporated July 23, 1986 (CM
Insurance Company) and renamed December 15, 1987. Type of
business - life insurance, endowments, annuities, accident,
disability and health insurance. Connecticut Mutual
owns all the stock.
CM BENEFIT INSURANCE COMPANY
This is a Connecticut corporation incorporated April 22, 1986 as
CM Pension Insurance Company and renamed CM Benefit
Insurance Company on December 15, 1987. Type of business -
life insurance, endowments, annuities, accident, disability
and health insurance. Connecticut Mutual owns all the stock.
CM INSURANCE SERVICES, INC.
A Connecticut corporation incorporated July 20, 1981 as
DIVERSIFIED INSURANCE SERVICES OF AMERICA, INC.
and renamed as CM Insurance Services, Inc. on June 23, 1992.
Type of business - the sale of, solicitation for, or procurement or
making of insurance or annuity contracts and any other type of
contract sold by insurance companies. DHC, Inc. owns all the
issued and outstanding stock.
C-5
<PAGE>
CM INSURANCE SERVICES, INC. (ARKANSAS)
An Arkansas corporation incorporated January 11, 1982 as
Diversified Insurance Services Agency of America and renamed
CM Insurance Services, Inc. on October 19, 1992. Type of business -
the sale of, solicitation for, or procurement or making of insurance or
annuity contracts and any other type of contract sold by insurance
companies. CM Insurance Services, Inc. owns all of the issued
and outstanding common stock.
CM INSURANCE SERVICES, INC. (TEXAS)
A Texas corporation incorporated April 16, 1982 and renamed CM Insurance
Services, Inc. Type of business - the sale of, solicitation for, or
procurement or making of insurance or annuity contracts and any other
type of contract sold by insurance companies. CM Insurance Services,
Inc. controls 100 shares (100%) of the issued and outstanding common
stock through a voting trust.
CM INTERNATIONAL, INC.
A Delaware corporation incorporated July 25, 1985. Type of
business - holding a mortgage pool and issuance of collateralized
mortgage obligations. DHC, Inc. owns all the outstanding stock.
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
This is a Maryland corporation incorporated December 9, 1981 as
Connecticut Mutual Liquid Account, Inc.
It is a diversified open-end management investment company. As of
3/31/94, Connecticut Mutual and its various subsidiaries owned
approximately 30% of its shares; AND
CONNECTICUT MUTUAL FINANCIAL SERVICES SERIES FUND I, INC.
This is a Maryland corporation organized August 17, 1981. It is a
diversified open-end management investment company. Shares of the
fund are sold only to Connecticut Mutual and its affiliates, primarily
CML's Panorama separate account.
CONNECTICUT MUTUAL FINANCIAL SERVICES, LLC
A Connecticut limited liability corporation formed November 10, 1994.
It is a registered broker-dealer. Connecticut Mutual has a 99%
ownership interest and CM Strategic Ventures, Inc. has a 1% ownership
interest.
C. M. LIFE INSURANCE COMPANY
A Connecticut corporation incorporated April 25, 1980. Its business is
the sale of life insurance, endowments, annuities, accident, disability
and accident and health insurance. Connecticut Mutual owns all the common
stock.
C-6
<PAGE>
CM PROPERTY MANAGEMENT, INC.
A Connecticut corporation incorporated December 27, 1976 as URBCO, Inc.,
and renamed CM Property Management, Inc. on October 7, 1991. Type of
business - Real estate holding company DHC, Inc. owns all the stock.
CM STRATEGIC VENTURES, INC.
A Connecticut corporation incorporated October 26, 1987. It acts as
general partner in limited partnerships.
All outstanding stock is held by G.R. Phelps & Co., Inc.
CM TRANSNATIONAL S.A.
A Luxembourg corporation incorporated July 8, 1987. Type of business -
life insurance endowments and annuity contracts. Connecticut Mutual
owns 99.7% and DHC, Inc. owns the remaining 0.3% of outstanding stock.
CML INVESTMENTS I CORP.
A Delaware corporation incorporated December 26, 1991. This Company is
organized to authorize, co-issue, sell and deliver jointly with CML
Investments I L.P. bonds, notes or other obligations secured by
primarily non-investment grade corporate debt obligations and other
collateral. CML Investments I L.P. owns all of the outstanding stock
(State House I Corp. is the General Partner of CML Investments I L.P.).
DHC, INC.
A Connecticut corporation incorporated December 27, 1976. Type of
business - holding company.
Connecticut Mutual owns all the stock.
DIVERSIFIED INSURANCE SERVICES AGENCY OF AMERICA, INC. (DISA OHIO)
An Ohio corporation incorporated March 18, 1982. Type of business - the
sale of, solicitation for, or procurement or making of insurance or
annuity contracts and any other type of contract sold by insurance
companies. CM Insurance Services, Inc. holds 100 shares (100%) of the
issued and outstanding Class B (non-voting) common. In addition, it
controls 1 share (100%) of the issued and outstanding Class A (voting)
common through a voting trust.
C-7
<PAGE>
DIVERSIFIED INSURANCE SERVICES AGENCY OF AMERICA, INC. (DISA MASSACHUSETTS)
A Massachusetts corporation incorporated March 18, 1982. Type of
business - the sale of, solicitation for, or procurement or making of
insurance or annuity contracts and any other type of contract sold by
insurance companies.
CM Insurance Services, Inc. owns all of the issued and outstanding
stock.
DIVERSIFIED INSURANCE SERVICES AGENCY OF AMERICA, INC. (DISA ALABAMA)
An Alabama corporation incorporated January 21, 1982. Type of
business - the sale of, solicitation for, or procurement or making of
insurance or annuity contracts and any other type of contract sold by
insurance companies.
CM Insurance Services, Inc. owns all of the issued and outstanding
stock.
DIVERSIFIED INSURANCE SERVICES AGENCY OF AMERICA, INC. (DISA NEW YORK)
A New York corporation incorporated January 20, 1982. Type of
business - the sale of, solicitation for, or procurement or making of
insurance or annuity contracts and any other type of contract sold by
insurance companies.
CM Insurance Services, Inc. owns all of the issued and outstanding
common stock.
DIVERSIFIED INSURANCE SERVICES AGENCY OF AMERICA, INC. (DISA HAWAII)
A Hawaii corporation incorporated January 13, 1982. Type of
business - the sale of, solicitation for, or procurement or making of
insurance or annuity contracts and any other type of contract sold by
insurance companies.
CM Insurance Services, Inc. owns all of the issued and outstanding
common stock.
G. R. PHELPS & CO., INC.
A Connecticut corporation incorporated December 27, 1976 as AGCO, Inc.,
renamed Connecticut Mutual Financial Services, Inc. on February 10,
1981, renamed again to G. R. Phelps & Co. on May 31, 1989. Type of
business - broker/dealer and investment adviser.
DHC, Inc. owns all the outstanding stock.
C-8
<PAGE>
STATE HOUSE I CORPORATION
A Delaware corporation incorporated December 26, 1991. This Company is
organized to (a) act as a general partner of CML Investments I L.P.
which will authorize, issue, sell and deliver, both by itself and
jointly with CML Investments I Corp. bonds, notes or other obligations
secured by primarily non-investment grade corporate debt obligations;
(b) to act as general partner of State House I L.P. which will hold a
limited partnership interest in CML Investments I L.P.
DHC, Inc. owns all of the outstanding stock.
SUNRIVER PROPERTIES, INC. - SHELL CORPORATION
This is an Oregon corporation incorporated February 8, 1965. It is not
actively engaged in any business. However, its name is a valuable asset
which is associated with a development project in which CML has a
substantial interest.
Connecticut Mutual owns all the outstanding stock.
URBAN PROPERTIES INC.
A Delaware corporation incorporated March 30, 1970. Type of business -
general partner in limited partnerships, real estate holding and
development company.
DHC, Inc. owns all the outstanding stock.
Item 26. Number of Holders of Securities.
Number of Record Holders
Title of Class as of June 30, 1995
Connecticut Mutual Liquid Account 4,843
Connecticut Mutual Government
Securities Account 2,786
Connecticut Mutual Income Account 1,856
Connecticut Mutual Total Return Account 14,005
Connecticut Mutual Growth Account 6,603
CMIA National Municipals Account 112
CMIA California Municipals Account 7
CMIA Massachusetts Municipals Account 5
CMIA New York Municipals Account 7
CMIA Ohio Municipals Account 32
CMIA LifeSpan Capital Appreciation Account 73
CMIA LifeSpan Balanced Account 52
CMIA LifeSpan Diversified Income Account 16
________
30,397
Total Holders of Securities ________
C-9
PAGE>
Item 27. Indemnification.
Reference is made to Article VI of By-laws filed with Post-
Effective Amendment Number 13.
Item 28. Business and Other Connections of Investment Adviser.
All of the information required by this item is set forth in
the Forms ADV, as amended, of the Registrant's investment adviser,
G.R. Phelps & Co., Inc. (File No. 801-16182), and subadvisers,
Scudder, Stevens & Clark, Inc. (File No. 801-252), Pilgrim,
Baxter & Assoc. Ltd. and BEA Associates. The following sections
of each such Form ADV are incorporated herein by reference:
(a) Items 1 and 2 of Part 2; and (b) Section IV, Business
Background, of each Schedule D.
Item 29. Principal Underwriters.
Registrant's distributor, Connecticut Mutual Financial Services, LLC.
("CMFS") is a majority owned subsidiary of Connecticut Mutual Life
Insurance Company ("CML"). CMFS is the principal underwriter for
Panaroma Separate Account, Panaroma Plus Separate Account and
Connecticut Mutual Variable Life Separate Account I, each a separate
account of CML and a registered investment company. Panorama Separate
Account and Panaroma Plus Separate Account are used to fund variable
annuity policies. Connecticut Mutual Variable Life Separate Account I
is used to fund variable annuity and variable life polcies. CMFS is
also principal underwriter for the Connecticut Mutual Financial Services
Series Fund I, Inc., an open-end investment company whose shares are
are offered to insurance company separate accounts.
The Directors and principal officers of CMFS and their
principal occupations during the last two years are as follows:
Name* Position with CMFS Position with
Registrant
Frank G. Dranginis President None
Emelia M. Bruno Financial and Operations None
Principal
Theresa M. Squillacote Compliance Officer None
Ann Iseley Vice President None
Ann F. Lomeli Secretary Secretary
* Principal Business Address of each person listed above is 140 Garden
Street, Hartford, Connecticut 06154.
C- 10
<PAGE>
Item 30. Location of Accounts and Records.
Books or other documents required to be maintained by the
Registrant by Section 31(a) of the Investment Company Act of 1940
and the Rules promulgated thereunder are maintained by the
Registrant's custodians, Investors Bank & Trust Company,
24 Federal Street, Boston, MA 02110 and 89 South Street, Boston,
MA 02111 (with respect to the CMIA Municipal Accounts Only) and
State Street Bank and Trust Company, 225 Franklin Street, Boston,
MA 02110 and the Registrant's transfer agent, NFDS, 1005
Baltimore, 5th Floor, Kansas City, MO 64105, with the exception
of certain portfolio trading documents (with respect to CMIA
Municipal Accounts only) which are in the possession and custody
of Eaton Vance Management, 24 Federal Street, Boston, MA 02110.
Registrant's financial ledgers and other corporate records are
maintained at its offices at 140 Garden Street, Hartford,
CT 06154. Registrant is informed that all applicable accounts,
books and documents (with respect to CMIA Municipal Accounts only)
required to be maintained by registered investment advisers are in
the custody and possession of Eaton Vance Management.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Not applicable
(b) The Registrant undertakes to file a post-effective
amendment to the Registration Statement with respect to
the LifeSpan Accounts, using financial statements which
need not be certified, within four to six months from
the effective date of post-effective amendment no. 22.
(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.
(d) The Registrant undertakes to comply with Section 16(c)
of the Investment Company Act of 1940, as amended, as it
relates to the assistance to be rendered to shareholders
with respect to the call of a meeting to replace a
director.
C-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
the Registrant certifies that it has caused this Post-Effective
Amendment No. 23 to the Registration Statement ("PEA No. 23") to
be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hartford, State of Connecticut, on the
19th day of July, 1995.
CONNECTICUT MUTUAL INVESTMENT
ACCOUNTS, INC.
By: *Donald H. Pond, Jr.
Donald H. Pond, Jr.
President
Pursuant to the requirements of the Securities Act of 1933,
this PEA No. 23 has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
*Donald H. Pond, Jr. President and Director
Donald H. Pond, Jr. (Principal Executive
Officer)
*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.
*Linda M. Napoli Treasurer
Linda M. Napoli (Principal Financial
and Accounting Officer)
*By: Michael A. Chong Attorney-in-fact July 19, 1995
Michael A. Chong
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER PAGE NO
99.B1.1 Articles Supplementary to the Company's Articles of
Amendment and Restatement to add the CMIA
LifeSpan Capital Appreciation Account, CMIA
LifeSpan Balanced Account and the CMIA LifeSpan
Diversified Income Account
99.B1.2 Amended and Restated Articles of Incorporation
99.B6.4 Underwriting Agreement between Registrant and
Connecticut Mutual Financial Services, L.L.C.
99.B10.3 Opinion and Consent of Counsel
99.B15.6 Class B Rule 12b-1 Distribution Plan for the
respective Accounts and Schedule of
substantially Similar Omitted Documents
99.B18 Rule 18f-3 Plan Multiple Class Plan for the
respective Accounts and Schedule of
substantially Similar Omitted Documents
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
ARTICLES SUPPLEMENTARY
Connecticut Mutual Investment Accounts, Inc., a Maryland
corporation (the "Corporation"), having its principal office in
Baltimore, Maryland, hereby certifies to the State Department
of Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the
Board of Directors of the Corporation by Article IV of the
Corporation's Articles of Incorporation, the Board of Directors
has duly divided and re-classified three billion
(3,000,000,000) shares of the authorized and unissued shares of
the Connecticut Mutual Investment Accounts, Inc. into the
following new and existing classes and has provided for the
issuance of such classes:
<TABLE>
<CAPTION>
CLASS NUMBER OF
SHARES
<S> <C>
Liquid Account 600,000,000
Government Securities Account 200,000,000
Income Account 200,000,000
Total Return Account 200,000,000
Growth Account 200,000,000
CMIA National Municipals Account 200,000,000
CMIA California Municipals Account 200,000,000
CMIA Massachusetts Municipals Account 200,000,000
CMIA New York Municipals Account 200,000,000
CMIA Ohio Municipals Account 200,000,000
CMIA LifeSpan Capital Appreciation
Account 200,000,000
CMIA LifeSpan Balanced Account 200,000,000
CMIA LifeSpan Diversified Income
Account 200,000,000
</TABLE>
SECOND: The terms of the Common Stock in each such classes
are as set forth in Article IV of the Company's Articles of
Incorporation.
<PAGE>
IN WITNESS WHEREOF, Connecticut Mutual Investment Accounts,
Inc. has caused these presents to be signed in its name and on
its behalf by its President and witnessed by its Secretary on
this
May 8, 1995
WITNESS: CONNECTICUT MUTUAL
INVESTMENT ACCOUNTS, INC.
/S/ ANN F. LOMELI By: /S/ DONALD H. POND
Ann F. Lomeli Donald H. Pond
Secretary President
THE UNDERSIGNED, President of Connecticut Mutual
Investment Accounts, Inc., who executed on behalf of the
Corporation the Articles Supplementary of which this
Certificate is made a part, hereby acknowledges in the name and
on behalf of said Corporation the foregoing Articles
Supplementary to be the corporate act of said Corporation and
hereby certifies that the matters and fact set forth herein
with respect to the authorization and approval thereof are true
in all material respects under the penalties of perjury.
/S/ DONALD H. POND
Donald H. Pond
President
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
Connecticut Mutual Investment Accounts, Inc., a Maryland corporation
having its principal place of business in Maryland in Baltimore City, Maryland
(which is hereinafter called the "Corporation") hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended by:
Changing and reclassifying each of the shares of Common Stock (par value
$0.10 per share) of the Corporation which is issued and outstanding as of the
close of business on the effective date of this amendment into one share of
Common Stock (par value $0.001 per share) and by transferring from the account
designated "common stock" to the account designated "capital surplus" $0.99
for each share of common stock outstanding immediately after the change and
reclassification.
SECOND: The Charter of the Corporation is hereby further amended and
completely restated so that the same shall read as follows:
ARTICLE I
NAME
The name of the corporation (which is hereinafter called the
"Corporation") is:
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
ARTICLE II
PURPOSES AND POWERS
(a) The purposes for which the Corporation is formed and the
business and objects to be carried on and promoted by it are:
(1) To engage generally in the business of investing,
reinvesting, owning, holding or trading in securities, as defined in the
Investment Company Act of 1940, as from time to time amended (hereinafter
referred to as the "Investment Company Act"), as an investment company
classified under the Investment Company Act as a management company.
(2) To engage in any one or more businesses or
transactions, or to acquire all or any portion of any entity engaged in any
one or more businesses or transactions, which the Board of Directors may from
time to time authorize or approve, whether or not related to the business
described elsewhere in this Article or to any other business at the time or
theretofore engaged in by the Corporation.
(3) To hold, invest and reinvest its assets in securities,
including securities of other investment companies and other instruments and
obligations, and in connection therewith, to hold part or all of its assets in
cash.
(4) To subscribe for, invest in, purchase or otherwise
acquire, own, hold, sell, exchange, pledge or otherwise dispose of, securities
of every nature and kind, including, without limitation, all types of stocks,
bonds, debentures, notes, other securities or obligations or evidences or
indebtedness or ownership issued or created by any and all persons,
associations, agencies, trusts or corporations, public or private, whether
created, established or organized under the laws of the United States, any of
the States, or any territory or district or colony or possession thereof, or
under the laws of any foreign country, and also foreign and domestic
government and municipal obligations, bank acceptances and commercial paper,
to pay for the same in cash or by the issue of stock, bonds, or notes of this
Corporation or otherwise; and while owning and holding any such securities, to
exercise all the rights, powers and privileges of a stockholder or owner,
including, and without
<PAGE>
limitation, the right to delete and assign to one or
more persons, firms, associations, or corporations the power to exercise any
of said rights, powers and privileges in respect of any such securities; to
borrow money or otherwise obtain credit and, if required, to secure the same
by mortgaging, pledging or otherwise encumbering as security the assets of
this Corporation.
(5) To issue and sell shares of its own capital stock in
such amounts and on such terms and conditions, for such purposes and for such
amount or kind of consideration now or hereafter permitted by the Maryland
General Corporation Law and by this charter, as its Board of Directors may
determine, provided, however, that the value of the consideration per share to
be received by the Corporation upon the sale or other disposition of any
shares of its capital stock shall be not less than the par value per share of
such capital stock outstanding at the time of such event.
(6) To redeem, purchase or otherwise acquire, hold,
dispose of, resell, transfer, reissue or cancel (all without the vote or
consent of the stockholders of the Corporation) shares of its capital stock,
in any manner and to the extent now or hereafter permitted by the General
Corporation Law of the State of Maryland and by the Corporation's charter.
(7) To do any and all such further acts or things and to
exercise any and all such further powers or rights as may be necessary,
incidental, relative, conducive, appropriate or desirable for the
accomplishment, carrying out or attainment of any of the foregoing purposes or
objects.
(b) The foregoing enumerated purposes and objects shall be in no
way limited or restricted by reference to, or inference from, the terms of any
other clause of this or any other Article of the charter of the Corporation,
and each shall be regarded as independent; and they are intended to be and
shall be construed as powers as well as purposes and objects of the
Corporation and shall be in addition to and not in limitation of the general
powers of corporations under the General Laws of the State of Maryland.
ARTICLE III
PRINCIPAL OFFICE AND RESIDENT AGENT
The present address of the principal office of the Corporation in this
State is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore,
Maryland 21202. The name and address of the resident agent of the Corporation
in this State are The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. Said resident agent is a Maryland corporation.
ARTICLE IV
CAPITAL STOCK
(a) The total number of shares of stock of all classes and
series which the Corporation initially has authority to issue is Three Billion
(3,000,000,000) shares of capital stock (par value $0.001 per share),
amounting in aggregate par value to $3,000,000. All of such shares are
initially classified as "Common Stock". The Board of Directors may classify
or reclassify any unissued shares of capital stock (whether or not such shares
have been previously classified or reclassified) from time to time by setting
or changing in any one or more respects the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption of such shares of stock.
(b) Unless otherwise prohibited by law, so long as the
Corporation is registered as an open-end company under the Investment Company
Act, the Board of Directors shall have the power and authority, without the
approval of the holders of any outstanding shares, to increase or decrease the
number of shares of capital stock or the number of shares of capital stock of
any class or series that the Corporation has authority to issue.
(c) The authorized shares of Common Stock shall be classified
into the following series of Common Stock, each series comprising the number
of shares indicated, subject to the authority of the Board of Directors to
classify or reclassify any unissued shares of capital stock and to the
authority of the Board of
<PAGE>
Directors to increase or decrease the number of
shares of capital stock or the number of shares of capital stock of any class
or series that the Corporation has the authority to issue:
<TABLE>
<CAPTION>
SERIES NUMBER OF SHARES IN SERIES
<S> <C>
Connecticut Mutual Government
Account Common Stock 300,000,000
Connecticut Mutual Income Account|
Common Stock 300,000,000
Connecticut Mutual Total Return Account|
Common Stock 300,000,000
Connecticut Mutual Growth Account|
Common Stock 300,000,000
Connecticut Mutual Liquid Account|
Common Stock 800,000,000
CMIA National Municipals Account Common|
Stock 200,000,000
CMIA California Municipals Account
Common Stock | 200,000,000
CMIA Massachusetts Municipals Account
Common Stock | 200,000,000
CMIA New York Municipals Account Common|
Stock 200,000,000
CMIA Ohio Account Municipals Common|
Stock 200,000,000
</TABLE>
Any series of Common Stock shall be referred to herein individually as a
"Series" and collectively, together with any further series from time to time
established, as the "Series".
(d) The following is a description of the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption of the
shares of Common Stock classified into the Series listed above and any
additional Series of Common Stock of the Corporation (unless provided
otherwise by the Board of Directors with respect to any such additional Series
at the time it is established and designated):
(1) ASSETS BELONGING TO SERIES. All consideration
received by the Corporation from the issue or sale of shares of a particular
Series, together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets, and
any funds or payments derived from any investment or reinvestment of such
proceeds in whatever form the same may be, shall irrevocably belong to that
Series for all purposes, subject only to the rights of creditors, and shall be
so recorded upon the books of account of the Corporation. Such consideration,
assets, income, earnings, profits and proceeds, together with any General
Items (as defined below) allocated to that Series as provided in the following
sentence, are herein referred to collectively
<PAGE>
as "assets belong to" that Series. In the event that there are any assets,
income, earnings, profits or proceeds which are not readily identifiable as
belonging to any particular Series (collectively, "General Items"), such
General Items shall be allocated by or under the supervision of the Board of
Directors to and among any one or more of the Series established and designated
from time to time in such manner and on such basis as the Board of Directors, in
its sole discretion, deems fair and equitable; and any General Items so
allocated to a particular Series shall belong to that Series. Each such
allocation by the Board of Directors shall be conclusive and binding for all
purposes.
(2) LIABILITIES OF SERIES. The assets belonging to each
particular Series shall be charged with the liabilities of the Corporation in
respect of that Series and all expenses, costs, charges and reserves
attributable to that Series, and any general liabilities, expenses, costs,
charges or reserves of the Corporation which are not readily identifiable as
pertaining to any particular Series, shall be allocated and charged by or
under the supervision of the Board of Directors to and among any one or more
of the Series established and designated from time to time in such manner and
on such basis as the Board of Directors, in its sole discretion, deems fair
and equitable. The liabilities, expenses, costs, charges and reserves
allocated and so charged to a Series are herein referred to collectively as
"liabilities of" that Series. Each allocation of liabilities, expenses,
costs, charges and reserves by or under the supervision of the Board of
Directors shall be conclusive and binding for all purposes.
(3) DIVIDENDS AND DISTRIBUTIONS. Dividends and capital
gains distributions on shares of a particular Series may be paid with such
frequency, in such form and in such amount as the Board of Directors may
determine by resolution adopted from time to time, or pursuant to a standing
resolution or resolutions adopted only once or with such frequency as the
Board of Directors may determine, after providing for actual and accrued
liabilities of that Series. All dividends on shares of a particular Series
shall be paid only out of the income belonging to that Series and all capital
gains distributions on shares of a particular Series shall be paid only out of
the capital gains belonging to that Series. All dividends and distributions
on shares of a particular Series shall be distributed pro rata to the holders
of that Series in proportion to the number of shares of that Series held by
such holders at the date and time of record established for the payment of
such dividends or distributions, except that in connection with any dividend
or distribution program or procedure, the Board of Directors may determine
that no dividend or distribution shall be payable on shares as to which the
stockholder's purchase order and/or payment have not been received by the time
or times established by the Board of Directors under such program or
procedure.
Dividends and distributions may be paid in cash,
property or additional shares of the same or another Series, or a combination
thereof, as determined by the Board of Directors or pursuant to any program
that the Board of Directors may have in effect at the time for the election by
stockholders of the form in which dividends or distributions are to be paid.
Any such dividend or distribution paid in shares shall be paid at the current
net asset value thereof.
(4) VOTING. On each matter submitted to a vote of the
stockholders, each holder of shares shall be entitled to one vote for each
share standing in his name on the books of the Corporation, irrespective of
the Series thereof, and all shares of all Series shall vote as a single class
("Single Class Voting"); provided, however, that (i) as to any matter with
respect to which a separate vote of any Series is required by the Investment
Company Act or by the Maryland General Corporation Law, such requirement as to
a separate vote by that Series shall apply in lieu of Single Class Voting,
(ii) in the event that the separate vote requirement referred to in clause (i)
above applies with respect to one or more Series, then, subject to clause
(iii) below, the shares of all other Series shall vote as a single class; and
(iii) as to any matter which does not affect the interest of a particular
Series, including liquidation of another Series as described in subsection (7)
below, only the holders of shares of the one or more affected Series will be
entitled to vote.
(5) REDEMPTION BY STOCKHOLDERS. Each holder of shares of
a particular Series shall have the right at such times as may be permitted by
the Corporation to require the Corporation to redeem all or any part of his
shares of that Series, at a redemption price per share equal to the net asset
value per share of that Series next determined after the shares are properly
tendered for redemption, less such redemption fee or sales
<PAGE>
charges, if any, as may established by the Board of Directors in its sole
discretion in accordance with any applicable provisions of the Investment
Company Act. Payment of the redemption price shall be in cash; provided,
however, that if the Board of Directors determines, which determination shall
be conclusive, that conditions exist which may payment wholly in cash unwise
or undesirable, the Corporation may, to the extent and in the manner permitted
by the Investment Company Act,make payment wholly or partly in securities or
other assets belonging to the Series of which the shares being redeemed are a
part, at the value of such securities or assets used in such determination of
net asset value.
Notwithstanding the foregoing, the Corporation may
postpone payment of the redemption price and may suspend the right of the
holders of shares of any Series to require the Corporation to redeem shares of
that Series during any period or at any time when and to the extent
permissible under the Investment Company Act.
(6) REDEMPTION BY CORPORATION. The Board of Directors may
cause the Corporation to redeem at their net asset value the shares of any
Series held in an account (i) if the redemption is, in the opinion of the
Board of Directors of the Corporation, desirable in order to prevent the
Corporation from being deemed a "personal holding company" within the meaning
of the Internal Revenue Code of 1986, as from time to time amended, (ii) if
the number of shares in the account maintained by the Corporation or its
transfer agent for any stockholder is less than a specified number determined
by the Board of Directors of the Corporation, from time to time, but in no
event more than one hundred (100) shares, and the stockholder has been given
at least thirty (30) days' written notice of the redemption and has failed to
make additional purchases of shares in an amount sufficient to bring the
number of shares in his account to the specified number of shares or more
before the redemption is effected by the Corporation or (iii) if the
stockholder has failed to furnish a correct certified social security or tax
identification number required by the Corporation to be obtained.
(7) LIQUIDATION. In the event of the liquidation of a
particular Series, the stockholders of the Series that is being liquidated
shall be entitled to receive, as a class, when and as declared by the Board of
Directors, the excess of the assets belonging to that Series over the
liabilities of that Series. The holders of shares of any particular Series
shall not be entitled thereby to any distribution upon liquidation of any
other Series. The assets so distributable to the stockholders of any
particular Series shall be distributed among such stockholders in proportion
to the number of shares of that Series held by them and recorded on the books
of the Corporation. The liquidation of any particular Series in which there
are shares then outstanding may be authorized by vote of a majority of the
Board of Directors then in office, and, if required under Maryland or other
applicable law, subject to the approval of a majority of the outstanding
voting securities of that Series, as defined in the Investment Company Act,
and without the vote of the holders of shares of any other Series. The
liquidation of a particular Series may be accomplished, in whole or in part,
by the transfer of assets of such Series another Series or by the exchange of
shares of such Series for the shares of another Series.
(8) NET ASSET VALUE PER SHARE. The net asset value per
share of any Series shall be the quotient obtained by dividing the value of
the net assets of that Series (being the value of the assets belonging to that
Series less the liabilities of that Series) by the total number of shares of
that Series outstanding, all as determined by or under the direction of the
Board of Directors in accordance with generally accepted accounting principles
and the Investment Company Act. Subject to the applicable provisions of the
Investment Company Act, the Board of Directors, in its sold discretion, may
prescribe and shall set forth in the By-Laws of the Corporation or in a duly
adopted resolution of the Board of Directors such bases and times for
determining the value of the assets belonging to, and the net asset value per
share of outstanding shares of, each Series, or the net income attributable to
such shares, as the Board of Directors deems necessary or desirable. The
Board of Directors shall have full discretion, to the extent not inconsistent
with the Maryland General Corporation Law and the Investment Company Act, to
determine which items shall be treated as income and which items as capital
and whether any item of expense shall be charged to income or capital. Each
such determination and allocation shall be conclusive and binding for all
purposes.
The Board of Directors may determine to maintain the net
asset value per share of any Series at a designated constant dollar amount and
in connection therewith may adopt procedures not inconsistent
<PAGE>
with the Investment Company Act for the continuing declaration of income
attributable to that Series as dividends and for the handling of any losses
attributable to that Series. Such procedures may provide that in the event of
any loss, each stockholder shall be deemed to have contributed to the capital of
the Corporation attributable to that Series his pro rata portion of the total
number of shares required to be canceled in order to permit the net asset
value per share of that Series to be maintained, after reflecting such loss,
at the designated constant dollar amount. Each stockholder of the Corporation
shall be deemed to have agreed, by his investment in any Series with respect
to which the Board of Directors shall have adopted any such procedure, to make
the contribution referred to in the preceding sentence in the event of any
such loss.
(9) CONVERSION OF EXCHANGE RIGHTS. Subject to compliance
with the requirements of the Investment Company Act, the Board of Directors
shall have the authority to provide that holders of shares of any Series shall
have the right to convert or exchange said shares into shares of one or more
other Series of shares in accordance with such requirements and procedures as
may be established by the Board of Directors.
(e) The Series identified in paragraph (c) of this Article IV and
any additional Series of Common Stock (unless otherwise specified in the
articles supplementary designating such Series) shall each initially have
three classes of shares, which shall be designated Class A, Class B and Class
C, each consisting, until further changed, of the lesser of (x) the total
number of shares of each such Series designated and specified in Paragraph (c)
above or (y) the number of shares that could be issued by issuing all of the
shares of that Series currently or hereafter classified less the total number
of shares of all other classes of such Series then issued and outstanding.
Any class of a Series of Common Stock shall be referred to herein individually
as a "Class" and collectively, together with any further class or classes of
such Series from time to time established, as the "Classes". For each of the
Series listed above, all of the shares of such Series that are currently
issued and outstanding shall be referred to as Class A shares.
(f) All Classes of a particular Series of Common Stock of the
Corporation shall represent the same interest in the Corporation and have
identical voting, dividend, liquidation, and other rights with any other
shares of Common Stock of that Series; provided, however, that notwithstanding
anything in the charter of the Corporation to the contrary:
(1) The Class A shares are subject to such front-end sales
loads as are currently in effect for such shares and may be
subject to such front-end sales loads and fees and expenses under
a Rule 12b-1 plan, established by the Board of Directors in
accordance with the Investment Company Act and applicable rules
and regulations of the National Association of Securities Dealers,
Inc., as may be approved by the stockholders of such Class from
time to time to the extent required by applicable Maryland law and
the Investment Company Act. The Class A shares are also subject
to such contingent deferred sales charges as are currently in
effect for such shares or as may be established by the Board of
Directors in accordance with the Investment Company Act and
applicable rules and regulations of the National Association of
Securities Dealers, Inc., as may be approved by the stockholders
of such Class from time to time to the extent required by
applicable Maryland law and the Investment Company Act.
(2) The Class B and Class C shares shall be subject to such
fees and expenses under a Rule 12b-1 plan as may be established
from time to time by the Board of Directors and such contingent
deferred sales charges as may be established from time to time by
the Board of Directors in accordance with the Investment Company
Act and applicable rules and regulations of the National
Association of Securities Dealers, Inc.
(3) Expenses related solely to a particular Class of a
Series (including, without limitation, distribution expenses under
a Rule 12b-1 plan and administrative expenses under an
administration or service agreement, plan or other arrangement,
however designated) shall be borne by that Class and shall be
appropriately reflected (in the manner determined by the Board of
Directors) in the net asset value, dividends, distribution and
liquidation rights of the shares of that Class.
<PAGE>
(4) At such time as may be determined by the Board of
Directors in accordance with the Investment Company Act and
applicable rules and regulations of the National Association of
Securities Dealers, Inc. and reflected in the current registration
statement relating to a Series, shares of a particular Class of a
Series may be automatically converted into shares of another
Class; provided, however, that such conversion shall be subject,
at the election of the Board of Directors, to the continuing
availability of a private letter ruling of the Internal Revenue
Service or an opinion of counsel to the effect that such
conversion does not constitute a taxable event under federal
income tax law and shall otherwise be in accordance with the
Investment Company Act. The Board of Directors, in its sole
discretion, may suspend any conversion rights if such opinion is
no longer available.
(5) As to any matter with respect to which a separate vote
of any Class of a Series is required by the Investment Company Act
or by the Maryland General Corporation Law (including, without
limitation, approval of any plan, agreement or other arrangement
referred to in subsection (3) above), such requirement as to a
separate vote by that Class shall apply in lieu of Single Class
Voting, and if permitted by the Investment Company Act or the
Maryland General Corporation Law, the Classes of more than one
Series shall vote together as a single class on any such matter
which shall have the same effect on each such Class. As to any
matter which does not affect the interest of a particular Class of
a Series, only the holders of shares of the affected Classes of
that Series shall be entitled to vote.
(g) The Corporation may issue and sell fractions of shares of
capital stock having pro rata all the rights of full shares, including,
without limitation, the right to vote and to receive dividends, and whereever
the words "share" or "shares" are used in the charter or By-Laws of the
Corporation, they shall be deemed to include fractions of shares where the
context does not clearly indicate that only full shares are intended.
(h) The Corporation shall not be obligated to issue certificates
representing shares of any Class or Series of capital stock. At the time of
issue or transfer of shares without certificates, the Corporation shall
provide the stockholder with such information as may be required under the
Maryland General Corporation Law.
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING AND REGULATING
CERTAIN POWERS OF THE CORPORATION AND OF
THE DIRECTORS AND STOCKHOLDERS
(a) The number of directors of the Corporation may be increased
or decreased pursuant to the By-Laws of the Corporation, but shall never be
less than the minimum number permitted by the General Laws of the State of
Maryland now or hereafter in force.
(b) The Board of Directors is hereby empowered to authorize the
issuance from time to time of shares of its stock of any class or series,
whether now or hereafter authorized, or securities convertible into shares of
its stock of any class or series, whether now of hereafter authorized, for
such consideration as may be deemed advisable by the Board of Directors and
without any action by the stockholders.
(c) No holder of any stock or any other securities of the
Corporation, whether now or hereafter authorized, shall have any preemptive
right to subscribe for or purchase any stock or any other securities of the
Corporation other than such, if any, as the Board of Directors, in its sole
discretion, may determine and at such price or prices and upon such other
terms as the Board of Directors, in its sole discretion, may fix; and any
stock or other securities which the Board of Directors may determine to offer
for subscription may, as the Board of Directors in its sole discretion shall
determine, be offered to the holders of any class, series or type of stock or
other securities at the time outstanding to the exclusion of the holders of
any or all other classes, series or types of stock or other securities at the
time outstanding.
<PAGE>
(d) The Board of Directors of the Corporation shall, consistent
with applicable law, power in its sole discretion to determine from time to
time in accordance with sound accounting practice or other reasonable
valuation methods what constitutes annual or other net profits, earnings,
surplus, or net assets in excess of capital; to determine the that retained
earnings or surplus shall remain in the hands of the Corporation; to set apart
out of any funds of the Corporation such reserve or reserves in such amount or
amounts and for such proper purpose or purposes as it shall determine and to
abolish any such reserve or any part thereof; to distribute and pay
distributions or dividends in stock, cash or other securities or property, out
of surplus or any other funds or amounts legally available therefor, at such
times and to the stockholders of record on such dates as it may, from time to
time, determine; and to determine whether and to what extent and at what times
and places and under what conditions and regulations the books, accounts and
documents of the Corporation, or any of them, shall be open to the inspection
of stockholders, except as otherwise provided by statute or by the By-Laws,
and, except as so provided, no stockholder shall have any right to inspect any
book, account or document of the Corporation unless authorized so to do by
resolution of the Board of Directors.
(e) Notwithstanding any provision of Maryland law requiring the
authorization of any action by a greater proportion than a majority of the
total number of shares of all classes and series of capital stock or of the
total number of shares of any class or series of capital stock entitled to
vote as a separate class, such action shall be valid and effective if
authorized by the affirmative vote of the holders of a majority of the total
number of shares of all classes and series outstanding and entitled to vote
thereon, or of the class or series entitled to vote thereon as a separate
class, as the case may be, except as otherwise provided in the charter of the
Corporation.
(f) The Corporation shall indemnify (i) its directors and
officers, whether serving the Corporation or at its request any other entity,
to the full extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of expenses under
the procedures and to the full extent permitted by law, and (ii) other
employees and agents to such extent as shall be authorized by the Board of
Directors or the By-Laws and as permitted by law. Nothing contained herein
shall be construed to protect any director or officer of the Corporation
against any liability to the Corporation or its security holders to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. The foregoing rights of indemnification shall not be exclusive of any
other rights to which those seeking indemnification may be entitled. The
Board of Directors may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt, approve and
amend from time to time such by-laws, resolutions or contracts implementing
such provisions or such further indemnification arrangements as may be
permitted by law. No amendment of the charter of the Corporation or repeal of
any of its provisions shall limit or eliminate the right of indemnification
provided hereunder with respect to acts or omissions occurring prior to such
amendment or repeal.
(g) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, and the Investment Company Act, no
director or officer of the Corporation shall be personally liable to the
Corporation or its stockholders for money damages; provided, however, that
nothing herein shall be construed to protect any director or officer of the
Corporation against any liability to the Corporation or its security holders
to which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his office. No amendment of the charter of the Corporation or
repeal of any of its provisions shall limit or eliminate the limitation of
liability provided to directors and officers hereunder with respect to any act
or omission occurring prior to such amendment or repeal.
(h) The Corporation reserves the right from time to time to make
any amendments of its charter which may now or hereafter be authorized by law,
including any amendments changing the terms or contract rights, as expressly
set forth in its charter, of any of its outstanding stock by classification,
reclassification or otherwise.
(i) The enumeration and definition of particular powers of the
Board of Directors included in the foregoing shall in no way be limited or
restricted by reference to or inference from the terms of any other clause of
this or any other Article of the charter of the Corporation, or construed as
or deemed by inference or
<PAGE>
otherwise in any manner to exclude or limit any powers conferred upon the
Board of Directors under the General Laws of the State of Maryland now or
hereafter in force.
ARTICLE VI
PERPETUAL EXISTENCE
The duration of the Corporation shall be perpetual.
THIRD: The provisions hereinabove set forth are all the provisions of
the Charter of the Corporation currently in effect.
FOURTH: The amendment does not increase the authorized stock of the
Corporation.
FIFTH: In accordance with the provisions of Section 2-607 of the
Maryland General Corporation Law, the foregoing amendment was advised by the
Board of Directors and approved by the stockholders of the Corporation.
<PAGE>
SIXTH: The current address of the principal office of the Corporation
in Maryland and the name and address of the Corporation's current resident
agent are as set forth in the amended and restated Charter of the Corporation.
There are six directors currently in office, whose names are as follows:
Donald H. Pond
David E. Sams, Jr.
Richard H. Ayers
David E. A. Carson
Richard W. Gleen
Beverly L. Hamilton
IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its President and witnessed by its
Secretary on this 6th day of January, 1995.
CONNECTICUT MUTUAL INVESTMENT
ACCOUNTS, INC.
/S/ DONALD H. POND
Name: Donald H. Pond
Title: President
ATTEST:
/S/ ANN F. LOMELI
Name: Ann F. Lomeli
Title: Secretary
THE UNDERSIGNED, the President of Connecticut Mutual Investment
Accounts, Inc. who executed on behalf of the Corporation the foregoing
Articles of Amendment and Restatement of which this certificate is made a
part, hereby acknowledges in the name and on behalf of the Corporation the
foregoing Articles of Amendment and Restatement to be the corporate act of the
Corporation and hereby certifies to the best of his knowledge, information and
belief the matters and facts set forth therein with respect to the
authorization and approval thereof are true in all material respects under the
penalties of perjury.
/S/DONANLD H. POND
Name: Donald H. Pond
Title: President
FORM OF
UNDERWRITING AGREEMENT
UNDERWRITING AGREEMENT made this 1st day of October, 1995, by and
between CONNECTICUT MUTUAL FINANCIAL SERVICES, LLC (hereinafter the
"Underwriter") and CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. (hereinafter
the "Company").
WHEREAS, the Company is a Maryland corporation registered as an
investment company under the Investment Company Act of 1940 (the "1940 Act")
and has shares of capital stock (hereinafter the "Shares") representing
interests in investment portfolios of the Company hereto (individually the
"Account" and collectively the "Accounts") which are registered under the
Securities Act of 1933 (the "1933 Act") and securities acts of various states
and jurisdictions; and
WHEREAS, the Underwriter is registered as a broker-dealer under the
Securities Exchange Act of 1934 and in various states and jurisdictions and is
a member of the National Association of Securities Dealers,
NOW, THEREFORE, the parties hereto agree as follows:
1. The Company grants to the Underwriter the exclusive right to be,
and the Underwriter agrees to serve as, distributor and principal underwriter
of the Shares during the term of this Agreement. In the event that the Board
of Directors of the Company exercises its authority to further classify the
Company's unissued capital stock, the Company shall notify the Underwriter,
who shall consent or decline to be the distributor and principal underwriter
for the classes created. If the Underwriter consents, this Agreement as
amended from time to time shall be applicable to the sale of each class of
Shares. The Underwriter shall offer the Shares for sale at net asset value
plus any applicable sales charge in accordance with the Prospectus then in
effect. Underwriter shall use its best efforts to sell all effectively
registered unissued Shares. Underwriter may fix the portion of its sales
charge to be allowed to dealers and others in accordance with the Company's
current prospectus. The Underwriter shall order Shares of the Accounts only
to the extent that it shall have received purchase orders therefor. The
Underwriter will not make, or authorize any dealers or others to make any
short sales of Shares of the Accounts. The Underwriter, as agent of and for
the Accounts, may repurchase the Shares at such prices and upon such terms and
conditions as shall be specified in the Company's current prospectus.
2. The Company agrees that it will use its best efforts to keep
effectively registered, under the various applicable securities acts for sale
as herein contemplated, such Shares as the Underwriter shall reasonably
request and as shall be permitted to be so registered.
<PAGE>
3. Notwithstanding any other provision hereof, the Company may
terminate, suspend or withdraw the offering of Shares whenever, in its sole
discretion, it deems such action to be desirable.
4. The Underwriter is hereby authorized to enter into written
agreements, on terms and conditions not inconsistent with and subject to this
Agreement, with organizations acceptable to the Company which agree to
participate in the distribution of the Shares on a best efforts basis.
5. The Underwriter represents that it is registered as a broker-
dealer under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. and shall be registered if
necessary or otherwise appropriately qualified under the securities laws of
any state or other jurisdiction. The Underwriter shall be responsible for
carrying out its sales, repurchase and underwriting obligations hereunder in
compliance with federal and state securities laws and regulations. In this
connection, the Underwriter agrees that it shall be responsible for and bear
the cost of the:
(a) Design, preparation, printing, and mailing of all sales and
promotional materials;
(b) Printing and distribution of any prospectus to prospective
shareholders, but shall not be responsible for expenses incurred
by the Company in connection with the preparation, typesetting,
printing and distribution of any registration statement or report
or other communication to stockholders in their capacity as such;
(c) Conducting of such training (including the preparation and
utilization of training materials) as in the opinion of the
Underwriter is necessary to accomplish the purposes of this
Agreement;
(d) Establishment and implementation of reasonable written procedures
for supervision of sales practices of agents, representatives or
brokers selling the Shares.
6. The Underwriter agrees to provide all administrative services
relative to Share sales. The Underwriter shall cause to be maintained and
preserved for the periods prescribed such accounts, books, and other documents
as are required of it by the 1940 Act and any other applicable laws and
regulations. The books, accounts and records of the Company, and the
Underwriter as to all transactions hereunder shall be maintained so as to
clearly and accurately disclose the nature and details of the transactions.
The Underwriter shall cause the Company to be furnished with such reports as
it may reasonably request for the purpose of meeting its reporting and record
keeping requirements under the federal securities laws and any applicable
securities laws of any state or other jurisdiction. The Underwriter agrees
that all records which it maintains for the Company are the Company's property
and it will surrender them to the Company promptly upon its request.
<PAGE>
7. The Underwriter shall issue and deliver on behalf of the Company such
confirmations of sales made by it as agent pursuant to this Agreement as may
be required. At or prior to the time of issuance of Shares, the Underwriter
will pay or cause to be paid to the Company the amount due the Company for the
sale of such Shares. If appropriate, certificates shall be issued or Shares
registered on the transfer books of the Company in such names and
denominations as the Underwriter may specify.
8. The Underwriter shall have the responsibility for paying all
commissions or other fees which are due for the sale of such Shares. The
price the Company shall receive for all Shares sold shall be the net asset
value at which they are sold. The Underwriter shall be entitled to receive
payments in accordance with a distribution plan pursuant to Rule 12b-1 of the
1940 Act, if applicable, and may reallow all or a part of such fees to
brokers, dealers, or other persons as appropriate.
9. The services of the Underwriter to the Company hereunder are not to
be deemed exclusive and the Underwriter shall be free to render similar
services to others so long as its services hereunder are not impaired or
interfered with thereby.
10. The Underwriter will not be liable for any error of judgment or
mistake of law or for any loss suffered by the Company in connection with the
matters to which this Agreement relates, except for a loss resulting from
willful misfeasance, bad faith or gross negligence on the Underwriter's part
in the performance of its duties or from reckless disregard of its obligations
and duties under this Agreement.
11. The Company authorizes the Underwriter and any dealers to use any
prospectus or statement of additional information in the form furnished from
time to time in connection with the sale of the Shares. The Company agrees to
indemnify and hold harmless the Underwriter, its officers, directors, and
employees, and any person who controls the Underwriter within the meaning of
Section 15 of the 1933 Act, as amended, from and against any and all losses,
claims, damages, liabilities and expenses (including the cost of investigating
or defending such claims and any legal fees incurred in connection therewith)
which the Underwriter, its officers, directors, employees, or any such
controlling person may incur under the 1933 Act, under any other statute, at
common law or otherwise, arising out of or based upon:
(a) any untrue statement or alleged untrue statement of a material
fact contained in the Company's Registration Statement,
prospectus, statement of additional information, or sales
literature (including amendments and supplements thereto), or
(b) any omission or alleged omission to state a material fact required
to be stated in the Company's Registration Statement, prospectus,
statement of additional information or sales literature (including
amendments or supplements thereto), necessary to make the
statements therein not misleading, provided, however, that insofar
as loses, claims, damages, liabilities, or expenses arise out of
or are based
<PAGE>
upon any such untrue statement or omission or alleged
untrue statement or omission made in reliance and in conformity
with information furnished to the Company by the Underwriter or
its affiliated persons for use in the Company's Registration
Statement, prospectus, or statement of additional information or
sales literature (including amendments or supplements thereto),
such indemnification is not applicable. In no case shall the
Company indemnify the Underwriter or its controlling persons, as
to any amounts incurred for any liability arising out of or based
upon any action for which the Underwriter, its officers and
directors or any controlling person, would otherwise be subject to
liability by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of the
reckless disregard of its obligations and duties under this
Agreement.
12. The Underwriter agrees to indemnify and hold harmless the Company,
its officers and directors and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act against any loss, claim,
damages, liabilities and expenses (including the cost of any legal fees
incurred in connection therewith) which the Company, its officers, directors,
or any such controlling person may incur under the 1933 Act, under any other
statute, at common law or otherwise arising out the acquisition of any Shares
by any person which may be based upon any untrue statement or alleged untrue
statement of a material fact contained in the Company's Registration
Statement, prospectus or statement of financial information (including
amendments and supplements thereto), or any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, if such statement or omission was made in
reliance upon information furnished or confirmed in writing to the Company by
the Underwriter or its affiliated persons (as defined in the 1940 Act).
13. The Company has herewith furnished the Underwriter copies of the
Company's Prospectus, Articles of Incorporation and By-Laws as currently in
effect and agrees during the continuance of this Agreement to furnish it
copies of any amendments or supplements thereto before or at the time the
amendments or supplements become effective. The Underwriter will be entitled
to rely on all documents furnished to it by the Company.
14. This Agreement shall be non-assignable by any of the parties
hereto. However, in performing its services hereunder, the Underwriter may
use the personnel or facilities of other companies including those affiliated
with the Underwriter or Connecticut Mutual Life Insurance Company (hereinafter
"Connecticut Mutual") including personnel employed by Connecticut Mutual who
may also render services to Connecticut Mutual and any affiliated companies.
The Underwriter may make arrangements as it deems appropriate for compensating
such companies or personnel either on a cost reimbursement basis or otherwise.
15. This Agreement will continue in effect until October 30, 1996, and
thereafter shall continue in effect automatically for successive annual
periods ending on October 30 of each year, provided that the continuance is
specifically approved at least annually by (i) the Company's Board of
Directors or (ii) by a vote of a majority (as defined in the 1940 Act) of the
Company's outstanding voting securities and provided, that, in either event,
the continuance is also approved
<PAGE>
by a majority of the Company's Directors who are not interested persons
(as defined in the 1940 Act) of any party to this Agreement, by vote cast
in person at a meeting called for the purpose of voting on such approval.
This Agreement is terminable without penalty, on not less than 60 days'
notice by the Company's Board of Directors or by vote of the holders of
a majority of the Company's Shares or, upon not less than 90 days' notice,
by the Underwriter. This Agreement will also terminate automatically in
the event of its assignment (as defined in the 1940 Act).
16. This Agreement shall be governed by the laws of the State of
Connecticut provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, 1933 Act, the Securities Exchange Act of 1934
or any rule or order of the Securities and Exchange Commission.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officials thereunder duly authorized as of the day
and year first above written.
CONNECTICUT MUTUAL INVESTMENT
ACCOUNTS, INC.
By: _____________________________
CONNECTICUT MUTUAL FINANCIAL SERVICES, LLC
By: _____________________________
<PAGE>
Connecticut Mutual
140 Garden Street
Hartford, CT 06154
July 19, 1995
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
RE: Connecticut Mutual Investment Accounts, Inc.
File Number 2-75276
Dear Commissioners:
I serve as Counsel to Connecticut Mutual Investment Accounts,
Inc. (the "Fund"). With reference to the Fund's Post-Effective
Amendment Number 23 to the Registration Statement under the
Securities Act of 1933 and Post-Effective Amendment Number 24
under the Investment Company Act of 1940, both filed on Form N-
1A as amended, I have examined such documents and such laws as
I considered necessary and appropriate, and on the basis of
such examination, it is my opinion that the shares of common
stock of the Portfolios, when issued as contemplated by said
Form N-1A Registration Statement, will be legally issued, fully
paid, and non-assessable.
I hereby consent to the filing of this opinion as an exhibit to
said N-1A Registration Statement.
Sincerely,
/s/ Michael A. Chong
Michael A. Chong
Assistant General Counsel
SCHEDULE OF OMITTED RULE 12B-1 DISTRIBUTION PLANS
Due to the substantial similarity of the Class B Rule 12b-1
Distribution Plans for the Registrant, on behalf of the respective
Account, the following form of Rule 12b-1 Distribution Plan on
behalf of CMIA LifeSpan Capital Appreciation Account 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. Rule 12b-1 Plan of Distribution for Class B shares on
behalf of Connecticut Mutual Government Securities Account.
2. Rule 12b-1 Plan of Distribution for Class B shares on
behalf of Connecticut Mutual Income Account.
3. Rule 12b-1 Plan of Distribution for Class B shares on
behalf Connecticut Mutual Total Return Account.
4. Rule 12b-1 Plan of Distribution for Class B shares on
behalf of Connecticut Mutual Growth Account.
5. Rule 12b-1 Plan of Distribution for Class B shares on
behalf of CMIA LifeSpan Balanced Account.
6. Rule 12b-1 Plan of Distribution for Class B shares on
behalf of CMIA LifeSpan Diversified Income Account.
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
CMIA LifeSpan Capital Appreciation Account
Distribution Plan
Class B Shares
October 1, 1995
Article I. This Plan
This Distribution Plan (the "Plan") sets forth the terms and
conditions on which Connecticut Mutual Investment Accounts, Inc.
(the "Company"), on behalf of CMIA LifeSpan Capital Appreciation
Account (the "Account"), a series portfolio of the Company, on
behalf of its Class B shares (hereinafter, the "Class B shares"),
will, after the effective date hereof, pay certain amounts to
Connecticut Mutual Financial Services, L.L.C. ("CMFS") in
connection with the provision by CMFS of certain services to the
Account and its Class B shareholders, as set forth herein.
Certain of such payments by the Account may, under Rule 12b-1 of
the Securities and Exchange Commission, as from time to time
amended (the "Rule"), under the Investment Company Act of 1940, as
amended (the "Act"), be deemed to constitute the financing of
distribution by the Account of its Class B shares. This Plan
describes all material aspects of such financing as contemplated
by the Rule and shall be administered and interpreted, and
implemented and continued, in a manner consistent with the Rule.
Article II. Distribution and Service Expenses
The Account shall pay to CMFS a fee in the amount specified
in Article III hereof. Such fee may be spent by CMFS on any
activities or expenses primarily intended to result in the sale of
Class B shares of the Account, including, but not limited to the
payment of Distribution Expenses (as defined below) and Service
Expenses (as defined below). Distribution Expenses include but
are not limited to, (a) initial and ongoing sales compensation out
of such fee as it is received by CMFS of the Account or other
broker-dealers ("Selling Brokers") that have entered into an
agreement with CMFS for the sale of Class B shares of the Account,
(b) direct out-of-pocket expenses incurred in connection with the
distribution of shares of the Account, including expenses related
to printing of prospectuses and reports to other than existing
Class B shareholders of the Account, and preparation, printing and
distribution of sales literature and advertising materials, and
(c) an allocation of overhead and other branch office expenses of
CMFS related to the distribution of Class B shares of the Account.
<PAGE>
Service Expenses include payments made to, or on account of,
account executives of selected broker-dealers (including
affiliates of CMFS) and others who furnish personal and
shareholder account maintenance services to Class B shareholders
of the Account.
Article III. Maximum Expenditures
The expenditures to be made by the Account pursuant to this
Plan, and the basis upon which such expenditures will be made,
shall be determined by the Account, and in no event shall such
expenditures exceed 1.00% of the average daily net asset value of
the Class B shares of the Account (determined in accordance with
the Account's prospectus as from time to time in effect) on an
annual basis to cover Distribution Expenses and Service Expenses,
provided that the portion of such fee used to cover service
expenses shall not exceed an annual rate of up to 0.25% of the
average daily net asset value of the Class B shares of the
Account. All such expenditures shall be calculated and accrued
daily and paid monthly or at such other intervals as the Board of
Directors shall determine. In the event CMFS is not fully
reimbursed for payments made or other expenses incurred by it
under this Plan, CMFS shall be entitled to carry forward such
expenses to subsequent fiscal years for submission to the Class B
shares of the Account for payment, subject always to the annual
maximum expenditures set forth in this Article III; provided,
however, that nothing herein shall prohibit or limit the Directors
from terminating this Plan and all payments hereunder at any time
pursuant to Article VIII hereof.
Article IV. Expenses Borne by the Account
Notwithstanding any other provision of this Plan, the
Company, the Account and its administrator, shall bear the
respective expenses to be borne by them under any administrative
services agreement in effect from time to time, and under the
Account's current prospectus as it is from time to time in effect.
Except as otherwise contemplated by this Plan, the Company, and
the Account shall not, directly or indirectly, engage in financing
any activity which is primarily intended to or should reasonably
result in the sale of Class B shares of the Account.
Article V. Approval by Board of Directors
This Plan shall not take effect until it has been approved,
together with any related agreements, by votes, cast in person at
a meeting called for the purpose of voting on this Plan or such
agreements, of a majority (or whatever greater or lesser
percentage may, from time to time, be required by Section 12(b) of
the Act or the rules and regulations thereunder) of (a) all of the
Directors of the Account and (b) those of the Directors who are
not "interested persons" of the Account, as such term may be from
-2-
<PAGE>
time to time defined under the Act, and have no direct or indirect
financial interest in the operation of this Plan or any agreements
related to it (the "Independent Directors").
Article VI. Continuance
This Plan and any related agreements shall continue in effect
for so long as such continuance is specifically approved at least
annually by the Board of Directors in the manner provided for the
initial approval of this Plan in Article V.
Article VII. Information
CMFS shall furnish the Account and its Directors quarterly,
or at such other intervals as the Account shall specify, a written
report of amounts expended or incurred for Distribution Expenses
and Service Expenses pursuant to this Plan and the purposes of
which such expenditures were made and such other information as
the Board of Directors may request.
Article VIII. Termination
This Plan may be terminated (a) at any time by vote of a
majority of the Directors, a majority of the Independent
Directors, or a majority of the Account's outstanding voting
Class B shares, or (b) CMFS, on 60 days' notice in writing to the
Account.
Article IX. Agreements
Each agreement with any person relating to implementation of
this Plan shall be in writing, and each agreement related to this
Plan shall provide:
(a) That, with respect to the Account, such agreement may be
terminated at any time, without payment of any penalty, by vote of
a majority of the Independent Directors or by vote of a majority
of the Account's then outstanding voting Class B shares.
(b) That such agreement shall terminate automatically in the
event of its assignment.
Article X. Amendments
This Plan may not be amended to increase the maximum amount
of the fees payable by the Account hereunder without the approval
of a majority of the outstanding voting Class B shares of the
Account. No material amendment to the Plan shall, in any event,
be effective unless it is approved by the Board of Directors in
the same manner as is provided for approval of this Plan in
Article V.
-3-
<PAGE>
Article XI. Limitation of Liability
No series of the Company shall be responsible for the
obligations of any other series of the Company.
IN WITNESS WHEREOF, the Account has executed this
Distribution Plan effective as of the 1st day of October, 1995 in
Hartford, Connecticut.
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC. --
CMIA LifeSpan Capital Appreciation Account
By:
President
CONNECTICUT MUTUAL FINANCIAL SERVICES, L.L.C.
By:
President
-4-
SCHEDULE OF OMITTED MULTIPLE CLASS PLANS PURSUANT TO
RULE 18f-3
Due to the substantial similarity of the Registrant's
Multiple Class Plans Pursuant to Rule 18f-3, on behalf of the
respective Account, the following form of Multiple Class Plan
Pursuant to Rule 18f-3 on behalf of CMIA LifeSpan Capital
Appreciation Account 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. Multiple Class Plan Pursuant to Rule 18f-3 of the
Registrant on behalf of Connecticut Mutual Government
Securities Account.
2. Multiple Class Plan Pursuant to Rule 18f-3 of the
Registrant on behalf of Connecticut Mutual Income Account.
3. Multiple Class Plan Pursuant to Rule 18f-3 of the
Registrant on behalf of Connecticut Mutual Total Return
Account.
4. Multiple Class Plan Pursuant to Rule 18f-3 of the
Registrant on behalf of Connecticut Mutual Growth Account.
5. Multiple Class Plan Pursuant to Rule 18f-3 of the
Registrant on behalf of CMIA LifeSpan Balanced Account.
6. Multiple Class Plan Pursuant to Rule 18f-3 of the
Registrant on behalf of CMIA LifeSpan Diversified Income
Account.
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
on behalf of
CMIA LifeSpan Capital Appreciation Account
Multiple Class Plan Pursuant to Rule 18f-3
October 1, 1995
Each class of shares of CMIA LifeSpan Capital Appreciation
Account (the "Account"), a series of Connecticut Mutual Investment
Accounts, Inc. (the "Company"), will have the same relative rights and
privileges and be subject to the same sales charges, fees and expenses, except
as set forth below. The Board of Directors may determine in the future
that other distribution arrangements, allocations of expenses
(whether ordinary or extraordinary) or services to be provided to a
class of shares are appropriate and amend this Plan accordingly
without the approval of shareholders of any class. Except as
set forth in the Account's prospectus, shares may be exchanged only for shares
of the same class of another Account in the Company.
Article I. Class A Shares
Class A Shares are sold at net asset value and subject to the
initial sales charge schedule or contingent deferred sales charge
and minimum purchase requirements as set forth in the Account's
prospectus. Class A Shares are subject to fees calculated as a stated
percentage of the net assets attributable to Class A shares under the
Account's Class A Rule 12b-1 Distribution Plan as set forth in such
Distribution Plan. The Class A Shareholders have exclusive voting rights, if
any, with respect to the Class A Rule 12b-1 Distribution Plan.
Transfer agency fees and expenses related to transfer agency activities
are allocated to Class A Shares on a per account basis. Class A Shares shall
be entitled to the shareholder services set forth from time
to time in the Account's prospectus with respect to Class A Shares.
Article II. Class B Shares
Class B Shares are sold at net asset value per share without the
imposition of an initial sales charge. However, Class B shares redeemed
within a specified number of years of purchase will be subject
to a contingent deferred sales charge as set forth in the Account's
prospectus. Class B Shares are sold subject to the minimum purchase
requirements set forth in the Account's prospectus. Class B Shares are
subject to fees calculated as a stated percentage of the net assets
attributable to Class B Shares under the Class B Rule 12b-1
Distribution Plan as set forth in such Distribution Plan.
The Class B Shareholders of the Account have exclusive voting rights,
if any, with respect to the Account's Class B Rule 12b-1
Distribution Plan. Transfer agency fees and expenses related to transfer
agency activities are allocated to Class B Shares on a per account basis.
Class B Shares shall be entitled to the shareholder services set
forth from time to time in the Account's prospectus with respect to Class B
Shares.
Redemption requests placed by shareholders who own both Class A
and Class B Shares of the Account will be satisfied first by redeeming
the shareholder's Class A Shares, unless the shareholder has
made a specific election to redeem Class B Shares.
<PAGE>
Class B Shares will automatically convert to Class A Shares of
the Account at the end of a specified number of years after
the initial purchase date of Class B shares, except as provided in the
Account's prospectus. Such conversion will occur at the relative net asset
value per share of each class without the imposition of any
sales charge, fee or other charge.
The conversion of Class B Shares to Class A Shares is subject to
the receipt of a ruling of the Internal Revenue Service or an
opinion of counsel to the effect that the automatic conversion of Class B
Shares to Class A Shares does not constitute a taxable event under federal
income tax law. The conversion of Class B Shares to Class A
Shares may be suspended if such a ruling is no longer effective or
such an opinion is not available.
The initial purchase date for Class B Shares acquired through
(i) reinvestment of dividends on Class B Shares or (ii) exchange from
another account in the Company will be deemed to be the date on
which the original Class B Shares were purchased.
Article III. Approval by Board of Directors
This Plan shall not take effect until it has been approved by
the vote of a majority (or whatever greater or lesser percentage may,
from time to time, be required under Rule Company Act of 1940,
as amended (the "Act")) of (a) all of the Directors of
the Company, on behalf of the Account, and (b) those of the Directors
who are not "interested persons" of the Company, as such term
may be from time to time defined under the Act.
Article IV. Amendments
No material amendment to the Plan shall be effective unless it
is approved by the Board of Directors in the same manner as is
provided for approval of this Plan in Article III.
