Preliminary Copy
OPPENHEIMER SERIES FUND, INC.
CONNECTICUT MUTUAL INCOME ACCOUNT
2 World Trade Center, New York, New York 10048
1-800-525-7048
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held April 24, 1996
To the Shareholders:
Notice is hereby given that a Special Meeting of the Shareholders of
Connecticut Mutual Income Account ("Income Fund" or the "Fund"), a series
of Oppenheimer Series Fund, Inc. (the "Company"), an open-end, management
investment company (formerly named Connecticut Mutual Investment Accounts,
Inc.), will be held at OppenheimerFunds, Inc., 3410 South Galena Street,
Denver, Colorado 80231, at 10:00 A.M., Denver time, on April 24, 1996, and
any adjournments thereof (the "Meeting"), for the following purposes:
1. To consider and vote upon approval of the Agreement and Plan of
Reorganization dated as of March 1, 1996 (the "Reorganization
Agreement") by and among Income Fund and Oppenheimer Bond Fund ("Bond
Fund"), a series of Oppenheimer Integrity Funds (the "Trust"), and
the transactions contemplated thereby (the "Reorganization"),
including (i) the transfer of substantially all the assets of Income
Fund to Bond Fund in exchange solely for Class A and Class B shares
of Bond Fund, (ii) the distribution of such shares of Bond Fund to
shareholders of Income Fund in liquidation of Income Fund, and (iii)
the cancellation of the outstanding shares of the Fund (the
"Proposal"); and
2. To act upon such other matters as may properly come before the
Meeting.
The Reorganization is more fully described in the accompanying Proxy
Statement and Prospectus and a copy of the Reorganization Agreement is
attached as Exhibit A thereto. Income Fund's Class A and Class B
shareholders of record at the close of business on March 18, 1996 are
entitled to notice of, and to vote at, the Meeting. Please read the Proxy
Statement and Prospectus carefully before telling us, through your proxy
or in person, how you wish your shares to be voted. The Board of
Directors of the Company recommends a vote in favor of the Reorganization.
WE URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Directors,
Andrew J. Donohue, Secretary
March 18, 1996
Shareholders who do not expect to attend the Meeting are requested to
indicate voting instructions on the enclosed proxy and to date, sign and
return it in the accompanying postage-paid envelope. To avoid unnecessary
duplicate mailings, we ask your cooperation in promptly mailing your proxy
no matter how large or small your holdings may be.
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE PROPOSED REORGANIZATION
1. What is the Reorganization?
The proposed Reorganization provides for the transfer of substantially all
the assets of Connecticut Mutual Income Account ("Income Fund" or the
"Fund") to Oppenheimer Bond Fund ("Bond Fund"), the issuance of shares of
Bond Fund to Income Fund for distribution to its shareholders and the
cancellation of the outstanding shares of Income Fund. The number of
shares of Bond Fund that will be received by shareholders of Income Fund
will be determined on the basis of the relative net asset values of Bond
Fund and Income Fund. Although the number of shares of Bond Fund received
by a shareholder of Income Fund may be more or less than the shareholder's
holdings of Income Fund shares, the value of the shares of Bond Fund
issued in the Reorganization will be equal to the value of the shares
previously held in Income Fund.
2. What are the reasons for the Reorganization?
On February 14, 1996, at a meeting of Income Fund's shareholders, the
Fund's shareholders voted to approve the appointment of OppenheimerFunds,
Inc. ("OFI") as the Fund's investment adviser. In the proxy statement
dated December 18, 1995 and the supplement dated January 19, 1996 (the
"1995 Proxy Statement") relating to that meeting, the Fund's shareholders
were advised that at a later date they would vote on the merger of the
Fund into a comparable Oppenheimer mutual fund.
3. What benefits to shareholders may result from this transaction?
The Directors of Income Fund believe that combining these two funds may
benefit shareholders of Income Fund by allowing the Fund to capitalize on
expected economies of scale in investment research, operations and other
important areas.
4. Who is paying the expenses of the Reorganization?
All expenses of the Reorganization will be paid by Massachusetts Mutual
Life Insurance Company (which is the indirect parent of G.R. Phelps & Co.,
Inc., the administrator and previous investment manager of the Fund and
of OFI, the Fund's new investment manager).
5. Who is OppenheimerFunds, Inc.?
OppenheimerFunds, Inc. and its subsidiaries are engaged principally in the
business of managing, distributing and servicing registered investment
companies. OFI is indirectly controlled by Massachusetts Mutual Life
Insurance Company ("MassMutual") which controls G.R. Phelps as a result
of the merger of MassMutual and Connecticut Mutual Life Insurance Company
on March 1, 1996, as described in the 1995 Proxy Statement. As of January
31, 1996, OppenheimerFunds, Inc. and a subsidiary had assets of more than
$45 billion under management in more than 40 mutual funds.
6. Do the Oppenheimer funds have a sales charge?
Yes, the Oppenheimer funds impose a sales charge, other than their money
market funds (certain of which have an asset-based sales charge on certain
classes of shares). However, there will be no commission or sales load
of any kind charged in connection with this Reorganization.
7. May I exchange between other Oppenheimer funds without a sales charge
or exchange fee?
Yes. As a shareholder of an Oppenheimer fund, you will be able to make
exchanges into the same class of shares of other Oppenheimer funds without
payment of any sales charges or exchange fees. Exchange privileges may
be modified or discontinued at any time.
8. Where can I get prospectuses and other information on the Oppenheimer
funds?
Call OppenheimerFunds Distributor, Inc. at 1-(800) 255-2755. They will
be pleased to supply you with all the information, including prospectuses,
which you will need to make an investment decision.
9. Whom do I contact about my account or to initiate a transaction in my
account?
For information about your account or to initiate a transaction in your
account, you may continue to contact your registered representative at
your broker/dealer or, in the alternative, OppenheimerFunds Services at
1-(800) 525-7048.
10. Will this Reorganization result in any tax liability to Income Fund,
Bond Fund or to me as a shareholder?
The Reorganization is intended to qualify for federal income tax purposes
as a tax-free reorganization. The aggregate tax basis of Bond Fund shares
received by you will be the same as the aggregate tax basis of your Income
Fund shares prior to the Reorganization and the holding period of the
shares of Bond Fund to be received by you will include the period during
which Income Fund shares surrendered in exchange therefore were held,
provided that those Income Fund shares were held as capital assets.
<PAGE>
OPPENHEIMER BOND FUND
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
PROXY STATEMENT AND PROSPECTUS
This Proxy Statement and Prospectus is being furnished to shareholders of
Connecticut Mutual Income Account ("Income Account" or the "Fund"), a
series of Oppenheimer Series Fund, Inc. (the "Company"), an open-end,
management investment company, in connection with the solicitation by the
Board of Directors of the Company (the "Board") of proxies to be used at
the Special Meeting of Shareholders of Income Fund, to be held at
OppenheimerFunds, Inc., 3410 South Galena Street, Denver, Colorado 80231,
at 10:00 A.M., Denver time, on April 24, 1996, and any adjournments
thereof (the "Meeting"). It is expected that this Proxy Statement and
Prospectus will be mailed to shareholders on or about March 22, 1996.
At the Meeting, shareholders of the Fund will be asked to consider and
vote upon approval of the Agreement and Plan of Reorganization, dated as
of March 1, 1996 (the "Reorganization Agreement"), by and among Income
Fund and Oppenheimer Bond Fund ("Bond Fund"), a series of Oppenheimer
Integrity Funds ("Integrity Trust" or the "Trust"), and the transactions
contemplated by the Reorganization Agreement (the "Reorganization"). The
Reorganization Agreement provides for the transfer of substantially all
the assets of Income Fund to Bond Fund in exchange for Class A and Class
B shares of Bond Fund, the distribution of such shares of Bond Fund to the
respective Class A and Class B shareholders of Income Fund in liquidation
of Income Fund and the cancellation of the outstanding shares of the Fund.
A copy of the Reorganization Agreement is attached hereto as Exhibit A and
is incorporated by reference herein. As a result of the proposed
Reorganization, each Class A and Class B shareholder of Income Fund will
receive that number of Class A and Class B shares, respectively, of Bond
Fund having an aggregate net asset value equal to the net asset value of
such shareholder's shares of Income Fund of that class. This transaction
is being structured as a tax-free reorganization. See "Approval of the
Reorganization."
Bond Fund currently offers Class A, Class B and Class C shares. Class A
shares are sold with a sales charge imposed at the time of purchase
(certain purchases aggregating $1.0 million or more ($500,000 as to
purchases by OppenheimerFunds prototype 401(k) plans) are not subject to
a sales charge, but may be subject to a contingent deferred sales charge
("CDSC") if redeemed within 18 months of the date of purchase). Class B
shares are sold without a front-end sales charge but may be subject to a
CDSC if redeemed within six years of the date of purchase. Class C shares
are sold without a front-end sales charge but may be subject to a CDSC if
not held for one year. As a result of the transaction, holders of Income
Fund Class A shares will receive Class A shares of Bond Fund and no sales
charge will be imposed on the Class A shares received by the Fund's Class
A shareholders. Holders of Income Fund Class B shares will receive Class
B shares of Bond Fund; any CDSC which is applicable to a shareholder's
investment will continue to apply, and, in calculating the applicable CDSC
payable upon the subsequent redemption of shares of Bond Fund, the period
during which an Income Fund shareholder held shares of the Fund will be
counted. Because Income Fund has no Class C shares outstanding, Bond Fund
will not issue Class C shares in the Reorganization. Accordingly, complete
information on Class C shares of Bond Fund is not included in this Proxy
Statement and Prospectus, and no offering of Class C shares is made
hereby.
Bond Fund, formerly named "Oppenheimer Investment Grade Bond Fund," is a
mutual fund that seeks a high level of current income by investing mainly
in debt instruments. Income Fund seeks high current income consistent
with prudent investment risk and preservation of capital. Income Fund
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 OFI, will result in payment of interest and
principal such that the effective maturity of the security is five years
or less. While both Income Fund and Bond Fund (collectively referred to
as the "funds") may invest assets in lower quality higher risk debt
securities (commonly referred to as "junk bonds"), and preferred stocks,
shareholders of Income Fund should consider the differences in investment
objectives and policies of Bond Fund and the Fund, including Bond Fund's
ability to invest a greater percentage of its assets in junk bonds. See
"Comparison Between Bond Fund and Income Fund - Comparison of Investment
Objectives, Policies and Restrictions."
Bond Fund has filed with the Securities and Exchange Commission (the
"SEC") a Registration Statement on Form N-14 (the "Registration
Statement") relating to the registration of Class A and Class B shares of
Bond Fund to be offered to the respective Class A and Class B shareholders
of Income Fund pursuant to the Reorganization Agreement. This Proxy
Statement and Prospectus relating to the Reorganization also constitutes
a Prospectus of Bond Fund filed as part of such Registration Statement.
Information contained or incorporated by reference herein relating to Bond
Fund has been prepared by and is the responsibility of Bond Fund.
Information contained or incorporated by reference herein relating to
Income Fund has been prepared by and is the responsibility of Income Fund.
This Proxy Statement and Prospectus sets forth concisely information about
Bond Fund that a prospective investor should know before voting on the
Reorganization. The following documents have been filed with the SEC and
are available without charge upon written request to the transfer and
shareholder servicing agent for the funds, OppenheimerFunds Services
("OFS"), at P.O. Box 5270, Denver Colorado 80217, or by calling 1-800-525-
7048 (a toll-free number) and are incorporated herein by reference: (i)
a Prospectus for Income Fund, dated October 1, 1995, together with the
supplement to that Prospectus dated March 1, 1996; (ii) a Statement of
Additional Information about Income Fund, dated October 1, 1995 (the
"Fund's Statement of Additional Information"), together with a supplement
dated March 1, 1996; (iii) a Prospectus for Bond Fund, dated July 10,
1995, as supplemented November 22, 1995, January 1, 1996 and January 5,
1996; (iv) a Statement of Additional Information for Bond Fund, dated July
10, 1995, together with a supplement dated July 14, 1995 (the "Bond Fund
Statement of Additional Information"); and (iv) a Statement of Additional
Information relating to the Reorganization described in this Proxy
Statement and Prospectus (the "Statement of Additional Information"),
dated March 18, 1996 and filed as part of the Registration Statement,
which Statement of Additional Information includes, among other things,
Income Fund's Prospectus, Income Fund's Statement of Additional
Information and the Bond Fund Statement of Additional Information, which
contains more detailed information about Bond Fund and its management.
Investors are advised to read and retain this Proxy Statement and
Prospectus for future reference.
Shares of Bond Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement and Prospectus is dated March 18, 1996.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
COMPARATIVE FEE TABLES
SYNOPSIS
Parties to the Reorganization
The Reorganization
Tax Consequences of the Reorganization
Investment Objectives and Policies
Investment Advisory and Distribution Plan Fees
Purchases, Exchanges and Redemptions
PRINCIPAL RISK FACTORS
APPROVAL OF THE REORGANIZATION (The Proposal)
Reasons for the Reorganization
The Reorganization
Tax Aspects of the Reorganization
Capitalization Table (Unaudited)
COMPARISON BETWEEN BOND FUND AND INCOME FUND
Comparison of Investment Objectives, Policies and Restrictions
Special Investment Methods
Investment Restrictions
Bond Fund Performance
Additional Comparative Information
INFORMATION CONCERNING THE MEETING
General
Record Date; Vote Required; Share Information
Proxies
Costs of the Solicitation and the Reorganization
MISCELLANEOUS
Financial Information
Public Information
OTHER BUSINESS
EXHIBIT A - Agreement and Plan of Reorganization, dated as of March 1,
1996, by and between Oppenheimer Series Fund, Inc. and
Oppenheimer Integrity Funds
<PAGE>
COMPARATIVE FEE TABLES
Transaction Charges
Shareholders pay certain expenses directly, such as sales charges and
account transaction charges. The schedule of such charges for both Income
Fund and Bond Fund is noted below.
<TABLE>
<CAPTION>
Income Fund Bond Fund
Class of Shares: A B A B C
<S> <C> <C> <C> <C> <C>
Maximum Initial Sales Load
Imposed on Purchases (as a %
of offering price) 4.00% None 4.75% None None
Maximum Deferred Sales
Load None 5.00%(2) None(1) 5.00%(2) 1.00%(3)
Maximum Sales Load Imposed on
Reinvested Dividends None None None None None
Redemption Fee None None None None None
Exchange Fee None(4) None(4) None None None
</TABLE>
(1) For Income Fund, certain purchases of Class A shares of $500,000 or
more are not subject to front-end sales charges, but a contingent
deferred sales charge ("CDSC") is imposed on the proceeds of such
shares equal to 1% if the shares are redeemed within 12 months after
the calendar month of purchase. For Bond Fund, a CDSC of up to 1%
is imposed on purchases of Class A shares of more than $1 million
(more than $500,000 for purchases by OppenheimerFunds prototype
401(k) plans), if the shares are redeemed within 18 months.
(2) The CDSC schedules are 5%/5%/4%/4%/2%/1% for Income Fund and
5%/4%/3%/3%/2%/1% for Bond Fund, and eliminated thereafter. After
eight years, Income Fund Class B shares automatically convert to
Class A shares. After six years, Bond Fund Class B shares
automatically convert to Class A shares.
(3) A CDSC of 1% may be imposed upon a redemption of Bond Fund Class C
shares made within 12 months of purchase.
(4) Exchanges of Income Fund shares in excess of 12 in a 12-month period
are subject to an exchange fee of .75% of the net asset value of the
shares redeemed.
Expenses of Bond Fund and Income Fund; Pro Forma Expenses
Each pays a variety of expenses directly for management of its assets,
administration, distribution of shares and other services, and those
expenses are reflected in the net asset value per share of each of Bond
Fund and Income Fund. The following calculations are based on the
expenses of Bond Fund and Income Fund for the 12 months ended December 31,
1995. The inception dates for Class C shares of Bond Fund and for Class
B shares of Income Fund were October 1, 1995 and July 11, 1995,
respectively. Total Fund Operating Expenses for Class C shares of Bond
Fund and for Class B shares of Income Fund are based on estimated expenses
that would have been incurred during the 12 months ended December 31, 1995
had such respective shares been outstanding during that entire period.
These amounts are shown as a percentage of the average net assets of each
class of shares of Income Fund and of Bond Fund for those periods. The
pro forma fees reflect what the fee schedules would have been at December
31, 1995 if the Reorganization had occurred 12 months prior to that date.
<TABLE>
<CAPTION>
Oppenheimer Bond Fund
Class A Class B Class C
<S> <C> <C> <C>
Management Fees(1) 0.75% 0.75% 0.75%
12b-1 Fees 0.25% 1.00% 1.00%
Other Expenses 0.38% 0.40% 0.40%
Total Fund Operating
Expenses(1) 1.38% 2.15% 2.15%
</TABLE>
Connecticut Mutual Income Account
<TABLE>
<CAPTION>
Class A Class B
<S> <C> <C>
Management Fees .625% .625%
12b-1 Fees(2) .25% 1.00%
Other Expenses(2) .315% .315%
Total Fund Operating Expenses 1.19% 1.94%
</TABLE>
Pro Forma Combined Fund
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Management Fees(1) .75% .75% .75%
12b-1 Fees .25% 1.00% 1.00%
Other Expenses .38% .40% .40%
Total Fund Operating
Expenses(1) 1.38% 2.15% 2.15%
</TABLE>
(1) Management fees for Bond Fund and the pro forma combined Fund have
been restated in the fee table above to reflect the increased management
fee rates paid by Bond Fund to its investment adviser, pursuant to a new
investment advisory agreement approved by shareholders of Bond Fund at a
meeting held July 10, 1995. Had this management fee not changed,
"Management Fees" for the twelve months ended December 31, 1995 would have
been 0.50%, 0.50% and 0.50% of Class A, Class B and Class C average annual
net assets, and "Total Fund Operating Expenses" would have been 1.13%,
1.90% and 1.90% of Class A, Class B and Class C average annual net assets.
See "Investment Advisory and Distribution Plan Fees" below.
(2) 12b-1 fees and other expenses for Income Fund have been restated to
reflect the fees that would have been paid in the absence of a temporary
agreement by Connecticut Mutual Financial Services, L.L.C. ("CMFS"),
formerly the distributor of Income Fund shares, not to impose such fees
and to assume such expenses during the fiscal year ended December 31,
1995. That expense limitation has been terminated.
Hypothetical Examples
To attempt to show the effect of these expenses on an investment over
time, the examples shown below have been created. Assume that you make
a $1,000 investment in either Income Fund or Bond Fund or the new combined
Fund and that the annual return is 5% and that the operating expenses for
each Fund are the ones shown in the chart above. If you were to redeem
your shares at the end of each period shown below, your investment would
incur the following expenses by the end of each period shown:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Oppenheimer Bond Fund
Class A Shares $61 $89 $119 $205
Class B Shares $72 $97 $135 $211(1)
Class C Shares $32 $67 $115 $248
Connecticut Mutual
Income Account
Class A Shares $46 $71 $ 98 $174
Class B Shares $67 $98 $122 $204(1)
Pro Forma Combined
Fund
Class A Shares $61 $89 $119 $205
Class B Shares $72 $97 $135 $211(1)
Class C Shares $32 $67 $115 $248
</TABLE>
If you did not redeem your investment, it would incur the following
expenses:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Oppenheimer Bond Fund
Class A Shares $61 $89 $119 $205
Class B Shares $22 $67 $115 $211(1)
Class C Shares $22 $67 $115 $248
Connecticut Mutual
Income Account
Class A Shares $46 $71 $ 98 $174
Class B Shares $17 $58 $102 $204(1)
Pro Forma Combined
Fund
Class A Shares $61 $89 $119 $205
Class B Shares $22 $67 $115 $211(1)
Class C Shares $22 $115 $115 $248
</TABLE>
(1) The Class B expenses (a) in years seven through ten for Bond Fund and
the Pro Forma Combined Fund, and (b) in years nine and ten for Income Fund
are based on the Class A expenses shown above, because Bond Fund and
Income Fund automatically convert Class B shares into Class A shares after
six years and eight years, respectively. Long-term Class B shareholders
could pay the economic equivalent of more than the maximum front-end sales
charge allowed under applicable regulatory requirements, because of the
effect of the asset-based sales charge and CDSC. For Class B shareholders
of both Funds, the automatic conversion of Class B shares to Class A
shares is designed to minimize the likelihood that this will occur.
SYNOPSIS
The following is a synopsis of certain information contained in or
incorporated by reference in this Proxy Statement and Prospectus and
presents key considerations for shareholders of the Fund to assist them
in determining whether to approve the Reorganization. This synopsis is
only a summary and is qualified in its entirety by the more detailed
information contained in or incorporated by reference in this Proxy
Statement and Prospectus and the Exhibit hereto. Shareholders should
carefully review this Proxy Statement and Prospectus and the Agreement and
Plan of Reorganization which is an Exhibit hereto in their entirety and,
in particular, the current Prospectus of Bond Fund which accompanies this
Proxy Statement and Prospectus and is incorporated by reference herein.
Parties to the Reorganization
Bond Fund is a series of Oppenheimer Integrity Funds (the "Trust") a
diversified, open-end, management investment company organized in 1982 as
a multi-series Massachusetts business trust. Bond Fund is located at 3410
South Galena Street, Denver, Colorado 80231. OppenheimerFunds, Inc.
("OFI") acts as investment adviser to Bond Fund. OppenheimerFunds
Distributor, Inc. ("OFDI"), a subsidiary of OFI, acts as the distributor
of Bond Fund's shares. Additional information about Bond Fund is set
forth below.
Income Fund is a series of Oppenheimer Series Fund, Inc. (the "Company"),
an open-end, management investment company organized as a multi-series
Maryland corporation on December 9, 1981 that changed its name from
Connecticut Mutual Investment Accounts, Inc. on March 18, 1996. The
following changes took effect March 1, 1996: the Fund's address changed
to Two World Trade Center, New York, NY 10048-0203 and OFI become the
Fund's investment adviser. On March 18, 1996, OFS became Income Fund's
transfer agent and shareholder servicing agent and OFDI became the
distributor of Income Fund's shares. Additional information about Income
Fund is set forth below.
The Reorganization
The Reorganization Agreement provides for the transfer of substantially
all the assets of Income Fund to Bond Fund in exchange for the issuance
of Class A and Class B shares of Bond Fund to the respective Class A and
Class B shareholders of Income Fund, in liquidation of Income Fund. The
Reorganization Agreement also provides for the distribution by Income Fund
of these shares of Bond Fund to the Fund shareholders in liquidation of
the Fund. As a result of the Reorganization, each Fund shareholder will
receive that number of full and fractional Bond Fund shares equal in value
to such shareholder's pro rata interest in the net assets transferred to
Bond Fund as of the Valuation Date (as hereinafter defined). Holders of
Class A and Class B shares of the Fund will receive Class A and Class
shares, respectively, of Bond Fund. For further information about the
Reorganization see "Approval of the Reorganization" below.
For the reasons set forth below under "Approval of the Reorganization -
Reasons for the Reorganization," the Board, including the Directors who
are not "interested persons" of the Company (the "Independent Directors"),
as that term is defined in the Investment Company Act of 1940, as amended
(the "1940 Act"), has concluded that the Reorganization is in the best
interests of the Fund and its shareholders and that the interests of
existing Fund shareholders will not be diluted as a result of the
Reorganization, and recommends approval of the Reorganization by Fund
shareholders. The Board of Trustees of the Trust has also approved the
Reorganization and determined that the interests of existing Bond Fund
shareholders will not be diluted as a result of the Reorganization. If
the Reorganization is not approved, the Fund will continue in existence
and the Board will determine whether to pursue alternative actions.
"Approval of the Reorganization" sets forth certain information with
respect to the background of the Reorganization, including other
transactions and agreements entered into, or contemplated to be entered
into, by OFI, Phelps and their respective affiliates.
Approval of the Reorganization will require the affirmative vote of the
holders of a majority of Income Fund's Class A and Class B shares
outstanding and entitled to vote, voting together as a series.
Tax Consequences of the Reorganization
As a condition to the closing of the Reorganization, Income Fund and Bond
Fund will have received an opinion to the effect that the Reorganization
will qualify as a tax-free reorganization for Federal income tax purposes.
As a result of such tax-free reorganization, no gain or loss would be
recognized by Income Fund, Bond Fund, or the shareholders of either Fund
for Federal income tax purposes, except to the extent the shareholders of
Income Fund may realize taxable income or gain if a distribution is made
to them of any portion of the "Cash Reserve," as defined below. For
further information about the tax consequences of the Reorganization, see
"Approval of the Reorganization -Tax Aspects of the Reorganization" below.
Investment Objectives and Policies
The investment policies described below are not "fundamental" unless this
Proxy Statement and Prospectus say that a particular policy is
"fundamental." Bond Fund's investment objective is fundamental, whereas
Income Fund's investment objective is non-fundamental. Fundamental
policies are those that cannot be changed without the approval of
shareholders of that Fund.
As its investment objective, Bond Fund seeks a high level of current
income by investing mainly in debt instruments. Under normal market
conditions, Bond Fund invests at least 65% of its total assets in
investment grade debt securities, U.S. Government securities, and money
market instruments and may invest up to 35% of its total assets in debt
securities rated less than investment grade. Investment grade debt
securities are those rated in one of the four highest categories by
Standard & Poor's Corporation ("S&P"), Moody's Investors Service, Inc.
("Moody's"), or another nationally-recognized rating organization. Such
categories are, from highest to lowest ratings, AAA, AA, A and BBB as to
S&P and Aaa, Aa, A and Baa as to Moody's. See "Comparison Between Bond
Fund and the Fund" for a discussion of certain of these ratings.
Securities rated less than investment grade (often called "junk bonds")
are considered speculative. Although non-investment grade securities
generally offer the potential for higher income than investment grade debt
securities, they may be subject to greater market fluctuations, greater
difficulty in selling them and a greater risk of default because of the
issuer's low creditworthiness. Prior to July 10, 1995, Bond Fund was
named "Oppenheimer Investment Grade Bond Fund" and its investments were
limited to investment grade bonds, U.S. Government securities and money
market instruments. Bond Fund's shareholders approved the changes in Bond
Fund's investment policies at a meeting held July 10, 1995 and these new
investment policies are described herein and in more detail in Bond Fund's
current Prospectus and the Bond Fund Statement of Additional Information.
OFI anticipates that Bond Fund would generally invest at least 75% of its
total assets in: (i) U.S. corporate bonds rated "A" or better and (ii)
U.S. government and agency bonds. OFI further anticipates that Bond Fund
would invest an additional 15% of its total assets in non-investment grade
domestic corporate bonds and 10% of its total assets in non-investment
grade foreign bonds. These anticipated investment targets, including the
allocation between domestic and foreign lower-grade debt securities, are
not Fundamental policies, and they are subject to fluctuation and may be
changed by OFI without further notice to shareholders or amended
prospectus disclosure.
Bond Fund's investments may also include securities of foreign governments
and companies, mortgage-backed securities, collateralized mortgage-backed
obligations (CMOs), asset-backed securities, zero coupon securities,
preferred stock and municipal securities. Bond Fund may also write
covered calls and use certain derivative investments, including options
and futures, to enhance income and may use hedging instruments to try to
manage investment risks.
As its investment objective, Income Fund seeks high current income
consistent with prudent investment risk and preservation of capital.
Income Fund seeks to achieve its objective by investing primarily in
corporate debt securities with remaining maturities of five years or less
of mortgage debt securities with prepayment features which in the judgment
of OFI will result in the payment of interest and principal such that the
effective maturity is five years or less. Income Fund invests at least
75% of its total assets in: U.S. Government and U.S. Government-related
securities, dollar-denominated foreign government and corporate securities
and short-term investments. These investments must be rated at least
investment grade by a major rating agency at the time of purchase or if
unrated, be judged by OFI to be of comparable credit quality, except that
Income Fund's investment in short-term investments must be rated, or
judged to be the equivalent of "Prime". Income Fund's investment may
include municipal obligations, mortgage-backed and asset-backed
securities, adjustable rate securities and stripped securities. Income
Fund 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 OFI to be of
comparable credit quality. Unrated debt securities will not exceed 10%
of Income Fund's total assets. Income Fund may also invest up to 20% of
its total assets in mortgage dollar rolls and up to 5% of its total assets
in inverse floating rate instruments. Income Fund's investments may also
include foreign securities, including debt and equity securities of
corporate and governmental issuers of countries with emerging economies
or securities markets and foreign currency exchange contracts. Income
Fund may invest up to 5% of its total assets in non-dollar denominated
securities of foreign issuers, including issuers in developing countries.
Income Fund may invest in structured notes and inverse floating rate
notes. Income Fund may also write covered call options that 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. As with Bond Fund, Income Fund
may use certain derivative investments, including options and futures and
may use hedging instruments to try to manage investment risks.
Shareholders of the Fund should consider the differences in investment
objectives and policies of the funds, including the ability, but not the
current investment policy of Bond Fund to invest up to 100% of its assets
in securities rated lower than investment grade. See "Comparison Between
Bond Fund and Income Fund - Comparison of Investment Objectives, Policies
and Restrictions."
Investment Advisory and Distribution Plan Fees
The funds obtain investment management services from OFI pursuant to the
terms of their respective investment advisory agreements. Each Fund's
management fee is payable to OFI monthly and is computed on the net asset
value of the respective Fund as of the close of business each day. Bond
Fund pays a management fee which declines on additional assets as Bond
Fund increases its asset base, at the annual rate of 0.75% of the first
$200 million of net assets, 0.72% of the next $200 million, 0.69% of the
next $200 million, 0.66% of the next $200 million, 0.60% of the next $200
million and 0.50% of net assets over $1 billion. Income Fund pays a
management fee which similarly declines, at an annual rate of 0.625% of
the first $300 million of net assets, 0.500% of the next $100 million and
0.450% of net assets over $400 million.
Each fund has adopted separate service and/or distribution plans pursuant
to Rule 12b-1 under the 1940 Act for their respective Class A and Class
B shares. Pursuant to the plans, Class A and Class B shares of Bond Fund
and the Fund are authorized to pay OFDI in connection with the
distribution of shares and the servicing of shareholder accounts that hold
the Fund's shares. The plans for Bond Fund and the Fund provide for
payments at a fixed rate to compensate OFDI, except for each Fund's Class
A service plan, which provides for reimbursement of OFDI's expenses. The
current maximum annual fee payable by shares of Bond Fund and the Fund
pursuant to their service and/or distribution plans is (i) as to Class A
shares, 0.25% (as a service fee) and (ii) as to Class B shares, 1.00%
(consisting of a 0.25% service fee and a 0.75% "asset-based sales
charge"). Class B shares of Bond Fund automatically convert to Class A
shares of Bond Fund six years after purchase. Class B shares of Income
Fund automatically convert to Class A shares of Income Fund eight years
after purchase. Accordingly, Class B shareholders of the Fund may pay the
asset-based sales charge on their shares for a longer period than Bond
Fund Class B shareholders.
Purchases, Exchanges and Redemptions
Purchases. Purchases of shares of Bond Fund and the Fund may be made
directly through OFDI, or through any dealer, broker or financial
institution that has a sales agreement with OFDI. In addition, a
shareholder of Bond Fund may purchase shares automatically from an account
at a domestic bank or other financial institution under the
"OppenheimerFunds AccountLink" service. Class A shares of both Bond Fund
and the Fund generally are sold subject to an initial sales charge; the
maximum sales charge rate is 0.75% higher for Bond Fund Class A shares
than for Income Fund Class A shares. Class B shares of both funds
generally are sold without a front-end sales charge but may be subject to
a CDSC upon redemption. See "Comparative Fee Tables -- Transaction
Charges" above for a complete description of such sales charges.
Class A shares of each fund may be purchased at reduced sales charges, and
the Class B CDSC of each fund may be waived in certain circumstances, as
described in that fund's Prospectus. Bond Fund has agreed that each
shareholder holding Income Fund shares as of the reorganization date who
is presently eligible (i) to purchase Class A shares of Income Fund at net
asset value or (ii) for a waiver from the CDSC applicable to either Class
A or Class B shares of Income Fund, in accordance with Income Fund's
current prospectus, will retain these privileges with respect to Bond Fund
shares, commencing as of the date Bond Fund's prospectus is appropriately
revised. These privileges apply only to accounts holding Bond Fund shares
received in the Reorganization, and terminates once all shares held in
such an account are redeemed or exchanged.
The Class A Bond Fund shares to be issued under the Reorganization
Agreement will be issued by Bond Fund at net asset value without a sales
charge. The sales charge on Class A shares of Bond Fund will only affect
shareholders of the Fund to the extent that they desire to make additional
purchases of Class A shares of Bond Fund in addition to the shares which
they will receive as a result of the Reorganization. Future dividends and
capital gain distributions of Bond Fund, if any, may be reinvested without
sales charge. The Class B shares of Bond Fund to be issued under the
Reorganization Agreement will be issued at net asset value and, along with
Class A shares of Bond Fund to be issued under the Reorganization
Agreement, will be deemed aged to the same level as the shareholder's
existing Fund Class A and Class B shares, for purposes of imposing the
CDSC of that class at redemption and for converting Class B to Class A
shares.
Exchanges. Shareholders of Bond Fund may exchange their shares at net
asset value for shares of the same class of mutual funds within the
Oppenheimer funds family (46 other portfolios), subject to certain
conditions. Shares of Income Fund may only be exchanged for shares of the
same class of another series of the Company (7 other portfolios). Bond
Fund offers an automatic exchange plan providing for systematic exchanges
from Bond Fund of a specified amount for shares of the same class of other
funds within the Oppenheimer funds family. Exchanges of Income Fund shares
in excess of 12 in a 12-month period are subject to an exchange fee of
.75% of the net assets of the redeemed shares.
Redemptions. Class A shares of the funds may be redeemed without charge
at their respective net asset values per share calculated after the
redemption order is received and accepted; however, certain large
investments in Class A shares that were exempt from the front-end sales
charge upon purchase may be subject to a CDSC of up to 1.0% upon
redemption. See "Comparative Fee Tables -- Transaction Charges" above.
Class B shares of the funds may be redeemed at their net asset value per
share, subject to a maximum CDSC of 5.0% for redemptions occurring within
six years of purchase. However, the Class B CDSC is 1% lower for Bond
Fund shares during the second, third and fourth year after purchase.
Shareholders of Bond Fund may reinvest redemption proceeds of Class A
shares on which an initial sales charge was paid, or the redemption
proceeds of Class A or Class B shares on which a CDSC was paid, within six
months of a redemption at net asset value in Class A shares of Bond Fund
or any of numerous mutual funds within the Oppenheimer funds family.
Shareholders of Income Fund may reinvest all or part of the redemption
proceeds of Class A shares in Class A shares of Income Fund within 60 days
after the date of the redemption without the imposition of a sales charge.
Shareholders of both funds may redeem their shares by written request or
by telephone request in certain stated amounts, or they may arrange to
have share redemption proceeds wired to a pre-designated account at a U.S.
bank or other financial institution that is an automated clearing house
("ACH") member. Checkwriting privileges on Class A shares of Bond Fund
are also available. Bond Fund may redeem accounts valued at less than
$1,000 if the account has fallen below such stated amount for reasons
other than market value fluctuations. For Income Fund, the corresponding
minimum is 100 shares once the account has been open at least 24 months.
The funds offer automatic withdrawal plans providing for systematic
withdrawals of a specified amount from the Fund account.
PRINCIPAL RISK FACTORS
In evaluating whether to approve the Reorganization and invest in Bond
Fund, shareholders should carefully consider the following summary of risk
factors, relating to both Bond Fund and the Fund, in addition to the other
information set forth in this Proxy Statement and Prospectus. A complete
description of risk factors for each fund is set forth in the Prospectuses
of the funds and their respective Statements of Additional Information.
As a general matter, Bond Fund and the Fund are intended for investors
seeking high current income and not for investors seeking capital
appreciation. There is no assurance that either Bond Fund or the Fund
will achieve its investment objective and investment in the funds is
subject to investment risks, including the possible loss of the principal
invested. As described below, each fund generally invests a certain
percentage of its assets in high-yield, lower-rated securities.
Investment in Debt Securities
The funds both seek their investment objective through investments
primarily in debt securities. Debt securities are subject to interest
rate risk and credit risk. Interest rate risk relates to fluctuations in
market value due to changes in prevailing interest rates. When prevailing
interest rates fall, the values of already-issued debt securities
generally rise. When interest rates rise, the values of already-issued
debt securities generally decline. The magnitude of these fluctuations
will often be greater for longer-term debt securities than shorter-term
debt securities. Changes in the value of securities held by a fund mean
that the fund's share prices can go up or down when interest rates change,
because of the effect of the change on the value of the fund's portfolio
of debt securities.
Credit risk relates to the ability of the issuer of a debt security to
make interest or principal payments on the security as they become due.
Generally, higher-yielding, lower-rated bonds are subject to greater
credit risk than higher-rated bonds. Securities issued or guaranteed by
the U.S. government are subject to little, if any, credit risk. Bond Fund
is currently permitted to invest up to 35% of its total assets in debt
securities rated less than investment grade or, if unrated, judged by OFI
to be of comparable quality to such lower-rated debt securities (often
called "junk bonds"). However, OFI anticipates that Bond Fund would
generally invest no more than 25% of its total assets in non-investment
grade debt securities. Such securities are speculative and involve
greater risk than investment grade debt securities. They may be less
liquid than higher-rated securities. If Bond Fund were forced to sell a
lower-grade debt security during a period of rapidly declining prices, it
might experience significant losses especially if a substantial number
of other holders decide to sell at the same time. Other risks may involve
the default of the issuer or price changes in the issuer's securities due
to change in the issuer's financial strength or economic conditions.
Income Fund may invest up to 25% of its total assets in non-investment
grade debt, but will not purchase securities rated below "B" by Moody's
or S&P. Up to 10% of Income Fund's assets may be invested in unrated debt
securities.
The funds may invest in mortgage-backed securities which securities are
subject to prepayment risks. The effective maturity of a mortgage-backed
security may be shortened by unscheduled or early payment of principal and
interest on the underlying mortgages. This may result in greater price
and yield volatility than traditional fixed-income securities that have
a fixed maturity and interest rate. The principal that is returned may
be invested in instruments having a higher or lower yield than the prepaid
instruments depending on then-current market conditions. Such securities
therefore may be less effective as a means of "locking in" attractive
long-term interest rates and may have less potential for appreciation
during periods of declining interest rates than conventional bonds with
comparable stated maturities. If the funds buy mortgage-backed securities
at a premium, prepayments of principal and foreclosures of mortgages may
result in some loss of the fund's principal investment to the extent of
the premium paid. The value of mortgage-backed securities may also be
affected by changes in the market's perception of the creditworthiness of
the entity issuing or guaranteeing them or by changes in government
regulations and tax policies.
The funds may invest in collateralized mortgage obligations ("CMOs"). CMOs
may be issued in a variety of classes or series ("tranches"). The
principal value of certain CMO tranches may be more volatile and less
liquid than other types of mortgage-related securities, because of the
possibility that the principal value of the CMOs may be prepaid earlier
than the maturity of the CMOs as a result of prepayments of the underlying
mortgage loans by the borrowers.
Each fund may invest in "asset-backed" securities. These represent
interests in pools of consumer loans and other trade receivables, similar
to mortgage-backed securities. They are issued by trusts and "special
purpose corporations." They are backed by a pool of assets, such as credit
card or auto loan receivables, which are the obligations of a number of
different parties. The income from the underlying pool is passed through
to holders, such as Bond Fund. These securities may be supported by a
credit enhancement, such as a letter of credit, a guarantee or a
preference right. However, the extent of the credit enhancement may be
different for different securities and generally applies to only a
fraction of the security's value. These securities present special risks.
For example, in the case of credit card receivables, the issuer of the
security may have no security interest in the related collateral.
Each fund may also invest in CMOs that are "stripped." Stripped mortgage-
backed securities usually have two classes. The classes receive different
proportions of the interest and principal distributions on the pool of
mortgage assets that act as collateral for the security. In certain
cases, one class will receive all of the interest payments (and is known
as an "I/O"), while the other class will receive all of the principal
payments (and is known as a "P/O"). The yield to maturity on the class
that receives only interest is extremely sensitive to the rate of payment
of the principal on the underlying mortgages. Principal prepayments
increase that sensitivity. Stripped securities that pay "interest only"
are therefore subject to greater price volatility when interest rates
change, and they have the additional risk that if the underlying mortgages
are prepaid, the fund will lose the anticipated cash flow from the
interest on the prepaid mortgages. That risk is increased when general
interest rates fall, and in times of rapidly falling interest rates, the
fund might receive back less than its investment in such I/Os. The value
of "principal only" securities generally increases as interest rates
decline and prepayment rates rise. The price of these securities is
typically more volatile than that of coupon-bearing bonds of the same
maturity.
Foreign Securities
The funds may invest in debt securities of foreign governments and foreign
companies, subject to the following limits. Investments in foreign
securities by Bond Fund are limited by the expectation that generally at
least 75% of its total assets will be invested in U.S. corporate bonds
rated "A" or better and U.S. government and agency bonds. Income Fund may
invest up to 10% of its assets in foreign securities, except the Fund may
invest up to 25% of its assets in foreign equity and debt securities (i)
issued, assumed or guaranteed by foreign governments or their political
subdivisions or instrumentalities, (ii) assumed or guaranteed by domestic
issuers, including Eurodollar securities and (iii) issued, assumed or
guaranteed by foreign issuers having a class of securities listed for
trading on the New York Stock Exchange. Some of the foreign debt
securities each fund may invest in, such as emerging market debt, have
speculative characteristics. There are certain risks of foreign
investing. For example, foreign issuers are not required to use
generally-accepted accounting principles. If foreign securities are not
registered for sale in the U.S. under U.S. securities laws, the issuer
does not have to comply with the disclosure requirements of our laws,
which are generally more stringent than foreign laws. The values of
foreign securities investments will be affected by other factors,
including exchange control regulations or currency blockage and possible
expropriation or nationalization of assets. There are risks of changes
in foreign currency values. The funds may purchase securities denominated
in foreign currencies, but Income Fund is required to limit its
investments in non-dollar denominated foreign issues to 5% of its total
assets. A change in value of a foreign currency against the U.S. dollar
will result in a change in the U.S. dollar value of a Fund's securities
denominated in a foreign currency. The currency rate change will also
affect its income available for distribution. Although the funds'
investment income from foreign securities may be received in foreign
currencies, the funds will be required to absorb the cost of currency
fluctuations. If a fund suffers a loss on foreign currencies after it has
distributed its income during the year, the fund may find that it has
distributed more income than was available from actual investment income.
There may also be changes in governmental administration or economic or
monetary policy in the U.S. or abroad that can affect foreign investing.
In addition, it is generally more difficult to obtain court judgments
outside the United States if the fund has to sue a foreign broker or
issuer. Additional costs may be incurred because foreign broker
commissions are generally higher than U.S. rates, and there are additional
custodial costs associated with holding securities abroad.
Repurchase Agreements
The funds may enter into repurchase agreements of seven days or less
without limit and may cause up to 10% of their respective net assets to
be subject to repurchase agreements having a maturity beyond seven days.
Repurchase agreements must be fully collateralized. However, if the
vendor fails to pay the resale price on the delivery date, the funds may
experience costs or delays in disposing of the collateral and may
experience losses to the extent that the proceeds from the sale of the
collateral is less than the repurchase price.
Options, Futures and Interest Rate Swaps; Derivatives
Both funds may purchase and sell certain kinds of futures contracts and
options on such contracts for hedging purposes. Bond Fund may also
purchase and sell put and call options, options on broadly-based stock or
bond indices and foreign currency and forward contracts. Both funds may
enter into interest rate swap agreements. The foregoing instruments,
referred to as "hedging instruments," may be considered derivative
investments. Both funds may also invest in certain derivative investments
to seek to enhance income. Hedging instruments and derivative investments
and their special risks are described below in "Comparison Between Bond
Fund and the Fund."
APPROVAL OF THE REORGANIZATION
(The Proposal)
Background
On March 1, 1996, the indirect parent company of Phelps, Connecticut
Mutual Life Insurance Company ("Connecticut Mutual") merged with and into
Massachusetts Mutual Life Insurance Company ("MassMutual"). On that date,
Connecticut Mutual ceased to exist and MassMutual became the surviving
company. Immediately subsequent to the merger, MassMutual became the
nation's fifth largest life insurance company.
MassMutual is the ultimate parent company of OppenheimerFunds, Inc.
("OFI"), which is engaged (directly and through subsidiaries) in the
business of managing, distributing and servicing registered investment
companies. As of January 31, 1996, OFI (including a subsidiary) had more
than $45 billion in assets under management, the majority of which is
represented by the Oppenheimer funds.
Board Approval of the Reorganization
At its meeting on November 17, 1995, the Company's Board, including the
Independent Directors, unanimously approved the Reorganization and the
Reorganization Agreement, determined that the Reorganization is in the
best interests of Income Fund and its shareholders and resolved to
recommend that Fund shareholders vote for approval of the Reorganization.
The Board further determined that the Reorganization would not result in
dilution of the Fund's shareholders' interests.
The Company's Board of Directors, on behalf of Income Fund, believes that
the proposed Reorganization will be advantageous to the shareholders of
Income Fund in several respects. The Board considered the following
matters, among others, in approving the Proposal.
First, the Board believes that it is not advantageous to operate and
market Income Fund separately from Bond Fund because their investment
objectives and policies are substantially similar. By being offered
simultaneously, each fund hinders the other fund's potential for asset
growth. For a complete description of Bond Fund's investment objectives
and policies, see Bond Fund's Prospectus included with this Proxy
Statement.
Second, the Board considered that shareholders may be better served by a
Fund offering greater diversification. To the extent that the funds'
assets are combined into a single portfolio and a larger asset base is
created as a result of the Reorganization, greater diversification of Bond
Fund's investment portfolio can be achieved than is currently possible in
either Fund, especially Income Fund. Greater diversification is expected
to be beneficial to shareholders of both funds because it may reduce the
negative effect which the adverse performance of any one security may have
on the performance of the entire portfolio.
Third, the Board considered the fact that Bond Fund is subject to a higher
management fee rate than Income Fund. The Board believes that the assets
of Bond Fund attributable to Income Fund will receive the benefit of OFI's
capabilities and resources in investment management and that the payment
by the assets of Income Fund of a higher management fee rate for these
services and resources is reasonable and in the best interests of Income
Fund's shareholders.
Fourth, the Board believes that the Bond Fund shares received in the
Reorganization will provide existing Income Fund shareholders with
substantially the same investment advantages that they currently enjoy.
The Board also considered the performance history of each Fund.
Fifth, a combined fund offers economies of scale that may have a positive
effect on the expenses currently borne by Income Fund, and hence,
indirectly, its shareholders. Both funds incur substantial costs for
accounting, legal, transfer agency services, insurance, and custodial and
administrative services. The Board expects that the Reorganization may
result over time in a decrease in the expenses currently borne indirectly
by Income Fund's shareholders. See expense information in "Comparative
Fee Tables."
The Board considered the fact that, from the perspective of Bond Fund, the
Reorganization presents an excellent opportunity to acquire assets without
the obligation to pay commissions or other similar costs that are normally
associated with the purchase of securities. This opportunity provides an
economic benefit to Bond Fund and its shareholders.
The Board also considered the fact that OFI and OFDI will receive certain
benefits from the Reorganization. The consolidated portfolio management
effort might result in time savings for OFI and the preparation of fewer
prospectuses, reports and regulatory filings. The Board, however,
believes that this consideration will not amount to a significant economic
benefit.
The Trust's Board of Trustees, on behalf of Bond Fund, including the
trustees who are not "interested persons" of Bond Fund, unanimously
approved the Reorganization and the Reorganization Agreement and
determined that the Reorganization is in the best interests of Bond Fund
and its shareholders. The Board further determined that the
Reorganization would not result in dilution of the Bond Fund shareholders'
interests. The Bond Fund Board considered, among other things, that an
increase in Bond Fund's asset base as a result of the Reorganization could
benefit Bond Fund shareholders due to the economies of scale available to
a larger fund. These economies of scale should result in slightly lower
costs per account for each Bond Fund shareholder through lower operating
expenses and transfer agency expenses.
The Reorganization
The following summary of the Reorganization Agreement is qualified in its
entirety by reference to the Reorganization Agreement (a copy of which is
set forth in full as Exhibit A to this Proxy Statement and Prospectus).
The Reorganization Agreement contemplates a reorganization under which (i)
substantially all of the assets of the Fund would be transferred to Bond
Fund in exchange for Class A and Class B shares of Bond Fund, (ii) these
Class A and Class B shares would be distributed to the respective Class
A and Class B shareholders of the Fund in liquidation of the Fund and
(iii) the outstanding shares of the Fund would be cancelled. Prior to the
Closing Date (as hereinafter defined), the Fund will endeavor to discharge
all of its liabilities and obligations when and as due prior to such date.
Bond Fund will not assume any liabilities or obligations of Income Fund
except for portfolio securities purchased which have not settled and
outstanding shareholder redemptions and dividend checks. In this regard,
the Fund will retain a cash reserve (the "Cash Reserve") in an amount
which is deemed sufficient in the discretion of the Board for the payment
of (a) the Fund's expenses of liquidation (if any) and (b) the Fund's
liabilities, other than those assumed by Bond Fund. The Cash Reserve will
be accounted for as a liability of Income Fund prior to the determination
of its net asset value. The number of full and fractional Class A and
Class B shares of Bond Fund to be issued to the Fund will be determined
on the basis of Bond Fund's and the Fund's relative net asset values per
Class A and Class B shares, respectively, computed as of the close of
business of the New York Stock Exchange, Inc. on the business day
preceding the Closing Date (the "Valuation Date").
OFI will utilize the valuation procedures set forth in the Prospectus and
Statement of Additional Information of Bond Fund to determine the value
of the Fund's assets to be transferred to Bond Fund pursuant to the
Reorganization, the value of Bond Fund's assets and the net asset value
of each class of shares of Bond Fund. Such values will be computed by OFI
as of the Valuation Date in a manner consistent with its regular practice
in pricing Bond Fund.
The Reorganization Agreement provides for coordination between the funds
as to their respective portfolios so that, on and after the Closing Date,
Bond Fund will be in compliance with all of its investment policies and
restrictions. The Fund will recognize capital gain or loss on any sales
made pursuant to this condition. As noted in "Tax Aspects of the
Reorganization" below, if the Fund realizes net gain from the sale of
securities, such gain, to the extent not offset by capital loss carry-
forwards, will be distributed to shareholders prior to the Closing Date
and will be taxable to shareholders as long-term capital gain or, if the
assets disposed of had not been held for more than one year, as ordinary
income.
Contemporaneously with the closing, the Fund will be liquidated (except
for the Cash Reserve) and the Fund will distribute or cause to be
distributed pro rata to Fund shareholders of record as of the close of
business on the Valuation Date the full and fractional Bond Fund shares
of each class received by the Fund. Upon such liquidation, all issued and
outstanding shares of the Fund will be cancelled on the Fund's books and
Fund shareholders will have no further rights as shareholders of the Fund.
To assist the Fund in the distribution of Bond Fund shares, Bond Fund
will, in accordance with a shareholder list supplied by the Fund, cause
Bond Fund's transfer agent to credit and confirm an appropriate number of
shares of Bond Fund to each shareholder of the Fund. Certificates for
shares of Bond Fund will be issued upon written request of a former
shareholder of the Fund but only for whole shares with fractional shares
credited to the name of the shareholder on the books of Bond Fund. Former
shareholders of the Fund who wish certificates representing their shares
of Bond Fund must, after receipt of their confirmations, make a written
request to OppenheimerFunds Services, P.O. Box 5270, Denver, Colorado
80217. Shareholders of the Fund holding certificates representing their
shares will not be required to surrender their certificates to anyone in
connection with the Reorganization. After the Reorganization, however,
it will be necessary for such shareholders to surrender such certificates
in order to redeem, transfer, pledge or exchange any shares of Bond Fund.
After the closing of the Reorganization, the Fund will not conduct any
business except in connection with the winding up of its affairs. Under
the Reorganization Agreement, within one year after the Closing Date, the
Fund shall: either (i) transfer any remaining amount of the Cash Reserve
to Bond Fund, if such remaining amount (as reduced by the estimated cost
of distributing it to shareholders) is not material (as defined below) or
(ii) distribute such remaining amount to the shareholders of the Fund who
were such on the Valuation Date. After this transfer or distribution, the
Fund's existence will be terminated. Such remaining amount shall be deemed
to be material if the amount to be distributed, after deducting the
estimated expenses of the distribution, equals or exceeds one cent per
share of the number of Fund shares outstanding on the Valuation Date.
The consummation of the Reorganization is subject to the conditions set
forth in the Reorganization Agreement, including, without limitation,
approval of the Reorganization by the Fund's shareholders.
Notwithstanding approval of the Fund's shareholders, the Reorganization
may be terminated at any time at or prior to the Closing Date (i) by
mutual written consent of the Company, on behalf of Income Fund, and
Integrity Trust, on behalf of Bond Fund, (ii) by the Company, on behalf
of Income Fund, or Integrity Trust, on behalf of Bond Fund if the
Registration Statement containing this Proxy Statement and Prospectus
shall not have been declared effective by the Securities and Exchange
Commission by December 31, 1996, or (iii) by the Company, on behalf of
Income Fund, or Integrity Trust, on behalf of Bond Fund upon a material
breach by the other of any representation, warranty, covenant or agreement
contained therein to be performed on or prior to the Closing Date, if a
condition therein expressed to be precedent to the obligations of the
terminating party has not been met and it reasonably appears that it will
not or cannot be met prior to the Closing Date or the Acquisition is not
consummated. Termination of the Reorganization Agreement will terminate
all obligations of the parties thereto without liability except, in the
event of a termination pursuant to (iii) above, any party in breach of the
Reorganization Agreement will, upon demand, reimburse the non-breaching
party for all reasonable out-of-pocket fees and expenses (if any) incurred
in connection with the transactions contemplated by the Reorganization
Agreement.
Approval of the Reorganization will require the vote specified below in
"Information Concerning the Meeting - Record Date; Vote Required; Share
Information." If the Reorganization is not approved by the shareholders
of the Fund, the Directors of the Company will consider other possible
courses of action.
Tax Aspects of the Reorganization
At or prior to the Closing Date, Income Fund will declare a dividend in
an amount large enough so that it will have declared a dividend of all of
its investment company taxable income and net capital gain, if any, for
the taxable period ending on the Closing Date (determined without regard
to any deduction for dividends paid). Such dividends will be included in
the taxable income of the Fund's shareholders as ordinary income and long-
term capital gain, respectively.
The exchange of the assets of the Fund for Class A and Class B shares of
Bond Fund and the assumption by Bond Fund of certain liabilities of the
Fund is intended to qualify for Federal income tax purposes as a
reorganization under Section 368(a)(1) of the Internal Revenue Code of
1986, as amended (the "Code"). The Fund has represented to Arthur
Andersen LLP, tax adviser to the Fund, that there is no plan or intention
by any Fund shareholder who owns 5% or more of the Fund's outstanding
shares, and, to the Fund's best knowledge, there is no plan or intention
on the part of the remaining Fund shareholders, to redeem, sell, exchange
or otherwise dispose of a number of Bond Fund shares received in the
transaction that would reduce the Fund shareholders' ownership of Bond
Fund Class A and Class B shares to a number of shares having a value, as
of the Closing Date, of less than 50% of the value of all the formerly
outstanding Fund shares as of the same date. The Fund and Bond Fund have
each further represented to Arthur Andersen LLP the fact that, as of the
Closing Date, the Fund and Bond Fund will qualify as regulated investment
companies or will meet the diversification test of Section
368(a)(2)(F)(ii) of the Code.
As a condition to the closing of the Reorganization, Bond Fund and the
Fund will receive the opinion of Arthur Andersen LLP to the effect that,
based on the Reorganization Agreement, the above representations and other
representations as such firm shall reasonably request, existing provisions
of the Code, Treasury Regulations issued thereunder, current Revenue
Rulings, Revenue Procedures and court decisions, for Federal income tax
purposes:
1. The transfer of substantially all of Income Fund's assets in
exchange for Class A and Class B shares of Bond Fund and the
assumption by Bond Fund of certain identified liabilities of the Fund
followed by the distribution by the Fund of Class A and Class B
shares of Bond Fund to the Fund shareholders in exchange for their
Fund shares will constitute a "reorganization" within the meaning of
Section 368(a)(1) of the Code and the Fund and Bond Fund will each
be a "party to a reorganization" within the meaning of Section 368(b)
of the Code.
2. Pursuant to Section 1032 of the Code, no gain or loss will be
recognized by Bond Fund upon the receipt of the assets of the Fund
solely in exchange for Class A and Class B shares of Bond Fund and
the assumption by Bond Fund of certain identified liabilities of the
Fund.
3. Pursuant to Sections 361(a) and 361(c) of the Code, no gain or
loss will be recognized by the Fund upon the transfer of the assets
of the Fund to Bond Fund in exchange for Class A and Class B shares
of Bond Fund and the assumption by Bond Fund of certain identified
liabilities of the Fund or upon the distribution of Class A and Class
B shares of Bond Fund to the Fund shareholders in exchange for the
Fund shares.
4. Pursuant to Section 354(a) of the Code, no gain or loss will be
recognized by the Fund shareholders upon the exchange of the Fund
shares for the Class A and Class B shares of Bond Fund. However,
Income Fund shareholders may recognize taxable income or gain to the
extent they receive any portion of the Cash Reserve, as defined
above.
5. Pursuant to Section 358 of the Code, the aggregate tax basis for
Class A and Class B shares of Bond Fund received by each Fund
shareholder pursuant to the Reorganization will be the same as the
aggregate tax basis of the Fund shares held by each such Fund
shareholder immediately prior to the Reorganization.
6. Pursuant to Section 1223 of the Code, the holding period of Class
A and Class B shares of Bond Fund to be received by each Fund
shareholder will include the period during which the Fund shares
surrendered in exchange therefor were held (provided such Fund shares
were held as capital assets on the date of the Reorganization).
7. Pursuant to Section 362(b) of the Code, the tax basis of the
assets of the Fund acquired by Bond Fund will be the same as the tax
basis of such assets of the Fund immediately prior to the
Reorganization.
8. Pursuant to Section 1223 of the Code, the holding period of the
assets of the Fund in the hands of Bond Fund will include the period
during which those assets were held by the Fund.
9. Bond Fund will succeed to and take into account the items of the
Fund described in Section 381(c) of the Code, including the earnings
and profits, or deficit in earnings and profits, of the Fund as of
the date of the transactions. Bond Fund will take these items into
account subject to the conditions and limitations specified in
Sections 381, 382, 383 and 384 of the Code and applicable regulations
thereunder.
Shareholders of the Fund should consult their tax advisors regarding the
effect, if any, of the Reorganization in light of their individual
circumstances. Since the foregoing discussion only relates to the Federal
income tax consequences of the Reorganization, shareholders of the Fund
should also consult their tax advisers as to state and local tax
consequences, if any, of the Reorganization.
Capitalization Table (Unaudited)
The table below sets forth the capitalization of Bond Fund and Income Fund
and indicates the pro forma combined capitalization as of December 31,
1995 as if the Reorganization had occurred on that date.
<TABLE>
<CAPTION>
Net Asset
Shares Value
Net Assets Outstanding Per Share
Bond Fund
<S> <C> <C> <C>
Class A Shares $169,059,333 15,399,839 $10.98
Class B Shares 39,187,315 3,570,470 10.98
Class C Shares 3,970,646 361,451 10.99
Income Fund $ 33,127,594 3,478,038 9.52
Class A Shares 58,767 6,150 9.56
Class B Shares
Pro Forma Combined
Fund**
Class A Shares $202,186,927 18,416,927 $10.98
Class B Shares 39,246,082 3,575,822 10.98
Class C Shares 3,970,646 361,451 10.99
</TABLE>
- ------------------
* No Bond Fund Class C shares are being issued in the Reorganization
because there are no outstanding Income Fund Class C shares.
**Reflects issuance of 3,017,085 Class A shares and 5,352 Class B shares
of Bond Fund in a tax-free exchange for the net assets of the Fund,
aggregating $33,127,594 and $58,767 for Class A and Class B shares,
respectively, of the Fund.
The pro forma ratio of expenses to average annual net assets of the
combined funds at December 31, 1995 would have been 1.38% with respect to
Class A shares and 2.15% with respect to Class B shares.
COMPARISON BETWEEN BOND FUND AND INCOME FUND
Comparative information about Bond Fund and the Fund is presented below.
More complete information about Bond Fund and the Fund is set forth in
their respective Prospectuses (which, as to Bond Fund, accompanies this
Proxy Statement and Prospectus and is incorporated herein by reference)
and Statements of Additional Information. To obtain copies of either
Prospectus, see "Miscellaneous - Public Information."
Comparison of Investment Objectives, Policies and Restrictions
As its investment objective, Bond Fund seeks a high level of current
income by investing mainly in debt instruments. As its investment
objective, Income Fund seeks high current income consistent with prudent
investment risk and preservation of capital. Income Fund seeks to achieve
its objective by investing in a portfolio consisting primarily of fixed
income obligations. In seeking their investment objectives, Bond Fund and
the Fund employ the investment policies as described in detail below.
Bond Fund. Under normal market conditions, Bond Fund invests at least 65%
of its total assets in a diversified portfolio of investment grade fixed-
income securities. These include (i) investment-grade debt securities
rated BBB or above by S&P, Baa or above by Moody's or an equivalent rating
category of another nationally-recognized rating organization or, if
unrated, are of comparable quality as determined by OFI; (ii) securities
issued or guaranteed as to principal and interest by the U.S. Government,
its agencies or instrumentalities or obligations secured by such
securities ("U.S. Government Securities"); and (iii) high-quality, short-
term money market instruments.
Currently, Bond Fund may invest up to 35% of its total assets in debt
securities rated less than investment grade or, if unrated, judged by OFI
to be of comparable quality to such lower-rated securities (collectively,
"lower-grade securities"). Lower-grade securities (often called "junk
bonds") are considered speculative and involve greater risk than
investment grade debt securities. Lower-grade securities include
securities rated BB, B, CCC, CC and D by S&P or Ba, B, Caa, Ca and C by
Moody's. Bonds rated BB, B, CCC and CC by S&P are regarded, on balance,
as predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the
obligation. Bonds on which no interest is paid are rated C by S&P. Bonds
rated D by S&P are in default and payment of interest and/or repayment of
principal is in arrears. Bonds rated Ba or B by Moody's are judged to
have speculative elements; their future is not well-assured. Bonds rated
Caa by Moody's are of poor standing and may be in default; bonds rated Ca
are speculative in a high degree and are often in default; bonds rated C
are regarded as having extremely poor prospects of attaining any real
investment standing. Prior to July 10, 1995, Bond Fund's investments were
limited to investment grade bonds, U.S. Government Securities and money
market instruments. Such investment policies were changed pursuant to
shareholder approval on July 10, 1995.
OFI anticipates that Bond Fund would generally invest at least 75% of its
total assets in: (i) U.S. corporate bonds rated "A" or better and (ii)
U.S. government and agency bonds. OFI further anticipates that Bond Fund
would invest an additional 15% of its total assets in non-investment grade
domestic corporate bonds and 10% of total assets in non-investment grade
foreign bonds. These anticipated investment targets, including the
allocation between domestic and foreign lower-grade debt securities, are
not fundamental investment policies, and they are subject to fluctuation
and may be changed by OFI without further notice to shareholders or
amended prospectus disclosure. When investing Bond Fund's assets, OFI
considers many factors, including current developments and trends in both
the economy and the financial markets. Under normal market conditions,
Bond Fund's target duration will be approximately five. Duration is a
measure of the anticipated rise or decline in value for a 1% change in
interest rates. For example, a duration of 2 in a portfolio indicates
that for every 1% rise in general interest rates, the portfolio's value
would be expected to fall 2%, and vice versa.
Bond Fund may invest in debt securities issued or guaranteed by foreign
companies and debt securities of foreign governments or their agencies.
Bond Fund is not restricted in the amount of assets that it may invest in
foreign countries or in which countries. However, if Bond Fund's assets
are held abroad, the countries in which they are held and the sub-
custodians holding then must be approved by the Integrity Trust Board of
Trustees when required to do so under applicable regulations.
Bond Fund may also invest in U.S. Government Securities (including
mortgage-related U.S. Government Securities that are issued or guaranteed
by federal agencies or government-sponsored entities but are not supported
by the full faith and credit of the U.S. Government), mortgage-backed
securities, whether issued by the U.S. government or private issuers,
CMOs, stripped CMOs and asset-backed securities. In addition to the
foregoing, Bond Fund may invest in zero coupon securities and illiquid
securities.
Income Fund. Under normal conditions, at least 75% of the Fund's assets
will be invested in U.S. Government securities, U.S. Government-related
securities (obligations that are fully collateralized or otherwise secured
by U.S. Government securities), dollar-denominated foreign government and
corporate securities rated at least investment grade or if unrated
determined by OFI to be of comparable quality, and short-term investments
rated Prime or the equivalent. The Fund may invest up to 25% of its total
assets in lower-grade securities (described above); however, Income Fund
will not invest in lower-grade securities rated below B by Moody's or S&P
or, if unrated, determined by OFI to be of comparable quality. Income Fund
may not invest ore than 10% of its assets in unrated debt securities.
Income Fund's investment in privately issued CMOs are limited to those
rated in the two highest rating categories. The average maturity of the
Fund's investments will vary based on market conditions. It is
anticipated, however, that the average dollar weighted maturity of the
Fund will generally be between 2-3 years. Income Fund may invest up to
20% of its total assets in mortgage dollar rolls; in these transactions,
it sells mortgage backed securities for delivery in the current month and
simultaneously contracts to purchase similar securities on a specified
future date. For temporary defensive purposes the Fund may invest up to
100% of its assets in various types of U.S. Government securities and high
quality money market instruments.
Special Investment Methods
Bond Fund and the Fund may use the special investment methods summarized
below.
Loans of Portfolio Securities. Both Bond Fund and the Fund may lend their
portfolio securities to brokers, dealers and other financial institutions,
subject to certain conditions. The funds must receive collateral for the
loans. Bond Fund presently does not intend to lend its portfolio
securities but, if it does, the value of securities loaned is not expected
to exceed 5% of the value of the total assets of Bond Fund in the coming
year. Income Fund may commit up to 33-1/3% of the value of its total
assets to such loans.
Repurchase Agreements. Both Bond Fund and the Fund may enter into
repurchase agreements. There is no limit on the amount of either fund's
net assets that may be subject to repurchase agreements of seven days or
less. Neither fund will enter into a repurchase agreement that will cause
more than 10% of its net assets to be subject to repurchase agreements
having a maturity beyond seven days; as to Bond Fund this percentage limit
may increase to 15% if certain state laws are changed or Bond Fund's
shares are no longer sold in those states.
Hedging. Bond Fund may purchase and sell: futures contracts that relate
to foreign currencies, financial indices and interest rates; certain put
and call options; and options on futures, broadly-based stock indices,
bond indices and foreign currency. Bond Fund may also enter into interest
rate swap agreements. The Fund may purchase or sell financial futures
contracts and purchase options on such contracts. These are all referred
to as "hedging instruments." The funds do not use hedging instruments for
speculative purposes. Up to 50% of Bond Fund's total assets may be
subject to covered calls; the corresponding limit for Income Fund is 20%.
Bond Fund will not write puts if more than 50% of its net assets would
have to be segregated to cover put obligations. Bond Fund may only
purchase a call or put if, after such purchase, the value of all call and
put options held by Bond Fund would not exceed 5% of Bond Fund's total
assets. Other limits on the use of hedging instruments are described in
the funds' respective Prospectuses and Statements of Additional
Information.
Hedging instruments may be used to manage a fund's exposure to the
possibility that the prices of its portfolio securities may decline, or
to establish a position in the securities market as a temporary substitute
for purchasing individual securities; to try to manage its exposure to
changing interest rates; to hedge the fund's portfolio against price
fluctuations; and to increase the fund's exposure to the securities
market. Forward contracts are used to try to manage foreign currency
risks on a fund's foreign investments. Both funds' foreign currency or
options are used to try to protect against declines in the dollar value
of foreign securities Bond Fund owns, or to protect against an increase
in the dollar cost of buying foreign securities. Both funds may write
covered call options to provide income for liquidity purposes, defensive
reasons, or to raise cash to distribute to shareholders.
The use of hedging instruments requires special skills and knowledge of
investment techniques that are different than those required for normal
portfolio management. If a fund uses a hedging instrument at the wrong
time or judges market conditions incorrectly, hedging strategies may
reduce the Fund's return. A fund could also experience losses if the
prices of its futures and options positions were not correlated with its
other investments or if it could not close out a position because of an
illiquid market for the future or option. Options trading involves the
payment of premiums, and options, futures and forward contracts are
subject to special tax rules that may affect the amount, timing and
character of a fund's distributions to its shareholders. There are also
special risks in particular hedging strategies. If a covered call written
by Bond Fund is exercised on an investment that has increased in value,
Bond Fund will be required to sell the investment at the call price and
will not be able to realize any profit if the investment has increased in
value above the call price. Interest rate swaps are subject to credit
risks (if the other party fails to meet its obligations) and also to
interest rate risks. Bond Fund could be obligated to pay more under its
swap agreements than it receives under them, as a result of interest rate
changes.
Derivative Investments. Each Fund can invest in a number of different
kinds of "derivative investments." Some types of derivatives may be used
for hedging purposes, as described above. Bond Fund may invest in others
because they offer the potential for increased income and principal value.
In general, a "derivative investment" is a specially-designed investment
the performance of which is linked to the performance of another
investment or security, such as an option, future, index, currency or
commodity. In the broadest sense, derivative investments include the
hedging instruments, mortgage-backed and asset-backed securities and CMOs
in which the funds may invest. Other types of derivatives in which Bond
Fund may invest include index-linked or commodity-linked notes, debt
exchangeable for common stock, equity-linked debt securities and currency
indexed securities. Other types of derivatives in which Income Fund may
invest include inverse floating rate instruments and structured notes.
One risk of investing in derivative investments is that the company
issuing the instrument might not pay the amount due on the maturity of the
instrument. There is also the risk that the underlying investment or
security might not perform the way the investment adviser expected it to
perform. The performance of derivative investments may also be influenced
by interest rate changes in the U.S. and abroad. All of these risks can
mean that a fund will realize less income than expected from its
investments, or that it can lose part or all of the value of its
investments, which will affect its share price.
When-Issued and Delayed Delivery Transactions. The funds may purchase
securities on a "when-issued" basis and may purchase or sell such
securities on a "delayed delivery" basis. These terms refer to securities
that have been created and for which a market exists, but which are not
available for immediate delivery or are to be delivered at a later date.
There may be a risk of loss to the funds if the value of the security
changes prior to the settlement date.
Investment Restrictions
Both Bond Fund and Fund have certain investment restrictions that,
together with the investment objective of Bond Fund, are fundamental
policies changeable only by shareholder approval. The investment
restrictions of Bond Fund and the Fund are set forth below.
Bond Fund cannot (1) make short sales except for sales "against the box";
(2) borrow money or enter into reverse repurchase agreements, except that
Bond Fund may borrow money from banks and enter into reverse repurchase
agreements as a temporary measure for extraordinary or emergency purposes
(but not for the purpose of making investments), provided that the
aggregate amount of all such borrowings and commitments under such
agreements does not, at the time of borrowing or of entering into such an
agreement, exceed 10% of Bond Fund's total assets taken at current market
value; Bond Fund will not purchase additional portfolio securities at any
time that the aggregate amount of its borrowings and its commitments under
reverse repurchase agreements exceeds 5% of Bond Fund's net assets (for
purposes of this restriction, entering into portfolio lending agreements
shall not be deemed to constitute borrowing money); (3) concentrate its
investments in any particular industry except that it may invest up to 25%
of the value of its total assets in the securities of issuers in any one
industry (of the utility companies, gas, electric, water and telephone
will each be considered as a separate industry); and (4) buy securities
issued or guaranteed by any one issuer (except the U.S. Government or any
of its agencies or instrumentalities) if with respect to 75% of its total
assets (a) more than 5% of Bond Fund's total assets would be invested in
the securities of that issuer, or (b) Bond Fund would own more than 10%
of that issuer's voting securities; (5) act as an underwriter, except to
the extent that, in connection with the disposition of portfolio
securities, Bond Fund may be deemed an underwriter under applicable laws;
(6) invest in oil, gas or other mineral leases, rights, royalty contracts
or exploration or development programs, real estate or real estate
mortgage loans (this restriction does not prevent Bond Fund from
purchasing securities secured or issued by companies investing or dealing
in real estate and by companies that are not principally engaged in the
business of buying and selling such leases, rights, contracts or
programs); (7) make loans other than by investing in obligations in which
Bond Fund may invest consistent with its investment objective and policies
and other than repurchase agreements and loans of portfolio securities;
(8) pledge, mortgage or hypothecate its assets, except that, to secure
permitted borrowings, it may pledge securities having a market value at
the time of the pledge not exceeding 15% of the cost of Bond Fund's total
assets and except in connection with permitted transactions in options,
futures contracts and options on futures contracts, and except for reverse
repurchase agreements and securities lending; (9) purchase or retain
securities of any issuer if, to the knowledge of the Trust, more than 5%
of such issuer's securities are beneficially owned by officers and
trustees of the Trust or officers and directors of MassMutual who
individually beneficially own more than 1/2 of 1% of the securities of
such issuer; and (10) make loans to an officer, trustee or employee of the
Trust or to any officer, director or employee of MassMutual, or to
MassMutual.
In accordance with certain non-fundamental policies and guidelines
changeable without shareholder approval, Bond Fund may not: (a)invest for
the purpose of exercising control over, or management of, any company; (b)
purchase any security of a company which (including any predecessor,
controlling person, general partner and guarantor) has a record of less
than three years of continuous operations or relevant business experience,
if such purchase would cause more than 5% of the current value of Bond
Fund's assets to be invested in such companies; and (c) invest in
securities of other investment companies except by purchase in the open
market where no commission or profit to a sponsor or dealer results from
such purchase other than the customary broker's commission, except when
such purchase is a part of a plan of merger, consolidation, reorganization
or acquisition.
Income Fund cannot: (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 Fund's investment policies, and the pledge, mortgage
or hypothecation of Income Fund's assets are not deemed to be senior
securities; (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 the
Fund may: (1) purchase securities of issuers which invest or deal on 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 Income Fund of initial or
maintenance margin in connection with futures contracts or related options
transactions is not considered the purchase of a security on margin; (8)
make loans, except that Income Fund (1) may lend portfolio securities in
accordance with Income Fund's investment policies up to 33-1/3% of Income
Fund's total assets taken at market value, (2) enter into repurchase
agreements, and (3) purchase all or a portion of an issue of publicly
distributed 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 the Fund 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 Income Fund's total assets, taken at market
value at the time thereof. In order to comply with certain state statues,
the Fund 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 Income Fund'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; (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 Income Fund's total assets 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; and (15) invest more than 10% 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.
Bond Fund Performance
Bond Fund does not maintain a fixed dividend rate and there can be no
assurance as to the payment of any dividends or the realization of any
capital gains.
During Bond Fund's fiscal year ended December 31, 1995, declines in
interest rates lead to a strong rally in Treasury securities, which
contributed to that Fund's positive overall performance. In the third and
fourth quarters of 1995, Bond Fund reduced its allocation to Treasury
securities, in order to realize profits and to emphasize investments in
different categories of U.S. Government and corporate bonds. During that
period, Bond Fund added to its holdings in the corporate bond sector,
favoring companies in industries expected to experience earnings growth,
such as cable, communications, broadcasting and media firms. Bond Fund
also allocated assets to non-agency mortgage-backed securities, which have
a higher degree of issuer default and therefore pay higher yields than
Government agency mortgage obligations. Issues of utilities and cyclical
industries such as mining and metals companies were underweighted in Bond
Fund's portfolio.
The chart below shows the performance of a hypothetical $10,000 investment
in Class A and Class B shares of Bond Fund held until December 31, 1995;
in the case of Class A shares, from the inception of the class on April
15, 1988, and in the case of Class B shares, from the inception of the
class on May 1, 1993. Class C shares are not being offered in the
Reorganization, and thus no performance information about Class C shares
is given.
The performance of Bond Fund's Class A and Class B shares is compared to
the performance of the Lehman Brothers Corporate Bond Index, a broad-
based, unmanaged index of publicly-issued nonconvertible investment grade
corporate debt of U.S. issuers, widely recognized as a measure of the U.S.
fixed-rate corporate bond market. Prior to July 10, 1995, Bond Fund's
investments were limited to investment grade bonds, U.S. Government
Securities, and money market instruments. The Lehman Brothers Corporate
Bond Index includes a factor for the reinvestment of interest, but does
not reflect expenses or taxes. Index performance reflects the
reinvestment of dividends but does not consider the effect of capital
gains or transaction costs, and none of the data below shows the effect
of taxes. Also, Bond Fund's performance reflects the effect of Fund
business and operating expenses. While index comparisons may be useful
to provide a benchmark for Bond Fund's performance, it must be noted that
Bond Fund's investments are not limited to the securities in any one
index. Moreover, the index performance data does not reflect any
assessment of the risk of the investments included in the index.
The performance of Bond Fund's Class A and Class B shares should also be
compared to the performance of the comparable class of Income Fund shares.
The average annual total returns on an investment in Income Fund Class A
shares for 1, 5 and 10 year periods ended December 31, 1995 were 7.29%,
7.03% and 7.30%, respectively. These calculations reflect investment of
all dividends and capital gains distributions and are shown net of the
applicable 4% maximum initial sales charge. The cumulative total return
on an investment in Income Fund Class B shares for the period from October
1, 1995 (inception) to December 31, 1995 was -2.71%. This calculation
also reflects reinvestment of all dividends and distributions and are
shown net of the applicable 5% contingent deferred sales charge.
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Bond Fund (Class A) and Lehman Brothers Corporate Bond Index
[graph]
Average Annual Total Return of Class A Shares of Bond Fund at 12/31/951
1 Year 5 Years Life
- ---------------------------------------------------------------------
11.38% 8.33% 8.05%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Bond Fund (Class B) and Lehman Brothers Corporate Bond Index
[graph]
Average Annual Total Return of Class B Shares of Bond Fund at 12/31/952
1 Year Life
- --------------------------------------------------------------------
11.06% 4.40%
1The inception date of Bond Fund (Class A shares) was 4/15/88. The
average annual total returns and the ending account value in the graph
reflect reinvestment of all dividends and capital gains distributions and
are shown net of the applicable 4.75% maximum initial sales charge.
2Class B shares of Bond Fund were first publicly offered on 5/1/93. The
average annual total returns reflect reinvestment of all dividends and
capital gains distributions and are shown net of the applicable 5% and 3%
contingent deferred sales charges, respectively, for the 1-year period and
life-of-the-class. The ending account value in the graph is net of the
applicable 3% contingent deferred sales charge.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
Additional information on Income Fund performance is set forth in the
Fund's Annual Report as of December 31, 1995, which is incorporated herein
by reference and may be obtained without charge as set forth in
"Miscellaneous - Public Information."
Additional Comparative Information
General
For a discussion of the organization and operation of Bond Fund, including
brokerage practices, see "Investment Objective and Policies" and "How the
Fund is Managed" in Bond Fund's current Prospectus and "Brokerage Policies
of the Fund" in the Bond Fund Statement of Additional Information. For
a discussion of the organization and operation of the Fund, including
brokerage practices, see "Investment Objectives and Policies,"
"Management" and "The Company" in Income Fund's current Prospectus and
"Portfolio Transactions and Brokerage" in the Fund's current Statement of
Additional Information.
Financial Information
For certain financial information about Bond Fund and Income Fund, see (as
to Bond Fund) "Financial Highlights" and "Performance of the Fund" in Bond
Fund's current Prospectus and (as to Income Fund) "Financial Highlights"
in the Fund's current Prospectus.
Management of Bond Fund and Income Fund
For information about the management of Bond Fund and the Fund, including
their respective Boards of Trustees or Directors, investment adviser,
portfolio managers and distributor, see (as to Bond Fund) "Expenses" and
"How the Fund is Managed" in the Bond Fund current Prospectus and (as to
Income Fund) "Management" and "The Company" in Income Fund's current
Prospectus.
Description of Shares of Bond Fund and Income Fund
Bond Fund is a series of Integrity Trust, a Massachusetts business trust.
Each share of Bond Fund represents an interest in Bond Fund
proportionately equal to the interest of each other share of the same
class and entitles the holder to one vote per share (and a fractional vote
for a fractional share) on matters submitted to a vote at shareholder
meetings. Shares of Bond Fund and of Integrity Trust's other series vote
together in the aggregate on certain matters at shareholder meetings, such
as the election of Trustees and ratification of appointment of auditors.
Shareholders of a particular series or class vote separately on proposals
which affect that series or class, and shareholders of a series or class
which are not affected by that matter are not entitled to vote on the
proposal. Shareholders of Bond Fund have the right, under certain
circumstances, to remove a Trustee and will be assisted in communicating
with other shareholders for such purpose.
Bond Fund is authorized to issue an unlimited number of shares of
beneficial interest. Shares are freely transferrable and shares do not
have cumulative voting rights or preemptive or subscription rights. Bond
Fund is governed by a Board of Trustees that has the power, without
shareholder approval, to establish and designate one or more series and
to divide unissued shares into two or more classes. The Board of Trustees
has established three classes of shares for Bond Fund, Class A, Class B
and Class C. Each class invests in the same investment portfolio. Each
class has its own dividends and distributions, and pays certain expenses
which may be different for the different classes. Under certain
circumstances, a shareholder of Bond Fund may be held personally liable
as a partner for the obligations of Bond Fund, and under the Declaration
of Trust for Integrity Trust, such a shareholder is entitled to
indemnification rights by Bond Fund; the risk of a shareholder incurring
any such loss is limited to the remote circumstances in which Bond Fund
is unable to meet its obligations.
The Company is a Maryland corporation with 3 billion shares of common
stock, par value $0.0001 per share, authorized. The Board is authorized
to classify and reclassify the common stock into additional series and the
series into one or more classes. The shares of each class represent an
interest in the same portfolio of investments as the series and have equal
rights as to voting, redemption, dividends and liquidation. 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 shares of the Company can elect all of the Company's
directors. Each share is entitled to one vote within each series.
Neither Bond Fund nor Income Fund are required to hold, and neither plans
to hold, regular annual meetings of shareholders.
For further information about the shares of Bond Fund, see (as to Bond
Fund) "How the Fund is Managed" in the Bond Fund current Prospectus and
Bond Fund Statement of Additional Information. For a description of the
classes of shares of Income Fund, including voting rights and restrictions
on disposition, see "Additional Information" in the Fund current
Prospectus.
Dividends, Distributions and Taxes
Bond Fund declares dividends from net investment income on each regular
business day, distributes dividends monthly and distribute net long-term
capital gains annually. Bond Fund declares and distributes net short-term
capital gains annually. Dividends from net investment income of Income
Fund are declared and paid monthly. All realized net short-term capital
gains in excess of net long-term capital losses, if any, and all realized
net long-term capital losses, if any, of Income Fund are declared and paid
at least annually. For a discussion of the policies of Bond Fund and the
Fund with respect to dividends and distributions, and a discussion of the
tax consequences of an investment in Bond Fund and the Fund, see (as to
Bond Fund) "Dividends, Capital Gains and Taxes" in the Bond Fund current
Prospectus and (as to Income Fund) "Dividends, Capital Gains and "Taxes"
in Income Fund's current Prospectus.
Purchases, Redemptions and Exchanges of Shares
For a discussion of how shares of Bond Fund and the Fund may be purchased,
redeemed and exchanged, see (as to Bond Fund) "How to Buy Shares," "How
to Sell Shares," "Exchanges of Shares," "Special Investor Services,"
"Service Plan for Class A Shares," and "Distribution and Service Plan for
Class B Shares" in Bond Fund's current Prospectus; and (as to Income Fund)
"Prospectus Summary" and "Your Account" in Income Fund's current
Prospectus.
Shareholder Inquiries
For a description of how shareholder inquiries should be made, see (as to
Bond Fund) "How the Fund is Managed" in Bond Fund current Prospectus and
(as to the Fund) the March 1, 1996 supplement to Income Fund's current
Prospectus.
INFORMATION CONCERNING THE MEETING
The Meeting
The Meeting and any adjournments thereof will be held at OppenheimerFunds,
Inc., 3410 South Galena Street, Denver, Colorado 80231, at 10:00 A.M.,
Denver time, on April 24, 1996. At the Meeting, Income Fund shareholders
will be asked to consider and vote upon approval of the Reorganization
Agreement, and the transactions contemplated thereby, including the
transfer of substantially all the assets of the Fund to Bond Fund in
exchange for Class A and Class B shares of Bond Fund, the distribution by
the Fund of such shares to its shareholders in liquidation of the Fund and
the cancellation of the outstanding shares of the Fund.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on March 18, 1996 as the record
date (the "Record Date") for the determination of shareholders entitled
to notice of, and to vote at, the Meeting. The affirmative vote of the
holders of a majority of Income Fund's Class A and Class B shares
outstanding, entitled to vote and voting together as a series, is required
for approval of the Proposal. Each shareholder will be entitled to one
vote for each share and a fractional vote for each fractional share held
of record at the close of business on the Record Date. Only Income Fund
shareholders will vote on the Reorganization. The vote of shareholders
of Bond Fund is not being solicited to approve the Reorganization
Agreement.
At the close of business on the Record Date, there were approximately
_____________ Class A and ___________ Class B shares of the Fund issued
and outstanding. The presence in person or by proxy of the holders of a
majority of Income Fund's shares constitutes a quorum for the transaction
of business at the Meeting. As of the close of business on the Record
Date, there were approximately _____________ Class A and _______________
Class B Fund share of Bond Fund issued and outstanding. To the knowledge
of the Fund, as of the Record Date, no person owned of record or
beneficially 5% or more of the outstanding Class A or Class B Fund shares
or 5% or more of the outstanding shares of Income Fund. To the knowledge
of Bond Fund, as of the Record Date, no person owned of record or
beneficially 5% or more of the outstanding Class A, Class B or Class C
Bond Fund shares or 5% or more of the outstanding shares of Bond Fund.
As of the Record Date, the officers and Directors of Integrity Trust, and
the officers and Directors of the Company, beneficially owned as a group
less than 1% of the outstanding shares of each class of Bond Fund and
Income Fund, respectively, and of the outstanding shares of the Trust and
the Company, respectively.
In the event a quorum does not exist on the date originally scheduled for
the Meeting, or, subject to approval of the Board, for other reasons, one
or more adjournments of the Meeting may be sought by the Board. Any
adjournment would require a vote in favor of the adjournment by the
holders of a majority of the shares present at the Meeting (or any
adjournment thereof) in person or by proxy. The persons named as proxies
will vote all shares represented by proxies which they are required to
vote in favor of the Proposal, in favor of an adjournment, and will vote
all shares which they are required to vote against the Proposal, against
an adjournment. In the event that a quorum is present at the Meeting but
the shareholders do not approve the Reorganization, the Reorganization
will be deemed to have not been approved and the Board will consider what
further action, if any, to take.
Shares of common stock of the Company represented in person or by proxy
(including shares which abstain or do not vote with respect to the
Proposal presented for shareholder approval) will be counted for purposes
of determining whether a quorum is present at the Meeting. If a broker
or nominee holding shares in "street name" indicates on the proxy that it
does not have discretionary authority to vote on the Proposal, those
shares will not be considered as present and entitled to vote on the
Proposal and are not considered to be votes cast. A "broker non-vote" has
the same effect as a vote against the Proposal.
Proxies
The enclosed form of proxy, if properly executed and returned, will be
voted (or counted as an abstention or withheld from voting) in accordance
with the choices specified thereon, and will be included in determining
whether there is quorum to conduct the Meeting. If a shareholder executes
and returns a proxy but fails to indicate how the votes should be cast,
the proxy will be voted in favor of the Proposal. The proxy may be revoked
at any time prior to the voting thereof by: (i) writing to the Secretary
of the Company at OppenheimerFunds, Inc., Two World Trade Center, New
York, New York 10048-0203; (ii) attending the Meeting and voting in
person; or (iii) signing and returning a new proxy (if returned and
received in time to be voted).
Costs of the Solicitation and the Reorganization
All expenses of this solicitation, including the cost of printing and
mailing this Proxy Statement and Prospectus, will be borne by MassMutual.
Any documents such as existing prospectuses or annual reports that are
included in that mailing will be a cost of the Fund issuing the document.
In addition to the solicitation of proxies by mail, proxies may be
solicited by officers and employees of OFI or OFI's affiliates, personally
or by telephone or telegraph. In addition, the Company has retained D.F.
King & Co., Inc., 77 Water Street, New York, New York 10005 to assist in
the solicitation of proxies primarily by contacting shareholders by
telephone and telegram. The cost of such proxy solicitor will be borne
by MassMutual. D.F. King & Co., Inc. may call shareholders to ask if they
would be willing to have their votes recorded by telephone. The telephone
voting procedure is designed to authenticate a shareholder's identity, to
allow a shareholder to authorize the voting of shares in accordance with
the shareholder's instructions and to confirm that the voting instructions
have been properly recorded. If these procedures were subject to a
successful legal challenge, such votes would not be counted at the
Meeting. The Company has not sought to obtain an opinion of counsel on
this matter and is unaware of any such challenge at this time. A
shareholder would be called on a recorded line at the telephone number the
Company has in its records for the account and could be asked the
shareholder's Social Security number or other identifying information.
The shareholder would then be given an opportunity to authorize proxies
to vote his or her shares at the Meeting in accordance with the
shareholder's instructions. To ensure that the shareholder's instructions
have been recorded correctly, the shareholder will also receive a
confirmation of the voting instructions in the mail. A special telephone
number will be available in case the voting information contained in the
confirmation is incorrect. If the shareholder decides after voting by
telephone to provide a written proxy or attend the Meeting, the
shareholder can revoke the proxy at that time and provide a written proxy
or vote the shares at the Meeting.
Brokerage houses, banks and other fiduciaries may be requested to forward
soliciting material to the beneficial owners of shares of the Fund and to
obtain authorization for the execution of proxies. For those services,
if any, they will be reimbursed by MassMutual for their reasonable out-of-
pocket expenses.
In addition to the proxy solicitation expenses (as described above),
MassMutual will bear the cost of the tax opinion, as well as any other
expenses associated with the Reorganization, including legal and
accounting expenses.
MISCELLANEOUS
Financial Information
The Reorganization will be accounted for by Bond Fund in its financial
statements similar to a pooling without restatement. Further financial
information as to Income Fund is contained in its current Prospectus,
which is available without charge upon written request to OFS at P.O. Box
5270, Denver, Colorado 80217, and is incorporated herein, and in its
audited financial statements as of December 31, 1995, which are included
in the Statement of Additional Information. Financial information for
Bond Fund is contained in its current Prospectus accompanying this Proxy
Statement and Prospectus and incorporated herein, and in its audited
financial statements as of December 31, 1995, which are included in the
Statement of Additional Information.
Public Information
Additional information about Bond Fund and Income Fund is available, as
applicable, in the following documents, which may be obtained without
charge by writing to OFS at P.O. Box 5270, Denver, Colorado 80217 or by
calling 1-800-525-7048: (i) Bond Fund's Prospectus dated July 10, 1995,
supplemented November 22, 1995, January 1, 1996 and January 5, 1996,
accompanying this Proxy Statement and Prospectus (ii) Income Fund's
Prospectus dated October 1, 1995, supplemented March 1, 1996, and
incorporated by reference herein; (iii) Bond Fund's Annual Report as of
December 31, 1995; and (iv) Income Fund's Annual Report as of December 31,
1995.
Additional information about the following matters is contained in the
Statement of Additional Information, which is incorporated herein by
reference and includes Bond Fund's Statement of Additional Information,
Income Fund's Statement of Additional Information and the Annual Reports
described in the preceding paragraph: the organization and operation of
Bond Fund and Income Fund; more information on investment policies,
practices and risks; information about the Board of Trustees of the Trust
and the Board of Directors of the Company (on behalf of Bond Fund and
Income Fund, respectively) and their responsibilities; a further
description of the services provided by Bond Fund's and the Fund's
investment adviser, distributor, and transfer and shareholder servicing
agent; dividend policies; tax matters; an explanation of the method of
determining the offering price of the shares of Bond Fund and Income Fund;
purchase, redemption and exchange programs; and distribution arrangements.
Bond Fund and Income Fund are subject to the informational requirements
of the Securities Exchange Act of 1934, as amended, and in accordance
therewith, file reports and other information with the SEC. Proxy
material, reports and other information about Bond Fund and the Fund which
are of public record can be inspected and copied at public reference
facilities maintained by the SEC in Washington, D.C. and certain of its
regional offices, and copies of such materials can be obtained at
prescribed rates from the Public Reference Branch, Office of Consumer
Affairs and Information Services, SEC, Washington, D.C. 20549.
OTHER BUSINESS
Management of the Fund knows of no business other than the matters
specified above which will be presented at the Meeting. Since matters not
known at the time of the solicitation may come before the Meeting, the
proxy as solicited confers discretionary authority with respect to such
matters as properly come before the Meeting, including any adjournment or
adjournments thereof, and it is the intention of the persons named as
attorneys-in-fact in the proxy to vote this proxy in accordance with their
judgment on such matters if no voting instructions are provided.
By Order of the Board of Directors
Andrew J. Donohue, Secretary
March 18, 1996
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of
March 1, 1996 by and between Oppenheimer Series Fund, Inc., a Maryland
corporation (the "Company") on behalf of Connecticut Mutual Income
Account, a series of the Company ("Income Fund") and Oppenheimer Integrity
Funds, a Massachusetts business trust (the "Trust") on behalf of
Oppenheimer Bond Fund, a series of the Trust ("Bond Fund").
W I T N E S S E T H:
WHEREAS, the parties are each open-end investment companies of the
management type; and
WHEREAS, the parties hereto desire to provide for the reorganization
pursuant to Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"), of Income Fund through the acquisition by Bond Fund
of substantially all of the assets of Income Fund in exchange solely for
voting shares of beneficial interest ("shares") of Class A and Class B
shares of Bond Fund and the assumption by Bond Fund of certain liabilities
of Income Fund, which Class A and Class B shares of Bond Fund are
thereafter to be distributed by Income Fund pro rata to its shareholders
in complete liquidation of Income Fund and complete cancellation of its
shares;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. The parties hereto hereby adopt this Agreement and Plan of
Reorganization (the "Agreement") pursuant to Section 368(a)(1) of the Code
as follows: The reorganization will be comprised of the acquisition by
Bond Fund of substantially all of the properties and assets of Income Fund
in exchange for the issuance of Class A and Class B shares of Bond Fund
to Income Fund and the assumption by Bond Fund of certain liabilities of
Income Fund, followed by the distribution by Income Fund of such Class A
and Class B shares of Bond Fund shares to the Class A and Class B
shareholders of Income Fund in exchange for their Class A and Class B
shares of Income Fund, all upon and subject to the terms of the Agreement
hereinafter set forth.
The share transfer books of Income Fund will be permanently
closed at the close of business on the Valuation Date (as hereinafter
defined) and only redemption requests received in proper form on or prior
to the close of business on the Valuation Date shall be fulfilled by
Income Fund; redemption requests received by Income Fund after that date
shall be treated as requests for the redemption of the shares of Bond Fund
that shall have been distributed to the shareholder in question as
provided in Section 5.
2. On the Closing Date (as hereinafter defined), all of the assets
of Income Fund on that date, excluding a cash reserve (the "Cash Reserve")
to be retained by Income Fund sufficient in its discretion for the payment
of the expenses of Income Fund's dissolution and its liabilities, but not
in excess of the amount contemplated by Section 10E of the Agreement,
shall be delivered as provided in Section 8 of the Agreement to Bond Fund,
in exchange for and against delivery to Income Fund on the Closing Date
of a number of Class A and Class B shares of Bond Fund, having an
aggregate net asset value equal to the value of the assets of Income Fund
so transferred and delivered.
3. The net asset value of Class A and Class B shares of Bond Fund
and the value of the assets of Income Fund to be transferred shall in each
case be determined as of the close of business of The New York Stock
Exchange on the Valuation Date. The computation of the net asset value
of the Class A and Class B shares of Bond Fund and the Class A and Class
B shares of Income Fund shall be done in the manner used by Bond Fund and
Income Fund, respectively, in the computation of such net asset value per
share as set forth in their respective prospectuses. The methods used
by Bond Fund in such computation shall be applied to the valuation of the
assets of Income Fund to be transferred to Bond Fund.
Income Fund shall declare and pay, immediately prior to the
Valuation Date, a dividend or dividends which, together with all previous
such dividends, shall have the effect of distributing to Income Fund's
shareholders all of Income Fund's investment company taxable income for
taxable years ending on or prior to the Closing Date (computed without
regard to any dividends paid) and all of its net capital gain, if any,
realized in taxable years ending on or prior to the Closing Date (after
reduction for any capital loss carry-forward).
4. The closing of the transactions contemplated herein (the
"Closing") shall be at the office of OppenheimerFunds, Inc. (the "Agent"),
Two World Trade Center, Suite 3400, New York, New York 10048, at 4:00 P.M.
New York time on April 26, 1996, or at such other time or place as the
parties may designate or as provided below (the "Closing Date"). The
business day preceding the Closing Date is herein referred to as the
"Valuation Date."
In the event that on the Valuation Date either party has,
pursuant to the Investment Company Act of 1940, as amended (the "Act"),
or any rule, regulation or order thereunder, suspended the redemption of
its shares or postponed payment therefor, the Closing Date shall be
postponed until the first business day after the date when both parties
have ceased such suspension or postponement; provided, however, that if
such suspension shall continue for a period of 60 days beyond the
Valuation Date, then the other party to the Agreement shall be permitted
to terminate the Agreement without liability to either party for such
termination.
5. As soon as practicable after the Closing, Income Fund shall
distribute on a pro rata basis to the shareholders of Income Fund on the
Valuation Date the Class A and Class B shares of Bond Fund received by
Income Fund on the Closing Date in exchange for the assets of Income Fund
in complete liquidation of Income Fund; for the purpose of the
distribution by Income Fund of Class A and Class B shares of Bond Fund to
its shareholders, Bond Fund will promptly cause its transfer agent to: (a)
credit an appropriate number of Class A and Class B shares of Bond Fund
on the books of Bond Fund to each Class A and Class B shareholder,
respectively of Income Fund in accordance with a list (the "Shareholder
List") of its shareholders received from Income Fund; and (b) confirm an
appropriate number of Class A and Class B shares of Bond Fund to each
shareholder of Income Fund; certificates for Class A and Class B shares
of Bond Fund will be issued upon written request of a former shareholder
of Income Fund but only for whole shares, with fractional shares credited
to the name of the shareholder on the books of Bond Fund.
The Shareholder List shall indicate, as of the close of business
on the Valuation Date, the name and address of each shareholder of Income
Fund, indicating his or her share balance. Income Fund agrees to supply
the Shareholder List to Bond Fund not later than the Closing Date.
Shareholders of Income Fund holding certificates representing their shares
shall not be required to surrender their certificates to anyone in
connection with the reorganization. After the Closing Date, however, it
will be necessary for such shareholders to surrender their certificates
in order to redeem, transfer or pledge the shares of Bond Fund which they
received.
6. Within one year after the Closing Date, Income Fund shall (a)
either pay or make provision for payment of all of its liabilities and
taxes, and (b) either (i) transfer any remaining amount of the Cash
Reserve to Bond Fund, if such remaining amount (as reduced by the
estimated cost of distributing it to shareholders) is not material (as
defined below) or (ii) distribute such remaining amount to the
shareholders of Income Fund on the Valuation Date. Such remaining amount
shall be deemed to be material if the amount to be distributed, after
deduction of the estimated expenses of the distribution, equals or exceeds
one cent per share of Income Fund outstanding on the Valuation Date.
7. Prior to the Closing Date, there shall be coordination between
the parties as to their respective portfolios so that, after the closing,
Bond Fund will be in compliance with all of its investment policies and
restrictions. At the Closing, Income Fund shall deliver to Bond Fund two
copies of a list setting forth the securities, cash and receivables then
owned by Income Fund. Promptly after the Closing, Income Fund shall
provide Bond Fund a list setting forth the respective federal income tax
bases thereof.
8. Portfolio securities or written evidence acceptable to Bond Fund
of record ownership thereof by The Depository Trust Company or through the
Federal Reserve Book Entry System or any other depository approved by
Income Fund pursuant to Rule 17f-4 and Rule 17f-5 under the Act shall be
endorsed and delivered, or transferred by appropriate transfer or
assignment documents, by Income Fund on the Closing Date to Bond Fund, or
at its direction, to its custodian bank, in proper form for transfer in
such condition as to constitute good delivery thereof in accordance with
the custom of brokers and shall be accompanied by all necessary state
transfer stamps, if any. The cash holding of Income Fund shall be
delivered to Bond Fund in the form of certified or bank cashiers' checks
or by bank wire or intra-bank transfer to Bond Fund's custodian bank
payable to the order of Bond Fund for the account of Bond Fund.
Shares of Bond Fund representing the number of shares of Bond Fund
being delivered against the assets of Income Fund, registered in the name
of Income Fund, shall be transferred to Income Fund on the Closing Date.
Such shares shall thereupon be assigned by Income Fund to its shareholders
so that the shares of Bond Fund may be distributed as provided in Section
5.
If, at the Closing Date, Income Fund is unable to make delivery
under this Section 8 to Bond Fund of any of its portfolio securities or
cash for the reason that any of such securities purchased by Income Fund,
or the cash proceeds of a sale of portfolio securities, prior to the
Closing Date have not yet been delivered to it or Income Fund's custodian,
then the delivery requirements of this Section 8 with respect to said
undelivered securities or cash will be waived and Income Fund will deliver
to Bond Fund by or on the Closing Date and with respect to said
undelivered securities or cash executed copies of an agreement or
agreements of assignment as to such securities or cash proceeds in a form
reasonably satisfactory to Bond Fund, together with such other documents,
including a due bill or due bills and brokers' confirmation slips as may
reasonably be required by Bond Fund.
9. Bond Fund shall not assume the liabilities (except for (a)
portfolio securities purchased which have not settled and (b) shareholder
redemption and dividend checks outstanding) of Income Fund, but Income
Fund will, nevertheless, use its best efforts to discharge all known
liabilities, so far as may be possible, prior to the Closing Date. Each
party represents to the other that Massachusetts Mutual Life Insurance
Company has agreed to assume liability for and pay all expenses associated
with the reorganization, including legal and accounting expenses, the
costs of required tax opinions, and the cost of printing and mailing the
proxies and proxy statements in connection with the solicitation of the
approval by the shareholders of Income Fund of this reorganization.
However, any documents such as existing prospectuses or annual reports
that are included in that proxy mailing will be a cost of the Fund issuing
the document. Other than the cost of such documents, neither party will
bear any expenses associated with the reorganization.
10. The obligations of Bond Fund hereunder shall be subject to the
following conditions:
A. The Board of Directors of the Company on behalf of Income
Fund shall have authorized the execution of the Agreement, and the
shareholders of Income Fund shall have approved the Agreement and the
transactions contemplated thereby, and Income Fund shall have furnished
to Bond Fund copies of resolutions to that effect certified by the
Secretary or an Assistant Secretary of the Company; such shareholder
approval shall have been by the affirmative vote of a majority of the
outstanding voting securities of Income Fund at a meeting for which
proxies have been solicited by the Proxy Statement and Prospectus (as
hereinafter defined).
B. Bond Fund shall have received an opinion dated the Closing
Date of Piper & Marbury LLP, counsel to the Company, to the effect that
(i) the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Maryland with
full powers to conduct its business as described by its charter and as
currently being conducted; (ii) the execution and delivery of the
Agreement and the consummation of the transactions contemplated therein
will not result in any violation of the provisions of the charter or by-
laws of the Company; and (iii) the Agreement has been duly authorized and
executed by the Company and the Agreement constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratoriums and other
similar laws relating to or affecting creditor rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
C. The representations and warranties of the Company on behalf
of Income Fund contained herein shall be true and correct at and as of the
Closing Date, and Bond Fund shall have been furnished with a certificate
of the President, or a Vice President, or the Secretary or the Assistant
Secretary or the Treasurer of the Company, dated the Closing Date, to that
effect.
D. On the Closing Date, Income Fund shall have furnished to
Bond Fund a certificate of the Treasurer or Assistant Treasurer of the
Company as to the amount of the capital loss carry-over , if any, and net
unrealized appreciation or depreciation, if any, with respect to Income
Fund as of the Closing Date.
E. The Cash Reserve shall not exceed 1% of the value of the
net assets, nor 10% in value of the gross assets, of Income Fund at the
close of business on the Valuation Date.
F. A Registration Statement on Form N-14 filed by Oppenheimer
Integrity Funds under the Securities Act of 1933, as amended (the "1933
Act"), containing a preliminary form of the Proxy Statement and Prospectus
required under the Act to request the approval of the shareholders of
Income Fund of the reorganization contemplated in the Agreement (the
"Proxy Statement and Prospectus"), shall have become effective under the
1933 Act not later than December 31, 1996.
G. On the Closing Date, Bond Fund shall have received a letter
of David E. Sams, Jr. or other senior executive officer of G.R. Phelps &
Co. Inc. (Income Fund's administrator and former investment manager)
acceptable to Bond Fund, stating that nothing has come to his or her
attention which in his or her judgment would indicate that as of the
Closing Date there were any material actual or contingent liabilities of
Income Fund arising out of litigation brought against Income Fund or
claims asserted against it, or pending or to the best of his or her
knowledge threatened claims or litigation not reflected in or apparent
from the most recent audited financial statements and footnotes thereto
of Income Fund delivered to Bond Fund. Such letter may also include such
additional statements relating to the scope of the review conducted by
such person and his or her responsibilities and liabilities as are not
unreasonable under the circumstances.
H. Bond Fund shall have received an opinion, dated the Closing
Date, of Arthur Andersen LLP, to the same effect as the opinion
contemplated by Section 11.E. of the Agreement.
I. Bond Fund shall have received at the closing all of the
assets of Income Fund to be conveyed hereunder, which assets shall be free
and clear of all liens, encumbrances, security interests, restrictions and
limitations whatsoever.
11. The obligations of Income Fund hereunder shall be subject to the
following conditions:
A. The Board of Trustees of the Trust on behalf of Bond Fund
shall have authorized the execution of the Agreement, and the transactions
contemplated thereby, and Bond Fund shall have furnished to Income Fund
copies of resolutions to that effect certified by the Secretary or an
Assistant Secretary of Oppenheimer Integrity Funds.
B. Income Fund's shareholders shall have approved the
Agreement and the transactions contemplated hereby, by an affirmative vote
of the holders of a majority of Income Fund's Class A and Class B shares
outstanding and entitled to vote, voting together as a series; and Income
Fund shall have furnished Bond Fund copies of resolutions to that effect
certified by the Secretary or an Assistant Secretary of Income Fund.
C. Income Fund shall have received an opinion dated the
Closing Date of Myer, Swanson, Adams & Wolf, P.C., counsel to Bond Fund,
to the effect that (i) the Trust is a business trust duly organized,
validly existing and in good standing under the laws of the Commonwealth
of Massachusetts with full powers to carry on its business as described
by its Declaration of Trust and to the best knowledge of such counsel,
then being conducted and to enter into and perform the Agreement; (ii) all
action necessary to make the Agreement, according to its terms, valid,
binding and enforceable upon the Trust in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratoriums and other similar laws relating to or
affecting creditor rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant
of good faith and fair dealing, and to authorize effectively the
transactions contemplated by the Agreement, have been taken by the Trust
on behalf of Bond Fund, and (iii) the shares of Bond Fund to be issued
hereunder are duly authorized and when issued will be validly issued,
fully-paid and non-assessable, except as set forth in Bond Fund's then
current Prospectus and Statement of Additional Information.
D. The representations and warranties of the Trust on behalf of
Bond Fund contained herein shall be true and correct at and as of the
Closing Date, and Income Fund shall have been furnished with a certificate
of the President, a Vice President or the Secretary or an Assistant
Secretary or the Treasurer of the Trust to that effect dated the Closing
Date.
E. Income Fund shall have received an opinion of Arthur
Andersen LLP to the effect that the Federal tax consequences of the
transaction, if carried out in the manner outlined in this Agreement and
Plan of Reorganization and in accordance with (i) Income Fund's
representation that there is no plan or intention by any Fund shareholder
who owns 5% or more of Income Fund's outstanding shares, and, to Income
Fund's best knowledge, there is no plan or intention on the part of the
remaining Fund shareholders, to redeem, sell, exchange or otherwise
dispose of a number of Bond Fund shares received in the transaction that
would reduce Income Fund shareholders' ownership of Bond Fund shares to
a number of shares having a value, as of the Closing Date, of less than
50% of the value of all of the formerly outstanding Fund shares as of the
same date, and (ii) the representation by each of Income Fund and Bond
Fund that, as of the Closing Date, Income Fund and Bond Fund will qualify
as regulated investment companies or will meet the diversification test
of Section 368(a)(2)(F)(ii) of the Code and (iii) the other
representations by each of Income Fund and Bond Fund made to Arthur
Andersen LLP, and set forth in the opinion, will generally be as follows:
1. The transfer of substantially all of Income Fund's
assets in exchange for Class A and Class B shares of Bond Fund and the
assumption by Bond Fund of certain identified liabilities of Income Fund
followed by the distribution by Income Fund of Class A and Class B shares
of Bond Fund to Income Fund shareholders in exchange for their Income Fund
shares will constitute a "reorganization" within the meaning of Section
368(a)(1) of the Code and Income Fund and Bond Fund will each be a "party
to a reorganization" within the meaning of Section 368(b) of the Code.
2. Pursuant to Section 1032 of the Code, no gain o loss
will be recognized by Bond Fund upon the receipt of the assets of Income
Fund solely in exchange for Class A and Class B shares of Bond Fund and
the assumption by Bond Fund of certain identified liabilities of Income
Fund.
3. Pursuant to Sections 361(a) and 361(c) of the Code,
no gain or loss will be recognized by Income Fund upon the transfer of the
assets of Income Fund to Bond Fund in exchange for Class A and Class B
shares of Bond Fund and the assumption by Bond Fund of certain identified
liabilities of Income Fund or upon the distribution of Class A and Class
B shares of Bond Fund to Income Fund shareholders in exchange for Income
Fund shares.
4. Pursuant to Section 354(a) of the Code, no gain or
loss will be recognized by Income Fund shareholders upon the exchange of
Income Fund shares for the Class A and Class B shares of Bond Fund.
However, Income Fund shareholders may recognize taxable income or gain to
the extent they receive any portion of the Cash Reserve, as defined in the
Agreement.
5. Pursuant to Section 358 of the Code, the aggregate tax
basis for Class A and Class B shares of Bond Fund received by each Income
Fund shareholder pursuant to the Reorganization will be the same as the
aggregate tax basis of Income Fund shares held by each such Income Fund
shareholder immediately prior to the Reorganization.
6. Pursuant to Section 1223 of the Code, the holding
period of Class A and Class B shares of Bond Fund to be received by each
Income Fund shareholder will include the period during which Income Fund
shares surrendered in exchange therefor were held (provided such Income
Fund shares were held as capital assets on the date of the Reorganization.
7. Pursuant to Section 362(b) of the Code, the tax basis
of the assets of Income Fund acquired by Bond Fund will be the same as the
tax basis of such assets of Income Fund immediately prior to the
Reorganization.
8. Pursuant to Section 1223 of the Code, the holding
period of the assets of Income Fund in the hands of Bond Fund will include
the period during which those assets were held by Income Fund.
9. Bond Fund will succeed to and take into account the
items of Income Fund described in Section 381(c) of the Code, including
the earnings and profits, or deficit in earnings and profits, of Income
Fund as of the date of the transactions. Bond Fund will take these items
into account subject to the conditions and limitations specified in
Sections 381, 382, 383 and 384 of the Code and applicable regulations
thereunder.
F. The Cash Reserve shall not exceed 1% of the value of the
net assets, nor 10% in value of the gross assets, of Income Fund at the
close of business on the Valuation Date.
G. A Registration Statement on Form N-14 filed by Oppenheimer
Integrity Funds under the 1933 Act, containing a preliminary form of the
Proxy Statement and Prospectus required under the Act to request the
approval of the shareholders of Income Fund of the reorganization
contemplated in the Agreement shall have become effective under the 1933
Act not later than December 31, 1996.
H. On the Closing Date, Income Fund shall have received a
letter of Andrew J. Donohue or other senior executive officer of
OppenheimerFunds, Inc. acceptable to Income Fund, stating that nothing has
come to his or her attention which in his or her judgment would indicate
that as of the Closing Date there were any material actual or contingent
liabilities of Bond Fund arising out of litigation brought against Bond
Fund or claims asserted against it, or pending or, to the best of his or
her knowledge, threatened claims or litigation not reflected in or
apparent by the most recent audited financial statements and footnotes
thereto of Bond Fund delivered to Income Fund. Such letter may also
include such additional statements relating to the scope of the review
conducted by such person and his or her responsibilities and liabilities
as are not unreasonable under the circumstances.
I. Income Fund shall acknowledge receipt of the shares of Bond
Fund.
12. The Company on behalf of Income Fund hereby represents and
warrants that:
A. The financial statements of Income Fund as at December 31,
1995 (audited) heretofore furnished to Bond Fund, present fairly the
financial position, results of operations, and changes in net assets of
Income Fund as of that date, in conformity with generally accepted
accounting principles applied on a basis consistent with the preceding
year; and that from December 31, 1995 through the date hereof there have
not been, and through the Closing Date there will not be, any material
adverse change in the business or financial condition of Income Fund, it
being agreed that a decrease in the size of Income Fund due to a
diminution in the value of its portfolio and/or redemption of its shares
shall not be considered a material adverse change;
B. Contingent upon approval of the Agreement and the
transactions contemplated thereby by Income Fund's shareholders, Income
Fund has authority to transfer all of the assets of Income Fund to be
conveyed hereunder free and clear of all liens, encumbrances, security
interests, restrictions and limitations whatsoever;
C. The Prospectus, as amended and supplemented, contained in
the Company's Registration Statement under the 1933 Act, as amended, is
true, correct and complete, conforms to the requirements of the 1933 Act
and does not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading. The Registration Statement, as
amended, was, as of the date of the filing of the last Post-Effective
Amendment, true, correct and complete, conformed to the requirements of
the 1933 Act and did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
D. There is no material contingent liability of Income Fund
and no material claim and no material legal, administrative or other
proceedings pending or, to the knowledge of Income Fund, threatened
against Income Fund, not reflected in such Prospectus;
E. There are no material contracts outstanding to which Income
Fund is a party other than those ordinary in the conduct of its business;
F. Income Fund is a series of Oppenheimer Series Fund, Inc.,
a corporation duly organized, validly existing and in good standing under
the laws of the State of Maryland; and has all necessary and material
Federal and state authorizations to own all of its assets and to carry on
its business as now being conducted; and Income Fund is duly registered
under the Act and such registration has not been rescinded or revoked and
is in full force and effect;
G. All Federal and other tax returns and reports of Income
Fund required by law to be filed have been filed, and all Federal and
other taxes shown due on said returns and reports have been paid or
provision shall have been made for the payment thereof and to the best of
the knowledge of Income Fund no such return is currently under audit and
no assessment has been asserted with respect to such returns and to the
extent such tax returns with respect to the taxable year of Income Fund
ended December 31, 1995 have not been filed, such returns will be filed
when required and the amount of tax shown as due thereon shall be paid
when due; and
H. Income Fund has elected to be treated as a regulated
investment company and, for each fiscal year of its operations, Income
Fund has met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company and Income
Fund intends to meet such requirements with respect to its current taxable
year.
13. The Trust on behalf of Bond Fund hereby represents and warrants
that:
A. The financial statements of Bond Fund as at December 31,
1995 (audited) heretofore furnished to Income Fund, present fairly the
financial position, results of operations, and changes in net assets of
Bond Fund, as of that date, in conformity with generally accepted
accounting principles applied on a basis consistent with the preceding
year; and that from December 31, 1995 through the date hereof there have
not been, and through the Closing Date there will not be, any material
adverse changes in the business or financial condition of Bond Fund, it
being understood that a decrease in the size of Bond Fund due to a
diminution in the value of its portfolio and/or redemption of its shares
shall not be considered a material or adverse change;
B. The Prospectus, as amended and supplemented, contained in
the Trust's Registration Statement under the 1933 Act, is true, correct
and complete, conforms to the requirements of the 1933 Act and does not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. The Registration Statement, as
amended, was, as of the date of the filing of the last Post-Effective
Amendment, true, correct and complete, conformed to the requirements of
the 1933 Act and did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
C. There is no material contingent liability of Bond Fund and
no material claim and no material legal, administrative or other
proceedings pending or, to the knowledge of Bond Fund, threatened against
Bond Fund, not reflected in such Prospectus;
D. There are no material contracts outstanding to which Bond
Fund is a party other than those ordinary in the conduct of its business;
E. Bond Fund is a series of Oppenheimer Integrity Funds, a
business trust duly organized, validly existing and in good standing under
the laws of the Commonwealth of Massachusetts; has all necessary and
material Federal and state authorizations to own all its properties and
assets and to carry on its business as now being conducted; the shares of
Bond Fund which it issues to Income Fund pursuant to the Agreement will
be duly authorized, validly issued, fully-paid and non-assessable, except
as otherwise set forth in the Trust's Registration Statement; and will
conform to the description thereof contained in the Trust's Registration
Statement, will be duly registered under the 1933 Act and in the states
where registration is required; and Bond Fund is duly registered under the
Act and such registration has not been revoked or rescinded and is in full
force and effect;
F. All Federal and other tax returns and reports of Bond Fund
required by law to be filed have been filed, and all Federal and other
taxes shown due on said returns and reports have been paid or provision
shall have been made for the payment thereof and to the best of the
knowledge of Bond Fund no such return is currently under audit and no
assessment has been asserted with respect to such returns and to the
extent such tax returns with respect to the taxable year of Bond Fund
ended December 31, 1995 have not been filed, such returns will be filed
when required and the amount of tax shown as due thereon shall be paid
when due;
G. Bond Fund has elected to be treated as a regulated
investment company and, for each fiscal year of its operations, Bond Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and Bond Fund intends to meet
such requirements with respect to its current taxable year;
H. Bond Fund has no plan or intention (i) to dispose of any
of the assets transferred by Income Fund, other than in the ordinary
course of business, or (ii) to redeem or reacquire any of the shares
issued by it in the reorganization other than pursuant to valid requests
of shareholders; and
I. After consummation of the transactions contemplated by the
Agreement, Bond Fund intends to operate its business in a substantially
unchanged manner.
14. Each party hereby represents to the other that no broker or
finder has been employed by it with respect to the Agreement or the
transactions contemplated hereby. Each party also represents and warrants
to the other that the information concerning it in the Proxy Statement and
Prospectus will not as of its date contain any untrue statement of a
material fact or omit to state a fact necessary to make the statements
concerning it therein not misleading and that the financial statements
concerning it will present the information shown fairly in accordance with
generally accepted accounting principles applied on a basis consistent
with the preceding year. Each party also represents and warrants to the
other that the Agreement is valid, binding and enforceable in accordance
with its terms and that the execution, delivery and performance of the
Agreement will not result in any violation of, or be in conflict with, any
provision of any charter, by-laws, contract, agreement, judgment, decree
or order to which it is subject or to which it is a party. Bond Fund
hereby represents to and covenants with Income Fund that, if the
reorganization becomes effective, Bond Fund will treat each shareholder
of Income Fund who received any of Bond Fund's shares as a result of the
reorganization as having made the minimum initial purchase of shares of
Bond Fund received by such shareholder for the purpose of making
additional investments in shares of Bond Fund, regardless of the value of
the shares of Bond Fund received. Bond Fund represents to Income Fund
that each shareholder of Income Fund who received shares of Bond Fund as
a result of the reorganization and was subject to a Class B contingent
deferred sales charge waiver, as described in the proxy statement of
Income Fund dated December 18, 1995, relating to the approval of
OppenheimerFunds, Inc. as Income Fund's investment adviser, will remain
eligible for such waiver as described therein, upon the supplementing of
the Prospectus of Bond Fund with respect thereto.
15. Bond Fund agrees that it will prepare and file a Registration
Statement on Form N-14 under the 1933 Act which shall contain a
preliminary form of proxy statement and prospectus contemplated by Rule
145 under the 1933 Act. The final form of such proxy statement and
prospectus is referred to in the Agreement as the "Proxy Statement and
Prospectus." Each party agrees that it will use its best efforts to have
such Registration Statement declared effective and to supply such
information concerning itself for inclusion in the Proxy Statement and
Prospectus as may be necessary or desirable in this connection.
16. The obligations of the parties under the Agreement shall be
subject to the right of either party to abandon and terminate the
Agreement without liability if the other party breaches any material
provision of the Agreement or if any material legal, administrative or
other proceeding shall be instituted or threatened between the date of the
Agreement and the Closing Date (i) seeking to restrain or otherwise
prohibit the transactions contemplated hereby and/or (ii) asserting a
material liability of either party, which proceeding has not been
terminated or the threat thereof removed prior to the Closing Date. In the
event of termination, damages will be limited to reimbursement by the
party breaching any material provision of the Agreement of the reasonable
out-of-pocket fees and expenses (if any) incurred by the other party in
connection with the transactions contemplated by the Agreement.
17. The Agreement may be executed in several counterparts, each of
which shall be deemed an original, but all taken together shall constitute
one Agreement. The rights and obligations of each party pursuant to the
Agreement shall not be assignable.
18. All prior or contemporaneous agreements and representations are
merged into the Agreement, which constitutes the entire contract between
the parties hereto. No amendment or modification hereof shall be of any
force and effect unless in writing and signed by the parties and no party
shall be deemed to have waived any provision herein for its benefit unless
it executes a written acknowledgement of such waiver.
19. Income Fund understands that the obligations of Bond Fund and
the Trust under the Agreement are not binding upon any Trustee or
shareholder of Bond Fund or the Trust personally, but bind only Bond Fund
and Bond Fund's property. Income Fund represents that it has notice of
the provisions of the Declaration of Trust of the Trust disclaiming
shareholder and Trustee liability for acts or obligations of Bond Fund or
the Trust.
IN WITNESS WHEREOF, each of the parties has caused the Agreement to
be executed and attested by its officers thereunto duly authorized on the
date first set forth above.
Attest: OPPENHEIMER SERIES FUND, INC.
On Behalf of
CONNECTICUT MUTUAL INCOME ACCOUNT
__________________________ By: _____________________________
Attest: OPPENHEIMER INTEGRITY FUNDS
On behalf of OPPENHEIMER BOND FUND
__________________________ By:_________________________________
APPENDIX TO PROXY STATEMENT AND PROSPECTUS OF
OPPENHEIMER BOND FUND
Graphic material included in Proxy Statement and Prospectus of
Oppenheimer Bond Fund "Bond Fund Performance":
Linear graphs will be included in the Proxy Statement and Prospectus
of Oppenheimer Bond Fund ("Bond Fund") depicting the initial account value
and subsequent account value of a hypothetical $10,000 in Bond Fund. In
the case of Bond Fund's Class A shares, that graph will cover each of Bond
Fund's fiscal years since the inception of the class on April 15, 1988
through December 31, 1995 and in the case of Class B shares the graph will
cover the period from the inception of the class on May 1, 1993 through
December 31, 1995. The graphs will compare such values with the same
investments over the same time periods with The Lehman Brothers Corporate
Bond Index. Set forth below are the relevant data points that will appear
on the linear graphs. Additional information with respect to the
foregoing, including a description of The Lehman Brothers Corporate Bond
Index, is set forth in the Proxy Statement and Prospectus under Bond Fund
Performance.
Lehman Brothers
Oppenheimer Corporate
(Period) Ended Bond Fund A Bond Index
04/15/88 $9,525 $10,000
12/31/88 $9,952 $10,368
12/31/89 $11,077 $11,885
12/31/90 $11,602 $12,759
12/31/91 $13,723 $15,170
12/31/92 $14,653 $16,392
12/31/93 $16,163 $18,310
12/31/94 $15,538 $17,530
12/31/95 $18,169 $21,429
Lehman Brothers
Fiscal Year Oppenheimer Corporate
(Period) Ended Bond Fund B(1) Bond Index
05/01/93 $10,000 $10,000
12/31/93 $10,391 $10,503
12/31/94 $ 9,920 $10,056
12/31/95 $11,216 $12,292
- ----------------------
(1) Class B shares of the Fund were first publicly offered on May 1, 1993.
<PAGE>
Preliminary Copy
OPPENHEIMER SERIES FUND, INC.
CONNECTICUT MUTUAL INCOME FUND
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD APRIL 24, 1996
The undersigned shareholder of Connecticut Mutual Income Fund (the
"Fund"), a series of Oppenheimer Series Fund, Inc. (the "Company"), does
hereby appoint Andrew J. Donohue, George Bowen and Robert Bishop, and each
of them, as attorneys-in-fact and proxies of the undersigned, with full
power of substitution, to attend the Special Meeting of Shareholders of
the Fund to be held on April 24, 1996, at OppenheimerFunds, Inc., 3410
South Galena Street, Denver, Colorado 80231 at 10:00 A.M., Denver time,
and at all adjournments thereof, and to vote the shares held in the name
of the undersigned on the record date for said meeting on the Proposal
specified on the reverse side. Said attorneys-in-fact shall vote in
accordance with their best judgment as to any other matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, WHO RECOMMENDS A VOTE
FOR THE PROPOSAL ON THE REVERSE SIDE. THE SHARES REPRESENTED HEREBY WILL
BE VOTED AS INDICATED ON THE REVERSE SIDE OR FOR IF NO CHOICE IS
INDICATED.
Please mark your proxy, date and sign it on the reverse side and return
it promptly in the accompanying envelope, which requires no postage if
mailed in the United States.
The Proposal:
To approve an Agreement and Plan of Reorganization dated as of March
1, 1996 by and among Oppenheimer Integrity Funds, on behalf of
Oppenheimer Bond Fund and the Company, on behalf of the Fund, and
the transactions contemplated thereby, including the transfer of
substantially all the assets of the Fund to Oppenheimer Bond Fund in
exchange for Class A and Class B shares of Oppenheimer Bond Fund,
the distribution by the Fund of such shares to its shareholders in
liquidation of the Fund and the cancellation of the outstanding
shares of the Fund.
FOR____ AGAINST____ ABSTAIN____
Dated:________________________, 1996
(Month) (Day)
______________________________
Signature(s)
______________________________
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When signing
as custodian, attorney, executor, administrator, trustee, etc., please
give your full title as such. All joint owners should sign this proxy.
If the account is registered in the name of a corporation, partnership or
other entity, a duly authorized individual must sign on its behalf and
give his or her title.
OPPENHEIMER BOND FUND
3410 SOUTH GALENA STREET, DENVER, COLORADO 80231-5099
1-800-525-7048
PART B
STATEMENT OF ADDITIONAL INFORMATION
March 18, 1996
___________________________________
This Statement of Additional Information of Oppenheimer Bond Fund
consists of this cover page and the following documents:
1. Statement of Additional Information of Oppenheimer Bond Fund dated July
10, 1995, supplemented July 14, 1995, filed herewith and incorporated
herein by reference.
2. Oppenheimer Bond Fund's Annual Report as of December 31, 1995, filed
herewith and incorporated herein by reference.
3. Prospectus of Connecticut Mutual Income Account dated October 1, 1995,
filed herewith and incorporated herein by reference.
4. Statement of Additional Information of Connecticut Mutual Income
Account dated October 1, 1995, filed herewith and incorporated herein by
reference.
5. Connecticut Mutual Income Account's Annual Report as of December 31,
1995, filed herewith and incorporated herein by reference.
6. Pro Forma Financial Statements, filed herewith and incorporated herein
by reference.
This Statement of Additional Information (the "Statement of
Additional Information") is not a Prospectus. This Statement of
Additional Information should be read in conjunction with the Proxy
Statement and Prospectus, which may be obtained by written request to
OppenheimerFunds Services ("OFS"), P.O. Box 5270, Denver, Colorado 80217,
or by calling OFS at the toll-free number shown above.
<PAGE>
OPPENHEIMER BOND FUND
Supplement dated July 14, 1995 to the
Statement of Additional Information dated July 10, 1995
The Statement of Additional Information is amended as follows:
1. In the section entitled "Letters of Intent" on page 41, the first
three sentences of the first paragraph in that section are replaced by the
following:
A Letter of Intent (referred to as a "Letter") is an investor's
statement in writing to the Distributor of the intention to
purchase Class A shares or Class A and Class B shares of the Fund
(and other OppenheimerFunds) during a 13-month period (the "Letter
of Intent period"), which may, at the investor's request, include
purchases made up to 90 days prior to the date of the Letter. The
Letter states the investor's intention to make the aggregate
amount of purchases of shares which, when added to the investor's
holdings of shares of those funds, will equal or exceed the amount
specified in the Letter. Purchases made by reinvestment of
dividends or distributions of capital gains and purchases made at
net asset value without sales charge do not count toward
satisfying the amount of the Letter. A Letter enables an investor
to count the Class A and Class B shares purchased under the Letter
to obtain the reduced sales charge rate on purchases of Class A
shares of the Fund (and other OppenheimerFunds) that applies under
the Right of Accumulation to current purchases of Class A shares.
2. In the section entitled "Letters of Intent" on page 41, a new third
paragraph is added as follows:
For purchases of shares of the Fund and other OppenheimerFunds by
OppenheimerFunds prototype 401(k) plans under a Letter of Intent,
the Transfer Agent will not hold shares in escrow. If the
intended purchase amount under the Letter entered into by an
OppenheimerFunds prototype 401(k) plan is not purchased by the
plan by the end of the Letter of Intent period, there will be no
adjustment of commissions paid to the broker-dealer or financial
institution of record for accounts held in the name of that plan.
3. In the section entitled "Terms of Escrow that Apply to Letters of
Intent" on page 42, item 5 of that section is replaced by the following:
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of a Letter)
include (a) Class A shares sold with a front-end sales charge or
subject to a Class A contingent deferred sales charge, (b) Class
B shares acquired subject to a contingent deferred sales charge,
and (c) Class A or B shares acquired in exchange for either (i)
Class A shares of one of the other OppenheimerFunds that were
acquired subject to a Class A initial or contingent deferred sales
charge or (ii) Class B shares of one of the other OppenheimerFunds
that were acquired subject to a contingent deferred sales charge.
4. In the section entitled "Distributions from Retirement Plans" on page
45, the phrase "401(k) plans" is added after "403(b)(7) custodial plans"
in the first sentence, and the third sentence of that section is revised
to read as follows:
Participants (other than self-employed persons maintaining a plan
account in their own name) in OppenheimerFunds-sponsored prototype
pension, profit-sharing or 401(k) plans may not directly redeem or
exchange shares held for their account under those plans.
5. In the section entitled "Special Arrangements for Repurchase of Shares
from Dealers and Brokers" on page 45, the last sentence of that section
is revised to read as follows:
Ordinarily, for accounts redeemed by a broker-dealer under this
procedure, payment will be made within three business days after
the shares have been redeemed upon the Distributor's receipt the
required redemption documents in proper form, with the
signature(s) of the registered owners guaranteed on the redemption
document as described in the Prospectus.
6. In the section entitled "How To Exchange Shares" on page 47, the
second full paragraph is changed by adding new third and fourth sentences
as follows:
However, shares of Oppenheimer Money Market Fund, Inc. purchased
with the redemption proceeds of shares of other mutual funds
(other than funds managed by the Manager or its subsidiaries)
redeemed within the 12 months prior to that purchase may
subsequently be exchanged for shares of other OppenheimerFunds
without being subject to an initial or contingent deferred sales
charge, whichever is applicable. To qualify for that privilege,
the investor or the investor's dealer must notify the Distributor
of eligibility for this privilege at the time the shares of
Oppenheimer Money Market Fund, Inc. are purchased, and, if
requested, must supply proof of entitlement to this privilege.
July 14, 1995
<PAGE>
OPPENHEIMER BOND FUND
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated July 10, 1995.
This Statement of Additional Information of Oppenheimer Bond Fund is
not a Prospectus. This document contains additional information about the
Fund and supplements information in the Prospectus dated July 10, 1995.
It should be read together with the Prospectus which may be obtained by
writing to the Fund's Transfer Agent, Oppenheimer Shareholder Services,
at P.O. Box 5270, Denver, Colorado 80217 or by calling the Transfer Agent
at the toll-free number shown above.
<TABLE>
<CAPTION>
Contents
Page
About the Fund
<S> <C>
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Policies and Strategies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Other Investment Techniques and Strategies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Other Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
How the Fund is Managed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Organization and History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Trustees and Officers of the Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
The Manager and Its Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Brokerage Policies of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Performance of the Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Distribution and Service Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
About Your Account
How to Buy Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
How to Sell Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
How to Exchange Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Dividends, Capital Gains and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Additional Information About the Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Financial Information About the Fund
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Appendix A: Description of Securities Ratings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Appendix B: Industry Classification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>
<PAGE>
ABOUT THE FUND
Investment Objective And Policies
Investment Policies and Strategies. The investment objectives and
policies of the Fund are discussed in the Prospectus. Set forth below is
supplemental information about those policies, and the types of securities
in which the Fund invests as well as the strategies the Fund may use to
try to achieve its objective. Certain capitalized terms used in this
Statement of Additional Information are defined in the Prospectus.
-- Debt Securities. All debt securities are subject to two types of
risk: credit risk and interest rate risk (these are in addition to other
investment risks that may affect a particular security).
- Credit Risk. Credit risk relates to the ability of the issuer to
meet interest or principal payments or both as they become due.
Generally, higher yielding bonds are subject to credit risk to a greater
extent than higher quality bonds.
- Interest Rate Risk. Interest rate risk refers to the fluctuations
in value of fixed-income securities resulting solely from the inverse
relationship between price and yield of outstanding fixed-income
securities. An increase in interest rates will generally reduce the
market value of fixed-income investments, and a decline in interest rates
will tend to increase their value. In addition, debt securities with
longer maturities, which tend to produce higher yields, are subject to
potentially greater capital appreciation and depreciation than obligations
with shorter maturities. Fluctuations in the market value of fixed-income
securities subsequent to their acquisition will not affect the interest
payable on those securities, and thus the cash income from such
securities, but will be reflected in the valuations of those securities
used to compute the Fund's net asset values.
- Commercial Paper. The Fund's commercial paper investments, in
addition to those described in the Prospectus, include the following:
Variable Amount Master Demand Notes. Master demand notes are
corporate obligations which permit the investment of fluctuating amounts
by the Fund at varying rates of interest pursuant to direct arrangements
between the Fund, as lender, and the borrower. They permit daily changes
in the amounts borrowed. The Fund has the right to increase the amount
under the note at any time up to the full amount provided by the note
agreement, or to decrease the amount, and the borrower may prepay up to
the full amount of the note without penalty. These notes may or may not
be backed by bank letters of credit. Because these notes are direct
lending arrangements between the lender and borrower, it is not generally
contemplated that they will be traded. There is no secondary market for
these notes, although they are redeemable (and thus immediately repayable
by the borrower) at principal amount, plus accrued interest, at any time.
Accordingly, the Fund's right to redeem such notes is dependent upon the
ability of the borrower to pay principal and interest on demand. The Fund
has no limitations on the type of issuer from whom these notes will be
purchased; however, in connection with such purchases and on an ongoing
basis, the Manager will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal and
interest on demand, including a situation in which all holders of such
notes made demand simultaneously. Investments in master demand notes are
subject to the limitation on investments by the Fund in illiquid
securities, described in the Prospectus.
Floating Rate/Variable Rate Notes. Some of the notes the Fund may
purchase may have variable or floating interest rates. Variable rates are
adjustable at stated periodic intervals; floating rates are automatically
adjusted according to a specified market rate for such investments, such
as the percentage of the prime rate of a bank, or the 91-day U.S. Treasury
Bill rate. Such obligations may be secured by bank letters of credit or
other credit support arrangements.
- Participation Interests. The Fund may invest in participation
interests, subject to the limitation, described in "Illiquid and
Restricted Securities" in the Prospectus on investments by the Fund in
illiquid investments. Participation interests provide the Fund an
undivided interest in a loan made by the issuing financial institution in
the proportion that the Fund's participation interest bears to the total
principal amount of the loan. No more than 5% of the Fund's net assets
can be invested in participation interests of the same borrowers. The
issuing financial institution may have no obligation to the Fund other
than to pay the Fund the proportionate amount of the principal and
interest payments it receives. Participation interests are primarily
dependent upon the creditworthiness of the borrowing corporation, which
is obligated to make payments of principal and interest on the loan, and
there is a risk that such borrowers may have difficulty making payments.
In the event the borrower fails to pay scheduled interest or principal
payments, the Fund could experience a reduction in its income and might
experience a decline in the value of that participation interest and in
the net asset value of its shares. In the event of a failure by the
financial institution to perform its obligation in connection with the
participation agreement, the Fund might incur certain costs and delays in
realizing payment or may suffer a loss of principal and/or interest.
- Bank Obligations and Instruments Secured Thereby. The bank
obligations the Fund may invest in include time deposits, certificates of
deposit, and bankers' acceptances if they are: (i) obligations of a
domestic bank with total assets of at least $1 billion or (ii) obligations
of a foreign bank with total assets of at least U.S. $1 billion. The Fund
may also invest in instruments secured by such obligations (e.g., debt
which is guaranteed by the bank). For purposes of this section, the term
"bank" includes commercial banks, savings banks, and savings and loan
associations which may or may not be members of the Federal Deposit
Insurance Corporation.
Time deposits are non-negotiable deposits in a bank for a specified
period of time at a stated interest rate, whether or not subject to
withdrawal penalties. However, time deposits, other than those maturing
in seven days or less, that are subject to withdrawal penalties are
subject to the limitation on investments by the Fund in illiquid
investments, set forth in the Prospectus under "Illiquid and Restricted
Securities."
Banker's acceptances are marketable short-term credit instruments
used to finance the import, export, transfer or storage of goods. They
are deemed "accepted" when a bank guarantees their payment at maturity.
-- Securities of Foreign Governments and Companies. As stated in the
Prospectus, the Fund may invest in debt obligations (which may be
dominated in U.S. dollars or non-U.S. currencies) issued or guaranteed by
foreign corporations, certain supranational entities (described below) and
foreign governments or their agencies or instrumentalities.
The percentage of the Fund's assets that will be allocated to foreign
securities will vary from time to time depending on, among other things,
the relative yields of foreign and U.S. securities, the economies of
foreign countries, the condition of such countries' financial markets, the
interest rate climate of such countries and the relationship of such
countries' currency to the U.S. dollar. The Manager will consider an
issuer's affiliation, if any, with a foreign government as one of the
factors in determining whether to purchase any particular foreign
security. These factors are judged on the basis of fundamental economic
criteria (e.g., relative inflation levels and trends, growth rate
forecasts, balance of payments status, and economic policies) as well as
technical and political data. The Fund's portfolio of foreign securities
may include those of a number of foreign countries or, depending upon
market conditions, those of a single country.
Investments in foreign securities offer potential benefits not
available from investments solely in securities of domestic issuers, by
offering the opportunity to invest in foreign issuers that appear to offer
growth potential, or in foreign countries with economic policies or
business cycles different from those of the U.S., or to reduce
fluctuations in portfolio value by taking advantage of foreign bond or
other markets that do not move in a manner parallel to U.S. markets. From
time to time, U.S. government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other
restrictions, and it is possible that such restrictions could be
reimposed.
Securities of foreign issuers that are represented by American
depository receipts, or that are listed on a U.S. securities exchange, or
are traded in the U.S. over-the-counter market are not considered "foreign
securities," because they are not subject to many of the special
considerations and risks (discussed below) that apply to foreign
securities traded and held abroad. If the Fund's securities are held
abroad, the countries in which such securities may be held and the sub-
custodians holding must be, in most cases, approved by the Fund's Board
of Trustees under applicable SEC rules.
The obligations of foreign governmental entities may or may not be
supported by the full faith and credit of a foreign government.
Obligations of "supranational entities" include those of international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and of international banking
institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the "World Bank"),
the European Coal and Steel Community, the Asian Development Bank and the
Inter-American Development Bank. The governmental members, or
"stockholders," of these entities usually make initial capital
contributions to the supranational entity and in many cases are committed
to make additional capital contributions if the supranational entity is
unable to repay its borrowings. Each supranational entity's lending
activities are limited to a percentage of its total capital (including
"callable capital" contributed by members at the entity's call), reserves
and net income. There is no assurance that foreign governments will be
able or willing to honor their commitments.
Investing in foreign securities involves considerations and possible
risks not typically associated with investing in securities in the U.S.
The values of foreign securities will be affected by changes in currency
rates or exchange control regulations or currency blockage, application
of foreign tax laws, including withholding taxes, changes in governmental
administration or economic or monetary policy (in the U.S. or abroad) or
changed circumstances in dealings between nations. There may be a lack
of public information about foreign issuers. Foreign countries may not
have financial reporting, accounting and auditing standards comparable to
those that apply to U.S. issuers. Costs will be incurred in connection
with conversions between various currencies. Foreign brokerage
commissions are generally higher than commissions in the U.S., and foreign
securities markets may be less liquid, more volatile and less subject to
governmental regulation than in the U.S. They may have increased delays
in settling portfolio transactions. Investments in foreign countries
could be affected by other factors not generally thought to be present in
the U.S., including expropriation or nationalization, confiscatory
taxation and potential difficulties in enforcing contractual obligations,
and could be subject to extended settlement periods.
Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the U.S.
dollar will result in a change in the U.S. dollar value of the Fund's
assets and its income available for distribution. In addition, although
a portion of the Fund's investment income may be received or realized in
foreign currencies, the Fund will be required to compute and distribute
its income in U.S. dollars, and absorb the cost of currency fluctuations.
The Fund may engage in foreign currency exchange transactions for hedging
purposes to protect against changes in future exchange rates. See "Other
Investment Techniques and Strategies - Hedging," below.
The values of foreign investments and the investment income derived
from them may also be affected unfavorably by changes in currency exchange
control regulations. Although the Fund will invest only in securities
denominated in foreign currencies that at the time of investment do not
have significant government-imposed restrictions on conversion into U.S.
dollars, there can be no assurance against subsequent imposition of
currency controls. In addition, the values of foreign securities will
fluctuate in response to a variety of factors, including changes in U.S.
and foreign interest rates.
-- U.S. Government Securities. U.S. Government Securities are debt
obligations issued or guaranteed by the U.S. Government or one of its
agencies or instrumentalities, and include "zero coupon" Treasury
securities and mortgage-backed securities and CMOs.
- Mortgage-Backed Securities. These securities represent
participation interests in pools of residential mortgage loans which are
guaranteed by agencies or instrumentalities of the U.S. Government. Such
securities differ from conventional debt securities which generally
provide for periodic payment of interest in fixed or determinable amounts
(usually semi-annually) with principal payments at maturity or specified
call dates. Some mortgage-backed securities in which the Fund may invest
may be backed by the full faith and credit of the U.S. Treasury (e.g.,
direct pass-through certificates of Government National Mortgage
Association); some are supported by the right of the issuer to borrow from
the U.S. Government (e.g., obligations of Federal Home Loan Mortgage
Corporation); and some are backed by only the credit of the issuer itself.
Those guarantees do not extend to the value of or yield of the mortgage-
backed securities themselves or to the net asset value of the Fund's
shares. Any of these government agencies may also issue collateralized
mortgage-backed obligations ("CMOs"), discussed below.
The yield on mortgage-backed securities is based on the average
expected life of the underlying pool of mortgage loans. The actual life
of any particular pool will be shortened by any unscheduled or early
payments of principal and interest. Principal prepayments generally
result from the sale of the underlying property or the refinancing or
foreclosure of underlying mortgages. The occurrence of prepayments is
affected by a wide range of economic, demographic and social factors and,
accordingly, it is not possible to predict accurately the average life of
a particular pool. Yield on such pools is usually computed by using the
historical record of prepayments for that pool, or, in the case of newly-
issued mortgages, the prepayment history of similar pools. The actual
prepayment experience of a pool of mortgage loans may cause the yield
realized by the Fund to differ from the yield calculated on the basis of
the expected average life of the pool.
Prepayments tend to increase during periods of falling interest
rates, while during periods of rising interest rates prepayments will most
likely decline. When prevailing interest rates rise, the value of a pass-
through security may decrease as do the values of other debt securities,
but, when prevailing interest rates decline, the value of a pass-through
security is not likely to rise to the extent that the value of other debt
securities rise, because of the prepayment feature of pass-through
securities. The Fund's reinvestment of scheduled principal payments and
unscheduled prepayments it receives may occur at times when available
investments offer higher or lower rates than the original investment, thus
affecting the yield of the Fund. Monthly interest payments received by
the Fund have a compounding effect which may increase the yield to the
Fund more than debt obligations that pay interest semi-annually. Because
of those factors, mortgage-backed securities may be less effective than
Treasury bonds of similar maturity at maintaining yields during periods
of declining interest rates. The Fund may purchase mortgage-backed
securities at par, at a premium or at a discount. Accelerated prepayments
adversely affect yields for pass-through securities purchased at a premium
(i.e., at a price in excess of their principal amount) and may involve
additional risk of loss of principal because the premium may not have been
fully amortized at the time the obligation is repaid. The opposite is
true for pass-through securities purchased at a discount.
The Fund may invest in "stripped" mortgage backed securities, in
which the principal and interest portions of the security are separated
and sold. Stripped mortgage-backed securities usually have at least two
classes each of which receives different proportions of interest and
principal distributions on the underlying pool of mortgage assets. One
common variety of stripped mortgage-backed security has one class that
receives some of the interest and most of the principal, while the other
class receives most of the interest and remainder of the principal. In
some cases, one class will receive all of the interest (the
"interest-only" or "IO" class), while the other class will receive all of
the principal (the "principal-only" or "PO" class). Interest only
securities are extremely sensitive to interest rate changes, and
prepayments of principal on the underlying mortgage assets. An increase
in principal payments or prepayments will reduce the income available to
the IO security. In other types of CMOs, the underlying principal
payments may apply to various classes in a particular order, and therefore
the value of certain classes or "tranches" of such securities may be more
volatile than the value of the pool as a whole, and losses may be more
severe than on other classes.
Mortgage-backed securities may be less effective than debt
obligations of similar maturity at maintaining yields during periods of
declining interest rates. As new types of mortgage-related securities are
developed and offered to investors, the Manager will, subject to the
direction of the Board of Trustees and consistent with the Fund's
investment objective and policies, consider making investments in such new
types of mortgage-related securities.
- GNMA Certificates. Certificates of Government National Mortgage
Association ("GNMA") are mortgage-backed securities of GNMA that evidence
an undivided interest in a pool or pools of mortgages ("GNMA
Certificates"). The GNMA Certificates that the Fund may purchase are of
the "modified pass-through" type, which entitle the holder to receive
timely payment of all interest and principal payments due on the mortgage
pool, net of fees paid to the "issuer" and GNMA, regardless of whether the
mortgagor actually makes the payments when due.
The National Housing Act authorizes GNMA to guarantee the timely
payment of principal and interest on securities backed by a pool of
mortgages insured by the Federal Housing Administration ("FHA") or
guaranteed by the Veterans Administration ("VA"). The GNMA guarantee is
backed by the full faith and credit of the U.S. Government. GNMA is also
empowered to borrow without limitation from the U.S. Treasury if necessary
to make any payments required under its guarantee.
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the
securities. Prepayments of principal by mortgagors and mortgage
foreclosures will usually result in the return of the greater part of
principal investment long before the maturity of the mortgages in the
pool. Foreclosures impose no risk to principal investment because of the
GNMA guarantee, except to the extent that the Fund has purchased the
certificates at a premium in the secondary market.
- FNMA Securities. The Federal National Mortgage Association
("FNMA") was established to create a secondary market in mortgages insured
by the FHA. FNMA issues guaranteed mortgage pass-through certificates
("FNMA Certificates"). FNMA Certificates resemble GNMA Certificates in
that each FNMA Certificate represents a pro rata share of all interest and
principal payments made and owed on the underlying pool. FNMA guarantees
timely payment of interest and principal on FNMA Certificates. The FNMA
guarantee is not backed by the full faith and credit of the U.S.
Government.
- FHLMC Securities. The Federal Home Loan Mortgage Corporation
("FHLMC") was created to promote development of a nationwide secondary
market for conventional residential mortgages. FHLMC issues two types of
mortgage pass-through certificates ("FHLMC Certificates"): mortgage
participation certificates ("PCs") and guaranteed mortgage certificates
("GMCs"). PCs resemble GNMA Certificates in that each PC represents a pro
rata share of all interest and principal payments made and owed on the
underlying pool. FHLMC guarantees timely monthly payment of interest on
PCs and the ultimate payment of principal. The FHLMC guarantee is not
backed by the full faith and credit of the U.S. Government.
GMCs also represent a pro rata interest in a pool of mortgages.
However, these instruments pay interest semi-annually and return principal
once a year in guaranteed minimum payments. The expected average life of
these securities is approximately ten years. The FHLMC guarantee is not
backed by the full faith and credit of the U.S. Government.
- Collateralized Mortgage-Backed Obligations ("CMOs"). CMOs are
fully-collateralized bonds that are the general obligations of the issuer
thereof, either the U.S. Government, a U.S. government instrumentality,
or a private issuer, which may be a domestic or foreign corporation. Such
bonds generally are secured by an assignment to a trustee (under the
indenture pursuant to which the bonds are issued) of collateral consisting
of a pool of mortgages. Payments with respect to the underlying mortgages
generally are made to the trustee under the indenture. Payments of
principal and interest on the underlying mortgages are not passed through
to the holders of the CMOs as such (i.e., the character of payments of
principal and interest is not passed through, and therefore payments to
holders of CMOs attributable to interest paid and principal repaid on the
underlying mortgages do not necessarily constitute income and return of
capital, respectively, to such holders), but such payments are dedicated
to payment of interest on and repayment of principal of the CMOs. CMOs
often are issued in two or more classes with different characteristics
such as varying maturities and stated rates of interest. Because interest
and principal payments on the underlying mortgages are not passed through
to holders of CMOs, CMOs of varying maturities may be secured by the same
pool of mortgages, the payments on which are used to pay interest on each
class and to retire successive maturities in sequence. Unlike other
mortgage-backed securities (discussed above), CMOs are designed to be
retired as the underlying mortgages are repaid. In the event of
prepayment on such mortgages, the class of CMO first to mature generally
will be paid down. Therefore, although in most cases the issuer of CMOs
will not supply additional collateral in the event of such prepayment,
there will be sufficient collateral to secure CMOs that remain
outstanding.
- Asset-Backed Securities. The value of an asset-backed security
is affected by changes in the market's perception of the asset backing the
security, the creditworthiness of the servicing agent for the loan pool,
the originator of the loans, or the financial institution providing any
credit enhancement, and is also affected if any credit enhancement has
been exhausted. The risks of investing in asset-backed securities are
ultimately dependent upon payment of consumer loans by the individual
borrowers. As a purchaser of an asset-backed security, the Fund would
generally have no recourse to the entity that originated the loans in the
event of default by a borrower. The underlying loans are subject to
prepayments, which shorten the weighted average life of asset-backed
securities and may lower their return, in the same manner as described
above for the prepayments of a pool of mortgage loans underlying mortgage-
backed securities.
Other Investment Techniques And Strategies
-- Hedging with Options and Futures Contracts. The Fund may employ
one or more types of Hedging Instruments for the purposes described in the
Prospectus. When hedging to attempt to protect against declines in the
market value of the Fund's portfolio, to permit the Fund to retain
unrealized gains in the value of portfolio securities which have
appreciated, or to facilitate selling securities for investment reasons,
the Fund may: (i) sell Futures, (ii) purchase puts on such Futures or
securities, or (iii) write calls on securities held by it or on Futures.
When hedging to attempt to protect against the possibility that portfolio
securities are not fully included in a rise in value of the debt
securities market, the Fund may: (i) purchase Futures, or (ii) purchase
calls on such Futures or on securities. Covered calls and puts may also
be written on debt securities to attempt to increase the Fund's income.
When hedging to protect against declines in the dollar value of a foreign
currency-denominated security, the Fund may: (a) purchase puts on that
foreign currency and on foreign currency Futures, (b) write calls on that
currency or on such Futures, or (c) enter into Forward Contracts at a
lower rate than the spot ("cash") rate.
The Fund's strategy of hedging with Futures and options on Futures
will be incidental to the Fund's activities in the underlying cash market.
Additional Information about the Hedging Instruments the Fund may use is
provided below. At present, the Fund does not intend to enter into
Futures, Forward Contracts and options on Futures if, after any such
purchase, the sum of margin deposits on Futures and premiums paid on
Futures options exceeds 5% of the value of the Fund's total assets. In
the future, the Fund may employ Hedging Instruments and strategies that
are not presently contemplated but which may be developed, to the extent
such investment methods are consistent with the Fund's investment
objective, legally permissible and adequately disclosed.
- Writing Call Options. The Fund may write (i.e. sell) call options
("calls") on debt securities that are traded on U.S. and foreign
securities exchanges and over-the-counter markets, to enhance income
through the receipt of premiums from expired calls and any net profits
from closing purchase transactions. After any such sale up to 50% of the
Fund's total assets may be subject to calls. All such calls written by
the Fund must be "covered" while the call is outstanding (i.e. the Fund
must own the securities subject to the call or other securities acceptable
for applicable escrow requirements). Calls on Futures (discussed below)
must be covered by deliverable securities or by liquid assets segregated
to satisfy the Futures contract. When the Fund writes a call on a
security it receives a premium and agrees to sell the callable investment
to a purchaser of a corresponding call on the same security during the
call period (usually not more than 9 months) at a fixed exercise price
(which may differ from the market price of the underlying security),
regardless of market price changes during the call period. The Fund has
retained the risk of loss should the price of the underlying security
decline during the call period, which may be offset to some extent by the
premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A
profit or loss will be realized, depending upon whether the net of the
amount of the option transaction costs and the premium received on the
call written was more or less than the price of the call subsequently
purchased. A profit may also be realized if the call lapses unexercised,
because the Fund retains the underlying investment and the premium
received. Any such profits are considered short-term capital gains for
Federal income tax purposes, and when distributed by the Fund are taxable
as ordinary income. If the Fund could not effect a closing purchase
transaction due to lack of a market, it would have to hold the callable
investments until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures
contract or a deliverable bond, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an equivalent
dollar amount of liquid assets. The Fund will segregate additional liquid
assets if the value of the escrowed assets drops below 100% of the current
value of the Future. In no circumstances would an exercise notice require
the Fund to deliver a futures contract; it would simply put the Fund in
a short futures position, which is permitted by the Fund's hedging
policies.
- Writing Put Options. The Fund may write put options on debt
securities or Futures but only if such puts are covered by segregated
liquid assets. The Fund will not write puts if, as a result, more than
50% of the Fund's net assets would be required to be segregated to cover
such put obligations. In writing puts, there is the risk that the Fund
may be required to buy the underlying security at a disadvantageous price.
A put option on securities gives the purchaser the right to sell, and the
writer the obligation to buy, the underlying investment at the exercise
price during the option period. Writing a put covered by segregated
liquid assets equal to the exercise price of the put has the same economic
effect to the Fund as writing a covered call. The premium the Fund
receives from writing a put option represents a profit, as long as the
price of the underlying investment remains above the exercise price.
However, the Fund has also assumed the obligation during the option period
to buy the underlying investment from the buyer of the put at the exercise
price, even though the value of the investment may fall below the exercise
price. If the put lapses unexercised, the Fund (as the writer of the put)
realizes a gain in the amount of the premium. If the put is exercised,
the Fund must fulfill its obligation to purchase the underlying investment
at the exercise price, which will usually exceed the market value of the
investment at that time. In that case, the Fund may incur a loss, equal
to the sum of the current market value of the underlying investment and
the premium received minus the sum of the exercise price and any
transaction costs incurred.
When writing put options on securities, to secure its obligation to
pay for the underlying security, the Fund will deposit in escrow liquid
assets with a value equal to or greater than the exercise price of the put
option. The Fund therefore forgoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring the Fund to take delivery of the underlying security against
payment of the exercise price. The Fund has no control over when it may
be required to purchase the underlying security, since it may be assigned
an exercise notice at any time prior to the termination of its obligation
as the writer of the put. This obligation terminates upon expiration of
the put, or such earlier time at which the Fund effects a closing purchase
transaction by purchasing a put of the same series as that previously
sold. Once the Fund has been assigned an exercise notice, it is
thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an
underlying security from being put. Furthermore, effecting such a closing
purchase transaction will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by the deposited
assets, or to utilize the proceeds from the sale of such assets for other
investments by the Fund. The Fund will realize a profit or loss from a
closing purchase transaction if the cost of the transaction is less or
more than the premium received from writing the option. As above for
writing covered calls, any and all such profits described herein from
writing puts are considered short-term gains for Federal tax purposes, and
when distributed by the Fund, are taxable as ordinary income.
The Trustees have adopted a non-fundamental policy that the Fund may
only purchase call options and put options with a value of up to 5% of its
net assets.
- Purchasing Puts and Calls. The Fund may purchase calls in order
to protect against the possibility that the Fund's portfolio will not
fully participate in an anticipated rise in value of the long-term debt
securities market. When the Fund purchases a call, it pays a premium
(other than in a closing purchase transaction) and, except as to calls on
bond indices, has the right to buy the underlying investment from a seller
of a corresponding call on the same investment during the call period at
a fixed exercise price. In purchasing a call, the Fund benefits only if
the call is sold at a profit or if, during the call period, the market
price of the underlying investment is above the sum of the call price,
transaction costs, and the premium paid, and the call is exercised. If
the call is not exercised or sold (whether or not at a profit), it will
become worthless at its expiration date and the Fund will lose its premium
payment and the right to purchase the underlying investment.
When the Fund purchases a put, it pays a premium and has the right
to sell the underlying investment to a seller of a corresponding put on
the same investment during the put period at a fixed exercise price.
Buying a put on an investment the Fund owns (a "protective put") enables
the Fund to attempt to protect itself during the put period against a
decline in the value of the underlying investment below the exercise price
by selling the underlying investment at the exercise price to a seller of
a corresponding put. If the market price of the underlying investment is
equal to or above the exercise price and as a result the put is not
exercised or resold, the put will become worthless at its expiration and
the Fund will lose the premium payment and the right to sell the
underlying investment. However, the put may be sold prior to expiration
(whether or not at a profit).
Purchasing either a put on Interest Rate Futures or on debt
securities it does not own permits the Fund either to resell the put or
to buy the underlying investment and sell it at the exercise price. The
resale price of the put will vary inversely with the price of the
underlying investment. If the market price of the underlying investment
is above the exercise price, and as a result the put is not exercised, the
put will become worthless on the expiration date. In the event of a
decline in price of the underlying investment, the Fund could exercise or
sell the put at a profit to attempt to offset some or all of its loss on
its portfolio securities. When the Fund purchases a put on an Interest
rate Future or debt security not held by it, the put protects the Fund to
the extent that the prices of the underlying Future or debt securities
move in a similar pattern of the debt securities in the Fund's portfolio.
The Fund's option activities may affect its portfolio turnover rate
and brokerage commissions. The exercise of calls written by the Fund may
cause the Fund to sell related portfolio securities, thus increasing its
turnover rate. The exercise by the Fund of puts on securities will cause
the sale of underlying investments, increasing portfolio turnover.
Although the decision whether to exercise a put it holds is within the
Fund's control, holding a put might cause the Fund to sell the related
investments for reasons that would not exist in the absence of the put.
The Fund will pay a brokerage commission each time it buys or sells a
call, put or an underlying investment in connection with the exercise of
a put or call. Those commissions may be higher than the commissions for
direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market value
of the underlying investments and, consequently, put and call options
offer large amounts of leverage. The leverage offered by trading in
options could result in the Fund's net asset value being more sensitive
to changes in the value of the underlying investments.
- Options on Foreign Currencies. The Fund intends to write and
purchase calls on foreign currencies. The Fund may purchase and write
puts and calls on foreign currencies that are traded on a securities or
commodities exchange or quoted by major recognized dealers in such
options, for the purpose of protecting against declines in the dollar
value of foreign securities and against increases in the dollar cost of
foreign securities to be acquired. If a rise is anticipated in the dollar
value of a foreign currency in which securities to be acquired are
denominated, the increased cost of such securities may be partially offset
by purchasing calls or writing puts on that foreign currency. If a
decline in the dollar value of a foreign currency is anticipated, the
decline in value of portfolio securities denominated in that currency may
be partially offset by writing calls or purchasing puts on that foreign
currency. However, in the event of currency rate fluctuations adverse to
the Fund's position, it would lose the premium it paid and transactions
costs.
A call written on a foreign currency by the Fund is covered if the
Fund owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without
additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of
other foreign currency held in its portfolio. A call may be written by
the Fund on a foreign currency to provide a hedge against a decline due
to an expected adverse change in the exchange rate in the U.S. dollar
value of a security which the Fund owns or has the right to acquire and
which is denominated in the currency underlying the option. This is a
cross-hedging strategy. In such circumstances, the Fund collateralizes
the option by maintaining in a segregated account with the Fund's
custodian, cash or U.S. Government Securities in an amount not less than
the value of the underlying foreign currency in U.S. dollars marked-to-
market daily.
- Futures. The Fund may buy and sell Futures. No price is paid or
received upon the purchase or sale of an Interest Rate Future or a foreign
currency exchange contract ("Forward Contract"), discussed below. An
Interest Rate Future obligates the seller to deliver and the purchaser to
take a specific type of debt security at a specific future date for a
fixed price. That obligation may be satisfied by actual delivery of the
debt security or by entering into an offsetting contract. A securities
index assigns relative values to the securities included in that index and
is used as a basis for trading long-term Financial Futures contracts.
Financial Futures reflect the price movements of securities included in
the index. They differ from Interest Rate Futures in that settlement is
made in cash rather than by delivery of the underlying investment.
Upon entering into a Futures transaction, the Fund will be required
to deposit an initial margin payment in cash or U.S. Treasury bills with
the futures commission merchant (the "futures broker"). The initial
margin will be deposited with the Fund's Custodian in an account
registered in the futures broker's name; however the futures broker can
gain access to that account only under specified conditions. As the
Future is marked to market to reflect changes in its market value,
subsequent margin payments, called variation margin, will be made to or
by the futures broker on a daily basis.
At any time prior to the expiration of the Future, if the Fund elects
to close out its position by taking an opposite position, a final
determination of variation margin is made, additional cash is required to
be paid by or released to the Fund, and any loss or gain is realized for
tax purposes. Although Interest Rate Futures by their terms call for
settlement by delivery or acquisition of debt securities, in most cases
the obligation is fulfilled by entering into an offsetting position. All
futures transactions are effected through a clearinghouse associated with
the exchange on which the contracts are traded.
- Forward Contracts. The Fund may enter into foreign currency
exchange contracts ("Forward Contracts"), which obligate the seller to
deliver and the purchaser to take a specific amount of foreign currency
at a specific future date for a fixed price. A Forward Contract involves
bilateral obligations of one party to purchase, and another party to sell,
a specific currency at a future date (which may be any fixed number of
days from the date of the contract agreed upon by the parties), at a price
set at the time the contract is entered into. These contracts are traded
in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The Fund may enter
into a Forward Contract in order to "lock in" the U.S. dollar price of a
security denominated in a foreign currency which it has purchased or sold
but which has not yet settled, or to protect against a possible loss
resulting from an adverse change in the relationship between the U.S.
dollar and a foreign currency. There is a risk that use of Forward
Contracts may reduce the gain that would otherwise result from a change
in the relationship between the U.S. dollar and a foreign currency.
Forward contracts include standardized foreign currency futures contracts
which are traded on exchanges and are subject to procedures and
regulations applicable to other Futures. The Fund may also enter into a
forward contract to sell a foreign currency denominated in a currency
other than that in which the underlying security is denominated. This is
done in the expectation that there is a greater correlation between the
foreign currency of the forward contract and the foreign currency of the
underlying investment than between the U.S. dollar and the foreign
currency of the underlying investment. This technique is referred to as
"cross hedging." The success of cross hedging is dependent on many
factors, including the ability of the Manager to correctly identify and
monitor the correlation between foreign currencies and the U.S. dollar.
To the extent that the correlation is not identical, the Fund may
experience losses or gains on both the underlying security and the cross
currency hedge.
The Fund may use Forward Contracts to protect against uncertainty in
the level of future exchange rates. The use of Forward Contracts does not
eliminate fluctuations in the prices of the underlying securities the Fund
owns or intends to acquire, but it does fix a rate of exchange in advance.
In addition, although Forward Contracts limit the risk of loss due to a
decline in the value of the hedged currencies, at the same time they limit
any potential gain that might result should the value of the currencies
increase.
There is no limitation as to the percentage of the Fund's assets that
may be committed to foreign currency exchange contracts. The Fund does
not enter into such forward contracts or maintain a net exposure in such
contracts to the extent that the Fund would be obligated to deliver an
amount of foreign currency in excess of the value of the Fund's assets
denominated in that currency, or enter into a "cross hedge," unless it is
denominated in a currency or currencies that the Manager believes will
have price movements that tend to correlate closely with the currency in
which the investment being hedged is denominated. See "Tax Aspects of
Covered Calls and Hedging Instruments" below for a discussion of the tax
treatment of foreign currency exchange contracts.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when
the Fund anticipates receipt of dividend payments in a foreign currency,
the Fund may desire to "lock-in" the U.S. dollar price of the security or
the U.S. dollar equivalent of such payment by entering into a Forward
Contract, for a fixed amount of U.S. dollars per unit of foreign currency,
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will thereby be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the currency exchange rates during the
period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date on which such payments are
made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when the Fund believes that foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
sale contract to sell an amount of that foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in
such foreign currency, or when the Fund believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a fixed
dollar amount. In this situation the Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed
U.S. dollar amount where the Fund believes that the U.S. dollar value of
the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross hedge").
The Fund's Custodian will place cash or U.S. Government securities
or other liquid high-quality debt securities in a separate account of the
Fund with the Custodian having a value equal to the aggregate amount of
the Fund's commitments under forward contracts entered into with respect
to position hedges and cross hedges. If the value of the securities
placed in the separate 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 the Fund's obligations with respect to
such contracts. As an alternative to maintaining all or part of the
separate account, the Fund may purchase a call option permitting the Fund
to purchase the amount of foreign currency being hedged by a forward sale
contract at a price no higher than the forward contract price, or the Fund
may purchase a put option permitting the Fund to sell the amount of
foreign currency subject to a forward purchase contract at a price as high
or higher than the forward contract price. Unanticipated changes in
currency prices may result in poorer overall performance for the Fund than
if it had not entered into such contracts.
The precise matching of the Forward Contract amounts and the value
of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of these securities between
the date the Forward Contract is entered into and the date it is sold.
Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense of
such purchase), if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some
of the foreign currency received upon the sale of the portfolio security
if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-
term hedging strategy is highly uncertain. Forward Contracts involve the
risk that anticipated currency movements will not be accurately predicted,
causing the Fund to sustain losses on these contracts and transactions
costs.
At or before the maturity of a Forward Contract requiring the Fund
to sell a currency, the Fund may either sell a portfolio security and use
the sale proceeds to make delivery of the currency or retain the security
and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on
the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund may close out a Forward
Contract requiring it to purchase a specified currency by entering into
a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would
realize a gain or loss as a result of entering into such an offsetting
Forward Contract under either circumstance to the extent the exchange rate
or rates between the currencies involved moved between the execution dates
of the first contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are
involved. Because such contracts are not traded on an exchange, the Fund
must evaluate the credit and performance risk of each particular
counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may convert foreign currency from time
to time, and investors should be aware of the costs of currency
conversion. Foreign exchange dealers do not charge a fee for conversion,
but they do seek to realize a profit based on the difference between the
prices at which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while offering
a lesser rate of exchange should the Fund desire to resell that currency
to the dealer.
- Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements.
A master netting agreement provides that all swaps done between the
Fund and that counterparty under that master agreement shall be regarded
as parts of an integral agreement. If on any date amounts are payable in
the same currency in respect of one or more swap transactions, the net
amount payable on that date in that currency shall be paid. In addition,
the master netting agreement may provide that if one party defaults
generally or on one swap, the counterparty may terminate the swaps with
that party. Under such agreements, if there is a default resulting in a
loss to one party, the measure of that party's damages is calculated by
reference to the average cost of a replacement swap with respect to each
swap (i.e., the mark-to-market value at the time of the termination of
each swap). The gains and losses on all swaps are then netted, and the
result is the counterparty's gain or loss on termination. The termination
of all swaps and the netting of gains and losses on termination is
generally referred to as "aggregation".
- Additional Information About Hedging Instruments and Their Use.
The Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written options traded on exchanges or as to other acceptable escrow
securities, so that no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or upon the
Fund's entering into a closing transaction. An option position may be
closed out only on a market which provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option.
The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise by the Fund of puts on securities
will cause the sale of related investments, increasing portfolio turnover.
Although such exercise is within the Fund's control, holding a put might
cause the Fund to sell the related investments for reasons which would not
exist in the absence of the put. The Fund will pay a brokerage commission
each time it buys a put or call, sells a call, or buys or sells an
underlying investment in connection with the exercise of a put or call.
Such commissions may be higher than those which would apply to direct
purchases or sales of such underlying investments. Premiums paid for
options are small in relation to the market value of the related
investments, and consequently, put and call options offer large amounts
of leverage. The leverage offered by trading in options could result in
the Fund's net asset value being more sensitive to changes in the value
of the underlying investments.
When the Fund writes an over-the-counter ("OTC") option, it will
enter into an arrangement with a primary U.S. Government securities
dealer, which would establish a formula price at which the Fund would have
the absolute right to repurchase that OTC option. That formula price
would generally be based on a multiple of the premium received for the
option, plus the amount by which the option is exercisable below the
market price of the underlying security (that is, the extent to which the
option is "in-the-money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of the limit on its assets that may be
invested in illiquid securities, stated in the Prospectus) the mark-to-
market value of any OTC option held by it. The Securities and Exchange
Commission ("SEC") is evaluating whether OTC options should be considered
liquid securities, and the procedure described above could be affected by
the outcome of that evaluation.
- Regulatory Aspects of Hedging Instruments. The Fund is required
to operate within certain guidelines and restrictions with respect to its
use of Futures and options on Futures established by the Commodity Futures
Trading Commission ("CFTC"). In particular the Fund is exempted from
registration with the CFTC as a "commodity pool operator" if the Fund
complies with the requirements of Rule 4.5 adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for
Futures margin and related options premiums for a bona fide hedging
position. However, under the Rule the Fund must limit its aggregate
initial futures margin and related option premiums to no more than 5% of
the Fund's net assets for hedging strategies that are not considered bona
fide hedging strategies under the Rule.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number of
options which may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held in one
or more accounts or through one or more exchanges or brokers. Thus, the
number of options which the Fund may write or hold may be affected by
options written or held by other entities, including other investment
companies having the same or an affiliated investment adviser. Position
limits also apply to Futures. An exchange may order the liquidation of
positions found to be in violation of those limits and may impose certain
other sanctions. Due to requirements under the Investment Company Act,
when the Fund purchases a Future, the Fund will maintain, in a segregated
account or accounts with its custodian bank, cash or readily-marketable,
short-term (maturing in one year or less) debt instruments in an amount
equal to the market value of the securities underlying such Future, less
the margin deposit applicable to it.
- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code (although it reserves the right not to qualify). That
qualification enables the Fund to "pass through" its income and realized
capital gains to shareholders without having to pay tax on them. This
avoids a "double tax" on that income and capital gains, since shareholders
normally will be taxed on the dividends and capital gains they receive
from the Fund (unless the Fund's shares are held in a retirement account
or the shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that less
than 30% of its gross income must be derived from gains realized on the
sale of securities held for less than three months. To comply with this
30% cap, the Fund will limit the extent to which it engages in the
following activities, but will not be precluded from them: (i) selling
investments, including Bond Index Futures, held for less than three
months, whether or not they were purchased on the exercise of a call held
by the Fund; (ii) purchasing options which expire in less than three
months; (iii) effecting closing transactions with respect to calls or puts
written or purchased less than three months previously; (iv) exercising
puts or calls held by the Fund for less than three months; or (v) writing
calls on investments held less than three months.
Certain foreign currency exchange contracts ("Forward Contracts") in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including Forward Contracts)
generally are treated as ordinary income or loss. In addition, section
1256 contracts held by the Fund at the end of each taxable year are
"marked-to market" with the result that unrealized gains or losses are
treated as though they were realized. These contracts also may be marked-
to-market for purposes of the excise tax applicable to investment company
distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt
these transactions from this mark-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position
making up a straddle is allowed only to the extent such loss exceeds any
unrecognized gain in the offsetting positions making up the straddle.
Disallowed loss is generally allowed at the point where there is no
unrecognized gain in the offsetting positions making up the straddle, or
the offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates that occur between the time the Fund
accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition
of debt securities denominated in a foreign currency and on disposition
of foreign currency forward contracts, gains or losses attributable to
fluctuations in the value of a foreign currency between the date of
acquisition of the security or contract and the date of disposition also
are treated as ordinary gain or loss. Currency gains and losses are
offset against market gains and losses before determining a net "Section
988" gain or loss under the Internal Revenue Code, which may increase or
decrease the amount of the Fund's investment company income available for
distribution to its shareholders.
- Possible Risk Factors in Hedging. In addition to the risks with
respect to options discussed in the Prospectus and above, there is a risk
when hedging by selling Futures to attempt to protect against decline in
value of the Fund's portfolio securities (due to an increase in interest
rates) that the prices of such Futures will correlate imperfectly with the
behavior of the cash (i.e., market value) prices of the Fund's securities.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions due to differences in the natures of those markets.
First, all participants in the futures markets are subject to margin
deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close out futures contracts
through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the liquidity
of the futures markets depend on participants entering into offsetting
transactions rather than making or taking delivery. To the extent
participants decide to make or take delivery, liquidity in the futures
markets could be reduced, thus producing distortion. Third, from the
point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators in the futures
markets may cause temporary price distortions.
-- Repurchase Agreements. In a repurchase transaction, the Fund
acquires a security from, and simultaneously resells it to, an approved
vendor (a U.S. commercial bank, the U.S. branch of a foreign bank or a
broker-dealer which has been designated a primary dealer in government
securities, which must meet the credit requirements set by the Trust's
Board of Trustees from time to time), for delivery on an agreed upon
future date. The resale price exceeds the purchase price by an amount
that reflects an agreed-upon interest rate effective for the period during
which the repurchase agreement is in effect. The majority of these
transactions run from day to day, and delivery pursuant to resale
typically will occur within one to five days of the purchase. Repurchase
agreements are considered "loans" under the Investment Company Act,
collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the collateral's value must equal or exceed the repurchase price
to fully collateralize the repayment obligation. Additionally, the
Manager will impose creditworthiness requirements to confirm that the
vendor is financially sound and will continuously monitor the collateral's
value.
-- Illiquid and Restricted Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The expenses
of registration of restricted securities may be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund, if
such registration is required before such securities may be sold publicly.
When registration must be arranged because the Fund wishes to sell the
security, a considerable period may elapse between the time the decision
is made to sell the securities and the time the Fund would be permitted
to sell them. The Fund would bear the risks of any downward price
fluctuation during that period. The Fund may also acquire, through
private placements, securities having contractual restrictions on their
resale, which might limit the Fund's ability to dispose of such securities
and might lower the amount realizable upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted securities, as stated in the Prospectus. Those percentage
restrictions do not limit purchases of restricted securities that are
eligible for sale to qualified institutional purchasers pursuant to Rule
144A under the Securities Act of 1933, provided that those securities have
been determined to be liquid by the Board of Trustees of the Fund or by
the Manager under Board-approved guidelines. Those guidelines take into
account the trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a lack of
trading interest in a particular Rule 144A security, the Fund's holding
of that security may be deemed to be illiquid.
-- Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral on each business day must at least equal the value of the
loaned securities and must consist of cash, bank letters of credit or
securities of the U.S. Government (or its agencies or instrumentalities).
To be acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities and also receives one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, and
(c) interest on short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the borrower. The
Fund may also pay reasonable finder's, custodian and administrative fees.
In connection with securities lending, the Fund might experience risks of
delay in receiving additional collateral, or risks of delay in recovery
of securities, or loss of rights in the collateral should the borrower
fail financially. The terms of the Fund's loans must meet applicable
tests under the Internal Revenue Code and must permit the Fund to
reacquire loaned securities on five days' notice or in time to vote on any
important matter.
-- When-Issued and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis, and may purchase or sell
such securities on a "delayed delivery" basis. Although the Fund will
enter into such transactions for the purpose of acquiring securities for
its portfolio or for delivery pursuant to options contracts it has entered
into, the Fund may dispose of a commitment prior to settlement. "When-
issued" or "delayed delivery" refers to securities whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery. When such transactions are negotiated,
the price (which is generally expressed in yield terms) is fixed at the
time the commitment is made, but delivery and payment for the securities
take place at a later date. The Fund does not intend to make such
purchases for speculative purposes. The commitment to purchase a security
for which payment will be made on a future date may be deemed a separate
security and involve a risk of loss if the value of the security declines
prior to the settlement date. During the period between commitment by the
Fund and settlement (generally within two months but not to exceed 120
days), no payment is made for the securities purchased by the purchaser,
and no interest accrues to the purchaser from the transaction. Such
securities are subject to market fluctuation; the value at delivery may
be less than the purchase price. The Fund will maintain a segregated
account with its Custodian, consisting of cash, U.S. Government securities
or other high grade debt obligations at least equal to the value of
purchase commitments until payment is made.
The Fund will engage in when-issued transactions in order to secure
what is considered to be an advantageous price and yield at the time of
entering into the obligation. When the Fund engages in when-issued or
delayed delivery transactions, it relies on the buyer or seller, as the
case may be, to consummate the transaction. Failure of the buyer or
seller to do so may result in the Fund losing the opportunity to obtain
a price and yield considered to be advantageous. At the time the Fund
makes a commitment to purchase or sell a security on a when-issued or
forward commitment basis, it records the transaction and reflects the
value of the security purchased, or if a sale, the proceeds to be
received, in determining its net asset value. If the Fund chooses to (i)
dispose of the right to acquire a when-issued security prior to its
acquisition or (ii) dispose of its right to deliver or receive against a
forward commitment, it may incur a gain or loss.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling
securities consistent with its investment objective and policies and not
for the purposes of investment leverage. The Fund enters into such
transactions only with the intention of actually receiving or delivering
the securities, although (as noted above), when-issued securities and
forward commitments may be sold prior to settlement date. In addition,
changes in interest rates before settlement in a direction other than that
expected by the Manager will affect the value of such securities and may
cause a loss to the Fund.
When-issued transactions and forward commitments allow the Fund a
technique to use against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling prices, the
Fund might sell securities in its portfolio on a forward commitment basis
to attempt to limit its exposure to anticipated falling prices. In
periods of falling interest rates and rising prices, the Fund might sell
portfolio securities and purchase the same or similar securities on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in
the Prospectus. There are additional investment restrictions that the
Fund must follow that are also fundamental policies. Fundamental policies
and the Fund's investment objective, cannot be changed without the vote
of a "majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a "majority" vote is defined as the vote of
the holders of the lesser of (i) 67% or more of the shares present or
represented by proxy at a shareholder meeting, if the holders of more than
50% of the outstanding shares are present, or (ii) more than 50% of the
outstanding shares.
Under these additional restrictions, the Trust may not, on behalf of
the Fund:
(1) act as an underwriter, except to the extent that, in connection
with the disposition of portfolio securities, the Fund may be deemed
an underwriter under applicable laws;
(2) invest in oil, gas or other mineral leases, rights, royalty
contracts or exploration or development programs, real estate or real
estate mortgage loans (this restriction does not prevent the Fund
from purchasing securities secured or issued by companies investing
or dealing in real estate and by companies that are not principally
engaged in the business of buying and selling such leases, rights,
contracts or programs);
(3) make loans other than by investing in obligations in which the
Fund may invest consistent with its investment objective and policies
and other than repurchase agreements and loans of portfolio
securities;
(4) pledge, mortgage or hypothecate its assets, except that, to
secure permitted borrowings, it may pledge securities having a market
value at the time of the pledge not exceeding 15% of the cost of the
Fund's total assets and except in connection with permitted
transactions in options, futures contracts and options on futures
contracts, and except for reverse repurchase agreements and
securities lending;
(5) purchase or retain securities of any issuer if, to the knowledge
of the Trust, more than 5% of such issuer's securities are
beneficially owned by officers and trustees of the Trust or officers
and directors of Massachusetts Mutual Life Insurance Company
("MassMutual") who individually beneficially own more than 1/2 of 1%
of the securities of such issuer; and
(6) make loans to an officer, trustee or employee of the Trust or to
any officer, director or employee of MassMutual, or to MassMutual.
In addition to the investment restrictions described above and those
contained in the Prospectus, the Trustees of the Trust have voluntarily
adopted certain policies and restrictions which are observed in the
conduct of the affairs of the Fund. These represent intentions of the
Trustees based upon current circumstances. They differ from fundamental
investment policies in that the following additional investment
restrictions may be changed or amended by action of the Trustees without
requiring prior notice to or approval of shareholders. In accordance with
such nonfundamental policies and guidelines, the Fund may not: (1) invest
for the purpose of exercising control over, or management of, any company;
(2) purchase any security of a company which (including any predecessor,
controlling person, general partner and guarantor) has a record of less
than three years of continuous operations or relevant business experience
, if such purchase would cause more than 5% of the current value of the
Fund's assets to be invested in such companies; and (3) invest in
securities of other investment companies, except by purchase in the open
market where no commission or profit to a sponsor or dealer results from
such purchase other than the customary broker's commission, except when
such purchase is part of a plan of merger, consolidation, reorganization
or acquisition.
For purposes of the Fund's policy not to concentrate investments as
described in the investment restrictions in the Prospectus, the Fund has
adopted the industry classifications set forth in Appendix B to this
Statement of Additional Information. This policy is not a fundamental
policy.
How the Fund is Managed
Organization and History. The Fund is one of two series of Oppenheimer
Integrity Funds (the "Trust"). This Statement of Additional Information
may be used with the Fund's Prospectus only to offer shares of the Fund.
The Trust was established in 1982 as MassMutual Liquid Assets Trust and
changed its name to MassMutual Integrity Funds on April 15, 1988. The
Fund was reorganized from a closed-end investment company known as
MassMutual Income Investors, Inc. into a series of the Trust on April 15,
1988. On March 29, 1991, the Trust changed its name from MassMutual
Integrity Funds to Oppenheimer Integrity Funds and the Fund changed its
name from MassMutual Investment Grade Bond Fund to Oppenheimer Investment
Grade Bond Fund. Shares of the Fund represent an interest in the Fund
proportionately equal to the interest of each other share of the same
class and entitle the holder to one vote per share (and a fractional vote
for a fractional share) on matters submitted to their vote at
shareholders' meetings. Shareholders of the Fund and of the Trust's other
series vote together in the aggregate on certain matters at shareholders'
meetings, such as the election of Trustees and ratification of appointment
of auditors for the Trust. Shareholders of a particular series or class
vote separately on proposals which affect that series or class, and
shareholders of a series or class which is not affected by that matter are
not entitled to vote on the proposal. For example, only shareholders of
a series, such as the Fund, vote exclusively on any material amendment to
the investment advisory agreement with respect to the series. Only
shareholders of a class of a series vote on certain amendments to the
Distribution and/or Service Plans if the amendments affect that class.
The Trustees are authorized to create new series and classes of
series. The Trustees may reclassify unissued shares of the Trust or its
series or classes into additional series or classes of shares. The
Trustees may also divide or combine the shares of a class into a greater
or lesser number of shares without thereby changing the proportionate
beneficial interest of a shareholder in the Fund. Shares do not have
cumulative voting rights or preemptive or subscription rights. Shares may
be voted in person or by proxy.
As a Massachusetts business trust, the Trust is not required to hold,
and does not plan to hold, regular annual meetings of shareholders. The
Trust will hold meetings when required to do so by the Investment Company
Act or other applicable law, or when a shareholder meeting is called by
the Trustees or upon proper request of the shareholders. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of
the outstanding shares of the Trust, to remove a Trustee. The Trustees
will call a meeting of shareholders to vote on the removal of a Trustee
upon the written request of the record holders of at least 10% of its
outstanding shares. In addition, if the Trustees receive a request from
at least 10 shareholders (who have been shareholders for at least six
months) holding shares of the Trust valued at $25,000 or more or holding
at least 1% of the Trust's outstanding shares, whichever is less, stating
that they wish to communicate with other shareholders to request a meeting
to remove a Trustee, the Trustees will then either make the Trust's
shareholder list available to the applicants or mail their communication
to all other shareholders at the applicant's expense, or the Trustees may
take such other action as set forth under Section 16(c) of the Investment
Company Act.
The Trust's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Trust's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Trust) to be held personally liable as a "partner" under certain
circumstances, the risk of a Trust shareholder incurring financial loss
on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees And Officers of the Fund. The Trust's Trustees and officers and
their principal occupations and business affiliations during the past five
years are listed below. Each Trustee is also a trustee, director or
managing general partner of Oppenheimer Total Return Fund, Inc.,
Oppenheimer Equity Income Fund, Oppenheimer High Yield Fund, Oppenheimer
International Bond Fund, Oppenheimer Cash Reserves, Oppenheimer Tax-Exempt
Fund, Oppenheimer Limited-Term Government Fund, The New York Tax-Exempt
Income Fund, Inc., Oppenheimer Champion High Yield Fund, Oppenheimer Main
Street Funds, Inc., Oppenheimer Strategic Funds Trust, Oppenheimer
Strategic Income & Growth Fund, Oppenheimer Strategic Investment Grade
Bond Fund, Oppenheimer Strategic Short-Term Income Fund, Oppenheimer
Variable Account Funds, Daily Cash Accumulation Fund, Inc., Centennial
America Fund, L.P., Centennial Money Market Trust, Centennial Government
Trust, Centennial New York Tax Exempt Trust, Centennial Tax Exempt Trust
and Centennial California Tax Exempt Trust, (collectively, the "Denver-
based OppenheimerFunds"). Mr. Fossel is President and Mr. Swain is
Chairman of each of the Denver-based OppenheimerFunds. As of July 10,
1995, the Trustees and officers of the Fund as a group owned of record or
beneficially less than 1% of each class of the Fund's outstanding shares,
and less than 1% of the outstanding shares of the Fund. The foregoing
does not include shares held of record by an employee benefit plan for
employees of the Manager (for which one of the officers, Mr. Donohue, is
a trustee) other than the shares beneficially owned under that plan by the
officers of the Fund listed below.
Robert G. Avis, Trustee*; Age: 63
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
William A. Baker, Trustee; Age: 80
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age: 64
19411 Merion Circle, Huntington Beach, California 92648
Vice President of McDonnell Douglas Space Systems, Co.; formerly
associated with the National Aeronautics and Space Administration.
Jon S. Fossel, President and Trustee*; Age: 53
Two World Trade Center, New York, New York 10048-0203
Chairman, Chief Executive Officer and a director of the Manager; President
and a director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company; President and a director of HarbourView Asset
Management Corporation ("HarbourView"), a subsidiary of the Manager; a
director of Shareholder Services, Inc. ("SSI") and Shareholder Financial
Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager;
formerly President of the Manager.
Raymond J. Kalinowski, Trustee; Age: 65
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc.: formerly Vice Chairman
and a director of A.G. Edwards, Inc., parent holding company of A.G.
Edwards & Sons, Inc. (a broker-dealer), of which he was a Senior Vice
President.
C. Howard Kast, Trustee; Age: 73
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
Robert M. Kirchner, Trustee; Age: 73
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee; Age: 79
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; director of Visiting Nurse
Corporation of Colorado; formerly Senior Vice President and a director of
Van Gilder Insurance Corp. (insurance brokers).
James C. Swain, Chairman and Trustee*; Age: 61
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman of the Manager; President and director of Centennial Asset
Management Corporation, an investment adviser subsidiary of the Manager
("Centennial"); formerly Chairman of the Board of SSI.
Andrew J. Donohue, Vice President; Age: 44
Two World Trade Center, New York, New York 10048-0203
Executive Vice President and General Counsel of the Manager and
Oppenheimer Funds Distributor, Inc. (the "Distributor"); an officer of
other OppenheimerFunds; formerly Senior Vice President and Associate
General Counsel of the Manager and the Distributor; formerly a Partner in,
Kraft & McManimon (a law firm) prior to which he was an officer of First
Investors Corporation (a broker-dealer) and First Investors Management
Company, Inc. (broker-dealer and investment adviser); and a director and
an officer of First Investors Family of Funds and First Investors Life
Insurance Company.
George C. Bowen, Vice President, Secretary and Treasurer; Age: 58
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of other
OppenheimerFunds; formerly Senior Vice President/Comptroller and Secretary
of OAMC.
David P. Negri, Vice President and Portfolio Manager; Age: 40
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other OppenheimerFunds.
David Rosenberg, Vice President and Portfolio Manager; Age 36
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other OppenheimerFunds;
formerly an officer and portfolio manager for Delaware Investment Advisors
and for one of its mutual funds.
Robert G. Zack, Assistant Secretary; Age: 46
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager,
Assistant Secretary of SSI and SFSI; an officer of other OppenheimerFunds.
Robert J. Bishop, Assistant Treasurer; Age: 36
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other OppenheimerFunds; formerly a Fund Controller of the Manager,
prior to which he was an Accountant for Yale & Seffinger, P.C., an
accounting firm, and previously an Accountant and Commissions Supervisor
for Stuart James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer; Age: 29
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other
OppenheimerFunds; previously a Fund Controller for the Manager, prior to
which he was an International Mutual Fund Supervisor for Brown Brothers
Harriman & Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company.
[FN]
- -------------
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
-- Remuneration of Trustees. The officers of the Fund are affiliated
with the Manager. They and the Trustees of the Fund who are affiliated
with the Manager (Messrs. Fossel and Swain, who are both officers and
Trustees) receive no salary or fee from the Fund. The Trustees of the
Fund (excluding Messrs. Fossel and Swain) received the total amounts shown
below from the Fund, during its fiscal year ended December 31, 1994, and
from all of the Denver-based OppenheimerFunds (including the Fund) listed
in the first paragraph of this section, for services in the positions
shown:
<TABLE>
<CAPTION>
Total Compensation
Aggregate From All
Compensation Denver-based
Name and Position from Fund OppenheimerFunds1
<S> <C> <C>
Robert G. Avis $600.00 $53,000.00
Trustee
William A. Baker $829.00 $73,257.01
Audit and Review Committee
Chairman and Trustee
Charles Conrad, Jr. $774.00 $68,293.67
Audit and Review Committee
Member and Trustee
C. Howard Kast $600.00 $53,000.00
Trustee
Raymond J. Kalinowski $600.00 $53,000.00
Trustee
Robert M. Kirchner $774.00 $68,293.67
Audit and Review Committee
Member and Trustee
Ned M. Steel $600.00 $53,000.00
Trustee
_____________
1For the 1994 calendar year.
</TABLE>
-- Major Shareholders. As of July 10, 1995, the only entity that
owned of record or was known by the Fund to own beneficially 5% or more
of any class of the Fund's outstanding shares was MML Reinsurance
(Bermuda) Ltd., c/o Investment Services 1295 State Street, Springfield,
MA 01111-0001, which owned 789,794.139 Class A shares (approximately 7.20%
of the Fund's Class A shares and 6.76% of the Fund's outstanding shares),
and which represented less than 5% of the outstanding shares of the Trust,
and Smith Barney, Inc., 388 Greenwich Street, New York, NY 10013, which
owned 102,753.693 Class B shares (approximately 14.47%) of the Fund's
Class B shares, and which represented less than 5% of the outstanding
shares of the Fund and of the Trust.
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company ("MassMutual"). OAC is also
owned in part by certain of the Manager's directors and officers, some of
whom also serve as officers of the Trust, and two of whom (Mr. Jon S.
Fossel and Mr. James C. Swain) serve as Trustees of the Trust.
The Manager, and the Fund have a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain employees,
including portfolio managers, that would compete with or take advantage
of the Fund's portfolio transactions. Compliance with the Code of Ethics
is carefully monitored and strictly enforced.
-- The Investment Advisory Agreement. Under the investment advisory
agreement dated July 10, 1995 between the Trust on behalf of the Fund and
the Manager, the Fund pays a management fee to the Manager at the annual
rate of: .75% of the first $200 million of average annual net assets; .72%
of the next $200 million; .69% of the next $200 million; .66% of the next
$200 million; .60% of the next $200 million; and .50% of average annual
net assets in excess of $1 billion. Under the prior investment advisory
agreement between the Trust on behalf of the Fund and the Manager, the
Fund paid a management fee to the Manager at the annual rate of: .50% of
the first $100 million of average annual net assets; .45% of the next $200
million; .40% of the next $200 million; and .35% of average annual net
assets in excess of $500 million. The investment advisory agreement, dated
July 10, 1995, between the Trust on behalf of the Fund and the Manager
requires the Manager, at its expense, to provide the Fund with adequate
office space, facilities and equipment, and to provide and supervise the
activities of all administrative and clerical personnel required to
provide effective corporate administration for the Fund, including the
compilation and maintenance of records with respect to its operations, the
preparation and filing of specified reports, and composition of proxy
materials and registration statements for continuous public sale of shares
of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributors Agreement
are paid by the Fund. The advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including
litigation costs.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its
duties or reckless disregard for its obligations and duties under the
advisory agreement, the Manager is not liable for any loss resulting from
a good faith error or omission on its part with respect to any of its
duties thereunder. The advisory agreement permits the Manager to act as
investment adviser for any other person, firm or corporation and to use
the name "Oppenheimer" in connection with other investment companies for
which it may act as investment adviser or general distributor. If the
Manager shall no longer act as investment adviser to the Fund, the right
of the Fund to use the name "Oppenheimer" as part of its name may be
withdrawn. The advisory agreement is subject to annual approval by the
Board of Trustees, who may terminate the advisory agreement on sixty days'
notice approved by a majority of the Trustees.
The advisory agreement contains no expense limitation. However,
independently of the advisory agreement, the Manager has undertaken that
the total expenses of the Fund in any fiscal year (including the
management fee, but excluding taxes, interest, brokerage fees,
distribution plan payments, and extraordinary expenses, such as litigation
costs) shall not exceed (and the Manager undertakes to reduce the Fund's
management fee in the amount by which such expenses shall exceed) the most
stringent applicable state "blue sky" expense limitation requirement for
qualification of sale of the Fund's shares. At present, that limitation
is imposed by California and limits expenses (with specified exclusions)
to 2.5% of the first $30 million of the Fund's average annual net assets,
2.0% of the next $70 million of average net assets and 1.5% of average net
assets in excess of $100 million. The Manager reserves the right to
change or eliminate this expense limitation at any time. The payment of
the management fee at the end of any month will be reduced so that at no
time will there be any accrued but unpaid liability under the above
expense limitation.
Prior to July 10, 1995, MassMutual served as investment sub-adviser
(the "Sub-Adviser") to the Fund pursuant to a sub-advisory agreement
between the Manager and MassMutual dated March 28, 1991. Under the sub-
advisory agreement, MassMutual was responsible for managing the Fund's
portfolio of securities and making investment decisions with respect to
the Fund's investments, subject to the Fund's investment objective,
policies and restrictions. The Sub-Adviser's fee was paid by the Manager.
The sub-advisory agreement was subject to the same renewal, termination
and standard of care provisions as the investment advisory agreement. On
July 10, 1995, the Fund's shareholders approved a new investment advisory
agreement with the Manager, at the fee rate set forth in the Prospectus,
under which the Manager performs the investment decision-making functions
previously performed by the Sub-Adviser. The sub-advisory agreement
terminated effective July 10, 1995.
For the fiscal years ended December 31, 1992, 1993 and 1994, the
advisory fees paid to the Manager were $491,642, $555,430 and $522,205,
respectively, of which $342,743, $380,790 and $362,287, respectively, was
paid by the Manager to the Sub-Adviser.
-- The Distributor. Under the General Distributor's Agreement
between the Trust and the Distributor, the Distributor acts as the Fund's
principal underwriter in the continuous public offering of the Fund's
Class A, Class B and Class C shares, but is not obligated to sell a
specific number of shares. Expenses normally attributable to sales (other
than those paid under the Class A, Class B and Class C Distribution and
Service Plans), including advertising and the cost of printing and mailing
prospectuses (other than those furnished to existing shareholders), are
borne by the Distributor. During the Fund's fiscal years ended December
31, 1992, 1993 and 1994, the aggregate amount of sales charges on sales
of the Fund's Class A shares was $337,554, $269,639 and $143,088,
respectively, of which the Distributor and on an affiliate, MassMutual
Investor Services, Inc. ("MMLISI") retained in the aggregate $213,717,
$163,271 and $67,090 in those respective years. For the fiscal year ended
December 31, 1994, the Distributor advanced $91,551 to broker-dealers on
the sales of the Funds' Class B shares, $8,449 of which went to MMLISI.
In addition, the Distributor collected $8,916 from contingent deferred
sales charges assessed on Class B shares. Class C shares were not
publicly offered prior to July 10, 1995.
- -- The Transfer Agent. Oppenheimer Shareholder Services, an operating
division of the Manager which is the Fund's transfer agent, is responsible
for maintaining the Fund's shareholder registry and shareholder accounting
records, and for shareholder servicing and administrative functions.
Brokerage Policies Of The Fund
Brokerage Provisions of the Investment Advisory Agreements. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions of the Fund. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers ("brokers"),
including "affiliated" brokers, as that term is defined in the Investment
Company Act, as may, in its best judgment based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
price obtainable) of such transactions. The Manager need not seek
competitive commission bidding or base its selection on "posted" rates,
but is expected to be aware of the current rates of eligible brokers and
to minimize the commissions paid to the extent consistent with the
provisions of the advisory agreement and the interests and policies of the
Fund as established by the Trust's Board of Trustees. Purchases of
securities from underwriters include a commission or concession paid by
the issuer to the underwriter, and purchases from dealers include a spread
between the bid and asked price.
Under the advisory agreement, the Manager is authorized to select
brokers which provide brokerage and/or research services for the Fund
and/or the other accounts over which it or its affiliates have investment
discretion. The commissions paid to such brokers may be higher than
another qualified broker would have charged, if a good faith determination
is made by the Manager that the commission is fair and reasonable in
relation to the services provided. Most purchases made by the Fund are
principal transactions at net prices, and the Fund incurs little or no
brokerage costs. During the fiscal year ended December 31, 1992, 1993 and
1994, no brokerage commissions were paid by the Fund.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the advisory agreement and the procedures and rules
described above, allocations of brokerage are generally made by the
Manager's portfolio traders upon recommendations from the Manager's
portfolio managers. In certain instances portfolio managers may directly
place trades and allocate brokerage, also subject to the provisions of the
advisory agreement and the procedures and rules described above. In
either case, brokerage is allocated under the supervision of the Manager's
executive officers. Transactions in securities other than those for which
an exchange is the primary market are generally done with principals or
market makers. Brokerage commissions are paid primarily for effecting
transactions in listed securities or for certain fixed-income agency
trades in the secondary market, and are otherwise paid only if it appears
likely that a better price or execution can be obtained. When the Fund
engages in an option transaction, ordinarily the same broker will be used
for the purchase or sale of the option and any transaction in the
securities to which the option relates. When possible, concurrent orders
to purchase or sell the same security by more than one of the accounts
managed by the Manager or its affiliates are combined. The transactions
effected pursuant to such combined orders are averaged as to price and
allocated in accordance with the purchase or sale orders actually placed
for each account.
Most purchases of money market instruments and debt obligations are
principal transactions at net prices. Instead of using a broker for those
transactions, the Fund normally deals directly with the selling or
purchasing principal or market maker unless it determines that a better
price or execution can be obtained by using a broker. Purchases of these
securities from underwriters include a commission or concession paid by
the issuer to the underwriter. Most purchases from dealers include a
spread between the bid and asked prices. The Fund seeks to obtain prompt
execution of these orders at the most favorable net price.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars. The Board of Trustees has permitted the Manager to
use concessions on fixed-price offerings to obtain research, in the same
manner as is permitted for agency transactions. The Board has also
permitted the Manager to use stated commissions on secondary fixed-income
agency trades to obtain research where the broker has represented to
Manager that (i) the trade is not from or for the broker's own inventory,
(ii) the trade was executed by the broker on an agency basis at the stated
commission, and (iii) the trade is not a riskless principal transaction.
The research services provided by brokers broadens the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the "independent" Trustees of the Fund (those Trustees
of the Fund who are not "interested persons" as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the advisory agreement or the Distribution Plans described
below) annually reviews information furnished by the Manager as to the
commissions paid to brokers furnishing such services so that the Board may
ascertain whether the amount of such commissions was reasonably related
to the value or benefit of such services.
Performance of the Fund
Yield and Total Return Information. As described in the Prospectus, from
time to time the "standardized yield," "dividend yield," "average annual
total return", "total return," "cumulative total return," "total return
at net asset value" and "cumulative total return at net asset value" of
an investment in a class of shares of the Fund may be advertised. An
explanation of how yields and total returns are calculated for each class
and the components of those calculations is set forth below.
The Fund's advertisement of its performance data must, under
applicable rules of the Securities and Exchange Commission, include the
average annual total returns for each class of shares of the Fund for the
1, 5 and 10-year periods (or the life of the class, if less) ending as of
the most recently ended calendar quarter prior to the publication of the
advertisement. This enables an investor to compare the Fund's performance
to the performance of other funds for the same periods. However, a number
of factors should be considered before using such information as a basis
for comparison with other investments. An investment in the Fund is not
insured; its returns and share prices are not guaranteed and normally will
fluctuate on a daily basis. When redeemed, an investor's shares may be
worth more or less than their original cost. Returns for any given past
period are not a prediction or representation by the Fund of future
returns on its shares. The returns of Class A, Class B and Class C shares
of the Fund are affected by portfolio quality, the type of investments the
Fund holds and its operating expenses allocated to a particular class.
-- Standardized Yields.
- Yield. The Fund's "yield" (referred to as "standardized yield")
for a given 30-day period for a class of shares is calculated using the
following formula set forth in rules adopted by the Securities and
Exchange Commission that apply to all funds (other than money market
funds) that quote yields:
(a-b) 6
Standardized Yield = 2 ((--- + 1) - 1)
( cd)
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class
outstanding during the 30-day period that were entitled to
receive dividends.
d = the maximum offering price per share of that class on the
last day of the period, adjusted for undistributed net
investment income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that
the standardized yield for a 30-day period occurs at a constant rate for
a six-month period and is annualized at the end of the six-month period.
This standardized yield is not based on actual distributions paid by the
Fund to shareholders in the 30-day period, but is a hypothetical yield
based upon the net investment income from the Fund's portfolio investments
calculated for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. Additionally, because
each class of shares is subject to different expenses, it is likely that
the standardized yields of the Fund's classes of shares will differ. For
the 30-day period ended December 31, 1994, the standardized yields for the
Fund's Class A and Class B shares were 6.76% and 6.34%, respectively.
Class C shares were not publicly offered prior to July 11, 1995.
-- Dividend Yield and Distribution Return. From time to time the
Fund may quote a "dividend yield" or a "distribution return" for each
class. Dividend yield is based on the dividends paid on shares of a class
from net investment income during a stated period. Distribution return
includes dividends derived from net investment income and from realized
capital gains declared during a stated period. Under those calculations,
the dividends and/or distributions for that class declared during a stated
period of one year or less (for example, 30 days) are added together, and
the sum is divided by the maximum offering price per share of that class)
on the last day of the period. When the result is annualized for a period
of less than one year, the "dividend yield" is calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
-----------------------------------------------------
Max. Offering Price of the Class (last day of period)
divided by Number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum
front-end sales charge. For Class B and Class C shares, the maximum
offering price is the net asset value per share, without considering the
effect of contingent deferred sales charges.
From time to time similar yield or distribution return calculations
may also be made using the Class A net asset value (instead of its
respective maximum offering price) at the end of the period. The dividend
yields on Class A shares for distribution made on December 30, 1994
covering the 31-day period ended December 31, 1994, were 10.85% and 11.40%
when calculated at maximum offering price and at net asset value,
respectively. The dividend yield on Class B shares for the 30-day period
ended December 31, 1994, was 10.63% when calculated at net asset value.
That distribution included amounts distributed by the Fund for both Class
A and Class B shares to avoid paying excise tax on undistributed income
at year-end as described in "Dividends, Capital Gains, and Taxes," below.
Therefore, these dividend yields are significantly higher than the divided
yields for prior months.
-- Total Return Information.
- Average Annual Total Returns. The "average annual total return"
of each class is an average annual compounded rate of return for each year
in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV") of that investment, according to the following
formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
- Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical investment of
$1,000 over an entire period of years. Its calculation uses some of the
same factors as average annual total return, but it does not average the
rate of return on an annual basis. Cumulative total return is determined
as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 4.75% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown at net asset
value, as described below). For Class B shares, the payment of the
applicable contingent deferred sales charge (of 5.0% for the first year,
4.0% for the second year, 3.0% for the third and fourth years, 2.0% for
the fifth year, 1.0% in the sixth year and none thereafter), is applied,
as described in the Prospectus. For Class C shares, the payment of the
1% contingent deferred sales charge for shares redeemed within 12 months
of purchase is applied, as described in the Prospectus. Total returns
also assume that all dividends and capital gains distributions during the
period are reinvested to buy additional shares at net asset value per
share, and that the investment is redeemed at the end of the period. The
"average annual total returns" on an investment in Class A shares for the
one year period ended December 31, 1994 and for the period from April 15,
1988 (the date the Fund became an open-end Fund) to December 31, 1994,
were -8.43% and 6.79%, respectively. The cumulative "total return" on
Class A shares for the latter period was 55.38%. For the fiscal period
from May 1, 1993 (inception of the class), through December 31, 1994, the
average annual total return and the cumulative total return on an
investment in Class B shares of the Fund were -2.67% and -4.41%,
respectively. Class C shares were and publicly offered prior to July 11,
1995.
-- Total Returns at Net Asset Value. From time to time the Fund may
also quote an "average annual total return at net asset value" or a
cumulative "total return at net asset value" for Class A, Class B and
Class C shares. Each is based on the difference in net asset value per
share at the beginning and the end of the period for a hypothetical
investment in that class of shares (without considering front-end or
contingent sales charges) and takes into consideration the reinvestment
of dividends and capital gains distributions. The cumulative total
returns at net asset value on the Fund's Class A shares for the fiscal
year ended December 31, 1993, and for the period from April 15, 1988 to
December 31, 1994 were -3.87 and 63.13%, respectively. The cumulative
total return at net asset value on the Fund's Class B shares for the
fiscal year-ended December 31, 1994 and for the period from May 1, 1993
through December 31, 1994 well -4.53% and -0.80%, respectively.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B and Class C shares. However,
when comparing total return of an investment in Class A, Class B or Class
C shares of the Fund, a number of factors should be considered before
using such information as a basis for comparison with other investments.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B or Class C shares by Lipper Analytical
Services, Inc. ("Lipper"), a widely-recognized independent mutual fund
monitoring service. Lipper monitors the performance of regulated
investment companies, including the Fund, and ranks their performance for
various periods based on categories relating to investment objectives.
For periods ending December 31, 1994, the performance of the Fund's
classes has been ranked against (i) all other funds, excluding money
market funds, and (ii) all other general bond funds. The Lipper
performance rankings are based on total return that includes the
reinvestment of capital gains distributions and income dividends but does
not take sales charges or taxes into consideration.
For periods ending December 31, 1994 the Fund's performance may also
be compared to the performance of the Lipper General Bond Fund Index,
which is a net asset value weighted index of general bond funds compiled
by Lipper. It is calculated with adjustments for income dividends and
capital gains distributions as of the ex-dividend date.
From time to time, the Fund may include in its advertisements and
sales literature performance information about the Fund cited in other
newspapers and periodicals, such as The New York Times, which may include
performance quotations from other sources, including Lipper.
From time to time the Fund may publish the ranking of the performance
of its Class A, Class B or Class C shares by Morningstar, Inc., an
independent mutual fund monitoring service that ranks mutual funds,
including the Fund, monthly, in broad investment categories (equity,
taxable bond, municipal bond and hybrid), based on risk-adjusted
investment return. Investment return measures a fund's or Class's three,
five and ten-year average annual total returns (when available). Risk and
return are combined to produce star rankings reflecting performance
relative to the average fund in a fund's category. Five stars is the
"highest" ranking (top 10%), four stars is "above average" (next 22.5%),
three stars is "average" (next 35%), two stars is "below average" (next
22.5%) and one star is "lowest" (bottom 10%). The current ranking is a
weighted average of the 3, 5 and 10 year rankings (if available).
Morningstar ranks the Class A, Class B and Class C shares of the Fund in
relation to other taxable bond funds. Rankings are subject to change.
The total return on an investment in the Fund's Class A, Class B or
Class C shares may be compared with the performance for the same period
of one or more of the following indices: the Consumer Price Index, the
Salomon Brothers World Government Bond Fund Index, the Salomon Brothers
High Grade Corporate Bond Index, the Lehman Brothers Government/Corporate
Bond Index, the Lehman Brothers Aggregate Bond Index, and the J.P. Morgan
Government Bond Index. The Consumer Price Index is generally considered
to be a measure of inflation. The Salomon Brothers World Government Bond
Index generally represents the performance of government debt securities
of various markets throughout the world, including the United States. The
Salomon Brothers High Grade Corporate Bond Index generally represents the
performance of high grade long-term corporate bonds, and the Lehman
Brothers Government/Corporate Bond Index generally represents the
performance of intermediate and long-term government and investment grade
corporate debt securities. The Lehman Brothers Aggregate Bond Index
generally represents the performance of the general fixed-rate investment
grade debt market. The J.P. Morgan Government Bond Index generally
represents the performance of government bonds issued by various countries
including the United States. Each index includes a factor for the
reinvestment of interest but does not reflect expenses or taxes.
Investors may also wish to compare the Fund's Class A, Class B or
Class C shares return to the returns on fixed income investments available
from banks and thrift institutions, such as certificates of deposit,
ordinary interest-paying checking and savings accounts, and other forms
of fixed or variable time deposits, and various other instruments such as
Treasury bills. However, the Fund's returns and share price are not
guaranteed by the FDIC or any other agency and will fluctuate daily, while
bank depository obligations may be insured by the FDIC and may provide
fixed rates of return, and Treasury bills are guaranteed as to principal
and interest by the U.S. government.
From time to time, the Fund's Manager may publish rankings or ratings
of the Manager (or Transfer Agent) or the investor services provided by
them to shareholders of the OppenheimerFunds, other than performance
rankings of the OppenheimerFunds themselves. Those ratings or rankings
of shareholder/investor services by third parties may compare the
OppenheimerFunds' services to those of other mutual fund families selected
by the rating or ranking services and may be based upon the opinions of
the rating or ranking service itself, based on its research or judgment,
or based upon surveys of investors, brokers, shareholders or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares, and
Distribution and Service Plans for Class B and Class C shares under Rule
12b-1 of the Investment Company Act, pursuant to which the Fund will make
payments to the Distributor quarterly in connection with the distribution
and/or servicing of the shares of that class, as described in the
Prospectus. Each Plan has been approved by a vote of (i) the Board of
Trustees of the Fund, including a majority of the Independent Trustees,
cast in person at a meeting called for the purpose of voting on that Plan,
and (ii) the holders of a "majority" (as defined in the Investment Company
Act) of the shares of each class. (For the Distribution and Service Plan
for the Class B shares, that vote was cast by the Manager as the sole
initial holder of Class C shares of the Fund).
In addition, under the Plans, the Manager and the Distributor, in
their sole discretion, from time to time may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund) to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make from their own resources to
Recipients.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as its continuance is specifically
approved at least annually by the Fund's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Either Plan may be terminated at
any time by the vote of a majority of the Independent Trustees or by the
vote of the holders of a "majority" (as defined in the Investment Company
Act) of the outstanding shares of that class. Neither Plan may be amended
to increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund is required by an
exemptive order issued by the Securities and Exchange Commission to obtain
the approval of Class B as well as Class A shareholders for a proposed
amendment to the Class A Plan that would materially increase the amount
to be paid by Class A shareholders under the Class A Plan. Such approval
must be by a "majority" of the Class A and Class B shares (as defined in
the Investment Company Act), voting separately by class. All material
amendments must be approved by the Independent Trustees.
While the Plans are in effect, the Treasurer of the Trust shall
provide separate written reports to the Trust's Board of Trustees at least
quarterly stating generally the amounts of all payments made pursuant to
each Plan and the purpose for which each payment was made. Those reports,
including the allocations on which they are based, will be subject to the
review and approval of the Independent Trustees in the exercise of their
fiduciary duty. Each Plan further provides that while it is in effect,
the selection and nomination of those Trustees of the Trust who are not
"interested persons" of the Trust is committed to the discretion of the
Independent Trustees. This does not prevent the involvement of others in
such selection and nomination if the final decision on selection or
nomination is approved by a majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the
fees at the maximum rate and set no minimum amount.
For the fiscal year ended December 31, 1994, payments under the Class
A Plan totaled $247,136, all of which was paid by the Distributor to
Recipients, including $154,100 paid to MMLISI.
Any unreimbursed expenses incurred by the Distributor with respect
to Class A shares for any fiscal year may not be recovered in subsequent
fiscal years. Payments received by the Distributor under the Plan for
Class A shares will not be used to pay any interest expense, carrying
charges, or other financial costs, or allocation of overhead by the
Distributor.
The Class B and Class C Plans allows the service fee payments to be
paid by the Distributor to Recipients in advance for the first year Class
B and Class C shares are outstanding, and thereafter on a quarterly basis,
as described in the Prospectus. The services rendered by Recipients in
connection with personal services and the maintenance of Class B
shareholder accounts may include but shall not be limited to, the
following: answering routine inquiries from the Recipient's customers
concerning the Fund, assisting in the establishment and maintenance of
accounts or sub-accounts in the Fund and processing share redemption
transactions, making the Fund's investment plans and dividend payment
options available, and providing such other information and services in
connection with the rendering of personal services and/or the maintenance
of accounts, as the Distributor or the Fund may reasonably request. The
advance payment is based on the net asset value of the Class B and Class
C shares sold. An exchange of shares does not entitle the Recipient to
an advance service fee payment. In the event Class B or Class C shares
are redeemed during the first year that the shares are outstanding, the
Recipient will be obligated to repay a pro rata portion of the advance
payment for those shares to the Distributor. Service fee payments made
under the Class B Plan during the fiscal year ended December 31, 1994
totalled $26,383, all of which was paid by the Distributor to Recipients,
including MMLISI.
Although the Class B and Class C Plans permit the Distributor to
retain both the asset-based sales charge and the service fee on Class B
shares, or to pay Recipients the service fee on a quarterly basis without
payment in advance, the Distributor intends to pay the service fee to
Recipients in the manner described above. A minimum holding period may
be established from time to time under the Class B or Class C Plan by the
Board. Initially, the Board has set no minimum holding period. All
payments under the Class B and Class C Plans are subject to the
limitations imposed by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. on payments of asset-based sales
charges and service fees. The Distributor anticipates that it will take
a number of years for it to recoup (from the Fund's payments to the
Distributor under the Class B Plan and recoveries of the contingent
deferred sales charge collected on redeemed Class B shares) the Class B
sales commissions paid to authorized brokers or dealers.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without paying a front-end sales load and
at the same time permit the Distributor to compensate Recipients in
connection with the sale of Class B and Class C shares of the Fund. The
Distributor retains the asset-based sales charge on Class B shares. As
to Class C shares, the Distributor retains the asset-based sales charge
during the first year shares are outstanding, and pays the asset-based
sales charge as an ongoing commission to the dealer on Class C shares
outstanding for a year or more. Under the Class B and Class C Plans, the
asset-based sales charge is paid to compensate the Distributor for its
services, described below, to the Fund.
Under the Class B and Class C Plans, the distribution assistance and
administrative support services rendered by the Distributor in connection
with the distribution of Class B and Class C shares may include: (i)
paying service fees and sales commissions to any broker, dealer, bank or
other person or entity that sells and services the Fund's Class B or Class
C shares, (ii) paying compensation to and expenses of personnel of the
Distributor who support distribution of Class B or Class C shares by
Recipients, (iii) obtaining financing or providing such financing from its
own resources, or from an affiliate, for interest and other borrowing
costs of the Distributor's unreimbursed expenses incurred in rendering
distribution assistance for Class B or Class C shares, and (iv) paying
certain other distribution expenses.
Other distribution assistance rendered by the Distributor and
Recipients under the Class B and Class C Plans may include, but shall not
be limited to, the following: distributing sales literature and
prospectuses other than those furnished to current Class B or Class C
shareholders, and providing such other information and services in
connection with the distribution of Class B or Class C shares as the
Distributor or the Fund may reasonably request. The Class B and Class C
Plans further provide that such other distribution assistance may include
distribution assistance and administrative support services rendered in
connection with Class B or Class C shares acquired (i) by purchase, (ii)
in exchange for shares of another investment company for which the
Distributor serves as distributor or sub-distributor, or (iii) pursuant
to a plan of reorganization to which the Fund is a party.
About Your Account
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits an investor to choose the
method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. Investors should
understand that the purpose and function of the deferred sales charge and
asset-based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class A
shares. Any salesperson or other person entitled to receive compensation
for selling Fund shares may receive different compensation with respect
to one class of shares than the other. The Distributor normally will not
accept (i) any order for $500,000 or more of Class B shares or (ii) any
order for $1 million or more of Class C shares, on behalf of a single
investor (not including dealer "street name" or omnibus accounts) because
generally it will be more advantageous for that investor to purchase Class
A shares of the Fund instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B and Class C shares and the dividends payable on Class B and Class C
shares will be reduced by incremental expenses borne solely by that class,
including the asset-based sales charge to which Class B and Class C shares
are subject.
The conversion of Class B shares to Class A shares after six years
is subject to the continuing availability of a private letter ruling from
the Internal Revenue Service, or an opinion of counsel or tax adviser, to
the effect that the conversion of Class B shares does not constitute a
taxable event for the holder under Federal income tax law. If such a
revenue ruling or opinion is no longer available, the automatic conversion
feature may be suspended, in which event no further conversions of Class
B shares would occur while such suspension remained in effect. Although
Class B shares could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event for
the holder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes
two types of expenses. General expenses that do not pertain specifically
to any class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total assets,
and then equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal, bookkeeping and
audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other materials for
current shareholders, (iv) fees to unaffiliated Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution and
Service Plan fees, (ii) incremental transfer and shareholder servicing
agent fees and expenses, (iii) registration fees and (iv) shareholder
meeting expenses, to the extent that such expenses pertain to a specific
class rather than to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A and Class B and Class C shares of the Fund are determined
as of the close of business of The New York Stock Exchange on each day
that the Exchange is open, by dividing the Fund's net assets attributable
to a class by the number of shares of that class that are outstanding.
The Exchange normally closes at 4:00 P.M., New York time, but may close
earlier on some days (for example, in case of weather emergencies or on
days falling before a holiday). The Exchange's most recent annual
announcement (which is subject to change) states that it will close on New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. It may also close on other
days. Trading in debt securities and foreign securities at times when the
New York Stock Exchange is closed, including weekends and holidays, or
after the close of the Exchange on a regular business day. The Fund may
invest a substantial portion of its assets in foreign securities primarily
listed on foreign exchanges or in foreign over-the-counter markets that
may trade on Saturdays or customary U.S. business holidays on which the
Exchange is closed. Because the Fund's net asset value will not be
calculated on those days, the Fund's net asset value per share may be
significantly affected on such days when shareholders may not purchase or
redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) equity
securities traded on a U.S. securities exchange or on NASDAQ for which
last sale information is regularly reported are valued at the last
reported sale price on their primary exchange or NASDAQ that day (or, in
the absence of sales that day, at values based on the last sales prices
of the preceding trading day, or closing bid and asked prices); (ii)
securities actively traded on a foreign securities exchange are valued at
the last sales price available to the pricing service approved by the
Fund's Board of Trustees or to the Manager as reported by the principal
exchange on which the security is traded; (iii) unlisted foreign
securities or listed foreign securities not actively traded are valued at
the last sale price, or at the mean between "bid" and "asked" prices
determined by a pricing service approved by the Board of Trustees or by
the Manager; (iv) long-term debt securities having a remaining maturity
in excess of 60 days are valued at the mean between the "bid" and "asked"
prices determined by a portfolio pricing service approved by the Fund's
Board of Trustees or obtained from active market makers in the security
on the basis of reasonable inquiry; (v) debt instruments having a maturity
of more than one year when issued, and non-money market type instruments
having a maturity of one year or less when issued, which have a remaining
maturity of 60 days or less are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the Fund's
Board of Trustees or obtained from active market makers in the security
on the basis of reasonable inquiry; (vi) money market-type debt securities
having a maturity of less than one year when issued that having a
remaining maturity of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; and (vii) securities
(including restricted securities) not having readily-available market
quotations are valued at fair value under the Board's procedures.
Trading in securities on European and Asian exchanges and over-the-
counter markets is normally completed before the close of The New York
Stock Exchange. Events affecting the values of foreign securities traded
in foreign markets that occur between the time their prices are determined
and the close of the Exchange will not be reflected in the Fund's
calculation of net asset value unless the Board of Trustees or the
Manager, under procedures established by the Board of Trustees, determines
that the particular event would materially affect the Fund's net asset
value, in which case an adjustment would be made, if necessary. Foreign
securities priced in a foreign currency as well as foreign currency have
their value converted to U.S. dollars at the closing price in the London
foreign exchange market as provided by a reliable bank, dealer or pricing
service.
In the case of U.S. Government Securities, mortgage-backed
securities, foreign government securities and corporate bonds, when last
sale information is not generally available, such pricing procedures may
include "matrix" comparisons to the prices for comparable instruments on
the basis of quality, yield, maturity, and other special factors involved.
The Trust's Board of Trustees has authorized the Manager to employ a
pricing service to price U.S. Government Securities, mortgage-backed
securities, foreign government securities and corporate bonds. The
Trustees will monitor the accuracy of such pricing services by comparing
prices used for portfolio evaluation to actual sales prices of selected
securities.
Puts, calls and Futures held by the Fund are valued at the last sales
price on the principal exchange on which they are traded, or on NASDAQ as
applicable, as determined by a pricing service approved by the Board of
Trustees or by the Manager, or, if there are no sales that day, in
accordance with (i), above. Forward currency contracts are valued at the
closing price in the London foreign exchange market as provided by a
reliable bank, dealer or pricing service. When the Fund writes an option,
an amount equal to the premium received by the Fund is included in the
Fund's Statement of Assets and Liabilities as an asset, and an equivalent
deferred credit is included in the liability section. The deferred credit
is adjusted ("marked-to-market") to reflect the current market value of
the option. In determining the Fund's gain on investments, if a call
written by the Fund is exercised, the proceeds are increased by the
premium received. If a call or put written by the Fund expires, the Fund
has a gain in the amount of the premium; if the Fund enters into a closing
purchase transaction, it will have a gain or loss depending on whether the
premium was more or less than the cost of the closing transaction. If the
Fund exercises a put it holds, the amount the Fund receives on its sale
of the underlying investment is reduced by the amount of premium paid by
the Fund.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy shares. Dividends will begin to accrue on shares
purchased by the proceeds of ACH transfers on the business day the Fund
receives Federal Funds for the purchase through the ACH system before the
close of The New York Stock Exchange. The Exchange normally closes at
4:00 P.M., but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the shares
will be purchased and dividends will begin to accrue on the next regular
business day. The proceeds of ACH transfers are normally received by the
Fund 3 days after the transfers are initiated. The Distributor and the
Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
expenses realized by the Distributor, dealers and brokers making such
sales. No sales charge is imposed in certain circumstances described in
the Prospectus because the Distributor or dealer or broker incurs little
or no selling expenses. The term "immediate family" refers to one's
spouse, children, grandchildren, grandparents, parents, parents-in-law,
sons- and daughters-in-law, siblings, a sibling's spouse and a spouse's
siblings.
-- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
Oppenheimer International Bond Fund
the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
-- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A and Class B shares
(or shares of either Class) of the Fund (and other eligible
OppenheimerFunds) during the 13-month period from the investor's first
purchase pursuant to the Letter (the "Letter of Intent period"), which
may, at the investor's request, include purchases made up to 90 days prior
to the date of the Letter. The Letter states the investor's intention to
make the aggregate amount of purchases (excluding any purchases made by
reinvestment of dividends or distributions or purchases made at net asset
value without sales charge), which together with the investor's holdings
of such funds (calculated at their respective public offering prices
calculated on the date of the Letter) will equal or exceed the amount
specified in the Letter. This enables the investor to count the shares
to be purchased under the Letter of Intent to obtain the reduced sales
charge rate (as set forth in the Prospectus) that applies under the Right
of Accumulation to current purchases of Class A shares. Each purchase of
Class A shares under the Letter will be made at the public offering price
(including the sales charge) that applies to a single lump-sum purchase
of shares in the amount intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended purchase amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account and
the amount of sales charge retained by the Distributor will be adjusted
to the rates applicable to actual purchases. If total eligible purchases
during the Letter of Intent period exceed the intended purchase amount and
exceed the amount needed to qualify for the next sales charge rate
reduction set forth in the applicable prospectus, the sales charges paid
will be adjusted to the lower rate, but only if and when the dealer
returns to the Distributor the excess of the amount of commissions allowed
or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such
purchase, promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
- Terms of Escrow that Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended purchase amount be held in escrow by the Transfer
Agent. For example, if the intended purchase amount specified under the
Letter is $50,000, the escrow shall be shares valued in the amount of
$2,500 (computed at the public offering price adjusted for a $50,000
purchase). Any dividends and capital gains distributions on the escrowed
shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor
an amount equal to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which would have
been paid if the total amount purchased had been made at a single time.
Such sales charge adjustment will apply to any shares redeemed prior to
the completion of the Letter. If such difference in sales charges is not
paid within twenty days after a request from the Distributor or the
dealer, the Distributor will, within sixty days of the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Full and fractional shares remaining after
such redemption will be released from escrow. If a request is received
to redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding
of which may be counted toward completion of a Letter) include Class A
shares sold with a front-end sales charge or subject to a Class A
contingent deferred sales charge, Class B shares, and Class A or B shares
acquired in exchange for either (a) Class A shares of one of the other
OppenheimerFunds that were acquired subject to a Class A initial or
contingent sales charge or (b) Class B shares of one of the other
OppenheimerFunds.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "How to Exchange Shares," and
the escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
OppenheimerFunds.
There is a front-end sales charge on the purchase of certain
OppenheimerFunds or a contingent deferred sales charge may apply to shares
purchased by Asset Builder payments. An application should be obtained
from the Distributor, completed and returned, and a prospectus of the
selected fund(s) should be obtained from the Distributor or your financial
advisor before initiating Asset Builder payments. The amount of the Asset
Builder investment may be changed or the automatic investments may be
terminated at any time by writing to the Transfer Agent. A reasonable
period (approximately 15 days) is required after the Transfer Agent's
receipt of such instructions to implement them. The Fund reserves the
right to amend, suspend, or discontinue offering such plans at any time
without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
Checkwriting. When a check is presented to the Bank for clearance, the
Bank will ask the Fund to redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the
check. This enables the shareholder to continue receiving dividends on
those shares until the check is presented to the Fund. Checks may not be
presented for payment at the offices of the Bank or the Fund's Custodian.
This limitation does not affect the use of checks for the payment of bills
or to obtain cash at other banks. The Fund reserves the right to amend,
suspend or discontinue offering checkwriting privileges at any time
without prior notice.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
-- Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board
of Trustees of the Trust may determine that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
of a redemption order wholly or partly in cash. In that case, the Fund
may pay the redemption proceeds in whole or in part by a distribution "in
kind" of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value its portfolio securities described above under
"Determination of Net Asset Value Per Share" and that valuation will be
made as of the time the redemption price is determined.
-- Involuntary Redemptions. The Trust's Board of Trustees has the
right to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of those shares is less than
$1,000 or such lesser amount as the Board may fix. The Board of Trustees
will not cause the involuntary redemption of shares in an account if the
aggregate net asset value of the shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or the Board may set
requirements for granting permission to the shareholder to increase the
investment, and set other terms and conditions so that the shares would
not be involuntarily redeemed.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of Class A shares or
of Class B shares of the Fund that you purchased by reinvesting dividends
or distributions or on which you paid a contingent deferred sales charge
when you redeemed them. The reinvestment may be made without sales charge
only in Class A shares of the Fund or any of the other OppenheimerFunds
into which shares of the Fund are exchangeable as described below, at the
net asset value next computed after the Transfer Agent receives the
reinvestment order. The shareholder must ask the Distributor for such
privilege at the time of reinvestment. This privilege is not available
for Class C shares. Any capital gain that was realized when the shares
were redeemed is taxable, and reinvestment will not alter any capital
gains tax payable on that gain. If there has been a capital loss on the
redemption, some or all of the loss may not be tax deductible, depending
on the timing and amount of the reinvestment. Under the Internal Revenue
Code, if the redemption proceeds of Fund shares on which a sales charge
was paid are reinvested in shares of the Fund or another of the
OppenheimerFunds within 90 days of payment of the sales charge, the
shareholder's basis in the shares of the Fund that were redeemed may not
include the amount of the sales charge paid. That would reduce the loss
or increase the gain recognized from the redemption. However, in that case
the sales charge would be added to the basis of the shares acquired by the
reinvestment of the redemption proceeds. The Fund may amend, suspend or
cease offering this reinvestment privilege at any time as to shares
redeemed after the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of either class at the time of transfer
to the name of another person or entity (whether the transfer occurs by
absolute assignment, gift or bequest, not involving, directly or
indirectly, a public sale). The transferred shares will remain subject
to the contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B or Class C
contingent deferred sales charge will be followed in determining the order
in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, or pension or
profit-sharing plans should be addressed to "Trustee, OppenheimerFunds
Retirement Plans," c/o the Transfer Agent at its address listed in "How
to Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the
plan and the Fund's other redemption requirements. Participants (other
than self-employed persons) in OppenheimerFunds-sponsored pension or
profit-sharing plans may not directly request redemptions or exchanges of
their accounts. The employer or plan administrator must sign the request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents
(available from the Transfer Agent) must be completed before the
distribution may be made. Distributions from retirement plans are subject
to withholding requirements under the Internal Revenue Code, and IRS Form
W-4P (available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be delayed.
Unless the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price per share will be the
net asset value next computed after the Distributor receives the order
placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of The New York
Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker
from its customers prior to the time the Exchange closes (normally, that
is 4:00 P.M., but may be earlier on some days) and the order was
transmitted to and received by the Distributor prior to its close of
business that day (normally 5:00 P.M.). Payment ordinarily will be made
within seven days after the Distributor's receipt of the required
redemption documents, with signature(s) guaranteed as described in the
Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made
by check payable to all shareholders of record and sent to the address of
record for the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from OppenheimerFunds-
sponsored retirement plans may not be arranged on this basis. Payments
are normally made by check, but shareholders having AccountLink privileges
(see "How To Buy Shares") may arrange to have Automatic Withdrawal Plan
payments transferred to the bank account designated on the
OppenheimerFunds New Account Application or signature-guaranteed
instructions. The Fund cannot guarantee receipt of a payment on the date
requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an Automatic
Withdrawal Plan. Class B and Class C shareholders should not establish
withdrawal plans that would require the redemption of shares purchased
subject to a contingent deferred sales charge and held less than 6 years
or 12 months, respectively, because of the imposition of the Class B or
Class C contingent deferred sales charge on such withdrawals (except where
the Class B or Class C contingent deferred sales charge is waived as
described in the Prospectus under "Waivers of Class B Sales Charges" and
"Waivers of Class C Sales Charges").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
-- Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other OppenheimerFunds automatically on
a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional
Information.
-- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and thereafter shares acquired with
reinvested dividends and capital gains distributions will be redeemed
next, followed by shares acquired with a sales charge, to the extent
necessary to make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made under
withdrawal plans should not be considered as a yield or income on your
investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent and the Fund shall incur no liability
to the Planholder for any action taken or omitted by the Transfer Agent
in good faith to administer the Plan. Certificates will not be issued for
shares of the Fund purchased for and held under the Plan, but the Transfer
Agent will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (the receipt of payment on the date selected cannot
be guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. Shares of
the OppenheimerFunds that have a single class without a class designation
are deemed "Class A" shares for this purpose. All OppenheimerFunds offer
Class A shares (except for Oppenheimer Strategic Diversified Income Fund,
which offers only Class C shares), but only the following other
OppenheimerFunds currently offer Class B shares:
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Value Stock Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer High Yield Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are available only by
exchange or by direct purchase by participants in the
OppenheimerFunds proprietary 401(k) plan)
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund
Oppenheimer International Bond Fund
The following Oppenheimer Funds offer Class C shares:
Oppenheimer Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Champion High Yield Fund
Oppenheimer U.S. Government Trust
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Cash Reserves (Class C shares are available only by
exchange or by direct purchase by participants in the
OppenheimerFunds proprietary 401(k) plan)
Oppenheimer Strategic Diversified Income Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer International Bond Fund
Class A shares of OppenheimerFunds may be exchanged at net asset
value for shares of any Money Market Fund. Shares of any Money Market
Fund purchased without a sales charge may be exchanged for shares of
OppenheimerFunds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of
OppenheimerFunds subject to a contingent deferred sales charge). Effective
on or about August 1, 1995, if the Distributor receives, at the time of
purchase, notice that shares of Oppenheimer Money Market Fund, Inc. are
being purchased with the redemption proceeds of shares of other mutual
funds (other than other money market funds) that are not part of the
OppenheimerFunds family, those shares of Oppenheimer Money Market Fund may
be exchanged for shares of other OppenheimerFunds at net asset value
without paying a sales charge.
Shares of this Fund acquired by reinvestment of dividends or
distributions from any other of the OppenheimerFunds or from any unit
investment trust for which reinvestment arrangements have been made with
the Distributor may be exchanged at net asset value for shares of any of
the OppenheimerFunds. No contingent deferred sales charge is imposed on
exchanges of shares of either class purchased subject to a contingent
deferred sales charge. However, when Class A shares acquired by exchange
of Class A shares of other OppenheimerFunds purchased subject to a Class
A contingent deferred sales charge are redeemed within 18 months of the
end of the calendar month of the initial purchase of the exchanged Class
A shares, the Class A contingent deferred sales charge is imposed on the
redeemed shares (see "Class A Contingent Deferred Sales Charge" in the
Prospectus). The Class B contingent deferred sales charge is imposed on
Class B shares acquired by exchange if they are redeemed within 6 years
of the initial purchase of the exchanged Class B shares. The Class C
contingent deferred sales charge is imposed on Class C shares acquired by
exchange if they are redeemed within 12 months of the initial purchase of
the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange,
the priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B or Class C contingent deferred sales charge will
be followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might
be imposed in the subsequent redemption of remaining shares. Shareholders
owning shares of more than one class must specify whether they intend to
exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In those
cases, only the shares available for exchange without restriction will be
exchanged.
When exchanging shares by telephone, a shareholder must either have
an existing account in, or obtain, open an account in, and acknowledge
receipt of a prospectus for, the fund to which the exchange is to be made.
For full or partial exchanges of an account made by telephone, any special
account features such as Asset Builder Plans, Automatic Withdrawal Plans
and retirement plan contributions will be switched to the new account
unless the Transfer Agent is instructed otherwise. If all telephone lines
are busy (which might occur, for example, during periods of substantial
market fluctuations), shareholders might not be able to request exchanges
by telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
request from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of
record at the time of the previous determination of net asset value, or
as otherwise described in "How to Buy Shares." Daily dividends on newly
purchased shares will not be declared or paid until such time as Federal
Funds (funds credited to a member bank's account at the Federal Reserve
Bank) are available from the purchase payment for such shares. Normally,
purchase checks received from investors are converted to Federal Funds on
the next business day. Dividends will be declared on shares repurchased
by a dealer or broker for four business days following the trade date
(i.e., to and including the day prior to settlement of the repurchase).
If all shares in an account are redeemed, all dividends accrued on shares
of the same class in the account will be paid together with the redemption
proceeds.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc., as promptly as possible after the return of such checks
to the Transfer Agent, in order to enable the investor to earn a return
on otherwise idle funds.
Tax Status of the Fund's Dividends and Distributions. The Federal tax
treatment of the Fund's dividends and capital gains distributions is
explained in the Prospectus under the caption "Dividends, Capital Gains
and Taxes." Special provisions of the Internal Revenue Code govern the
eligibility of the Fund's dividends for the dividends-received deduction
for corporate shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends paid by
the Fund which may qualify for the deduction is limited to the aggregate
amount of qualifying dividends which the Fund derives from its portfolio
investments that the Fund has held for a minimum period, usually 46 days.
A corporate shareholder will not be eligible for the deduction on
dividends paid on shares held for 45 days or less. To the extent the
Fund's dividends are derived from its gross income from option premiums,
interest income or short-term gains from the sale of securities, or
dividends from foreign corporations, its dividends will not qualify for
the deduction. It is expected that for the most part the Fund's dividends
will not qualify, because of the nature of the investments held by the
Fund in its portfolio.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by the Fund or borne separately by a class, as
described in "Alternative Sales Arrangements -- Class A, Class B and Class
C," above. Dividends are calculated in the same manner, at the same time
and on the same day for shares of each class. However, dividends on Class
B and Class C shares are expected to be lower as a result of the asset-
based sales charge on Class B and Class C shares, and Class B and Class
C dividends will also differ in amount as a consequence of any difference
in net asset value between Class A, Class B and Class C shares.
Under the Internal Revenue Code, by December 31 each year the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. While it is presently anticipated that the Fund will meet
those requirements, the Fund's Board and the Manager might determine in
a particular year that it would be in the best interest of shareholders
for the Fund not to make such distributions at the required levels and to
pay the excise tax on the undistributed amounts. That would reduce the
amount of income or capital gains available for distribution to
shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other OppenheimerFunds listed in "Reduced
Sales Charges" above at net asset value without sales charge. As of the
date of this Statement of Additional Information, not all of the
OppenheimerFunds offer Class B or Class C shares. To elect this option,
a shareholder must notify the Transfer Agent in writing and either have
an existing account in the fund selected for reinvestment or must obtain
a prospectus for that fund and an application from the Distributor to
establish an account. The investment will be made at the net asset value
per share in effect at the close of business on the payable date of the
dividend or distribution. Dividends and/or distributions from shares of
other OppenheimerFunds may be invested in shares of this Fund on the same
basis.
Additional Information About The Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities and handling the delivery of
such securities to and from the Fund. The Manager has represented to the
Fund that the banking relationships between the Manager and the Custodian
have been and will continue to be unrelated to and unaffected by the
relationship between the Fund and the Custodian. It will be the practice
of the Fund to deal with the Custodian in a manner uninfluenced by any
banking relationship the Custodian may have with the Manager and its
affiliates. The Fund's cash balances with the Custodian in excess of
$100,000 are not protected by Federal deposit insurance. Those uninsured
balances at times may be substantial.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for the Manager and certain other funds advised
by the Manager and its affiliates.
<PAGE>
<TABLE>
<S> <C>
-----------------------------------------------------------------------------------------------------
Independent Auditors' Report
-----------------------------------------------------------------------------------------------------
The Board of Trustees and Shareholders of Oppenheimer Investment Grade Bond Fund:
We have audited the accompanying statement of assets and liabilities, including the statement of
investments, of Oppenheimer Investment Grade Bond Fund as of December 31, 1994, the related
statement
of operations for the year then ended, the statements of changes in net assets for the years ended
December 31, 1994 and 1993 and the financial highlights for the period January 1, 1991 to December
31, 1994. These financial statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial statements and financial
highlights based on our audits. The financial highlights (except for total return) for the period
February 1, 1984 to December 31, 1990 were audited by other auditors whose report dated February
4,
1991, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December 31, 1994 by
correspondence with the custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present fairly, in all
material respects, the financial position of Oppenheimer Investment Grade Bond Fund at December 31,
1994, the results of its operations, the changes in its net assets, and the financial highlights for
the respective stated periods, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
-------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
January 23, 1995
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Statement of Investments December 31, 1994
------------------------------------------------------------------------------------------------------
Face Market Value
Amount See Note 1
<S> <C> <C> <C>
Short-Term Notes--14.9%
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals--2.4%
- -----------------------------------------------------------------------------------------------------------------------------------
Food Wholesalers--2.4% Tyson Foods, Inc., 6.10%, 1/4/95 $2,410,000 $ 2,408,775
- -----------------------------------------------------------------------------------------------------------------------------------
Energy--2.5%
- -----------------------------------------------------------------------------------------------------------------------------------
Oil: Integrated
Domestic--2.5% Burlington Resources, Inc., 6.30%, 1/17/95 2,500,000 2,493,000
- -----------------------------------------------------------------------------------------------------------------------------------
Financial--3.2%
- -----------------------------------------------------------------------------------------------------------------------------------
Diversified Finance--0.7% Ford Motor Credit Co., 5.80%, 1/9/95 555,000 555,000
------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 6.05%, 1/9/95 120,000 119,839
------------
674,839
- -----------------------------------------------------------------------------------------------------------------------------------
Financial Services:
Miscellaneous--2.5% Countrywide Funding Corp., 6.30%, 1/6/95 2,500,000 2,497,812
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities--6.8%
- -----------------------------------------------------------------------------------------------------------------------------------
Electric Companies--4.5% Indiana & Michigan Power Co., 6.05%, 1/3/95 2,040,000
2,039,314
------------------------------------------------------------------------------------------------------
Texas Electric Services Co., 6.20%, 1/5/95 2,500,000 2,498,278
------------
4,537,592
- -----------------------------------------------------------------------------------------------------------------------------------
Telephone--2.3% GTE Norwest, Inc., 5.88%, 1/13/95 2,340,000 2,335,414
------------
Total Short-Term Notes (Cost $14,947,432) 14,947,432
==========================================================
==========================================================
===============
Asset-Backed Securities--7.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Auto Loan--7.1% Daimler-Benz Vehicle Trust, Series 1994-A, Cl. A, 5.95%, 12/15/00 827,697
814,537
------------------------------------------------------------------------------------------------------
Ford Credit Grantor Trust, Series 1994-B, Cl. A, 7.30%, 10/15/99 1,458,742 1,447,933
------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., Grantor Trust, Series 1992-E,
Cl. A, 4.75%, 8/15/97 454,750 445,615
------------------------------------------------------------------------------------------------------
Nissan Auto Receivables Grantor Trust, Series 1994-A,
Cl. A, 6.45%, 9/15/99 2,241,045 2,202,567
------------------------------------------------------------------------------------------------------
Select Auto Receivable Trust, Series 1991-2 Asset-Backed Certificates,
Cl. A, 7.65%, 7/15/96 194,180 193,881
------------------------------------------------------------------------------------------------------
World Omni Automobile Lease Securitization Trust, Series 1994-A,
Cl. A, 6.45%, 9/25/00 2,000,000 1,967,360
------------
Total Asset-Backed Securities (Cost $7,163,638) 7,071,893
==========================================================
==========================================================
===============
Mortgage-Backed Obligations--13.3%
- -----------------------------------------------------------------------------------------------------------------------------------
Government Agency--11.3%
- -----------------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/Sponsored--7.1% Federal Home Loan Mortgage Corp., Certificates of Participation,
9%, 3/1/17 770,177 772,234
------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Certificates of Participation,
Series 17-039, 13.50%, 11/1/10 91,657 101,813
------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Certificates of Participation,
Series 17-094, 12.50%, 4/1/14 50,645 55,629
------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Collateralized Mortgage Obligation
Gtd. Multiclass Certificates of Participation, 7.50%, 2/15/07 2,000,000 1,898,120
------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Multiclass Mortgage Participation
Certificates, Series 1460, Cl. 1460-H, 7%, 5/15/07 1,500,000 1,374,090
------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Gtd. Mtg. Pass-Through
Certificates, 8%, 8/1/17 1,116,105 1,097,712
------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Series 1993-191, Cl. PD, 5.40%, 4/25/04 1,500,000 1,365,300
</TABLE>
5 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Statement of Investments (Continued)
------------------------------------------------------------------------------------------------------
Face Market Value
Amount See Note 1
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FHLMC/FNMA/Sponsored
(continued) Federal National Mortgage Assn., Interest-Only Collateralized Mortgage
Obligation Gtd. Real Estate Mortgage Investment Conduit Pass-Through
Certificates, Trust 1992 G-57, Cl. SA, 44.60%, 10/25/22(1) $ 568,843 $ 443,698
------------
7,108,596
- -----------------------------------------------------------------------------------------------------------------------------------
GNMA/Guaranteed:--4.2% Government National Mortgage Assn.:
10%, 11/15/09 595,139 622,481
12%, 1/15/99 24,402 25,944
12%, 1/15/99 66,980 71,210
12%, 5/15/14 2,184 2,423
12.75%, 6/15/15 44,137 49,704
15%, 2/15/12 26,167 30,505
8%, 10/15/05 243,215 239,689
8%, 10/15/06 377,529 371,447
8%, 6/15/05 125,505 123,686
8%, 6/15/05 97,196 95,787
8%, 6/15/05 132,000 130,087
8%, 7/15/05 222,830 219,600
8%, 7/15/05 326,463 321,730
8%, 7/15/05 109,149 107,567
8%, 7/15/06 167,313 164,618
8%, 7/15/06 216,029 212,549
8%, 8/15/05 135,305 133,344
8%, 8/15/05 146,311 144,190
8%, 9/15/05 309,653 305,163
8%, 9/15/05 158,612 156,312
9%, 2/15/09 22,973 23,335
9%, 2/15/09 234,544 238,238
9%, 3/15/09 167,088 169,720
9%, 3/15/09 25,494 25,896
9%, 5/15/09 28,368 28,815
9%, 6/15/09 159,386 161,897
------------
4,175,937
- -----------------------------------------------------------------------------------------------------------------------------------
Other--2.0% JHM Acceptance Corp., 8.96% Collateralized Mortgage Obligation Bonds,
Series E, Cl. E-6, 4/1/19 2,000,000 2,008,900
------------
Total Mortgage-Backed Obligations (Cost $14,177,957) 13,293,433
U.S. Government Obligations--43.8%
- -----------------------------------------------------------------------------------------------------------------------------------
Agency--3.8%
- -----------------------------------------------------------------------------------------------------------------------------------
Government Agency/
Full Faith--3.8% Allentown, Pennsylvania, U.S. Government Gtd. Nts.,
Series A, 8.74%, 8/1/01 65,000 66,092
------------------------------------------------------------------------------------------------------
Babylon, New York, U.S. Government Gtd. Nts.,
Series A, 5.93%, 8/1/99 115,000 104,767
------------------------------------------------------------------------------------------------------
Bakersfield, California, U.S. Government Gtd. Nts.,
Series A, 5.93%, 8/1/99 255,000 232,311
------------------------------------------------------------------------------------------------------
Boston, Massachusetts, U.S. Government Gtd. Nts.,
Series A, 5.93%, 8/1/99 795,000 724,262
------------------------------------------------------------------------------------------------------
Buena Vista Township, New Jersey, U.S. Government Gtd. Nts.,
Series A, 5.93%, 8/1/99 270,000 245,976
</TABLE>
6 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Face Market Value
Amount See Note 1
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Government Agency/
Full Faith (continued) Buffalo, New York, U.S. Government Gtd. Nts.,
Series A, 5.93%, 8/1/99 $ 400,000 $ 364,409
------------------------------------------------------------------------------------------------------
Detroit, Michigan, U.S. Government Gtd. Nts.,
Series A, 5.93%, 8/1/99 405,000 368,964
------------------------------------------------------------------------------------------------------
Fajardo, Puerto Rico, U.S. Government Gtd. Nts.,
Series A, 8.74%, 8/1/01 300,000 305,042
------------------------------------------------------------------------------------------------------
New Haven, Connecticut, U.S. Government Gtd. Nts.,
Series A, 8.74%, 8/1/01 400,000 406,722
------------------------------------------------------------------------------------------------------
Roanoke, Virginia, U.S. Government Gtd. Nts.,
Series A, 5.93%, 8/1/99 220,000 200,425
------------------------------------------------------------------------------------------------------
Sacramento County, California Redevelopment Agency U.S. Government
Gtd. Nts., Series 94A, 5.93%, 8/1/99 240,000 218,390
------------------------------------------------------------------------------------------------------
Tacoma, Washington, U.S. Government Gtd. Nts.,
Series 94A, 5.93%, 8/1/99 165,000 150,319
------------------------------------------------------------------------------------------------------
Trenton, New Jersey, U.S. Government Gtd. Nts.,
Series A, 5.93%, 8/1/99 135,000 122,988
------------------------------------------------------------------------------------------------------
Tujillo Alto, Puerto Rico, U.S. Government Gtd. Nts.,
Series A, 8.74%, 8/1/01 235,000 238,949
------------
3,749,616
- -----------------------------------------------------------------------------------------------------------------------------------
Treasury--40.0% U.S. Treasury Bonds:
7.125%, 2/15/23 4,000,000 3,638,748
7.25%, 8/15/22 4,900,000 4,521,778
7.875%, 2/15/21 900,000 888,188
8%, 11/15/21 2,000,000 2,006,874
------------------------------------------------------------------------------------------------------
U.S. Treasury Notes:
6.375%, 8/15/02 2,750,000 2,519,687
7%, 4/15/99 10,700,000 10,372,312
7.25%, 8/15/04 10,000,000 9,600,000
8.50%, 7/15/97 6,400,000 6,504,000
------------
40,051,587
------------
Total U.S. Government Obligations (Cost $47,152,705) 43,801,203
Foreign Government
Obligations--0.9% Iceland (Republic of) Nts., 6.125%, 2/1/04 (Cost $989,168) 1,000,000 857,030
Corporate Bonds and Notes--29.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Basic Materials--5.5%
- -----------------------------------------------------------------------------------------------------------------------------------
Chemicals--0.4% Imcera Group, Inc., 6% Nts., 10/15/03 500,000 424,747
- -----------------------------------------------------------------------------------------------------------------------------------
Metals--3.5% AMAX, Inc., 9.875% Nts., 6/13/01 1,000,000 1,041,957
------------------------------------------------------------------------------------------------------
Newmont Mining Corp., 8.625% Nts., 4/1/02 1,000,000 985,022
------------------------------------------------------------------------------------------------------
Teck Corp., 8.70% Debs., 5/1/02 1,500,000 1,479,052
------------
3,506,031
- -----------------------------------------------------------------------------------------------------------------------------------
Paper and Forest
Products--1.6% Georgia-Pacific Corp., 9.95% Debs., 6/15/02 1,500,000 1,600,647
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--3.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Automotive--1.1% Chrysler Corp., 10.40% Nts., 8/1/99 1,000,000 1,048,078
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Goods and
Services--1.0% Toro Co. (The), 11% Debs., 8/1/17 1,000,000 1,041,250
- -----------------------------------------------------------------------------------------------------------------------------------
Media--0.9% News America Holdings, Inc., 7.50% Gtd. Sr. Nts., 3/1/00 1,000,000 945,495
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals--2.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Food--1.0% Wendy's International, Inc., 12.125% Debs., 4/1/95 1,000,000 1,010,211
- -----------------------------------------------------------------------------------------------------------------------------------
Healthcare--1.0% Baxter International, Inc., 9.25% Nts., 9/15/96 1,000,000 1,018,178
</TABLE>
7 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Statement of Investments (Continued)
------------------------------------------------------------------------------------------------------
Face Market Value
Amount See Note 1
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Energy--4.5% Enron Corp., 8.10% Nts., 12/15/96 $1,500,000 $ 1,499,236
------------------------------------------------------------------------------------------------------
Union Oil Co. of California, 8.75% Nts., 8/15/01 1,500,000 1,517,873
------------------------------------------------------------------------------------------------------
Union Oil Co. of California, 9.625% Gtd. Debs., 5/15/95 1,500,000 1,513,434
------------
4,530,543
- -----------------------------------------------------------------------------------------------------------------------------------
Financial--5.9% Ford Motor Credit Co., 9.90% Med.-Term Nts., 11/6/97 2,000,000
2,057,252
------------------------------------------------------------------------------------------------------
Goldman Sachs Group, LP, 6.20% Nts., 2/15/01 1,500,000 1,312,969
------------------------------------------------------------------------------------------------------
Leucadia National Corp., 7.75% Sr. Nts., 8/15/13 2,000,000 1,757,329
------------------------------------------------------------------------------------------------------
PaineWebber Group, Inc., 6.50% Nts., 11/1/05 1,000,000 794,856
------------
5,922,406
- -----------------------------------------------------------------------------------------------------------------------------------
Industrial--3.8%
- -----------------------------------------------------------------------------------------------------------------------------------
General Industrial--1.0% Thomas & Betts Corp., 8.25% Sr. Nts., 1/15/04 1,000,000 976,858
- -----------------------------------------------------------------------------------------------------------------------------------
Transportation--2.8% AMR Corp., 9% Debs., 8/1/12 1,500,000 1,353,010
------------------------------------------------------------------------------------------------------
United Air Lines, Inc., 10.11% Equipment Trust Certificates,
Series 91B, 2/19/06 1,449,687 1,409,815
------------
2,762,825
- -----------------------------------------------------------------------------------------------------------------------------------
Technology--3.3%
- -----------------------------------------------------------------------------------------------------------------------------------
Aerospace/Defense--3.3% McDonnell Douglas Corp., 9.25% Nts., 4/1/02 2,750,000
2,812,540
------------------------------------------------------------------------------------------------------
Textron, Inc., 9.55% Med.-Term Nts., 3/19/01 500,000 525,255
------------
3,337,795
- -----------------------------------------------------------------------------------------------------------------------------------
Utilities--1.0% Tenaga Nasional Berhad, 7.875% Nts., 6/15/04(2) 1,000,000 951,846
------------
Total Corporate Bonds and Notes (Cost $30,473,758) 29,076,910
Shares
Common Stocks--0.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals--0.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Food Processing--0.0% Doskocil Cos., Inc. (Cost $0) 1,761 13,208
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $114,904,658) 109.0% 109,061,109
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (9.0) (8,970,361)
---------- ------------
Net Assets 100.0% $100,090,748
==========
============
<FN>
1. Interest rate resets monthly, inversely related to LIBOR. Interest-Only Strips represent the right
to receive the monthly interest payments on an underlying pool of mortgage loans. These securities are
subject to the risk of accelerated principal paydowns as interest rates decline. The principal amount
represents the notional amount on which current interest is calculated.
2. Restricted security--See Note 6 of Notes to Financial Statements.
See accompanying Notes to Financial Statements.
</FN>
</TABLE>
8 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1994
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets Investments, at value (cost $114,904,658)--see accompanying statement $109,061,109
------------------------------------------------------------------------------------------------------
Receivables:
Interest and principal paydowns 1,694,107
Shares of beneficial interest sold 202,489
------------------------------------------------------------------------------------------------------
Other 55,797
------------
Total assets 111,013,502
Liabilities Bank overdraft 57,356
------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 9,823,047
Dividends 646,989
Shares of beneficial interest redeemed 258,588
Distribution and service plan fees--Note 4 65,541
Deferred trustee fees--Note 5 18,086
Other 53,147
------------
Total liabilities 10,922,754
Net Assets $100,090,748
============
Composition of
Net Assets Paid-in capital $110,009,506
------------------------------------------------------------------------------------------------------
Undistributed (overdistributed) net investment income (204,894)
------------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) from investment transactions (3,870,315
------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments--Note 3 (5,843,549)
-------------
Net assets $100,090,748
=============
Net Asset Value
Per Share Class A Shares:
Net asset value and redemption price per share (based on net assets of
$96,639,607 and 9,653,273 shares of beneficial interest outstanding) $10.01
Maximum offering price per share (net asset value plus sales charge of 4.75% of
offering price) $10.51
------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $3,451,141 and 344,660 shares of beneficial interest outstanding) $10.01
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1994
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income Interest $ 7,667,379
Expenses Management fees--Note 4 522,205
------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 4 247,136
Class B--Note 4 26,383
------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 184,806
------------------------------------------------------------------------------------------------------
Shareholder reports 80,889
------------------------------------------------------------------------------------------------------
Legal and auditing fees 13,761
------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 12,864
------------------------------------------------------------------------------------------------------
Custodian fees and expenses 12,743
------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 162
Class B 603
------------------------------------------------------------------------------------------------------
Other 28,219
-----------
Total expenses 1,129,771
Net Investment Income (Loss) 6,537,608
Realized and Unrealized Gain
(Loss) on Investments Net realized gain (loss) on investments (2,274,518)
------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (8,559,673)
-----------
Net realized and unrealized gain (loss) on investments (10,834,191)
Net Increase (Decrease) in Net Assets Resulting From Operations $(4,296,583)
===========
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
------------------------------------------------------------------------------------------------------
Year Ended December 31,
1994 1993
<S> <C> <C> <C>
Operations Net investment income (loss) $6,537,608 $ 6,955,080
------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (2,274,518) 3,772,429
------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (8,559,673) 22,233
------------ ------------
Net increase (decrease) in net assets resulting from operations (4,296,583) 10,749,742
Dividends and Distributions
To Shareholders Dividends from net investment income:
Class A ($.6539 and $.707 per share, respectively) (6,381,575) (7,067,709)
Class B ($.5754 and $.42 per share, respectively) (156,032) (33,652)
------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.0306 per share) (298,880) --
Class B ($.027 per share) (7,308) --
Beneficial Interest
Transactions Net increase (decrease) in net assets resulting from
Class A beneficial interest transactions--Note 2 (3,255,547) 802,199
------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
Class B beneficial interest transactions--Note 2 1,918,288 1,828,205
Net Assets Total increase (decrease) (12,477,637) 6,278,785
------------------------------------------------------------------------------------------------------
Beginning of period 112,568,385 106,289,600
------------ ------------
End of period (including overdistributed net investment
income of $204,894 and $56,074, respectively) $100,090,748 $112,568,385
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Financial Highlights
-----------------------------------------------------------------------------------
Class A
-----------------------------------------------------------------------------------
Eleven
Months
Ended
Year Ended December 31, Dec. 31,
1994 1993 1992 1991(3) 1990 1989 1988(2)
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning
of period $11.12 $10.74 $10.80 $ 9.86 $10.29 $10.12 $10.55
- -------------------------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income .65 .69 .75 .82 .88(4) .92 .93
Net realized and
unrealized gain (loss)
on investments (1.08) .40 (.05) .90 (.43) .19 (.36)
------- ------- ------- ------- ------ ------- -------
Total income (loss) from
investment operations (.43) 1.09 .70 1.72 .45 1.11 .57
- -------------------------------------------------------------------------------------------------------------------
Dividends to shareholders:
Dividends from net
investment income (.65) (.71) (.76) (.78) (.88) (.94) (1.00)
Dividends in excess of net
investment income (.03) -- -- -- -- -- --
------- ------- ------- ------- ------ ------- -------
Total dividends to
shareholders (.68) (.71) (.76) (.78) (.88) (.94) (1.00)
- -------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $ 10.01 $ 11.12 $ 10.74 $ 10.80 $ 9.86 $ 10.29 $ 10.12
======= ======= ======= ======= ====== ======= =======
Total Return, at Net
Asset Value(5) (3.87)% 10.30% 6.77% 18.28% 4.74% 11.31% 4.48%
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $96,640 $110,759 $106,290 $90,623 $87,021 $96,380 $102,293
- -------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $102,168 $111,702 $ 98,672 $86,471 $ 90,065 $100,891 $111,264
- -------------------------------------------------------------------------------------------------------------------
Number of shares
outstanding at end of
period (in thousands) 9,653 9,963 9,899 8,390 8,829 9,369 10,108
- -------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.25% 6.20% 7.00% 8.02% 8.85% 8.85% 8.75%
Expenses 1.06% 1.06% 1.10% 1.23% 1.24%(4) 1.14% 1.05%
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 70.3% 110.1% 116.4% 97.1% 80.4% 41.3% 45.0%
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Financial Highlights (continued)
------------------------------------------------------------------------
Class A (continued) Class B
-------------------------------------------------------------- --------
Year Period
Ended Ended
Year Ended January 31, Dec. 31, Dec. 31,
1988(2) 1987(2) 1986(2) 1985(2) 1994 1993(1)
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning
of period $ 11.30 $ 11.16 $ 10.91 $ 11.00 $ 11.11 $ 11.10
- -------------------------------------------------------------------------------------------------------
Income (loss) from
investment operations:
Net investment income 1.09 1.16 1.22 1.27 .58 .40
Net realized and
unrealized gain (loss)
on investments (.55) .22 .35 (.04) (1.08) .03
------- ------- ------- ------- ------- -------
Total income (loss) from
investment operations .54 1.38 1.57 1.23 (.50) .43
- -------------------------------------------------------------------------------------------------------
Dividends to shareholders:
Dividends from net
investment income (1.29) (1.24) (1.32) (1.32) (.57) (.42)
Dividends in excess of net
investment income -- -- -- -- (.03) --
------- ------- ------- ------- ------- -------
Total dividends to
shareholders (1.29) (1.24) (1.32) (1.32) (.60) (.42)
- -------------------------------------------------------------------------------------------------------
Net asset value,
end of period $ 10.55 $ 11.30 $ 11.16 $ 10.91 $ 10.01 $ 11.11
======= ======= ======= ======= =======
=======
Total Return, at Net
Asset Value(5) N/A N/A N/A N/A (4.53)% 3.91%
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $118,568 $125,513 $121,979 $117,293 $3,451 $1,809
- -------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $118,724 $123,045 $118,253 $111,235 $2,747 $ 922
- -------------------------------------------------------------------------------------------------------
Number of shares
outstanding at end of
period (in thousands) 11,234 11,103 10,930 10,751 345 163
- -------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 10.28% 10.45% 11.26% 12.21% 5.53% 4.80%(6)
Expenses .98% .93% .97% 1.01% 1.78% 1.90%(6)
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 19.5% 59.8% 36.5% 76.7% 70.3% 110.1%
<FN>
1. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
2. Operating results prior to April 15, 1988 were achieved by the Fund's predecessor corporation as a
closed-end fund under different investment objectives and policies. Such results are thus not
necessarily representative of operating results the Fund may achieve under its current investment
objectives and policies.
3. On March 28, 1991, Oppenheimer Management Corporation became the investment advisor to the
Fund.
4. Net investment income would have been $.87 absent the voluntary expense limitation, resulting in
an expense ratio of 1.26%.
5. Assumes a hypothetical initial investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day of the fiscal period.
Sales charges are not reflected in the total returns.
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly
average of the market value of portfolio securities owned during the period. Securities with a
maturity or expiration date at the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding short-term securities) for the
year ended December 31, 1994 were $67,852,873 and $67,362,839, respectively.
See accompanying Notes to Financial Statements.
</FN>
</TABLE>
12 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<S> <C>
-----------------------------------------------------------------------------------------------------
Notes to Financial Statements
-----------------------------------------------------------------------------------------------------
1. Significant
Accounting Policies Oppenheimer Investment Grade Bond Fund (the Fund) is a separate fund of Oppenheimer Integrity
Funds,
a diversified, open-end management investment company registered under the Investment Company Act
of
1940, as amended. The Fund's investment advisor is Oppenheimer Management Corporation (the
Manager).
The Fund offers both Class A and Class B shares. Class A shares are sold with a front-end sales
charge. Class B shares may be subject to a contingent deferred sales charge. Both classes of shares
have identical rights to earnings, assets and voting privileges, except that each class has its own
distribution and/or service plan, expenses directly attributable to a particular class and exclusive
voting rights with respect to matters affecting a single class. Class B shares will automatically
convert to Class A shares six years after the date of purchase. The following is a summary of
significant accounting policies consistently followed by the Fund.
-----------------------------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at 4:00 p.m. (New York time) on each trading
day. Long-term debt securities are valued by a portfolio pricing service approved by the Board of
Trustees. Long-term debt securities which cannot be valued by the approved portfolio pricing service
are valued using dealer-supplied valuations provided the Manager is satisfied that the firm rendering
the quotes is reliable and that the quotes reflect current market value, or under consistently
applied procedures established by the Board of Trustees to determine fair value in good faith.
Short-term debt securities having a remaining maturity of 60 days or less are valued at cost (or last
determined market value) adjusted for amortization to maturity of any premium or discount. Forward
foreign currency contracts are valued at the closing price on the London foreign exchange market on
a
daily basis. Options are valued based upon the last sale price on the principal exchange on which the
option is traded or, in the absence of any transactions that day, the value is based upon the last
sale on the prior trading date if it is within the spread between the closing bid and asked prices.
If the last sale price is outside the spread, the closing bid or asked price closest to the last
reported sale price is used.
-----------------------------------------------------------------------------------------------------
Allocation of Income, Expenses and Gains and Losses. Income, expenses (other than those attributable
to a specific class) and gains and losses are allocated daily to each class of shares based upon the
relative proportion of net assets represented by such class. Operating expenses directly attributable
to a specific class are charged against the operations of that class.
-----------------------------------------------------------------------------------------------------
Federal Income Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its taxable income,
including any net realized gain on investments not offset by loss carryovers, to shareholders.
Therefore, no federal income tax provision is required. At December 31, 1994, the Fund had available
for federal income tax purposes an unused capital loss carryover of approximately $3,738,000,
$442,000 of which will expire in 1997, $958,000 in 1998 and $2,338,000 in 2002.
-----------------------------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends separately for Class A and Class
B shares from net investment income each day the New York Stock Exchange is open for business and
pay
such dividends monthly. Distributions from net realized gains on investments, if any, will be
declared at least once each year.
-----------------------------------------------------------------------------------------------------
Change in Accounting for Distributions to Shareholders. Net investment income (loss) and net realized
gain (loss) may differ for financial statement and tax purposes primarily because of paydown gains
and losses. The character of the distributions made during the year from net investment income or net
realized gains may differ from their ultimate characterization for federal income tax purposes. Also,
due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ
from the year that the income or realized gain (loss) was recorded by the Fund. Effective January 1,
1994, the Fund adopted Statement of Position 93-2: Determination, Disclosure, and Financial Statement
Presentation of Income, Capital Gain, and Return of Capital Distributions by Investment Companies.
As
a result, the Fund changed the classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions determined in accordance with
income tax regulations. Accordingly, subsequent to December 31, 1993, amounts have been reclassified
to reflect a decrease in paid-in capital of $29,803, an increase in undistributed net investment
income of $42,134, and an increase in undistributed capital loss on investments of $12,331. During
the year ended December 31, 1994, in accordance with Statement of Position 93-2, undistributed net
investment income was increased by $115,233 and undistributed capital loss on investments was
increased by the same amount.
</TABLE>
13 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<S> <C>
-----------------------------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
-----------------------------------------------------------------------------------------------------
1. Significant
Accounting Policies
(continued) Other. Investment transactions are accounted for on the date the investments are purchased or sold
(trade date). Discount on securities purchased is amortized over the life of the respective
securities, in accordance with federal income tax requirements. Realized gains and losses on
investments and unrealized appreciation and depreciation are determined on an identified cost basis,
which is the same basis used for federal income tax purposes.
2. Shares of
Beneficial Interest The Fund has authorized an unlimited number of no par value shares of beneficial interest of each
class. Transactions in shares of beneficial interest were as follows:
<CAPTION>
Year Ended December 31, 1994 Year Ended December 31, 1993(1)
---------------------------- ---------------------------------
Shares Amount Shares Amount
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 1,071,379 $ 11,256,317 2,953,788 $ 33,325,053
Dividends reinvested 323,100 3,353,309 259,953 2,897,712
Redeemed (1,704,508) (17,865,173) (3,149,098) (35,420,566)
--------- ------------ --------- ------------
Net increase (decrease) (310,029) $ (3,255,547) 64,643 $ 802,199
========= ============ =========
============
-----------------------------------------------------------------------------------------------------
Class B:
Sold 293,817 $ 3,089,618 195,606 $ 2,198,191
Dividends reinvested 11,974 123,504 2,293 25,726
Redeemed (123,969) (1,294,834) (35,061) (395,712)
--------- ------------ --------- ------------
Net increase 181,822 $ 1,918,288 162,838 $ 1,828,205
========= ============ =========
============
1. For the year ended December 31, 1993 for Class A shares and for the period from May 1, 1993
(inception of offering) to December 31, 1993 for Class B shares.
<S> <C>
3. Unrealized Gains and
Losses on Investments At December 31, 1994, net unrealized depreciation on investments of $5,843,549 was composed
of gross
appreciation of $404,576, and gross depreciation of $6,248,125.
4. Management Fees
And Other Transactions
With Affiliates Management fees paid to the Manager were in accordance with the investment advisory agreement
with
the Fund which provides for an annual fee of .50% on the first $100 million of net assets with a
reduction of .05% on each $200 million thereafter, to .35% on net assets in excess of $500 million.
The Manager has agreed to reimburse the Fund if aggregate expenses (with specified exceptions) exceed
the most stringent applicable regulatory limit on Fund expenses.
For the year ended December 31, 1994, commissions (sales charges paid by investors) on sales of
Class A shares totaled $143,088, of which $67,090 was retained by Oppenheimer Funds Distributor,
Inc.
(OFDI), a subsidiary of the Manager, as general distributor, and by an affiliated broker/dealer.
During the year ended December 31, 1994, OFDI received contingent deferred sales charges of $8,916
upon redemption of Class B shares, as reimbursement for sales commissions advanced by OFDI at the
time of sale of such shares.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the transfer and
shareholder servicing agent for the Fund, and for other registered investment companies. OSS's total
costs of providing such services are allocated ratably to these companies.
Under separate approved plans, each class may expend up to .25% of its net assets annually to
reimburse OFDI for costs incurred in connection with the personal service and maintenance of accounts
that hold shares of the Fund, including amounts paid to brokers, dealers, banks and other
institutions. In addition, Class B shares are subject to an asset-based sales charge of .75% of net
assets annually, to reimburse OFDI for sales commissions paid from its own resources at the time of
sale and associated financing costs. In the event of termination or discontinuance of the Class B
plan, the Board of Trustees may allow the Fund to continue payment of the asset-based sales charge to
OFDI for distribution expenses incurred on Class B shares sold prior to termination or discontinuance
of the plan. During the year ended December 31, 1994, OFDI paid $154,100 to an affiliated
broker/dealer as reimbursement for Class A personal service and maintenance expenses and retained
$27,341 as reimbursement for Class B sales commissions and service fee advances, as well as financing
costs.
</TABLE>
14 Oppenheimer Investment Grade Bond Fund
<PAGE>
<TABLE>
<S> <C>
5. Deferred Trustee
Compensation A former trustee elected to defer receipt of fees earned. These deferred fees earn interest at a rate
determined by the current Board of Trustees at the beginning of each calendar year, compounded each
quarter-end. As of December 31, 1994, the Fund was incurring interest at a rate of 5.22% per annum.
Deferred fees are payable in annual installments, with accrued interest, each April 1 through 1995.
6. Restricted
Securities The Fund owns securities purchased in private placement transactions, without registration under the
Securities Act of 1933 (the Act). The securities are valued under methods approved by the Board of
Trustees as reflecting fair value. The Fund intends to invest no more than 10% of its net assets
(determined at the time of purchase) in restricted and illiquid securities, excluding securities
eligible for resale pursuant to rule 144A of the Act that are determined to be liquid by the Board of
Trustees or by the Manager under Board-approved guidelines.
Valuation Per Unit
Security Acquisition Date Cost Per Unit of December 31, 1994
-----------------------------------------------------------------------------------------------------
Tenaga Nasional Berhad 7.875% Nts., 6/15/04(1) 9/27/94 $96.79 $95.18
1. Transferable under Rule 144A of the Act.
</TABLE>
<PAGE>
Appendix A: Description of Securities Ratings
Description of Standard & Poor's Corporation ("Standard & Poor's") and
Moody's Investors Service, Inc. ("Moody's") commercial paper, note and
bond ratings:
Commercial Paper Ratings
Standard & Poor's commercial paper ratings are graded into four
categories, ranging from "A" for the highest quality obligations to "D"
for the lowest. The "A-l" and "A-2" categories are described as follows:
"A" - Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are further
refined with the designations 1, 2, and 3 to indicate the relative degree
of safety.
"A-l" - This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics will be noted
with a plus (+) sign designation.
"A-2" - Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for
issues designated "A-l."
Moody's employs three designations, all judged to be investment grade, to
indicate the relative repayment ability of rated issuers. The two highest
designations are as follows:
Issuers (or supporting institutions) rated Prime-1 (or P-1) have a
superior ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will normally be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers (or supporting institutions) rated Prime-2 (or P-2) have a strong
ability for repayment of senior short-term debt 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, may be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Standard & Poor's ratings for Municipal Notes due in three years or less
are:
SP-1: Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming
safety characteristics will be given a plus (+)
designation.
SP-2: Satisfactory capacity to pay principal and interest.
Bond Ratings
Standard & Poor's describes its ratings for corporate bonds as follows:
AAA: Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA: Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in a small
degree.
A: Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit 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 bonds in this category than for
bonds rated "A."
BB, B, CCC, CC:
Bonds rated "BB," "B," "CCC" and "CC" are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the
obligation. "BB" indicates the lowest degree of speculation and "CC"
the highest degree. While such bonds will likely have some quality
and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
C, D:
Bonds on which no interest is being paid are rated "C." Bonds rated
"D" are in default and payment of interest and/or repayment of
principal is in arrears.
The ratings from AA to CCC may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Moody's describes its corporate bond ratings as follows:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and may be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa: Bonds 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.
Ba: Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered well-assured. Often the protection of
interest and principal payments may be very moderate and not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Bonds rated "B" generally lack characteristics of desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of
time may be small.
Caa: Bonds rated "Caa" are of poor standing and may be in default or there
may be present elements of danger with respect to principal or
interest.
Ca: Bonds rated "Ca" represent obligations which are speculative in a
high degree and are often in default or have other marked
shortcomings.
C: Bonds rated "C" can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
<PAGE>
Appendix B: Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Transmission
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202-4918
<PAGE>
OPPENHEIMER BOND FUND
Annual Report December 31, 1995
[photo]
[logo] OppenheimerFunds-r-
<PAGE>
YIELD
STANDARDIZED YIELD
For the 30 Days Ended 12/31/95 (3)
Class A
6.14%
Class B
5.69%
Class C
5.70%
This Fund is for people who want solid INCOME.
HOW YOUR FUND IS MANAGED
Oppenheimer Bond Fund's portfolio is made up primarily of corporate bonds
and government securities.
Of these investments, corporate bonds often offer higher yields, but can
come in all different levels of quality. That's why your Fund's manager
is careful to allocate assets to seek high yields with less risk, thereby
offering the potential for high current income.
PERFORMANCE
Total return at net asset value for the 12 months ended 12/31/95 was
16.94% for Class A shares and 16.06% for Class B shares. (1) Your Fund's
average annual total returns at maximum offering price for Class A shares
for the 1- and 5- year periods ended 12/31/95 and since inception of the
Class on 4/15/88 were 11.38%, 8.33% and 8.05%, respectively. For Class B
shares, average annual total returns for the 1-year period ended 12/31/95
and since inception of the Class on 5/1/93 were 11.06% and 4.40%,
respectively.
(2) OUTLOOK
"Our outlook is good. We expect a continuation of the current soft landing
scenario -- a period of slow but steady growth with low inflation, which
should be a good environment for both stocks and bonds. In this type of
a market, we expect to see low interest rate volatility."
David Rosenberg and David Negri
Portfolio Managers
December 31, 1995
Total returns include change in share price and reinvestment of dividends
and capital gains distributions. Past performance does not guarantee
future results. Investment return and principal value of an investment in
the Fund will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than the original cost. For more complete
information, please review the prospectus carefully before you invest.
1. Based on the change in net asset value per share for the period shown,
without deducting any sales changes. Such performance would have been
lower if sales charges were taken into account.
2. Class A returns show results of hypothetical investments on 12/31/94,
12/31/90 and 4/15/88 (since inception), after deducting the current
maximum initial sales charge of 4.75%. The Fund's maximum sales charge
rate for Class A shares was lower during a portion of some of the periods
shown, and actual investment results will be different as a result of the
change. Class B returns show results of hypothetical investments on
12/31/94 and 5/1/93 (inception of class), and the deduction of the
applicable contingent deferred sales charge of 5% (1-year) and 3% (since
inception). Class C cumulative total return since inception (7/11/95) was
2.76%. An explanation of the different performance calculations is in the
Fund's prospectus.
3. Standardized yield is net investment income calculated on a
yield-to-maturity basis for the 30-day period ended 12/31/95, divided by
the maximum offering price at the end of the period, compounded
semiannually and then annualized.
Falling net asset values will tend to artificially raise yields.
2 Oppenheimer Bond Fund
<PAGE>
[photo]
James C. Swain
Chairman
Oppenheimer Bond Fund
[photo]
Bridget A. Macaskill
President
Oppenheimer Bond Fund
Dear OppenheimerFunds Shareholder,
The bond market amply rewarded patient investors in 1995.
One year ago, many fixed-income investors had negative returns, as a
surging economy pushed interest rates higher and bond prices lower. But
a vigilant Federal Reserve Board helped slow the economy down by early
1995, lowering the fear of inflation. And by the summer, after a quarter
in which GDP growth was just 1.3%, the Fed began to lower short-term
interest rates.
In the Fall, a balanced federal budget was on the front burner in
Washington, suggesting to foreign investors that the U.S. was finally
addressing its debt burden, which helped stabilize the U.S. dollar, making
U.S. fixed-income investments more attractive to international investors.
Throughout 1995, inflation and economic growth came in at less than 3%.
As a result, the yield on the benchmark 30-year U.S. Treasury bond fell
to 6% from nearly 8% the year before. And patient investors saw the value
of their higher paying bonds appreciate substantially. In 1995, while the
stock market was up 35%, bonds rose as much as 20%, depending on the type
of security. Overall, the best performing sector of the bond market was
the 30-year U.S. Treasury bond. This is because when interest rates are
falling, bonds with the longest maturities appreciate the most in price.
Another excellent performing sector in 1995 was high quality corporate
bonds. Although a slowing economy often raises credit worries about
Corporate America, the continuation of strong corporate profits offset
these concerns.
After having such a good year, where does the bond market go from here?
Unlike stocks, which have infinite upside potential, bonds have a
constraint. For bonds to do well, interest rates must remain steady or
continue to fall. And when interest rates are low already, there is only
so far they can decline. But if low inflation can be maintained and if
a budget accord is reached, a positive environment cancontinue to exist.
We believe that the general long-term trend for the U.S. economy is slow
growth and low inflation. Moving into 1996, we're looking for even slower
growth than we saw in 1995, which should be an excellent environment for
bond investors.
Your portfolio manager discusses the outlook for your Fund in light of
these broad issues on the following pages.
Thank you for your confidence in OppenheimerFunds, and we look forward to
helping you reach your investment goals in the future.
/s/ James C. Swain
- --------------------
James C. Swain
/s/ Bridget A. Macaskill
- -------------------------
Bridget A. Macaskill
January 22, 1996
3 Oppenheimer Bond Fund
<PAGE>
Q + A
[photo][photo]
Q What helped overall performance?
An interview with your Fund's managers.
HOW HAS THE FUND PERFORMED OVER THE PERIOD?
The Fund's total return has been very good. The combination of declining
interest rates and low inflation led to an exceptionally strong rally in
the bond market over the past year, which we've benefited from along with
other bond funds. Additionally, our new strategic investment approach
during an already strong market has also helped the overall performance
of the Fund.
WHAT INVESTMENTS MADE A POSITIVE CONTRIBUTION TO PERFORMANCE?
This year's declines in interest rates led to a very strong rally in
Treasuries. So, especially in the first half, the Fund's holdings there
paid off. Since July, however, we've reduced our Treasury allocation to
slowly rework our assets toward our new diversification strategy of
emphasizing investments in different categories of U.S. government and
corporate bonds. This new strategy allows us to pursue good
income-producing investments while being diversified to help reduce risk.
Over the course of the year, the Fund's performance was also helped by our
corporate bond holdings, many of which reacted favorably to the successes
of their underlying companies.
WERE THERE ANY INVESTMENTS THAT DIDN'T PERFORM AS WELL AS EXPECTED?
The mortgage-backed sector, an area which we still believe has great
long-term potential, performed relatively poorly over the period. This was
primarily due to investors' fears that lower rates would mean an increase
in mortgage prepayments.
WHAT AREAS ARE YOU CURRENTLY TARGETING?
Our strategy over recent months has been to invest primarily in the U.S.
to get a broad base
[photo]
4 Oppenheimer Bond Fund
<PAGE>
FACING PAGE
Top left: David Negri, Portfolio Manager, with Mark Frank,
Member of Fixed Income Investments Team
Top right: David Rosenberg, Portfolio Manager
Bottom left: Len Darling, Executive VP, Director of Fixed Income
Investments
THIS PAGE
Top: David Negri and Mark Frank
Bottom: David Rosenberg with Leslie Falconio and Gina Palmieri,
Members of Fixed Income Investment Team
[photo]
A Our new strategic investment approach.
of the U.S. market. Thus, we've broadened our investment categories to
include new assets that can help us target the best opportunities in the
market. Our aim is to achieve the following goals -- to provide higher
yield and higher total return potential, to have more flexibility so we
can take advantage of a broad range of investment opportunities, and to
decrease volatility by increasing diversification across asset classes.
One of the areas we've added to is the corporate sector. With an
expectation for continued slower growth in the economy, we're
underweighting utilities and cyclicals such as mining and metals
companies. We are currently in favor of companies that can expect to
experience earnings growth in excess of the growth rate of the economy --
such as cable, telecommunications, broadcasting, and media firms.
We've also added an allocation to non-agency mortgage-backed securities,
which are mortgage loans underwritten by banks rather than by the
government. Non-agency mortgages, though having a higher risk of issuer
default, have an advantage in that they tend to offer higher yields than
government agency mortgages. Because prepayment risk decreases when
interest rates increase, investors often favor mortgage-backed securities
over other types of bonds in increasing rate environments. Thus, adding
to mortgage holdings helps to lower interest rate risk and the overall
volatility of the portfolio.
WHAT IS YOUR OUTLOOK FOR THE FUND?
Our outlook is good. We expect a continuation of the current soft landing
scenario -- a period of slow but steady economic growth with low
inflation, which should be a good environment for both stocks and bonds.
In this type of a market, we expect to see low interest rate volatility.
In terms of the Treasury market, where we've seen the best performance
over the past year, we believe most of the gains have already been
experienced. With expectations for limited further appreciation in
Treasuries, our new diversification strategy has come at a good time. As
the coming year unfolds, we expect our reconfigured portfolio to perform
well in terms of both yield and return.
[photo]
5 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS December 31, 1995
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
<S> <C> <C> <C>
==========================================================
==========================================================
================
CERTIFICATES OF DEPOSIT - 0.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Citibank CD, 13%, 5/6/96(2)CLP $ 49,956,445 $ 122,853
-----------------------------------------------------------------------------------------------------------------------------
Indonesia (Republic of) Bank Negara CD, Zero Coupon,
15.914%, 6/17/96(2)(3)IDR 500,000,000 201,253
-------------
Total Certificates of Deposit (Cost $337,372) 324,106
==========================================================
==========================================================
================
ASSET-BACKED SECURITIES - 2.2%
- ------------------------------------------------------------------------------------------------------------------------------------
AUTO LOAN - 2.2%
-----------------------------------------------------------------------------------------------------------------------------
Daimler-Benz Vehicle Trust, Series 1994-A, Cl. A, 5.95%,
12/15/00 440,645 441,373
-----------------------------------------------------------------------------------------------------------------------------
Ford Credit Grantor Trust, Series 1994-B, Cl. A, 7.30%,
10/15/99 959,109 977,390
-----------------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., Grantor Trust, Series
1992-E, Cl. A, 4.75%, 8/15/97 192,999 192,154
-----------------------------------------------------------------------------------------------------------------------------
Nissan Auto Receivables Grantor Trust, Series 1994-A,
Cl. A, 6.45%, 9/15/99 1,289,223 1,300,091
-----------------------------------------------------------------------------------------------------------------------------
World Omni Automobile Lease Securitization Trust,
Series 1994-A, Cl. A, 6.45%, 9/25/00 1,705,242 1,716,958
-------------
Total Asset-Backed Securities (Cost $4,581,131) 4,627,966
==========================================================
==========================================================
================
MORTGAGE-BACKED OBLIGATIONS - 29.6%
- ------------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY - 22.7%
- ------------------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED - 12.7%
----------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
Certificates of Participation, 9%, 3/1/17 684,842 727,563
Certificates of Participation, Series 17-039, 13.50%,
11/1/10 75,372 89,209
Certificates of Participation, Series 17-094, 12.50%,
4/1/14 40,781 47,205
Collateralized Mtg. Obligation Gtd. Multiclass Certificates
of Participation, Series 1322, Cl. G, 7.50%, 2/15/07 2,000,000 2,088,740
Collateralized Mtg. Obligations, Series 1548, Cl. C, 7%,
4/15/21 4,000,000 4,022,480
Multiclass Gtd. Mtg. Participation Certificates, Series
1460, Cl. H, 7%, 5/15/07 1,500,000 1,554,375
----------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
11%, 7/1/16 6,832,876 7,751,045
Gtd. Mtg. Pass-Through Certificates, 8%, 8/1/17 884,543 920,624
Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Series 1993-175, Cl. PL, 5%, 10/25/02 2,000,000 1,980,000
Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Series 1993-191, Cl. PD, 5.40%, 3/25/04 1,500,000 1,486,395
Interest-Only Stripped Mtg.-Backed Security, Trust 240, Cl.
2, 12.095%, 9/1/23(4) 23,117,327 6,330,174
-------------
26,997,810
- ------------------------------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED - 10.0%
----------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
6%, 1/15/26(5) 5,000,000 5,053,125
6%, 7/20/25 1,984,195 2,005,278
7%, 1/15/26(5) 5,000,000 5,059,400
10%, 11/15/09 328,943 361,015
10.50%, 12/15/17-7/15/19 418,560 468,527
12%, 1/15/99-5/15/14 66,291 70,409
12.75%, 6/15/15 43,595 50,461
8%, 6/15/05-7/15/25 7,202,212 7,527,961
9%, 2/15/09-6/15/09 567,867 608,463
-------------
21,204,639
</TABLE>
6 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
PRIVATE - 6.9%
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL - 3.4%
----------------------------------------------------------------------------------------------------------------------------
CMC Securities Corp. I, Collateralized Mtg. Obligation,
Series 1993-D, Cl. D-3, 10%, 7/25/23(6) $ 711,456 $ 765,482
----------------------------------------------------------------------------------------------------------------------------
DLJ Mortgage Acceptance Corp., Sub. Collateralized Mtg.
Obligations, Series X-Q13B, Cl. 3B1, 8.75%, 11/25/24 1,442,350 1,449,112
----------------------------------------------------------------------------------------------------------------------------
FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Series 1994-C1, Cl. 2-D,
8.70%, 9/25/25(6) 1,000,000 1,078,125
----------------------------------------------------------------------------------------------------------------------------
FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Series 1994-C1, Cl. 2-E,
8.70%, 9/25/25(6) 1,000,000 1,069,687
----------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates, Series 1991-M6, Cl. B4, 7.477%, 6/25/21(7) 75,761 75,738
----------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates, Series 1992-CHF, Cl. E, 8.25%, 12/25/20 2,004,994 1,967,401
----------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates, Series 1993-C1, Cl. B, 8.75%, 5/25/24 700,000 729,312
-------------
7,134,857
- ------------------------------------------------------------------------------------------------------------------------------------
MULTI-FAMILY - 2.2%
----------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates, Series 1991-M5, Cl. A, 9%, 3/25/17 733,176 776,251
----------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates, Series 1994-C1, Cl. C, 8%, 6/25/26 1,500,000 1,603,594
----------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates, Series 1995-C1, Cl. D, 6.90%, 2/25/27 2,500,000 2,387,500
-------------
4,767,345
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER - 0.9%
----------------------------------------------------------------------------------------------------------------------------
JHM Mtg. Acceptance Corp., 8.96% Collateralized Mtg.
Obligation Bonds, Series E, Cl. 5, 4/1/19 1,790,105 1,913,175
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL - 0.4%
----------------------------------------------------------------------------------------------------------------------------
Residential Funding Corp., Mtg. Pass-Through
Certificates, Series 1993-S10, Cl. A9, 8.50%, 2/25/23 774,963 800,150
-------------
Total Mortgage-Backed Obligations (Cost $62,473,955) 62,817,976
==========================================================
==========================================================
================
U.S. GOVERNMENT OBLIGATIONS - 20.4%
- ------------------------------------------------------------------------------------------------------------------------------------
TREASURY - 20.4%
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
11.625%, 11/15/02 5,000,000 6,743,750
8.75%, 5/15/20 6,750,000 9,036,562
8.75%, 8/15/20 3,050,000 4,092,719
8.875%, 8/15/17 13,500,000 18,090,000
----------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
8.75%, 8/15/00 550,000 625,109
8.875%, 11/15/97 4,335,000 4,615,418
-------------
Total U.S. Government Obligations (Cost $40,331,251) 43,203,558
</TABLE>
7 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (Continued)
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
<S> <C> <C> <C>
==========================================================
==========================================================
================
FOREIGN GOVERNMENT OBLIGATIONS - 0.8%
- ------------------------------------------------------------------------------------------------------------------------------------
International Bank for Reconstruction and Development
Bonds, 12.50%, 7/25/97NZD $ 800,000 $ 556,998
----------------------------------------------------------------------------------------------------------------------------
New Zealand (Republic of) Bonds, 10%, 7/15/97NZD 390,000 262,030
----------------------------------------------------------------------------------------------------------------------------
Norwegian Government Bonds, 5.75%, 11/30/04NOK 540,000 81,686
----------------------------------------------------------------------------------------------------------------------------
Queensland Treasury Corp. Gtd. Nts., 8%, 8/14/01AUD 1,045,000 778,537
-------------
Total Foreign Government Obligations (Cost $1,565,840) 1,679,251
==========================================================
==========================================================
================
CORPORATE BONDS AND NOTES - 50.6%
- ------------------------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY - 4.3%
- ------------------------------------------------------------------------------------------------------------------------------------
CHEMICALS - 0.8%
----------------------------------------------------------------------------------------------------------------------------
Quantum Chemical Corp., 10.375% First Mtg. Nts., 6/1/03 900,000 1,024,144
----------------------------------------------------------------------------------------------------------------------------
Rohm & Haas Co., 9.50% Debs., 4/1/21 500,000 602,239
-------------
1,626,383
- ------------------------------------------------------------------------------------------------------------------------------------
METALS/MINING - 1.8%
----------------------------------------------------------------------------------------------------------------------------
AMAX, Inc., 9.875% Nts., 6/13/01 1,000,000 1,138,882
----------------------------------------------------------------------------------------------------------------------------
Newmont Mining Corp., 8.625% Nts., 4/1/02 1,000,000 1,107,358
----------------------------------------------------------------------------------------------------------------------------
Teck Corp., 8.70% Debs., 5/1/02 1,500,000 1,663,795
-------------
3,910,035
- ------------------------------------------------------------------------------------------------------------------------------------
PAPER - 1.7%
----------------------------------------------------------------------------------------------------------------------------
Crown Paper Co., 11% Sr. Sub. Nts., 9/1/05 750,000 660,000
----------------------------------------------------------------------------------------------------------------------------
Georgia-Pacific Corp., 9.95% Debs., 6/15/02 1,500,000 1,784,147
----------------------------------------------------------------------------------------------------------------------------
Repap Wisconsin, Inc., 9.25% First Priority Sr. Sec. Nts.,
2/1/02 500,000 477,500
----------------------------------------------------------------------------------------------------------------------------
Scotia Pacific Holding Co., 7.95% Timber Collateralized
Nts., 7/20/15 454,847 462,280
----------------------------------------------------------------------------------------------------------------------------
Union Camp Corp., 10% Debs., 5/1/19 100,000 116,911
-------------
3,500,838
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER RELATED - 6.2%
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS - 0.7%
----------------------------------------------------------------------------------------------------------------------------
Tag-Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(6) 550,000 552,063
----------------------------------------------------------------------------------------------------------------------------
Toro Co. (The), 11% Debs., 8/1/17 1,000,000 1,067,115
-------------
1,619,178
- ------------------------------------------------------------------------------------------------------------------------------------
FOOD/BEVERAGES/TOBACCO - 1.8%
----------------------------------------------------------------------------------------------------------------------------
American Brands, Inc., 7.875% Debs., 1/15/23 2,000,000 2,253,562
----------------------------------------------------------------------------------------------------------------------------
ConAgra, Inc., 7.40% Sub. Nts., 9/15/04 250,000 264,433
----------------------------------------------------------------------------------------------------------------------------
Dr. Pepper/Seven-Up Cos., Inc., 0%/11.50% Sr. Sub.
Disc. Nts., 11/1/02(8) 500,000 471,250
----------------------------------------------------------------------------------------------------------------------------
Pulsar Internacional SA de CV, 11.80% Nts., 9/19/96(9) 750,000 755,625
-------------
3,744,870
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 2.5%
----------------------------------------------------------------------------------------------------------------------------
Grace (W.R.) & Co., 7.25% Medium-Term Nts., 7/15/97 2,000,000 2,040,198
----------------------------------------------------------------------------------------------------------------------------
HEALTHSOUTH Corp., 9.50% Sr. Sub. Nts., 4/1/01 500,000 536,250
----------------------------------------------------------------------------------------------------------------------------
Imcera Group, Inc., 6% Nts., 10/15/03 500,000 494,950
----------------------------------------------------------------------------------------------------------------------------
R.P. Scherer Corp., 6.75% Sr. Nts., 2/1/04 500,000 475,812
----------------------------------------------------------------------------------------------------------------------------
Service Corp. International, 7% Sr. Nts., 6/1/15 1,000,000 1,073,020
----------------------------------------------------------------------------------------------------------------------------
Total Renal Care, Inc., 0%/12% Sr. Sub. Disc. Nts.,
8/15/04(8) 649,000 626,285
-------------
5,246,515
</TABLE>
8 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
HOTEL/GAMING - 0.6%
----------------------------------------------------------------------------------------------------------------------------
Grand Casinos, Inc., 10.125% Gtd. First Mtg. Nts., 12/1/03 $ 750,000 $ 785,625
----------------------------------------------------------------------------------------------------------------------------
HMC Acquisition Properties, Inc., 9% Sr. Nts., 12/15/07(6) 500,000 502,500
-------------
1,288,125
- ------------------------------------------------------------------------------------------------------------------------------------
RESTAURANTS - 0.4%
----------------------------------------------------------------------------------------------------------------------------
Foodmaker, Inc., 9.25% Sr. Nts., 3/1/99 835,000 803,688
- ------------------------------------------------------------------------------------------------------------------------------------
TEXTILE/APPAREL - 0.2%
----------------------------------------------------------------------------------------------------------------------------
Fruit of the Loom, Inc., 7% Debs., 3/15/11 500,000 505,204
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Coastal Corp., 11.75% Sr. Debs., 6/15/06 500,000 531,653
----------------------------------------------------------------------------------------------------------------------------
Enron Corp., 8.10% Nts., 12/15/96 1,500,000 1,536,089
----------------------------------------------------------------------------------------------------------------------------
McDermott, Inc., 9.375% Nts., 3/15/02 100,000 113,618
----------------------------------------------------------------------------------------------------------------------------
Occidental Petroleum Corp., 11.125% Sr. Debs., 6/1/19 3,000,000 3,584,202
----------------------------------------------------------------------------------------------------------------------------
Southwest Gas Corp., 9.75% Debs., Series F, 6/15/02 275,000 321,762
----------------------------------------------------------------------------------------------------------------------------
Tenneco, Inc., 10% Debs., 3/15/08 100,000 124,414
----------------------------------------------------------------------------------------------------------------------------
Tenneco, Inc., 7.875% Nts., 10/1/02 250,000 272,987
----------------------------------------------------------------------------------------------------------------------------
TransCanada PipeLines Ltd., 9.875% Debs., 1/1/21 1,500,000 2,061,675
----------------------------------------------------------------------------------------------------------------------------
United Meridian Corp., 10.375% Gtd. Sr. Sub. Nts.,
10/15/05 500,000 531,250
----------------------------------------------------------------------------------------------------------------------------
Vintage Petroleum, Inc., 9% Sr. Sub. Nts., 12/15/05 150,000 151,875
-------------
9,229,525
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES - 12.6%
- ------------------------------------------------------------------------------------------------------------------------------------
BANKS & THRIFTS - 1.7%
----------------------------------------------------------------------------------------------------------------------------
Banco Ganadero SA, Zero Coupon Sr. Unsub. Unsec.
Nts., 9.931%, 6/15/96(3)(6) 250,000 239,520
----------------------------------------------------------------------------------------------------------------------------
BankAmerica Corp., 7.50% Sr. Nts., 3/15/97 200,000 204,724
----------------------------------------------------------------------------------------------------------------------------
Chemical New York Corp., 9.75% Sub. Capital Nts.,
6/15/99 300,000 337,112
----------------------------------------------------------------------------------------------------------------------------
First Chicago Corp., 9% Sub. Nts., 6/15/99 100,000 110,118
----------------------------------------------------------------------------------------------------------------------------
First Chicago NBD Bancorp, 7.25% Sub. Debs., 8/15/04 250,000 267,041
----------------------------------------------------------------------------------------------------------------------------
National Westminster Bank PLC, 9.375% Gtd. Capital
Nts., 11/15/03 70,000 83,913
----------------------------------------------------------------------------------------------------------------------------
Royal Bank of Scotland Group (The) PLC, 10.125% Sub.
Gtd. Capital Nts., 3/1/04 500,000 621,195
----------------------------------------------------------------------------------------------------------------------------
Westpac Banking Corp., 9.125% Sub. Debs., 8/15/01 1,500,000 1,711,150
-------------
3,574,773
</TABLE>
9 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (Continued)
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL - 7.3%
----------------------------------------------------------------------------------------------------------------------------
American Car Line Co., 8.25% Equipment Trust
Certificates, Series 1993-A, 4/15/08 $ 246,000 $ 258,608
----------------------------------------------------------------------------------------------------------------------------
Beneficial Corp., 12.875% Debs., 8/1/13 20,000 24,313
----------------------------------------------------------------------------------------------------------------------------
BHP Finance (USA) Ltd., 8.50% Gtd. Debs., 12/1/12 1,500,000 1,780,785
----------------------------------------------------------------------------------------------------------------------------
Enterprise Rent-A-Car USA Finance Co., 7.875% Nts.,
3/15/98(6) 1,500,000 1,554,709
----------------------------------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 9.90% Medium-Term Nts., 11/6/97 2,000,000 2,080,364
----------------------------------------------------------------------------------------------------------------------------
GPA Holland BV, 9.75% Medium-Term Nts., Series B,
6/10/96(6) 500,000 500,000
----------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 8.375% Nts., 2/15/99 300,000 318,942
----------------------------------------------------------------------------------------------------------------------------
Leucadia National Corp., 7.75% Sr. Nts., 8/15/13 2,000,000 2,082,104
----------------------------------------------------------------------------------------------------------------------------
Midland American Capital Corp., 12.75% Gtd. Nts.,
11/15/03 205,000 241,118
----------------------------------------------------------------------------------------------------------------------------
NationsBank Corp., 10.20% Sub. Nts., 7/15/15 1,300,000 1,759,866
----------------------------------------------------------------------------------------------------------------------------
PaineWebber Group, Inc., 7% Sr. Nts., 3/1/00 160,000 163,909
----------------------------------------------------------------------------------------------------------------------------
Penske Truck Leasing Co. LP, 7.75% Sr. Nts., 5/15/99 1,500,000 1,583,350
----------------------------------------------------------------------------------------------------------------------------
Ryder System, Inc., 8.75% Debs., Series J, 3/15/17 1,600,000 1,703,704
----------------------------------------------------------------------------------------------------------------------------
Source One Mortgage Services Corp., 9% Debs., 6/1/12 1,250,000 1,485,481
-------------
15,537,253
- ------------------------------------------------------------------------------------------------------------------------------------
INSURANCE - 3.6%
----------------------------------------------------------------------------------------------------------------------------
Aetna Life & Casualty Co., 8% Debs., 1/15/17 1,000,000 1,060,133
----------------------------------------------------------------------------------------------------------------------------
Capital Holding Corp., 8.75% Debs., 1/15/17 1,200,000 1,272,654
----------------------------------------------------------------------------------------------------------------------------
CNA Financial Corp., 7.25% Debs., 11/15/23 2,000,000 1,990,074
----------------------------------------------------------------------------------------------------------------------------
Torchmark Corp., 7.875% Nts., 5/15/23 3,000,000 3,243,750
-------------
7,566,611
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING RELATED - 0.5%
- ------------------------------------------------------------------------------------------------------------------------------------
HOMEBUILDERS/REAL ESTATE - 0.5%
----------------------------------------------------------------------------------------------------------------------------
Saul (B.F.) Real Estate Investment Trust, 11.625% Sr.
Sec. Nts., Series B, 4/1/02 1,125,000 1,153,125
- ------------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING - 7.3%
- ------------------------------------------------------------------------------------------------------------------------------------
AEROSPACE/ELECTRONICS/COMPUTERS - 3.2%
----------------------------------------------------------------------------------------------------------------------------
Boeing Co., 7.50% Debs., 8/15/42 2,000,000 2,320,236
----------------------------------------------------------------------------------------------------------------------------
General Electric Capital Corp., 8.75% Debs., 5/21/07 1,000,000 1,216,910
----------------------------------------------------------------------------------------------------------------------------
McDonnell Douglas Corp., 9.25% Nts., 4/1/02 1,500,000 1,738,060
----------------------------------------------------------------------------------------------------------------------------
Rolls-Royce Capital, Inc., 7.125% Gtd. Unsec. Unsub.
Nts., 7/29/03 1,000,000 1,046,250
----------------------------------------------------------------------------------------------------------------------------
Tracor, Inc., 10.875% Sr. Sub. Nts., 8/15/01 500,000 516,250
-------------
6,837,706
- ------------------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE - 2.1%
----------------------------------------------------------------------------------------------------------------------------
Chrysler Corp., 10.40% Nts., 8/1/99 1,000,000 1,069,464
----------------------------------------------------------------------------------------------------------------------------
Chrysler Corp., 10.95% Debs., 8/1/17 200,000 224,527
----------------------------------------------------------------------------------------------------------------------------
Foamex LP/Foamex Capital Corp., 11.25% Sr. Nts.,
10/1/02 500,000 482,500
----------------------------------------------------------------------------------------------------------------------------
Ford Motor Co., 8.875% Debs., 11/15/22 2,000,000 2,312,126
----------------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.50% Nts., 12/15/01 100,000 96,549
----------------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 7.75% Nts., 4/15/97 300,000 305,708
-------------
4,490,874
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL GOODS - 2.0%
----------------------------------------------------------------------------------------------------------------------------
Caterpillar, Inc., 9.75% Debs., 6/1/19 1,750,000 2,035,827
----------------------------------------------------------------------------------------------------------------------------
Thomas & Betts Corp., 8.25% Sr. Nts., 1/15/04 1,000,000 1,125,063
----------------------------------------------------------------------------------------------------------------------------
Westinghouse Electric Corp., 8.375% Nts., 6/15/02 1,000,000 1,022,800
-------------
4,183,690
</TABLE>
10 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA - 4.9%
- ------------------------------------------------------------------------------------------------------------------------------------
BROADCASTING - 0.6%
----------------------------------------------------------------------------------------------------------------------------
Paxson Communications Corp., 11.625% Sr. Sub. Nts.,
10/1/02(6) $ 750,000 $ 757,500
----------------------------------------------------------------------------------------------------------------------------
United International Holdings, Inc., Zero Coupon Sr. Sec.
Disc. Nts., 12.982%, 11/15/99(3) 750,000 468,750
-------------
1,226,250
- ------------------------------------------------------------------------------------------------------------------------------------
CABLE TELEVISION - 1.9%
----------------------------------------------------------------------------------------------------------------------------
Rogers Cablesystems Ltd., 10% Sr. Sec. Second Priority
Debs., 12/1/07 1,000,000 1,067,500
----------------------------------------------------------------------------------------------------------------------------
Tele-Communications, Inc., 5.28% Medium-Term Nts.,
8/20/96 1,000,000 996,207
----------------------------------------------------------------------------------------------------------------------------
TeleWest PLC, 0%/11% Sr. Disc. Debs., 10/1/07(8) 1,280,000 776,000
----------------------------------------------------------------------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 1,000,000 1,176,779
-------------
4,016,486
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED MEDIA - 1.7%
----------------------------------------------------------------------------------------------------------------------------
Time Warner, Inc., 9.15% Debs., 2/1/23 3,100,000 3,534,961
- ------------------------------------------------------------------------------------------------------------------------------------
PUBLISHING/PRINTING - 0.7%
----------------------------------------------------------------------------------------------------------------------------
Valassis Communications, Inc., 9.55% Sr. Nts., 12/1/03 1,500,000 1,543,258
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER - 0.3%
- ------------------------------------------------------------------------------------------------------------------------------------
CONGLOMERATES - 0.3%
----------------------------------------------------------------------------------------------------------------------------
Textron, Inc., 9.55% Medium-Term Nts., 3/19/01 500,000 579,296
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL - 1.2%
- ------------------------------------------------------------------------------------------------------------------------------------
DEPARTMENT STORES - 0.2%
----------------------------------------------------------------------------------------------------------------------------
Sears Canada Inc., 11.70% Debs., 7/10/00CAD 500,000 426,186
- ------------------------------------------------------------------------------------------------------------------------------------
DRUG STORES - 0.2%
----------------------------------------------------------------------------------------------------------------------------
Hook-SupeRx, Inc., 10.125% Sr. Nts., 6/1/02 400,000 438,128
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAILING - 0.4%
----------------------------------------------------------------------------------------------------------------------------
May Department Stores Cos., 10.625% Debs., 11/1/10 405,000 564,550
----------------------------------------------------------------------------------------------------------------------------
May Department Stores Cos., 9.875% Debs., 6/1/17 250,000 265,491
-------------
830,041
- ------------------------------------------------------------------------------------------------------------------------------------
SUPERMARKETS - 0.4%
----------------------------------------------------------------------------------------------------------------------------
Grand Union Co., 12% Sr. Nts., 9/1/04 500,000 435,000
----------------------------------------------------------------------------------------------------------------------------
Penn Traffic Co., 10.25% Sr. Nts., 2/15/02 500,000 478,750
-------------
913,750
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 2.0%
- ------------------------------------------------------------------------------------------------------------------------------------
AIR TRANSPORTATION - 1.3%
----------------------------------------------------------------------------------------------------------------------------
American Airlines, Inc., 9.73% Pass-Through Certificates,
Series 1991-C2, 9/29/14 1,000,000 1,118,750
----------------------------------------------------------------------------------------------------------------------------
Atlas Air, Inc., 12.25% Pass-Through Certificates, 12/1/02 1,000,000 1,025,000
----------------------------------------------------------------------------------------------------------------------------
Delta Air Lines, Inc., 10.375% Debs., 2/1/11 550,000 707,854
-------------
2,851,604
- ------------------------------------------------------------------------------------------------------------------------------------
RAILROADS - 0.7%
----------------------------------------------------------------------------------------------------------------------------
Canadian Pacific Ltd., 9.45% Debs., 8/1/21 1,000,000 1,304,000
----------------------------------------------------------------------------------------------------------------------------
Union Pacific Corp., 9.65% Medium-Term Nts., 4/17/00 100,000 113,888
-------------
1,417,888
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 6.9%
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES - 1.0%
----------------------------------------------------------------------------------------------------------------------------
Commonwealth Edison Co., 6.50% Nts., 7/15/97 225,000 226,315
----------------------------------------------------------------------------------------------------------------------------
Public Service Co. of Colorado, 8.75% First Mtg. Bonds,
3/1/22 250,000 284,110
----------------------------------------------------------------------------------------------------------------------------
Tenaga Nasional Berhad, 7.875% Nts., 6/15/04(6) 1,000,000 1,106,039
----------------------------------------------------------------------------------------------------------------------------
Union Gas Ltd., 13% Debs., 6/30/03CAD 572,000 474,450
-------------
2,090,914
</TABLE>
11 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (Continued)
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 5.9%
----------------------------------------------------------------------------------------------------------------------------
A+ Network, Inc., 11.875% Sr. Sub. Nts., 11/1/05 $ 1,000,000 $ 1,012,500
----------------------------------------------------------------------------------------------------------------------------
Cellular Communications International, Inc., Zero Coupon
Sr. Disc. Nts., 11.44%, 8/15/00(3) 500,000 301,250
----------------------------------------------------------------------------------------------------------------------------
GST Telecommunications, Inc., Units (each unit consists
of eight 0%/13.875% sr. disc. nts., 12/15/05 and one
0%/13.875% cv. sr. sub. disc. nt., 12/15/05)(6)(8)(10) 900,000 470,000
----------------------------------------------------------------------------------------------------------------------------
Horizon Cellular Telephone LP/Horizon Finance Corp.,
0%/11.375% Sr. Sub. Disc. Nts., 10/1/00(8) 1,250,000 1,068,750
----------------------------------------------------------------------------------------------------------------------------
IntelCom Group (USA), Inc., 0%/13.50% Sr. Disc. Nts.,
9/15/05(6)(8) 600,000 346,500
----------------------------------------------------------------------------------------------------------------------------
New York Telephone Co., 9.375% Debs., 7/15/31 2,500,000 2,976,547
----------------------------------------------------------------------------------------------------------------------------
Nextel Communications, Inc., 0%/11.50% Sr. Disc. Nts.,
9/1/03(8) 1,000,000 618,750
----------------------------------------------------------------------------------------------------------------------------
Pacific Bell, 8.50% Debs., 8/15/31 2,000,000 2,234,214
----------------------------------------------------------------------------------------------------------------------------
PriCellular Wireless Corp., 0%/14% Sr. Sub. Disc. Nts.,
11/15/01(8) 1,000,000 880,000
----------------------------------------------------------------------------------------------------------------------------
Southern New England Telephone Co., 8.70% Medium-
Term Nts., 8/15/31 2,000,000 2,203,806
----------------------------------------------------------------------------------------------------------------------------
USA Mobile Communications, Inc. II, 9.50% Sr. Nts.,
2/1/04 500,000 497,500
-------------
12,609,817
-------------
Total Corporate Bonds and Notes (Cost $100,700,984) 107,296,972
UNITS
==========================================================
==========================================================
================
RIGHTS, WARRANTS AND CERTIFICATES - 0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Cellular Communications International, Inc. Wts.,
Exp. 8/03 500 11,250
----------------------------------------------------------------------------------------------------------------------------
IntelCom Group, Inc. Wts., Exp. 9/05(6) 1,980 7,920
-------------
Total Rights, Warrants and Certificates (Cost $0) 19,170
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $209,990,533) 103.7%
219,968,999
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (3.7) (7,751,705)
--------------- -------------
NET ASSETS 100.0% $212,217,294
===============
=============
<FN>
1. Face amount is reported in U.S. Dollars, except for those denoted
in the following currencies:
AUD - Australian Dollar IDR - Indonesian Rupiah
CAD - Canadian Dollar NOK - Norwegian Krone
CLP - Chilean Peso NZD - New Zealand Dollar
2. Indexed instrument for which the principal amount and/or interest due
at maturity is affected by the relative value of a foreign currency.
3. For zero coupon bonds, the interest rate shown is the effective
yield on the date of purchase.
4. Interest-Only Strips represent the right to receive the monthly
interest payments on an underlying pool of mortgage loans. These
securities typically decline in price as interest rates decline. Most
other fixed-income securities increase in price when interest rates
decline. The principal amount of the underlying pool represents the
notional amount on which current interest is calculated. The price of
these securities is typically more sensitive to changes in prepayment
rates than traditional mortgage-backed securities (for example, GNMA
pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future
cash flows.
5. When-issued security to be delivered and settled after December 31,
1995.
6. Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the
Board of Trustees. These securities amount to $8,950,045 or 4.22% of the
Fund's net assets, at December 31, 1995.
7. Represents the current interest rate for a variable rate security.
8. Denotes a step bond: a zero coupon bond that converts to a fixed
rate of interest at a designated future date.
9. Identifies issues considered to be illiquid - See Note 6 of Notes
to Financial Statements.
10. Units may be comprised of several components, such as debt and equity
and/or warrants to purchase equity at some point in the future. For units
which represent debt securities, face amount disclosed represents total
underlying principal.
See accompanying Notes to Financial Statements.
</FN>
</TABLE>
12 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES December 31, 1995
<S> <C> <C>
==========================================================
==========================================================
==============
ASSETS Investments, at value (cost $209,990,533) - see accompanying statement $219,968,999
--------------------------------------------------------------------------------------------------------
Receivables:
Interest and principal paydowns 3,449,576
Shares of beneficial interest sold 502,558
Receivable from OppenheimerFunds, Inc. 20,522
--------------------------------------------------------------------------------------------------------
Other 25,430
------------
Total assets 223,967,085
==========================================================
==========================================================
==============
LIABILITIES Bank overdraft 306,908
--------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 10,088,020
Dividends 610,049
Shares of beneficial interest redeemed 545,312
Distribution and service plan fees 110,630
Transfer and shareholder servicing agent fees 9,767
Other 79,105
-------------
Total liabilities 11,749,791
==========================================================
==========================================================
==============
NET ASSETS $212,217,294
-------------
-------------
==========================================================
==========================================================
==============
COMPOSITION OF Paid-in capital $206,251,590
NET ASSETS --------------------------------------------------------------------------------------------------------
Undistributed net investment income 116,937
--------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (4,129,345)
--------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 9,978,112
-------------
Net assets $212,217,294
-------------
-------------
==========================================================
==========================================================
==============
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets
of $169,059,333 and 15,399,839 shares of beneficial interest outstanding) $10.98
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $11.53
--------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $39,187,315 and 3,570,470 shares of beneficial interest outstanding) $10.98
--------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $3,970,646 and 361,451 shares of beneficial interest outstanding) $10.99
See accompanying Notes to Financial Statements.
</TABLE>
13 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS For the Year Ended December 31, 1995
<S> <C> <C>
==========================================================
==========================================================
==============
INVESTMENT INCOME Interest (net of foreign withholding taxes of $13,483) $10,089,605
==========================================================
==========================================================
==============
EXPENSES Management fees - Note 4 820,507
--------------------------------------------------------------------------------------------------------
Distribution and service plan fees - Note 4:
Class A 287,716
Class B 127,308
Class C 4,560
--------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees - Note 4 247,878
--------------------------------------------------------------------------------------------------------
Shareholder reports 147,863
--------------------------------------------------------------------------------------------------------
Legal and auditing fees 38,082
--------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 22,344
Class B 10,705
Class C 1,358
--------------------------------------------------------------------------------------------------------
Custodian fees and expenses 32,880
--------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 872
--------------------------------------------------------------------------------------------------------
Other 21,787
------------
Total expenses 1,763,860
------------
Less reimbursement of expenses by OppenheimerFunds, Inc. - Note 4 (20,522)
------------
Net expenses 1,743,338
==========================================================
==========================================================
==============
NET INVESTMENT INCOME 8,346,267
==========================================================
==========================================================
==============
REALIZED AND Net realized gain (loss) on:
UNREALIZED GAIN (LOSS) Investments 566,180
Closing of futures contracts - Note 8 (931,937)
Foreign currency transactions 64,980
------------
Net realized loss (300,777)
--------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 12,202,101
Translation of assets and liabilities denominated in foreign currencies (136,201)
------------
Net change 12,065,900
------------
Net realized and unrealized gain 11,765,123
==========================================================
==========================================================
==============
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$20,111,390
------------
------------
See accompanying Notes to Financial Statements.
</TABLE>
14 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
1995 1994
<S> <C> <C> <C>
==========================================================
==========================================================
==============
OPERATIONS Net investment income $ 8,346,267 $ 6,537,608
--------------------------------------------------------------------------------------------------------
Net realized loss (300,777) (2,274,518)
--------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 12,065,900 (8,559,673)
----------------------------------
Net increase (decrease) in net assets resulting
from operations 20,111,390 (4,296,583)
==========================================================
==========================================================
==============
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS Class A (7,564,945) (6,381,575)
TO SHAREHOLDERS Class B (751,223) (156,032)
Class C (29,746) --
--------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A -- (298,880)
Class B -- (7,308)
==========================================================
==========================================================
==============
BENEFICIAL INTEREST Net increase (decrease) in net assets resulting from
TRANSACTIONS beneficial interest transactions - Note 2:
Class A 61,827,603 (3,255,547)
Class B 34,622,947 1,918,288
Class C 3,910,520 --
==========================================================
==========================================================
==============
NET ASSETS Total increase (decrease) 112,126,546 (12,477,637)
--------------------------------------------------------------------------------------------------------
Beginning of period 100,090,748 112,568,385
----------------------------------
End of period [including undistributed (overdistributed)
net investment income of $116,937 and
$(204,894), respectively] $212,217,294 $100,090,748
----------------------------------
----------------------------------
See accompanying Notes to Financial Statements.
</TABLE>
15 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------------
CLASS A
-----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994 1993 1992 1991(4)
<S> <C> <C> <C> <C> <C>
==========================================================
===========================================================
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.01 $11.12 $10.74 $10.80 $9.86
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .69 .65 .69 .75 .82
Net realized and unrealized gain (loss) .96 (1.08) .40 (.05) .90
- ---------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.65 (.43) 1.09 .70 1.72
- ---------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.68) (.65) (.71) (.76) (.78)
Dividends in excess of net investment
income -- (.03) -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.68) (.68) (.71) (.76) (.78)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.98 $10.01 $11.12 $10.74 $10.80
==========================================================
=============
==========================================================
===========================================================
TOTAL RETURN, AT NET ASSET VALUE (5) 16.94% (3.87)% 10.30% 6.77% 18.28%
==========================================================
===========================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $169,059 $96,640 $110,759 $106,290 $90,623
- ---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $116,940 $102,168 $111,702 $98,672 $86,471
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.47% 6.25% 6.20% 7.00% 8.02%
Expenses, before voluntary reimbursement
by the Manager 1.27% 1.06% 1.06% 1.10% 1.23%
Expenses, net of voluntary reimbursement
by the Manager 1.26% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (7) 175.4% 70.3% 110.1% 116.4% 97.1%
<FN>
1. For the period from July 11, 1995 (inception of offering) to December 31,
1995.
2. For the period from May 1, 1993 (inception of offering) to December 31,
1993.
3. Operating results prior to April 15, 1988 were achieved by the Fund's
predecessor corporation as a closed-end fund under different investment
objectives and policies. Such results are thus not necessarily representative of
operating results the Fund may achieve under its current investment objectives
and policies.
4. On March 28, 1991, OppenheimerFunds, Inc. became the investment advisor to
the Fund.
</FN>
</TABLE>
See accompanying Notes to Financial Statements.
16 Oppenheimer Bond Fund
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------------------------
ELEVEN
MONTHS
ENDED
DEC. 31, YEAR ENDED JANUARY 31,
1990 1989 1988(3) 1988(3) 1987(3) 1986(3)
<S> <C> <C> <C> <C> <C> <C>
==========================================================
==========================================================
================
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.29 $10.12 $10.55 $11.30 $11.16 $10.91
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .88 .92 .93 1.09 1.16 1.22
Net realized and unrealized gain (loss) (.43) .19 (.36) (.55) .22 .35
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations .45 1.11 .57 .54 1.38 1.57
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.88) (.94) (1.00) (1.29) (1.24) (1.32)
Dividends in excess of net investment
income -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.88) (.94) (1.00) (1.29) (1.24) (1.32)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.86 $10.29 $10.12 $10.55 $11.30 $11.16
==========================================================
==============================
==========================================================
==========================================================
================
TOTAL RETURN, AT NET ASSET VALUE (5) 4.74% 11.31% 4.48% N/A N/A
N/A
==========================================================
==========================================================
================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $87,021 $96,380 $102,293 $118,568 $125,513 $121,979
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $90,065 $100,891 $111,264 $118,724 $123,045 $118,253
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.85% 8.85% 8.75% 10.28% 10.45% 11.26%
Expenses, before voluntary reimbursement
by the Manager 1.26% 1.14% 1.05% 0.98% 0.93% 0.97%
Expenses, net of voluntary reimbursement
1.24% N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (7) 80.4% 41.3% 45.0% 19.5% 59.8% 36.5%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------
CLASS B CLASS C
------------------------------------ -------------
PERIOD ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31,
1995 1994 1993(2) 1995(1)
<S> <C> <C> <C> <C>
==========================================================
===============================================
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.01 $11.11 $11.10 $10.89
- ---------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .63 .58 .40 .28
Net realized and unrealized gain (loss) .94 (1.08) .03 .10
- ---------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations 1.57 (.50) .43 .38
- ---------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.60) (.57) (.42) (.28)
Dividends in excess of net investment
income -- (.03) -- --
- ---------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.60) (.60) (.42) (.28)
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.98 $10.01 $11.11 $10.99
==========================================================
===
==========================================================
===============================================
TOTAL RETURN, AT NET ASSET VALUE (5) 16.06% (4.53)% 3.91% 3.76%
==========================================================
===============================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $39,187 $3,451 $1,809 $3,971
- ---------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $12,823 $2,747 $922 $979
- ---------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.84% 5.53% 4.80%(6) 6.32%(6)
Expenses, before voluntary reimbursement
by the Manager 2.12% 1.78% 1.90%(6) 2.25%(6)
Expenses, net of voluntary reimbursement
by the Manager 2.08% N/A N/A 1.96%(6)
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate (7) 175.4% 70.3% 110.1% 175.4%
<FN>
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns. Total returns are not annualized for
periods of less than one full year.
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended December 31, 1995 were $233,752,932 and $211,825,884, respectively.
</FN>
</TABLE>
17 Oppenheimer Bond Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Bond Fund (the Fund), formerly named Oppenheimer Investment
Grade Bond Fund, is a separate fund of Oppenheimer Integrity Funds, a
diversified, open end management investment company registered under the
Investment Company Act of 1940, as amended. The Fund's investment
objective is to seek a high level of current income by investing mainly
in debt instruments. The Fund's investment advisor is OppenheimerFunds,
Inc. (the Manager). The Fund offers Class A , Class B and Class C shares.
Class A shares are sold with a front-end sales charge.
Class B and Class C shares may be subject to a contingent deferred sales
charge. All three classes of shares have identical rights to earnings,
assets and voting privileges, except that each class has its own
distribution and/or service plan, expenses directly attributable to a
particular class and exclusive voting rights with respect to matters
affecting a single class. Class B shares will automatically convert to
Class A shares six years after the date of purchase. The following is a
summary of significant accounting policies consistently followed by the
Fund.
- -----------------------------------------------------------------------
- ---------
INVESTMENT VALUATION. Portfolio securities are valued at the close of the
New York Stock Exchange on each trading day. Listed and unlisted
securities for which such information is regularly reported are valued at
the last sale price of the day or, in the absence of sales, at values
based on the closing bid or asked price or the last sale price on the
prior trading day. Long-term and short-term "non-money market" debt
securities are valued by a portfolio pricing service approved by the Board
of Trustees. Such securities which cannot be valued by the approved
portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is
reliable and that the quotes reflect current market value, or are valued
under consistently applied procedures established by the Board of Trustees
to determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at
cost (or last determined market value) adjusted for amortization to
maturity of any premium or discount.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Delivery and payment for
securities that have been purchased by the Fund on a forward commitment
or when-issued basis can take place a month or more after the transaction
date. During this period, such securities do not earn interest, are
subject to market fluctuation and may increase or decrease in value prior
to their delivery. The Fund maintains, in a segregated account with its
custodian, assets with a market value equal to the amount of its purchase
commitments. The purchase of securities on a when-issued or forward
commitment basis may increase the volatility of the Fund's net asset value
to the extent the Fund makes such purchases while remaining substantially
fully invested. As of December 31, 1995, the Fund had entered into
outstanding when-issued or forward commitments of $10,088,020.
In connection with its ability to purchase securities on a when-issued or
forward commitment basis, the Fund may enter into mortgage "dollar-rolls"
in which the Fund sells securities for delivery in the current month and
simultaneously contracts with the same counterparty to repurchase similar
(same type coupon and maturity) but not identical securities on a
specified future date. The Fund records each dollar-roll as a sale and a
new purchase transaction.
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses
(other than those attributable to a specific class) and gains and losses
are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the
operations of that class.
FEDERAL TAXES. The Fund intends to continue to comply with provisions of
the Internal Revenue Code applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain
on investments not offset by loss carryovers, to shareholders. Therefore,
no federal income or excise tax provision is required. At December 31,
1995, the Fund had available for federal income tax purposes an unused
capital loss carryover of approximately $6,446,000, which expires between
1997 and 2003.
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends
separately for Class A, Class B and Class C shares from net investment
income each day the New York Stock Exchange is open for business and pay
such dividends monthly. Distributions from net realized gains on
investments, if any, will be declared at least once each year.
18 Oppenheimer Bond Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are
maintained in U.S. dollars. Prices of securities denominated in foreign
currencies are translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of securities and
investment income are translated at the rates of exchange prevailing on
the respective dates of such transactions. The effect of changes in
foreign currency exchange rates on investments is separately identified
from the fluctuations arising from changes in market values of securities
held and reported with all other foreign currency gains and losses in the
Fund's Statement of Operations.
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income
(loss) and net realized gain (loss) may differ for financial statement and
tax purposes primarily because of paydown gains and losses and the
recognition of certain foreign currency gains (losses) as ordinary income
(loss) for tax purposes. The character of the distributions made during
the year from net investment income or net realized gains may differ from
their ultimate characterization for federal income tax purposes. Also, due
to timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gain
(loss) was recorded by the Fund.
During the year ended December 31, 1995, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during
the year ended December 31, 1995, amounts have been reclassified to
reflect a decrease in paid-in capital of $363,225, an increase in
undistributed net investment income of $321,478, and a decrease in
accumulated net realized loss on investments of $41,747.
OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold (trade date). Discount on securities
purchased is amortized over the life of the respective securities, in
accordance with federal income tax requirements. Realized gains and losses
on investments and unrealized appreciation and depreciation are determined
on an identified cost basis, which is the same basis used for federal
income tax purposes.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those
estimates.
19 Oppenheimer Bond Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995(1) YEAR ENDED DECEMBER
31, 1994
------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
Class A:
Sold 3,592,604 $ 37,958,201 1,071,379 $ 11,256,317
Dividends reinvested 401,453 4,283,086 323,100 3,353,309
Issued in connection with
the acquisition of:
Oppenheimer Strategic Investment
Grade Bond Fund - Note 7 2,101,654 22,529,733 -- --
Quest Investment Quality Income
Fund - Note 7 3,900,357 42,201,864 -- --
Redeemed (4,249,502) (45,145,281) (1,704,508) (17,865,173)
------------- ------------- ------------- -------------
Net increase (decrease) 5,746,566 $ 61,827,603 (310,029) $ (3,255,547)
============= =============
============= =============
---------------------------------------------------------------------------------------------------------
Class B:
Sold 1,038,290 $ 11,014,073 293,817 $ 3,089,618
Dividends reinvested 45,815 494,471 11,974 123,504
Issued in connection with
the acquisition of:
Oppenheimer Strategic Investment
Grade Bond Fund - Note 7 1,474,533 15,806,991 -- --
Quest Investment Quality Income
Fund - Note 7 1,236,995 13,384,283 -- --
Redeemed (569,823) (6,076,871) (123,969) (1,294,834)
------------- ------------- ------------- -------------
Net increase 3,225,810 $ 34,622,947 181,822 $ 1,918,288
============= =============
============= ============
---------------------------------------------------------------------------------------------------------
Class C:
Sold 47,725 $ 516,952 -- $ --
Dividends reinvested 1,625 17,809 -- --
Issued in connection with
the acquisition of
Quest Investment Quality
Income Fund - Note 7 362,821 3,929,348 -- --
Redeemed (50,720) (553,589) -- --
------------- ------------- ------------- ------------
Net increase 361,451 $ 3,910,520 -- $ --
============= =============
============= ============
</TABLE>
1. For the year ended December 31, 1995 for Class A and Class B shares and
for the period from July 11, 1995 (inception of offering) to December 31,
1995 for Class C shares.
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At December 31, 1995, net unrealized appreciation on investments of
$9,978,466 was composed of gross appreciation of $11,552,223, and gross
depreciation of $1,573,757.
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund. At a meeting held on July 10, 1995,
shareholders of Oppenheimer Bond Fund approved a new investment advisory
agreement. Subsequent to July 10, management fees are as follows: .75% of
the first $200 million of the Fund's average annual net assets, .72% of
the next $200 million, .69% of the next $200 million, .66% of the next
$200 million, .60% of the next $200 million, and .50% of aggregate net
assets over $1 billion. Prior to July 10, 1995, management fees were as
follows: .50% on the first $100 million of average annual net assets with
a reduction of .05% on each $200 million thereafter, to .35% on net assets
in excess of $500 million. The Manager has agreed to reimburse the Fund
if aggregate expenses (with specified exceptions) exceed the most
stringent state regulatory limit on Fund expenses.
The Manager has agreed to reimburse the Fund for SEC fees incurred in
connection with the acquisition of Quest Investment Quality Income Fund.
For the year ended December 31, 1995, commissions (sales charges paid by
investors) on sales of Class A shares totaled $166,065, of which $59,442
was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary
of the Manager, as general distributor, and by an affiliated
broker/dealer. Sales charges advanced to broker/dealers by OFDI on sales
of the Fund's Class B and Class C shares totaled $167,546 and $5,007, of
which $14,745 was paid to an affiliated broker/dealer. During the year
ended December 31, 1995, OFDI received contingent deferred sales charges
of $33,311 upon redemption of Class B shares as reimbursement for sales
commissions advanced by OFDI at the time of sale of such shares.
20 Oppenheimer Bond Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
=======================================================================
=========
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED)
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other
registered investment companies. OFS's total costs of providing such
services are allocated ratably to these companies.
Under separate approved plans, each class may expend up to .25% of its net
assets annually to compensate OFDI for costs incurred in connection with
the personal service and maintenance of accounts that hold shares of the
Fund, including amounts paid to brokers, dealers, banks and other
institutions. In addition, Class B and Class C shares are subject to an
asset-based sales charge of .75% of net assets annually, to compensate
OFDI for sales commissions paid from its own resources at the time of sale
and associated financing costs. In the event of termination or
discontinuance of the Class B or Class C plan, the Board of Trustees may
allow the Fund to continue payment of the asset-based sales charge to OFDI
for distribution expenses incurred on Class B or Class C shares sold prior
to termination or discontinuance of the plan. At December 31, 1995, OFDI
had incurred unreimbursed expenses of $1,004,267 for Class B and $21,412
for Class C. During the year ended December 31, 1995, OFDI paid $142,856
and $2,033, respectively, to an affiliated broker/dealer as compensation
for Class A and Class B personal service and maintenance expenses, and
retained $106,790 and $1,848, respectively, as compensation for Class B
and Class C sales commissions and service fee advances, as well as
financing costs.
=======================================================================
=========
5. DEFERRED TRUSTEE COMPENSATION
A former trustee elected to defer receipt of fees earned. These deferred
fees earned interest at a rate determined by the current Board of Trustees
at the beginning of each calendar year, compounded each quarter-end. From
January 1, 1995 through May 10, 1995, the Fund was incurring interest at
a rate of 7.89% per annum. The final payment was made on May 10, 1995.
=======================================================================
=========
6. ILLIQUID AND RESTRICTED SECURITIES
At December 31, 1995, investments in securities included issues that are
illiquid or restricted. The securities are often purchased in private
placement transactions, are not registered under the Securities Act of
1933, may have contractual restrictions on resale, and are valued under
methods approved by the Board of Trustees as reflecting fair value. The
Fund intends to invest no more than 10% of its net assets (determined at
the time of purchase) in illiquid or restricted securities. The aggregate
value of these securities subject to this limitation at December 31, 1995
was $755,625 which represents .36% of the Fund's net assets. Information
concerning these securities is as follows:
<TABLE>
<CAPTION>
VALUATION PER
COST UNIT AS OF
SECURITY ACQUISITION DATE PER UNIT DECEMBER
31, 1995
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
Pulsar Internacional SA de CV, 11.80%
Nts., 9/19/96 9/14/95 $100.00 $100.75
</TABLE>
Pursuant to guidelines adopted by the Board of Trustees, certain
unregistered securities are determined to be liquid and are not included
within the 10% limitation specified above.
21 Oppenheimer Bond Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
=======================================================================
=========
7. ACQUISITION OF STRATEGIC INVESTMENT GRADE AND QUEST INVESTMENT QUALITY
INCOME FUND
On September 22, 1995, the Fund acquired all the net assets of Oppenheimer
Strategic Investment Grade Bond Fund, pursuant to an Agreement and Plan
of Reorganization approved by the Oppenheimer Strategic Investment Grade
Bond Fund shareholders on September 20, 1995. The Fund issued 2,101,654
and 1,474,533 shares of beneficial interest for Class A and Class B,
respectively, valued at $22,529,733 and $15,806,991 in exchange for the
net assets, resulting in combined Class A net assets of $125,283,258 and
Class B net assets of $24,206,043 on September 22, 1995. The net assets
acquired included net unrealized appreciation of $772,151. The exchange
qualifies as a tax-free reorganization for federal income tax purposes.
On November 24, 1995, the Fund acquired all the net assets of Quest
Investment Quality Income Fund, pursuant to an Agreement and Plan of
Reorganization approved by the Quest Investment Quality Income Fund
shareholders on November 16, 1995. The Fund issued 3,900,357, 1,236,995
and 362,821 shares of beneficial interest for Class A, Class B and Class
C, respectively, valued at $42,201,864, $13,384,283 and $3,929,348 in
exchange for the net assets, resulting in combined Class A net assets of
$168,776,907, Class B net assets of $38,281,909 and Class C net assets of
$4,265,500 on November 24, 1995. The net assets acquired included net
unrealized appreciation of $2,983,610. The exchange qualifies as a
tax-free reorganization for federal income tax purposes.
=======================================================================
=========
8. FUTURES CONTRACTS
The Fund may buy and sell futures contracts in order to gain exposure to
or protect against changes in interest rates. The Fund may also buy or
write put or call options on these futures contracts. The Fund generally
sells futures contracts to hedge against increases in interest rates and
the resulting negative effect on the value of fixed rate portfolio
securities. The Fund may also purchase futures contracts to gain exposure
to changes in interest rates as it may be more efficient or cost effective
than actually buying fixed income securities. The Fund will segregate
assets to cover its commitments under futures contracts.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Fund each day. The variation margin payments
are equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Fund recognizes a realized gain or loss
when the contract is closed or expires.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the
value of the contract or option may not correlate with changes in the
value of theunderlying securities.
22 Oppenheimer Bond Fund
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer Bond Fund:
We have audited the accompanying statement of assets and liabilities,
includingthe statement of investments, of Oppenheimer Bond Fund (formerly
Oppenheimer Investment Grade Bond Fund) as of December 31, 1995, the
related statement of operations for the year then ended, the statements
of changes in net assets for the years ended December 31, 1995 and 1994,
and the financial highlights for the period January 1, 1991 to December
31, 1995. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based
on our audits. The financial highlights (except for total return) for the
period February 1, 1985 to December 31, 1990 were audited by other
auditors whose report dated February 4, 1991, expressed an unqualified
opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1995 by correspondence
with the custodian and brokers; where replies were not received from
brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Oppenheimer
Bond Fund at December 31, 1995, the results of its operations, the changes
in its net assets, and the financial highlights for the respective stated
periods, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- ---------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
January 22, 1996
Oppenheimer Bond Fund
<PAGE>
FEDERAL INCOME TAX INFORMATION (Unaudited)
=======================================================================
=========
In early 1996, shareholders will receive information regarding all
dividends and distributions paid to them by the Fund during calendar year
1995. Regulations of the U.S. Treasury Department require the Fund to
report this information to the Internal Revenue Service.
None of the dividends paid by the Fund during the fiscal year ended
December 31, 1995 are eligible for the corporate dividend- received
deduction. The foregoing information is presented to assist shareholders
in reporting distributions received from the Fund to the Internal Revenue
Service. Because of the complexity of the federal regulations which may
affect your individual tax return and the many variations in the state and
local tax regulations, we recommend that you consult your tax advisor for
specific guidance.
24 Oppenheimer Bond Fund
<PAGE>
SHAREHOLDER MEETING (Unaudited)
On July 10, 1995, a special shareholder meeting was held at which the
proposed changes in the Fund's investment policies were approved (Proposal
No. 1), the new advisory agreement with the Manager was approved (Proposal
No. 2), and the Fund's amended Class B 12b-1 Distribution and Service Plan
was approved by Class B shareholders (Proposal No. 3), as described in the
Fund's proxy statement for that meeting. The following is a report of the
votes cast:
<TABLE>
<CAPTION>
WITHHELD/ BROKER
PROPOSAL FOR AGAINST ABSTAIN NON-VOTES TOTAL
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
Proposal No. 1 4,962,101.683 449,195.254 185,962.536 1,135,744 5,597,259.473
Proposal No. 2 4,892,601.396 492,950.944 211,707.133 1,135,744 5,597,259.473
Proposal No. 3 286,217.802 29,365.485 7,912.259 61,076 323,495.546
</TABLE>
25 Oppenheimer Bond Fund
<PAGE>
OPPENHEIMER BOND FUND
A SERIES OF OPPENHEIMER INTEGRITY FUNDS
OFFICERS AND TRUSTEES
James C. Swain, Chairman and Chief Executive Officer
Robert G. Avis, Trustee
William A. Baker, Trustee
Charles Conrad, Jr., Trustee
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Bridget A. Macaskill, President
Ned M. Steel, Trustee
Andrew J. Donohue, Vice President
David P. Negri, Vice President
David Rosenberg, Vice President
George C. Bowen, Vice President, Secretary and Treasurer
Robert J. Bishop, Assistant Treasurer
Scott Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
INVESTMENT ADVISOR
OppenheimerFunds, Inc.
DISTRIBUTOR
OppenheimerFunds Distributor, Inc.
TRANSFER AND SHAREHOLDER SERVICING AGENT
OppenheimerFunds Services
CUSTODIAN OF PORTFOLIO SECURITIES
The Bank of New York
INDEPENDENT AUDITORS
Deloitte & Touche LLP
LEGAL COUNSEL
Myer, Swanson, Adams & Wolf, P.C.
This is a copy of a report to shareholders of Oppenheimer Bond Fund. This
report must be preceded by a Prospectus of Oppenheimer Bond Fund. For
material information concerning the Fund, see the Prospectus. Shares of
Oppenheimer funds are not deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the FDIC or any other
agency, and involve investment risks, including possible loss of the
principal amount invested.
<PAGE>
- -----------------------
OPPENHEIMERFUNDS FAMILY
- -----------------------
OppenheimerFunds offers over 35 funds designed to fit virtually every
investment goal. Whether you're investing for retirement, your children's
education or tax-free income, we have the funds to help you seek your
objective. When you invest with OppenheimerFunds, you can feel comfortable
knowing that you are investing with a respected financial institution with
over 35 years of experience in helping people just like you reach their
financial goals. And you're investing with a leader in global, growth
stock and flexible fixed-income investments--with over 2.8 million
shareholder accounts and more than $41 billion under Oppenheimer's
management and that of our affiliates.
At OppenheimerFunds, we don't charge a fee to exchange shares. And you
can exchange shares easily by mail or by telephone.(1) For more
information on Oppenheimer funds, please contact your financial advisor
or call us at 1-800-525-7048 for a prospectus. You may also write us at
the address shown on the back cover. As always, please read the
prospectus carefully before you invest.
STOCK FUNDS
Global Emerging Growth Fund Growth Fund
Enterprise Fund Global Fund
Discovery Fund Quest Global Value Fund
Quest Small Cap Value Fund Oppenheimer Fund
Gold & Special Minerals Fund Value Stock Fund
Target Fund Quest Value Fund
STOCK & BOND FUNDS
Main Street Income & Growth Fund Global Growth & Income Fund
Quest Opportunity Value Fund Equity Income Fund
Total Return Fund Asset Allocation Fund
Quest Growth & Income Value Fund Strategic Income & Growth Fund
BOND FUNDS
International Bond Fund Bond Fund
High Yield Fund U.S. Government Trust
Strategic Income Fund Limited-Term Government Fund
Champion Income Fund
TAX-EXEMPT FUNDS
California Tax-Exempt Fund(2) Pennsylvania Tax-Exempt Fund(2)
Florida Tax-Exempt Fund(2) Tax-Free Bond Fund
New Jersey Tax-Exempt Fund(2) Insured Tax-Exempt Fund
new York Tax-Exempt Fund(2) Intermediate Tax-Exempt Fund
MONEY MARKET FUNDS
Money Market Fund Cash Reserves
1. Exchange privileges are subject to change or termination. Shares may
be exchanged only for shares of the same class of eligible funds.
2. Available only to investors in certain states.Oppenheimer funds are
distributed by OppenheimerFunds Distributor, Inc., Two World Trade Center,
New York, NY 10048-0203.
- -c-Copyright 1996 OppenheimerFunds, Inc. All rights reserved.
27 Oppenheimer Bond Fund
<PAGE>
INFORMATION
GENERAL INFORMATION
Monday-Friday 8:30 a.m.-8 p.m. ET
Saturday 10 a.m.-2 p.m. ET
- --------------
1-800-525-7048
- --------------
TELEPHONE TRANSACTIONS
Monday-Friday 8:30 a.m.-8 p.m. ET
- --------------
1-800-852-8457
- --------------
PHONELINK
24 hours a day, automated
information and transactions
- --------------
1-800-533-3310
- --------------
TELECOMMUNICATIONS DEVICE
FOR THE DEAF (TDD)
Monday-Friday 8:30 a.m.-8 p.m. ET
- --------------
1-800-843-4461
- --------------
OPPENHEIMERFUNDS
INFORMATION HOTLINE
24 hours a day, timely and insightful
messages on the economy and
issues that affect your investments
- --------------
1-800-835-3104
- --------------
RA0285.001.1295 February 28, 1996
- -----------------------------------------------------------------------
- -------
"HOW MAY I HELP YOU?" [PHOTO]
Jennifer Leonard, Customer Service Representative
OppenheimerFunds Services
As an Oppenheimer funds shareholder, you have some special privileges.
Whether it's automatic investment plans, informative newsletters and
hotlines, or ready account access, you can benefit from services designed
to make investing simple. And when you need help, our Customer Service
Representatives are only a toll-free phone call away. They can provide
information about your account and handle administrative requests. You
can reach them at our General Information number.
When you want to make a transaction, you can do it easily by calling our
toll-free Telephone Transactions number. And, by enrolling in AccountLink,
a convenient service that "links" your Oppenheimer funds accounts and your
bank checking or savings account, you can use the Telephone Transactions
number to make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a
week. PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management
professionals from around the country, honored the Oppenheimer fund's
transfer agent, OppenheimerFunds Services, with their Award of Excellence
in 1993.
So call us today--we're here to help.
[LOGO] OPPENHEIMERFUNDS-R-
OppenheimerFunds Distributor, Inc. Bulk Rate
P.O. Box 5270 U.S. Postage
Denver, CO 80217-5270 PAID
Permit No. 314
Farmingdale, NY
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
140 GARDEN STREET - HARTFORD, CONNECTICUT 06154 - 1-800-322-CMIA
PROSPECTUS -- 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.
- -----------------------------------------------------------------------
- ---------
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.
- -----------------------------------------------------------------------
- ---------
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.
Prospectus Page 1
<PAGE>
Connecticut Mutual Investment Accounts, Inc.
TABLE OF CONTENTS
- -----------------------------------------------------------------------
- ---------
PAGE
----
Prospectus Summary......................................................
3
Your Investment.....................................................
4
Alternative Purchase Plan...........................................
6
Your Shareholder Manual.............................................
7
Summary of Investor Expenses........................................
9
Financial Highlights....................................................
11
Investment Objectives and Policies......................................
12
Your Account............................................................
16
How to Buy Shares...................................................
16
How to Sell Shares..................................................
19
How to Exchange Shares..............................................
20
Investor Services...................................................
21
Transaction Details.................................................
23
Management..............................................................
25
The Manager.........................................................
25
Breakdown of Expenses...............................................
26
Dividends, Capital Gains and Taxes......................................
28
The Company.............................................................
30
Performance.........................................................
31
Risk Factors, Securities and Investment Techniques......................
32
Appendix A: Description of Securities Ratings...........................
A-1
Appendix B: Credit Quality Distribution.................................
B-1
Prospectus Page 2
<PAGE>
Connecticut Mutual Investment Accounts, Inc.
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
maintenance 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
of
principal 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 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.
/ / 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' distributor, 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 subject
to the sales charge applicable
to such other Account.
</TABLE>
Prospectus Page 3
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
<TABLE>
<S> <C>
DIVIDENDS AND Dividends will be paid
semi-annually for Growth Account and
Total Return Account and
OTHER DISTRIBUTIONS 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 Account 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 Statement of Intention;
Quantity Discounts; Rights of
Accumulation; Reinstatement
LIQUID ACCOUNT SHARES 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 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.
Prospectus Page 4
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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.
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."
Prospectus Page 5
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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 required to be assumed by G.R. Phelps
or
other agents. From time to time, G.R. Phelps may agree not to impose all
or a
portion of its advisory fee and/or undertake to pay or reimburse an
Account for
all or a portion of its expenses not otherwise required to be borne or
reimbursed by G.R. Phelps. 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
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 Account's 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
Prospectus Page 6
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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 $500,000 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.
- -----------------------------------------------------------------------
- ---------
YOUR SHAREHOLDER MANUAL
<TABLE>
<CAPTION>
INITIAL
SUBSEQUENT
MINIMUM INVESTMENTS 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>
- -----------------------------------------------------------------------
- -----
BY MAIL / /Complete and sign the / /Make your check
payable
application. to "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.
- -----------------------------------------------------------------------
- -----
BY WIRE / /Call 1-800-322-CMIA by / /Call 1-800-322-CMIA
by
12:00 noon Eastern Time on 12:00 noon Eastern Time
on
the day of investment to the day of investment
to
set up your account and arrange a wire
arrange a 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>
Prospectus Page 7
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
<TABLE>
<CAPTION>
BUYING SHARES TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
- -----------------------------------------------------------------------
- -----
<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 (or from the Liquid
"2") Account) with the same Account) with the same
registration, including registration,
including
name, address and name, address and
taxpayer ID number. taxpayer ID number.
- -----------------------------------------------------------------------
- -----
AUTOMATICALLY / /You may not open an / /Establish an Automatic
account automatically, but Investment Plan or
Dollar
you may complete and sign Cost Averaging
Investment
an application; make your Program. Sign up for
check payable to CMIA; these services when
and mail to the address opening your account
by
indicated on the completing Section 9
on
application. 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.
- -----------------------------------------------------------------------
- -----
SELLING SHARES ACCOUNT TYPE SPECIAL REQUIREMENTS
- -----------------------------------------------------------------------
- -----
BY MAIL / /Individual, Joint Tenant, / /The letter of
instruction
Sole Proprietorship, UGMA, must be signed by all
UTMA persons required to
sign
for transactions,
exactly
as their names appear
on
the account.
Each redemption
request is limited / /Retirement Account / /The account owner
should
to $50,000 unless complete a retirement
you have provided distribution form.
Call
a signature 1-800-322-CMIA to
request
one.
guarantee. / /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.
- -----------------------------------------------------------------------
- -----
BY PHONE / /All account types except / /Minimum request: $500,
1-800-322-CMIA retirement unless closing an
account.
Limited to $50,000 per
day.
(select option / / All account types / /You may exchange to
the
"2") same class of other
Accounts
(or to the Liquid
Account
shares) if both
accounts
are registered with
the
same name(s), address
and
taxpayer ID number.
- -----------------------------------------------------------------------
- -----
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>
Prospectus Page 8
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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
INCOME
ACCOUNT ACCOUNT ACCOUNT
ACCOUNT
- ----------------- ---------------- ---------------- -------
LIQUID CLASS
CLASS CLASS CLASS CLASS
CLASS CLASS
ACCOUNT A
B A B A B A
------ -------
- ------- ------- ------ ------- ------ -------
<S> <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%
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)
Exchange Fee(3).................................. 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%
12b-1 Fees (net of expense limits, if any)....... .00(4) .00(5)
1.00 .00(5) 1.00 .25(5) 1.00
.25(5)
Other Expenses (net of expense limits, if any)... .43 .00(6)
.00(6) .285 .285 .335 .335
.395
---- -----
- ------ ----- ----- ----- ----- -----
TOTAL ANNUAL OPERATING EXPENSES OF EACH
ACCOUNT........................................ .93% .625%
1.625% .91% 1.91% 1.21%
1.96% 1.27%
---- -----
- ------ ----- ----- ----- ----- -----
---- -----
- ----- ----- ----- ----- ----- -----
<CAPTION>
CLASS
B
------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............ None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as
applicable).................................... 5.00%
Exchange Fee(3).................................. None
ANNUAL OPERATING EXPENSES OF EACH ACCOUNT
(as a percentage of average net assets)
Management Fees.................................. .625%
12b-1 Fees (net of expense limits, if any)....... 1.00
Other Expenses (net of expense limits, if any)... .395
-----
TOTAL ANNUAL OPERATING EXPENSES OF EACH
ACCOUNT........................................ 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.
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
</TABLE>
Prospectus Page 9
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
<TABLE>
<CAPTION>
GOVERNMENT TOTAL
INCOME
SECURITIES RETURN GROWTH
ACCOUNT
ACCOUNT ACCOUNT ACCOUNT
-------
---------- ------- -------
CLASS B SHARES
<S> <C>
<C> <C> <C>
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).
Prospectus Page 10
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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 .0256 (.0256) - - 1.00 1.00
(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 .37 (.36) .67 - 9.76 10.44
(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 .33 (.33) .30 - 9.14 9.44
(unaudited)
TOTAL RETURN ACCOUNT
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 .31 (.30) 1.44 - 13.44 14.89
(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 .94(b) 5.16(b) n/a 63,864 2.58
(unaudited)
GOVERNMENT SECU
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 .94(b) 7.17(b) 55.89(b) 51,528 10.83
(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 .63(b) 7.13 37.88(b) 46,109 6.97
(unaudited)
TOTAL RETURN AC
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 1.20(b) 4.39(b) 53.78(b) 202,718 13.04
(unaudited)
</TABLE>
Prospectus Page 11
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
<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
- --------------- ------ -------- ------ ------ ----- -----
GROWTH ACCOUNT
<S> <C> <C> <C> <C> <C> <C>
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 .14 (.13) 2.42 - 14.20 16.63
(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)
- --------------- -------- -------- --------- -------- -----
GROWTH ACCOUNT
<S> <C> <C> <C> <C> <C>
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 1.26(b) 1.88(b) 75.85(b) 97,691 18.03
(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.
- -----------------------------------------------------------------------
- ---------
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.
Prospectus Page 12
<PAGE>
Connecticut Mutual Investment Accounts, Inc.
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.
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
certain
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.
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."
Prospectus Page 13
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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. CMOs are derivative securities; for a discussion of
derivative
securities, see "Risk Factors, Securities and Investment Techniques --
Derivative Investments." 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.
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
Prospectus Page 14
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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 certain 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 which are a type of derivative security. See "Risk
Factors,
Securities and Investment Techniques -- Inverse Floating Rate Instruments
- --
Mortgage Dollar Rolls and -- Derivative Investments." 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.
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.
Prospectus Page 15
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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 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>
INCOME
ACCOUNT AND
GOVERNMENT
SECURITIES
GROWTH ACCOUNT AND ACCOUNT
TOTAL RETURN ACCOUNT ------------
- -------------------------------------------
SALES
SALES
CHARGES DEALER CHARGES
AS % OF REALLOWANCE AS % OF
- -------------------------- AS A % ------------
NET AMOUNT
OFFERING OF OFFERING NET
AMOUNT
INVESTED
PRICE PRICE INVESTED
- ------------ ------------ --------------- ------------
<S> <C>
<C> <C> <C>
Less than $50,000............................................ 5.26%
5.00% 4.50% 4.17%
$50,000 but less than $75,000................................ 4.71%
4.50% 4.00% 4.17%
$75,000 but less than $100,000............................... 4.44%
4.25% 3.75% 4.17%
$100,000 but less than $250,000.............................. 3.36%
3.25% 3.00% 3.36%
$250,000 but less than $500,000.............................. 2.83%
2.75% 2.50% 2.83%
$500,000 or more.............................................
0% 0% 0%
<CAPTION>
DEALER
REALLOWANCE
AS A %
OFFERING
OF OFFERING
PRICE
PRICE
- ------------ ---------------
<S> <C>
<C>
Less than $50,000............................................ 4.00%
3.50%
$50,000 but less than $75,000................................ 4.00%
3.50%
$75,000 but less than $100,000............................... 4.00%
3.50%
$100,000 but less than $250,000.............................. 3.25%
3.00%
$250,000 but less than $500,000.............................. 2.75%
2.50%
$500,000 or more.............................................
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 including cash compensation in
excess of
the applicable sales charge 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."
Prospectus Page 16
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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 DEALER
AT OFFERING PRICE CONCESSIONS 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.
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.
Prospectus Page 17
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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) 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 $500,000 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
Prospectus Page 18
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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, 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 subject to a CDSC of any of the other
Accounts
in the Company, such shares of the Liquid Account when redeemed are
subject to
the CDSC rate of the original shares purchased minus a credit for the Rule
12b-1
fees, if any, paid while in the Liquid Account. See "How to Exchange
Shares".
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the methods
described below.
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.
Prospectus Page 19
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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. The Company reserves
the
right to waive the requirement of a signature guarantee in certain limited
circumstances. 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.
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.
Prospectus Page 20
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
/ / 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
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, if any, 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
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).
Prospectus Page 21
<PAGE>
Connecticut Mutual Investment Accounts, Inc.
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.
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
Prospectus Page 22
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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.
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
Prospectus Page 23
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
Account if a constant NAV is maintained, 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:
/ / 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, 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.
Prospectus Page 24
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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)
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)
Government Stephen F. Libera, C.F.A. 1985 Vice
President and Senior Portfolio
Manager,
Securities
Fixed Income -- G.R. Phelps (1989-Present)
Account
William H. Jefferis 1993
Portfolio Manager, Fixed Income -- CML
(1993-present); Investment Officer, Fixed Income
--
CML (1990-1993)
Total Return Michael C. Strathearn, C.F.A. 1988
Portfolio Manager, Equities -- CML
(1988-Present)
Account
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)
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)
</TABLE>
Prospectus Page 25
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
<TABLE>
<CAPTION>
YEAR BECAME
ACCOUNT PORTFOLIO MANAGER PORTFOLIO MANAGER
BUSINESS
EXPERIENCE (LAST 5 YEARS)
- -------------- --------------------------------- -----------------
- -------------------------------------------------
Growth Account Peter M. Antos, C.F.A. 1989 Vice
President and Senior Portfolio
Manager,
Equities -- G.R. Phelps (1989-Present)
<S> <C> <C> <C>
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.
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>
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>
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.
From time to time, G.R. Phelps may agree not to impose all or a portion
of its
advisory fee and/or undertake to pay or reimburse an Account for all or
a
portion of its expenses not otherwise required to be borne or reimbursed
by G.R.
Phelps. Any such fee reduction or undertaking may be discontinued or
modified by
G.R. Phelps at any time. 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
Prospectus Page 26
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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
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,
Prospectus Page 27
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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.
MERGER OF PARENT OF G.R. PHELPS
The Boards of Directors of Connecticut Mutual Life Insurance Company (the
parent
company to G.R. Phelps) ("CML") and Massachusetts Mutual Life Insurance
Company
("MassMutual") have approved a plan of merger pursuant to which CML would
merge
with and into MassMutual. The agreement was signed on September 13, 1995.
The
merger, if consummated, will result in the Adviser becoming a wholly-owned
subsidiary of MassMutual. The merger is expected to be consummated on or
about
December 31, 1995, subject to the approval of certain policy holders and
insureds of CML and MassMutual and applicable regulatory authorities.
Consummation of the merger may result in an assignment, and consequently
a
termination, of each existing investment management agreement between the
Adviser and the Fund and any sub-investment management agreement among the
Adviser, Sub-Adviser and the Fund. Fund shareholders on the record date
will be
asked to vote on new investment management agreements to become effective
at or
about the time the transaction is completed.
- -----------------------------------------------------------------------
- ---------
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.
Prospectus Page 28
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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.
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.
Prospectus Page 29
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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 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 August 31, 1995, Connecticut Mutual and its affiliates owned 29% of
the
shares of the Company, including 33% 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.
Prospectus Page 30
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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.
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 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
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Connecticut Mutual Investment Accounts, Inc.
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 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.
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CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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 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
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CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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 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 a fund's investment objective 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
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<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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 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.
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
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CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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 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
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CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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.
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 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%
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CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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.
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
Prospectus Page 38
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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 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
Prospectus Page 39
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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.
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.
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.
Prospectus Page 40
<PAGE>
Connecticut Mutual Investment Accounts, Inc.
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 consi-
dered 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 (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
Appendix Page A-1
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
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.
Appendix Page A-2
<PAGE>
Connecticut Mutual Investment Accounts, Inc.
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>
Appendix Page 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
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
<TABLE>
<CAPTION>
<C> <S> <C> <C>
1. General Information 1
2. Investment Objectives and Policies 1
3. Investment Restrictions 20
4. Management 30
5. Investment Advisory Arrangements 35
6. Account Expenses 39
7. Distribution Arrangements 39
8. Distribution Financing Plans 40
9. Portfolio Transactions and Brokerage 42
10. Determination of Net Asset Value 44
11. Purchase and Redemption of Shares 45
12. Investment Performance 47
13. Taxes .... 54
14. Custodian 58
15. Transfer Agent Services 58
16. Independent Certified Public Accountants 58
17. Other Information 58
18. Financial Statements 59
</TABLE>
____________________
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.
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 in its
respective Prospectus, 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 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 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 invest-ment 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 govern-mental 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.
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.
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 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 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.
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 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 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.
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.
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 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. 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 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
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 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
obliga-tions 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 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. 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, 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 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 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 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 liquidity 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 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
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.
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 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.
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.
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.
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 paragraphs 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.
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.
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 Income, Growth, Total Return and Liquid Accounts of the
Company may not, as a non-fundamental investment restriction, invest more
than
5% of its total assets in securities of any issuer which, together with
its
predecessors, has been in operation for less than three years.
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.
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. 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.
(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.
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
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-June, 1995).
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 August 31, 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:
<TABLE>
<CAPTION>
RICHARD M. DONALD E. RICHARD W. BEVERLY L.
DONALD H. DAVID
E.
AYERS A.CARSON GREENE HAMILTON POND,
JR. SAMS, JR.
<S> <C> <C> <C> <C> <C>
<C>
COMPENSATION
RECEIVED FROM
ACCOUNT
Liquid Account* $1,000 $962.50 $1,100 $1,000 $-0-
$-0-
</TABLE>
Government
Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
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-
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-
</TABLE>
____________
* As of most recently completed fiscal year.
** Estimated for current fiscal year.
*** As of the calendar year ended December 31, 1994, there were sixteen
investment companies in the Complex (including the Accounts).
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 August 31, 1995, CML and its affiliates owned shares of certain
accounts as follows: Government Securities Account (733,944 shares) (15%
of
shares outstanding); Income Account (1,550,411 shares) (31% of shares
outstanding); Total Return Account (211 shares) (0% of shares
outstanding);
Growth Account (1,848,510 shares) (31% of shares outstanding); and Liquid
Account (23,540,988 shares) (33% of shares outstanding), Capital
Appreciation
Account (2,512,549 shares) (95% of shares outstanding); Balanced Account
(3,359,773 shares) (96% of shares outstanding); Diversified Income
(2,033,202
shares) (95% 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 August 31, 1995, no other shareholder of the Company owns of
record
or beneficially 5% or more of the shares outstanding of any Account.
As of August 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 9%
Yoakum, TX
Julius and Deanna Staatz 7%
Yoakum, TX
James A. Jones
Bettendorf, IA 12%
CMIA CALIFORNIA MUNICIPAL ACCOUNT
Frank J. Edwards IV
Houston, TX 18%
Archie and Winifred Dingwall
Fresno, CA 22%
Frank E. Blakeley
Fresno, CA 56%
CMIA MASSACHUSETTS MUNICIPAL ACCOUNT
Tom F. and Edna M. Cavanaugh
Carver, MA 35%
CML
Hartford, CT 8%
Martin J. Healey
Lynn, MA 21%
Eugene F. and Jean K. Walsh
Tewksbury, MA 27%
CMIA NEW YORK MUNICIPAL ACCOUNT
Robert W. Lang
Gloversville, NY 5%
Michael Nicoletto
Huntington, NY 6%
Herbert F. Ross
Rochester, NY 7%
Shirley M. Baker
Elma, NY 9%
Arnold and Ellen Ostrower
New York, NY 17%
Salvatore J. Bellavia
Syracuse, NY 29%
CMIA OHIO MUNICIPAL ACCOUNT
Martha L. Lanter
Springfield, OH 5%
Lawrence H. Stookey, Jr.
Sandusky, OH 6%
Hardy & Hardy Co.
Lima, OH 7%
Lawrence A. Walborn
Sylvania, OH 7%
Friddle Trust
Mason, OH 19%
Warren and Mary Copeland
Lima, OH 24%
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.
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, 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.
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:
<TABLE>
<CAPTION>
1992 1993 1994
---------- ---------- ----------
<S> <C> <C> <C>
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
========== ========== ==========
<FN>
The LifeSpan Accounts commenced operations in fiscal 1995 and
therefore
paid no advisory fees during the periods listed above.
</TABLE>
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.
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.
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 representa-tives 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 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:
<TABLE>
<CAPTION>
1992 1993 1994
---------- ---------- ----------
<S> <C> <C> <C>
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
<FN>
Each of the LifeSpan Accounts commenced operations in fiscal 1995 and
therefore paid no underwriting fees during the periods listed above.
</TABLE>
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).
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
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 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.
Brokerage commissions for the most recent three year period for the
Growth Account and the Total Return Account were as follows:
<TABLE>
<CAPTION>
1992 1993 1994
------------ ------------ ------------
Brokerage Brokerage Brokerage
<S> <C> <C> <C>
Account Commissions Commissions Commissions
- -------------------- ------------ ------------ ------------
Growth Account $ 201,111 $ 187,654 $ 249,665
Total Return Account $ 277,519 $ 297,403 $ 379,734
</TABLE>
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).
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 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.
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 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.
Special Redemptions. Although it would not normally do so, each
Account
has the right to pay the redemption price of shares of the Account in
whole or
in part in portfolio securities as prescribed by the Directors. When the
shareholder sells portfolio securities received in this fashion, he would
incur a brokerage charge. Any such securities would be valued for the
purposes of making such payment at the same value as used in determining
net
asset value. The Accounts have elected to be governed by Rule 18f-1 under
the
Investment Company Act, pursuant to which each Account is obligated to
redeem
shares solely in cash up to the lesser of $250,000 of 1% of the net asset
value of the applicable Account during any 90 day period for any one
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.
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:
<TABLE>
<CAPTION>
P(1+T) n = ERV
<S> <C> <C>
Where: P = a hypothetical initial payment of $1,000, less the
maximum sales load applicable to an Account
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)
</TABLE>
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 perform-ance 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 reinvest-ment 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.
The charts below set forth certain performance information for the
Class
A shares of the Government Securities, Income, Total Return and Growth
Accounts as of June 30, 1995 and Capital Appreciation, Balanced, and
Diversified Income Accounts as of August 31, 1995, adjusted to reflect the
maximum sales charge (5.00% for the Growth, Total Return, Capital
Appreciation, Balanced and Diversified Income Accounts 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:
<TABLE>
<CAPTION>
Total Return Total Return
Annualized Annualized
<S> <C> <C> <C>
Investment Investment (including 4% (excluding 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:
</TABLE>
<TABLE>
<CAPTION>
Total Return Total Return
Annualized Annualized
<S> <C> <C> <C>
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:
</TABLE>
<TABLE>
<CAPTION>
Total Return Total Return
Annualized Annualized
<S> <C> <C> <C>
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:
</TABLE>
<TABLE>
<CAPTION>
Total Return Total Return
Annualized Annualized
<S> <C> <C> <C>
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
Value of a $1,000 Investment in the Class A shares of the Capital
Appreciation Account:
</TABLE>
<TABLE>
<CAPTION>
Total Return Total Return
Annualized Annualized
<S> <C> <C> <C>
Investment Investment (excluding 5% (including 5%
Period Date sales charge) sales charge)
Life of Account 5/1/95* 9.25% 3.78%
to 8/31/95
Value of a $1,000 Investment in the Class A shares of the Balanced
Account:
</TABLE>
<TABLE>
<CAPTION>
Total Return Total Return
Annualized Annualized
<S> <C> <C> <C>
Investment Investment (excluding 5% (including 5%
Period Date sales charge) sales charge)
Life of Account 5/1/95* 9.25% 3.78%
to 8/31/95
Value of a $1,000 Investment in the Class A shares of the Diversified
Income Account:
</TABLE>
<TABLE>
<CAPTION>
Total Return Total Return
Annualized Annualized
<S> <C> <C> <C>
Investment Investment (excluding 5% (including 5%
Period Date sales charge) sales charge)
Life of Account 5/1/95* 9.25% 3.78%
to 8/31/95
No Class B shares of any of the Accounts were outstanding during the
periods.
</TABLE>
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
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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
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
</TABLE>
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.
<TABLE>
<CAPTION>
<S> <C>
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
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
</TABLE>
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 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 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.
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 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 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 (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.
<PAGE>
<TABLE>
<S> <C>
SCHEDULE OF INVESTMENTS CONNECTICUT
MUTUAL
INVESTMENT ACCOUNTS, INC.
December 31,
1994
</TABLE>
LIQUID ACCOUNT
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
COMMERCIAL PAPER
(94.2% OF NET ASSETS)
American Express Credit Corp.
$ 900,000 5.80%, due 1/5/95 $ 900,000
1,042,000 5.85%, due 1/6/95 1,042,000
Banc One Corp.
2,240,000 5.97%, due 1/18/95 2,233,685
1,000,000 5.75%, due 2/13/95 993,132
Bell Atlantic Financial Services,
Inc.
2,000,000 5.57%, due 1/10/95 1,997,215
1,000,000 5.98%, due 1/25/95 996,013
Cargill, Inc.
1,050,000 5.45%, due 1/26/95 1,046,026
1,100,000 5.50%, due 2/6/95 1,093,950
Cargill Financial Services Corp.
1,000,000 5.05%, due 2/7/95 994,810
Central & South West Corp.
1,000,000 5.80%, due 1/24/95 996,294
500,000 6.17%, due 2/7/95 496,829
1,200,000 6.10%, due 2/14/95 1,191,053
Cincinnati Bell, Inc.
2,600,000 6.10%, due 1/3/95 2,599,119
Corporate Asset Funding Co., Inc.
1,000,000 5.45%, due 1/26/95 996,215
Corporate Receivables Corp.
580,000 5.47%, due 1/9/95 579,295
Dover Corp.
1,000,000 5.90%, due 1/24/95 996,231
1,500,000 5.85%, due 1/31/95 1,492,688
Ford Motor Credit Co.
1,700,000 5.81%, due 2/16/95 1,700,000
545,000 5.81%, due 2/21/95 545,000
1,200,000 5.83%, due 3/13/95 1,200,000
General Electric Capital Corp.
1,250,000 5.06%, due 2/27/95 1,250,000
647,000 6.03%, due 3/2/95 647,000
General Mills, Inc.
1,840,000 6.02%, due 1/4/95 1,839,077
Golden Peanut Co.
1,200,000 5.62%, due 2/3/95 1,193,818
1,000,000 5.63%, due 2/7/95 994,214
800,000 6.22%, due 3/17/95 789,633
International Lease Finance Corp.
500,000 5.00%, due 1/10/95 499,375
1,000,000 5.40%, due 1/12/95 998,350
1,950,000 5.87%, due 3/21/95 1,924,881
Interstate Power Co.
2,000,000 5.92%, due 1/23/95 1,992,764
McGraw-Hill Inc.
1,840,000 5.63%, due 2/2/95 1,830,792
900,000 5.80%, due 2/17/95 893,185
Merrill Lynch & Co., Inc.
900,000 5.60%, due 2/7/95 894,820
1,000,000 5.77%, due 2/15/95 992,788
$ 1,000,000 5.90%, due 2/28/95 $ 990,494
Michigan Consolidated Gas Co.
1,500,000 5.45%, due 1/13/95 1,497,275
1,000,000 5.48%, due 1/13/95 998,173
Morgan (J.P.) & Co., Inc.
1,000,000 6.20%, due 3/1/95 989,839
National Rural Utilities
Cooperative Finance Corp.
1,095,000 5.65%, due 1/3/95 1,094,656
2,075,000 5.95%, due 1/11/95 2,071,571
Norwest Corp.
1,000,000 5.63%, due 1/17/95 997,498
1,230,000 5.78%, due 2/15/95 1,221,113
PHH Corp.
755,000 6.00%, due 1/5/95 754,497
1,600,000 6.05%, due 1/25/95 1,593,547
Philip Morris Companies Inc.
1,100,000 6.05%, due 1/19/95 1,096,673
U.S. Bancorp
1,000,000 5.42%, due 1/12/95 998,344
1,000,000 5.37%, due 1/17/95 997,613
1,085,000 5.50%, due 1/27/95 1,080,690
U S West Communications, Inc.
1,500,000 5.35%, due 1/11/95 1,497,771
1,500,000 5.55%, due 1/23/95 1,494,913
-----------
TOTAL COMMERCIAL PAPER
(COST $60,204,919) 60,204,919
-----------
U.S. AGENCY SHORT-TERM OBLIGATIONS
(5.8% OF NET ASSETS)
Federal Farm Credit Banks
1,000,000 5.55%, due 2/6/95 994,450
Federal National Mortgage Assn.
750,000 5.73%, due 2/28/95 743,076
Student Loan Marketing Assn.
2,000,000 5.90%, due 5/14/96 2,000,000
-----------
TOTAL U. S. AGENCY SHORT-TERM
OBLIGATIONS (COST $3,737,526) 3,737,526
-----------
TOTAL INVESTMENTS
(COST $63,942,445) $63,942,445
-----------
-----------
</TABLE>
GOVERNMENT SECURITIES ACCOUNT
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
U.S. GOVERNMENT & AGENCY
LONG-TERM OBLIGATIONS
(97.9% OF NET ASSETS)
Federal National Mortgage Assn.
$ 1,388,913 7.00%, 2019 $ 1,333,787
Government National Mortgage Assn.
107,126 11.50%, 1998 116,030
60,135 9.50%, 2001 62,202
53,621 7.25%, 2005 52,507
349,172 7.50%, 2006 338,459
</TABLE>
4 The accompanying notes are an integral part of these financial
statements.
<PAGE>
GOVERNMENT SECURITIES ACCOUNT (cont'd)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
$ 211,624 8.00%, 2006 $ 210,221
480,723 7.50%, 2007 464,062
558,997 8.00%, 2007 546,593
193,430 8.25%, 2008 191,938
91,430 9.00%, 2008 93,258
618,933 9.00%, 2009 631,312
10,208 13.50%, 2010 11,816
123,467 13.00%, 2011 141,679
4,378 13.50%, 2011 5,068
66,694 14.00%, 2011 77,865
60,289 15.00%, 2011 71,443
3,798 12.00%, 2012 4,221
109,397 13.50%, 2012 125,857
192,524 15.00%, 2012 228,141
111,335 11.50%, 2013 122,330
45,728 13.00%, 2013 52,472
218,165 13.50%, 2013 252,526
90,819 12.00%, 2014 100,922
300,618 12.50%, 2014 337,068
141,917 13.00%, 2014 162,850
1,421 13.50%, 2014 1,645
583,317 8.50%, 2016 578,418
457,298 6.75%, 2017 454,298
447,698 10.00%, 2019 470,499
105,652 12.50%, 2019 118,463
2,205,499 6.50%, 2023 1,911,197
8,673,606 7.00%, 2023 7,784,561
3,652,606 7.00%, 2024 3,278,214
U.S. Treasury Bonds
2,250,000 11.75%, 2010 2,832,547
11,000,000 9.25%, 2016 12,376,760
U.S. Treasury Notes
2,000,000 9.25%, 1996 2,038,120
6,000,000 9.375%, 1996 6,133,140
4,500,000 8.50%, 1997 4,567,500
3,500,000 8.875%, 1997 3,592,435
6,750,000 9.25%, 1998 7,043,220
-----------
TOTAL U.S. GOVERNMENT & AGENCY
LONG-TERM OBLIGATIONS
(COST $62,872,182) 58,915,644
-----------
REPURCHASE AGREEMENTS*
(.3% OF NET ASSETS)
State Street Bank & Trust Co.
165,000 5.15%, due 1/3/95 (COST $165,000) 165,000
-----------
TOTAL INVESTMENTS
(COST $63,037,182) $59,080,644
-----------
-----------
</TABLE>
INCOME ACCOUNT
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
CORPORATE BONDS
(82.4% OF NET ASSETS)
AEROSPACE (1.6%)
British Aerospace Finance Inc.
$ 500,000 8.00%, 1997 $ 495,312
Coltec Industries Inc.
250,000 9.75%, 2000 246,250
-----------
741,562
-----------
AIRLINES (1.1%)
Southwest Airlines Co.
500,000 9.25%, 1998 510,795
-----------
AUTO & AUTO RELATED (2.9%)
Burmah Castrol Capital, Ltd.
500,000 7.00%, 1997 484,650
Chrysler Corp.
500,000 13.00%, 1997 504,720
Ford Motor Co.
404,047 6.27%, 2000 369,485
-----------
1,358,855
-----------
BANKING (13.3%)
Banco Ganadero S.A.
400,000 9.75%, 1999 388,000
Bank of Boston Corp.
400,000 10.30%, 2000 406,272
BankAmerica Corp.
500,000 6.00%, 1997 474,125
Barnett Banks, Inc.
515,000 8.50%, 1999 512,101
Chemical Banking Corp.
500,000 6.625%, 1998 476,535
First Fidelity Bancorporation
500,000 8.50%, 1998 500,590
First Union Corp.
500,000 6.75%, 1998 476,690
First USA Bank of Delaware
500,000 5.05%, 1995 487,240
250,000 5.35%, 1996 234,484
Home Savings of America
500,000 10.50%, 1997 513,550
Mellon Financial Co.
500,000 6.50%, 1997 478,050
Security Pacific Corp.
500,000 7.75%, 1996 497,290
Shawmut National Corp.
750,000 8.875%, 1996 754,995
-----------
6,199,922
-----------
BROKER/DEALER (1.3%)
Merrill Lynch & Co., Inc.
600,000 8.25%, 1996 599,182
-----------
</TABLE>
*Repurchase agreements are fully collateralized by U.S. Government
obligations.
5
<PAGE>
INCOME ACCOUNT (cont'd)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
BUILDING MATERIALS & CONSTRUCTION
(.5%)
Cemex
$ 250,000 8.875%, 1998 $ 239,854
-----------
CHEMICALS (2.6%)
Grace (W.R.) & Co.
500,000 7.40%, 2000 473,650
Lyondell Petrochemical Co.
750,000 8.25%, 1997 742,102
-----------
1,215,752
-----------
CONGLOMERATES (.8%)
Tenneco, Inc.
375,000 10.00%, 1998 391,620
-----------
DRUGS & COSMETICS (.8%)
Roche Holdings Inc.
500,000 2.75%, 2000 384,687
-----------
ELECTRIC UTILITIES (2.6%)
Consumers Power Co.
250,000 8.75%, 1998 250,040
Long Island Lighting Co.
500,000 8.75%, 1996 501,765
Midwest Power Systems Inc.
500,000 6.25%, 1998 471,880
-----------
1,223,685
-----------
ELECTRICAL & ELECTRONIC EQUIPMENT
(1.6%)
Electrolux
500,000 7.75%, 1997 491,250
Westinghouse Electric Corp.
250,000 7.75%, 1996 247,745
-----------
738,995
-----------
FINANCIAL SERVICES (14.6%)
Allied Lyons
500,000 6.50%, 1997 478,750
American General Finance Corp.
500,000 8.50%, 1998 501,500
Aristar, Inc.
500,000 6.25%, 1996 486,075
Avco Financial Services, Inc.
500,000 5.875%, 1997 470,745
Banque Nationale de Paris
205,000 9.875%, 1998 213,700
Chrysler Financial Corp.
500,000 5.08%, 1997 470,280
Countrywide Funding Corp.
500,000 6.57%, 1997 479,960
Discover Credit Corp.
250,000 8.73%, 1996 251,958
Fleet Mortgage Group, Inc.
500,000 6.125%, 1997 474,285
General Motors Acceptance Corp.
1,000,000 5.65%, 1997 925,080
Green Tree Financial Corp.
250,000 7.70%, 2019 243,125
Household Financial Corporation
Ltd.
$ 250,000 6.00%, 1998 $ 232,075
Household International
Netherlands B.V.
250,000 6.00%, 1999 229,015
Nacional Financier
400,000 10.625%, 2001 362,500
Norwest Financial, Inc.
500,000 6.50%, 1997 478,700
Transamerica Finance Group, Inc.
500,000 7.42%, 1998 487,435
-----------
6,785,183
-----------
FOOD & BEVERAGES (3.3%)
ConAgra, Inc.
500,000 9.75%, 1997 514,865
Grand Metropolitan Investment
Corp.
500,000 8.125%, 1996 500,935
Seagram Company Ltd.
500,000 9.75%, 2000 506,945
-----------
1,522,745
-----------
INSURANCE (.8%)
SunAmerica Inc.
370,000 9.00%, 1999 373,522
-----------
LEASING (2.1%)
Penske Truck Leasing Co.
500,000 7.75%, 1999 483,630
U.S. Leasing International Inc.
500,000 7.00%, 1997 482,365
-----------
965,995
-----------
LODGING & RESTAURANTS (.4%)
Host Marriott Hospitality Inc.
206,000 9.125%, 2000 203,168
-----------
MACHINERY & EQUIPMENT (1.0%)
Caterpillar Financial Services
Corp.
500,000 6.85%, 1997 481,610
-----------
MORTGAGE-BACKED SECURITIES (5.6%)
American Southwest Financial Corp.
1,559,244 8.25%, 2016 1,493,459
GE Capital Mortgage Services, Inc.
161,584 6.50%, 2024 154,767
Housing Securities, Inc.
250,000 7.25%, 2012 244,141
Ryland Mortgage Securities Corp.
444,482 8.339%, 2030 423,369
Salomon Brothers, Inc.
296,291 0.00%, 2017 199,810
200,220 12.50%, 2017 79,774
-----------
2,595,320
-----------
OIL & GAS (10.6%)
Arkla, Inc.
505,000 9.875%, 1997 510,050
BP America Inc.
500,000 8.875%, 1997 507,430
</TABLE>
6 The accompanying notes are an integral part of these financial
statements.
<PAGE>
INCOME ACCOUNT (cont'd)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
Bridas Corp.
$ 250,000 12.50%, 1999 $ 241,250
Coastal Corp.
500,000 11.125%, 1998 507,500
500,000 8.75%, 1999 494,410
El Paso Natural Gas Co.
250,000 6.90%, 1997 243,333
Empresa Columbia de Petroleos
250,000 7.25%, 1998 230,000
Florida Gas Transmission Co.
500,000 7.75%, 1997 491,585
Petroleos Mexicanos
250,000 8.25%, 1998 233,125
Occidental Petroleum Corp.
500,000 6.43%, 1997 475,735
Phillips Petroleum Co.
500,000 7.53%, 1998 490,652
Transco Energy Co.
350,000 11.25%, 1999 372,312
Transcontinental Gas Pipe Line
Corp.
150,000 9.00%, 1996 151,125
-----------
4,948,507
-----------
PAPER & FOREST PRODUCTS (1.8%)
Celulosa Arauco y Constitucion
S.A.
350,000 7.25%, 1998 332,063
Georgia-Pacific Corp.
500,000 9.85%, 1997 513,880
-----------
845,943
-----------
PRINTING & PUBLISHING (2.1%)
Reed Publishing USA Inc.
500,000 7.20%, 1997 492,740
Time Warner Inc.
500,000 7.45%, 1998 476,565
-----------
969,305
-----------
RETAIL TRADE (2.1%)
Kmart Corp.
500,000 8.61%, 1997 503,795
Sears, Roebuck & Co.
500,000 8.39%, 1999 496,705
-----------
1,000,500
-----------
SAVINGS & LOAN (1.1%)
Golden West Financial Corp.
500,000 8.625%, 1998 502,650
-----------
TELECOMMUNICATIONS (1.3%)
Tele-Communications, Inc.
615,000 5.28%, 1996 587,811
-----------
TELEPHONE UTILITIES (2.2%)
GTE Corp.
500,000 8.85%, 1998 504,790
MCI Communications Corp.
500,000 7.625%, 1996 496,235
-----------
1,001,025
-----------
TOBACCO (2.1%)
B.A.T Capital Corp.
$ 500,000 6.66%, 2000 $ 445,585
Philip Morris Companies Inc.
500,000 8.75%, 1996 505,040
-----------
950,625
-----------
TRANSPORTATION (2.2%)
Federal Express Corp.
500,000 9.75%, 1996 510,100
250,000 6.25%, 1998 233,953
Southern Pacific Transportation
Co.
250,000 10.50%, 1999 253,750
-----------
997,803
-----------
TOTAL CORPORATE BONDS
(COST $40,705,389) 38,336,621
-----------
U.S. GOVERNMENT & AGENCY
LONG-TERM OBLIGATIONS
(10.0% OF NET ASSETS)
Federal Home Loan Mortgage Corp.
202,261 5.50%, 1997 194,487
636,250 5.50%, 1998 611,794
Federal National Mortgage Assn.
926,229 7.50%, 2008 886,568
913,336 7.00%, 2009 855,394
877,461 8.00%, 2009 845,310
250,000 6.00%, 2019 223,592
Government National Mortgage Assn.
54,277 13.00%, 2014 62,283
U.S. Treasury Notes
500,000 5.125%, 1998 454,845
500,000 9.00%, 1998 516,795
-----------
TOTAL U.S. GOVERNMENT & AGENCY
LONG-TERM OBLIGATIONS
(COST $4,848,807) 4,651,068
-----------
FOREIGN GOVERNMENT BONDS
(2.5% OF NET ASSETS)
Fomento Economico Mexicano
250,000 9.50%, 1997 247,188
Province of Ontario
500,000 8.25%, 1996 502,270
United Mexican States
500,000 6.97%, 2000 422,616
-----------
TOTAL FOREIGN GOVERNMENT BONDS
(COST $1,274,203) 1,172,074
-----------
COMMERCIAL PAPER
(3.2% OF NET ASSETS)
Johnson Controls, Inc.
1,500,000 5.80%, due 1/3/95 (COST $1,499,517) 1,499,517
-----------
TOTAL INVESTMENTS
(COST $48,327,916) $45,659,280
-----------
-----------
</TABLE>
7
<PAGE>
TOTAL RETURN ACCOUNT
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
COMMON STOCKS
(41.6% OF NET ASSETS)
AEROSPACE (3.2%)
31,600 General Dynamics Corp. $ 1,374,600
20,200 General Motors Corp. Class H 704,475
19,400 Lockheed Corp. 1,408,925
34,700 Loral Corp. 1,314,262
6,000 McDonnell Douglas Corp. 852,000
-----------
5,654,262
-----------
APPAREL & TEXTILES (.7%)
30,700 Reebok International Ltd. 1,212,650
-----------
AUTO & AUTO RELATED (.4%)
16,000 Johnson Controls, Inc. 784,000
-----------
BANKING (2.2%)
46,200 Bank of New York Co., Inc. 1,339,800
37,200 Citicorp 1,539,150
7,200 Wells Fargo & Co. 1,044,000
-----------
3,922,950
-----------
CHEMICALS (1.6%)
14,300 FMC Corp. 825,825
21,100 Georgia Gulf Corp. 820,262
31,600 Grace (W.R.) & Co. 1,220,550
-----------
2,866,637
-----------
CONGLOMERATES (1.0%)
23,100 AlliedSignal Inc. 785,400
19,300 Textron, Inc. 972,237
-----------
1,757,637
-----------
DRUGS & COSMETICS (.7%)
18,600 American Home Products Corp. 1,167,150
-----------
ELECTRIC UTILITIES (2.2%)
42,400 American Electric Power Co., Inc. 1,393,900
41,000 FPL Group, Inc. 1,440,125
50,100 Illinova Corp. 1,089,675
-----------
3,923,700
-----------
ELECTRICAL & ELECTRONIC EQUIPMENT
(.6%)
10,100 LSI Logic Corp. 407,787
15,350 Micron Technology Inc. 677,319
-----------
1,085,106
-----------
ENERGY SERVICES (.4%)
19,200 Offshore Pipelines, Inc. 434,400
9,100 Tosco Corp. 265,037
-----------
699,437
-----------
FOOD & BEVERAGES (2.3%)
82,923 Archer Daniels Midland Co. 1,710,277
10,100 IBP, Inc. 305,525
33,200 Ralcorp Holdings, Inc. 738,700
46,800 Seagram Company Ltd. 1,380,600
-----------
4,135,102
-----------
HEALTH SERVICES & HOSPITAL SUPPLIES
(2.4%)
51,900 Baxter International Inc. 1,466,175
36,500 Charter Medical Corp. $ 784,750
31,500 Columbia Healthcare Corp. 1,149,750
25,800 Foundation Health Corp. 799,800
-----------
4,200,475
-----------
INSURANCE (1.9%)
30,700 American General Corp. 867,275
16,800 St. Paul Companies Inc. 751,800
39,700 TIG Holdings, Inc. 744,375
34,000 Travelers, Inc. 1,105,000
-----------
3,468,450
-----------
LEASING (.3%)
28,200 Ryder System, Inc. 620,400
-----------
LEISURE RELATED (.9%)
60,500 Mattel, Inc. 1,520,062
-----------
MACHINERY & EQUIPMENT (1.9%)
26,100 Caterpillar Inc. 1,438,763
34,900 Mark IV Industries, Inc. 689,275
25,900 Parker-Hannifin Corp. 1,178,450
-----------
3,306,488
-----------
MISCELLANEOUS (1.3%)
63,000 Dial Corp. 1,338,750
22,800 Premark International, Inc. 1,020,300
-----------
2,359,050
-----------
OFFICE EQUIPMENT (.8%)
15,200 Xerox Corp. 1,504,800
-----------
OIL & GAS (3.5%)
20,100 Amoco Corp. 1,188,413
25,500 El Paso Natural Gas Co. 777,750
16,300 Mobil Corp. 1,373,275
71,600 Panhandle Eastern Corp. 1,414,100
11,400 Royal Dutch Petroleum Co. 1,225,500
11,200 Ultramar Corp. 285,600
-----------
6,264,638
-----------
PAPER & FOREST PRODUCTS (1.8%)
7,200 Georgia-Pacific Corp. 514,800
21,700 Scott Paper Co. 1,500,013
24,200 Willamette Industries, Inc. 1,149,500
-----------
3,164,313
-----------
RETAIL TRADE (5.1%)
52,900 American Stores Co. 1,421,688
10,200 Dayton Hudson Corp. 721,650
29,800 Dillard Department Stores, Inc. 797,150
27,900 Eckerd Corp. 833,513
43,900 Kroger Co. 1,059,088
60,700 Safeway Inc. 1,934,812
30,600 Sears, Roebuck & Co. 1,407,600
50,900 Waban, Inc. 903,475
-----------
9,078,976
-----------
TECHNOLOGY (3.4%)
44,100 Compaq Computer Corp. 1,741,950
Computer Associates International,
32,000 Inc. 1,552,000
International Business Machines
20,800 Corp. 1,528,800
</TABLE>
8 The accompanying notes are an integral part of these financial
statements.
<PAGE>
TOTAL RETURN ACCOUNT (cont'd)
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
10,500 Stratus Computer, Inc. $ 399,000
21,100 Sun Microsystems, Inc. 749,050
-----------
5,970,800
-----------
TELEPHONE UTILITIES (1.0%)
44,100 Ameritech Corp. 1,780,537
-----------
TOBACCO (1.6%)
44,300 American Brands, Inc. 1,661,250
21,700 Philip Morris Companies Inc. 1,247,750
-----------
2,909,000
-----------
TRANSPORTATION (.4%)
27,500 Yellow Corp. 656,563
-----------
TOTAL COMMON STOCKS
(COST $70,310,068) 74,013,183
-----------
PRINCIPAL CORPORATE BONDS
AMOUNT (24.5% OF NET ASSETS)
AEROSPACE (.4%)
British Aerospace Finance Inc.
$ 500,000 8.00%, 1997 495,313
Coltec Industries, Inc.
250,000 9.75%, 2000 246,250
-----------
741,563
-----------
AUTO & AUTO RELATED (.6%)
Burmah Castrol Capital, Ltd.
500,000 7.00%, 1997 484,650
Chrysler Corp.
500,000 13.00%, 1997 504,720
-----------
989,370
-----------
BANKING (2.9%)
Banco Nacional de Comercio
Exterior, S.N.C.
400,000 7.25%, 2004 284,000
Bank of Boston Corp.
500,000 10.30%, 2000 507,840
BankAmerica Corp.
500,000 6.00%, 1997 474,125
Chemical Banking Corp.
250,000 10.125%, 2000 267,618
First Fidelity Bancorporation
500,000 8.50%, 1998 500,590
First USA Bank of Delaware
500,000 5.05%, 1995 487,240
750,000 5.35%, 1996 703,453
Fleet Financial Group, Inc.
250,000 9.90%, 2001 265,247
Marshall & Ilsley Corp.
500,000 6.95%, 1997 488,100
Mellon Financial Co.
400,000 6.50%, 1997 382,440
Shawmut National Corp.
750,000 8.875%, 1996 754,995
-----------
5,115,648
-----------
BUILDING MATERIALS & CONSTRUCTION
(.1%)
Cemex
$ 200,000 8.875%, 1998 $ 191,883
-----------
CHEMICALS (1.5%)
Grace (W.R.) & Co.
750,000 7.40%, 2000 710,475
Lyondell Petrochemical Co.
1,100,000 8.25%, 1997 1,088,417
Morton International, Inc.
500,000 9.25%, 2020 536,250
PPG Industries, Inc.
250,000 9.00%, 2021 258,485
-----------
2,593,627
-----------
CONGLOMERATES (.5%)
Tenneco Credit Corp.
500,000 9.25%, 1996 507,340
Tenneco, Inc.
375,000 10.00%, 1998 391,620
-----------
898,960
-----------
DRUGS & COSMETICS (.6%)
Procter & Gamble Co.
250,000 9.36%, 2021 269,700
Roche Holdings Inc.
950,000 2.75%, 2000 730,906
-----------
1,000,606
-----------
ELECTRIC UTILITIES (.6%)
Hydro-Quebec
500,000 9.375%, 2030 516,040
Long Island Lighting Co.
500,000 8.75%, 1996 501,765
-----------
1,017,805
-----------
ELECTRICAL & ELECTRONIC EQUIPMENT
(.5%)
Electrolux
500,000 7.75%, 1997 491,250
Westinghouse Electric Corp.
500,000 7.75%, 1996 495,490
-----------
986,740
-----------
FINANCIAL SERVICES (6.3%)
American General Finance Corp.
500,000 7.70%, 1997 491,335
500,000 8.50%, 1998 501,500
Aristar, Inc.
500,000 6.25%, 1996 486,075
250,000 8.125%, 1997 248,308
Associates Corp. of North America
500,000 6.75%, 1999 466,380
Avco Financial Services, Inc.
500,000 5.875%, 1997 470,745
Chrysler Financial Corp.
1,500,000 5.08%, 1997 1,410,840
Countrywide Funding Corp.
250,000 6.57%, 1997 239,980
</TABLE>
9
<PAGE>
TOTAL RETURN ACCOUNT (cont'd)
<TABLE>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<S> <C> <C>
$ 500,000 6.085%, 1999 $ 455,300
Discover Credit Corp.
500,000 8.73%, 1996 503,915
Fleet Mortgage Corp.
1,000,000 6.125%, 1997 948,570
250,000 6.50%, 1999 230,150
Ford Motor Credit Co.
500,000 8.00%, 1997 496,930
500,000 6.25%, 1998 471,015
General Motors Acceptance Corp.
1,000,000 5.65%, 1997 925,080
750,000 7.75%, 1997 740,370
Green Tree Financial Corp.
500,000 8.00%, 2020 492,030
Household Financial Corporation
Ltd.
250,000 6.00%, 1998 232,075
Household International
Netherlands B.V.
500,000 6.00%, 1999 458,030
ITT Financial Corp.
250,000 8.75%, 2006 250,250
Norwest Financial, Inc.
500,000 6.50%, 1997 478,700
Transamerica Finance Corp.
250,000 6.80%, 1999 235,415
-----------
11,232,993
-----------
FOOD & BEVERAGES (.8%)
Bass America Inc.
250,000 6.75%, 1999 233,360
ConAgra, Inc.
500,000 9.75%, 1997 514,865
Seagram Company Ltd.
700,000 9.75%, 2000 709,723
-----------
1,457,948
-----------
INSURANCE (.4%)
Skandia Group Insurance Co. Ltd.
300,000 6.00%, 1998 273,000
SunAmerica Inc.
450,000 9.00%, 1999 454,284
-----------
727,284
-----------
LEASING (.9%)
Penske Truck Leasing Co.
750,000 7.75%, 1999 725,445
PHH Corp.
350,000 6.50%, 2000 321,804
U.S. Leasing International Inc.
500,000 7.00%, 1997 482,365
-----------
1,529,614
-----------
MANUFACTURING (.2%)
Black & Decker Corp.
400,000 6.625%, 2000 356,032
-----------
MORTGAGE-BACKED SECURITIES (.7%)
Fleet Mortgage Securities, Inc.
327,524 8.25%, 2023 326,807
Housing Securities, Inc.
$ 400,000 7.25%, 2012 $ 390,625
Sears Mortgage Securities Corp.
9,956 7.645%, 2019 9,906
Transamerica Finance Corp.
500,000 6.75%, 1997 482,360
-----------
1,209,698
-----------
OIL & GAS (3.2%)
Arkla, Inc.
750,000 9.875%, 1997 757,500
BP America, Inc.
500,000 8.875%, 1997 507,430
Bridas Corp.
270,000 12.50%, 1999 260,550
Coastal Corp.
500,000 11.125%, 1998 507,500
500,000 8.125%, 2002 472,850
Norsk Hydro
500,000 8.75%, 2001 498,750
Petroleos Mexicanos
150,000 8.25%, 1998 139,875
Petroliam Nasional Berhad
500,000 6.875%, 2003 448,135
Phillips Petroleum Co.
1,000,000 7.53%, 1998 981,304
TransCanada Pipelines Ltd.
500,000 9.875%, 2021 553,525
Transco Energy Co.
500,000 11.25%, 1999 531,875
-----------
5,659,294
-----------
PAPER & FOREST PRODUCTS (.7%)
Celulosa Arauco y Constitucion
S.A.
500,000 7.25%, 1998 474,375
Georgia-Pacific Corp.
750,000 9.85%, 1997 770,820
-----------
1,245,195
-----------
PRINTING & PUBLISHING (.5%)
Reed Elsevier, Inc.
400,000 6.625%, 2023 312,344
Time Warner Inc.
700,000 7.45%, 1998 667,191
-----------
979,535
-----------
RETAIL TRADE (.2%)
Sears, Roebuck & Co.
300,000 8.39%, 1999 298,023
-----------
SAVINGS & LOAN (.3%)
Golden West Financial Corp.
500,000 10.25%, 1997 518,390
-----------
TELECOMMUNICATIONS (.2%)
Tele-Communications, Inc.
400,000 7.15%, 1998 382,480
-----------
TELEPHONE UTILITIES (.7%)
GTE Corp.
750,000 8.85%, 1998 757,185
</TABLE>
10 The accompanying notes are an integral part of these financial
statements.
<PAGE>
TOTAL RETURN ACCOUNT (cont'd)
<TABLE>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
MCI Communications Corp.
$ 500,000 7.125%, 2000 $ 476,065
-----------
1,233,250
-----------
TOBACCO (.9%)
B.A.T Capital Corp.
700,000 6.875%, 2003 622,846
Philip Morris Companies Inc.
500,000 8.75%, 1996 505,040
500,000 9.25%, 2000 508,320
-----------
1,636,206
-----------
TRANSPORTATION (.8%)
Federal Express Corp.
750,000 9.75%, 1996 765,150
250,000 6.25%, 1998 233,952
Southern Pacific Transportation
Co.
500,000 10.50%, 1999 507,500
-----------
1,506,602
-----------
TOTAL CORPORATE BONDS
(COST $45,628,309) 43,508,746
-----------
U.S. GOVERNMENT & AGENCY
LONG-TERM OBLIGATIONS
(24.6% OF NET ASSETS)
Federal Home Loan Mortgage Corp.
1,000,000 6.00%, 2007 798,750
Federal National Mortgage Assn.
1,372,522 7.50%, 2008 1,313,750
800,000 6.00%, 2019 715,496
609,333 7.00%, 2022 428,434
Government National Mortgage Assn.
646,322 8.00%, 2017 626,648
221,975 9.00%, 2018 224,510
296,675 9.00%, 2019 299,532
309,068 9.00%, 2021 312,597
691,095 7.50%, 2022 641,205
260,295 9.00%, 2022 262,572
2,604,561 6.50%, 2023 2,257,009
1,397,296 7.50%, 2023 1,296,425
287,340 8.50%, 2023 282,312
3,769,356 6.50%, 2024 3,266,373
6,681,507 7.00%, 2024 5,996,653
U.S. Treasury Bonds
2,450,000 7.50%, 2016 2,325,197
10,750,000 8.75%, 2017 11,571,408
U.S. Treasury Notes
2,500,000 3.875%, 1995 2,481,250
2,550,000 5.125%, 1998 2,319,710
5,000,000 6.375%, 2002 4,578,100
1,000,000 0.00%, 2003 512,290
800,000 5.75%, 2003 695,248
2,600,000 0.00%, 2012 644,618
-----------
TOTAL U.S. GOVERNMENT & AGENCY
LONG-TERM OBLIGATIONS
(COST $45,394,157) 43,850,087
-----------
FOREIGN GOVERNMENT BONDS
(1.5% OF NET ASSETS)
Fomento Economico Mexicano
$ 750,000 9.50%, 1997 $ 741,563
Republic of Columbia
300,000 7.125%, 1998 286,500
400,000 8.75%, 1999 381,500
United Mexican States
250,000 6.97%, 2000 211,308
1,350,000 8.50%, 2002 1,086,750
-----------
TOTAL FOREIGN GOVERNMENT BONDS
(COST $3,030,294) 2,707,621
-----------
COMMERCIAL PAPER
(5.9% OF NET ASSETS)
American Express Credit Corp.
4,306,000 5.80%, due 1/4/95 4,306,000
Johnson Controls, Inc.
6,180,000 5.80%, due 1/3/95 6,178,009
-----------
TOTAL COMMERCIAL PAPER
(COST $10,484,009) 10,484,009
-----------
TOTAL INVESTMENTS
(COST $174,846,837) $174,563,646
-----------
-----------
</TABLE>
GROWTH ACCOUNT
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
COMMON STOCKS
(88.8% OF NET ASSETS)
AEROSPACE (7.4%)
33,900 General Dynamics Corp. $ 1,474,650
24,400 General Motors Corp. Class H 850,950
16,900 Lockheed Corp. 1,227,362
34,500 Loral Corp. 1,306,688
6,300 McDonnell Douglas Corp. 894,600
-----------
5,754,250
-----------
APPAREL & TEXTILES (1.6%)
32,000 Reebok International Ltd. 1,264,000
-----------
AUTO & AUTO RELATED (.8%)
12,500 Johnson Controls, Inc. 612,500
-----------
BANKING (5.0%)
48,900 Bank of New York Co., Inc. 1,418,100
32,400 Citicorp 1,340,550
7,900 Wells Fargo & Co. 1,145,500
-----------
3,904,150
-----------
CHEMICALS (3.5%)
14,600 FMC Corp. 843,150
19,600 Georgia Gulf Corp. 761,950
28,700 Grace (W.R.) & Co. 1,108,538
-----------
2,713,638
-----------
CONGLOMERATES (2.1%)
20,200 AlliedSignal Inc. 686,800
</TABLE>
11
<PAGE>
GROWTH ACCOUNT (cont'd)
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
19,300 Textron, Inc. $ 972,237
-----------
1,659,037
-----------
DRUGS & COSMETICS (1.5%)
19,200 American Home Products Corp. 1,204,800
-----------
ELECTRIC UTILITIES (4.8%)
44,200 American Electric Power Co., Inc. 1,453,075
35,600 FPL Group, Inc. 1,250,450
49,400 Illinova Corp. 1,074,450
-----------
3,777,975
-----------
ELECTRICAL & ELECTRONIC EQUIPMENT
(1.4%)
8,400 LSI Logic Corp. 339,150
16,350 Micron Technology Inc. 721,444
-----------
1,060,594
-----------
ENERGY SERVICES (.9%)
17,000 Offshore Pipelines, Inc. 384,625
10,700 Tosco Corp. 311,638
-----------
696,263
-----------
FOOD & BEVERAGES (4.6%)
63,315 Archer Daniels Midland Co. 1,305,872
10,000 IBP, Inc. 302,500
30,100 Ralcorp Holdings, Inc. 669,725
46,000 Seagram Company Ltd. 1,357,000
-----------
3,635,097
-----------
HEALTH SERVICES & HOSPITAL SUPPLIES
(4.9%)
48,400 Baxter International Inc. 1,367,300
34,600 Charter Medical Corp. 743,900
28,500 Columbia Healthcare Corp. 1,040,250
22,800 Foundation Health Corp. 706,800
-----------
3,858,250
-----------
INSURANCE (4.4%)
32,000 American General Corp. 904,000
17,600 St. Paul Companies Inc. 787,600
36,400 TIG Holdings, Inc. 682,500
33,800 Travelers, Inc. 1,098,500
-----------
3,472,600
-----------
LEASING (.8%)
28,700 Ryder System, Inc. 631,400
-----------
LEISURE RELATED (1.5%)
47,475 Mattel, Inc. 1,192,809
-----------
MACHINERY & EQUIPMENT (4.1%)
23,100 Caterpillar Inc. 1,273,388
37,100 Mark IV Industries, Inc. 732,725
27,200 Parker-Hannifin Corp. 1,237,600
-----------
3,243,713
-----------
MISCELLANEOUS (2.7%)
47,600 Dial Corp. 1,011,500
23,700 Premark International, Inc. $ 1,060,575
-----------
2,072,075
-----------
OFFICE EQUIPMENT (1.8%)
14,500 Xerox Corp. 1,435,500
-----------
OIL & GAS (7.4%)
19,600 Amoco Corp. 1,158,850
21,500 El Paso Natural Gas Co. 655,750
16,700 Mobil Corp. 1,406,975
65,300 Panhandle Eastern Corp. 1,289,675
10,600 Royal Dutch Petroleum Co. 1,139,500
5,700 Ultramar Corp. 145,350
-----------
5,796,100
-----------
PAPER & FOREST PRODUCTS (3.9%)
7,400 Georgia-Pacific Corp. 529,100
22,300 Scott Paper Co. 1,541,487
21,400 Willamette Industries, Inc. 1,016,500
-----------
3,087,087
-----------
RETAIL TRADE (9.9%)
38,900 American Stores Co. 1,045,437
10,400 Dayton Hudson Corp. 735,800
25,700 Dillard Department Stores, Inc. 687,475
29,400 Eckerd Corp. 878,325
34,200 Kroger Co. 825,075
39,600 Safeway Inc. 1,262,250
32,100 Sears, Roebuck & Co. 1,476,600
46,800 Waban, Inc. 830,700
-----------
7,741,662
-----------
TECHNOLOGY (7.6%)
41,700 Compaq Computer Corp. 1,647,150
Computer Associates International,
31,600 Inc. 1,532,600
International Business Machines
21,100 Corp. 1,550,850
11,000 Stratus Computer, Inc. 418,000
22,200 Sun Microsystems, Inc. 788,100
-----------
5,936,700
-----------
TELEPHONE UTILITIES (1.7%)
33,000 Ameritech Corp. 1,332,375
-----------
TOBACCO (3.7%)
43,400 American Brands, Inc. 1,627,500
22,200 Philip Morris Companies Inc. 1,276,500
-----------
2,904,000
-----------
TRANSPORTATION (.8%)
25,800 Yellow Corp. 615,975
-----------
TOTAL COMMON STOCKS
(COST $64,780,805) 69,602,550
-----------
</TABLE>
12 The accompanying notes are an integral part of these financial
statements.
<PAGE>
GROWTH ACCOUNT (cont'd)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
COMMERCIAL PAPER
(10.8% OF NET ASSETS)
American Express Credit Corp.
$ 1,417,000 5.83%, due 1/3/95 $ 1,417,000
1,370,000 5.80%, due 1/6/95 1,370,000
Cargill, Inc.
1,100,000 5.55%, due 1/3/95 1,099,661
Ford Motor Credit Co.
2,578,000 5.90%, due 1/4/95 2,578,000
GTE Florida, Inc.
$ 2,000,000 5.90%, due 1/5/95 $ 1,998,689
TOTAL COMMERCIAL PAPER
(COST $8,463,350) 8,463,350
-----------
TOTAL INVESTMENTS
(COST $73,244,155) $78,065,900
-----------
-----------
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS December 31, 1994
<TABLE>
<CAPTION>
A C C O U N T S
<S> <C> <C>
<C> <C> <C>
1. Aggregate gross unrealized appreciation
(depreciation) as of December 31, 1994, based
on cost for Federal income tax purposes, was
GOVERNMENT TOTAL
as follows: LIQUID
SECURITIES INCOME RETURN
GROWTH
Aggregate gross unrealized appreciation $ -- $
208,554 $ 63,871 $ 5,869,711
$ 6,243,951
Aggregate gross unrealized depreciation --
(4,165,092) (2,732,507) (6,152,902)
(1,422,206)
--------------
- -------------- -------------- -------------- --------------
Net unrealized appreciation (depreciation) $ --
$(3,956,538) $(2,668,636) $
(283,191) $ 4,821,745
--------------
- -------------- -------------- -------------- --------------
--------------
- -------------- -------------- -------------- --------------
2. The aggregate cost of investments for Federal
income tax purposes was: $63,942,445
$63,037,182 $48,327,916
$174,846,837 $73,244,155
--------------
- -------------- -------------- -------------- --------------
--------------
- -------------- -------------- -------------- --------------
</TABLE>
13
<PAGE>
<TABLE>
STATEMENT OF NET ASSETS CONNECTICUT
MUTUAL INVESTMENT
ACCOUNTS, INC.
December 31,
1994
<CAPTION>
A C C O U N T S
GOVERNMENT TOTAL
LIQUID
SECURITIES INCOME RETURN
GROWTH
<S> <C> <C>
<C> <C> <C>
ASSETS
Investments:
Bonds, at market value
(Cost $62,872,182, $46,828,399,
$94,052,760) $ -- $
58,915,644 $ 44,159,763 $ 90,066,454 $
--
Common stocks, at market value
(Cost $70,310,068, $64,780,805) --
-- -- 74,013,183
69,602,550
Short-term securities 63,942,445
165,000 1,499,517 10,484,009
8,463,350
--------------
- -------------- -------------- -------------- --------------
63,942,445
59,080,644 45,659,280 174,563,646
78,065,900
Cash 6,595
606 24,824 23,940 6,409
Investment income receivable 65,908
1,187,262 865,917 1,627,488
138,820
Receivable from securities sold --
-- -- 2,849,794
1,402,989
Receivable from Fund shares sold 30,609
14,864 43,564 178,542
60,677
--------------
- -------------- -------------- -------------- --------------
Total Assets 64,045,557
60,283,376 46,593,585 179,243,410
79,674,795
--------------
- -------------- -------------- -------------- --------------
LIABILITIES
Accrued expenses payable 99,687
121,037 46,621 272,160
127,466
Payable for securities purchased --
-- -- 1,067,243
1,157,491
--------------
- -------------- -------------- -------------- --------------
Total Liabilities 99,687
121,037 46,621 1,339,403
1,284,957
--------------
- -------------- -------------- -------------- --------------
NET ASSETS $ 63,945,870 $
60,162,339 $ 46,546,964 $177,904,007
$ 78,389,838
--------------
- -------------- -------------- -------------- --------------
--------------
- -------------- -------------- -------------- --------------
OUTSTANDING SHARES 63,945,870
6,163,266 5,094,374
13,232,562 5,520,444
--------------
- -------------- -------------- -------------- --------------
--------------
- -------------- -------------- -------------- --------------
NET ASSET VALUE PER SHARE $1.00
$9.76 $9.14 $13.44
$14.20
--------------
- -------------- -------------- -------------- --------------
--------------
- -------------- -------------- -------------- --------------
</TABLE>
14 The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS CONNECTICUT
MUTUAL
INVESTMENT ACCOUNTS, INC.
For the year
ended December 31, 1994
<CAPTION>
A C C O U N T S
GOVERNMENT TOTAL
LIQUID
SECURITIES INCOME RETURN
GROWTH
<S> <C> <C>
<C> <C> <C>
INVESTMENT INCOME
Income:
Interest $3,291,134
$5,611,282 $3,789,066 $ 6,944,799 $
312,020
Dividends --
-- -- 1,984,611 1,499,227
--------------
- -------------- -------------- -------------- -------------
Total Income 3,291,134
5,611,282 3,789,066 8,929,410
1,811,247
--------------
- -------------- -------------- -------------- -------------
Expenses:
Investment advisory fees 385,774
460,523 304,391 1,173,401
447,812
Transfer agent fees 229,500
119,000 74,500 462,500
187,000
Registration fees 32,955
28,353 27,023 53,194 29,159
Custodian fees 29,900
27,700 29,500 47,200 34,700
Shareholder reports 21,500
15,000 10,200 53,400
23,500
Professional services 6,200
6,200 6,200 6,200 6,200
Directors' fees 4,284
4,284 4,284 4,284 4,284
Other 5,053
8,120 -- 1,306 1,294
Expense reimbursement from investment
adviser --
-- (151,707) -- --
--------------
- -------------- -------------- -------------- -------------
Total Expenses 715,166
669,180 304,391 1,801,485
733,949
--------------
- -------------- -------------- -------------- -------------
NET INVESTMENT INCOME 2,575,968
4,942,102 3,484,675
7,127,925 1,077,298
--------------
- -------------- -------------- -------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments (987)
(2,822,974) (660,384) 2,872,138
3,074,097
Net unrealized depreciation on investments --
(5,366,869) (3,054,974)
(14,089,642) (4,619,868)
--------------
- -------------- -------------- -------------- -------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (987)
(8,189,843)
(3,715,358) (11,217,504) (1,545,771)
--------------
- -------------- -------------- -------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 2,574,981 $
(3,247,741) $ (230,683) $
(4,089,579) $ (468,473)
--------------
- -------------- -------------- -------------- -------------
--------------
- -------------- -------------- -------------- -------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS CONNECTICUT
MUTUAL
INVESTMENT ACCOUNTS, INC.
For the years
ended December 31, 1994 and 1993
A C C O U N T S
LIQUID GOVERNMENT SECURITIES
1994
1993 1994 1993
<S> <C>
<C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $2,575,968
$ 1,624,974 $4,942,102
$4,494,963
Net realized gain (loss) on investments (987)
6 (2,822,974)
4,005,208
Net unrealized appreciation (depreciation) --
-- (5,366,869)
(1,899,883)
- -------------- -------------- -------------- -------------
Net increase (decrease) in net assets resulting from
operations 2,574,981
1,624,980 (3,247,741) 6,600,288
- -------------- -------------- -------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (2,574,981)
(1,624,974) (4,939,034)
(4,489,918)
Net realized gain from investment transactions --
(6) (56,279)
(4,289,205)
- -------------- -------------- -------------- -------------
(2,574,981)
(1,624,980) (4,995,313) (8,779,123)
- -------------- -------------- -------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 177,469,640
195,569,442 7,468,147
13,740,760
Net asset value of shares issued to shareholders from
reinvestment of dividends 2,548,202
1,594,210 4,527,905
7,959,413
Cost of shares reacquired
(192,692,366) (188,092,462) (21,186,898)
(9,536,822)
- -------------- -------------- -------------- -------------
Increase (decrease) in net assets derived from capital
share transactions
(12,674,524) 9,071,190 (9,190,846)
12,163,351
- -------------- -------------- -------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS
(12,674,524) 9,071,190
(17,433,900) 9,984,516
NET ASSETS -- BEGINNING OF PERIOD 76,620,394
67,549,204
77,596,239 67,611,723
- -------------- -------------- -------------- -------------
NET ASSETS -- END OF PERIOD $63,945,870
$76,620,394
$60,162,339 $77,596,239
- -------------- -------------- -------------- -------------
- -------------- -------------- -------------- -------------
Undistributed net investment income included in net assets
at end of period
- -- -- $31,978 $28,910
-------------- -------------
-------------- -------------
Undistributed net realized gain (loss) on investments
included in net assets at end of period
- -- -- $(2,853,150) $26,103
-------------- -------------
-------------- -------------
</TABLE>
16 The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE>
<CAPTION>
A C C O U N T S
INCOME TOTAL RETURN
GROWTH
1994 1993 1994 1993 1994
1993
<C> <C> <C> <C> <C>
<C>
$ 3,484,675 $ 2,909,983 $ 7,127,925 $ 4,722,043 $
1,077,298 $ 1,065,223
(660,384) 144,920 2,872,138 9,934,386
3,074,097 6,017,450
(3,054,974) 224,988 (14,089,642) 4,955,279
(4,619,868) 3,036,923
- -------------- -------------- -------------- --------------
- -------------- --------------
(230,683) 3,279,891 (4,089,579) 19,611,708
(468,473) 10,119,596
- -------------- -------------- -------------- --------------
- -------------- --------------
(3,473,505) (2,919,683) (7,098,435) (4,729,047)
(1,076,035) (1,070,312)
-- -- (3,186,699) (10,403,444)
(3,254,775) (6,489,124)
- -------------- -------------- -------------- --------------
- -------------- --------------
(3,473,505) (2,919,683) (10,285,134) (15,132,491)
(4,330,810) (7,559,436)
- -------------- -------------- -------------- --------------
- -------------- --------------
11,501,443 13,802,741 52,357,416 53,648,129
20,893,600 32,723,682
3,019,579 2,554,120 10,101,758 14,889,112
4,286,409 7,458,025
(12,906,272) (6,756,110) (41,385,584) (11,512,779)
(6,485,813) (23,846,490)
- -------------- -------------- -------------- --------------
- -------------- --------------
1,614,750 9,600,751 21,073,590 57,024,462
18,694,196 16,335,217
- -------------- -------------- -------------- --------------
- -------------- --------------
(2,089,438) 9,960,959 6,698,877 61,503,679
13,894,913 18,895,377
48,636,402 38,675,443 171,205,130 109,701,451
64,494,925 45,599,548
- -------------- -------------- -------------- --------------
- -------------- --------------
$ 46,546,964 $ 48,636,402 $177,904,007 $171,205,130
$78,389,838 $ 64,494,925
- -------------- -------------- -------------- --------------
- -------------- --------------
- -------------- -------------- -------------- --------------
- -------------- --------------
$17,359 $6,189 $44,571 $15,081
$1,393 $130
- -------------- -------------- -------------- --------------
- -------------- --------------
- -------------- -------------- -------------- --------------
- -------------- --------------
$(1,698,673) $(1,038,289) $532,694 $847,255
$528,131 $708,809
- -------------- -------------- -------------- --------------
- -------------- --------------
- -------------- -------------- -------------- --------------
- -------------- --------------
</TABLE>
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONNECTICUT MUTUAL INVESTMENT
ACCOUNTS,
INC.
December 31, 1994
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Connecticut Mutual Investment Accounts, Inc. (the Fund), a Maryland
corporation, is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
Fund is
comprised of five separate Accounts: Liquid, Government Securities,
Income,
Total Return and Growth. An interest in the Fund is limited to the
assets of
the Account or Accounts in which shares are held by shareholders, and
such
shareholders are entitled to a pro rata share of all dividends and
distributions arising from the net investment income and net realized
capital
gains on the investments of such Accounts.
The following is a summary of significant accounting policies followed
by the
Fund:
(a)VALUATION OF INVESTMENT SECURITIES - Except with respect to
securities held
by the Liquid Account, equity and debt securities which are traded
on
securities exchanges are valued at the last sales price as of the
close of
business on the day the securities are being valued. Lacking any
sales,
equity securities are valued at the last bid price and debt
securities are
valued at the mean between closing bid and asked prices. Securities
traded
in the over-the-counter market and included in the NASDAQ National
Market
System are valued using the last sales price when available.
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
who
make a market in the securities. Short-term securities are valued on
an
amortized cost basis, which approximates market value. Securities for
which
market quotations are not readily available are valued at fair value
as
determined in accordance with procedures established by the Board of
Directors of the Fund, including the use of valuations furnished by
a
private service retained by the custodian.
Securities held by the Liquid Account are valued on an amortized cost
basis. This basis involves valuing a security at cost and thereafter
assuming a constant amortization to maturity of any discount or
premium,
regardless of the impact of fluctuating interest rates on the market
value
of the instrument. The amortized cost method, in the opinion of the
Board
of Directors, represents the fair value of the particular security.
The
Board monitors the deviation between the Account's net asset value
per
share as determined by using available market quotations and its
amortized
cost price per share. If the deviation exceeds one half of one
percent, the
Board will consider what action, if any, should be initiated to
provide
fair valuation. For the year ended December 31, 1994, the deviation
was
less than one half of one percent.
(b)FEDERAL INCOME TAXES - The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal
Revenue
Code. Under such provisions, by distributing substantially all of its
taxable income to its shareholders or otherwise complying with
requirements
for regulated investment companies, the Fund will not be subject to
Federal
income taxes. Accordingly, no provision for Federal income taxes is
required. For Federal tax reporting purposes, each Account is treated
as a
separate taxable entity.
(c)GAINS AND LOSSES - Realized gains and losses from sales of
investments are
determined on the identified cost basis.
(d)AFFILIATE HOLDINGS - Connecticut Mutual Life Insurance Company
and its
affiliates own 31,655,715 shares of the Fund as follows:
<TABLE>
<CAPTION>
LIQUID GOVERNMENT SECURITIES INCOME TOTAL RETURN
GROWTH
<S> <C> <C> <C>
<C>
26,109,655 1,826,721 1,894,554 206
1,824,579
</TABLE>
(e)OTHER - Investment transactions are accounted for on the trade date
which
is the date the order to buy or sell is executed. Dividend income is
recorded on the ex-dividend date and interest income is accrued on
a daily
basis. All expenses are accrued on a daily basis.
2. INVESTMENT ADVISORY FEES
The Fund has an Investment Advisory Agreement with G.R. Phelps & Co.,
Inc.
(the Investment Adviser), a wholly-owned subsidiary of Connecticut
Mutual Life
Insurance Company. The Investment Adviser, subject to review by the
Board of
Directors, is responsible for the investment management of each Account
and
has the responsibility for making decisions to buy, sell or hold any
particular security. The Investment Adviser is obligated to perform
certain
administrative services for the Fund.
As compensation for its services to the Liquid Account, the Investment
Adviser
receives monthly compensation at the annual rate of 0.50% of the first
$200
million of average daily net assets, 0.45% of the next $100 million of
average
daily net assets and 0.40% of the average daily net assets in excess of
$300
million of the Account. As compensation for its services to the
Government
Securities, Income, Total Return and Growth Accounts, the Investment
Adviser
receives monthly compensation at the annual rate of 0.625% of the first
$300
million of average daily net assets, 0.50% of the next $100 million of
average
daily net assets and 0.45% of the average daily net assets in excess of
$400
million of each Account.
18
<PAGE>
The investment advisory fees, which also cover certain administrative
and
management services, amounted to $2,771,901 for all Accounts for the
year
ended December 31, 1994. For the year ended December 31, 1994, the
Investment
Adviser, serving as principal underwriter for sale of shares of the
Accounts,
earned $2,502,163 related to sales charges deducted from proceeds for
shares
sold.
Expenses incurred in the operation of the Fund are borne by the Fund.
However,
the Investment Adviser has agreed that in any year the aggregate
expenses
(including the investment advisory fee, but excluding interest, taxes,
brokerage fees, commissions and uncommon charges such as litigation
costs)
exceed 1% of the value of the average daily net assets of the Liquid
Account
or 1.5% of the value of the average daily net assets in each of the
other four
Accounts, it will reimburse the Accounts for such excess.
3. DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are paid monthly for the Government
Securities and Income Accounts and semi-annually for the Total Return
and
Growth Accounts. Dividends from net investment income of the Liquid
Account,
which include any net short-term capital gains, are declared and accrued
daily
and paid monthly.
4. CAPITAL STOCK
The authorized capital stock of the Fund consists of 3,000,000,000
shares of
common stock, par value $0.10 per share. The shares of stock are divided
into
five classes as indicated below. All shares of common stock have equal
voting
rights, except that only shares of a particular Account are entitled to
vote
on matters pertaining to that Account.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1994
GOVERNMENT TOTAL
LIQUID
SECURITIES INCOME RETURN
GROWTH
<S> <C> <C>
<C> <C> <C>
Shares authorized
(in millions) 800
300 300 300 300
---
--- --- --- ---
---
--- --- --- ---
Shares sold 177,469,640
722,134 1,209,211 3,669,999
1,391,034
Shares issued to shareholders from reinvestment
of dividends 2,548,202
445,989 320,316 743,603
298,545
-------------
- ------------- ------------- ------------- ----------
Total issued 180,017,842
1,168,123 1,529,527 4,413,602
1,689,579
Shares reacquired (192,692,366)
(2,116,136) (1,367,697) (2,955,224)
(430,233)
-------------
- ------------- ------------- ------------- ----------
Net increase (decrease) (12,674,524)
(948,013) 161,830 1,458,378
1,259,346
-------------
- ------------- ------------- ------------- ----------
-------------
- ------------- ------------- ------------- ----------
</TABLE>
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONT'D)
5. FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the
period:
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS
RATIO OF
RATIO OF NET
DIVIDENDS & UNREALIZED FROM NET
NET ASSET NET ASSET
OPERATING INVESTMENT
YEARS NET FROM NET GAIN (LOSS) REALIZED
VALUE AT VALUE
AT EXPENSES TO INCOME TO
ENDED INVESTMENT INVESTMENT ON GAIN ON
BEGINNING
END AVERAGE AVERAGE
DECEMBER 31 INCOME INCOME INVESTMENTS INVESTMENTS
OF
PERIOD OF PERIOD NET ASSETS NET ASSETS
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------
- -----------------------------------------------
- ----------
LIQUID ACCOUNT
1985 $.0729 $(.0729) $ -- $ --
$1.00 $1.00 1.00% 7.30%
1986 .0588 (.0588) -- --
1.00 1.00 1.00 5.88
1987 .0581 (.0581) -- --
1.00 1.00 1.00 5.81
1988 .0664 (.0664) -- --
1.00 1.00 1.04 6.64
1989 .0822 (.0822) -- --
1.00 1.00 1.06 8.22
1990 .0731 (.0731) -- --
1.00 1.00 1.06 7.31
1991 .0522 (.0522) -- --
1.00 1.00 1.01 5.22
1992 .0287 (.0287) -- --
1.00 1.00 1.02 2.87
1993 .0227 (.0227) -- --
1.00 1.00 .95 2.27
1994 .0334 (.0334) -- --
1.00 1.00 .93 3.34
GOVERNMENT SECURITIES ACCOUNT
1985(a) .24 (.21) .70 --
10.00 10.73 1.50(b) 8.00(b)
1986 .92 (.92) .28 (.11)
10.73 10.90 1.27 8.92
1987 .84 (.84) (.52) (.21)
10.90 10.17 1.24 8.12
1988 .84 (.85) (.05) (.05)
10.17 10.06 1.16 8.27
1989 .84 (.84) .52 --
10.06 10.58 1.19 8.14
1990 .84 (.84) .10 --
10.58 10.68 1.16 8.07
1991 .85 (.85) .68 --
10.68 11.36 1.07 7.83
1992 .77 (.77) (.12) (.05)
11.36 11.19 1.01 6.92
1993 .70 (.70) .36 (.64)
11.19 10.91 .93 6.03
1994 .69 (.69) (1.14) (.01)
10.91 9.76 .91 6.71
INCOME ACCOUNT
1985(a) .24 (.23) .54 --
10.00 10.55 1.50(b) 8.20(b)
1986 .83 (.83) .57 (.08)
10.55 11.04 1.29 7.69
1987 .76 (.76) (.56) (.51)
11.04 9.97 1.27 7.32
1988 .84 (.85) (.19) --
9.97 9.77 1.24 8.43
1989 .88 (.88) .02 --
9.77 9.79 1.27 8.93
1990 .94 (.94) (.35) --
9.79 9.44 1.24 9.78
1991 .81 (.81) .47 --
9.44 9.91 1.12 8.44
1992 .79 (.79) (.16) --
9.91 9.75 .63 8.09
1993 .65 (.65) .11 --
9.75 9.86 .63 6.56
1994 .68 (.68) (.72) --
9.86 9.14 .63 7.16
TOTAL RETURN ACCOUNT
1985(a) .13 (.12) .90 --
10.00 10.91 1.50(b) 4.46(b)
1986 .31 (.30) .99 (.04)
10.91 11.87 1.26 3.22
1987 .38 (.38) .13 (1.09)
11.87 10.91 1.08 3.15
1988 .53 (.53) .60 --
10.91 11.51 1.11 4.61
1989 .76 (.76) 1.81 (.63)
11.51 12.69 1.20 5.90
1990 .66 (.66) (.68) (.07)
12.69 11.94 1.24 5.31
1991 .54 (.54) 2.79 (.71)
11.94 14.02 1.20 4.02
1992 .50 (.50) .86 (1.07)
14.02 13.81 1.11 3.61
1993 .48 (.48) 1.70 (.97)
13.81 14.54 1.02 3.40
1994 .55 (.55) (.86) (.24)
14.54 13.44 .96 3.80
GROWTH ACCOUNT
1985(a) .11 (.11) .94 --
10.00 10.94 1.50(b) 3.81(b)
1986 .24 (.24) 1.11 (.08)
10.94 11.97 1.31 2.21
1987 .22 (.22) (.12) (2.05)
11.97 9.80 1.17 1.71
1988 .20 (.20) 1.20 --
9.80 11.00 1.23 1.95
1989 .51 (.51) 3.30 (1.25)
11.00 13.05 1.18 3.90
1990 .34 (.34) (1.36) (.07)
13.05 11.62 1.19 2.73
1991 .25 (.25) 4.00 (1.22)
11.62 14.40 1.19 1.74
1992 .26 (.26) 1.44 (1.64)
14.40 14.20 1.12 1.74
1993 .30 (.30) 2.64 (1.70)
14.20 15.14 1.05 1.95
1994 .22 (.22) (.32) (.62)
15.14 14.20 1.02 1.50
NET ASSETS
YEARS AT END ANNUAL
ENDED PORTFOLIO OF PERIOD TOTAL
DECEMBER 31 TURNOVER (IN THOUSANDS) RETURN(C)
<S> <C> <C> <C>
- -----------------------------------------------------------
LIQUID ACCOUNT
1985 n/a $ 65,098 7.50%
1986 n/a 74,111 6.03
1987 n/a 68,908 5.97
1988 n/a 73,921 6.82
1989 n/a 87,264 8.53
1990 n/a 84,387 7.53
1991 n/a 69,932 5.31
1992 n/a 67,549 2.89
1993 n/a 76,620 2.30
1994 n/a 63,946 3.40
GOVERNMENT SECURITIES ACCOUNT
1985 468.56% 12,890 9.40
1986 111.68 22,947 11.66
1987 207.67 24,703 3.33
1988 175.50 35,910 7.99
1989 68.14 41,561 14.10
1990 44.19 47,524 9.44
1991 27.50 55,332 15.03
1992 131.79 67,612 6.07
1993 224.02 77,596 9.56
1994 156.90 60,162 (4.18)
INCOME ACCOUNT
1985 242.68(b) 11,048 7.80
1986 164.13 14,620 13.54
1987 231.39 15,367 2.03
1988 150.04 16,789 6.70
1989 52.95 18,705 9.56
1990 90.20 19,809 6.33
1991 50.44 22,839 14.22
1992 109.47 38,675 6.60
1993 145.94 48,636 7.97
1994 62.88 46,547 (0.42)
TOTAL RETURN ACCOUNT
1985 49.82(b) 12,083 10.34
1986 143.32 35,382 11.88
1987 197.79 44,770 3.92
1988 223.62 54,253 10.40
1989 149.22 65,071 22.61
1990 115.45 66,382 (0.21)
1991 122.40 86,455 28.21
1992 177.85 109,701 9.90
1993 155.16 171,205 15.89
1994 115.01 177,904 (2.11)
GROWTH ACCOUNT
1985 57.58(b) 11,514 10.50
1986 163.15 19,469 12.25
1987 214.32 19,638 (0.29)
1988 246.14 26,285 14.32
1989 169.75 37,323 34.86
1990 143.95 35,202 (7.98)
1991 148.30 40,716 36.91
1992 141.69 45,600 11.99
1993 99.67 64,495 20.91
1994 98.46 78,390 (0.65)
<FN>
(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
</TABLE>
20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Connecticut Mutual Investment Accounts,
Inc.:
We have audited the accompanying statement of net assets, including the
schedule of investments, of Connecticut Mutual Investment Accounts,
Inc.
(a Maryland corporation comprised of the Liquid, Government Securities,
Income, Total Return and Growth Accounts) as of December 31, 1994, and
the
related statement of operations for the year then ended, the statement
of
changes in net assets for each of the two years in the period then
ended,
and the financial highlights for each of the periods indicated in Note
5
of Notes to Financial Statements. These financial statements and
financial
highlights are the responsibility of the Accounts' management. Our
responsibility is to express an opinion on these financial statements
and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit
includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1994, by
correspondence with the custodian bank. An audit also includes
assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred
to above present fairly, in all material respects, the financial
position
of each of the respective Accounts comprising Connecticut Mutual
Investment Accounts, Inc. as of December 31, 1994, the results of their
operations for the year then ended, the changes in their net assets for
each of the two years in the period then ended, and the financial
highlights for each of the periods indicated in Note 5 of Notes to
Financial Statements, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN
LLP
Hartford, Connecticut
February 15, 1995
<PAGE>
PERFORMANCE -- TOTAL RETURN*
SALES CHARGE ADJUSTED PERFORMANCE As of 6/30/95* -- AFTER EXPENSES
<TABLE>
<CAPTION>
AVERAGE ANNUALIZED
30 DAY
CURRENT YIELD
ACCOUNTS ONE YEAR FIVE
YEAR SINCE INCEPTION
AS OF 6/30/95
<S> <C> <C>
<C> <C>
LIQUID** 4.63%
4.04% 6.50% 5.09%
GOVERNMENT SECURITIES 7.18%
7.73% 8.98%
5.46%
INCOME 3.74%
6.61% 7.81% 6.21%
TOTAL RETURN 9.75%
10.72% 11.78%
GROWTH 16.31%
12.89% 14.06%
</TABLE>
Sales Charge Adjusted Performance assumes the current initial sales
charge
reduces portfolio performance and was paid at the beginning of each
period
shown. The current maximum initial sales charges are 4.00% for the
Government
Securities and Income Accounts and 5.00% for the Total Return and
Growth
Accounts. The Liquid Account has no initial sales charge.
ACTUAL PORTFOLIO PERFORMANCE As of 6/30/95* -- AFTER EXPENSES
<TABLE>
<CAPTION>
AVERAGE ANNUALIZED
7-DAY
CURRENT YIELD
ACCOUNTS ONE YEAR FIVE
YEAR SINCE INCEPTION
AS OF 6/30/95
<S> <C> <C>
<C> <C>
LIQUID** 4.63%
4.04% 6.50% 5.11%
GOVERNMENT SECURITIES 11.65%
8.62% 9.43%
INCOME 8.06%
7.48% 8.26%
TOTAL RETURN 15.53%
11.86% 12.37%
GROWTH 22.43%
14.06% 14.66%
</TABLE>
Actual Portfolio Performance assumes the initial sales charge is paid
by a
client in a prior period and is not reflected on this table.
All portfolios became effective September 16, 1985 except for the Liquid
Account
which was first offered to the public on March 31, 1982.
*Total Return figures include reinvestment of all dividends and capital
gains.
Performance data quoted represents past performance. The investment
return and
principal values of an investment will fluctuate so that an investor's
shares,
when redeemed, may be worth more or less than their original cost.
**There can be no assurance that the Liquid Account will be able to
maintain a
stable net asset value of $1.00 per share. An investment in the Liquid
Account
is neither insured nor guaranteed by the U.S. Government.
<PAGE>
SCHEDULE OF INVESTMENTS CONNECTICUT MUTUAL INVESTMENT
ACCOUNTS,
INC.
June 30, 1995 (Unaudited)
LIQUID ACCOUNT
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
COMMERCIAL PAPER
(96.7% OF NET ASSETS)
American Broadcasting Companies,
Inc.
$ 1,500,000 5.62%, due 10/4/95 $ 1,477,754
American Express Credit Corp.
2,033,000 6.10%, due 7/10/95 2,033,000
784,000 5.75%, due 11/30/95 784,000
600,000 5.70%, due 12/15/95 600,000
American Home Products Corp.
1,035,000 5.97%, due 8/4/95 1,029,164
Banc One Corp.
1,000,000 5.92%, due 8/9/95 993,587
Bank of America
1,000,000 5.87%, due 11/10/95 978,477
2,000,000 5.71%, due 12/4/95 1,950,513
Beneficial Corp.
1,000,000 5.94%, due 8/18/95 992,080
Cargill, Inc.
2,000,000 5.67%, due 10/12/95 1,967,555
Corporate Asset Funding Co., Inc.
1,150,000 6.10%, due 8/24/95 1,139,478
Corporate Receivables Corp.
1,500,000 5.80%, due 8/3/95 1,492,025
1,000,000 5.95%, due 8/23/95 991,240
Dayton Hudson Corp.
500,000 5.97%, due 7/17/95 498,673
2,500,000 5.80%, due 8/1/95 2,487,514
Electronic Data Systems Corp.
1,200,000 5.90%, due 9/18/95 1,184,463
Ford Motor Credit Co.
2,000,000 6.07%, due 7/20/95 2,000,000
1,300,000 5.55%, due 1/12/96 1,260,919
General Electric Capital Corp.
1,160,000 5.97%, due 8/2/95 1,153,844
1,000,000 6.17%, due 10/11/95 982,518
General Electric Co.
925,000 5.87%, due 8/22/95 917,157
Golden Peanut Co.
750,000 5.95%, due 8/7/95 745,414
International Lease Finance Corp.
1,000,000 6.00%, due 7/20/95 996,833
1,000,000 5.72%, due 10/16/95 982,999
Interstate Power Co.
370,000 5.97%, due 7/17/95 369,018
640,000 5.93%, due 7/25/95 637,470
McGraw-Hill Inc.
700,000 6.10%, due 7/28/95 696,798
1,300,000 5.94%, due 8/2/95 1,293,136
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
Merrill Lynch & Co., Inc.
$ 750,000 5.93%, due 8/8/95 $ 745,305
725,000 5.95%, due 8/14/95 719,728
860,000 5.95%, due 8/15/95 853,604
900,000 5.91%, due 8/28/95 891,431
Mitsubishi International Corp.
2,800,000 5.90%, due 8/4/95 2,784,398
Monsanto Co.
1,685,000 5.85%, due 8/29/95 1,668,845
Morgan (J.P.) & Company, Inc.
1,700,000 5.84%, due 9/7/95 1,681,247
National Rural Utilities
Cooperative Finance Corp.
425,000 5.93%, due 9/1/95 420,660
1,000,000 5.88%, due 9/6/95 989,057
1,100,000 5.95%, due 9/6/95 1,087,819
700,000 5.90%, due 9/29/95 689,675
Norwest Corp.
1,300,000 6.01%, due 7/24/95 1,295,008
2,000,000 5.73%, due 9/25/95 1,972,623
NYNEX Corp.
2,000,000 5.71%, due 9/5/95 1,979,063
Penney (J.C.) Funding Corp.
1,000,000 5.94%, due 7/20/95 996,865
1,570,000 5.93%, due 7/21/95 1,564,828
PHH Corp.
1,000,000 5.85%, due 7/12/95 998,213
Philip Morris Companies Inc.
1,100,000 5.99%, due 7/31/95 1,094,509
Potomac Electric Power Co.
595,000 5.97%, due 8/7/95 591,349
U.S. Bancorp
900,000 6.04%, due 7/7/95 899,094
U S West Communications, Inc.
1,480,000 6.07%, due 7/5/95 1,479,002
Wal-Mart Stores Inc.
600,000 6.15%, due 7/3/95 599,795
Xerox Corp.
1,200,000 5.90%, due 8/10/95 1,192,133
1,100,000 5.93%, due 8/22/95 1,090,578
850,000 5.94%, due 8/25/95 842,286
------------
TOTAL COMMERCIAL PAPER
(COST $61,762,744) 61,762,744
------------
U.S. AGENCY SHORT-TERM OBLIGATIONS
(3.1% OF NET ASSETS)
Student Loan Marketing Assn.
5.69%, due 5/14/96 (Cost
2,000,000 $2,000,000) 2,000,000
------------
TOTAL INVESTMENTS
(COST $63,762,744) $ 63,762,744
------------
------------
</TABLE>
1 The accompanying notes are an integral part of these financial
statements.
<PAGE>
GOVERNMENT SECURITIES ACCOUNT INCOME ACCOUNT
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
U.S. GOVERNMENT & AGENCY
LONG-TERM OBLIGATIONS
(98.5% OF NET ASSETS)
Federal National Mortgage Assn.
$ 1,174,238 7.00%, 2019 $ 1,177,537
Government National Mortgage Assn.
81,101 11.50%, 1998 86,601
45,095 9.50%, 2001 47,251
50,138 7.25%, 2005 51,297
324,599 7.50%, 2006 328,527
200,662 8.00%, 2006 206,766
524,312 8.00%, 2007 541,022
180,541 8.25%, 2008 186,777
84,503 9.00%, 2008 89,548
562,233 9.00%, 2009 596,423
10,111 13.50%, 2010 11,425
98,967 13.00%, 2011 111,894
3,439 13.50%, 2011 3,886
64,994 14.00%, 2011 73,890
43,407 15.00%, 2011 50,135
3,718 12.00%, 2012 4,185
108,607 13.50%, 2012 121,962
168,566 15.00%, 2012 194,694
107,161 11.50%, 2013 120,053
45,032 13.00%, 2013 50,914
203,024 13.50%, 2013 229,417
83,119 12.00%, 2014 93,561
284,277 12.50%, 2014 322,475
139,709 13.00%, 2014 157,958
1,414 13.50%, 2014 1,598
534,679 8.50%, 2016 559,878
445,915 6.50%, 2017 453,023
409,588 10.00%, 2019 446,729
101,689 12.50%, 2019 114,175
2,177,473 6.50%, 2023 2,091,724
1,860,980 7.00%, 2023 1,831,316
952,018 7.00%, 2024 936,843
500,000 8.00%, TBA 511,875
U.S. Treasury Bond
9,650,000 9.25%, 2016 12,373,133
U.S. Treasury Notes
800,000 9.25%, 1996 814,248
5,000,000 9.375%, 1996 5,138,300
500,000 8.50%, 1997 522,185
3,500,000 8.875%, 1997 3,728,585
6,750,000 9.25%, 1998 7,381,733
2,500,000 7.50%, 2001 2,683,600
2,250,000 11.75%, 2001 2,856,442
3,000,000 7.25%, 2004 3,205,770
------------
TOTAL U.S. GOVERNMENT & AGENCY
LONG-TERM OBLIGATIONS
(COST $49,799,117) 50,509,355
------------
REPURCHASE AGREEMENTS*
(.6% OF NET ASSETS)
State Street Bank & Trust Co.
5.50%, due 7/3/95 (Cost
310,000 $310,000) 310,000
------------
TOTAL INVESTMENTS
(COST $50,109,117) $ 50,819,355
------------
------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
CORPORATE BONDS
(83.2% OF NET ASSETS)
AEROSPACE (1.7%)
British Aerospace Finance Inc.
$ 500,000 8.00%, 1997 $ 513,750
Coltec Industries Inc.
250,000 9.75%, 2000 258,750
------------
772,500
------------
AIRLINES (1.2%)
Southwest Airlines Co.
500,000 9.25%, 1998 532,270
------------
AUTO & AUTO RELATED (1.9%)
Burmah Castrol Capital, Ltd.
500,000 7.00%, 1997 508,525
Ford Motor Co.
372,474 6.27%, 2000 370,097
------------
878,622
------------
BANKING (12.8%)
Banco Ganadero SA
400,000 9.75%, 1999 399,500
Bank of Boston Corp.
400,000 10.30%, 2000 402,312
Barnett Banks, Inc.
515,000 8.50%, 1999 543,459
Chemical Banking Corp.
500,000 6.625%, 1998 501,985
Citicorp
500,000 9.46%, 1996 513,500
First Fidelity Bancorporation
500,000 8.50%, 1998 524,650
First Union Corp.
500,000 6.75%, 1998 503,420
First USA Bank of Delaware
500,000 5.05%, 1995 497,375
Home Savings of America
500,000 10.50%, 1997 513,910
Mellon Financial Co.
500,000 6.50%, 1997 502,175
Security Pacific Corp.
500,000 7.75%, 1996 510,345
Shawmut National Corp.
500,000 8.875%, 1996 508,650
------------
5,921,281
------------
BROKER/DEALER (1.3%)
Merrill Lynch & Co., Inc.
600,000 8.25%, 1996 619,440
------------
CHEMICALS (2.2%)
FMC Corp.
250,000 8.75%, 1999 266,190
</TABLE>
*Repurchase agreements are fully collateralized by U.S. Government
obligations.
2
<PAGE>
INCOME ACCOUNT (cont'd)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
Lyondell Petrochemical Co.
$ 750,000 8.25%, 1997 $ 766,560
------------
1,032,750
------------
COMPUTER BUSINESS EQUIPMENT &
SERVICES (.8%)
Unisys Corp.
350,000 9.75%, 1996 357,875
------------
CONGLOMERATES (.9%)
Tenneco, Inc.
375,000 10.00%, 1998 409,357
------------
ELECTRIC UTILITIES (2.8%)
Consumers Power Co.
250,000 8.75%, 1998 262,042
Long Island Lighting Co.
500,000 8.75%, 1996 508,750
Midwest Power Systems Inc.
500,000 6.25%, 1998 498,210
------------
1,269,002
------------
ELECTRICAL & ELECTRONIC EQUIPMENT
(2.2%)
Electrolux
500,000 7.75%, 1997 511,875
Westinghouse Electric Corp.
500,000 7.75%, 1996 503,065
------------
1,014,940
------------
FINANCIAL SERVICES (15.8%)
Allied Lyons
500,000 6.50%, 1997 501,563
American General Finance Corp.
500,000 8.50%, 1998 529,015
Aristar, Inc.
500,000 6.25%, 1996 499,990
Associates Corp. of North America
500,000 7.40%, 1999 517,540
Avco Financial Services, Inc.
500,000 5.875%, 1997 495,300
Banque Nationale de Paris
205,000 9.875%, 1998 222,683
Beneficial Corp.
500,000 9.125%, 1998 532,105
Chrysler Financial Corp.
500,000 5.08%, 1997 491,280
Countrywide Funding Corp.
500,000 6.57%, 1997 502,010
Discover Credit Corp.
250,000 8.73%, 1996 256,215
Fleet Mortgage Group, Inc.
500,000 6.125%, 1997 497,035
General Motors Acceptance Corp.
500,000 5.65%, 1997 491,320
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
Green Tree Financial Corp.
$ 250,000 7.70%, 2019 $ 258,905
Household Financial Corporation
Ltd.
250,000 6.00%, 1998 246,907
Household International
Netherlands B.V.
250,000 6.00%, 1999 245,913
Norwest Financial, Inc.
500,000 6.50%, 1997 502,450
Transamerica Finance Group, Inc.
500,000 7.42%, 1998 512,275
------------
7,302,506
------------
FOOD & BEVERAGES (4.5%)
ConAgra, Inc.
500,000 9.75%, 1997 533,695
Grand Metropolitan Investment
Corp.
500,000 8.125%, 1996 510,105
Nabisco Brands Inc.
500,000 8.00%, 2000 523,780
Seagram Company Ltd.
500,000 9.75%, 2000 512,335
------------
2,079,915
------------
INSURANCE (.9%)
SunAmerica Inc.
370,000 9.00%, 1999 395,223
------------
LEASING (2.2%)
Penske Truck Leasing Co.
500,000 7.75%, 1999 513,675
U.S. Leasing International Inc.
500,000 7.00%, 1997 507,250
------------
1,020,925
------------
LEISURE & ENTERTAINMENT (.5%)
Blockbuster Entertainment Corp.
250,000 6.625%, 1998 248,398
------------
MACHINERY & EQUIPMENT (1.1%)
Caterpillar Financial Services
Corp.
500,000 6.85%, 1997 505,230
------------
MANUFACTURING (.6%)
First Brands Corp.
265,000 9.125%, 1999 274,164
------------
MORTGAGE-BACKED SECURITIES (5.8%)
American Southwest Financial Corp.
1,624,603 8.25%, 2016 1,627,649
GE Capital Mortgage Services, Inc.
152,509 6.50%, 2024 152,079
Housing Securities, Inc.
227,396 7.25%, 2012 227,112
</TABLE>
3 The accompanying notes are an integral part of these financial
statements.
<PAGE>
INCOME ACCOUNT (cont'd)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
Ryland Mortgage Securities Corp.
$ 426,648 8.339%, 2030 $ 423,182
Salomon Brothers, Inc.
263,007 0.00%, 2017 187,637
177,728 12.50%, 2017 43,543
------------
2,661,202
------------
OFFICE EQUIPMENT (.6%)
Xerox Corp.
270,000 9.20%, 1999 277,104
------------
OIL & GAS (8.6%)
Arkla, Inc.
505,000 9.875%, 1997 525,200
BP America Inc.
500,000 8.875%, 1997 529,570
Bridas Corp.
250,000 12.50%, 1999 225,625
Coastal Corp.
500,000 8.75%, 1999 532,955
El Paso Natural Gas Co.
250,000 6.90%, 1997 252,230
Empresa Columbia de Petroleos
250,000 7.25%, 1998 248,125
Florida Gas Transmission Co.
500,000 7.75%, 1997 513,675
Occidental Petroleum Corp.
500,000 6.43%, 1997 499,055
Phillips Petroleum Co.
474,163 7.53%, 1998 483,461
Transcontinental Gas Pipe Line
Corp.
150,000 9.00%, 1996 155,065
------------
3,964,961
------------
PAPER & FOREST PRODUCTS (1.9%)
Celulosa Arauco y Constitucion SA
350,000 7.25%, 1998 350,875
Georgia-Pacific Corp.
500,000 9.85%, 1997 529,880
------------
880,755
------------
PRINTING & PUBLISHING (2.2%)
Reed Publishing USA Inc.
500,000 7.20%, 1997 508,375
Time Warner Inc.
500,000 7.45%, 1998 504,035
------------
1,012,410
------------
RETAIL TRADE (2.7%)
Kmart Corp.
500,000 8.61%, 1997 516,370
Sears, Roebuck & Co.
200,000 9.44%, 1996 204,900
500,000 8.39%, 1999 530,580
------------
1,251,850
------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
SAVINGS & LOAN (1.1%)
Golden West Financial Corp.
$ 500,000 8.625%, 1998 $ 528,925
------------
TELECOMMUNICATIONS (1.3%)
Tele-Communications, Inc.
615,000 5.28%, 1996 607,522
------------
TELEPHONE UTILITIES (2.3%)
GTE Corp.
500,000 8.85%, 1998 527,595
MCI Communications Corp.
500,000 7.625%, 1996 508,645
------------
1,036,240
------------
TOBACCO (2.2%)
B.A.T Capital Corp.
500,000 6.66%, 2000 488,900
Philip Morris Companies Inc.
500,000 8.75%, 1996 516,130
------------
1,005,030
------------
TRANSPORTATION (1.1%)
Federal Express Corp.
500,000 9.75%, 1996 513,670
------------
TOTAL CORPORATE BONDS
(COST $39,041,898) 38,374,067
------------
U.S. GOVERNMENT & AGENCY
LONG-TERM OBLIGATIONS
(10.7% OF NET ASSETS)
Federal Home Loan Mortgage Corp.
169,307 5.50%, 1997 166,820
505,197 5.50%, 1998 497,777
Federal National Mortgage Assn.
872,111 7.50%, 2008 886,553
873,484 7.00%, 2009 875,667
816,947 8.00%, 2009 840,173
250,000 6.00%, 2019 242,968
Government National Mortgage Assn.
397,717 7.00%, 2009 399,578
46,223 13.00%, 2014 52,261
U.S. Treasury Note
1,000,000 5.25%, 1998 981,090
------------
TOTAL U.S. GOVERNMENT & AGENCY
LONG-TERM OBLIGATIONS
(COST $4,889,313) 4,942,887
------------
COMMERCIAL PAPER
(4.3% OF NET ASSETS)
Wal-Mart Stores Inc.
6.15%, due 7/3/95 (COST
$1,984,322) 1,984,322
1,985,000
------------
TOTAL INVESTMENTS
(COST $45,915,533) $ 45,301,276
------------
------------
</TABLE>
4
<PAGE>
TOTAL RETURN ACCOUNT
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
COMMON STOCKS
(38.7% OF NET ASSETS)
AEROSPACE (4.4%)
22,600 General Dynamics Corp. $ 1,002,875
28,100 General Motors Corp. Class H 1,109,950
35,371 Lockheed Martin Corp. 2,232,794
37,600 Loral Corp. 1,945,800
19,000 McDonnell Douglas Corp. 1,458,250
26,900 Rockwell International Corp. 1,230,675
------------
8,980,344
------------
AIRLINES (1.8%)
16,100 AMR Corp. 1,201,462
22,300 Delta Air Lines, Inc. 1,644,625
25,100 Northwest Airlines Corp. 887,912
------------
3,733,999
------------
BANKING (2.1%)
18,600 Bank of New York Co., Inc. 750,975
26,500 Chase Manhattan Corp. 1,245,500
21,300 Morgan (J.P.) & Company, Inc. 1,493,663
4,600 Wells Fargo & Co. 829,150
------------
4,319,288
------------
BUILDING MATERIALS & CONSTRUCTION
(.1%)
11,500 USG Corp. 273,125
------------
CHEMICALS (2.0%)
13,000 FMC Corp. 874,250
28,800 Grace (W.R.) & Co. 1,767,600
15,700 Monsanto Co. 1,414,963
------------
4,056,813
------------
CONGLOMERATES (1.0%)
21,000 AlliedSignal Inc. 934,500
17,600 Textron, Inc. 1,023,000
------------
1,957,500
------------
DRUGS & COSMETICS (.4%)
9,500 American Home Products Corp. 735,062
------------
ELECTRIC UTILITIES (1.8%)
37,300 FPL Group, Inc. 1,440,712
45,600 Illinova Corp. 1,157,100
41,000 Unicom Corp. 1,091,625
------------
3,689,437
------------
ELECTRICAL & ELECTRONIC EQUIPMENT
(.5%)
18,500 Micron Technology Inc. 1,015,188
------------
FOOD & BEVERAGES (.9%)
60,422 Archer Daniels Midland Co. 1,125,360
30,200 Ralcorp Holdings, Inc. 690,825
------------
1,816,185
------------
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
HEALTH SERVICES & HOSPITAL SUPPLIES
(1.5%)
49,100 Baxter International Inc. $ 1,786,013
28,700 Columbia Healthcare Corp. 1,241,275
------------
3,027,288
------------
INSURANCE (3.4%)
26,500 Aetna Life & Casualty Co. 1,666,187
35,100 American General Corp. 1,184,625
18,500 Lincoln National Corp. 809,375
15,300 St. Paul Companies Inc. 753,525
36,100 TIG Holdings, Inc. 830,300
39,200 Travelers Group 1,715,000
------------
6,959,012
------------
LEISURE RELATED (.8%)
19,300 Grand Casinos, Inc. 682,738
37,675 Mattel, Inc. 979,550
------------
1,662,288
------------
MACHINERY & EQUIPMENT (1.3%)
15,700 Caterpillar Inc. 1,008,725
33,390 Mark IV Industries, Inc. 717,885
25,650 Parker-Hannifin Corp. 929,812
------------
2,656,422
------------
MANUFACTURING (.8%)
25,300 Black & Decker Corp. 781,138
18,000 Philips Electronics NV 769,500
------------
1,550,638
------------
METALS & MINING (1.1%)
19,800 IMC Global Inc. 1,071,675
Potash Corporation of Saskatchewan
19,800 Inc. 1,106,325
------------
2,178,000
------------
MISCELLANEOUS (1.5%)
57,300 Dial Corp. 1,418,175
30,500 Premark International, Inc. 1,582,188
------------
3,000,363
------------
OFFICE EQUIPMENT (.6%)
11,200 Xerox Corp. 1,313,200
------------
OIL & GAS (3.4%)
18,300 Amoco Corp. 1,219,238
26,400 Chevron Corp. 1,230,900
14,800 Mobil Corp. 1,420,800
71,200 Panhandle Eastern Corp. 1,735,500
10,400 Royal Dutch Petroleum Co. 1,267,500
------------
6,873,938
------------
PAPER & FOREST PRODUCTS (1.8%)
9,500 Georgia-Pacific Corp. 824,125
31,200 Scott Paper Co. 1,544,400
</TABLE>
5 The accompanying notes are an integral part of these financial
statements.
<PAGE>
TOTAL RETURN ACCOUNT (cont'd)
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
22,000 Willamette Industries, Inc. $ 1,221,000
------------
3,589,525
------------
RETAIL TRADE (2.5%)
45,900 American Stores Co. 1,290,937
18,900 Eckerd Corp. 604,800
49,700 Kroger Co. 1,335,688
30,400 Sears, Roebuck & Co. 1,820,200
------------
5,051,625
------------
TECHNOLOGY (2.0%)
9,800 Applied Materials Inc. 848,925
17,100 Compaq Computer Corp. 775,912
Computer Associates International,
13,200 Inc. 894,300
International Business Machines
15,900 Corp. 1,526,400
------------
4,045,537
------------
TELEPHONE UTILITIES (1.7%)
31,400 Ameritech Corp. 1,381,600
31,000 GTE Corp. 1,057,875
27,200 NYNEX Corp. 1,094,800
------------
3,534,275
------------
TOBACCO (1.3%)
28,800 American Brands, Inc. 1,144,800
18,700 Philip Morris Companies Inc. 1,390,812
------------
2,535,612
------------
TOTAL COMMON STOCKS
(COST $64,331,079) 78,554,664
------------
PRINCIPAL CORPORATE BONDS
AMOUNT (20.8% OF NET ASSETS)
AEROSPACE (.4%)
British Aerospace Finance Inc.
$ 500,000 8.00%, 1997 513,750
Coltec Industries, Inc.
250,000 9.75%, 2000 258,750
------------
772,500
------------
AUTO & AUTO RELATED (.2%)
Burmah Castrol Capital, Ltd.
500,000 7.00%, 1997 508,525
------------
BANKING (2.5%)
Bank of Boston Corp.
500,000 10.30%, 2000 502,890
BankAmerica Corp.
500,000 6.00%, 1997 496,525
Chemical Banking Corp.
250,000 10.125%, 2000 285,820
First Fidelity Bancorporation
500,000 8.50%, 1998 524,650
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
First USA Bank of Delaware
$ 500,000 5.05%, 1995 $ 497,375
750,000 5.35%, 1996 713,550
Fleet Financial Group, Inc.
250,000 9.90%, 2001 285,345
Marshall & Ilsley Corp.
500,000 6.95%, 1997 506,970
Mellon Financial Co.
400,000 6.50%, 1997 401,740
Shawmut National Corp.
750,000 8.875%, 1996 762,975
------------
4,977,840
------------
CHEMICALS (1.3%)
FMC Corp.
500,000 8.75%, 1999 532,380
Lyondell Petrochemical Co.
1,100,000 8.25%, 1997 1,124,288
Morton International, Inc.
500,000 9.25%, 2020 613,510
PPG Industries, Inc.
250,000 9.00%, 2021 296,102
------------
2,566,280
------------
COMPUTER BUSINESS EQUIPMENT &
SERVICES (.4%)
Unisys Corp.
750,000 9.75%, 1996 766,875
------------
CONGLOMERATES (.5%)
Tenneco Credit Corp.
500,000 9.25%, 1996 517,255
Tenneco, Inc.
375,000 10.00%, 1998 409,358
------------
926,613
------------
DRUGS & COSMETICS (.5%)
Procter & Gamble Co.
250,000 9.36%, 2021 304,637
Roche Holdings Inc.
950,000 2.75%, 2000 808,688
------------
1,113,325
------------
ELECTRIC UTILITIES (.7%)
Hydro-Quebec
500,000 9.375%, 2030 595,605
Long Island Lighting Co.
500,000 8.75%, 1996 508,750
Public Service Co. of New
Hampshire
250,000 8.875%, 1996 254,353
------------
1,358,708
------------
</TABLE>
6
<PAGE>
TOTAL RETURN ACCOUNT (cont'd)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
ELECTRICAL & ELECTRONIC EQUIPMENT
(.5%)
Electrolux
$ 500,000 7.75%, 1997 $ 511,875
Westinghouse Electric Corp.
500,000 7.75%, 1996 503,065
------------
1,014,940
------------
FINANCIAL SERVICES (5.3%)
American General Finance Corp.
500,000 7.70%, 1997 514,585
500,000 8.50%, 1998 529,015
Aristar, Inc.
500,000 6.25%, 1996 499,990
250,000 8.125%, 1997 259,777
Associates Corp. of North America
500,000 6.75%, 1999 503,895
Avco Financial Services, Inc.
500,000 5.875%, 1997 495,300
Countrywide Funding Corp.
250,000 6.57%, 1997 251,005
500,000 6.085%, 1999 491,290
Discover Credit Corp.
500,000 8.73%, 1996 512,430
Fleet Mortgage Corp.
1,000,000 6.125%, 1997 994,070
250,000 6.50%, 1999 248,640
Ford Motor Credit Co.
500,000 8.00%, 1997 518,145
500,000 6.25%, 1998 498,710
General Motors Acceptance Corp.
1,000,000 5.65%, 1997 982,640
750,000 7.75%, 1997 766,320
Green Tree Financial Corp.
500,000 8.00%, 2020 521,560
Household Financial Corporation
Ltd.
250,000 6.00%, 1998 246,908
Household International
Netherlands B.V.
500,000 6.00%, 1999 491,825
ITT Financial Corp.
250,000 8.75%, 2006 268,993
Norwest Financial, Inc.
500,000 6.50%, 1997 502,450
Transamerica Finance Corp.
500,000 6.75%, 1997 503,965
250,000 6.80%, 1999 252,465
------------
10,853,978
------------
FOOD & BEVERAGES (1.1%)
Bass America Inc.
250,000 6.75%, 1999 252,217
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
ConAgra, Inc.
$ 500,000 9.75%, 1997 $ 533,695
Nabisco Brands Inc.
500,000 8.00%, 2000 523,780
Seagram Company Ltd.
950,000 9.75%, 2000 973,436
------------
2,283,128
------------
INSURANCE (.2%)
SunAmerica Inc.
450,000 9.00%, 1999 480,677
------------
LEASING (.8%)
Penske Truck Leasing Co.
750,000 7.75%, 1999 770,513
PHH Corp.
350,000 6.50%, 2000 348,709
U.S. Leasing International Inc.
500,000 7.00%, 1997 507,250
------------
1,626,472
------------
LEISURE & ENTERTAINMENT (.2%)
Blockbuster Entertainment Corp.
500,000 6.625%, 1998 496,795
------------
MANUFACTURING (.2%)
Black & Decker Corp.
400,000 6.625%, 2000 394,040
------------
MORTGAGE-BACKED SECURITIES (.3%)
Fleet Mortgage Securities, Inc.
153,076 8.25%, 2023 153,075
Housing Securities, Inc.
363,833 7.25%, 2012 363,379
------------
516,454
------------
OIL & GAS (2.5%)
Arkla, Inc.
750,000 9.875%, 1997 780,000
BP America, Inc.
500,000 8.875%, 1997 529,570
Bridas Corp.
270,000 12.50%, 1999 243,675
Coastal Corp.
500,000 8.125%, 2002 526,220
Norsk Hydro
500,000 8.75%, 2001 549,062
Petroliam Nasional Berhad
500,000 6.875%, 2003 499,920
Phillips Petroleum Co.
948,326 7.53%, 1998 966,922
TransCanada Pipelines Ltd.
500,000 9.875%, 2021 628,375
Transco Energy Co.
250,000 9.625%, 2000 280,565
------------
5,004,309
------------
</TABLE>
7 The accompanying notes are an integral part of these financial
statements.
<PAGE>
TOTAL RETURN ACCOUNT (cont'd)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
PAPER & FOREST PRODUCTS (.6%)
Celulosa Arauco y Constitucion SA
$ 500,000 7.25%, 1998 $ 501,250
Georgia-Pacific Corp.
750,000 9.85%, 1997 794,820
------------
1,296,070
------------
PRINTING & PUBLISHING (.5%)
Reed Elsevier, Inc.
400,000 6.625%, 2023 360,388
Time Warner Inc.
700,000 7.45%, 1998 705,649
------------
1,066,037
------------
RETAIL TRADE (.2%)
Sears, Roebuck & Co.
300,000 8.39%, 1999 318,348
------------
SAVINGS & LOAN (.3%)
Golden West Financial Corp.
500,000 10.25%, 1997 531,970
------------
TELECOMMUNICATIONS (.2%)
Tele-Communications, Inc.
400,000 7.15%, 1998 404,412
------------
TELEPHONE UTILITIES (.6%)
GTE Corp.
750,000 8.85%, 1998 791,393
MCI Communications Corp.
500,000 7.125%, 2000 512,780
------------
1,304,173
------------
TOBACCO (.3%)
Philip Morris Companies Inc.
500,000 8.75%, 1996 516,130
------------
TRANSPORTATION (.5%)
Federal Express Corp.
750,000 9.75%, 1996 770,505
250,000 6.25%, 1998 248,115
------------
1,018,620
------------
TOTAL CORPORATE BONDS
(COST $41,824,531) 42,117,219
------------
U.S. GOVERNMENT & AGENCY
LONG-TERM OBLIGATIONS
(14.3% OF NET ASSETS)
Federal Home Loan Mortgage Corp.
1,000,000 6.00%, 2007 927,180
Federal National Mortgage Assn.
1,288,885 7.50%, 2008 1,310,229
800,000 6.00%, 2019 777,496
630,973 7.00%, 2022 547,369
Government National Mortgage Assn.
680,968 7.00%, 2009 684,155
979,208 7.50%, 2009 997,871
606,893 8.00%, 2017 625,203
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
$ 209,596 9.00%, 2018 $ 221,496
294,868 9.00%, 2019 310,726
306,072 9.00%, 2021 323,451
258,677 9.00%, 2022 272,588
2,566,997 6.50%, 2023 2,465,909
285,601 8.50%, 2023 296,488
3,705,272 6.50%, 2024 3,559,358
4,599,878 7.00%, 2024 4,526,556
U.S. Treasury Bonds
650,000 7.50%, 2016 707,688
8,250,000 8.75%, 2017 10,144,943
U.S. Treasury Note
300,000 5.75%, 2003 290,859
------------
TOTAL U.S. GOVERNMENT & AGENCY
LONG-TERM OBLIGATIONS
(COST $27,188,364) 28,989,565
------------
FOREIGN GOVERNMENT BONDS
(.7% OF NET ASSETS)
Fomento Economico Mexicano
450,000 9.50%, 1997 429,750
Republic of Columbia
300,000 7.125%, 1998 294,750
400,000 8.75%, 1999 414,000
United Mexican States
250,000 6.97%, 2000 180,000
------------
TOTAL FOREIGN GOVERNMENT BONDS
(COST $1,387,071) 1,318,500
------------
COMMERCIAL PAPER
(25.2% OF NET ASSETS)
Armstrong World Industries Inc.
4,100,000 5.97%, due 7/18/95 4,088,441
Beneficial Corp.
1,700,000 5.95%, due 7/17/95 1,695,505
Cargill, Inc.
3,630,000 5.92%, due 7/7/95 3,626,418
Corporate Receivables Corp.
2,000,000 6.00%, due 7/19/95 1,994,000
Dayton Hudson Corp.
2,000,000 6.00%, due 7/21/95 1,993,333
Ford Motor Credit Co.
5,065,000 5.97%, due 7/12/95 5,065,000
1,914,000 5.96%, due 7/17/95 1,914,000
GTE Florida, Inc.
4,000,000 6.00%, due 7/20/95 3,987,333
Hewlett Packard Finance Co.
3,000,000 5.95%, due 7/11/95 2,995,042
Merrill Lynch & Co., Inc.
2,880,000 5.98%, due 7/6/95 2,877,608
4,025,000 5.97%, due 7/13/95 4,016,990
PACCAR Financial Corp.
2,380,000 5.95%, due 7/5/95 2,378,427
3,000,000 5.97%, due 7/14/95 2,993,533
</TABLE>
8
<PAGE>
TOTAL RETURN ACCOUNT (cont'd)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
PHH Corp.
$ 1,605,000 5.97%, due 7/6/95 $ 1,603,669
Public Service Electric and Gas
Co.
3,050,000 5.97%, due 7/10/95 3,045,448
U.S. Central Credit Union
2,885,000 5.98%, due 7/5/95 2,883,083
Xerox Corp.
3,895,000 5.96%, due 7/13/95 3,887,262
------------
TOTAL COMMERCIAL PAPER
(COST $51,045,092) 51,045,092
------------
TOTAL INVESTMENTS
(COST $185,776,137) $202,025,040
------------
------------
</TABLE>
GROWTH ACCOUNT
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
COMMON STOCKS
(90.8% OF NET ASSETS)
AEROSPACE (10.8%)
25,400 General Dynamics Corp. $ 1,127,125
36,000 General Motors Corp. Class H 1,422,000
35,371 Lockheed Martin Corp. 2,232,794
41,700 Loral Corp. 2,157,975
24,500 McDonnell Douglas Corp. 1,880,375
38,400 Rockwell International Corp. 1,756,800
------------
10,577,069
------------
AIRLINES (4.3%)
20,400 AMR Corp. 1,522,350
22,500 Delta Air Lines, Inc. 1,659,375
30,000 Northwest Airlines Corp. 1,061,250
------------
4,242,975
------------
BANKING (5.0%)
18,600 Bank of New York Co., Inc. 750,975
23,800 Chase Manhattan Corp. 1,118,600
27,100 Morgan (J.P.) & Company, Inc. 1,900,388
6,300 Wells Fargo & Co. 1,135,575
------------
4,905,538
------------
BUILDING MATERIALS & CONSTRUCTION
(.4%)
14,800 USG Corp. 351,500
------------
CHEMICALS (4.5%)
14,600 FMC Corp. 981,850
28,700 Grace (W.R.) & Co. 1,761,462
18,800 Monsanto Co. 1,694,350
------------
4,437,662
------------
CONGLOMERATES (2.6%)
24,700 AlliedSignal Inc. 1,099,150
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
24,000 Textron, Inc. $ 1,395,000
------------
2,494,150
------------
DRUGS & COSMETICS (.8%)
9,900 American Home Products Corp. 766,013
------------
ELECTRIC UTILITIES (4.1%)
35,600 FPL Group, Inc. 1,375,050
49,400 Illinova Corp. 1,253,525
52,300 Unicom Corp. 1,392,487
------------
4,021,062
------------
ELECTRICAL & ELECTRONIC EQUIPMENT
(1.2%)
21,000 Micron Technology Inc. 1,152,375
------------
FOOD & BEVERAGES (2.1%)
71,115 Archer Daniels Midland Co. 1,324,517
30,100 Ralcorp Holdings, Inc. 688,538
------------
2,013,055
------------
HEALTH SERVICES & HOSPITAL SUPPLIES
(3.3%)
50,700 Baxter International Inc. 1,844,212
32,700 Columbia Healthcare Corp. 1,414,275
------------
3,258,487
------------
INSURANCE (8.1%)
24,000 Aetna Life & Casualty Co. 1,509,000
51,300 American General Corp. 1,731,375
22,200 Lincoln National Corp. 971,250
22,700 St. Paul Companies Inc. 1,117,975
36,400 TIG Holdings, Inc. 837,200
39,500 Travelers Group 1,728,125
------------
7,894,925
------------
LEISURE RELATED (1.8%)
23,300 Grand Casinos, Inc. 824,238
35,968 Mattel, Inc. 935,168
------------
1,759,406
------------
MACHINERY & EQUIPMENT (3.2%)
17,400 Caterpillar Inc. 1,117,950
38,955 Mark IV Industries, Inc. 837,533
31,100 Parker-Hannifin Corp. 1,127,375
------------
3,082,858
------------
MANUFACTURING (2.0%)
30,000 Black & Decker Corp. 926,250
23,300 Philips Electronics NV 996,075
------------
1,922,325
------------
METALS & MINING (2.7%)
24,400 IMC Global Inc. 1,320,650
Potash Corporation of Saskatchewan
24,100 Inc. 1,346,588
------------
2,667,238
------------
</TABLE>
9 The accompanying notes are an integral part of these financial
statements.
<PAGE>
GROWTH ACCOUNT (cont'd)
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
MISCELLANEOUS (3.1%)
64,900 Dial Corp. $ 1,606,275
27,600 Premark International, Inc. 1,431,750
------------
3,038,025
------------
OFFICE EQUIPMENT (1.5%)
12,700 Xerox Corp. 1,489,075
------------
OIL & GAS (7.9%)
22,400 Amoco Corp. 1,492,400
32,200 Chevron Corp. 1,501,325
16,700 Mobil Corp. 1,603,200
73,100 Panhandle Eastern Corp. 1,781,812
10,600 Royal Dutch Petroleum Co. 1,291,875
------------
7,670,612
------------
PAPER & FOREST PRODUCTS (3.8%)
10,800 Georgia-Pacific Corp. 936,900
28,200 Scott Paper Co. 1,395,900
24,600 Willamette Industries, Inc. 1,365,300
------------
3,698,100
------------
RETAIL TRADE (6.1%)
55,700 American Stores Co. 1,566,562
21,600 Eckerd Corp. 691,200
52,300 Kroger Co. 1,405,563
38,000 Sears, Roebuck & Co. 2,275,250
------------
5,938,575
------------
TECHNOLOGY (4.8%)
11,700 Applied Materials Inc. 1,013,512
22,100 Compaq Computer Corp. 1,002,787
Computer Associates International,
12,100 Inc. 819,775
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
International Business Machines
19,700 Corp. $ 1,891,200
------------
4,727,274
------------
TELEPHONE UTILITIES (4.1%)
33,000 Ameritech Corp. 1,452,000
36,900 GTE Corp. 1,259,213
32,700 NYNEX Corp. 1,316,175
------------
4,027,388
------------
TOBACCO (2.6%)
28,500 American Brands, Inc. 1,132,875
18,800 Philip Morris Companies Inc. 1,398,250
------------
2,531,125
------------
TOTAL COMMON STOCKS
(COST $71,945,181) 88,666,812
------------
PRINCIPAL COMMERCIAL PAPER
AMOUNT (9.6% OF NET ASSETS)
Armstrong World Industries Inc.
$ 2,420,000 6.03%, due 7/11/95 2,415,946
CSW Credit, Inc.
2,200,000 6.00%, due 7/6/95 2,198,167
International Lease Finance Corp.
1,220,000 6.00%, due 7/5/95 1,219,187
Merrill Lynch & Co., Inc.
2,000,000 6.00%, due 7/7/95 1,998,000
U S West Communications, Inc.
1,540,000 5.97%, due 7/10/95 1,537,701
------------
TOTAL COMMERCIAL PAPER
(COST $9,369,001) 9,369,001
------------
TOTAL INVESTMENTS
(COST $81,314,182) $ 98,035,813
------------
------------
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS June 30, 1995 (Unaudited)
<TABLE>
<S> <C> <C>
<C> <C> <C>
A C C O U N T S
1. Aggregate gross unrealized appreciation
(depreciation) as of June 30, 1995, based on
cost for Federal income tax purposes, was as
GOVERNMENT TOTAL
follows: LIQUID
SECURITIES INCOME RETURN
GROWTH
Aggregate gross unrealized appreciation $ -- $
1,077,858 $ 316,314 $ 16,947,234
$16,779,774
Aggregate gross unrealized depreciation --
(367,620) (930,571) (698,331)
(58,143)
------------
- ------------ ------------ ------------- ------------
Net unrealized appreciation (depreciation) $ -- $
710,238 $ (614,257) $ 16,248,903
$16,721,631
------------
- ------------ ------------ ------------- ------------
------------
- ------------ ------------ ------------- ------------
2. The aggregate cost of investments for Federal
income tax purposes was: $63,762,744
$50,109,117 $45,915,533
$185,776,137 $81,314,182
------------
- ------------ ------------ ------------- ------------
------------
- ------------ ------------ ------------- ------------
3. Purchases and sales of securities (excluding
short-term securities) for the six months ended
June 30, 1995 are summarized as follows:
Purchases $ --
$15,982,930 $ 8,377,048 $ 42,898,643
$35,140,419
Sales $ --
$27,933,247 $10,605,131 $ 74,114,376
$29,874,172
</TABLE>
10
<PAGE>
STATEMENT OF NET ASSETS CONNECTICUT MUTUAL INVESTMENT
ACCOUNTS,
INC.
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
A C C O U N T S
GOVERNMENT
TOTAL
LIQUID SECURITIES
INCOME RETURN
GROWTH
<S> <C> <C>
<C> <C> <C>
ASSETS
Investments:
Bonds, at market value
(Cost $49,799,117, $43,931,211,
$70,399,966) $ -- $50,509,355
$43,316,954 $ 72,425,284 $ --
Common stocks, at market value
(Cost $64,331,079, $71,945,181) -- --
-- 78,554,664 88,666,812
Short-term securities 63,762,744 310,000
1,984,322 51,045,092
9,369,001
------------ ------------
------------ ------------- ------------
63,762,744 50,819,355
45,301,276 202,025,040 98,035,813
Cash 2,853 1,393
9,863 8,746 5,339
Investment income receivable 80,093 1,033,935
794,292 1,224,367
214,040
Receivable from securities sold -- --
-- 588,984 636,602
Receivable from Fund shares sold 117,807 28,911
48,828 59,956
50,401
------------ ------------
------------ ------------- ------------
Total Assets 63,963,497 51,883,594
46,154,259 203,907,093
98,942,195
------------ ------------
------------ ------------- ------------
LIABILITIES
Accrued expenses payable 91,408 113,406
45,371 334,009
167,379
Payable for securities purchased -- 511,720
-- 855,457 1,083,336
Dividends payable 8,306 --
-- -- --
Total Liabilities 99,714 625,126
45,371 1,189,466 1,250,715
------------ ------------
------------ ------------- ------------
NET ASSETS $63,863,783 $51,258,468
$46,108,888 $202,717,627
$97,691,480
------------ ------------
------------ ------------- ------------
------------ ------------
------------ ------------- ------------
OUTSTANDING SHARES 63,863,783 4,907,718
4,882,627 13,611,392
5,874,382
------------ ------------
------------ ------------- ------------
------------ ------------
------------ ------------- ------------
NET ASSET VALUE PER SHARE $1.00 $10.44
$9.44 $14.89
$16.63
----- ------
----- ------ ------
----- ------
----- ------ ------
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $63,863,783 $53,921,691
$48,871,786
$183,199,804 $78,476,370
Undistributed net investment income -- 72,169
36,057 128,739
67,221
Accumulated undistributed net realized
gain (loss) -- (3,445,630)
(2,184,698) 3,140,181 2,426,258
Net unrealized appreciation
(depreciation) -- 710,238
(614,257) 16,248,903 16,721,631
------------ ------------
------------ ------------- ------------
NET ASSETS $63,863,783 $51,258,468
$46,108,888 $202,717,627
$97,691,480
------------ ------------
------------ ------------- ------------
------------ ------------
------------ ------------- ------------
</TABLE>
11 The accompanying notes are an integral part of these financial
statements.
<PAGE>
STATEMENT OF OPERATIONS CONNECTICUT MUTUAL INVESTMENT
ACCOUNTS,
INC.
For the six months ended June 30,
1995
(Unaudited)
<TABLE>
<CAPTION>
A C C O U N T S
GOVERNMENT
TOTAL
LIQUID SECURITIES
INCOME RETURN
GROWTH
<S> <C> <C>
<C> <C> <C>
INVESTMENT INCOME
Income:
Interest $2,021,301 $2,382,456
$1,807,409 $ 4,146,518 $ 276,503
Dividends -- --
-- 945,743 1,016,400
----------- -----------
----------- ------------ ------------
Total Income 2,021,301 2,382,456
1,807,409 5,092,261 1,292,903
----------- -----------
----------- ------------ ------------
Expenses:
Investment advisory fees 165,853 183,692
145,711 586,971 271,369
Transfer agent fees 99,800 45,100
30,200 189,400 91,700
Distribution fees -- --
-- 83,049 39,540
Registration fees 16,750 15,250
14,250 21,750 18,250
Custodian fees 14,000 12,475
13,500 22,450 17,900
Shareholder reports 5,000 5,500
4,000 20,000 10,000
Professional services 7,700 6,050
5,500 24,200 11,550
Directors' fees 2,100 1,900
1,710 5,220 2,820
Other 116 5,158
-- 18,954 13,291
Expense reimbursement from investment
adviser -- --
(69,160) -- --
----------- -----------
----------- ------------ ------------
Total Expenses 311,319 275,125
145,711 971,994 476,420
----------- -----------
----------- ------------ ------------
NET INVESTMENT INCOME 1,709,982 2,107,331
1,661,698 4,120,267
816,483
----------- -----------
----------- ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 2 (592,478)
(486,025) 2,607,488
1,898,129
Net unrealized appreciation on
investments -- 4,666,776
2,054,379 16,532,094 11,899,886
----------- -----------
----------- ------------ ------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 2 4,074,298
1,568,354 19,139,582
13,798,015
----------- -----------
----------- ------------ ------------
NET INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS $1,709,984 $6,181,629
$3,230,052
$23,259,849 $14,614,498
----------- -----------
----------- ------------ ------------
----------- -----------
----------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial
statements. 12
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS CONNECTICUT MUTUAL INVESTMENT
ACCOUNTS,
INC.
For the six months ended June 30,
1995
(Unaudited)
and the year ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<C>
A C C O U N T S
LIQUID
GOVERNMENT SECURITIES
1995 1994 1995
1994
INCREASE (DECREASE) IN NET
ASSETS
FROM OPERATIONS:
Net investment income $ 1,709,982 $ 2,575,968 $
2,107,331 $ 4,942,102
Net realized gain (loss)
on investments 2 (987)
(592,478) (2,822,974)
Net unrealized
appreciation
(depreciation) -- --
4,666,776 (5,366,869)
------------- --------------
- ------------- -------------
Net increase (decrease) in
net assets resulting from
operations 1,709,984 2,574,981
6,181,629 (3,247,741)
------------- --------------
- ------------- -------------
DIVIDENDS TO SHAREHOLDERS
FROM:
Net investment income (1,709,984) (2,574,981)
(2,067,140) (4,939,034)
Net realized gain from
investment transactions -- --
-- (56,279)
------------- --------------
- ------------- -------------
(1,709,984) (2,574,981)
(2,067,140) (4,995,313)
------------- --------------
- ------------- -------------
FROM CAPITAL SHARE
TRANSACTIONS:
Net proceeds from sale of
shares 87,303,939 177,469,640
1,630,430 7,468,147
Net asset value of shares
issued to shareholders
from reinvestment of
dividends 1,674,793 2,548,202
1,834,042 4,527,905
Cost of shares reacquired (89,060,819) (192,692,366)
(16,482,832) (21,186,898)
------------- --------------
- ------------- -------------
Increase (decrease) in net
assets derived from
capital share
transactions (82,087) (12,674,524)
(13,018,360) (9,190,846)
------------- --------------
- ------------- -------------
NET INCREASE (DECREASE) IN
NET ASSETS (82,087) (12,674,524)
(8,903,871) (17,433,900)
NET ASSETS -- BEGINNING OF
PERIOD 63,945,870 76,620,394
60,162,339 77,596,239
------------- --------------
- ------------- -------------
NET ASSETS -- END OF PERIOD $ 63,863,783 $ 63,945,870 $
51,258,468 $ 60,162,339
------------- --------------
- ------------- -------------
------------- --------------
- ------------- -------------
Undistributed net investment
income included in net
assets at end of period -- --
$72,169 $31,978
- ------------- -------------
- ------------- -------------
Undistributed net realized
gain (loss) on investments
included in net assets at
end of period -- --
$(3,445,628) $(2,853,150)
- ------------- -------------
- ------------- -------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<C> <C> <C>
A C
C O U N T S
INCOME
TOTAL RETURN GROWTH
1995 1994 1995
1994 1995 1994
INCREASE (DECREASE) IN NET
ASSETS
FROM OPERATIONS:
Net investment income $ 1,661,698 $ 3,484,675 $
4,120,267 $ 7,127,925 $ 816,483
$ 1,077,298
Net realized gain (loss)
on investments (486,025) (660,384)
2,607,488 2,872,138 1,898,129
3,074,097
Net unrealized
appreciation
(depreciation) 2,054,379 (3,054,974)
16,532,094 (14,089,642) 11,899,886
(4,619,868)
------------ -------------
- ------------- ------------- ------------ ------------
Net increase (decrease) in
net assets resulting from
operations 3,230,052 (230,683)
23,259,849 (4,089,579) 14,614,498
(468,473)
------------ -------------
- ------------- ------------- ------------ ------------
DIVIDENDS TO SHAREHOLDERS
FROM:
Net investment income (1,643,000) (3,473,505)
(4,036,099) (7,098,435) (750,655)
(1,076,035)
Net realized gain from
investment transactions -- --
- -- (3,186,699) -- (3,254,775)
------------ -------------
- ------------- ------------- ------------ ------------
(1,643,000) (3,473,505)
(4,036,099) (10,285,134) (750,655)
(4,330,810)
------------ -------------
- ------------- ------------- ------------ ------------
FROM CAPITAL SHARE
TRANSACTIONS:
Net proceeds from sale of
shares 3,779,052 11,501,443
14,787,890 52,357,416 9,109,416
20,893,600
Net asset value of shares
issued to shareholders
from reinvestment of
dividends 1,405,785 3,019,579
3,941,409 10,101,758 737,664
4,286,409
Cost of shares reacquired (7,209,965) (12,906,272)
(13,139,429) (41,385,584)
(4,409,281) (6,485,813)
------------ -------------
- ------------- ------------- ------------ ------------
Increase (decrease) in net
assets derived from
capital share
transactions (2,025,128) 1,614,750
5,589,870 21,073,590 5,437,799
18,694,196
------------ -------------
- ------------- ------------- ------------ ------------
NET INCREASE (DECREASE) IN
NET ASSETS (438,076) (2,089,438)
24,813,620 6,698,877 19,301,642
13,894,913
NET ASSETS -- BEGINNING OF
PERIOD 46,546,964 48,636,402
177,904,007 171,205,130 78,389,838
64,494,925
------------ -------------
- ------------- ------------- ------------ ------------
NET ASSETS -- END OF PERIOD $46,108,888 $ 46,546,964
$202,717,627 $177,904,007
$97,691,480 $78,389,838
------------ -------------
- ------------- ------------- ------------ ------------
------------ -------------
- ------------- ------------- ------------ ------------
Undistributed net investment
income included in net
assets at end of period $ 36,057 $ 17,359 $
128,739 $ 44,571 $ 67,221 $
1,393
------------ -------------
- ------------- ------------- ------------ ------
------------ -------------
- ------------- ------------- ------------ ------
Undistributed net realized
gain (loss) on investments
included in net assets at
end of period $(2,184,698) $ (1,698,673) $
3,140,182 $ 532,694 $ 2,426,260
$ 528,131
------------ -------------
- ------------- ------------- ------------ ------------
------------ -------------
- ------------- ------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial
statements. 14
<PAGE>
FINANCIAL HIGHLIGHTS CONNECTICUT MUTUAL INVESTMENT
ACCOUNTS,
INC.
June 30, 1995 (Unaudited)
Selected data for a share of capital stock outstanding throughout the
period:
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS
DIVIDENDS & UNREALIZED FROM NET NET
ASSET
YEARS NET FROM NET GAIN (LOSS) REALIZED VALUE
AT
ENDED INVESTMENT INVESTMENT ON GAIN ON
BEGINNING
DECEMBER 31 INCOME INCOME INVESTMENTS INVESTMENTS OF
PERIOD
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------
- ----
LIQUID ACCOUNT
1986 $.0588 $(.0588) $ -- $ -- $
1.00
1987 .0581 (.0581) -- --
1.00
1988 .0664 (.0664) -- --
1.00
1989 .0822 (.0822) -- --
1.00
1990 .0731 (.0731) -- --
1.00
1991 .0522 (.0522) -- --
1.00
1992 .0287 (.0287) -- --
1.00
1993 .0227 (.0227) -- --
1.00
1994 .0334 (.0334) -- --
1.00
1995 (c) .0256 (.0256) -- --
1.00
GOVERNMENT SECURITIES ACCOUNT
1986 .92 (.92) .28 (.11)
10.73
1987 .84 (.84) (.52) (.21)
10.90
1988 .84 (.85) (.05) (.05)
10.17
1989 .84 (.84) .52 --
10.06
1990 .84 (.84) .10 --
10.58
1991 .85 (.85) .68 --
10.68
1992 .77 (.77) (.12) (.05)
11.36
1993 .70 (.70) .36 (.64)
11.19
1994 .69 (.69) (1.14) (.01)
10.91
1995 (c) .37 (.36) .67 --
9.76
INCOME ACCOUNT
1986 .83 (.83) .57 (.08)
10.55
1987 .76 (.76) (.56) (.51)
11.04
1988 .84 (.85) (.19) --
9.97
1989 .88 (.88) .02 --
9.77
1990 .94 (.94) (.35) --
9.79
1991 .81 (.81) .47 --
9.44
1992 .79 (.79) (.16) --
9.91
1993 .65 (.65) .11 --
9.75
1994 .68 (.68) (.72) --
9.86
1995 (c) .33 (.33) .30 --
9.14
TOTAL RETURN ACCOUNT
1986 .31 (.30) .99 (.04)
10.91
1987 .38 (.38) .13 (1.09)
11.87
1988 .53 (.53) .60 --
10.91
1989 .76 (.76) 1.81 (.63)
11.51
1990 .66 (.66) (.68) (.07)
12.69
1991 .54 (.54) 2.79 (.71)
11.94
1992 .50 (.50) .86 (1.07)
14.02
1993 .48 (.48) 1.70 (.97)
13.81
1994 .55 (.55) (.86) (.24)
14.54
1995 (c) .31 (.30) 1.44 --
13.44
GROWTH ACCOUNT
1986 .24 (.24) 1.11 (.08)
10.94
1987 .22 (.22) (.12) (2.05)
11.97
1988 .20 (.20) 1.20 --
9.80
1989 .51 (.51) 3.30 (1.25)
11.00
1990 .34 (.34) (1.36) (.07)
13.05
1991 .25 (.25) 4.00 (1.22)
11.62
1992 .26 (.26) 1.44 (1.64)
14.40
1993 .30 (.30) 2.64 (1.70)
14.20
1994 .22 (.22) (.32) (.62)
15.14
1995 (c) .14 (.13) 2.42 --
14.20
<CAPTION>
RATIO OF RATIO OF NET
NET ASSET OPERATING INVESTMENT NET ASSETS
YEARS VALUE AT EXPENSES TO INCOME TO AT END
ANNUAL
ENDED END AVERAGE AVERAGE PORTFOLIO OF PERIOD
TOTAL
DECEMBER 31 OF PERIOD NET ASSETS NET ASSETS TURNOVER (IN
THOUSANDS)
RETURN(B)
<S> <C> <C> <C> <C> <C>
<C>
-----------
LIQUID ACCOUNT
1986 $ 1.00 1.00% 5.88% n/a $74,111
6.03%
1987 1.00 1.00 5.81 n/a 68,908
5.97
1988 1.00 1.04 6.64 n/a 73,921
6.82
1989 1.00 1.06 8.22 n/a 87,264
8.53
1990 1.00 1.06 7.31 n/a 84,387
7.53
1991 1.00 1.01 5.22 n/a 69,932
5.31
1992 1.00 1.02 2.87 n/a 67,549
2.89
1993 1.00 .95 2.27 n/a 76,620
2.30
1994 1.00 .93 3.34 n/a 63,946
3.40
1995 (c) 1.00 .94(a) 5.16(a) n/a 63,864
2.58
GOVERNMENT SECURITIES ACCOUNT
1986 10.90 1.27 8.92 111.68% 22,947
11.66
1987 10.17 1.24 8.12 207.67 24,703
3.33
1988 10.06 1.16 8.27 175.50 35,910
7.99
1989 10.58 1.19 8.14 68.14 41,561
14.10
1990 10.68 1.16 8.07 44.19 47,524
9.44
1991 11.36 1.07 7.83 27.50 55,332
15.03
1992 11.19 1.01 6.92 131.79 67,612
6.07
1993 10.91 .93 6.03 224.02 77,596
9.56
1994 9.76 .91 6.71 156.90 60,162
(4.18)
1995 (c) 10.44 .94(a) 7.17(a) 55.89(a) 51,258
10.83
INCOME ACCOUNT
1986 11.04 1.29 7.69 164.13 14,620
13.54
1987 9.97 1.27 7.32 231.39 15,367
2.03
1988 9.77 1.24 8.43 150.04 16,789
6.70
1989 9.79 1.27 8.93 52.95 18,705
9.56
1990 9.44 1.24 9.78 90.20 19,809
6.33
1991 9.91 1.12 8.44 50.44 22,839
14.22
1992 9.75 .63 8.09 109.47 38,675
6.60
1993 9.86 .63 6.56 145.94 48,636
7.97
1994 9.14 .63 7.16 62.88 46,547
(0.42)
1995 (c) 9.44 .63(a) 7.13(a) 37.88(a) 46,109
6.97
TOTAL RETURN ACCOUNT
1986 11.87 1.26 3.22 143.32 35,382
11.88
1987 10.91 1.08 3.15 197.79 44,770
3.92
1988 11.51 1.11 4.61 223.62 54,253
10.40
1989 12.69 1.20 5.90 149.22 65,071
22.61
1990 11.94 1.24 5.31 115.45 66,382
(0.21)
1991 14.02 1.20 4.02 122.40 86,455
28.21
1992 13.81 1.11 3.61 177.85 109,701
9.90
1993 14.54 1.02 3.40 155.16 171,205
15.89
1994 13.44 .96 3.80 115.01 177,904
(2.11)
1995 (c) 14.89 1.20(a) 4.39(a) 53.78(a) 202,718
13.04
GROWTH ACCOUNT
1986 11.97 1.31 2.21 163.15 19,469
12.25
1987 9.80 1.17 1.71 214.32 19,638
(0.29)
1988 11.00 1.23 1.95 246.14 26,285
14.32
1989 13.05 1.18 3.90 169.75 37,323
34.86
1990 11.62 1.19 2.73 143.95 35,202
(7.98)
1991 14.40 1.19 1.74 148.30 40,716
36.91
1992 14.20 1.12 1.74 141.69 45,600
11.99
1993 15.14 1.05 1.95 99.67 64,495
20.91
1994 14.20 1.02 1.50 98.46 78,390
(0.65)
1995 (c) 16.63 1.26(a) 1.88(a) 75.89(a) 97,691
18.03
<FN>
(a) Annualized
(b) Annual total returns do not include the effect of sales charges
(c) For the six months ended June 30, 1995
</TABLE>
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONNECTICUT MUTUAL INVESTMENT
ACCOUNTS,
INC.
June 30, 1995 (Unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Connecticut Mutual Investment Accounts, Inc. (the Fund), a Maryland
corporation, is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Fund is
comprised
of thirteen distinct mutual funds, including the following five Accounts
included in these financial statements: Liquid, Government Securities,
Income,
Total Return and Growth. An interest in the Fund is limited to the
assets of
the Account or Accounts in which shares are held by shareholders, and
such
shareholders are entitled to a pro rata share of all dividends and
distributions arising from the net investment income and net realized
capital
gains on the investments of such Accounts.
The following is a summary of significant accounting policies followed
by the
Fund:
(a)VALUATION OF INVESTMENT SECURITIES - Except with respect to
securities held
by the Liquid Account, equity and debt securities which are traded
on
securities exchanges are valued at the last sales price as of the
close of
business on the day the securities are being valued. Lacking any
sales,
equity securities are valued at the last bid price and debt
securities are
valued at the mean between closing bid and asked prices. Securities
traded
in the over-the-counter market and included in the NASDAQ National
Market
System are valued using the last sales price when available.
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
who
make a market in the securities. Short-term securities are valued on
an
amortized cost basis, which approximates market value. Securities for
which
market quotations are not readily available are valued at fair value
as
determined in accordance with procedures established by the Board of
Directors of the Fund, including the use of valuations furnished by
a
private service retained by the custodian.
Securities held by the Liquid Account are valued on an amortized cost
basis. This basis involves valuing a security at cost and thereafter
assuming a constant amortization to maturity of any discount or
premium,
regardless of the impact of fluctuating interest rates on the market
value
of the instrument. The amortized cost method, in the opinion of the
Board
of Directors, represents the fair value of the particular security.
The
Board monitors the deviation between the Account's net asset value
per
share as determined by using available market quotations and its
amortized
cost price per share. If the deviation exceeds one half of one
percent, the
Board will consider what action, if any, should be initiated to
provide
fair valuation. Throughout the second quarter of 1995, the deviation
was
less than one half of one percent.
(b)FEDERAL INCOME TAXES - The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal
Revenue
Code. Under such provisions, by distributing substantially all of its
taxable income to its shareholders or otherwise complying with
requirements
for regulated investment companies, the Fund will not be subject to
Federal
income taxes. Accordingly, no provision for Federal income taxes is
required. For Federal tax reporting purposes, each Account is treated
as a
separate taxable entity.
(c)GAINS AND LOSSES - Realized gains and losses from sales of
investments are
determined on the identified cost basis.
(d)AFFILIATE HOLDINGS - Connecticut Mutual Life Insurance Company
and its
affiliates own 29,124,112 shares of the five Accounts of the
Fund as
follows:
<TABLE>
<CAPTION>
GOVERNMENT
LIQUID SECURITIES INCOME TOTAL RETURN GROWTH
<S> <C> <C> <C> <C>
25,026,814 725,035 1,533,159 210 1,838,894
</TABLE>
(e)OTHER - Investment transactions are accounted for on the trade date
which
is the date the order to buy or sell is executed. Dividend income is
recorded on the ex-dividend date and interest income is accrued on
a daily
basis. All expenses are accrued on a daily basis.
2. INVESTMENT ADVISORY FEES AND OTHER AFFILIATE TRANSACTIONS
The Fund has an Investment Advisory Agreement with G.R. Phelps & Co.,
Inc.
(the Investment Adviser), a wholly-owned subsidiary of Connecticut
Mutual Life
Insurance Company. The Investment Adviser, subject to review by the
Board of
Directors, is responsible for the investment management of each Account
and
has the responsibility for making decisions to buy, sell or hold any
particular security. The Investment Adviser is obligated to perform
certain
administrative services for the Fund.
As compensation for its services to the Liquid Account, the Investment
Adviser
receives monthly compensation at the annual rate of 0.50% of the first
$200
million of average daily net assets, 0.45% of the next $100 million of
average
daily net assets and 0.40% of the average daily net assets in excess of
$300
million of the Account. As compensation for its services to the
Government
Securities, Income, Total Return and Growth Accounts, the Investment
Adviser
receives monthly compensation at the annual rate of 0.625% of the first
$300
million of average daily net assets, 0.50% of the next $100 million of
average
daily net assets and 0.45% of the average daily net assets in excess of
$400
million of each Account.
16
<PAGE>
The investment advisory fees, which also cover certain administrative
and
management services, amounted to $1,353,596 for all Accounts for the six
months ended June 30, 1995. For the six months ended June 30, 1995, the
Investment Adviser, serving as principal underwriter for sale of shares
of the
Accounts, earned $809,906 related to sales charges deducted from
proceeds for
shares sold.
Expenses incurred in the operation of the Fund are borne by the Fund.
However,
the Investment Adviser has agreed that in any year the aggregate
expenses
(including the investment advisory fee, but excluding interest, taxes,
brokerage fees, commissions and uncommon charges such as litigation
costs)
exceed 1% of the value of the average daily net assets of the Liquid
Account
or 1.5% of the value of the average daily net assets in each of the
other four
Accounts, it will reimburse the Accounts for such excess.
Each Account has adopted a distribution plan (Plan) in accordance with
the
requirements of Rule 12b-1 of the Investment Company Act of 1940. Under
each
Plan, each Account may pay G. R. Phelps & Co., Inc. (the Distributor)
a fee,
not exceeding 0.25% of the Account's average daily net assets for any
fiscal
year, as reimbursement for its expenditures incurred in distributing and
servicing shares of the Account. Effective May 1, 1995, the Total Return
and
Growth Accounts commenced accruing fees daily and paying fees monthly
to the
Distributor at an annual rate of 0.25% of each Account's average daily
net
assets. For the two months ended June 30, 1995, the Distributor received
$122,589 in fees from these Accounts. The Liquid, Government Securities
and
Income Accounts accrued no fees and paid no amounts pursuant to any Plan
during the six months ended June 30, 1995.
3. DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared and paid monthly for
the
Government Securities and Income Accounts and semi-annually for the
Total
Return and Growth Accounts. Dividends from net investment income of the
Liquid
Account, which include any net short-term capital gains, are declared
and
accrued daily and paid monthly. All net realized capital gains
(excluding the
Liquid Account), if any, are declared and paid at least annually.
4. CAPITAL STOCK
The authorized capital stock of the Fund at June 30, 1995 consisted of
3,000,000,000 shares of common stock, par value $0.001 per share. The
shares
of stock are divided among thirteen separate Accounts, five of which are
indicated below. All shares of common stock have equal voting rights,
except
that only shares of a particular Account are entitled to vote on matters
pertaining to that Account.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED JUNE 30, 1995
GOVERNMENT TOTAL
LIQUID
SECURITIES INCOME RETURN
GROWTH
<S> <C> <C>
<C> <C> <C>
Shares authorized (in millions) 600
200 200 200 200
---
--- --- --- ---
---
--- --- --- ---
Shares sold 87,303,939
161,212 406,488 1,034,767 595,765
Shares issued to shareholders from reinvestment
of dividends 1,674,793
181,502 151,184 265,449 44,738
------------
- ----------- ---------- ------------ ---------
Total issued 88,978,732
342,714 557,672 1,300,216 640,503
Shares reacquired (89,060,819)
(1,598,262) (769,419) (921,386)
(286,565)
------------
- ----------- ---------- ------------ ---------
Net increase (decrease) (82,087)
(1,255,548) (211,747) 378,830
353,938
------------
- ----------- ---------- ------------ ---------
------------
- ----------- ---------- ------------ ---------
</TABLE>
17
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
-------------------------------------------
BOARD OF DIRECTORS AND OFFICERS
DIRECTORS
RICHARD H. AYERS
Chairman and Chief Executive Officer
The Stanley Works
DAVID E. A. CARSON
President, Chairman and
Chief Executive Officer
People's Bank
RICHARD W. GREENE
Executive Vice President and Treasurer
University of Rochester
BEVERLY L. HAMILTON
President
ARCO Investment Management Company
DAVID E. SAMS, JR.
President and Chief Executive Officer
Connecticut Mutual Life Insurance Company
OFFICERS
LINDA M. NAPOLI, Treasurer and Controller
Treasurer, Mutual Funds
Connecticut Mutual Life Insurance Company
LOUIS A. LACCAVOLE, CPA, General Auditor
Vice President and General Auditor
Connecticut Mutual Life Insurance Company
ANN F. LOMELI, Secretary
Corporate Secretary and Counsel
Connecticut Mutual Life Insurance Company
AUDITORS
ARTHUR ANDERSEN LLP
Hartford, CT
This report has been prepared for shareholders of the Account and
may be
distributed to prospective investors in the Account when preceded or
accompanied
by a current prospectus.
<PAGE>
CONNECTICUT MUTUAL
INVESTMENT ACCOUNTS, INC.
FINANCIAL STATEMENTS
AUGUST 31, 1995
LIFESPAN DIVERSIFIED INCOME ACCOUNT
LIFESPAN BALANCED ACCOUNT
LIFESPAN CAPITAL APPRECIATION ACCOUNT
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN DIVERSIFIED INCOME ACCOUNT
SCHEDULE OF INVESTMENTS
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Market
Security Shares Cost
Value
-------- ------ ----
- -----
<S> <C> <C> <C>
COMMON STOCKS(21.6% OF NET ASSETS)
Aerospace(1.4%)
General Dynamics Corp. 2,800 $129,201
$147,350
Lockheed Martin Corp. 1,700 98,156
103,488
Rockwell International Corp. 1,700 74,268
76,075
--------
- --------
301,625
326,913
--------
- --------
Banking(2.1%)
Ahmanson (H.F.) & Co. 1,200 29,335
28,500
Bank of Boston Corp. 2,600 108,730
114,400
Chase Manhattan Corp. 1,900 87,120
109,250
Morgan (J.P.) & Company, Inc. 1,500 104,395
109,313
Wells Fargo & Co. 600 99,425
111,825
--------
- --------
429,005
473,288
--------
- --------
Business Equipment & Services(.4%)
New England Business Service, Inc 4,700 85,371
91,650
--------
- --------
Chemicals(1.5%)
Goodrich (B.F.) Company 1,500 89,602
89,250
Grace (W.R.) & Co. 1,900 101,831
126,588
Monsanto Co. 1,200 99,756
113,850
--------
- --------
291,189
329,688
--------
- --------
Conglomerates(.6%)
Hanson PLC 7,400 136,608
126,725
--------
- --------
Drugs & Cosmetics(1.0%)
American Home Products Corp. 1,400 107,962
107,800
Bristol-Myers Squibb Co. 1,700 116,766
116,662
--------
- --------
224,728
224,462
--------
- --------
Electric Utilities(3.1%)
Entergy Corp. 4,600 113,597
110,400
FPL Group, Inc. 3,400 125,722
132,175
Illinova Corp. 3,400 78,795
85,425
Kansas City Power & Light Co. 5,000 115,330
111,875
Unicom Corp. 4,800 126,960
135,000
Western Resources, Inc. 3,900 119,438
117,975
--------
- --------
679,842
692,850
--------
- --------
Health Services & Hospital Supplies(.8%)
Baxter International Inc. 4,400 151,866
171,600
--------
- --------
Insurance(2.2%)
Aetna Life & Casualty Co. 2,200 131,735
150,150
Allstate Corp. 1,668 49,310
56,504
American General Corp. 1,800 59,386
63,450
Hartford Steam Boiler Inspection 2,500 113,247
115,937
& Insurance
St. Paul Companies Inc. 2,000 96,820
108,500
--------
- --------
450,498
494,541
--------
- --------
Iron & Steel(2.0%)
British Steel PLC 4,100 118,861
114,800
Carpenter Technology Corp. 1,600 96,714
122,000
UNR Industries Inc. 25,000 154,380
196,875
--------
- --------
369,955
433,675
--------
- --------
Office Equipment(.2%)
Xerox Corp. 400 49,441
48,300
--------
- --------
Oil & Gas(2.9%)
Amoco Corp. 1,300 86,736
82,875
Chevron Corp. 2,400 116,352
116,100
Mobil Corp. 1,200 116,813
114,300
Panhandle Eastern Corp. 6,200 149,110
155,000
Royal Dutch Petroleum Co. 600 74,987
71,550
Ultramar Corp. 4,300 114,126
101,587
--------
- --------
658,124
641,412
--------
- --------
Real Estate(1.4%)
Camden Property Trust 4,800 102,142
105,000
Health & Retirement Property Trust 6,300 95,388
96,862
Meditrust Corp. 3,100 96,289
101,912
--------
- --------
293,819
303,774
--------
- --------
Retail Trade(.3%)
Sears, Roebuck & Co. 1,800 49,165
58,275
--------
- --------
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN DIVERSIFIED INCOME ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Market
Security Shares Cost
Value
-------- ------ ----
- -----
<S> <C> <C> <C>
Telephone Utilities(1.7%)
Ameritech Corp. 3,100 $140,077
$158,875
GTE Corp. 2,800 95,721
102,550
NYNEX Corp. 2,500 101,943
112,500
---------
- ---------
337,741
373,925
---------
- ---------
Total Common Stocks 4,508,977
4,791,078
---------
- ---------
CONVERTIBLE PREFERRED STOCKS(1.5% OF NET ASSETS)
Building Materials & Construction(.5%)
Case Corp. 1,200 115,000
115,800
---------
- ---------
Computer Business Equipment & Services(.5%)
Storage Technology Corp. 1,600 103,967
99,000
---------
- ---------
Energy Services(.5%)
J. Ray McDermott, SA 2,300 142,485
113,850
---------
- ---------
Total Preferred Stocks 361,452
328,650
---------
- ---------
<CAPTION>
Principal
CORPORATE BONDS(21.3% OF NET ASSETS Amount
---------
<S> <C> <C> <C>
Apparel & Textiles(.2%)
U.S. Leather, Inc.
10.25%, 2003 $50,000 43,858
43,250
---------
- ---------
Auto & Auto Related(.2%)
Venture Holdings
9.75%, 2004 50,000 43,503
43,750
---------
- ---------
Banking(2.7%)
BankAmerica Corp.
6.00%, 1997 300,000 299,570
298,218
First USA Bank of Delaware
5.35%, 1996 150,000 148,472
142,944
Shawmut National Corp.
8.875%, 1996 150,000 153,152
152,075
---------
- ---------
601,194
593,237
---------
- ---------
Chemicals(1.6%)
Building Materials Corp. of America
0.00%, 2004 100,000 63,568
62,000
Crain Industries, Inc.
13.50%, 2005 50,000 50,000
50,250
G-I Holdings
0.00%, 1998 50,000 36,216
35,750
Harris Chemical North America, Inc.
0.00%, 2001 50,000 47,781
44,500
LaRoche Industries, Inc.
13.00%, 2004 75,000 77,250
78,750
Sherritt, Inc.
10.50%, 2014 75,000 74,812
76,500
---------
- ---------
349,627
347,750
---------
- ---------
Computer Business Equipment & Services(.6%)
Unisys Corp.
9.75%, 1996 125,000 128,438
127,188
---------
- ---------
Drugs & Cosmetics(1.5%)
Revlon Consumer Products Corp.
9.375%, 2001 50,000 48,348
49,125
Revlon Worldwide Corp.
0.00%, 1998 50,000 35,456
35,375
Roche Holdings Inc.
2.75%, 2000 300,000 258,027
256,313
---------
- ---------
341,831
340,813
---------
- ---------
Financial Services(1.9%)
Chrysler Financial Corp.
6.65%, 1997 120,000 120,829
120,678
General Motors Acceptance Corp.
5.65%, 1997 300,000 296,180
295,248
---------
- ---------
417,009
415,926
---------
- ---------
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN DIVERSIFIED INCOME ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal
Market
Security Amount Cost
Value
-------- --------- ----
- ------
<S> <C> <C>
<C>
Health Services & Hospital Supplies(.6%)
Genesis Health Venture, Inc.
9.75%, 2005 $75,000 $74,815
$77,437
Integrated Health Services, Inc.
9.625%, 2002 50,000 50,000
51,125
-------
- -------
124,815
128,562
-------
- -------
Iron & Steel(.4%)
Geneva Steel Co.
9.50%, 2004 25,000 21,298
18,750
Republic Engineered Steels, Inc.
9.875%, 2001 25,000 23,580
23,250
Wierton Steel Corp.
10.75%, 2005 50,000 49,260
46,500
-------
- -------
94,138
88,500
-------
- -------
Leasing(.2%)
GPA Delaware, Inc.
8.75%, 1998 50,000 41,563
44,500
-------
- -------
Leisure & Entertainment(3.0%)
Adelphia Communications Corp.
12.50%, 2002 25,000 24,879
25,375
Australis Media Ltd.
0.00%, 2003 75,000 39,304
43,125
Bally Park Place Funding
9.25%, 2004 50,000 46,502
47,125
Bell Cablemedia PLC
0.00%, 2004 75,000 50,466
48,563
Comcast Corp.
9.375%, 2005 50,000 49,763
50,375
Greate Bay Property Funding
10.875%, 2004 25,000 21,500
21,750
GNF Corp.
10.625%, 2003 50,000 41,068
43,250
Helicon Group Ltd.
9.00%, 2003 100,000 91,923
92,250
Kloster Cruise Ltd.
13.00%, 2003 25,000 21,694
17,750
New World Communications Corp.
0.00%, 1999 75,000 50,030
49,125
Santa Fe Hotel
11.00%, 2000 50,000 49,278
44,500
Selmer Company, Inc.
11.00%, 2015 50,000 50,000
48,000
Sinclair Broadcast Group, Inc.
10.00%, 2005 50,000 50,000
50,375
Trump Plaza Funding
10.875%, 2001 50,000 43,562
46,000
Trump Taj Mahal
0.00%, 1999 50,000 38,437
42,250
-------
- -------
668,406
669,813
-------
- -------
Machinery & Equipment(.2%)
Specialty Equipment Companies, Inc.
11.375%, 2003 50,000 50,489
52,500
-------
- -------
Manufacturing(1.7%)
American Standard, Inc.
10.50%, 2005 50,000 39,416
38,625
Day International Group, Inc.
11.125%, 2005 50,000 50,000
52,625
Huntsman Corp.
10.625%, 2001 75,000 79,594
79,500
Interlake Corp.
12.125%, 2002 50,000 50,970
49,500
International Wire Group, Inc.
11.75%, 2005 50,000 50,000
50,125
Jordan Industries, Inc.
10.375%, 2003 25,000 23,780
23,187
Plantronics, Inc.
10.00%, 2001 75,000 75,937
75,937
-------
- -------
369,697
369,499
-------
- -------
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN DIVERSIFIED INCOME ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal
Market
Security Amount Cost
Value
-------- --------- ----
- ------
<S> <C> <C>
<C>
Oil & Gas(.4%)
Maxus Energy Corp.
9.875%, 2002 $50,000 $47,083
$48,375
Mesa Capital CP
0.00%, 1998 50,000 48,920
45,750
-------
- -------
96,003
94,125
-------
- -------
Paper & Forest Products(1.7%)
Crown Packaging Holdings Ltd.
0.00%, 2003 100,000 51,386
47,500
Doman Industries Ltd.
8.75%, 2004 50,000 48,000
47,875
Gaylord Container Corp.
0.00%, 2005 50,000 50,605
49,750
Grupo Industrial Durango
12.00%, 2001 25,000 18,875
22,155
Indah Kiat Pulp & Paper Corp.
11.875%, 2002 50,000 51,000
51,000
Malette, Inc.
12.25%, 2004 50,000 54,125
55,500
Stone Container Corp.
9.875%, 2001 100,000 99,879
99,125
-------
- -------
373,870
372,905
-------
- -------
Printing & Publishing(.1%)
Marvel III Holdings Inc.
9.125%, 1998 25,000 23,027
22,875
-------
- -------
Retail Trade(2.0%)
Cole National Corp.
11.25%, 2001 50,000 48,550
49,500
Dairy Mart Convenience Stores, Inc.
10.25%, 2004 50,000 41,775
42,750
Duane Reade Corp.
12.00%, 2002 50,000 45,180
44,125
Farm Fresh, Inc.
12.25%, 2000 50,000 48,680
47,500
Hills Stores Co.
10.25%, 2003 50,000 49,450
46,000
Pathmark Stores, Inc.
0.00%, 2003 100,000 61,379
65,750
Penn Traffic Co.
9.625%, 2005 50,000 47,914
41,125
Ralph's Grocery Co.
11.00%, 2005 50,000 50,000
47,000
Waban, Inc.
11.00%, 2004 50,000 51,712
51,000
-------
- -------
444,640
434,750
-------
- -------
Technology(.3%)
Monarch Acquisition
12.50%, 2003 75,000 75,000
76,500
-------
- -------
Telecommunications(.9%)
Centennial Cellular Corp.
10.125%, 2005 50,000 49,816
49,500
Intermedia Communications of
Florida, Inc.
13.50%, 2005 50,000 50,000
52,375
MFS Communications Company, Inc.
0.00%, 2004 75,000 53,792
55,875
Nextel Communications, Inc.
0.00%, 2004 100,000 55,337
48,500
-------
- -------
208,945
206,250
-------
- -------
Telephone Utilities(.2%)
Peoples Telephone Company, Inc.
12.25%, 2002 50,000 50,000
51,000
-------
- -------
Transportation(.7%)
Federal Express Corp.
6.25%, 1998 150,000 149,593
148,839
-------
- -------
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN DIVERSIFIED INCOME ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal
Market
Security Amount Cost
Value
-------- --------- ----
- ------
<S> <C> <C> <C>
Wholesale Trade(.2%)
Falcon Holdings PLC
11.00%, 2003 $50,000 $48,553
$46,500
-----------
- -----------
Total Corporate Bonds 4,744,199
4,719,032
-----------
- -----------
U.S. GOVERNMENT & AGENCY LONG-TERM OBLIGATIONS(49.8% OF NET ASSETS)
U.S. Treasury Bond
8.125%, 2019 1,320,000 1,414,050
1,526,250
U.S. Treasury Notes
7.375%, 1997 2,950,000 2,995,863
3,037,586
5.125%, 1998 4,500,000 4,333,370
4,413,292
7.75%, 1999 270,000 284,133
286,959
7.25%, 2004 1,670,000 1,701,809
1,772,020
-----------
- -----------
Total U.S. Government & Agency
Long-Term Obligations 10,729,225
11,036,107
-----------
- -----------
FOREIGN GOVERNMENT BONDS(1.4% of NET ASSETS)
Province of Ontario
8.25%, 1996 300,000 305,337
303,702
-----------
- -----------
REPURCHASE AGREEMENTS(3.1% OF NET ASSETS)
State Street Bank & Trust Co.
5.00%, due 9/1/95 688,000 688,000
688,000
-----------
- -----------
TOTAL INVESTMENTS $21,337,190
$21,866,569
-----------
- -----------
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN BALANCED ACCOUNT
SCHEDULE OF INVESTMENTS
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Market
Security Shares Cost
Value
-------- ------ ----
- ------
<S> <C> <C> <C>
COMMON STOCKS(41.7% OF NET ASSETS)
Aerospace(2.2%)
General Dynamics Corp. 4,300 $198,415
$226,288
General Motors Corp. Class H 1,500 60,215
59,813
Lockheed Martin Corp. 3,200 184,765
194,800
Loral Corp. 2,200 103,235
120,450
McDonnell Douglas Corp. 1,300 80,959
104,325
Rockwell International Corp. 2,900 126,692
129,775
---------
- ---------
754,281
835,451
---------
- ---------
Airlines(.6%)
AMR Corp. 1,100 74,676
77,550
Delta Air Lines, Inc. 1,300 85,166
96,688
Northwest Airlines Corp. 1,700 50,400
61,413
---------
- ---------
210,242
235,651
---------
- ---------
Apparel & Textiles(.6%)
Nautica Enterprises, Inc. 1,900 57,439
60,087
St. John Knits, Inc. 1,000 36,485
44,250
Tommy Hilfiger Corp. 3,500 85,434
117,250
---------
- ---------
179,358
221,587
---------
- ---------
Auto & Auto Related(.2%)
Discount Auto Parts, Inc. 2,800 74,088
91,350
---------
- ---------
Banking(2.1%)
Ahmanson (H.F.) & Co. 2,300 56,226
54,625
Bank of Boston Corp. 3,300 137,892
145,200
Chase Manhattan Corp. 3,400 152,769
195,500
Morgan (J.P.) & Company, Inc. 3,100 215,831
225,913
Wells Fargo & Co. 900 149,138
167,738
---------
- ---------
711,856
788,976
---------
- ---------
Building Materials & Construction(.2%)
Case Corp. 1,900 64,875
71,725
USG Corp. 2,200 54,398
59,675
---------
- ---------
119,273
131,400
---------
- ---------
Business Equipment & Services(.5%)
Medic Computer Systems, Inc. 1,700 71,963
74,800
New England Business Service, Inc. 4,700 85,371
91,650
---------
- ---------
157,334
166,450
---------
- ---------
Chemicals(1.7%)
FMC Corp. 700 43,210
53,900
Goodrich (B.F.) Company 2,400 143,355
142,800
Grace (W.R.) & Co. 3,600 192,942
239,850
Monsanto Co. 2,200 182,886
208,725
---------
- ---------
562,393
645,275
---------
- ---------
Commercial Services(.7%)
Alternative Resources Corp. 1,300 31,915
38,675
Cambridge Technology Partners, Inc. 2,200 73,691
86,350
Corrections Corporation of America 2,000 70,141
90,000
Sylvan Learning Systems, Inc. 1,600 47,141
45,600
---------
- ---------
222,888
260,625
---------
- ---------
Computer Business Equipment & Services(3.0%)
Acxiom Corporation 4,000 96,169
107,500
ALANTEC Corp. 1,600 59,300
64,000
Avid Technology, Inc. 1,000 38,109
39,750
Cognex Corp. 2,300 74,613
114,712
Davidson and Associates, Inc. 1,400 66,881
72,100
Epic Design Technology, Inc. 400 17,238
17,250
Global Village Communication 3,600 61,276
56,250
Hyperion Software Corp. 1,700 65,248
79,050
Inso Corp. 500 34,787
31,312
McAfee Associates, Inc. 2,200 68,856
96,525
National Data Corp. 2,400 49,399
61,800
Optical Data Systems, Inc. 1,900 44,200
62,225
Seagate Technology, Inc. 800 39,206
35,400
Sierra Semiconductor Corp. 800 37,828
39,500
Storage Technology Corp. 2,000 54,934
54,750
StorMedia, Inc. 1,100 47,016
45,650
Wonderware Corp. 2,400 85,001
82,800
Zebra Technologies Corp. 1,400 82,279
81,550
---------
- ---------
1,022,340
1,142,124
---------
- ---------
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN BALANCED ACCOUNT
SCHEDULE OF INVESTMENTS
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Market
Security Shares Cost
Value
-------- ------ ----
- ------
<S> <C> <C> <C>
Conglomerates(.9%)
AlliedSignal Inc. 1,100 $43,261
$48,813
Hanson PLC 7,400 136,608
126,725
Jardine Matheson Holdings Ltd. 3,800 30,419
27,360
Textron, Inc. 1,700 99,168
116,450
---------
- ---------
309,456
319,348
---------
- ---------
Drugs & Cosmetics(1.0%)
American Home Products Corp. 2,000 154,232
154,000
Bristol-Myers Squibb Co. 1,600 109,898
109,800
Watson Pharmaceuticals, Inc. 2,862 93,319
118,415
---------
- ---------
357,449
382,215
---------
- ---------
Electrical & Electronic Equipment(2.9%)
Allen Group, Inc. 2,100 67,457
68,513
Cidco, Inc. 1,200 38,607
42,000
Credence Systems Corp. 950 23,267
33,487
GaSonics International 2,200 56,469
76,450
Integrated Silicon Solution, Inc. 1,900 73,974
94,525
Kemet Corp. 1,900 82,519
108,300
Mattson Technology, Inc. 1,100 54,951
56,375
Micron Technology Inc. 1,100 45,879
84,563
Philips Electronics NV 1,400 61,750
63,000
S3, Inc. 2,000 55,741
78,500
Sanmina Corp. 1,400 65,629
63,700
Silicon Valley Group, Inc. 2,000 65,894
86,000
Tyco International Ltd. 1,000 57,218
59,125
Ultratech Stepper, Inc. 3,000 97,807
118,500
Vicor Corp. 1,200 47,842
56,400
---------
- ---------
895,004
1,089,438
---------
- ---------
Electric Utilities(2.6%)
Entergy Corp. 7,800 192,176
187,200
FPL Group, Inc. 5,400 199,676
209,925
Illinova Corp. 5,200 120,510
130,650
Kansas City Power & Light Co. 5,000 115,330
111,875
Unicom Corp. 7,600 201,507
213,750
Western Resources, Inc. 3,900 119,438
117,975
---------
- ---------
948,637
971,375
---------
- ---------
Environmental Control(.3%)
United Waste Systems, Inc. 3,100 105,866
120,125
---------
- ---------
Food & Beverages(.8%)
Apple South Inc. 2,300 50,663
56,350
Boston Chicken, Inc. 2,900 61,564
69,600
Dole Food Co., Inc. 800 26,959
26,200
Landry's Seafood Restaurants, Inc. 2,700 51,408
47,587
Papa John's International, Inc. 1,600 55,658
64,000
Ralcorp Holdings, Inc. 2,100 48,067
47,513
---------
- ---------
294,319
311,250
---------
- ---------
Health Services & Hospital Supplies(2.4%)
Baxter International Inc. 7,200 248,508
280,800
Columbia Healthcare Corp. 1,800 76,352
84,600
Community Health Systems, Inc. 2,200 76,111
84,700
Express Scripts, Inc. 1,200 39,366
44,400
Gulf South Medical Supply, Inc. 2,000 44,266
56,500
Idexx Laboritories, Inc. 2,500 71,719
84,687
Omnicare, Inc. 3,000 96,768
99,750
PhyCor, Inc. 1,800 66,282
75,150
Physician Sales & Service, Inc. 1,400 61,084
63,700
TheraTx, Inc. 2,400 35,211
31,800
---------
- ---------
815,667
906,087
---------
- ---------
Insurance(2.9%)
Aetna Life & Casualty Co. 3,500 205,621
238,875
Allstate Corp. 4,214 126,671
142,749
American General Corp. 2,800 92,378
98,700
Compdent Corp. 1,900 45,009
51,775
Hartford Steam Boiler Inspection
& Insurance 2,400 108,718
111,300
Healthsource, Inc. 1,900 73,124
76,000
St. Paul Companies Inc. 3,200 154,912
173,600
TIG Holdings, Inc. 2,300 52,233
58,937
Travelers Group 2,800 115,920
134,400
---------
- ---------
974,586
1,086,336
---------
- ---------
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN BALANCED ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Market
Security Shares Cost
Value
-------- ------ ----
- ------
<S> <C> <C> <C>
Iron & Steel(1.3%)
British Steel PLC 5,600 $163,105
$156,800
Carpenter Technology Corp. 1,600 96,714
122,000
UNR Industries Inc. 25,000 156,250
196,875
---------
- ---------
416,069
475,675
---------
- ---------
Leisure & Entertainment(.7%)
Clear Channel Communications, Inc 1,300 73,041
97,012
Mattel, Inc. 1,900 45,258
55,100
Regal Cinemas, Inc. 2,400 67,892
81,600
Station Casinos, Inc. 2,000 33,444
38,750
---------
- ---------
219,635
272,462
---------
- ---------
Machinery & Equipment(.8%)
AGCO Corp. 1,400 72,856
68,075
Electroglas, Inc. 1,400 77,951
105,700
Mark IV Industries, Inc. 2,200 40,066
48,950
Parker-Hannifin Corp. 1,800 62,635
71,325
---------
- ---------
253,508
294,050
---------
- ---------
Manufacturing(1.0%)
Black & Decker Corp. 1,700 50,910
55,037
FSI International, Inc. 2,900 65,975
102,225
Helix Technology Corp. 1,400 51,473
71,269
Integrated Process Equipment Corp. 1,700 78,510
61,412
Lydall, Inc. 3,700 71,194
88,337
---------
- ---------
318,062
378,280
---------
- ---------
Metals & Mining(.4%)
IMC Global Inc. 1,300 66,118
82,225
Potash Corporation of Saskatchewan Inc. 1,400 74,244
79,625
---------
- ---------
140,362
161,850
---------
- ---------
Miscellaneous(.2%)
Premark International, Inc. 1,700 82,154
89,038
---------
- ---------
Office Equipment(.4%)
Xerox Corp. 1,100 135,962
132,825
---------
- ---------
Oil & Gas(3.0%)
Amoco Corp. 2,100 140,112
133,875
Chevron Corp. 4,200 203,766
203,175
Mobil Corp. 2,100 204,422
200,025
Panhandle Eastern Corp. 10,500 253,051
262,500
Repsol SA (ADR) 2,000 66,370
63,250
Royal Dutch Petroleum Co. 1,100 137,477
131,175
Ultramar Corp. 4,300 114,126
101,587
YPF Sociedad Anonima (ADR) 1,500 30,165
26,438
---------
- ---------
1,149,489
1,122,025
---------
- ---------
Paper & Forest Products(.6%)
Georgia-Pacific Corp. 600 47,968
54,000
Scott Paper Co. 1,600 71,570
74,200
Willamette Industries, Inc. 1,200 61,175
82,500
---------
- ---------
180,713
210,700
---------
- ---------
Printing & Publishing(.2%)
Gartner Group, Inc. 2,300 65,262
65,262
---------
- ---------
Real Estate(.8%)
Camden Property Trust 4,800 102,142
105,000
Health & Retirement Property Trust 6,300 95,388
96,862
Meditrust Corp. 3,100 96,289
101,912
---------
- ---------
293,819
303,774
---------
- ---------
Retail Trade(2.4%)
American Stores Co. 3,100 80,984
91,063
CDW Computer Centers, Inc. 1,500 57,483
81,000
Corporate Express, Inc. 2,900 57,085
67,787
Eckerd Corp. 1,700 51,355
62,263
General Nutrition Companies, Inc. 2,900 86,851
121,075
Gymboree Corp. 1,700 52,386
50,575
Kroger Co. 2,700 68,753
88,088
Micro Warehouse, Inc. 800 37,200
38,200
Sears, Roebuck & Co. 4,700 133,585
152,163
Service Merchandise Co., Inc. 4,600 31,759
32,775
Sunglass Hut International, Inc. 1,700 56,937
72,250
Waban, Inc. 2,500 46,958
47,188
---------
- ---------
761,336
904,427
---------
- ---------
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN BALANCED ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Market
Security Shares Cost
Value
-------- ------ ----
- ------
<S> <C> <C> <C>
Technology(1.1%)
Applied Materials, Inc. 600 $37,375
$62,400
Compaq Computer Corp. 1,800 82,388
85,950
Computer Associates International Inc. 800 51,258
55,600
Electronics for Imaging, Inc. 1,800 97,374
101,700
International Business Machines Corp. 900 84,707
93,037
----------
- ----------
353,102
398,687
----------
- ----------
Telcommunications(1.0%)
Ascend Communications, Inc. 1,000 42,875
64,500
Aspect Telecommunications Corp. 1,300 53,495
62,075
Coherent Communication System Corp. 1,400 28,704
31,850
Ericsson LM Tel. Co.(ADR) 3,200 54,600
68,400
LCI International, Inc. 2,100 58,057
83,737
Spectrian Corp. 1,100 51,867
50,875
----------
- ----------
289,598
361,437
----------
- ----------
Telephone Utilities(1.7%)
Ameritech Corp. 5,100 230,449
261,375
GTE Corp. 5,300 181,789
194,112
NYNEX Corp. 4,400 179,419
198,000
----------
- ----------
591,657
653,487
----------
- ----------
Transportation(.4%)
Fritz Companies, Inc. 1,300 66,229
92,625
Wisconsin Central Transportation 1,000 61,350
59,500
----------
- ----------
127,579
152,125
----------
- ----------
Wholesale Trade(.1%)
CellStar Corp. 1,700 39,498
54,187
----------
- ----------
Total Common Stocks 14,132,842
15,735,354
----------
- ----------
FOREIGN COMMON STOCKS(11.5% OF NET ASSETS)
Auto & Auto Related(.5%)
Autoliv AB (Sweden) 1,000 48,006
60,439
Michelin CGDE (France) 1,000 46,204
43,402
Shinmaywa Industries Ltd. (Japan) 3,000 28,532
24,854
Valeo SA (France) 706 42,246
33,706
----------
- ----------
164,988
162,401
----------
- ----------
Banking(1.0%)
Banco Popular Espanol (Spain) 400 59,340
61,553
Banco Santander SA (Spain) 1,500 58,030
61,354
Bangkok Bank Company Ltd. (Thailand) 4,000 43,062
44,693
Deutsche Bank AG (Germany) 1,000 50,268
46,269
HSBC Holdings PLC (United Kingdom) 2,000 25,239
26,870
Malayan Banking Berhad (Malaysia) 6,000 48,028
49,299
Societe Generale Paris (France) 200 23,355
20,889
Thai Farmers Bank Ltd. (Thailand) 4,500 42,841
43,815
----------
- ----------
350,163
354,742
----------
- ----------
Building Materials & Construction(.1%)
Compagnie de Saint-Gobain 250 33,060
31,759
PT Indocement Tunggal Prakar (Indonesia) 7,000 28,144
24,862
----------
- ----------
61,204
56,621
----------
- ----------
Chemicals(.2%)
Akzo Nobel (Netherlands) 200 23,340
23,594
Bayer AG (Germany) 225 55,807
58,186
----------
- ----------
79,147
81,780
----------
- ----------
Computer Business Equipment & Services(.3%)
Fujitsu Ltd. (Japan) 9,000 96,487
97,576
Getronics NV (Netherlands) 600 27,165
25,722
----------
- ----------
123,652
123,298
----------
- ----------
Conglomerates(.7%)
Canadian Pacific Ltd. (Canada) 2,000 33,412
33,507
Hanson PLC (United Kingdom) 13,000 47,898
43,784
Hutchison Whampoa Ltd. (Hong Kong) 10,000 44,980
48,185
Mannesmann AG (Germany) 195 56,689
61,550
Renong Berhad (Malaysia) 22,000 41,297
42,501
Viag AG (Germany) 120 47,149
46,201
----------
- ----------
271,425
275,728
----------
- ----------
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN BALANCED ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Market
Security Shares Cost
Value
-------- ------ ----
- ------
<S> <C> <C>
<C>
Drugs & Cosmetics(1.3%)
Astra AB (Sweden) 1,800 $52,911
$59,699
Ciba-Geigy AG (Switzerland) 100 70,174
70,788
PT Kalbe Farma (Indonesia) 6,000 28,248
24,752
Sandoz AG (Switzerland) 100 67,763
72,116
Schering AG (Germany) 1,000 68,742
72,913
SmithKline Beecham (United Kingdom) 8,051 64,773
74,849
SmithKline Bch/Bec Units
(United Kingdom) 5,027 38,508
44,024
Zeneca Group PLC (Germany) 4,000 59,254
69,533
-------
- -------
450,373
488,674
-------
- -------
Electric Utilities(.3%)
Powergen PLC (United Kingdom) 3,366 26,026
30,588
VEBA AG (Germany) 2,000 77,279
76,511
-------
- -------
103,305
107,099
-------
- -------
Electrical & Electronic Equipment(1.7%)
BBC AG Brown Boveri & Cie. (Switzerland) 65 67,607
68,560
Hitachi Ltd. (Japan) 7,000 74,827
76,608
Keyence Corp. (Japan) 400 45,483
51,140
Kyocera Corp. (Japan) 1,000 75,913
88,371
Matsushita Electric Industrial Co.
Ltd. (Japan) 4,000 67,996
62,596
Philips Electronics NV (Netherlands) 2,000 80,364
89,754
Pioneer Electronic Corp. (Japan) 1,000 21,612
19,127
Sony Corp. (Japan) 1,000 48,817
54,618
Sumitomo Electric Industries
Ltd. (Japan) 6,000 79,781
77,938
Toshiba Corp. (Japan) 7,000 50,198
50,547
-------
- -------
612,598
639,259
-------
- -------
Financial Services(.4%)
Compagnie Bancaire SA (France) 220 23,395
22,934
International Nederlanden Groep NV 1,000 54,145
55,579
(Netherlands)
Itochu Corporation (Japan) 4,000 28,019
24,875
Nichiei Co. Ltd. (Japan) 1,000 69,474
57,891
-------
- -------
175,033
161,279
-------
- -------
Food & Beverages(.3%)
Heineken NV (Netherlands) 550 74,674
77,258
Nestle SA (Switzerland) 50 50,532
50,581
-------
- -------
125,206
127,839
-------
- -------
Insurance(.5%)
AEGON NV (Netherlands) 2,000 65,174
67,254
Munich Reinsurance (Germany) 25 51,152
50,426
Skandia Foersaekrings AB (Sweden) 1,300 25,518
26,725
Union des Assurances Federales SA
(France) 400 43,070
40,509
-------
- -------
184,914
184,914
-------
- -------
Iron & Steel(.6%)
Hitachi Metals Ltd. (Japan) 2,000 25,920
23,320
Kawasaki Steel (Japan) 6,000 25,374
20,558
Nisshin Steel Co., Ltd. (Japan) 12,000 48,428
48,604
Outokumpu Oy (Finland) 2,425 43,288
45,216
Rio Tinto-Zinc Corp. PLC
(United Kingdom) 4,000 51,448
54,291
Sumitomo Metal Industries (Japan) 7,000 23,998
19,546
-------
- -------
218,456
211,535
-------
- -------
Leisure & Entertainment(.3%)
Carlton Communications PLC
(United Kingdom) 3,300 50,416
53,267
Television Broadcasts Ltd. (Hong Kong) 8,000 30,940
29,557
TV Francaise (TF1) (France) 400 39,611
40,588
-------
- -------
120,967
123,412
-------
- -------
Machinery & Equipment(.3%)
Mabuchi Motor Co. (Japan) 800 55,738
54,250
NSK Limited (Japan) 3,000 22,759
20,221
SMC Corp. (Japan) 400 23,542
24,261
-------
- -------
102,039
98,732
-------
- -------
Metals & Mining(.1%)
Broken Hill Proprietary Co. Ltd.
(Australia) 85 972
1,233
Poseidon Gold Ltd. (Australia) 7,400 15,183
14,409
Western Mining Corp. Holdings Ltd.
(Australia) 2,000 11,491
13,443
-------
- -------
27,646
29,085
-------
- -------
Miscellaneous(.1%)
SGS Societe Generale de Surveillance
Holding SA (Switzerland) 30 51,157
53,900
-------
- -------
Office Equipment(.2%)
Canon Inc. (Japan) 4,000 68,170
72,415
-------
- -------
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN BALANCED ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Market
Security Shares Cost
Value
-------- ------ ----
- ------
<S> <C> <C> <C>
Oil & Gas(1.2%)
Ampolex Ltd. (Australia) 23,000 $64,747
$54,297
British Gas Corp. (United Kingdom) 5,000 23,757
21,535
British Petroleum Co. Ltd.
(United Kingdom) 6,000 44,154
44,979
Compagnie Francaise de Petroleum
Total (France) 1,641 105,302
96,396
Enterprise Oil PLC (United Kingdom) 7,500 50,032
43,070
Hong Kong & China Gas Company Ltd.
(Hong Kong) 13,000 21,066
20,488
Imperial Oil Ltd. (Canada) 1,100 40,429
39,520
Lasmo PLC (United Kingdom) 16,000 44,537
43,955
Saga Petroleum (Norway) 4,000 59,943
50,183
Societe Nationale Elf Aquitaine (France) 554 46,349
40,569
---------
- ---------
500,316
454,992
---------
- ---------
Paper & Forest Products(.2%)
Metsa-Serla Oy (Finland) 950 41,313
37,462
Mo och Domsjo AB (Sweden) 800 43,544
46,049
---------
- ---------
84,857
83,511
---------
- ---------
Printing & Publishing(.2%)
De La Rue PLC (United Kingdom) 1,526 22,362
20,641
Elsevier NV (Netherlands) 2,200 25,371
27,826
Wolters-Kluwer NV (Netherlands) 400 33,854
35,269
---------
- ---------
81,587
83,736
---------
- ---------
Retail Trade(.3%)
Argyll Group PLC 4,000 21,875
21,853
Carrefour Supermarche SA (France) 90 46,489
50,246
LVMH Louis Vuitton Moet-Hennessy (France) 270 53,383
48,587
---------
- ---------
121,747
120,686
---------
- ---------
Telecommunications(.4%)
Nokia AB (Finland) 1,200 51,834
83,153
Telecom Italia S.p.A (Italy) 19,000 31,390
30,519
Telecom Italia Mobile S.p.A (Italy) 19,000 22,591
28,005
---------
- ---------
105,815
141,677
---------
- ---------
Telephone Utilities(.2%)
DDI Corporation (Japan) 5 45,506
42,242
Telefonica de Espana (Spain) 2,000 27,735
27,109
---------
- ---------
73,241
69,351
---------
- ---------
Tobacco(.1%)
PT HM Sampoerna (Indonesia) 4,000 31,685
37,944
---------
- ---------
Total Foreign Common Stocks 4,289,691
4,344,610
---------
- ---------
CONVERTIBLE PREFERRED STOCKS(.8% OF NET ASSETS)
Building Materials & Construction(.3%)
Case Corp. 1,100 105,350
106,150
---------
- ---------
Computer Business Equipment & Services(.2%)
Storage Technology Corp. 1,500 97,506
92,812
---------
- ---------
Energy Services(.3%)
J. Ray McDermott, SA 2,300 142,485
113,850
---------
- ---------
Total Convertible Preferred Stocks 345,341
312,812
---------
- ---------
FOREIGN PREFERRED STOCKS(.8% OF NET ASSETS)
Auto & Auto Related (.1%)
Fiat S.p.A.(Italy) 13,500 35,936
30,450
---------
- ---------
Computer Business Equipment & Services(.2%)
SAP AG (Germany) 400 41,598
59,203
---------
- ---------
Conglomerates(.1%)
RWE AG (Germany) 185 50,545
50,186
---------
- ---------
Electric Utilities (.1%)
CEMIG (Brazil) 2,000,000 40,147
45,273
---------
- ---------
Financial Services(.1%)
Banco Bradesco SA (Brazil) 4,600,000 39,949
44,315
---------
- ---------
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN BALANCED ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Market
Security Shares Cost
Value
-------- ------ ----
- ------
<S> <C> <C>
<C>
Telecommunications(.2%)
Telecomunicacoes de Sao Paulo SA
(Brazil) 350,000 $43,574
$57,486
-------
- -------
Total Foreign Preferred Stocks 251,749
286,913
-------
- -------
<CAPTION>
Principal
CORPORATE BONDS(16.4% OF NET ASSETS) Amount
---------
<S> <C> <C>
<C>
Apparel & Textiles(.2%)
U.S. Leather, Inc.
10.25%, 2003 $100,000 87,715
86,500
-------
- -------
Auto & Auto Related(.2%)
Venture Holdings
9.75%, 2004 100,000 87,006
87,500
-------
- -------
Banking(1.1%)
BankAmerica Corp.
6.00%, 1997 200,000 199,713
198,812
First USA Bank of Delaware
5.35%, 1996 100,000 98,981
95,296
Shawmut National Corp.
8.875%, 1996 100,000 102,101
101,383
-------
- -------
400,795
395,491
-------
- -------
Chemicals(1.2%)
Building Materials Corp. of America
0.00%, 2004 200,000 127,137
124,000
Crain Industries, Inc.
13.50%, 2005 75,000 75,000
75,375
G-I Holdings
0.00%, 1998 100,000 72,431
71,500
Harris Chemical North America, Inc.
0.00%, 2001 100,000 95,562
89,000
LaRoche Industries, Inc.
13.00%, 2004 100,000 103,000
105,000
-------
- -------
473,130
464,875
-------
- -------
Computer Business Equipment & Services(.2%)
Unisys Corp.
9.75%, 1996 75,000 77,063
76,313
-------
- -------
Drugs & Cosmetics(.8%)
Revlon Consumer Products Corp.
9.375%, 2001 100,000 96,695
98,250
Revlon Worldwide Corp.
0.00%, 1998 50,000 35,456
35,375
Roche Holdings Inc.
2.75%, 2000 200,000 172,018
170,875
-------
- -------
304,169
304,500
-------
- -------
Financial Services(.7%)
Chrysler Financial Corp.
6.65%, 1997 80,000 80,553
80,452
General Motors Acceptance Corp.
5.65%, 1997 200,000 197,454
196,832
-------
- -------
278,007
277,284
-------
- -------
Health Services & Hospital Supplies(.3%)
Integrated Health Services, Inc.
9.625%, 2002 100,000 100,000
102,250
-------
- -------
Iron & Steel(.5%)
Geneva Steel Co.
9.50%, 2004 50,000 42,597
37,500
Republic Engineered Steels, Inc.
9.875%, 2001 50,000 47,161
46,500
Wierton Steel Corp.
10.75%, 2005 100,000 98,519
93,000
-------
- -------
188,277
177,000
-------
- -------
Leasing(.2%)
GPA Delaware, Inc.
8.75%, 1998 100,000 83,125
89,000
-------
- -------
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN BALANCED ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal
Market
Security Amount Cost
Value
-------- --------- ----
- ------
<S> <C> <C> <C>
Leisure & Entertainment (3.3%)
Adelphia Communications Corp.
12.50%, 2002 $50,000 $49,757
$50,750
Australis Media Ltd.
0.00%, 2003 150,000 78,608
86,250
Bally Park Place Funding
9.25%, 2004 100,000 93,003
94,250
Bell Cablemedia PLC
0.00%, 2004 150,000 100,932
97,125
Comcast Corp.
9.375%, 2005 100,000 99,525
100,750
Greate Bay Property Funding
10.875%, 2004 50,000 43,140
43,500
GNF Corp.
10.625%, 2003 100,000 82,136
86,500
Helicon Group Ltd.
9.00%, 2003 50,000 45,962
46,125
Kloster Cruise Ltd.
13.00%, 2003 50,000 43,388
35,500
New World Communications Corp.
0.00%, 1999 150,000 100,061
98,250
Santa Fe Hotel
11.00%, 2000 100,000 98,556
89,000
Selmer Company, Inc.
11.00%, 2005 100,000 100,000
96,000
Sinclair Broadcast Group, Inc.
10.00%, 2005 100,000 100,000
100,750
Trump Plaza Funding
10.875%, 2001 100,000 87,537
92,000
Trump Taj Mahal
0.00%, 1999 100,000 76,873
84,500
United International Holdings, Inc.
0.00%, 1999 50,000 30,186
30,250
---------
- ---------
1,229,664
1,231,500
---------
- ---------
Machinery & Equipment(.3%)
Specialty Equipment Companies, Inc.
11.375%, 2003 100,000 101,000
105,000
---------
- ---------
Manufacturing(1.4%)
American Standard, Inc.
0.00%, 2005 100,000 78,839
77,250
Day International Group, Inc.
11.125%, 2005 100,000 100,000
105,250
Huntsman Corp.
10.625%, 2001 100,000 106,125
106,000
Interlake Corp.
12.125%, 2002 100,000 102,000
99,000
International Wire Group, Inc.
11.75%, 2005 100,000 100,000
100,250
Jordan Industries, Inc.
10.375%, 2003 50,000 47,560
46,375
---------
- ---------
534,524
534,125
---------
- ---------
Oil & Gas(.5%)
Maxus Energy Corp.
9.875%, 2002 100,000 94,166
96,750
Mesa Capital CP
0.00%, 1998 100,000 97,839
91,500
---------
- ---------
192,005
188,250
---------
- ---------
Paper & Forest Products(1.7%)
Crown Packaging Holdings Ltd.
0.00%, 2003 200,000 102,772
95,000
Doman Industries Ltd.
8.75%, 2004 100,000 96,087
95,750
Gaylord Container Corp.
0.00%, 2005 100,000 101,210
99,500
Grupo Industrial Durango
12.00%, 2001 75,000 59,034
66,465
Indah Kiat Pulp & Paper Corp.
11.875%, 2002 100,000 102,000
102,000
Malette, Inc.
12.25%, 2004 100,000 108,250
111,000
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN BALANCED ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal
Market
Security Amount Cost
Value
-------- --------- ----
- ------
<S> <C> <C> <C>
Stone Container Corp.
9.875%, 2001 $50,000 $49,939
$49,562
---------
- ---------
619,292
619,277
---------
- ---------
Printing & Publishing(.1%)
Marvel III Holdings Inc.
9.125%, 1998 50,000 46,055
45,750
---------
- ---------
Retail Trade(2.2%)
Cole National Corp.
11.25%, 2001 50,000 48,550
49,500
Dairy Mart Convenience Stores, Inc.
10.25%, 2004 100,000 83,550
85,500
Duane Reade Corp.
12.00%, 2002 100,000 90,360
88,250
Farm Fresh, Inc.
12.25%, 2000 100,000 97,360
95,000
Hills Stores Co.
10.25%, 2003 100,000 98,901
92,000
Pathmark Stores, Inc.
0.00%, 2003 200,000 122,783
131,500
Penn Traffic Co.
9.625%, 2005 100,000 95,829
82,250
Ralph's Grocery Co.
11.00%, 2005 100,000 100,000
94,000
Waban, Inc.
11.00%, 2004 100,000 103,500
102,000
---------
- ---------
840,833
820,000
---------
- ---------
Technology(.1%)
Monarch Acquisition
12.50%, 2003 50,000 50,000
51,000
---------
- ---------
Telecommunications(1.1%)
Centennial Cellular Corp.
10.125%, 2005 100,000 99,632
99,000
Intermedia Communications of
Florida, Inc.
13.50%, 2005 100,000 100,000
104,750
MFS Communications Company, Inc.
0.00%, 2004 150,000 107,583
111,750
Nextel Communications, Inc.
0.00%, 2004 200,000 110,713
97,000
---------
- ---------
417,928
412,500
---------
- ---------
Transportation(.3%)
Federal Express Corp.
6.25%, 1998 100,000 99,728
99,226
---------
- ---------
Total Corporate Bonds 6,210,316
6,167,341
---------
- ---------
U.S. GOVERNMENT & AGENCY LONG-TERM OBLIGATIONS (20.6% OF NET ASSETS)
U.S. Treasury Bond
8.125%, 2019 920,000 985,550
1,063,750
U.S. Treasury Notes
7.375%, 1997 2,000,000 2,031,094
2,059,380
5.125%, 1998 3,150,000 3,032,828
3,089,649
7.75%, 1999 230,000 242,039
244,446
7.25%, 2004 1,220,000 1,244,513
1,294,530
---------
- ---------
Total U.S. Government & Agency
Long-Term Obligation 7,536,024
7,751,755
---------
- ---------
FOREIGN GOVERNMENT BONDS(.5% OF NET ASSETS)
Province of Ontario
8.25%, 1996 200,000 203,558
202,468
---------
- ---------
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN BALANCED ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal
Market
Security Amount Cost
Value
-------- --------- ----
- ------
<S> <C> <C> <C>
FOREIGN CURRENCY (.1% OF NET ASSETS)
Canadian Dollar $443 $342
$344
Deutsche Mark 6,272 4,490
4,274
Finnish Markka 9,583 2,198
2,184
French Franc 15,122 3,156
2,997
Hong Kong Dollar 15,262 1,973
1,971
Indonesian Rupiah 340,001 150
150
Italian Lira 898,170 565
553
Netherlands Guilder 2,417 1,492
1,470
Norwegian Krone 6,800 1,080
1,060
Pound Sterling 881 1,392
1,367
Spanish Pesta 195,483 1,635
1,559
Swedish Krona 10,923 1,503
1,497
Swiss Franc 2,607 2,255
2,163
Thailand Baht 9,720 388
388
-----------
- -----------
Total Foreign Currency 22,619
21,977
-----------
- -----------
REPURCHASE AGREEMENTS(3.6% OF NET ASSETS)
State Street Bank & Trust Co.
5.00%, due 9/1/95 1,372,000 1,372,000
1,372,000
-----------
- -----------
TIME DEPOSITS(1.3% OF NET ASSETS)
State Street Bank & Trust Co. 484,000 484,000
484,000
3.25%, due 9/1/95
-----------
- -----------
TOTAL INVESTMENTS $34,848,140
$36,679,230
-----------
- -----------
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN CAPITAL APPRECIATION ACCOUNT
SCHEDULE OF INVESTMENTS
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Market
Security Shares
Cost Value
-------- ------
---- ------
<S> <C>
<C> <C>
COMMON STOCKS(57.2% OF NET ASSETS)
Aerospace(2.9%)
General Dynamics Corp. 4,300
$198,415 $226,288
General Motors Corp. Class H 1,500
60,215 59,812
Lockheed Martin Corp. 3,200
184,765 194,800
Loral Corp. 2,200
103,235 120,450
McDonnell Douglas Corp. 1,300
80,958 104,325
Rockwell International Corp. 2,900
126,692 129,775
- -------- --------
754,280 835,450
- -------- --------
Airlines(.8%)
AMR Corp. 1,100
74,676 77,550
Delta Air Lines, Inc. 1,300
85,166 96,688
Northwest Airlines Corp. 1,700
50,400 61,412
- -------- --------
210,242 235,650
- -------- --------
Apparel & Textiles(.8%)
Nautica Enterprises, Inc. 1,900
57,439 60,087
St. John Knits, Inc. 1,100
40,064 48,675
Tommy Hilfiger Corp. 4,100
98,958 137,350
- -------- --------
196,461 246,112
- -------- --------
Auto & Auto Related (.3%)
Discount Auto Parts, Inc. 2,800
74,088 91,350
- -------- --------
Banking(2.7%)
Ahmanson (H.F.) & Co. 2,300
56,226 54,625
Bank of Boston Corp. 3,300
137,892 145,200
Chase Manhattan Corp. 3,400
152,769 195,500
Morgan (J.P.) & Company, Inc. 3,100
215,831 225,913
Wells Fargo & Co. 900
149,138 167,737
- -------- --------
711,856 788,975
- -------- --------
Building Materials & Construction(.5%)
Case Corp. 1,900
64,875 71,725
USG Corp. 2,200
54,398 59,675
- -------- --------
119,273 131,400
- -------- --------
Business Equipment & Services(.6%)
Medic Computer Systems, Inc. 2,000
85,426 88,000
New England Business Service, Inc. 4,700
85,371 91,650
- -------- --------
170,797 179,650
- -------- --------
Chemicals(2.2%)
FMC Corp. 700
43,210 53,900
Goodrich (B.F.) Company 2,400
143,355 142,800
Grace (W.R.) & Co. 3,600
192,942 239,850
Monsanto Co. 2,200
182,886 208,725
- -------- --------
562,393 645,275
- -------- --------
Commercial Services(1.0%)
Alternative Resources Corp. 1,500
36,715 44,625
Cambridge Technology Partners, Inc. 2,200
73,625 86,350
Corrections Corporation of America 2,500
87,713 112,500
Sylvan Learning Systems, Inc. 1,900
56,002 54,150
- -------- --------
254,055 297,625
- -------- --------
Computer Business Equipment & Services(4.4%)
Acxiom Corporation 4,900
118,556 131,688
ALANTEC Corp. 1,900
71,188 76,000
Avid Technology, Inc. 1,100
42,710 43,725
Cognex Corp. 2,600
83,400 129,675
Davidson and Associates, Inc. 1,600
76,981 82,400
Epic Design Technology, Inc. 500
21,604 21,562
Global Village Communication 3,600
61,273 56,250
Hyperion Software Corp. 1,700
65,249 79,050
Inso Corp. 600
41,034 37,575
McAfee Associates, Inc. 2,500
78,268 109,687
National Data Corp. 2,800
57,058 72,100
Optical Data Systems, Inc. 1,900
44,200 62,225
Seagate Technology, Inc. 800
39,206 35,400
Sierra Semiconductor 800
37,828 39,500
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN CAPITAL APPRECIATION ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Market
Security Shares
Cost Value
-------- ------
---- ------
<S> <C>
<C> <C>
Storage Technology Corp. 2,000
$54,934 $54,750
StorMedia, Inc. 1,500
64,432 62,250
Wonderware Corp. 2,700
96,224 93,150
Zebra Technologies Corp. 1,600
94,286 93,200
- --------- ---------
1,148,431 1,280,187
- --------- ---------
Conglomerates(1.1%)
AlliedSignal Inc. 1,100
43,261 48,813
Hanson PLC 7,400
136,608 126,725
Jardine Matheson Holdings Ltd. 3,800
30,419 27,360
Textron, Inc. 1,700
99,168 116,450
- --------- ---------
309,456 319,348
- --------- ---------
Drugs & Cosmetics(1.4%)
American Home Products Corp. 2,000
154,232 154,000
Bristol-Myers Squibb Co. 1,600
109,898 109,800
Watson Pharmaceuticals, Inc. 3,262
106,210 134,965
- --------- ---------
370,340 398,765
- --------- ---------
Electrical & Electronic Equipment(4.2%)
Allen Group, Inc. 2,100
67,457 68,513
Cidco, Inc. 1,500
49,173 52,500
Credence Systems Corp. 950
23,267 33,487
GaSonics International 3,000
75,669 104,250
Integrated Silicon Solution, Inc. 2,300
95,681 114,425
Kemet Corp. 2,000
88,623 114,000
Mattson Technology, Inc. 1,400
70,674 71,750
Micron Technology Inc. 1,100
45,879 84,563
Philips Electronics NV 1,400
61,750 63,000
Photronics, Inc. 500
12,237 17,492
S3, Inc. 2,400
65,441 94,200
Sanmina Corp. 1,500
70,279 68,250
Silicon Valley Group, Inc. 2,300
77,929 98,900
Tyco International Ltd. 1,000
57,218 59,125
Ultratech Stepper, Inc. 3,000
97,807 118,500
Vicor Corp. 1,200
47,842 56,400
- --------- ---------
1,006,926 1,219,355
- --------- ---------
Electric Utilities(3.4%)
Entergy Corp. 7,800
192,176 187,200
FPL Group, Inc. 5,400
199,676 209,925
Illinova Corp. 5,200
120,510 130,650
Kansas City Power & Light Co. 5,000
115,330 111,875
Unicom Corp. 7,600
201,507 213,750
Western Resources, Inc. 3,900
119,437 117,975
- --------- ---------
948,636 971,375
- --------- ---------
Environmental Control(.5%)
United Waste Systems, Inc. 3,500
119,116 135,625
- --------- ---------
Financial Services(.1%)
National Auto Credit, Inc. 1,500
17,837 21,750
- --------- ---------
Food & Beverages(1.3%)
Apple South, Inc. 2,800
61,475 68,600
Boston Chicken, Inc. 3,200
67,564 76,800
Dole Food Co., Inc. 800
26,959 26,200
Doubletree Corp. 2,100
50,900 40,425
Landry's Seafood Restaurants, Inc. 3,300
62,557 58,162
Papa John's International, Inc. 1,600
55,657 64,000
Ralcorp Holdings, Inc. 2,100
48,067 47,513
- --------- ---------
373,179 381,700
- --------- ---------
Health Services & Hospital Supplies(3.4%)
Baxter International Inc. 7,200
248,508 280,800
Columbia Healthcare Corp. 1,800
76,352 84,600
Community Health Systems, Inc. 2,500
86,554 96,250
Express Scripts, Inc. 2,000
64,766 74,000
Gulf South Medical Supply, Inc. 2,100
46,416 59,325
Idexx Laboritories, Inc. 2,800
79,444 94,850
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN CAPITAL APPRECIATION ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Market
Security Shares
Cost Value
-------- ------
---- ------
<S> <C>
<C> <C>
Omnicare, Inc. 3,000
$96,655 $99,750
PhyCor, Inc. 2,000
73,832 83,500
Physician Sales & Service, Inc. 1,400
61,084 63,700
TheraTx, Inc. 2,400
35,199 31,800
- --------- ---------
868,810 968,575
- --------- ---------
Insurance(3.8%)
Aetna Life & Casualty Co. 3,500
205,621 238,875
Allstate Corp. 4,214
126,671 142,749
American General Corp. 2,800
92,378 98,700
Compdent Corp. 2,000
47,551 54,500
Hartford Steam Boiler Inspection & Insurance Co. 2,400
108,718 111,300
Healthsource, Inc. 1,900
73,124 76,000
St. Paul Companies Inc. 3,200
154,912 173,600
TIG Holdings, Inc. 2,300
52,233 58,938
Travelers Group 2,800
115,920 134,400
- --------- ---------
977,128 1,089,062
- --------- ---------
Iron & Steel(1.6%)
British Steel PLC 5,600
163,105 156,800
Carpenter Technology Corp. 1,600
96,714 122,000
UNR Industries Inc. 25,000
156,250 196,875
- --------- ---------
416,069 475,675
- --------- ---------
Leisure & Entertainment(1.0%)
Clear Channel Communications, Inc. 1,500
84,278 111,937
Mattel, Inc. 1,900
45,258 55,100
Regal Cinemas, Inc. 2,400
67,892 81,600
Station Casinos, Inc. 2,000
33,444 38,750
- --------- ---------
230,872 287,387
- --------- ---------
Machinery & Equipment(1.1%)
AGCO Corp. 1,400
72,856 68,075
Electroglas, Inc. 1,600
87,002 120,800
Mark IV Industries, Inc. 2,200
40,066 48,950
Parker-Hannifin Corp. 1,800
62,635 71,325
- --------- ---------
262,559 309,150
- --------- ---------
Manufacturing(1.4%)
Black & Decker Corp. 1,700
50,910 55,038
FSI International, Inc. 3,300
75,075 116,325
Helix Technology Corp. 1,600
61,580 81,450
Integrated Process Equipment Corp. 1,700
78,510 61,412
Lydall, Inc. 4,400
84,202 105,050
- --------- ---------
350,277 419,275
- --------- ---------
Metals & Mining(.6%)
IMC Global Inc. 1,300
66,118 82,225
Potash Corporation of Saskatchewan Inc. 1,400
74,244 79,625
- --------- ---------
140,362 161,850
- --------- ---------
Miscellaneous(.3%)
Premark International, Inc. 1,700
82,154 89,038
- --------- ---------
Office Equipment(.5%)
Xerox Corp. 1,100
135,962 132,825
- --------- ---------
Oil & Gas(3.9%)
Amoco Corp. 2,100
140,112 133,875
Chevron Corp. 4,200
203,766 203,175
Mobil Corp. 2,100
204,422 200,025
Panhandle Eastern Corp. 10,500
253,051 262,500
Repsol SA (ADR) 2,000
66,370 63,250
Royal Dutch Petroleum Co. 1,100
137,477 131,175
Ultramar Corp. 4,300
114,126 101,588
YPF Sociedad Anonima (ADR) 1,500
30,165 26,438
- --------- ---------
1,149,489 1,122,026
- --------- ---------
Paper & Forest Products(.7%)
Georgia-Pacific Corp. 600
47,968 54,000
Scott Paper Co. 1,600
71,570 74,200
Willamette Industries, Inc. 1,200
61,175 82,500
- --------- ---------
180,713 210,700
- --------- ---------
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN CAPITAL APPRECIATION ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Market
Security Shares
Cost Value
-------- ------
---- ------
<S> <C> <C>
<C>
Printing & Publishing(.2%)
Gartner Group, Inc. 2,300
$65,263 $65,263
- ---------- ----------
Real Estate(1.1%)
Camden Property Trust 4,800
102,142 105,000
Health & Retirement Property Trust 6,300
95,388 96,862
Meditrust Corp. 3,100
96,289 101,912
- ---------- ----------
293,819 303,774
- ---------- ----------
Retail Trade(3.4%)
American Stores Co. 3,100
80,984 91,063
CDW Computer Centers, Inc. 1,700
64,991 91,800
Corporate Express, Inc. 3,600
70,231 84,150
Eckerd Corp. 1,700
51,355 62,263
General Nutrition Companies, Inc. 3,000
89,593 125,250
Gymboree Corp. 2,000
62,399 59,500
Kroger Co. 2,700
68,753 88,088
Micro Warehouse, Inc. 1,100
50,203 52,525
Sears, Roebuck & Co. 4,700
133,585 152,162
Service Merchandise Co., Inc. 4,600
31,759 32,775
Sunglass Hut International, Inc. 2,000
65,847 85,000
Waban, Inc. 2,500
46,958 47,188
- ---------- ----------
816,658 971,764
- ---------- ----------
Technology(1.5%)
Applied Materials, Inc. 600
37,375 62,400
Compaq Computer Corp. 1,800
82,388 85,950
Computer Associates International, Inc. 800
51,258 55,600
Electronics for Imaging, Inc. 2,200
119,274 124,300
International Business Machine Corp. 900
84,707 93,037
- ---------- ----------
375,002 421,287
- ---------- ----------
Telcommunications(1.4%)
Ascend Communications, Inc. 1,000
42,875 64,500
Aspect Telecommunications Corp. 1,600
66,446 76,400
Coherent Communications Systems Corp. 1,900
39,837 43,225
Ericsson LM Tel. Co.(Spons. ADR) 3,200
54,600 68,400
LCI International, Inc. 2,100
58,056 83,737
Spectrian Corp. 1,500
70,381 69,375
- ---------- ----------
332,195 405,637
- ---------- ----------
Telephone Utilities(2.3%)
Ameritech Corp. 5,100
230,449 261,375
GTE Corp. 5,300
181,789 194,112
NYNEX Corp. 4,400
179,419 198,000
- ---------- ----------
591,657 653,487
- ---------- ----------
Transportation(.6%)
Fritz Companies, Inc. 1,500
76,903 106,875
Wisconsin Central Transportation 1,200
73,550 71,400
- ---------- ----------
150,453 178,275
- ---------- ----------
Wholesale Trade(.2%)
CellStar Corp. 1,700
39,498 54,187
- ---------- ----------
Total Common Stocks
14,806,306 16,498,829
- ---------- ----------
FOREIGN COMMON STOCKS(15.0% OF NET ASSETS)
Auto & Auto Related(.6%)
Autoliv AB (Sweden) 1,000
48,006 60,439
Michelin CGDE (France) 1,000
46,204 43,402
Shinmaywa Industries Ltd. (Japan) 3,000
28,532 24,854
Valeo SA (France) 706
42,246 33,706
- ---------- ----------
164,988 162,401
- ---------- ----------
Banking(1.2%)
Banco Popular Espanol (Spain) 400
59,340 61,553
Banco Santander SA (Spain) 1,500
58,030 61,354
Bangkok Bank Company Ltd. (Thailand) 4,000
43,062 44,693
Deutsche Bank AG (Germany) 1,000
50,268 46,269
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN CAPITAL APPRECIATION ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Market
Security Shares
Cost Value
-------- ------
---- ------
<S> <C>
<C> <C>
HSBC Holdings PLC (United Kingdom) 2,000
$25,239 $26,870
Malayan Banking Berhad (Malaysia) 6,000
48,028 49,299
Societe Generale Paris (France) 200
23,355 20,889
Thai Farmers Bank Ltd. (Thailand) 4,500
42,841 43,815
------- -------
350,163 354,742
------- -------
Building Materials & Construction(.2%)
Compagnie de Saint Gobain (France) 250
33,060 31,759
PT Indocement Tunggal Prakar (Indonesia) 7,000
28,144 24,862
------- -------
61,204 56,621
------- -------
Chemicals(.3%)
Akzo Nobel (Netherlands) 200
23,340 23,594
Bayer AG (Germany) 225
55,807 58,186
------- -------
79,147 81,780
------- -------
Computer Business Equipment & Services(.4%)
Fujitsu Ltd. (Japan) 9,000
96,487 97,576
Getronics NV (Netherlands) 600
27,165 25,722
------- -------
123,652 123,298
------- -------
Conglomerates(1.0%)
Canadian Pacific Ltd. (Canada) 2,000
33,412 33,507
Hanson PLC (United Kingdom) 13,000
47,898 43,784
Hutchison Whampoa Ltd. (Hong Kong) 10,000
44,980 48,185
Mannesmann AG (Germany) 195
56,689 61,550
Renong Berhad (Malaysia) 22,000
41,297 42,501
Viag AG (Germany) 120
47,149 46,201
------- -------
271,425 275,728
------- -------
Drugs & Cosmetics(1.7%)
Astra AB (Sweden) 1,800
52,911 59,699
Ciba-Geigy AG (Switzerland) 100
70,174 70,788
PT Kalbe Farma (Indonesia) 6,000
28,248 24,752
Sandoz AG (Switzerland) 100
67,763 72,116
Schering AG (Germany) 1,000
68,742 72,913
SmithKline Beecham (United Kingdom) 8,051
64,773 74,849
SmithKline Bch/Bec Units (United Kingdom) 5,027
38,508 44,024
Zeneca Group PLC (Germany) 4,000
59,254 69,533
------- -------
450,373 488,674
------- -------
Electric Utilities(.4%)
Powergen PLC (United Kingdom) 3,366
26,026 30,588
VEBA AG (Germany) 2,000
77,279 76,511
------- -------
103,305 107,099
------- -------
Electrical & Electronic Equipment(2.2%)
BBC AG Brown Boveri & Cie. (Switzerland) 65
67,607 68,560
Hitachi Ltd. (Japan) 7,000
74,827 76,608
Keyence Corp. (Japan) 400
45,483 51,140
Kyocera Corp. (Japan) 1,000
75,913 88,371
Matsushita Electric Industrial Co. Ltd. (Japan) 4,000
67,996 62,596
Philips Electronics NV (Netherlands) 2,000
80,364 89,754
Pioneer Electronic Corp. (Japan) 1,000
21,612 19,127
Sony Corp. (Japan) 1,000
48,817 54,618
Sumitomo Electric Industries Ltd. (Japan) 6,000
79,781 77,938
Toshiba Corp. (Japan) 7,000
50,198 50,547
------- -------
612,598 639,259
------- -------
Financial Services(.6%)
Compagnie Bancaire SA (France) 220
23,395 22,934
International Nederlanden Groep NV (Netherlands) 1,000
54,145 55,579
Itochu Corporation (Japan) 4,000
28,019 24,875
Nichiei Co. Ltd. (Japan) 1,000
69,474 57,891
------- -------
175,033 161,279
------- -------
Food & Beverages(.4%)
Heineken NV (Netherlands) 550
74,674 77,258
Nestle SA (Switzerland) 50
50,532 50,581
------- -------
125,206 127,839
------- -------
Insurance(.6%)
AEGON N.V. (Netherlands) 2,000
65,174 67,254
Munich Reinsurance (Germany) 25
51,152 50,426
Skandia Foersaekrings AB (Sweden) 1,300
25,518 26,725
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN CAPITAL APPRECIATION ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Market
Security Shares
Cost Value
-------- ------
---- ------
<S> <C>
<C> <C>
Union des Assurances Federales SA (France) 400
$43,070 $40,509
------- -------
184,914 184,914
------- -------
Iron &Steel(.7%)
Hitachi Metals Ltd. (Japan) 2,000
25,920 23,320
Kawasaki Steel (Japan) 6,000
25,374 20,558
Nisshin Steel Co. Ltd. (Japan) 12,000
48,428 48,604
Outokumpu Oy (Finland) 2,425
43,288 45,216
Rio Tinto-Zinc Corp. PLC (United Kingdom) 4,000
51,448 54,291
Sumitomo Metal Industries (Japan) 7,000
23,998 19,546
------- -------
218,456 211,535
------- -------
Leisure & Entertainment(.4%)
Carlton Communications PLC (United Kingdom) 3,300
50,416 53,267
Television Broadcasts Ltd. (Hong Kong) 8,000
30,940 29,557
TV Francaise (TF1) (France) 400
39,611 40,588
------- -------
120,967 123,412
------- -------
Machinery & Equipment(.3%)
Mabuchi Motor Co. (Japan) 800
55,738 54,250
NSK Limited (Japan) 3,000
22,759 20,221
SMC Corp. (Japan) 400
23,542 24,261
------- -------
102,039 98,732
------- -------
Metals & Mining(.1%)
Broken Hill Proprietary Co. Ltd. (Australia) 85
972 1,233
Poseidon Gold Ltd. (Australia) 7,400
15,183 14,409
Western Mining Corp. Holdings Ltd. (Australia) 2,000
11,491 13,443
------- -------
27,646 29,085
------- -------
Miscellaneous(.2%)
SGS Societe Generale de Surveillance
Holding SA (Switzerland) 30
51,157 53,900
------- -------
Office Equipment(.3%)
Canon Inc. (Japan) 4,000
68,170 72,415
------- -------
Oil & Gas(1.6%)
Ampolex Ltd. (Australia) 23,000
64,747 54,297
British Gas Corp. (United Kingdom) 5,000
23,757 21,535
British Petroleum Co. Ltd. (United Kingdom) 6,000
44,154 44,979
Compagnie Francaise de Petroleum Total (France) 1,641
105,302 96,396
Enterprise Oil PLC (United Kingdom) 7,500
50,032 43,070
Hong Kong & China Gas Company Ltd. (Hong Kong) 13,000
21,066 20,488
Imperial Oil Ltd. (Canada) 1,100
40,429 39,520
Lasmo PLC (United Kingdom) 16,000
44,537 43,955
Saga Petroleum (Norway) 4,000
59,943 50,183
Societe Nationale Elf Aquitaine (France) 554
46,349 40,569
------- -------
500,316 454,992
------- -------
Paper & Forest Products(.3%)
Metsa-Serla Oy (Finland) 950
41,313 37,462
Mo och Domsjo AB (Sweden) 800
43,544 46,049
------- -------
84,857 83,511
------- -------
Printing & Publishing(.3%)
De La Rue PLC (United Kingdom) 1,526
22,362 20,641
Elsevier NV (Netherlands) 2,200
25,371 27,826
Wolters-Kluwer NV (Netherlands) 400
33,854 35,269
------- -------
81,587 83,736
------- -------
Retail Trade(.4%)
Argyll Group PLC (United Kingdom) 4,000
21,875 21,853
Carrefour Supermarche SA (France) 90
46,489 50,246
LVMH Louis Vuitton Moet-Hennessy (France) 270
53,383 48,587
------- -------
121,747 120,686
------- -------
Telecommunications(.5%)
Nokia AB (Finland) 1,200
51,834 83,153
Telecom Italia S.p.A (Italy) 19,000
31,390 30,519
Telecom Italia Mobile S.p.A (Italy) 19,000
22,591 28,005
------- -------
105,815 141,677
------- -------
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN CAPITAL APPRECIATION ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Market
Security Shares
Cost Value
-------- ------
---- ------
<S> <C>
<C> <C>
Telephone Utilities(.2%)
DDI Corporation(Japan) 5
$45,506 $42,242
Telefonica de Espana (Spain) 2,000
27,735 27,109
- --------- ---------
73,241 69,351
- --------- ---------
Tobacco(.1%)
PT HM Sampoerna (Indonesia) 4,000
31,685 37,943
- --------- ---------
Total Foreign Common Stocks
4,289,691 4,344,609
- --------- ---------
CONVERTIBLE PREFERRED STOCKS(1.1% OF NET ASSETS)
Building Materials & Construction(.4%)
Case Corp. 1,100
105,350 106,150
- --------- ---------
Computer Business Equipment & Services(.3%)
Storage Technology Corp. 1,500
97,505 92,812
- --------- ---------
Energy Services(.4%)
J. Ray McDermott, SA 2,300
142,486 113,851
- --------- ---------
Total Convertible Preferred Stocks
345,341 312,813
- --------- ---------
FOREIGN PREFERRED STOCKS(1.0% OF NET ASSETS)
Auto & Auto Related (.1%)
Fiat S.p.A.(Italy) 13,500
35,936 30,449
- --------- ---------
Computer Business Equipment & Services(.2%)
SAP AG (Germany) 400
41,598 59,203
- --------- ---------
Conglomerates(.2%)
RWE AG (Germany) 185
50,545 50,186
- --------- ---------
Electric Utilities (.2%)
CEMIG (Brazil) 2,000,000
40,147 45,273
- --------- ---------
Financial Services(.1%)
Banco Bradesco SA (Brazil) 4,600,000
39,949 44,315
- --------- ---------
Telecommunications(.2%)
Telecomunicacoes de Sao Paulo SA (Brazil) 350,000
43,573 57,486
- --------- ---------
Total Foreign Preferred Stocks
251,748 286,912
- --------- ---------
<CAPTION>
CORPORATE BONDS(8.9% OF NET ASSETS) Principal
Amount
---------
<S> <C>
<C> <C>
Apparel & Textiles(.1%)
U.S. Leather, Inc.
10.25%, 2003 $50,000
43,858 43,250
- --------- ---------
Auto & Auto Related(.1%)
Venture Holdings
9.75%, 2004 50,000
43,503 43,750
- --------- ---------
Chemicals(.7%)
Building Materials Corp. of America
0.00%, 2004 100,000
63,568 $62,000
Crain Industries, Inc.
13.50%, 2005 25,000
25,000 25,125
G-I Holdings
0.00%, 1998 50,000
36,216 35,750
Harris Chemical North America, Inc.
0.00%, 2001 50,000
47,781 44,500
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN CAPITAL APPRECIATION ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal
Market
Security Amount
Cost Value
-------- ---------
---- ------
<S> <C>
<C> <C>
LaRoche Industries, Inc.
13.00%, 2004 $25,000
$25,750 $26,250
------- -------
198,315 193,625
------- -------
Drugs & Cosmetics(.3%)
Revlon Consumer Products Corp.
9.375%, 2001 50,000
48,348 49,125
Revlon Worldwide Corp.
0.00%, 1998 50,000
35,456 35,375
------- -------
83,804 84,500
------- -------
Health Services & Hospital Supplies(.2%)
Integrated Health Services, Inc.
9.625%, 2002 50,000
50,000 51,125
------- -------
Iron & Steel(.3%)
Geneva Steel Co.
9.50%, 2004 25,000
21,298 18,750
Republic Engineered Steels, Inc.
9.875%, 2001 25,000
23,580 23,250
Wierton Steel Corp.
10.75%, 2005 50,000
49,260 46,500
------- -------
94,138 88,500
------- -------
Leasing(.2%)
GPA Delaware, Inc.
8.75%, 1998 50,000
41,563 44,500
------- -------
Leisure & Entertainment (2.2%)
Adelphia Communications Corp.
12.50%, 2002 25,000
24,879 25,375
Australis Media Ltd.
0.00%, 2003 75,000
39,304 43,125
Bally Park Place Funding
9.25%, 2004 50,000
46,502 47,125
Bell Cablemedia PLC
0.00%, 2004 75,000
50,466 48,563
Comcast Corp.
9.375%, 2005 50,000
49,763 50,375
Greate Bay Property Funding
10.875%, 2004 25,000
21,570 21,750
GNF Corp.
10.625%, 2003 50,000
41,068 43,250
Helicon Group Ltd.
9.00%, 2003 50,000
45,962 46,125
Kloster Cruise Ltd.
13.00%, 2003 25,000
21,694 17,750
New World Communications Corp.
0.00%, 1999 75,000
50,030 49,125
Santa Fe Hotel
11.00%, 2000 50,000
49,278 44,500
Selmer Company, Inc.
11.00%, 2005 50,000
50,000 48,000
Sinclair Broadcast Group, Inc.
10.00%, 2005 50,000
50,000 50,375
Trump Plaza Funding
10.875%, 2001 50,000
43,563 46,000
Trump Taj Mahal
0.00%, 1999 50,000
38,437 42,250
------- -------
622,516 623,688
------- -------
Machinery & Equipment(.2%)
Specialty Equipment Companies, Inc.
11.375%, 2003 50,000
50,500 52,500
------- -------
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN CAPITAL APPRECIATION ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal
Market
Security Amount
Cost Value
-------- ---------
---- ------
<S> <C>
<C> <C>
Manufacturing(.9%)
American Standard, Inc.
0.00%, 2005 $50,000
$39,419 $38,625
Day International Group, Inc.
11.125%, 2005 50,000
50,000 52,625
Huntsman Corp.
10.625%, 2001 50,000
53,063 53,000
Interlake Corp.
12.125%, 2002 50,000
51,000 49,500
International Wire Group, Inc.
11.75%, 2005 50,000
50,000 50,125
Jordan Industries, Inc.
10.375%, 2003 25,000
23,780 23,188
------- -------
267,262 267,063
------- -------
Oil & Gas(.3%)
Maxus Energy Corp.
9.875%, 2002 50,000
47,083 48,375
Mesa Capital CP
0.00%, 1998 50,000
48,920 45,750
------- -------
96,003 94,125
------- -------
Paper & Forest Products(1.3%)
Crown Packaging Holdings Ltd.
0.00%, 2003 100,000
51,386 47,500
Doman Industries Ltd.
8.75%, 2004 50,000
48,044 47,875
Gaylord Container Corp.
0.00%, 2005 50,000
50,605 49,750
Grupo Industrial Durango
12.00%, 2001 75,000
60,907 66,465
Indah Kiat Pulp & Paper Corp.
11.875%, 2002 50,000
51,000 51,000
Malette, Inc.
12.25%, 2004 50,000
54,125 55,500
Stone Container Corp.
9.875%, 2001 50,000
49,935 49,561
------- -------
366,002 367,651
------- -------
Printing & Publishing(.1%)
Marvel III Holdings Inc.
9.125%, 1998 25,000
23,027 22,875
------- -------
Retail Trade(1.3%)
Dairy Mart Convenience Stores, Inc.
10.25%, 2004 50,000
41,775 42,750
Duane Reade Corp.
12.00%, 2002 50,000
45,063 44,125
Farm Fresh, Inc.
12.25%, 2000 50,000
48,680 47,500
Hills Stores Co.
10.25%, 2003 50,000
49,450 46,000
Pathmark Stores, Inc.
0.00%, 2003 100,000
61,391 65,750
Penn Traffic Co.
9.625%, 2005 50,000
47,914 41,125
Ralph's Grocery Co.
11.00%, 2005 50,000
50,000 47,000
Waban, Inc.
11.00%, 2004 50,000
51,750 51,000
------- -------
396,023 385,250
------- -------
Telecommunications(.7%)
Centennial Cellular Corp.
10.125%, 2005 50,000
49,816 49,500
Intermedia Communications of Florida, Inc.
13.50%, 2005 50,000
50,000 52,375
MFS Communications Company, Inc.
0.00%, 2004 75,000
53,792 55,875
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
LIFESPAN CAPITAL APPRECIATION ACCOUNT
SCHEDULE OF INVESTMENTS (Cont'd)
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal
Market
Security Amount
Cost Value
-------- ---------
---- ------
<S> <C>
<C> <C>
Nextel Communications, Inc.
0.00%, 2004 $100,000
$55,357 $48,500
- ----------- -----------
208,965 206,250
- ----------- -----------
Total Corporate Bonds
2,585,479 2,568,652
- ----------- -----------
U.S. GOVERNMENT & AGENCY LONG-TERM OBLIGATIONS (9.4% OF NET ASSETS)
U.S. Treasury Bond
8.125%, 2019 460,000
492,775 531,875
U.S. Treasury Notes
5.125%, 1998 1,550,000
1,492,106 1,520,457
7.250%, 2004 610,000
622,256 647,265
- ----------- -----------
Total U.S. Government & Agency Long-Term Obligations
2,607,137 2,699,597
- ----------- -----------
FOREIGN CURRENCY (.1% OF NET ASSETS)
Canadian Dollar 1,897
349 352
Deutsche Mark 6,272
4,489 4,274
Finnish Markka 9,583
2,198 2,184
French Franc 15,122
3,156 2,997
Hong Kong Dollar 15,262
1,972 1,972
Indonesian Rupiah 340,001
150 150
Italian Lira 898,170
565 553
Netherlands Guilder 2,417
1,492 1,470
Norwegian Krone 6,800
1,080 1,059
Pound Sterling 882
1,395 1,369
Spanish Peseta 171,609
1,437 1,368
Swedish Krona 10,923
1,503 1,496
Swiss Franc 2,617
2,264 2,172
Thailand Baht 9,720
388 388
- ----------- -----------
Total Foreign Currency
22,438 21,804
- ----------- -----------
REPURCHASE AGREEMENTS(4.6% OF NET ASSETS)
State Street Bank & Trust Co.
5.00%, due 9/1/95 1,324,000
1,324,000 1,324,000
- ----------- -----------
TIME DEPOSITS(1.8% OF NET ASSETS)
State Street Bank & Trust Co.
3.25%, due 9/1/95 510,000
510,000 510,000
- ----------- -----------
TOTAL INVESTMENTS
$26,742,140 $28,567,216
- ----------- -----------
</TABLE>
<PAGE>
Notes to Schedule of Investments
August 31, 1995 (Unaudited)
1. Aggregate gross unrealized appreciation (depreciation) as of August
31,
1995, based on cost for Federal income tax purposes, was as follows:
<TABLE>
<CAPTION>
Accounts
- --------
Diversified
Capital
Income
Balanced Appreciation
- ----------------------------------------------
<S> <C> <C>
<C>
Aggregate gross unrealized appreciation $687,083
2,272,023 $2,211,616
Aggregate gross unrealized depreciation (157,704)
(440,933) (386,540)
-----------
- ----------- -----------
Net unrealized appreciation $529,379
$1,831,090 $1,825,076
-----------
- ----------- -----------
2. The aggregate cost of investments for
Federal income tax purposes was: $21,337,190
$34,848,140 $26,742,140
-----------
- ----------- -----------
3. Purchases and sales of securities
(excluding short-term securities) for
the two months ended August 31, 1995
are summarized as follows:
Purchases $2,299,539
$5,418,825 $4,950,124
Sales $1,234,206
$4,935,528 $4,294,460
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
STATEMENT OF NET ASSETS
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------
LIFESPAN
ACCOUNTS
- -------------------------------------------------
DIVERSIFIED
CAPITAL
INCOME
BALANCED APPRECIATION
- -------------------------------------------------
<S> <C>
<C> <C>
ASSETS
Investments:
Bonds, at market value
(Cost $15,778,761, $13,949,898, $5,192,616) $16,058,841
$14,121,564 $5,268,249
Common stocks, at market value
(Cost $4,508,977, $18,422,533, $19,095,997) 4,791,078
20,079,964 20,843,438
Preferred stocks, at market value
(Cost $361,452, $597,090, $597,089) 328,650
599,725 599,725
Foreign currency, at market value
(Cost $22,619, $22,438) --
21,977 21,804
Short-term securities 688,000
1,856,000 1,834,000
- -------------------------------------------------
21,866,569
36,679,230 28,567,216
Cash 57,357
132,449 113,684
Investment income receivable 308,136
308,384 138,817
Receivable from securities sold 38,047
638,065 191,262
Receivable from Fund shares sold --
61,542 125,380
Foreign currency market receivable --
39,255 39,255
Foreign tax receivable --
4,826 4,826
- -------------------------------------------------
Total Assets 22,270,109
37,863,751 29,180,440
- -------------------------------------------------
LIABILITIES
Accrued expenses payable 44,859
65,126 44,241
Payable for securities purchased 69,540
109,538 299,613
- -------------------------------------------------
Total Liabilities 114,399
174,664 343,854
- -------------------------------------------------
NET ASSETS $22,155,710
$37,689,087 $28,836,586
- -------------------------------------------------
- -------------------------------------------------
OUTSTANDING SHARES 2,149,005
3,514,925 2,652,171
- -------------------------------------------------
- -------------------------------------------------
NET ASSET VALUE PER SHARE $10.31
$10.72 $10.87
- -------------------------------------------------
- -------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $21,533,496
$35,240,372 $26,617,638
Undistributed net investment income 19,328
220,115 108,720
Accumulated undistributed net realized gain 73,507
358,255 245,897
Net unrealized appreciation 529,379
1,870,345 1,864,331
- -------------------------------------------------
NET ASSETS $22,155,710
$37,689,087 $28,836,586
- -------------------------------------------------
- -------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
STATEMENT OF OPERATIONS
For the period from May 1, 1995 (Inception) to August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------
LIFESPAN
ACCOUNTS
- -------------------------------------------------
DIVERSIFIED
CAPITAL
INCOME
BALANCED APPRECIATION
- -------------------------------------------------
<S> <C>
<C> <C>
INVESTMENT INCOME
Income:
Interest $402,059
$443,074 $212,278
Dividends 75,153
165,387 165,547
- -------------------------------------------------
Total Income 477,212
608,461 377,825
- -------------------------------------------------
Expenses:
Investment advisory fees 52,915
100,551 75,904
Distribution fees 17,638
29,574 22,325
Other 35,277
53,232 40,184
- -------------------------------------------------
Total Expenses 105,830
183,357 138,413
- -------------------------------------------------
NET INVESTMENT INCOME 371,382
425,104 239,412
- -------------------------------------------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain on investments 73,507
369,161 256,932
Net realized loss on foreign currency --
(10,906) (11,035)
Net unrealized appreciation on investments 529,379
1,831,090 1,825,076
Net unrealized appreciation on foreign currency --
39,255 39,255
- -------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS 602,886
2,228,600 2,110,228
- -------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $974,268
$2,653,704
$2,349,640
- -------------------------------------------------
- -------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the period from May 1, 1995 (Inception) to August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------
LIFESPAN
ACCOUNTS
- -------------------------------------------------
DIVERSIFIED
CAPITAL
INCOME
BALANCED APPRECIATION
- -------------------------------------------------
<S> <C>
<C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income $371,382
$425,104 $239,412
Net realized gain on investments 73,507
369,161 256,932
Net realized loss on foreign currency --
(10,906) (11,035)
Net unrealized appreciation 529,379
1,870,345 1,864,331
- -------------------------------------------------
Net increase in net assets
resulting from operations 974,268
2,653,704 2,349,640
- -------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (352,054)
(204,989) (130,692)
Net realized gain from investment transactions --
-- --
- -------------------------------------------------
(352,054)
(204,989) (130,692)
- -------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 21,187,396
35,046,498 26,497,646
Net asset value of shares issued to
shareholders from reinvestment of dividends 346,243
204,989 130,692
Cost of shares reacquired (143)
(11,115) (10,700)
- -------------------------------------------------
Increase in net assets derived from
capital share transactions 21,533,496
35,240,372 26,617,638
- -------------------------------------------------
NET INCREASE IN NET ASSETS 22,155,710
37,689,087 28,836,586
NET ASSETS - BEGINNING OF PERIOD --
-- --
- -------------------------------------------------
NET ASSETS - END OF PERIOD $22,155,710
$37,689,087 $28,836,586
- -------------------------------------------------
- -------------------------------------------------
Undistributed net investment income included in
net assets at end of period $19,328
$220,115 $108,720
- -------------------------------------------------
- -------------------------------------------------
Undistributed net realized gain on investments
included in net assets at end of period $73,507
$369,161 $256,932
- -------------------------------------------------
- -------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
FINANCIAL HIGHLIGHTS
For the period from May 1, 1995 (Inception) to August 31, 1995 (Unaudited)
Selected data for a share of capital stock outstanding throughout the
period:
<TABLE>
<CAPTION>
Net Realized Distributions
Ratio of Ratio of Net
Dividends & Unrealized From Net
Net Asset Net Asset Operating
Investment
Year Net From Net Gain (Loss) Realized
Value at Value at Expenses to
Income to
Ended Investment Investment on Gain on
Beginning End Average
Average
December 31 Income Income Investments Investments
of Period of Period Net
Assets (b) Net Assets (b)
- -----------------------------------------------------------------------
- -----------------------------------------------
- -----------
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
LIFESPAN DIVERSIFIED INCOME ACCOUNT
1995(a) $.18 $(.17) $.30 $ --
$10.00 $10.31 1.50%
5.26%
LIFESPAN BALANCED ACCOUNT
1995(a) $.12 $(.06) $.66 $ --
$10.00 $10.72 1.55%
3.59%
LIFESPAN CAPITAL APPRECIATION ACCOUNT
1995(a) $.09 $(.05) $.83 $ --
$10.00 $10.87 1.55%
2.68%
<CAPTION>
Net
Assets
at End of Annual
Portfolio Period (in Total
Turnover (b) Thousands) Return (c)
- -------------------------------------
<S> <C> <C>
LIFESPAN DIVERSIFIED INCOME ACCOUNT
50.19% $22,156 4.81%
LIFESPAN BALANCED ACCOUNT
81.69% $37,689 7.83%
LIFESPAN CAPITAL APPRECIATION ACCOUNT
64.27% $28,837 9.25%
<FN>
(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
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
NOTES TO FINANCIAL STATEMENTS
For the period from May 1, 1995 (Inception) to August 31, 1995 (Unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Connecticut Mutual Investment Accounts, Inc. (the Fund), a Maryland
corporation, is registered under the Investment Company Act of 1940,
as
amended, as an open-end management investment company. The Fund is
comprised of thirteen distinct mutual funds, including the following
three
LifeSpan Accounts included in these financial statements: Diversified
Income, Balanced and Capital Appreciation. An interest in the Fund
is
limited to the assets of the Account or Accounts in which shares are
held
by shareholders, and such shareholders are entitled to a pro rata
share of
all dividends and distributions arising from the net investment
income and
net realized capital gains on the investments of such Accounts.
The following is a summary of significant accounting policies
followed by
the Fund:
(a) Valuation of Investment Securities - Equity and debt securities
which
are traded on securities exchanges are valued at the last sales
price
as of the close of business on the day the securities are being
valued. Lacking any sales, equity securities are valued at the
last
bid price and debt securities are valued at the mean between
closing
bid and asked prices. Securities traded in the over-the-counter
market
and included in the NASDAQ National Market System are valued
using the
last sales price when available. 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 who make
a
market in the securities. Short-term securities are valued on
an
amortized cost basis, which approximates market value.
Securities for
which market quotations are not readily available are valued at
fair
value as determined in accordance with procedures established
by the
Board of Directors of the Fund, including the use of valuations
furnished by a private service retained by the custodian.
(b) Foreign Currency Transactions - Foreign currency transactions
are
translated to U. S. dollars at the prevailing exchange rate on
the
trade date. Since investment transactions are recorded on a
trade date
basis, the prevailing exchange rate may differ on actual
settlement
date. Similarly, the prevailing exchange rate on ex-dividend or
interest receivable date may vary from the date when dividends
or
interest are received. These differences give rise to currency
gains
and losses which are included as a component of investment
income. For
the four months ended August 31, 1995, the Balanced Account and
the
Capital Appreciation Account had net currency gains of $5,445
and
$5,603, respectively.
(c) Federal Income Taxes - The Fund intends to continue to qualify
as a
regulated investment company under Subchapter M of the Internal
Revenue Code. Under such provisions, by distributing
substantially all
of its taxable income to its shareholders or otherwise complying
with
requirements for regulated investment companies, the Fund will
not be
subject to Federal income taxes. Accordingly, no provision for
Federal
income taxes is required. For Federal tax reporting purposes,
each
Account is treated as a separate taxable entity.
(c) Gains and Losses - Realized gains and losses from sales of
investments
are determined on the identified cost basis.
(d) Affiliate Holdings - Connecticut Mutual Life Insurance Company
owns
7,905,525 shares of the three LifeSpan Accounts of the Fund as
follows:
Diversified Income Balanced Capital
Appreciation
2,033,203 3,359,773 2,512,549
(e) Other - Investment transactions are accounted for on the trade
date
which is the date the order to buy or sell is executed.
Dividend
income is recorded on the ex-dividend date and interest income
is
accrued on a daily basis. All expenses are accrued on a daily
basis.
<PAGE>
2. INVESTMENT ADVISORY FEES AND OTHER AFFILIATE TRANSACTIONS
The Fund has an Investment Advisory Agreement with G.R. Phelps & Co.,
Inc.
(the Investment Adviser), a wholly-owned subsidiary of Connecticut
Mutual
Life Insurance Company. Subject to review by the Board of Directors
of the
Fund, the Investment Adviser is responsible for the investment
management
(the buying, holding and selling of securities) for all Accounts and
has
engaged three Sub-Advisers to assist in the selection of portfolio
investments for three of the Components of the Accounts. Scudder,
Stevens &
Clark, Inc. is the Sub-Adviser to the International Equity Component,
BEA
Associates is the Sub-Adviser to the High Yield Bond Component and
Pilgrim
Baxter & Associates is the Sub-Adviser to the Small Cap Component.
The
Fund's Board of Directors has approved all Sub-Advisory Agreements.
The
Investment Adviser performs certain administrative services for all
the
Accounts.
The Diversified Income Account, Balanced Account and Capital
Appreciation
Account each pay monthly to the Investment Adviser a fee equal on an
annual
basis to 0.75%, 0.85% and 0.85%, respectively, of the respective
Accounts'
first $250 million of average daily net assets and 0.65%, 0.75% and
0.75%,
respectively, on such assets over $250 million.
The investment advisory fees, which also cover certain administrative
and
management services, amounted to $229,370 for all Accounts for the
four
months ended August 31, 1995. As compensation for their services to
the
Accounts, the Sub-Advisers received the following fees for the four
months
ended August 31, 1995: Scudder, Stevens & Clark, Inc. - $25,965, BEA
Associates - $16,189 and Pilgrim Baxter & Associates - $22,597. For
the
four months ended August 31, 1995, the Investment Adviser, serving
as
principal underwriter for sale of shares of the Accounts, earned
$130,800
related to sales charges deducted from proceeds for shares sold.
On May 1, 1995, each Account adopted a distribution plan (Plan) in
accordance with the requirements of Rule 12b-1 of the Investment
Company
Act of 1940. Under each Plan, each Account pays G. R. Phelps & Co.,
Inc.
(the Distributor) a fee as reimbursement for its expenditures
incurred in
distributing and servicing shares of the Account. The Accounts accrue
fees
daily and pay fees monthly to the Distributor at an annual rate of
0.25% of
each Account's average daily net assets. For the four months ended
August
31, 1995, the Distributor received $69,537 in fees from these
Accounts.
3. DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared and paid monthly
for the
Diversified Income Account and semi-annually for the Balanced and
Capital
Appreciation Accounts. All net realized capital gains, if any, are
declared
and paid at least annually.
4. CAPITAL STOCK
The authorized capital stock of the Fund at August 31, 1995 consisted
of
3,000,000,000 shares of common stock, par value $0.001 per share. The
shares of stock are divided among thirteen separate Accounts, three
of
which are indicated below. All shares of common stock have equal
voting
rights, except that only shares of a particular Account are entitled
to
vote on matters pertaining to that Account.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
For the period from May 1, 1995
(Inception)
to August 31, 1995
- --------------------------------------------
Diversified
Capital
Income Balanced
Appreciation
- --------------------------------------------
<S> <C> <C> <C>
Shares authorized (in millions) 200 200
200
- --------------------------------------------
- --------------------------------------------
Shares sold 2,115,288 3,496,008
2,640,518
Shares issued to shareholders
from reinvestment of dividends 33,731 19,960
12,688
- --------------------------------------------
Total issued 2,149,019 3,515,968
2,653,206
Shares reacquired (14) (1,043)
(1,035)
- --------------------------------------------
Net increase 2,149,005 3,514,925
2,652,171
- --------------------------------------------
- --------------------------------------------
</TABLE>
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
---------------------------
1995 ANNUAL REPORT
DEAR CMIA SHAREHOLDER:
The stock and bond markets both turned in impressive performances
last
year, making 1995 a banner year for investors. It was a year in which the
Dow
Jones Industrial Average exceeded 5200 and the yield on the 30-year
Treasury
bond dropped by almost 200 basis points.
What went right for the markets in 1995? Just about everything that
mattered.
We entered the year with a strong economy. The Central Bank, in a
tightening mode, had been increasing interest rates to head off inflation.
The
November elections brought victory for the Republicans in Congress,
signalling a
better political time for markets.
As expected, the increasing interest
rates of 1994 and early 1995 put the
brakes on the economy, slowing it
sufficiently to avoid higher inflation,
but not enough to cause a recession. The
Fed began to ease its grip on interest
rates, the dollar gathered strength, and
inflation remained stagnant -- setting a
positive tone for the bond market and
providing a good backdrop for the stock
market.
At the same time, corporate earnings
grew vigorously and the federal government
continued moving toward greater fiscal
responsibility -- contributing to a
superlative year for the stock market.
Because our portfolio managers were
anticipating this type of environment,
Connecticut Mutual Investment Accounts
(CMIA) investors were able to capitalize
on market trends. All of the CMIA funds
performed well in their respective
categories.
The CMIA Liquid Account, as with all
money market funds, responded to lower
inflation and lower interest rates with
modest returns. The CMIA Liquid Fund was
up 5.11 percent for the 12 months ended
December 31, 1995 -- in line with the
category average of 5.37 percent,
according to Lipper Analytical Services,
Inc.
The CMIA Income Account was up 11.72
percent, compared with the category
average increase of 10.84 percent for the
12 months ended December 31, 1995,
according to Lipper. The Fund was
well-positioned for a decreasing interest
rate environment and held maturities that
were a little longer than the average bond
fund.
The CMIA Total Return Account, with
a mix of stocks, bonds and cash, ended the
12 months with a 23.95 percent increase,
according to Lipper. The Fund maintained
its strict asset allocation discipline,
but a slight underweight in stocks
contributed to its underperformance. The
category average was 25.16 percent.
The CMIA Growth Account boasted a
36.40 percent gain in the 12 months ended
December 31, 1995, according to Lipper,
outperforming the category average
increase of 30.79 percent. The Fund's
investment discipline of looking for
stocks with low P/Es and positive earnings
surprise contributed to its impressive
results.
The CMIA Government Securities
Account performed well, turning in a gain
of 17.90 percent and outperforming the
category average of 17.34 percent for the
12 months, according to Lipper. The Fund
continued to de-emphasize mortgage-backed
securities and held bonds with maturities
a little longer than average.
We are certainly pleased with the performance of CMIA throughout
1995, and
we will continue to monitor economic and market conditions to help
maintain
CMIA's position as a top-performing mutual fund.
You likely will find that the expertise of our investment
professionals is
even more valuable as we grapple with the federal budget battle and
anticipate
the Presidential elections in the months ahead.
ECONOMIC FORECAST: FIRST AND SECOND QUARTERS 1996
A look ahead at 1996 shows a continuation of 1995, with low inflation,
a
slow economy and continued reductions in interest rates by the Fed. This
scenario --
combined with a strong dollar and decreasing rates overseas
- --
provides a favorable backdrop for the bond market.
In the bond market, the ingredients for still lower
yields
are present, but most of the rally seems to be behind us.
With
our inflation forecast of 2 percent, long-term treasury
yields
should be about 6 percent.
A strong bond market and low interest rates should
fuel
more growth in the stock market. That growth could,
however, be
dampened by a lag in corporate earnings. Lackluster
corporate
earnings could introduce downward pressures on the market
and
create some volatility.
<PAGE>
Our investment managers also are keeping a close eye
on
Washington. Although the current battle over the federal
budget
signifies another step in the march toward fiscal
responsibility,
it could create short-term volatility in the markets. The
presidential election in November bears watching as well.
Overall, the fundamentals are extraordinarily
bullish: a
slowing economy, no inflation, improving prospects of a
balanced
federal budget and falling short-term interest rates. Until
these
dynamics change, we look forward to another strong year in
the
financial markets.
SUMMARY
For most investors, the current bull market is a dream
come
true. But, anyone who has watched the markets over time
knows
that circumstances can change quickly and double-digit
returns
can easily dwindle.
Successful investors anticipate those ups and downs
and
ride them out -- because they know that, in the long run,
the
stock market has provided financial rewards. That why we,
too,
stick to a tried and true investment discipline designed
to work
in good times and in bad, over time.
On the whole, we are pleased with the results of CMIA
for
1995 and we hope you share our enthusiasm and optimism for
the
coming year. If you want to know more about CMIA and the
options
available to you, talk to your registered representative
or call
1-800-234-5606.
David E. Sams, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CONNECTICUT MUTUAL LIFE INSURANCE COMPANY
THE CMIA ACCOUNTS
LIQUID
The objective of this Account is to achieve as high a level of current
income
as possible consistent with safety of principal and maintenance of
liquidity
by investing in money market instruments.
GOVERNMENT SECURITIES
The Account seeks to provide a high level of current income with a high
degree
of safety of principal by investing in securities issued by, or guaranteed
as
to principal and interest by, the U.S. Government, its agencies, or
authorities or instrumentalities and by obligations that are fully
collateralized or otherwise fully backed by U.S. Government Securities.*
INCOME
This objective of this Account is to obtain a high level of current income
consistent with prudent investment risk and preservation of capital, by
investing primarily in fixed-income debt securities that generally mature
within five years of purchase.
TOTAL RETURN
This Account attempts to maximize over time the return achieved from
capital
appreciation and income by varying the allocation of the Account's assets
among stocks, corporate bonds, securities issued by the U.S. Government,
and
money market instruments of the type acquired respectively by the Growth
Account, the Government Securities Account, the Income Account and the
Liquid
Account.
GROWTH
This Account invests in common stock with low price-earnings ratios and
better
than anticipated earnings, with the goal of long-term growth of capital.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE.
LIPPER RANKINGS DO NOT TAKE INTO CONSIDERATION THE EFFECT OF SALES CHARGES
AND
HAD SALES CHARGES BEEN INCLUDED, THE PERFORMANCE RANKINGS WOULD HAVE BEEN
LESS
FAVORABLE.
* THE GOVERNMENT BACKING APPLIES ONLY TO THE TIMELY PAYMENT OF PRINCIPAL
AND
INTEREST AND DOES NOT APPLY TO THE SHARES OF THE FUND.
THIS MATERIAL IS INTENDED FOR USE ONLY WHEN ACCOMPANIED OR PRECEDED BY A
PROSPECTUS.
<PAGE>
LIQUID ACCOUNT
The CMIA Liquid Account showed a 5.11 percent increase -- about
comparable
with the Lipper category average of 5.37 percent -- for the year ended
December
31, 1995.
Money market yields were modest, consistent with low interest rates and
low
inflation in 1995. We expect interest rates to remain low and money
markets to
continue producing low yields
Over time, however, the CMIA Liquid Account has turned in
respectable
results, with a 20.5% return for the five years ended December 31,
1995,
according to Lipper Analytical Services, Inc.
SCHEDULE TO PROSPECTUS OF CMIA LIQUID ACCOUNT
Graphic material included in Prospectus of CMIA Liquid Account:
"Comparison
of Total Return of CMIA Liquid Account with the Consumer Price Index --
Change
in Value of $10,000 Hypothetical Investments in CMIA Liquid Account
and the
Consumer Price Index."
Linear graphs will be included in the Prospectus of CMIA Liquid Account
(the
"Fund") depicting the initial account value and subsequent account
value
of a hypothetical $10,000 investment in the Fund. The graph will cover
the
period from 12/31/85 through 12/31/95. The graph will compare
such
values with hypothetical $10,000 investments over the same time
periods
in the Consumer Price Index. Set forth below are the relevant data
points
that will appear on the linear graph. Additional information with
respect to the foregoing, including a description of the Consumer
Price Index, is set forth in the Prospectus under "Performance of the
Fund
- -- Comparing the Fund's Performance to the Market."
<TABLE>
<CAPTION>
FISCAL
PERIOD CMIA
ENDED LIQUID FUND CPI
- ----------- ----------- ---------
<S> <C> <C>
12/31/85 10,000 10,000
12/31/86 10,603 10,119
12/31/87 11,236 10,566
12/31/88 12,003 11,032
12/31/89 13,027 11,543
12/31/90 14,008 12,265
12/31/91 14,751 12,630
12/31/92 15,177 13,005
12/31/93 15,525 13,361
12/31/94 16,054 13,708
12/31/95 16,875 14,064
</TABLE>
Comparative performance of $10,000 invested in the CMIA Liquid Account and
the Consumer Price Index. The Consumer Price Index is an unmanaged index
and
represents price changes in a broad market basket of consumer goods and
is
indicative of the rate of inflation. AN INVESTMENT IN THE LIQUID ACCOUNT
IS
NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT AND THERE IS NO
ASSURANCE
THAT THE MONEY MARKET INSTRUMENTS WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET
VALUE.
Past performance is not predictive of future performance.
- -----------------------------------------------------------------------
- ---------
*FOR PERIODS ENDED 12/31/95. THE W/O SC RETURNS DO NOT REFLECT THE EFFECTS
OF SALES CHARGES. THE W/ SC ASSUMES THE CURRENT MAXIMUM INITIAL SALES
CHARGES OF 2.00% FOR THE INCOME ACCOUNT, 4.00% FOR THE GOVERNMENT
SECURITIES ACCOUNT AND 5.00% FOR THE TOTAL RETURN AND GROWTH ACCOUNTS. THE
LIQUID ACCOUNT HAS NO INITIAL SALES CHARGES.
ALL PORTFOLIOS BECAME EFFECTIVE SEPTEMBER 16, 1985 EXCEPT FOR THE LIQUID
ACCOUNT WHICH WAS FIRST OFFERED TO THE PUBLIC ON MARCH 31, 1982.
STANDARD RETURNS ARE NET OF FUND EXPENSES AND INCLUDE REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS.
1LIPPER RANKINGS DO NOT TAKE INTO CONSIDERATION THE EFFECT OF SALES
CHARGES
AND HAD SALES CHARGES BEEN INCLUDED, THE PERFORMANCE RANKINGS MAY HAVE
BEEN
LESS FAVORABLE.
GOVERNMENT
SECURITIES
ACCOUNT
The CMIA Government Securities Account outperformed the competition,
turning
in a 17.90 percent return for the year ended December 31, 1996,
compared with
17.34 percent for the Lipper category average.
We continued to de-emphasize mortgage-backed securities, which tend
to
underperform in periods of falling interest rates. We also maintained
bonds with
maturities a little longer than average, which paid off well in last
year's
falling rate environment.
We will continue with these strategies as we look for interest rates
to
remain low and the bond market to remain healthy.
Over the past five years ended December 31, 1995, the CMIA
Government
Securities Account has provided a return of 51.67 percent.
SCHEDULE TO PROSPECTUS OF CMIA GOVERNMENT SECURITIES ACCOUNT
Graphic material included in Prospectus of CMIA Government Securities
Account: "Comparison of Total Return of CMIA Government Securities
Account
with the Consumer Price Index and the Merrill Lynch Government Master
Index
- -- Change in Value of $10,000 Hypothetical Investments in CMIA
Government
Securities Account and the Consumer Price Index and the Merrill Lynch
Government Master Index."
Linear graphs will be included in the Prospectus of CMIA Government
Securities Account (the "Fund") depicting the initial account value and
subsequent account value of a hypothetical $10,000 investment in the
Fund.
The graph will cover the period from 12/31/85 through 12/31/95. The
graph will compare such values with hypothetical $10,000 investments
over the same time periods in the Consumer Price Index and the
Merrill
Lynch Government Master Index. Set forth below are the relevant data
points
that will appear on the linear graph. Additional information with
respect to the foregoing, including a description of the Consumer
Price Index and Merrill Lynch Government Master Index, is set forth in
the
Prospectus under "Performance of the Fund -- Comparing the Fund's
Performance to the Market."
<TABLE>
<CAPTION>
CMIA
FISCAL GOVERNMENT MERRILL LYNCH
PERIOD SECURITIES GOVERNMENT
ENDED FUND CPI MASTER INDEX
- ----------- --------- --------- -------------
<S> <C> <C> <C>
12/31/85 10,000 10,000 10,000
12/31/86 10,719 10,119 11,539
12/31/87 11,076 10,566 11,789
12/31/88 11,961 11,032 12,627
12/31/89 13,648 11,543 14,412
12/31/90 14,936 12,265 15,684
12/31/91 17,181 12,630 18,069
12/31/92 18,224 13,005 19,376
12/31/93 19,966 13,361 21,435
12/31/94 19,132 13,708 20,743
12/31/95 22,558 14,064 24,540
</TABLE>
Comparative performance of $10,000 invested in the CMIA
Government
Securities Account, the Merrill Lynch Government Master Index and the
Consumer
Price Index. The Merrill Lynch Government Master Index represents a broad
index
of unmanaged Government bonds not adjusted for expenses. If portfolio
expenses
had been applied to the index, its ending value would have been
lower. The
Consumer Price Index is an unmanaged index and represents price
changes in a
broad market basket of consumer goods and is indicative of the
rate of
inflation.
Past performance is not predictive of future performance.
INCOME ACCOUNT
The CMIA Income Account had another very competitive year, providing
a
return of 11.72 percent -- compared with the Lipper category average of
10.84
percent for other investment guide short-term bond funds.
The Fund continued to invest in high quality corporate bonds and
was
well-positioned for the declining interest rate environment. In line
with our
economic views, we held bonds with slightly longer than average
maturities. We
continued our conservative management approach and maintained relatively
stable
net asset values.
The CMIA Income account, in fact, was cited by U.S. NEWS & WORLD REPORT
on
January 29, 1996 as one of the "best funds for the long haul" -- funds
that are
"tops at rewarding investors over time."
Over the past five years ended December 31, 1996, the CMIA Income
Account
has rewarded investors handsomely with a 46.26 percent return,
according to
Lipper.
As interest rates and inflation remain low, we expect bond funds such as
the
CMIA Income Account to continue to perform well.
SCHEDULE TO PROSPECTUS OF CMIA INCOME ACCOUNT
Graphic material included in Prospectus of CMIA Income
Account: "Comparison of Total Return of CMIA Income Account
with the Consumer Price Index and the Salomon Brothers 1-3 Year
Treasury/Government Sponsored/Corporate Index -- Change in Value of
$10,000
Hypothetical Investments in CMIA Income
Account and the Consumer Price Index and the Salomon Brothers 1-3 Year
Treasury/Government Sponsored/Corporate Index."
Linear graphs will be included in the Prospectus of CMIA Income Account
(the
"Fund") depicting the initial account value and subsequent account
value
of a hypothetical $10,000 investment in the Fund. The graph will cover
the
period from 12/31/85 through 12/31/95. The graph will compare
such
values with hypothetical $10,000 investments over the same time
periods
in the Consumer Price Index and the Salomon Brothers 1-3 Year
Treasury/Government Sponsored/Corporate Index. Set forth below are the
relevant data points that will appear on the linear graph. Additional
information with respect to the foregoing, including a description
of
the Consumer Price Index and the Salomon Brothers 1-3 Year
Treasury/Government Sponsored/Corporate Index, is set forth in the
Prospectus under "Performance of the Fund -- Comparing the Fund's
Performance to the Market."
<TABLE>
<CAPTION>
SALOMON
BROTHERS
1-3 YEAR
TREASURY/
FISCAL GOVERNMENT
PERIOD CMIA SPONSORED/
ENDED INCOME FUND CPI CORPORATE INDEX
- ----------- ----------- --------- ---------------
<S> <C> <C> <C>
12/31/85 10,000 10,000 10,000
12/31/86 10,900 10,119 11,046
12/31/87 11,121 10,566 11,677
12/31/88 11,886 11,032 12,424
12/31/89 13,001 11,543 13,782
12/31/90 13,824 12,265 15,119
12/31/91 15,789 12,630 16,911
12/31/92 16,831 13,005 18,002
12/31/93 18,173 13,361 19,017
12/31/94 18,097 13,708 19,133
12/31/95 20,227 14,064 21,216
</TABLE>
Comparative performance of $10,000 invested in the CMIA Income Account,
the
Salomon Brothers 1-3 Year Treasury/Government Sponsored/Corporate Index
and the
Consumer Price Index. The Salomon Brothers Index represents an unmanaged
group
of bonds not adjusted for operating expenses. If portfolio operating
expenses
had been applied to the index, its ending value would have been
lower. The
Consumer Price Index is an unmanaged index and represents price changes
in a
broad market basket of consumer goods and is indicative of the
rate of
inflation.
In the fourth quarter of 1987, the Income Account investment
objectives
changed from a general bond fund to investing primarily in
fixed-income debt
securities that generally mature within five years of purchase.
Past performance is not predictive of future performance.
2
<PAGE>
TOTAL RETURN
ACCOUNT
The CMIA Total Return Account posted a 23.95 percent increase for the
year
ended December 31, 1995, performing near the Lipper category average
of 25.16
percent.
This Fund holds stocks, bonds and cash -- each managed with the
same
investment disciplines used in our CMIA stock, bond and money market
accounts.
In addition, we vary the mix of stocks, bonds and cash in line
with a
quantitatively based, value-oriented asset allocation discipline.
Although the return of the Total Return Account was excellent last year,
it
was below the category average because of a slight underweight in
stocks. We
maintained our stock weighting near 40 percent for most of the year,
consistent
with our asset allocation discipline.
The impact of imbalance in the stock/bond weighting was lessened somewhat
by
our good stock selection -- producing about average performance.
Over time, the CMIA Total Return Account has provided healthy returns:
Five Years Ten Years
CMIA 98.13% 211.15%
Avg. Balanced Fund 85.12% 196.14%
Comparative performance of $10,000 invested in the CMIA Total
Return
Account, the Merrill Lynch Corporate & Government Master Index, the S&P
500 and
the Consumer Price Index. The Merrill Lynch Government Corporate Master
Index
represents an unmanaged group of bonds not adjusted for operating
expenses. The
S&P 500 represents a broad index of unmanaged securities not
adjusted for
expenses. If portfolio expenses had been applied to these indices, their
ending
values would have been lower. The Consumer Price Index is an unmanaged
index and
represents price changes in a broad market basket of consumer goods
and is
indicative of the rate of inflation.
Past performance is not predictive of future performance.
GROWTH ACCOUNT
The CMIA Growth Account had a strong year in 1995, returning 36.40
percent
to investors, according to Lipper Analytical Services Inc. That
performance
outshone the average growth fund, which Lipper said returned 30.79
percent.
The Growth Account's stellar performance can be attributed to two
factors.
First was our consistent strategy of buying stocks with low
price-earnings
ratios and positive earnings surprise. Second was the fund's strong
performance
in the fourth quarter -- a quarter in which other stock funds were
battered by
the underperformance of technology stocks. Because we adhered to our
discipline
and didn't chase after the technology stock fad, we were able to avoid the
fall
and come out ahead.
Our discipline calls for us to find stocks that are undervalued and out
of
favor but are starting to show earnings momentum. This discipline has
worked
well over time as evidenced by the long-term results of the CMIA Growth
Fund:
Five Years Ten Years
CMIA 151.12% 298.62%
Avg. Growth Fund 113.44% 251.83%
SOURCE: LIPPER ANALYTICAL SERVICES
The CMIA Growth Fund was cited by U.S. NEWS & WORLD REPORT in its
January
29, 1996, issue as one of the "best funds for the long
haul."
Comparative performance of $10,000 invested in the CMIA Growth Account,
the
S&P 500 and the Consumer Price Index. The S&P 500 represents a broad
index of
unmanaged securities not adjusted for expenses. If portfolio expenses
had been
applied to the index, its ending value would have been lower. The Consumer
Price
Index is an unmanaged index and represents price changes in a broad
market
basket of consumer goods and is indicative of the rate of inflation.
Disclaimer:
Past performance is not indicative of future performance.
3
<PAGE>
CONNECTICUT MUTUAL
INVESTMENT ACCOUNTS, INC.
<TABLE>
<S> <C>
F I N A N C I A L
S T A T E M E N T S
- ----------DECEMBER
31,
1995
</TABLE>
Liquid Account
Government Securities Account
Income Account
Total Return Account
Growth Account
<PAGE>
<TABLE>
<S> <C>
PERFORMANCE -- TOTAL RETURN*
</TABLE>
SALES CHARGE ADJUSTED PERFORMANCE AS OF 12/31/95* -- AFTER EXPENSES
<TABLE>
<S> <C> <C>
<C> <C>
AVERAGE
ANNUALIZED
ACCOUNTS ONE YEAR FIVE YEAR
TEN YEAR SINCE INCEPTION
LIQUID** 5.11 % 3.79
% 5.37 % 6.44 %
GOVERNMENT SECURITIES 13.18 % 7.71
% 8.48 % 9.17 %
INCOME 7.29 % 7.03
% 7.30 % 7.87 %
TOTAL RETURN 17.75 % 13.48
% 11.45 % 12.17 %
GROWTH 29.58 % 19.00
% 14.25 % 14.93 %
<CAPTION>
30 DAY
CURRENT YIELD
ACCOUNTS AS OF 12/31/95
LIQUID** 4.72 %
GOVERNMENT SECURITIES 4.89 %
INCOME 5.41 %
TOTAL RETURN
GROWTH
</TABLE>
Sales Charge Adjusted Performance assumes the current initial sales
charge
reduces portfolio performance and was paid at the beginning of each
period
shown. The current maximum initial sales charges are 4.00% for the
Government
Securities and Income Accounts and 5.00% for the Total Return and
Growth
Accounts. The Liquid Account has no initial sales charge.
ACTUAL PORTFOLIO PERFORMANCE AS OF 12/31/95* -- AFTER EXPENSES
<TABLE>
<S> <C> <C>
<C> <C>
AVERAGE
ANNUALIZED
ACCOUNTS ONE YEAR FIVE YEAR
TEN YEAR SINCE INCEPTION
LIQUID** 5.11 % 3.79
% 5.37 % 6.44 %
GOVERNMENT SECURITIES 17.90 % 8.59
% 8.92 % 9.61 %
INCOME 11.77 % 7.91
% 7.74 % 8.30 %
TOTAL RETURN 23.95 % 14.65
% 12.02 % 12.73 %
GROWTH 36.40 % 20.23
% 14.84 % 15.50 %
<CAPTION>
7-DAY
CURRENT YIELD
ACCOUNTS AS OF 12/31/95
LIQUID** 4.73 %
GOVERNMENT SECURITIES
INCOME
TOTAL RETURN
GROWTH
</TABLE>
Actual Portflio Performance assumes the initial sales charge is paid
by a
client in a prior period and is not reflected on this table.
All portfolios became effective September 16, 1985 except for the
Liquid
Account which was first offered to the public on March 31, 1982.
* Total Return figures include reinvestment of all dividends and
capital
gains. Performance data quoted represents past performance. The
investment
return and principal values of an investment will fluctuate so
that an
investor's shares, when redeemed, may be worth more or less than
their
original cost.
** There can be no assurance that the Liquid Account will be able to
maintain
a stable net asset value of $1.00 per share. An investment in the
Liquid
Account is neither insured not guaranteed by the U.S. Government.
1
<PAGE>
<TABLE>
<S> <C>
SCHEDULE OF INVESTMENTS CONNECTICUT
MUTUAL INVESTMENT ACCOUNTS, INC.
December 31,
1995
</TABLE>
LIQUID ACCOUNT
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
COMMERCIAL PAPER
(95.9% OF NET ASSETS)
American Express Credit Corp.
$ 1,300,000 5.60%, due 3/5/96 $ 1,300,000
950,000 5.63%, due 3/20/96 950,000
700,000 5.53%, due 3/29/96 700,000
American Home Products Corp.
1,500,000 5.60%, due 3/4/96 1,485,300
Anheuser-Busch Companies, Inc.
1,000,000 5.55%, due 3/6/96 989,979
Banc One Corp.
1,600,000 5.68%, due 1/19/96 1,595,456
Beneficial Corp.
800,000 5.66%, due 1/3/96 799,748
1,500,000 5.50%, due 4/8/96 1,477,542
Cargill, Inc.
1,500,000 5.65%, due 1/16/96 1,496,469
1,000,000 5.55%, due 3/4/96 990,287
Cargill Financial Services Corp.
1,000,000 5.52%, due 6/3/96 976,387
Carolina Telephone & Telegraph Co.
775,000 5.87%, due 1/2/96 774,874
Clorox Company
1,125,000 5.53%, due 3/11/96 1,112,903
Corporate Asset Funding Co., Inc.
1,500,000 5.67%, due 1/24/96 1,494,566
1,100,000 5.625%, due 2/22/96 1,091,062
Corporate Receivables Corp.
725,000 5.68%, due 2/6/96 720,882
1,500,000 5.68%, due 2/7/96 1,491,243
Electronic Data Systems Corp.
1,500,000 5.70%, due 1/4/96 1,499,287
Ford Motor Credit Co.
1,300,000 5.55%, due 1/12/96 1,297,795
1,400,000 5.69%, due 2/5/96 1,400,000
910,000 5.69%, due 2/12/96 910,000
Gateway Fuel Co.
1,500,000 5.63%, due 1/26/96 1,494,135
General Electric Capital Corp.
1,000,000 5.58%, due 2/8/96 994,110
1,000,000 5.65%, due 2/16/96 992,781
1,000,000 5.58%, due 4/4/96 985,430
500,000 5.50%, due 4/15/96 491,979
Golden Peanut Co.
2,130,000 5.62%, due 3/7/96 2,108,054
Heinz (H.J.) Co.
1,000,000 5.80%, due 1/30/96 995,328
2,000,000 5.75%, due 2/2/96 1,989,778
Hewlett-Packard Co.
1,050,000 5.70%, due 1/2/96 1,049,834
1,000,000 5.42%, due 3/19/96 988,257
Household Finance Corp.
1,000,000 5.70%, due 2/9/96 993,825
International Lease Finance Corp.
1,100,000 5.67%, due 1/11/96 1,098,267
2,220,000 5.65%, due 2/26/96 2,200,489
McGraw-Hill Inc.
1,500,000 5.52%, due 3/11/96 1,483,900
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
MCI Communications Corp.
$ 1,000,000 5.53%, due 2/28/96 $ 991,091
Merrill Lynch & Co., Inc.
1,250,000 5.72%, due 1/18/96 1,246,624
1,000,000 5.63%, due 2/21/96 992,024
Monsanto Co.
1,000,000 5.80%, due 1/23/96 996,456
Morgan (J.P.) & Company, Inc.
1,100,000 5.58%, due 3/15/96 1,087,383
1,500,000 5.45%, due 3/18/96 1,482,515
Morgan Guaranty Trust Co.
1,000,000 5.57%, due 3/1/96 990,717
National Rural Utilities
Cooperative Finance Corp.
1,100,000 5.68%, due 1/9/96 1,098,612
Norwest Corp.
1,600,000 5.67%, due 2/23/96 1,586,644
PHH Corporation
1,500,000 5.68%, due 1/8/96 1,498,343
1,000,000 5.65%, due 1/17/96 997,489
1,000,000 5.70%, due 1/29/96 995,567
Penney (J.C.) Funding Corp.
1,500,000 5.60%, due 2/29/96 1,486,233
Republic National Bank of New York
2,000,000 5.57%, due 2/1/96 1,990,407
Swiss Bank Corp.
1,000,000 5.67%, due 3/25/96 999,769
Tampa Electric Co.
1,200,000 5.67%, due 1/29/96 1,194,708
Transamerica Finance Corp.
1,000,000 5.60%, due 1/5/96 999,378
1,400,000 5.65%, due 1/5/96 1,399,121
1,090,000 5.71%, due 1/16/96 1,087,407
U.S. Bancorp
1,000,000 5.55%, due 2/13/96 993,371
2,450,000 5.50%, due 2/22/96 2,430,536
Xerox Corp.
1,500,000 5.70%, due 1/10/96 1,497,862
1,150,000 5.69%, due 1/17/96 1,147,092
1,100,000 5.70%, due 1/22/96 1,096,342
-----------
TOTAL COMMERCIAL PAPER
(COST $72,705,638) 72,705,638
-----------
U.S. AGENCY SHORT-TERM OBLIGATIONS
(4.0% OF NET ASSETS)
Student Loan Marketing Assn.
2,000,000 5.23%, due 5/14/96 2,000,000
U.S. Treasury Note
1,000,000 6.125%, due 7/31/96 1,001,875
-----------
TOTAL U.S. AGENCY SHORT-TERM
OBLIGATIONS (COST $3,001,875) 3,001,875
-----------
TOTAL INVESTMENTS
(COST $75,707,513) $75,707,513
-----------
-----------
</TABLE>
2 The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
GOVERNMENT SECURITIES ACCOUNT INCOME ACCOUNT
</TABLE>
3
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
U.S. GOVERNMENT & AGENCY LONG-TERM
OBLIGATIONS
(97.4% OF NET ASSETS)
Federal National Mortgage Assn.
$ 870,467 7.00%, 2019 $ 876,178
Government National Mortgage Assn.
62,393 11.50%, 1998 65,980
31,954 9.50%, 2001 33,581
46,713 7.25%, 2005 48,844
297,452 7.50%, 2006 310,260
187,668 8.00%, 2006 197,716
450,852 8.00%, 2007 470,293
168,055 8.25%, 2008 177,600
78,352 9.00%, 2008 83,871
501,423 9.00%, 2009 537,000
74,173 13.00%, 2011 88,057
3,408 13.50%, 2011 4,099
52,664 14.00%, 2011 64,316
31,389 15.00%, 2011 38,461
3,466 12.00%, 2012 4,018
107,759 13.50%, 2012 128,856
166,026 15.00%, 2012 203,214
104,227 11.50%, 2013 119,329
44,287 13.00%, 2013 52,482
174,954 13.50%, 2013 210,436
82,420 12.00%, 2014 95,813
280,426 12.50%, 2014 330,306
137,371 13.00%, 2014 163,084
1,406 13.50%, 2014 1,692
422,135 7.375%, 2017 428,995
391,370 10.00%, 2019 430,749
62,082 12.50%, 2019 72,113
2,092,796 6.50%, 2023 2,075,782
1,251,999 7.00%, 2023 1,267,350
U.S. Treasury Bond
8,500,000 9.25%, 2016 11,683,505
U.S. Treasury Notes
3,500,000 8.875%, 1997 3,725,295
6,750,000 9.25%, 1998 7,403,872
2,500,000 6.75%, 1999 2,614,050
1,500,000 9.125%, 1999 1,673,910
2,500,000 7.50%, 2001 2,753,525
4,050,000 11.75%, 2001 5,201,091
4,450,000 7.25%, 2004 4,948,533
-----------
TOTAL U.S. GOVERNMENT & AGENCY
LONG-TERM OBLIGATIONS
(COST $46,462,748) 48,584,256
-----------
REPURCHASE AGREEMENTS*
(.7% OF NET ASSETS)
State Street Bank & Trust Co.
4.75%, due 1/2/96 (COST
377,000 $377,000) 377,000
-----------
TOTAL INVESTMENTS
(COST $46,839,748) $48,961,256
-----------
-----------
</TABLE>
*Repurchase agreements are fully collateralized by U.S. Government
obligations.
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
CORPORATE BONDS
(68.7% OF NET ASSETS)
AEROSPACE (1.7%)
British Aerospace Finance BV
$ 300,000 8.00%, 1997 $ 309,000
Coltec Industries Inc.
250,000 9.75%, 2000 257,500
-----------
566,500
-----------
AIRLINES (1.6%)
Southwest Airlines Co.
500,000 9.25%, 1998 533,600
-----------
AUTO & AUTO RELATED (2.4%)
Burmah Castrol Capital, Ltd.
500,000 7.00%, 1997 513,800
Ford Motor Co.
286,301 6.27%, 2000 289,261
-----------
803,061
-----------
BANKING (8.6%)
Barnett Banks, Inc.
325,000 8.50%, 1999 351,111
Chemical Banking Corp.
325,000 6.625%, 1998 331,269
Citicorp
325,000 9.46%, 1996 328,731
First Fidelity Bancorporation
325,000 8.50%, 1998 342,885
First Union Corp.
325,000 6.75%, 1998 331,103
Home Savings of America
500,000 10.50%, 1997 504,475
Mellon Financial Co.
325,000 6.50%, 1997 330,223
Security Pacific Corp.
325,000 7.75%, 1996 331,097
-----------
2,850,894
-----------
BROKER/DEALER (1.0%)
Merrill Lynch & Co., Inc.
325,000 8.25%, 1996 330,912
-----------
CHEMICALS (2.0%)
FMC Corp.
250,000 8.75%, 1999 269,248
Lyondell Petrochemical Co.
400,000 8.25%, 1997 410,320
-----------
679,568
-----------
CONGLOMERATES (1.2%)
Tenneco, Inc.
375,000 10.00%, 1998 412,237
-----------
ELECTRIC UTILITIES (3.8%)
Consumers Power Co.
250,000 8.75%, 1998 263,335
Long Island Lighting Co.
500,000 8.75%, 1996 506,145
</TABLE>
3
<PAGE>
INCOME ACCOUNT (cont'd)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
Midwest Power Systems Inc.
$ 500,000 6.25%, 1998 $ 505,235
-----------
1,274,715
-----------
ELECTRICAL & ELECTRONIC EQUIPMENT
(1.5%)
Westinghouse Electric Corp.
500,000 7.75%, 1996 502,105
-----------
FINANCIAL SERVICES (13.0%)
American General Finance Corp.
300,000 8.50%, 1998 320,706
Associates Corp. of North America
300,000 7.40%, 1999 316,149
Avco Financial Services, Inc.
500,000 5.875%, 1997 501,975
Banque Nationale de Paris
205,000 9.875%, 1998 224,157
Beneficial Corp.
500,000 9.125%, 1998 534,940
Countrywide Funding Corp.
300,000 6.57%, 1997 304,269
General Motors Acceptance Corp.
500,000 5.65%, 1997 500,675
Green Tree Financial Corp.
250,000 7.70%, 2019 260,232
Household Financial
Corporation Ltd.
250,000 6.00%, 1998 251,853
Household International
Netherlands BV
250,000 6.00%, 1999 251,222
Norwest Financial, Inc.
325,000 6.50%, 1997 330,275
Transamerica Finance Group, Inc.
500,000 7.42%, 1998 517,065
-----------
4,313,518
-----------
FOOD & BEVERAGES (4.6%)
ConAgra, Inc.
500,000 9.75%, 1997 532,925
Grand Metropolitan Investment
Corp.
325,000 8.125%, 1996 329,602
Nabisco Brands Inc.
325,000 8.00%, 2000 345,443
Seagram Company Ltd.
300,000 9.75%, 2000 304,167
-----------
1,512,137
-----------
INSURANCE (1.2%)
SunAmerica Inc.
370,000 9.00%, 1999 399,186
-----------
LEASING (2.6%)
Penske Truck Leasing Co.
325,000 7.75%, 1999 339,417
U.S. Leasing International Inc.
500,000 7.00%, 1997 511,645
-----------
851,062
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
LEISURE & ENTERTAINMENT (.8%)
Blockbuster Entertainment Corp.
$ 250,000 6.625%, 1998 $ 252,798
-----------
MANUFACTURING (.8%)
First Brands Corp.
265,000 9.125%, 1999 273,679
-----------
MORTGAGE-BACKED SECURITIES (2.9%)
GE Capital Mortgage Services, Inc.
135,893 6.50%, 2024 135,596
Housing Securities, Inc.
193,964 7.25%, 2012 196,752
Ryland Mortgage Securities Corp.
413,677 8.339%, 2030 417,167
Salomon Brothers, Inc.
239,258 0.00%, 2017 (principal only) 174,881
161,680 12.50%, 2017 44,664
-----------
969,060
-----------
OFFICE EQUIPMENT (.8%)
Xerox Corp.
270,000 9.20%, 1999 274,450
-----------
OIL & GAS (6.8%)
Arkla, Inc.
505,000 9.875%, 1997 525,513
Coastal Corp.
325,000 8.75%, 1999 350,681
Empresa Columbia de Petroleos
250,000 7.25%, 1998 249,375
Florida Gas Transmission Co.
500,000 7.75%, 1997 516,745
Phillips Petroleum Co.
458,313 7.53%, 1998 470,781
Transcontinental Gas Pipe Line
Corp.
150,000 9.00%, 1996 153,974
-----------
2,267,069
-----------
PAPER & FOREST PRODUCTS (2.0%)
Celulosa Arauco y Constitucion SA
350,000 7.25%, 1998 359,187
Georgia-Pacific Corp.
300,000 9.85%, 1997 316,293
-----------
675,480
-----------
PRINTING & PUBLISHING (2.6%)
Reed Publishing USA Inc.
325,000 7.24%, 1997 330,986
Time Warner Inc.
500,000 7.45%, 1998 513,925
-----------
844,911
-----------
RETAIL TRADE (1.0%)
Sears, Roebuck & Co.
300,000 8.39%, 1999 322,965
-----------
SAVINGS & LOAN (1.1%)
Golden West Financial Corp.
325,000 8.625%, 1998 346,986
-----------
</TABLE>
4 The accompanying notes are an integral part of these financial
statements.
<PAGE>
INCOME ACCOUNT (cont'd)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
TELECOMMUNICATIONS (.9%)
Tele-Communications, Inc.
$ 315,000 5.28%, 1996 $ 313,743
-----------
TELEPHONE UTILITIES (1.9%)
GTE Corp.
300,000 8.85%, 1998 319,845
MCI Communications Corp.
300,000 7.625%, 1996 304,779
-----------
624,624
-----------
TOBACCO (1.9%)
B.A.T Capital Corp.
300,000 6.66%, 2000 306,930
Philip Morris Companies Inc.
300,000 8.75%, 1996 308,247
-----------
615,177
-----------
TOTAL CORPORATE BONDS
(COST $22,975,602) 22,810,437
-----------
U.S. GOVERNMENT & AGENCY
LONG-TERM OBLIGATIONS
(25.6% OF NET ASSETS)
Federal Home Loan Mortgage Corp.
130,372 5.50%, 1997 129,241
369,783 5.50%, 1998 366,199
Federal National Mortgage Assn.
813,043 7.50%, 2008 836,158
822,819 7.00%, 2009 837,983
250,000 6.00%, 2019 249,295
Government National Mortgage Assn.
387,056 7.00%, 2009 396,004
45,963 13.00%, 2014 54,566
U.S. Treasury Notes
3,350,000 6.75%, 1999 3,502,827
1,950,000 7.75%, 1999 2,116,062
-----------
TOTAL U.S. GOVERNMENT & AGENCY
LONG-TERM OBLIGATIONS (COST
$8,352,192) 8,488,335
-----------
COMMERCIAL PAPER
(3.8% OF NET ASSETS)
Carolina Telephone & Telegraph Co.
1,250,000 5.87%, due 1/2/96 1,249,796
-----------
TOTAL INVESTMENTS
(COST $32,577,590) $32,548,568
-----------
-----------
</TABLE>
TOTAL RETURN ACCOUNT
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
COMMON STOCKS
(42.5% OF NET ASSETS)
AEROSPACE (4.2%)
22,600 General Dynamics Corp. $1,336,225
29,671 Lockheed Martin Corp. 2,344,009
80,300 Loral Corp. 2,840,612
19,000 McDonnell Douglas Corp. 1,748,000
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
17,600 Rockwell International Corp. $ 930,600
------------
9,199,446
------------
AIRLINES (1.5%)
12,400 AMR Corp. 920,700
15,900 Delta Air Lines, Inc. 1,174,612
25,100 Northwest Airlines Corp. 1,280,100
------------
3,375,412
------------
BANKING (4.0%)
42,800 Bank of Boston Corp. 1,979,500
12,600 Bankers Trust New York Corp. 837,900
32,400 Chase Manhattan Corp. 1,964,250
21,300 Morgan (J.P.) & Company, Inc. 1,709,325
34,100 PNC Bank Corp. 1,099,725
5,400 Wells Fargo & Co. 1,166,400
------------
8,757,100
------------
BUILDING MATERIALS & CONSTRUCTION
(.5%)
33,800 USG Corp. 1,014,000
------------
CHEMICALS (4.0%)
9,600 Cabot Corp. 517,200
16,000 FMC Corp. 1,082,000
15,000 Goodrich (B.F.) Co. 1,021,875
28,800 Grace (W.R.) & Co. 1,702,800
39,600 IMC Global, Inc. 1,618,650
12,000 Monsanto Co. 1,470,000
Potash Corporation of Saskatchewan
19,800 Inc. 1,403,325
------------
8,815,850
------------
CONGLOMERATES (1.5%)
26,000 Textron, Inc. 1,755,000
41,600 Tyco International Ltd. 1,482,000
------------
3,237,000
------------
DRUGS & COSMETICS (.4%)
9,500 American Home Products Corp. 921,500
------------
ELECTRIC UTILITIES (3.0%)
50,700 Entergy Corp. 1,482,975
37,300 FPL Group, Inc. 1,729,787
33,900 Illinova Corp. 1,017,000
10,600 Texas Utilities Co. 435,925
54,300 Unicom Corp. 1,778,325
------------
6,444,012
------------
FOOD & BEVERAGES (.4%)
24,100 Dole Food Company, Inc. 843,500
------------
HEALTH SERVICES & HOSPITAL SUPPLIES
(1.6%)
24,100 Baxter International Inc. 1,009,188
28,700 Columbia Healthcare Corp. 1,456,525
44,300 OrNda HealthCorp. 1,029,975
------------
3,495,688
------------
INSURANCE (4.2%)
26,500 Aetna Life & Casualty Co. 1,835,125
</TABLE>
5
<PAGE>
TOTAL RETURN ACCOUNT (cont'd)
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
41,381 Allstate Corp. $1,701,794
12,600 CIGNA Corp. 1,300,950
15,300 St. Paul Companies Inc. 851,062
36,100 TIG Holdings, Inc. 1,028,850
39,200 Travelers Group 2,464,700
------------
9,182,481
------------
LEISURE RELATED (.5%)
37,675 Mattel, Inc. 1,158,506
------------
MACHINERY & EQUIPMENT (2.3%)
26,300 AGCO Corp. 1,341,300
38,400 Case Corp. 1,756,800
11,400 Harnischfeger Industries, Inc. 379,050
33,390 Mark IV Industries, Inc. 659,453
25,650 Parker-Hannifin Corp. 878,513
------------
5,015,116
------------
MANUFACTURING (.4%)
25,300 Black & Decker Corp. 891,825
------------
MISCELLANEOUS (.8%)
35,800 Premark International, Inc. 1,812,375
------------
OFFICE EQUIPMENT (.8%)
12,400 Xerox Corp. 1,698,800
------------
OIL & GAS (3.3%)
13,400 Amoco Corp. 963,125
26,400 Chevron Corp. 1,386,000
16,400 Mobil Corp. 1,836,800
71,200 Panhandle Eastern Corp. 1,984,700
8,000 Royal Dutch Petroleum Co. 1,129,000
------------
7,299,625
------------
PAPER & FOREST PRODUCTS (.9%)
24,336 Kimberly-Clark Corp. 2,013,804
------------
REAL ESTATE (.1%)
8,033 Castle & Cooke Inc. 134,558
------------
RETAIL TRADE (2.5%)
25,100 Eckerd Corp. 1,120,088
49,700 Kroger Co. 1,863,750
42,700 Sears, Roebuck & Co. 1,665,300
37,100 Service Merchandise Co., Inc. 185,500
37,000 Waban Inc. 693,750
------------
5,528,388
------------
SAVINGS & LOAN (.5%)
39,000 Ahmanson (H.F.) & Co. 1,033,500
------------
TECHNOLOGY (2.8%)
26,000 Compaq Computer Corp. 1,248,000
21,200 Conner Peripherals, Inc. 445,200
20,900 Seagate Technology Inc. 992,750
30,600 Storage Technology Corp. 730,575
38,600 Stratus Computer, Inc. 1,336,525
28,000 Sun Microsystems, Inc. 1,277,500
------------
6,030,550
------------
TELEPHONE UTILITIES (2.3%)
31,400 Ameritech Corp. 1,852,600
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
37,100 GTE Corp. $1,632,400
27,200 NYNEX Corp. 1,468,800
------------
4,953,800
------------
TOTAL COMMON STOCKS
(COST $70,464,960) 92,856,836
------------
PRINCIPAL CORPORATE BONDS
AMOUNT (16.3% OF NET ASSETS)
AEROSPACE (.4%)
British Aerospace Finance BV
$ 500,000 8.00%, 1997 515,000
Coltec Industries, Inc.
250,000 9.75%, 2000 257,500
------------
772,500
------------
AUTO & AUTO RELATED (.2%)
Burmah Castrol Capital, Ltd.
500,000 7.00%, 1997 513,800
------------
BANKING (1.2%)
BankAmerica Corp.
500,000 6.00%, 1997 503,515
Chemical Banking Corp.
250,000 10.125%, 2000 293,310
First Fidelity Bancorporation
500,000 8.50%, 1998 527,515
Fleet Financial Group, Inc.
250,000 9.90%, 2001 292,550
Marshall & Ilsley Corp.
500,000 6.95%, 1997 508,285
Mellon Financial Co.
400,000 6.50%, 1997 406,428
------------
2,531,603
------------
CHEMICALS (1.4%)
FMC Corp.
500,000 8.75%, 1999 538,495
Lyondell Petrochemical Co.
1,100,000 8.25%, 1997 1,128,380
Morton International, Inc.
500,000 9.25%, 2020 653,780
PPG Industries, Inc.
250,000 9.00%, 2021 320,792
Reliance Industries Ltd.
400,000 8.125%, 2005 402,000
------------
3,043,447
------------
CONGLOMERATES (.7%)
Norsk Hydro
500,000 8.75%, 2001 562,500
Tenneco Credit Corp.
500,000 9.25%, 1996 513,235
Tenneco, Inc.
375,000 10.00%, 1998 412,238
------------
1,487,973
------------
DRUGS & COSMETICS (.5%)
Procter & Gamble Co.
250,000 9.36%, 2021 319,375
</TABLE>
6 The accompanying notes are an integral part of these financial
statements.
<PAGE>
TOTAL RETURN ACCOUNT (cont'd)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
Roche Holdings Inc.
$ 950,000 2.75%, 2000 $ 845,500
------------
1,164,875
------------
ELECTRIC UTILITIES (.3%)
Long Island Lighting Co.
500,000 8.75%, 1996 506,145
Public Service Co. of New
Hampshire
250,000 8.875%, 1996 252,733
------------
758,878
------------
ELECTRICAL & ELECTRONIC
EQUIPMENT (.5%)
Electrolux
500,000 7.75%, 1997 514,062
Westinghouse Electric Corp.
500,000 7.75%, 1996 502,105
------------
1,016,167
------------
FINANCIAL SERVICES (4.2%)
American General Finance Corp.
500,000 7.70%, 1997 517,670
500,000 8.50%, 1998 534,510
Aristar, Inc.
250,000 8.125%, 1997 260,955
Associates Corp. of North America
500,000 6.75%, 1999 514,915
Countrywide Funding Corp.
250,000 6.57%, 1997 253,557
500,000 6.085%, 1999 503,090
Fleet Mortgage Corp.
1,000,000 6.125%, 1997 1,006,130
250,000 6.50%, 1999 255,380
Ford Motor Credit Co.
500,000 8.00%, 1997 520,760
500,000 6.25%, 1998 507,455
General Motors Acceptance Corp.
1,000,000 5.65%, 1997 1,001,350
750,000 7.75%, 1997 766,673
Green Tree Financial Corp.
500,000 8.00%, 2020 524,375
Household Financial Corporation
Ltd.
250,000 6.00%, 1998 251,853
Household International
Netherlands BV
500,000 6.00%, 1999 502,445
Norwest Financial, Inc.
500,000 6.50%, 1997 508,115
Transamerica Finance Corp.
500,000 6.75%, 1997 508,240
250,000 6.80%, 1999 257,702
------------
9,195,175
------------
FOOD & BEVERAGES (1.0%)
Bass America Inc.
250,000 6.75%, 1999 257,310
ConAgra, Inc.
500,000 9.75%, 1997 532,925
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
Nabisco Brands Inc.
$ 500,000 8.00%, 2000 $ 531,450
Seagram Company Ltd.
950,000 9.75%, 2000 963,195
------------
2,284,880
------------
INSURANCE (.2%)
SunAmerica Inc.
450,000 9.00%, 1999 485,496
------------
LEASING (.8%)
Penske Truck Leasing Co.
750,000 7.75%, 1999 783,270
PHH Corp.
350,000 6.50%, 2000 357,360
U.S. Leasing International Inc.
500,000 7.00%, 1997 511,645
------------
1,652,275
------------
LEISURE & ENTERTAINMENT (.2%)
Blockbuster Entertainment Corp.
500,000 6.625%, 1998 505,595
------------
MANUFACTURING (.2%)
Black & Decker Corp.
400,000 6.625%, 2000 408,032
------------
MORTGAGE-BACKED SECURITIES (.2%)
Fleet Mortgage Securities, Inc.
20,523 8.25%, 2023 20,523
Housing Securities, Inc.
310,342 7.25%, 2012 314,803
------------
335,326
------------
OIL & GAS (2.0%)
Arkla, Inc.
750,000 9.875%, 1997 780,465
BP America, Inc.
500,000 8.875%, 1997 530,165
Coastal Corp.
500,000 8.125%, 2002 546,885
Petroliam Nasional Berhad
500,000 6.875%, 2003 518,635
Phillips Petroleum Co.
916,625 7.53%, 1998 941,561
TransCanada Pipelines Ltd.
500,000 9.875%, 2021 672,620
Transco Energy Co.
250,000 9.625%, 2000 282,693
------------
4,273,024
------------
PAPER & FOREST PRODUCTS (.6%)
Celulosa Arauco y Constitucion SA
500,000 7.25%, 1998 513,125
Georgia-Pacific Corp.
750,000 9.85%, 1997 790,732
------------
1,303,857
------------
</TABLE>
7
<PAGE>
TOTAL RETURN ACCOUNT (cont'd)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
PRINTING & PUBLISHING (.5%)
Reed Elsevier, Inc.
$ 400,000 6.625%, 2023 $ 390,224
Time Warner Inc.
700,000 7.45%, 1998 719,495
------------
1,109,719
------------
RETAIL TRADE (.1%)
Sears, Roebuck & Co.
300,000 8.39%, 1999 322,965
------------
SAVINGS & LOAN (.2%)
Golden West Financial Corp.
500,000 10.25%, 1997 529,240
------------
TELECOMMUNICATIONS (.2%)
Tele-Communications, Inc.
400,000 7.15%, 1998 409,100
------------
TELEPHONE UTILITIES (.6%)
GTE Corp.
750,000 8.85%, 1998 799,612
MCI Communications Corp.
500,000 7.125%, 2000 520,950
------------
1,320,562
------------
TRANSPORTATION (.1%)
Federal Express Corp.
250,000 6.25%, 1998 252,062
------------
TOTAL CORPORATE BONDS
(COST $34,849,067) 35,676,551
------------
U.S. GOVERNMENT & AGENCY
LONG-TERM OBLIGATIONS
(18.3% OF NET ASSETS)
Federal Home Loan Mortgage Corp.
1,000,000 6.00%, 2007 955,930
Federal National Mortgage Assn.
1,207,257 7.50%, 2008 1,241,580
800,000 6.00%, 2019 797,744
653,381 7.00%, 2022 618,262
Government National Mortgage Assn.
645,858 7.00%, 2009 660,791
944,737 7.50%, 2009 976,914
574,570 8.00%, 2017 603,919
2,492,635 6.50%, 2023 2,472,370
3,625,377 6.50%, 2024 3,595,903
1,133,072 7.00%, 2024 1,146,522
U.S. Treasury Bonds
2,150,000 7.50%, 2016 2,520,875
8,250,000 8.75%, 2017 10,910,625
550,000 8.125%, 2019 691,537
U.S. Treasury Notes
3,120,000 6.75%, 1999 3,262,335
250,000 9.125%, 1999 278,985
2,500,000 7.50%, 2001 2,753,525
300,000 5.75%, 2003 303,609
5,620,000 7.25%, 2004 6,249,609
------------
TOTAL U.S. GOVERNMENT & AGENCY
LONG-TERM OBLIGATIONS
(COST $36,540,338) 40,041,035
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
FOREIGN GOVERNMENT BONDS
(.4% OF NET ASSETS)
Fomento Economico Mexicano
$ 450,000 9.50%, 1997 $ 447,188
Republic of Columbia
300,000 7.125%, 1998 300,000
United Mexican States
250,000 6.97%, 2000 205,000
------------
TOTAL FOREIGN GOVERNMENT BONDS
(COST $989,997) 952,188
------------
COMMERCIAL PAPER
(22.7% OF NET ASSETS)
Beneficial Corp.
4,075,000 5.77%, due 1/2/96 4,074,347
Carolina Telephone & Telegraph Co.
1,125,000 5.88%, due 1/5/96 1,124,265
Corporate Receivables Corp.
3,395,000 5.85%, due 1/9/96 3,390,586
Duke Power Co.
4,050,000 5.70%, due 1/5/96 4,047,435
Ford Motor Credit Co.
4,152,000 5.80%, due 1/3/96 4,152,000
General Electric Capital Corp.
3,747,000 5.80%, due 1/10/96 3,747,000
GTE California, Inc.
4,800,000 5.79%, due 1/8/96 4,794,596
Household Finance Corp.
2,015,000 5.77%, due 1/11/96 2,011,770
International Lease Finance Corp.
2,553,000 5.74%, due 1/4/96 2,551,779
Johnson Controls, Inc.
1,250,000 5.90%, due 1/2/96 1,249,795
Oklahoma Gas & Electric Co.
3,300,000 5.75%, due 1/5/96 3,297,892
Pacific Gas & Electric Co.
3,000,000 5.75%, due 1/16/96 2,992,813
PHH Corp.
5,750,000 5.85%, due 1/19/96 5,733,181
U S West Communications, Inc.
4,360,000 5.70%, due 1/4/96 4,357,929
Xerox Corp.
2,150,000 5.70%, due 1/11/96 2,146,596
------------
TOTAL COMMERCIAL PAPER
(COST $49,671,984) 49,671,984
------------
TOTAL INVESTMENTS
(COST $192,516,346) 2$19,198,594
------------
------------
</TABLE>
GROWTH ACCOUNT
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
COMMON STOCKS
(90.8% OF NET ASSETS)
AEROSPACE (8.9%)
25,400 General Dynamics Corp. $1,501,775
</TABLE>
8 The accompanying notes are an integral part of these financial
statements.
<PAGE>
GROWTH ACCOUNT (cont'd)
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
31,371 Lockheed Martin Corp. $2,478,309
83,400 Loral Corp. 2,950,275
24,500 McDonnell Douglas Corp. 2,254,000
26,900 Rockwell International Corp. 1,422,338
------------
10,606,697
------------
AIRLINES (3.2%)
15,700 AMR Corp. 1,165,725
14,400 Delta Air Lines, Inc. 1,063,800
30,000 Northwest Airlines Corp. 1,530,000
------------
3,759,525
------------
BANKING (9.0%)
48,500 Bank of Boston Corp. 2,243,125
16,800 Bankers Trust New York Corp. 1,117,200
35,200 Chase Manhattan Corp. 2,134,000
30,000 Morgan (J.P.) & Company, Inc. 2,407,500
45,700 PNC Bank Corp. 1,473,825
6,300 Wells Fargo & Co. 1,360,800
------------
10,736,450
------------
BUILDING MATERIALS &
CONSTRUCTION (1.1%)
42,400 USG Corp. 1,272,000
------------
CHEMICALS (9.0%)
12,900 Cabot Corp. 694,988
18,400 FMC Corp. 1,244,300
20,300 Goodrich (B.F.) Co. 1,382,938
28,700 Grace (W.R.) & Co. 1,696,887
54,700 IMC Global, Inc. 2,235,863
13,800 Monsanto Co. 1,690,500
Potash Corporation of Saskatchewan
24,100 Inc. 1,708,087
------------
10,653,563
------------
CONGLOMERATES (3.4%)
31,800 Textron, Inc. 2,146,500
51,800 Tyco International Ltd. 1,845,375
------------
3,991,875
------------
DRUGS & COSMETICS (.8%)
9,900 American Home Products Corp. 960,300
------------
ELECTRIC UTILITIES (6.0%)
62,500 Entergy Corp. 1,828,125
35,600 FPL Group, Inc. 1,650,950
35,000 Illinova Corp. 1,050,000
14,400 Texas Utilities Co. 592,200
62,600 Unicom Corp. 2,050,150
------------
7,171,425
------------
FOOD & BEVERAGES (.9%)
30,400 Dole Food Company, Inc. 1,064,000
------------
HEALTH SERVICES & HOSPITAL
SUPPLIES (3.3%)
23,200 Baxter International Inc. 971,500
32,700 Columbia Healthcare Corp. 1,659,525
57,000 OrNda HealthCorp 1,325,250
------------
3,956,275
------------
INSURANCE (8.6%)
24,000 Aetna Life & Casualty Co. 1,662,000
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
46,827 Allstate Corp. $1,925,760
16,100 CIGNA Corp. 1,662,325
26,700 St. Paul Companies Inc. 1,485,187
36,400 TIG Holdings, Inc. 1,037,400
39,500 Travelers Group 2,483,563
------------
10,256,235
------------
LEISURE RELATED (.9%)
35,968 Mattel, Inc. 1,106,016
------------
MACHINERY & EQUIPMENT (5.3%)
32,600 AGCO Corp. 1,662,600
44,000 Case Corp. 2,013,000
15,200 Harnischfeger Industries, Inc. 505,400
38,955 Mark IV Industries, Inc. 769,361
37,400 Parker-Hannifin Corp. 1,280,950
------------
6,231,311
------------
MANUFACTURING (.9%)
30,000 Black & Decker Corp. 1,057,500
------------
MISCELLANEOUS (1.7%)
39,000 Premark International, Inc. 1,974,375
------------
OFFICE EQUIPMENT (1.5%)
12,700 Xerox Corp. 1,739,900
------------
OIL & GAS (7.0%)
16,400 Amoco Corp. 1,178,750
32,200 Chevron Corp. 1,690,500
18,900 Mobil Corp. 2,116,800
73,100 Panhandle Eastern Corp. 2,037,663
9,400 Royal Dutch Petroleum Co. 1,326,575
------------
8,350,288
------------
PAPER & FOREST PRODUCTS (1.5%)
21,996 Kimberly-Clark Corp. 1,820,169
------------
REAL ESTATE (.1%)
10,133 Castle & Cooke Inc. 169,733
------------
RETAIL TRADE (5.4%)
29,200 Eckerd Corp. 1,303,050
52,300 Kroger Co. 1,961,250
53,100 Sears, Roebuck & Co. 2,070,900
46,900 Service Merchandise Co., Inc. 234,500
45,300 Waban Inc. 849,375
------------
6,419,075
------------
SAVINGS & LOAN (.9%)
40,400 Ahmanson (H.F.) & Co. 1,070,600
------------
TECHNOLOGY (6.4%)
31,500 Compaq Computer Corp. 1,512,000
26,500 Conner Peripherals, Inc. 556,500
25,600 Seagate Technology Inc. 1,216,000
47,300 Storage Technology Corp. 1,129,288
44,300 Stratus Computer, Inc. 1,533,887
35,800 Sun Microsystems, Inc. 1,633,375
------------
7,581,050
------------
TELEPHONE UTILITIES (5.0%)
33,000 Ameritech Corp. 1,947,000
</TABLE>
9
<PAGE>
GROWTH ACCOUNT (cont'd)
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES SECURITY VALUE
<C> <S> <C>
44,500 GTE Corp. $1,958,000
37,300 NYNEX Corp. 2,014,200
------------
5,919,200
------------
TOTAL COMMON STOCKS
(COST $82,143,516) 107,867,562
------------
PRINCIPAL COMMERCIAL PAPER
AMOUNT (10.9% OF NET ASSETS)
Beneficial Corp.
$ 2,020,000 5.83%, due 1/8/96 2,017,710
Carolina Telephone & Telegraph Co.
2,225,000 5.88%, due 1/5/96 2,223,546
Ford Motor Credit Co.
652,000 5.75%, due 1/3/96 652,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT SECURITY VALUE
<C> <S> <C>
General Electric Capital Corp.
$ 2,210,000 5.80%, due 1/3/96 $2,210,000
Gillette Co.
1,855,000 5.80%, due 1/5/96 1,853,805
Household Finance Corp.
2,000,000 5.90%, due 1/4/96 1,999,017
U S West Communications, Inc.
1,970,000 5.70%, due 1/2/96 1,969,688
------------
TOTAL COMMERCIAL PAPER
(COST $12,925,766) 12,925,766
------------
TOTAL INVESTMENTS
(COST $95,069,282) 1$20,793,328
------------
------------
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS December 31, 1995
<TABLE>
<S> <C> <C>
<C> <C> <C>
A C C O U N T S
1. Aggregate gross unrealized appreciation
(depreciation) as of December 31, 1995,
based on cost for Federal income tax
GOVERNMENT TOTAL
purposes, was as follows: LIQUID
SECURITIES INCOME RETURN GROWTH
Aggregate gross unrealized appreciation $ --
$2,294,937 $ 435,777 $ 27,208,985 $25,984,836
Aggregate gross unrealized depreciation --
(173,429) (464,799) (526,737) (260,790)
--------------
- -------------- -------------- -------------- --------------
Net unrealized appreciation
(depreciation) $ --
$2,121,508 $ (29,022) $ 26,682,248 $25,724,046
--------------
- -------------- -------------- -------------- --------------
--------------
- -------------- -------------- -------------- --------------
2. The aggregate cost of investments for
Federal income tax purposes was: $75,707,513
$46,839,748 $32,577,590 $192,516,346 $95,069,282
--------------
- -------------- -------------- -------------- --------------
--------------
- -------------- -------------- -------------- --------------
3. Purchases and sales of securities
(excluding short-term securities) for the
year ended December 31, 1995 are
summarized as follows:
Purchases $ --
$27,090,969 $23,653,745 $ 88,015,567 $70,697,765
Sales $ --
$41,107,836 $37,629,462 $115,330,077 $61,274,945
</TABLE>
10 The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE>
<S> <C>
STATEMENT OF NET ASSETS CONNECTICUT
MUTUAL INVESTMENT ACCOUNTS, INC.
December 31,
1995
</TABLE>
<TABLE>
<CAPTION>
A C C O U N T S
GOVERNMENT TOTAL
LIQUID
SECURITIES INCOME RETURN GROWTH
<S> <C> <C>
<C> <C> <C>
ASSETS
Investments:
Bonds, at market value
(Cost $46,462,748, $31,327,794,
$72,379,402) $ --
$48,584,256 $31,298,772 $76,669,774 $ --
Common stocks, at market value
(Cost $70,464,960, $82,143,516) --
-- -- 92,856,836 107,867,562
Short-term securities 75,707,513
377,000 1,249,796 49,671,984 12,925,766
--------------
- -------------- -------------- -------------- --------------
75,707,513
48,961,256 32,548,568 219,198,594 120,793,328
Cash 12,344
107 13,220 6,632 21,967
Investment income receivable 103,419
1,058,287 654,267 1,390,464 220,695
Receivable from securities sold --
-- -- 104,295 140,291
Receivable from Fund shares sold 112,587
6,461 4,629 67,621 58,292
--------------
- -------------- -------------- -------------- --------------
Total Assets 75,935,863
50,026,111 33,220,684 220,767,606 121,234,573
--------------
- -------------- -------------- -------------- --------------
LIABILITIES
Accrued expenses payable 124,293
123,228 34,323 377,614 199,744
Payable for securities purchased --
-- -- 1,640,712 2,200,297
Dividends payable 3,819
-- -- -- --
--------------
- -------------- -------------- -------------- --------------
Total Liabilities 128,112
123,228 34,323 2,018,326 2,400,041
--------------
- -------------- -------------- -------------- --------------
NET ASSETS $75,807,751
$49,902,883 $33,186,361 2$18,749,280 1$18,834,532
--------------
- -------------- -------------- -------------- --------------
--------------
- -------------- -------------- -------------- --------------
OUTSTANDING SHARES -- CLASS A 75,807,751
4,644,816 3,478,038 14,108,084 6,619,121
--------------
- -------------- -------------- -------------- --------------
--------------
- -------------- -------------- -------------- --------------
OUTSTANDING SHARES -- CLASS B --
6,904 6,150 41,504 39,640
--------------
- -------------- -------------- -------------- --------------
--------------
- -------------- -------------- -------------- --------------
NET ASSET VALUE PER SHARE -- CLASS A $1.00
$10.73 $9.52 $15.46 $17.84
--------------
- -------------- -------------- -------------- --------------
--------------
- -------------- -------------- -------------- --------------
NET ASSET VALUE PER SHARE -- CLASS B --
$10.77 $9.56 $15.66 $18.08
--------------
- -------------- -------------- -------------- --------------
--------------
- -------------- -------------- -------------- --------------
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $ 75,807,751 $
51,220,513 $ 35,612,380 $191,347,357 $ 92,323,812
Undistributed net investment income --
32,873 19,045 68,633 11,438
Accumulated undistributed net realized
gain (loss) --
(3,472,011 ) (2,416,042 ) 651,042 775,236
Net unrealized appreciation (depreciation) --
2,121,508 (29,022 ) 26,682,248 25,724,046
--------------
- -------------- -------------- -------------- --------------
NET ASSETS $ 75,807,751 $
49,902,883 $ 33,186,361 $218,749,280 $118,834,532
--------------
- -------------- -------------- -------------- --------------
--------------
- -------------- -------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial
statements. 11
<PAGE>
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS CONNECTICUT
MUTUAL INVESTMENT ACCOUNTS, INC.
For the year
ended December 31, 1995
</TABLE>
<TABLE>
<CAPTION>
A C C O U N T S
GOVERNMENT TOTAL
LIQUID
SECURITIES INCOME RETURN GROWTH
<S> <C> <C>
<C> <C> <C>
INVESTMENT INCOME
Income:
Interest $4,162,889
$4,326,765 $3,327,978 $8,376,038 $ 598,872
Dividends --
-- -- 1,826,407 2,035,451
---------------
- --------------- --------------- -------------- --------------
Total Income 4,162,889
4,326,765 3,327,978 10,202,445 2,634,323
---------------
- --------------- --------------- -------------- --------------
Expenses:
Investment advisory fees 349,609
342,325 274,057 1,251,666 613,378
Transfer agent fees 216,300
84,800 61,100 354,800 181,400
Distribution fees -- Class A --
-- -- 348,698 176,158
Distribution fees -- Class B --
75 112 917 742
Registration fees 26,942
24,048 23,316 52,101 45,955
Custodian fees 28,900
24,600 26,900 42,800 35,600
Professional services 16,580
20,660 15,180 59,820 37,710
Shareholder reports 13,000
9,400 7,400 34,850 17,800
Directors' fees 4,383
3,829 3,396 10,303 5,859
Other 18,946
25,140 -- 42,120 18,014
Expense reimbursement from investment
adviser --
-- (137,292) -- --
---------------
- --------------- --------------- -------------- --------------
Total Expenses 674,660
534,877 274,169 2,198,075 1,132,616
---------------
- --------------- --------------- -------------- --------------
NET INVESTMENT INCOME 3,488,229
3,791,888 3,053,809 8,004,370 1,501,707
---------------
- --------------- --------------- -------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 2
(618,861) (717,369) 7,754,106 7,939,891
Net unrealized appreciation on investments --
6,078,046 2,639,614 26,965,439 20,902,301
---------------
- --------------- --------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 2
5,459,185 1,922,245 34,719,545 28,842,192
---------------
- --------------- --------------- -------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $3,488,231
$9,251,073 $4,976,054 $42,723,915 $30,343,899
---------------
- --------------- --------------- -------------- --------------
---------------
- --------------- --------------- -------------- --------------
</TABLE>
12 The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE>
<S> <C>
STATEMENT OF CHANGES IN NET ASSETS CONNECTICUT
MUTUAL INVESTMENT ACCOUNTS, INC.
For the years
ended December 31, 1995 and 1994
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<C>
A C C O U N T S
LIQUID
GOVERNMENT SECURITIES
1995 1994 1995
1994
INCREASE (DECREASE) IN NET
ASSETS
FROM OPERATIONS:
Net investment income $ 3,488,229 $ 2,575,968 $
3,791,888 $ 4,942,102
Net realized gain (loss)
on investments 2 (987)
(618,861) (2,822,974)
Net unrealized
appreciation
(depreciation) on
investments -- --
6,078,046 (5,366,869)
------------- --------------
- ------------- -------------
Net increase (decrease) in
net assets resulting from
operations 3,488,231 2,574,981
9,251,073 (3,247,741)
------------- --------------
- ------------- -------------
DIVIDENDS TO SHAREHOLDERS
FROM:
Net investment income --
Class A (3,488,229) (2,574,981)
(3,790,617) (4,939,034)
Net investment income --
Class B -- --
(376) --
Net realized gain on
investments -- Class A (2) --
-- (56,279)
Net realized gain on
investments -- Class B -- --
-- --
------------- --------------
- ------------- -------------
(3,488,231) (2,574,981)
(3,790,993) (4,995,313)
------------- --------------
- ------------- -------------
FROM CAPITAL SHARE
TRANSACTIONS:
Net proceeds from sale of
shares 184,452,934 177,469,640
3,206,633 7,468,147
Net asset value of shares
issued to shareholders
from reinvestment
of dividends 3,424,659 2,548,202
3,327,217 4,527,905
Cost of shares reacquired (176,015,712) (192,692,366)
(22,253,386) (21,186,898)
------------- --------------
- ------------- -------------
Increase in net assets
derived from capital
share transactions 11,861,881 (12,674,524)
(15,719,536) (9,190,846)
------------- --------------
- ------------- -------------
NET INCREASE (DECREASE) IN
NET ASSETS 11,861,881 (12,674,524)
(10,259,456) (17,433,900)
NET ASSETS -- BEGINNING OF
PERIOD 63,945,870 76,620,394
60,162,339 77,596,239
------------- --------------
- ------------- -------------
NET ASSETS -- END OF PERIOD $ 75,807,751 $ 63,945,870 $
49,902,883 $ 60,162,339
------------- --------------
- ------------- -------------
------------- --------------
- ------------- -------------
Undistributed net investment
income included in net
assets at end of
period -- --
$32,873 $31,978
- ------------- -------------
- ------------- -------------
Undistributed net realized
gain (loss) on investments
included in net assets at
end of period -- --
$(3,472,011) $(2,853,150)
- ------------- -------------
- ------------- -------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<C> <C> <C>
A C
C O U N T S
INCOME
TOTAL RETURN GROWTH
1995 1994 1995
1994 1995 1994
INCREASE (DECREASE) IN NET
ASSETS
FROM OPERATIONS:
Net investment income $ 3,053,809 $ 3,484,675 $
8,004,370 $ 7,127,925 $ 1,501,707 $ 1,077,298
Net realized gain (loss)
on investments (717,369) (660,384)
7,754,106 2,872,138 7,939,891 3,074,097
Net unrealized
appreciation
(depreciation) on
investments 2,639,614 (3,054,974)
26,965,439 (14,089,642) 20,902,301 (4,619,868)
------------ -------------
- ------------- ------------- ------------ ------------
Net increase (decrease) in
net assets resulting from
operations 4,976,054 (230,683)
42,723,915 (4,089,579) 30,343,899 (468,473)
------------ -------------
- ------------- ------------- ------------ ------------
DIVIDENDS TO SHAREHOLDERS
FROM:
Net investment income --
Class A (3,051,490) (3,473,505)
(7,977,727) (7,098,435) (1,491,101) (1,076,035)
Net investment income --
Class B (633) --
(2,581) -- (561) --
Net realized gain on
investments -- Class A -- --
(7,615,071) (3,186,699) (7,649,952) (3,254,775)
Net realized gain on
investments -- Class B -- --
(20,687) -- (42,834) --
------------ -------------
- ------------- ------------- ------------ ------------
(3,052,123) (3,473,505)
(15,616,066) (10,285,134) (9,184,448) (4,330,810)
------------ -------------
- ------------- ------------- ------------ ------------
FROM CAPITAL SHARE
TRANSACTIONS:
Net proceeds from sale of
shares 7,223,431 11,501,443
30,319,938 52,357,416 21,362,895 20,893,600
Net asset value of shares
issued to shareholders
from reinvestment
of dividends 2,567,525 3,019,579
15,328,598 10,101,758 9,082,811 4,286,409
Cost of shares reacquired (25,075,490) (12,906,272)
(31,911,112) (41,385,584) (11,160,463) (6,485,813)
------------ -------------
- ------------- ------------- ------------ ------------
Increase in net assets
derived from capital
share transactions (15,284,534) 1,614,750
13,737,424 21,073,590 19,285,243 18,694,196
------------ -------------
- ------------- ------------- ------------ ------------
NET INCREASE (DECREASE) IN
NET ASSETS (13,360,603) (2,089,438)
40,845,273 6,698,877 40,444,694 13,894,913
NET ASSETS -- BEGINNING OF
PERIOD 46,546,964 48,636,402
177,904,007 171,205,130 78,389,838 64,494,925
------------ -------------
- ------------- ------------- ------------ ------------
NET ASSETS -- END OF PERIOD $33,186,361 $ 46,546,964
$218,749,280 $177,904,007 $118,834,532 $78,389,838
------------ -------------
- ------------- ------------- ------------ ------------
------------ -------------
- ------------- ------------- ------------ ------------
Undistributed net investment
income included in net
assets at end of
period $ 19,045 $ 17,359 $
68,633 $ 44,571 $ 11,438 $ 1,393
------------ -------------
- ------------- ------------- ------------ ------
------------ -------------
- ------------- ------------- ------------ ------
Undistributed net realized
gain (loss) on investments
included in net assets at
end of period $(2,416,042) $(1,698,673)
$651,042 $532,694 $775,236 $528,131
------------ -------------
- ------------- ------------- ------------ ------------
------------ -------------
- ------------- ------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial
statements. 14
<PAGE>
<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS CONNECTICUT
MUTUAL INVESTMENT ACCOUNTS, INC.
December 31,
1995
</TABLE>
Selected data for a share of capital stock outstanding throughout the
period:
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS
RATIO OF RATIO OF NET
DIVIDENDS & UNREALIZED FROM NET
NET ASSET NET ASSET OPERATING INVESTMENT
YEARS NET FROM NET GAIN (LOSS) REALIZED
VALUE AT VALUE AT EXPENSES TO INCOME TO
ENDED INVESTMENT INVESTMENT ON GAIN ON
BEGINNING END AVERAGE AVERAGE
DECEMBER 31 INCOME INCOME INVESTMENTS INVESTMENTS
OF PERIOD OF PERIOD NET ASSETS NET ASSETS
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------
- --------------------------------------------------------
LIQUID ACCOUNT
1986 $ .0588 $ (.0588) $ -- $ --
$ 1.00 $ 1.00 1.00 % 5.88 %
1987 .0581 (.0581) -- --
1.00 1.00 1.00 5.81
1988 .0664 (.0664) -- --
1.00 1.00 1.04 6.64
1989 .0822 (.0822) -- --
1.00 1.00 1.06 8.22
1990 .0731 (.0731) -- --
1.00 1.00 1.06 7.31
1991 .0522 (.0522) -- --
1.00 1.00 1.01 5.22
1992 .0287 (.0287) -- --
1.00 1.00 1.02 2.87
1993 .0227 (.0227) -- --
1.00 1.00 .95 2.27
1994 .0334 (.0334) -- --
1.00 1.00 .93 3.34
1995 .0499 (.0499) -- --
1.00 1.00 .96 4.99
GOVERNMENT SECURITIES ACCOUNT -- CLASS A
1986 .92 (.92) .28 (.11)
10.73 10.90 1.27 8.92
1987 .84 (.84) (.52) (.21)
10.90 10.17 1.24 8.12
1988 .84 (.85) (.05) (.05)
10.17 10.06 1.16 8.27
1989 .84 (.84) .52 --
10.06 10.58 1.19 8.14
1990 .84 (.84) .10 --
10.58 10.68 1.16 8.07
1991 .85 (.85) .68 --
10.68 11.36 1.07 7.83
1992 .77 (.77) (.12) (.05)
11.36 11.19 1.01 6.92
1993 .70 (.70) .36 (.64)
11.19 10.91 .93 6.03
1994 .69 (.69) (1.14) (.01)
10.91 9.76 .91 6.71
1995 .72 (.72) .97 --
9.76 10.73 .98 6.93
INCOME ACCOUNT -- CLASS A
1986 .83 (.83) .57 (.08)
10.55 11.04 1.29 7.69
1987 .76 (.76) (.56) (.51)
11.04 9.97 1.27 7.32
1988 .84 (.85) (.19) --
9.97 9.77 1.24 8.43
1989 .88 (.88) .02 --
9.77 9.79 1.27 8.93
1990 .94 (.94) (.35) --
9.79 9.44 1.24 9.78
1991 .81 (.81) .47 --
9.44 9.91 1.12 8.44
1992 .79 (.79) (.16) --
9.91 9.75 .63 8.09
1993 .65 (.65) .11 --
9.75 9.86 .63 6.56
1994 .68 (.68) (.72) --
9.86 9.14 .63 7.16
1995 .67 (.66) .37 --
9.14 9.52 .63 6.97
TOTAL RETURN ACCOUNT -- CLASS A
1986 .31 (.30) .99 (.04)
10.91 11.87 1.26 3.22
1987 .38 (.38) .13 (1.09)
11.87 10.91 1.08 3.15
1988 .53 (.53) .60 --
10.91 11.51 1.11 4.61
1989 .76 (.76) 1.81 (.63)
11.51 12.69 1.20 5.90
1990 .66 (.66) (.68) (.07)
12.69 11.94 1.24 5.31
1991 .54 (.54) 2.79 (.71)
11.94 14.02 1.20 4.02
1992 .50 (.50) .86 (1.07)
14.02 13.81 1.11 3.61
1993 .48 (.48) 1.70 (.97)
13.81 14.54 1.02 3.40
1994 .55 (.55) (.86) (.24)
14.54 13.44 .96 3.80
1995 .60 (.60) 2.59 (.57)
13.44 15.46 1.17 4.00
GROWTH ACCOUNT -- CLASS A
1986 .24 (.24) 1.11 (.08)
10.94 11.97 1.31 2.21
1987 .22 (.22) (.12) (2.05)
11.97 9.80 1.17 1.71
1988 .20 (.20) 1.20 --
9.80 11.00 1.23 1.95
1989 .51 (.51) 3.30 (1.25)
11.00 13.05 1.18 3.90
1990 .34 (.34) (1.36) (.07)
13.05 11.62 1.19 2.73
1991 .25 (.25) 4.00 (1.22)
11.62 14.40 1.19 1.74
1992 .26 (.26) 1.44 (1.64)
14.40 14.20 1.12 1.74
1993 .30 (.30) 2.64 (1.70)
14.20 15.14 1.05 1.95
1994 .22 (.22) (.32) (.62)
15.14 14.20 1.02 1.50
1995 .25 (.25) 4.88 (1.24)
14.20 17.84 1.22 1.53
<CAPTION>
NET ASSETS
AT END
YEARS OF PERIOD ANNUAL
ENDED PORTFOLIO (IN TOTAL
DECEMBER 31 TURNOVER THOUSANDS) RETURN(A)
<S> <C> <C> <C>
- --------------
1986 n/a $ 74,111 6.03 %
1987 n/a 68,908 5.97
1988 n/a 73,921 6.82
1989 n/a 87,264 8.53
1990 n/a 84,387 7.53
1991 n/a 69,932 5.31
1992 n/a 67,549 2.89
1993 n/a 76,620 2.30
1994 n/a 63,946 3.40
1995 n/a 75,808 5.11
GOVERNMENT SEC
1986 111.68 22,947 11.66
1987 207.67 24,703 3.33
1988 175.50 35,910 7.99
1989 68.14 41,561 14.10
1990 44.19 47,524 9.44
1991 27.50 55,332 15.03
1992 131.79 67,612 6.07
1993 224.02 77,596 9.56
1994 156.90 60,162 (4.18)
1995 50.64 49,829 17.90
INCOME ACCOUNT
1986 164.13 14,620 13.54
1987 231.39 15,367 2.03
1988 150.04 16,789 6.70
1989 52.95 18,705 9.56
1990 90.20 19,809 6.33
1991 50.44 22,839 14.22
1992 109.47 38,675 6.60
1993 145.94 48,636 7.97
1994 62.88 46,547 (0.42)
1995 57.08 33,127 11.77
TOTAL RETURN A
1986 143.32 35,382 11.88
1987 197.79 44,770 3.92
1988 223.62 54,253 10.40
1989 149.22 65,071 22.61
1990 115.45 66,382 (0.21)
1991 122.40 86,455 28.21
1992 177.85 109,701 9.90
1993 155.16 171,205 15.89
1994 115.01 177,904 (2.11)
1995 55.20 218,099 23.95
GROWTH ACCOUNT
1986 163.15 19,469 12.25
1987 214.32 19,638 (0.29)
1988 246.14 26,285 14.32
1989 169.75 37,323 34.86
1990 143.95 35,202 (7.98)
1991 148.30 40,716 36.91
1992 141.69 45,600 11.99
1993 99.67 64,495 20.91
1994 98.46 78,390 (0.65)
1995 69.69 118,118 36.40
</TABLE>
(a) Annual total returns do not include the effect of sales charges
15
<PAGE>
<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS (CONT'D)
</TABLE>
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS
RATIO OF RATIO OF NET
DIVIDENDS & UNREALIZED FROM NET
NET ASSET NET ASSET OPERATING INVESTMENT
YEARS NET FROM NET GAIN (LOSS) REALIZED
VALUE AT VALUE AT EXPENSES TO INCOME TO
ENDED INVESTMENT INVESTMENT ON GAIN ON
BEGINNING END AVERAGE AVERAGE
DECEMBER 31 INCOME INCOME INVESTMENTS INVESTMENTS
OF PERIOD OF PERIOD NET ASSETS (A) NET ASSETS (A)
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
- -----------------------------------------------------------------------
- -----------------------------------------------------------
GOVERNMENT SECURITIES ACCOUNT --
CLASS B
1995 (c) $ .12 $ (.12) $ .32 $ --
$ 10.45 $ 10.77 1.98 % 1.36 %
INCOME ACCOUNT -- CLASS B
1995 (c) .13 (.13) .10 --
9.46 9.56 1.63 1.43
TOTAL RETURN ACCOUNT -- CLASS B
1995 (c) .07 (.07) .70 (.52)
15.48 15.66 1.92 .73
GROWTH ACCOUNT -- CLASS B
1995 (c) .02 (.02) 1.40 (1.15)
17.83 18.08 1.97 .21
<CAPTION>
NET ASSETS
YEARS AT END ANNUAL
ENDED PORTFOLIO OF PERIOD TOTAL
DECEMBER 31 TURNOVER (IN THOUSANDS) RETURN(B)
<S> <C> <C> <C>
- --------------
1995 50.64 $ 74 4.20 %
INCOME ACCOUNT
1995 57.08 59 2.41
TOTAL RETURN A
1995 55.20 650 4.93
GROWTH ACCOUNT
1995 69.69 717 8.04
</TABLE>
(a) Annualized
(b) Annual total returns do not include the effect of sales charges
(c) For the period from October 1, 1995 (Inception) through December
31, 1995
The accompanying notes are an integral part of these financial
statements. 16
<PAGE>
<TABLE>
<S> <C>
NOTES TO FINANCIAL STATEMENTS CONNECTICUT
MUTUAL INVESTMENT ACCOUNTS, INC.
December 31,
1995
</TABLE>
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Connecticut Mutual Investment Accounts, Inc. (the Fund), a Maryland
corporation, is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Fund is
comprised
of thirteen distinct mutual funds, including the following five Accounts
included in these financial statements: Liquid, Government Securities,
Income,
Total Return and Growth. The Fund offers both Class A and Class B
shares.
Class A shares are sold with a front-end sales charge. Class B shares
may be
subject to a contingent deferred sales charge. An interest in the Fund
is
limited to the assets of the Account or Accounts in which shares are
held by
shareholders, and such shareholders are entitled to a pro rata share of
all
dividends and distributions arising from the net investment income and
net
realized capital gains on the investments of such Accounts.
The following is a summary of significant accounting policies followed
by the
Fund:
(a)VALUATION OF INVESTMENT SECURITIES - Except with respect to
securities held
by the Liquid Account, equity and debt securities which are traded
on
securities exchanges are valued at the last sales price as of the
close of
business on the day the securities are being valued. Lacking any
sales,
equity securities are valued at the last bid price and debt
securities are
valued at the mean between closing bid and asked prices. Securities
traded
in the over-the-counter market and included in the NASDAQ National
Market
System are valued using the last sales price when available.
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
who
make a market in the securities. Short-term securities are valued on
an
amortized cost basis, which approximates market value. Securities for
which
market quotations are not readily available are valued at fair value
as
determined in accordance with procedures established by the Board of
Directors of the Fund, including the use of valuations furnished by
a
private service retained by the custodian.
Securities held by the Liquid Account are valued on an amortized cost
basis. This basis involves valuing a security at cost and thereafter
assuming a constant amortization to maturity of any discount or
premium,
regardless of the impact of fluctuating interest rates on the market
value
of the instrument. The amortized cost method, in the opinion of the
Board
of Directors, represents the fair value of the particular security.
The
Board monitors the deviation between the Account's net asset value
per
share as determined by using available market quotations and its
amortized
cost price per share. If the deviation exceeds one half of one
percent per
share, the Board will consider what action, if any, should be
initiated to
provide fair valuation. Throughout 1995, the deviation was less than
one
half of one percent.
(b)FEDERAL INCOME TAXES - The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal
Revenue
Code. Under such provisions, by distributing substantially all of its
taxable income to its shareholders or otherwise complying with
requirements
for regulated investment companies, the Fund will not be subject to
Federal
income taxes. Accordingly, no provision for Federal income taxes is
required. For Federal tax reporting purposes, each Account is treated
as a
separate taxable entity.
(c)GAINS AND LOSSES - Realized gains and losses from sales of
investments are
determined on the identified cost basis.
(d)AFFILIATE HOLDINGS - Connecticut Mutual Life Insurance Company
and its
affiliates own 33,548,333 shares of the five Accounts of the
Fund as
follows:
<TABLE>
<CAPTION>
LIQUID GOVERNMENT SECURITIES INCOME
TOTAL RETURN
<S> <C> <C>
<C>
30,904,449 662,517 239
222
<CAPTION>
LIQUID GROWTH
<S> <C>
30,904,449 1,980,906
</TABLE>
(e)OTHER - Investment transactions are accounted for on the trade date
which
is the date the order to buy or sell is executed. Dividend income is
recorded on the ex-dividend date and interest income is accrued on
a daily
basis. All expenses are accrued on a daily basis.
2. INVESTMENT ADVISORY FEES AND OTHER AFFILIATE TRANSACTIONS
The Fund has an Investment Advisory Agreement with G.R. Phelps & Co.,
Inc.
(the Investment Adviser), a wholly-owned subsidiary of Connecticut
Mutual Life
Insurance Company. The Investment Adviser, subject to review by the
Board of
Directors, is responsible for the investment management of each Account
and
has the responsibility for making decisions to buy, sell or hold any
particular security. The Investment Adviser is obligated to perform
certain
administrative services for the Fund.
17
<PAGE>
As compensation for its services to the Liquid Account, the Investment
Adviser
receives monthly compensation at the annual rate of 0.50% of the first
$200
million of average daily net assets, 0.45% of the next $100 million of
average
daily net assets and 0.40% of the average daily net assets in excess of
$300
million of the Account. As compensation for its services to the
Government
Securities, Income, Total Return and Growth Accounts, the Investment
Adviser
receives monthly compensation at the annual rate of 0.625% of the first
$300
million of average daily net assets, 0.50% of the next $100 million of
average
daily net assets and 0.45% of the average daily net assets in excess of
$400
million of each Account.
The investment advisory fees, which also cover certain administrative
and
management services, amounted to $2,831,035 for all Accounts for the
year
ended December 31, 1995. For the year ended December 31, 1995, the
Investment
Adviser, serving as principal underwriter for sale of shares of the
Accounts,
earned $1,642,321 related to sales charges deducted from proceeds for
shares
sold.
Expenses incurred in the operation of the Fund are borne by the Fund.
However,
the Investment Adviser has agreed that in any year the aggregate
expenses
(including the investment advisory fee, but excluding interest, taxes,
brokerage fees, commissions and uncommon charges such as litigation
costs)
exceed 1% of the value of the average daily net assets of the Liquid
Account
or 1.5% of the value of the average daily net assets in each of the
other four
Accounts, it will reimburse the Accounts for such excess.
3. 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 Investment Company Act of 1940.
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 Connecticut Mutual Financial Services, Inc. (CMFS), the
Distributor, 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. Effective May 1, 1995, the Total
Return
and Growth Accounts commenced accruing fees daily and paying fees
monthly to
the Distributor. For the eight months ended December 31, 1995, the
Distributor
received $524,856 in fees from these Accounts. The Government Securities
and
Income Accounts accrued no fees and paid no amounts pursuant to any Plan
during the year ended December 31, 1995.
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. Effective October 1, 1995, the Government Securities,
Income,
Total Return and Growth Accounts commenced accruing fees daily and
paying fees
monthly to the Distributor. For the three months ended December 31,
1995, the
Distributor received $1,846 in fees from these Accounts.
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
reimbursement 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. The Liquid Account accrued no fees and paid no
amounts pursuant to any Plan during the year ended December 31, 1995.
18
<PAGE>
4. DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared and paid monthly for
the
Government Securities and Income Accounts and semi-annually for the
Total
Return and Growth Accounts. Dividends from net investment income of the
Liquid
Account, which include any net short-term capital gains, are declared
and
accrued daily and paid monthly. All net realized capital gains, if any,
are
declared and paid at least annually.
5. CAPITAL STOCK
The authorized capital stock of the Fund at December 31, 1995 consisted
of
3,000,000,000 shares of common stock, par value $0.001 per share. The
shares
of stock are divided among thirteen separate Accounts, five of which are
indicated below. All shares of common stock have equal voting rights,
except
that only shares of a particular Account are entitled to vote on matters
pertaining to that Account.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
CLASS A SHARES
FOR THE YEAR ENDED DECEMBER 31, 1995
GOVERNMENT TOTAL
LIQUID
SECURITIES INCOME RETURN
<S> <C> <C>
<C> <C>
Shares authorized (in millions) 250
200 200 200
Shares sold 184,452,934
304,895 764,273 1,998,083
Shares issued to shareholders from reinvestment
of dividends 3,424,659
324,108 274,100 1,003,774
---------------
- --------------- --------------- ---------------
Total issued 187,877,593
629,003 1,038,373 3,001,857
Shares reacquired (176,015,712)
(2,147,453) (2,654,709) (2,126,335)
---------------
- --------------- --------------- ---------------
Net increase (decrease) 11,861,881
(1,518,450) (1,616,336) 875,522
---------------
- --------------- --------------- ---------------
---------------
- --------------- --------------- ---------------
<CAPTION>
GROWTH
<S> <C>
Shares authorized (in millions) 200
Shares sold 1,242,427
Shares issued to shareholders from reinvestment
of dividends 513,302
---------------
Total issued 1,755,729
Shares reacquired (657,052)
---------------
Net increase (decrease) 1,098,677
---------------
---------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES
FOR THE PERIOD FROM OCTOBER 1, 1995
(INCEPTION)
TO DECEMBER 31, 1995
GOVERNMENT
TOTAL
SECURITIES
INCOME RETURN GROWTH
<S> <C> <C>
<C> <C>
Shares authorized (in millions) 50
50 50 50
Shares sold 6,888
6,140 40,033 37,415
Shares issued to shareholders from reinvestment of
dividends 35
10 1,471 2,434
-------------
- ------------- ------------- -------------
Total issued 6,923
6,150 41,504 39,849
Shares reacquired (19)
-- -- (209)
-------------
- ------------- ------------- -------------
Net increase 6,904
6,150 41,504 39,640
-------------
- ------------- ------------- -------------
-------------
- ------------- ------------- -------------
</TABLE>
6. SUBSEQUENT EVENT
On January 27, 1996, the policyholders of Connecticut Mutual Life
Insurance
Company (CML) approved a merger, subject to regulatory approval, of CML
into
the Massachusetts Mutual Life Insurance Company (MML). In connection
with this
merger, the shareholders of the Fund are being asked to consider and
approve a
new investment advisory agreement between the Fund and OppenheimerFunds,
Inc.,
an indirect subsidiary of MML.
19
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Connecticut Mutual Investment Accounts,
Inc.:
We have audited the accompanying statement of net assets, including the
schedule of investments, of Connecticut Mutual Investment Accounts,
Inc.
(a Maryland corporation) Liquid, Government Securities, Income, Total
Return, and Growth Accounts as of December 31, 1995, and the related
statements of operations for the year then ended, the statement of
changes
in net assets for each of the two years in the period then ended, and
the
financial highlights for each of the ten years in the period then
ended.
These financial statements and financial highlights are the
responsibility
of the Accounts' management. Our responsibility is to express an
opinion
on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit
includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by
correspondence with the custodian bank. An audit also includes
assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred
to above present fairly, in all material respects, the financial
position
of each of the respective Accounts comprising Connecticut Mutual
Investment Accounts, Inc. as of December 31, 1995, the results of their
operations for the year then ended, the changes in their net assets for
each of the two years in the period then ended, and the financial
highlights for each of the ten years in the period then ended, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 9, 1996
20
<PAGE>
CONNECTICUT MUTUAL INVESTMENT ACCOUNTS, INC.
--------------------------------------
BOARD OF DIRECTORS AND OFFICERS
DIRECTORS
RICHARD H. AYERS, Director
Chairman and Chief Executive Officer
The Stanley Works
DAVID E. A. CARSON, Director
President, Chairman and
Chief Executive Officer
People's Bank
RICHARD W. GREENE, Director
Executive Vice President and Treasurer
University of Rochester
BEVERLY L. HAMILTON, Director
President
ARCO Investment Management Company
DONALD H. POND, JR., President and Director
Retired Executive Vice President
Connecticut Mutual Life Insurance Company
DAVID E. SAMS, JR., Director
President and Chief Executive Officer
Connecticut Mutual Life Insurance Company
OFFICERS
LOUIS A. LACCAVOLE, CPA, General Auditor
Vice President and General Auditor
Connecticut Mutual Life Insurance Company
ANN F. LOMELI, Secretary
Corporate Secretary and Counsel
Connecticut Mutual Life Insurance Company
LINDA M. NAPOLI, Treasurer and Controller
Treasurer, Mutual Funds
Connecticut Mutual Life Insurance Company
AUDITORS
ARTHUR ANDERSEN LLP
Hartford, CT
This report has been prepared for shareholders of the Account and
may be
distributed to prospective investors in the Account when preceded or
accompanied
by a current prospectus.
<PAGE>
<TABLE>
=======================================================================
====================================================
PRO FORMA COMBINING STATEMENT OF INVESTMENTS
December 31, 1995 (Unaudited)
<CAPTION>
Oppenheimer Bond Fund and Connecticut Mutual Investment Accounts,
Inc. - Income Account
FACE
AMOUNT(1) MARKET VALUE
- --------------------------------------
- ---------------------------------------
Oppenheimer
Connecticut Pro Forma Oppenheimer Connecticut Pro Forma
Bond Income
Combined Bond Income Combined
<S> <C> <C> <C>
<C> <C> <C> <C>
=======================================================================
=============================================================
SHORT-TERM NOTES - 0.5%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
Carolina Telephone & Telegraph Co.,
5.87%, due 1/2/96 (Cost $1,249,796) $ --
$1,250,000 $ 1,250,000 $ -- $ 1,249,796 $ 1,249,796
=======================================================================
=============================================================
CERTIFICATES OF DEPOSIT - 0.1%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
Citibank CD, 13%, 5/6/96(2)CLP 49,956,445 --
49,956,445 122,853 -- 122,853
- -----------------------------------------------------------------------
- ----------------------------------------------------
Indonesia (Republic of) Bank Negara
CD, Zero Coupon, 15.914%, 6/17/96(2)(3)IDR 500,000,000 --
500,000,000 201,253 -- 201,253
---------------------------------------
Total Certificates of Deposit (Cost $337,372)
324,106 -- 324,106
=======================================================================
=============================================================
ASSET-BACKED SECURITIES - 1.9%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
AUTO LOAN - 1.9%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
Daimler-Benz Vehicle Trust, Series
1994-A, Cl. A, 5.95%, 12/15/00 440,645 --
440,645 441,373 -- 441,373
- -----------------------------------------------------------------------
- ----------------------------------------------------
Ford Credit Grantor Trust, Series
1994-B, Cl. A, 7.30%, 10/15/99 959,109 --
959,109 977,390 -- 977,390
- -----------------------------------------------------------------------
- ----------------------------------------------------
General Motors Acceptance Corp.,
Grantor Trust, Series 1992-E,
Cl. A, 4.75%, 8/15/97 192,999 --
192,999 192,154 -- 192,154
- -----------------------------------------------------------------------
- ----------------------------------------------------
Nissan Auto Receivables Grantor Trust,
Series 1994-A, Cl. A, 6.45%, 9/15/99 1,289,223 --
1,289,223 1,300,091 -- 1,300,091
- -----------------------------------------------------------------------
- ----------------------------------------------------
World Omni Automobile Lease Securitization
Trust, Series 1994-A, Cl. A, 6.45%, 9/25/00 1,705,242 --
1,705,242 1,716,958 -- 1,716,958
---------------------------------------
Total Asset-Backed Securities (Cost $4,581,131)
4,627,966 -- 4,627,966
=======================================================================
=============================================================
MORTGAGE-BACKED OBLIGATIONS - 26.8%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
GOVERNMENT AGENCY - 20.8%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
FHLMC/FNMA/SPONSORED - 12.0%
- -----------------------------------------------------------------------
- -----------------------------------------------------
Federal Home Loan Mortgage Corp.:
5.50%, 1997 --
130,372 130,372 -- 129,241 129,241
5.50%, 1998 --
369,783 369,783 -- 366,199 366,199
Certificates of Participation,
9%, 3/1/17 684,842 --
684,842 727,563 -- 727,563
Certificates of Participation,
Series 17-039, 13.50%, 11/1/10 75,372 --
75,372 89,209 -- 89,209
Certificates of Participation,
Series 17-094, 12.50%, 4/1/14 40,781 --
40,781 47,205 -- 47,205
Collateralized Mtg. Obligation Gtd.
Multiclass Certificates of Participation,
Series 1322, Cl. G, 7.50%, 2/15/07 2,000,000 --
2,000,000 2,088,740 -- 2,088,740
Collateralized Mtg. Obligations,
Series 1548, Cl. C, 7%, 4/15/21 4,000,000 --
4,000,000 4,022,480 -- 4,022,480
Multiclass Gtd. Mtg. Participation
Certificates, Series 1460, Cl. H, 7%,
5/15/07 1,500,000 --
1,500,000 1,554,375 -- 1,554,375
- -----------------------------------------------------------------------
- ----------------------------------------------------
Federal National Mortgage Assn.:
7.50%, 2008 --
813,043 813,043 -- 836,158 836,158
7.00%, 2009 --
822,819 822,819 -- 837,983 837,983
6.00%, 2019 --
250,000 250,000 -- 249,295 249,295
11%, 7/1/16 6,832,876 --
6,832,876 7,751,045 -- 7,751,045
Gtd. Mtg. Pass-Through Certificates,
8%, 8/1/17 884,543 --
884,543 920,624 -- 920,624
Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Series 1993-175,
Cl. PL, 5%, 10/25/02 2,000,000 --
2,000,000 1,980,000 -- 1,980,000
Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Series 1993-191,
Cl. PD, 5.40%, 3/25/04 1,500,000 --
1,500,000 1,486,395 -- 1,486,395
Interest-Only Stripped Mtg.-Backed Security,
Trust 240, Cl. 2, 12.095%, 9/1/23(4) 23,117,327 --
23,117,327 6,330,174 -- 6,330,174
---------------------------------------
26,997,810 2,418,876 29,416,686
- -----------------------------------------------------------------------
- -------------------------------------------------------------
GNMA/GUARANTEED - 8.8%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Government National Mortgage Assn.:
6%, 1/15/26(5) 5,000,000 --
5,000,000 5,053,125 -- 5,053,125
6%, 7/20/25 1,984,195 --
1,984,195 2,005,278 -- 2,005,278
7%, 1/15/26(5) 5,000,000 --
5,000,000 5,059,400 -- 5,059,400
10%, 11/15/09 328,943 --
328,943 361,015 -- 361,015
10.50%, 12/15/17-7/15/19 418,560 --
418,560 468,527 -- 468,527
12%, 1/15/99-5/15/14 66,291 --
66,291 70,409 -- 70,409
12.75%, 6/15/15 43,595 --
43,595 50,461 -- 50,461
8%, 6/15/05-7/15/25 7,202,212 --
7,202,212 7,527,961 -- 7,527,961
9%, 2/15/09-6/15/09 567,867 --
567,867 608,463 -- 608,463
7.00%, 2009 --
387,056 387,056 -- 396,004 396,004
13.00%, 2014 --
45,963 45,963 -- 54,566 54,566
---------------------------------------
21,204,639 450,570 21,655,209
- -----------------------------------------------------------------------
- -------------------------------------------------------------
PRIVATE - 6.0%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
COMMERCIAL - 2.9%
- -----------------------------------------------------------------------
- ----------------------------------------------------
CMC Securities Corp. I, Collateralized Mtg.
Obligation, Series 1993-D, Cl. D-3, 10%,
7/25/23(6) 711,456 --
711,456 765,482 -- 765,482
- -----------------------------------------------------------------------
- ----------------------------------------------------
DLJ Mortgage Acceptance Corp., Sub.
Collateralized Mtg. Obligations, Series
X-Q13B, Cl. 3B1, 8.75%, 11/25/24 1,442,350 --
1,442,350 1,449,112 -- 1,449,112
- -----------------------------------------------------------------------
- ----------------------------------------------------
FDIC Trust, Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates, Series
1994-C1, Cl. 2-D, 8.70%, 9/25/25(6) 1,000,000 --
1,000,000 1,078,125 -- 1,078,125
- -----------------------------------------------------------------------
- ----------------------------------------------------
FDIC Trust, Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates, Series
1994C1, Cl. 2-E, 8.70%, 9/25/25(6) 1,000,000 --
1,000,000 1,069,687 -- 1,069,687
- -----------------------------------------------------------------------
- ----------------------------------------------------
Resolution Trust Corp., Commercial Mtg.
Pass-Through Certificates, Series 1991-M6,
Cl. B4, 7.477%, 6/25/21(7) 75,761 --
75,761 75,738 -- 75,738
- -----------------------------------------------------------------------
- ----------------------------------------------------
Resolution Trust Corp., Commercial Mtg.
Pass-Through Certificates, Series 1992-CHF,
Cl. E, 8.25%, 12/25/20 2,004,994 --
2,004,994 1,967,401 -- 1,967,401
- -----------------------------------------------------------------------
- ----------------------------------------------------
Resolution Trust Corp., Commercial Mtg.
Pass-Through Certificates, Series 1993-C1,
Cl. B, 8.75%, 5/25/24 700,000 --
700,000 729,312 -- 729,312
---------------------------------------
7,134,857 -- 7,134,857
- -----------------------------------------------------------------------
- -------------------------------------------------------------
MULTI-FAMILY - 2.0%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Resolution Trust Corp., Commercial Mtg.
Pass-Through Certificates, Series 1991-M5,
Cl. A, 9%,3/25/17 733,176 --
733,176 776,251 -- 776,251
- -----------------------------------------------------------------------
- ----------------------------------------------------
Resolution Trust Corp., Commercial Mtg.
Pass-Through Certificates, Series 1994-C1,
Cl. C, 8%, 6/25/26 1,500,000 --
1,500,000 1,603,594 -- 1,603,594
- -----------------------------------------------------------------------
- ----------------------------------------------------
Resolution Trust Corp., Commercial Mtg.
Pass-Through Certificates, Series 1995-C1,
Cl. D, 6.90%, 2/25/27 2,500,000 --
2,500,000 2,387,500 -- 2,387,500
---------------------------------------
4,767,345 -- 4,767,345
- -----------------------------------------------------------------------
- -------------------------------------------------------------
OTHER - 0.8%
- -----------------------------------------------------------------------
- ----------------------------------------------------
JHM Mtg. Acceptance Corp., 8.96%
Collateralized Mtg. Obligation Bonds,
Series E, Cl. 5, 4/1/19 1,790,105 --
1,790,105 1,913,175 -- 1,913,175
- -----------------------------------------------------------------------
- -------------------------------------------------------------
RESIDENTIAL - 0.3%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Residential Funding Corp., Mtg.
Pass-Through Certificates, Series
1993-S10, Cl. A9, 8.50%, 2/25/23 774,963 --
774,963 800,150 -- 800,150
---------------------------------------
Total Mortgage-Backed Obligations
(Cost $62,473,955, $2,813,669,
Combined $65,287,624)
62,817,976 2,869,446 65,687,422
=======================================================================
=============================================================
U.S. GOVERNMENT OBLIGATIONS - 19.9%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
TREASURY - 19.9%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
U.S. Treasury Bonds:
11.625%, 11/15/02 5,000,000 --
5,000,000 6,743,750 -- 6,743,750
8.75%, 5/15/20 6,750,000 --
6,750,000 9,036,562 -- 9,036,562
8.75%, 8/15/20 3,050,000 --
3,050,000 4,092,719 -- 4,092,719
8.875%, 8/15/17 13,500,000 --
13,500,000 18,090,000 -- 18,090,000
- -----------------------------------------------------------------------
- ----------------------------------------------------
U.S. Treasury Nts.:
8.75%, 8/15/00 550,000 --
550,000 625,109 -- 625,109
8.875%, 11/15/97 4,335,000 --
4,335,000 4,615,418 -- 4,615,418
6.75%, 1999 --
3,350,000 3,350,000 -- 3,502,827 3,502,827
7.75%, 1999 --
1,950,000 1,950,000 -- 2,116,062 2,116,062
---------------------------------------
Total U.S. Government Obligations
(Cost $40,331,251, $5,538,523,
Combined $45,869,774)
43,203,558 5,618,889 48,822,447
=======================================================================
=============================================================
FOREIGN GOVERNMENT OBLIGATIONS - 0.7%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
International Bank for Reconstruction
and Development Bonds, 12.50%, 7/25/97NZD 800,000 --
800,000 556,998 -- 556,998
- -----------------------------------------------------------------------
- ----------------------------------------------------
New Zealand (Republic of) Bonds, 10%,
7/15/97NZD 390,000 --
390,000 262,030 -- 262,030
- -----------------------------------------------------------------------
- ----------------------------------------------------
Norwegian Government Bonds, 5.75%,
11/30/04NOK 540,000 --
540,000 81,686 -- 81,686
- -----------------------------------------------------------------------
- ----------------------------------------------------
Queensland Treasury Corp. Gtd. Nts.,
8%, 8/14/01AUD 1,045,000 --
1,045,000 778,537 -- 778,537
---------------------------------------
Total Foreign Government Obligations
(Cost $1,565,840)
1,679,251 -- 1,679,251
=======================================================================
=============================================================
CORPORATE BONDS AND NOTES - 53.0%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
BASIC INDUSTRY - 4.2%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
CHEMICALS - 0.9%
- -----------------------------------------------------------------------
- ----------------------------------------------------
FMC Corp., 8.75%, 1999 --
250,000 250,000 -- 269,248 269,248
- -----------------------------------------------------------------------
- ----------------------------------------------------
Lyondell Petrochemical Co., 8.25%, 1997 --
400,000 400,000 -- 410,320 410,320
- -----------------------------------------------------------------------
- ----------------------------------------------------
Quantum Chemical Corp., 10.375% First Mtg.
Nts., 6/1/03 900,000 --
900,000 1,024,144 -- 1,024,144
- -----------------------------------------------------------------------
- ----------------------------------------------------
Rohm & Haas Co., 9.50% Debs., 4/1/21 500,000 --
500,000 602,239 -- 602,239
---------------------------------------
1,626,383 679,568 2,305,951
- -----------------------------------------------------------------------
- -------------------------------------------------------------
METALS & MINING - 1.6%
- -----------------------------------------------------------------------
- ----------------------------------------------------
AMAX, Inc., 9.875% Nts., 6/13/01 1,000,000 --
1,000,000 1,138,882 -- 1,138,882
- -----------------------------------------------------------------------
- ----------------------------------------------------
Newmont Mining Corp., 8.625% Nts., 4/1/02 1,000,000 --
1,000,000 1,107,358 -- 1,107,358
- -----------------------------------------------------------------------
- ---------------------------------------------------
Teck Corp., 8.70% Debs., 5/1/02 1,500,000 --
1,500,000 1,663,795 -- 1,663,795
---------------------------------------
3,910,035 -- 3,910,035
- -----------------------------------------------------------------------
- -------------------------------------------------------------
PAPER - 1.7%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Celulosa Arauco y Constitucion SA, 7.25%, 1998 --
350,000 350,000 -- 359,187 359,187
- -----------------------------------------------------------------------
- ----------------------------------------------------
Crown Paper Co., 11% Sr. Sub. Nts., 9/1/05 750,000 --
750,000 660,000 -- 660,000
- -----------------------------------------------------------------------
- ----------------------------------------------------
Georgia-Pacific Corp., 9.95% Debs., 6/15/02 1,500,000 --
1,500,000 1,784,147 -- 1,784,147
- -----------------------------------------------------------------------
- ----------------------------------------------------
Georgia-Pacific Corp., 9.85%, 1997 --
300,000 300,000 -- 316,293 316,293
- -----------------------------------------------------------------------
- ----------------------------------------------------
Repap Wisconsin, Inc., 9.25% First Priority
Sr. Sec. Nts., 2/1/02 500,000 --
500,000 477,500 -- 477,500
- -----------------------------------------------------------------------
- ----------------------------------------------------
Scotia Pacific Holding Co., 7.95% Timber
Collateralized Nts., 7/20/15 454,847 --
454,847 462,280 -- 462,280
- -----------------------------------------------------------------------
- ----------------------------------------------------
Union Camp Corp., 10% Debs., 5/1/19 100,000 --
100,000 116,911 -- 116,911
---------------------------------------
3,500,838 675,480 4,176,318
- -----------------------------------------------------------------------
- -------------------------------------------------------------
CONSUMER RELATED - 6.3%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
CONSUMER PRODUCTS - 0.7%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Tag-Heuer International SA, 12% Sr.
Sub. Nts., 12/15/05(6) 550,000 --
550,000 552,063 -- 552,063
- -----------------------------------------------------------------------
- ----------------------------------------------------
Toro Co. (The), 11% Debs., 8/1/17 1,000,000 --
1,000,000 1,067,115 -- 1,067,115
---------------------------------------
1,619,178 -- 1,619,178
- -----------------------------------------------------------------------
- -------------------------------------------------------------
FOOD/BEVERAGES/TOBACCO - 2.4%
- -----------------------------------------------------------------------
- ----------------------------------------------------
American Brands, Inc., 7.875% Debs., 1/15/23 2,000,000 --
2,000,000 2,253,562 -- 2,253,562
- -----------------------------------------------------------------------
- ----------------------------------------------------
B.A.T. Capital Corp. , 6.66%, 2000 --
300,000 300,000 -- 306,930 306,930
- -----------------------------------------------------------------------
- ----------------------------------------------------
ConAgra, Inc., 7.40% Sub. Nts., 9/15/04 250,000 --
250,000 264,433 -- 264,433
- -----------------------------------------------------------------------
- ----------------------------------------------------
ConAgra, Inc., 9.75%, 1997 --
500,000 500,000 -- 532,925 532,925
- -----------------------------------------------------------------------
- ----------------------------------------------------
Dr. Pepper/Seven-Up Cos., Inc., 0%/11.50%
Sr. Sub. Disc. Nts., 11/1/02(8) 500,000 --
500,000 471,250 -- 471,250
- -----------------------------------------------------------------------
- ----------------------------------------------------
Grand Metropolitan Investment Corp.,
8.125%, 1996 --
325,000 325,000 -- 329,602 329,602
- -----------------------------------------------------------------------
- ----------------------------------------------------
Nabisco Brands Inc., 8.00%, 2000 --
325,000 325,000 -- 345,443 345,443
- -----------------------------------------------------------------------
- ----------------------------------------------------
Philip Morris Companies Inc., 8.75%, 1996 --
300,000 300,000 -- 308,247 308,247
- -----------------------------------------------------------------------
- ----------------------------------------------------
Pulsar Internacional SA de CV, 11.80% Nts.,
9/19/96(9) 750,000 --
750,000 755,625 -- 755,625
- -----------------------------------------------------------------------
- ---------------------------------------------------
Seagram Company Ltd., 9.75%, 2000 --
300,000 300,000 -- 304,167 304,167
---------------------------------------
3,744,870 2,127,314 5,872,184
- -----------------------------------------------------------------------
- -------------------------------------------------------------
HEALTHCARE - 2.1%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Grace (W.R.) & Co., 7.25% Medium-Term Nts.,
7/15/97 2,000,000 --
2,000,000 2,040,198 -- 2,040,198
- -----------------------------------------------------------------------
- ----------------------------------------------------
HEALTHSOUTH Corp., 9.50% Sr. Sub. Nts.,
4/1/01 500,000 --
500,000 536,250 -- 536,250
- -----------------------------------------------------------------------
- ----------------------------------------------------
Imcera Group, Inc., 6% Nts., 10/15/03 500,000 --
500,000 494,950 -- 494,950
- -----------------------------------------------------------------------
- ----------------------------------------------------
R.P. Scherer Corp., 6.75% Sr. Nts., 2/1/04 500,000 --
500,000 475,812 -- 475,812
- -----------------------------------------------------------------------
- ----------------------------------------------------
Service Corp. International, 7% Sr. Nts.,
6/1/15 1,000,000 --
1,000,000 1,073,020 -- 1,073,020
- -----------------------------------------------------------------------
- ----------------------------------------------------
Total Renal Care, Inc., 0%/12% Sr. Sub.
Disc. Nts., 8/15/04(8) 649,000 --
649,000 626,285 -- 626,285
---------------------------------------
5,246,515 -- 5,246,515
- -----------------------------------------------------------------------
- -------------------------------------------------------------
HOTEL/GAMING - 0.5%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Grand Casinos, Inc., 10.125% Gtd.
First Mtg. Nts., 12/1/03 750,000 --
750,000 785,625 -- 785,625
- -----------------------------------------------------------------------
- ----------------------------------------------------
HMC Acquisition Properties, Inc., 9%
Sr. Nts., 12/15/07(6) 500,000 --
500,000 502,500 -- 502,500
---------------------------------------
1,288,125 -- 1,288,125
- -----------------------------------------------------------------------
- -------------------------------------------------------------
LEISURE - 0.1%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Blockbuster Entertainment Corp., 6.625%, 1998 --
250,000 250,000 -- 252,798 252,798
- -----------------------------------------------------------------------
- -------------------------------------------------------------
RESTAURANTS - 0.3%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Foodmaker, Inc., 9.25% Sr. Nts., 3/1/99 835,000 --
835,000 803,688 -- 803,688
- -----------------------------------------------------------------------
- -------------------------------------------------------------
TEXTILE/APPAREL - 0.2%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Fruit of the Loom, Inc., 7% Debs., 3/15/11 500,000 --
500,000 505,204 -- 505,204
- -----------------------------------------------------------------------
- -------------------------------------------------------------
ENERGY - 4.9%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
Arkla, Inc., 9.875%, 1997 --
505,000 505,000 -- 525,513 525,513
- -----------------------------------------------------------------------
- ----------------------------------------------------
Coastal Corp., 11.75% Sr. Debs., 6/15/06 500,000 --
500,000 531,653 -- 531,653
- -----------------------------------------------------------------------
- ----------------------------------------------------
Coastal Corp., 8.75%, 1999 --
325,000 325,000 -- 350,681 350,681
- -----------------------------------------------------------------------
- ----------------------------------------------------
Empresa Columbia de Petroleos, 7.25%, 1998 --
250,000 250,000 -- 249,375 249,375
- -----------------------------------------------------------------------
- ----------------------------------------------------
Enron Corp., 8.10% Nts., 12/15/96 1,500,000 --
1,500,000 1,536,089 -- 1,536,089
- -----------------------------------------------------------------------
- ----------------------------------------------------
Florida Gas Transmission Co., 7.75%, 1997 --
500,000 500,000 -- 516,745 516,745
- -----------------------------------------------------------------------
- ----------------------------------------------------
McDermott, Inc., 9.375% Nts., 3/15/02 100,000 --
100,000 113,618 -- 113,618
- -----------------------------------------------------------------------
- ----------------------------------------------------
Occidental Petroleum Corp., 11.125% Sr.
Debs., 6/1/19 3,000,000 --
3,000,000 3,584,202 -- 3,584,202
- -----------------------------------------------------------------------
- ----------------------------------------------------
Phillips Petroleum Co., 7.53%, 1998 --
458,313 458,313 -- 470,781 470,781
- -----------------------------------------------------------------------
- ---------------------------------------------------
Southwest Gas Corp., 9.75% Debs.,
Series F, 6/15/02 275,000 --
275,000 321,762 -- 321,762
- -----------------------------------------------------------------------
- ----------------------------------------------------
Tenneco, Inc., 10% Debs., 3/15/08 100,000 --
100,000 124,414 -- 124,414
- -----------------------------------------------------------------------
- ----------------------------------------------------
Tenneco, Inc., 7.875% Nts., 10/1/02 250,000 --
250,000 272,987 -- 272,987
- -----------------------------------------------------------------------
- ----------------------------------------------------
Tenneco, Inc., 10.00%, 1998 --
375,000 375,000 -- 412,237 412,237
- -----------------------------------------------------------------------
- ----------------------------------------------------
TransCanada PipeLines Ltd., 9.875% Debs.,
1/1/21 1,500,000 --
1,500,000 2,061,675 -- 2,061,675
- -----------------------------------------------------------------------
- ----------------------------------------------------
Transcontinental Gas Pipe Line Corp.,
9.00%, 1996 --
150,000 150,000 -- 153,974 153,974
- -----------------------------------------------------------------------
- ----------------------------------------------------
United Meridian Corp., 10.375% Gtd. Sr.
Sub. Nts., 10/15/05 500,000 --
500,000 531,250 -- 531,250
- -----------------------------------------------------------------------
- ----------------------------------------------------
Vintage Petroleum, Inc., 9% Sr. Sub. Nts.,
12/15/05 150,000 --
150,000 151,875 -- 151,875
---------------------------------------
9,229,525 2,679,306 11,908,831
- -----------------------------------------------------------------------
- -------------------------------------------------------------
FINANCIAL SERVICES - 14.8%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
BANKS & THRIFTS - 2.8%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Banco Ganadero SA, Zero Coupon Sr. Unsub.
Unsec. Nts., 9.931%, 6/15/96(3)(6) 250,000 --
250,000 239,520 -- 239,520
- -----------------------------------------------------------------------
- ----------------------------------------------------
BankAmerica Corp., 7.50% Sr. Nts., 3/15/97 200,000 --
200,000 204,724 -- 204,724
- -----------------------------------------------------------------------
- ----------------------------------------------------
Barnett Banks, Inc., 8.50%, 1999 --
325,000 325,000 -- 351,111 351,111
- -----------------------------------------------------------------------
- ----------------------------------------------------
Chemical Banking Corp., 6.625%, 1998 --
325,000 325,000 -- 331,269 331,269
- -----------------------------------------------------------------------
- ----------------------------------------------------
Chemical New York Corp., 9.75% Sub.
Capital Nts., 6/15/99 300,000 --
300,000 337,112 -- 337,112
- -----------------------------------------------------------------------
- ----------------------------------------------------
Citicorp, 9.46%, 1996 --
325,000 325,000 -- 328,731 328,731
- -----------------------------------------------------------------------
- ----------------------------------------------------
First Chicago Corp., 9% Sub. Nts., 6/15/99 100,000 --
100,000 110,118 -- 110,118
- -----------------------------------------------------------------------
- ----------------------------------------------------
First Chicago NBD Bancorp, 7.25% Sub.
Debs., 8/15/04 250,000 --
250,000 267,041 -- 267,041
- -----------------------------------------------------------------------
- ----------------------------------------------------
First Fidelity Bancorporation, 8.50%, 1998 --
325,000 325,000 -- 342,885 342,885
- -----------------------------------------------------------------------
- ----------------------------------------------------
First Union Corp., 6.75%, 1998 --
325,000 325,000 -- 331,103 331,103
- -----------------------------------------------------------------------
- ----------------------------------------------------
Golden West Financial Corp., 8.625%, 1998 --
325,000 325,000 -- 346,986 346,986
- -----------------------------------------------------------------------
- ----------------------------------------------------
Home Savings of America, 10.50%, 1997 --
500,000 500,000 -- 504,475 504,475
- -----------------------------------------------------------------------
- ----------------------------------------------------
Mellon Financial Co., 6.50%, 1997 --
325,000 325,000 -- 330,223 330,223
- -----------------------------------------------------------------------
- ----------------------------------------------------
National Westminster Bank PLC, 9.375%
Gtd. Capital Nts., 11/15/03 70,000 --
70,000 83,913 -- 83,913
- -----------------------------------------------------------------------
- ----------------------------------------------------
Royal Bank of Scotland Group (The) PLC,
10.125% Sub. Gtd. Capital Nts., 3/1/04 500,000 --
500,000 621,195 -- 621,195
- -----------------------------------------------------------------------
- ----------------------------------------------------
Security Pacific Corp., 7.75%, 1996 --
325,000 325,000 -- 331,097 331,097
- -----------------------------------------------------------------------
- ----------------------------------------------------
Westpac Banking Corp., 9.125% Sub. Debs.,
8/15/01 1,500,000 --
1,500,000 1,711,150 -- 1,711,150
---------------------------------------
3,574,773 3,197,880 6,772,653
- -----------------------------------------------------------------------
- -------------------------------------------------------------
DIVERSIFIED FINANCIAL - 8.8%
- -----------------------------------------------------------------------
- ----------------------------------------------------
American Car Line Co., 8.25% Equipment
Trust Certificates, Series 1993-A, 4/15/08 246,000 --
246,000 258,608 -- 258,608
- -----------------------------------------------------------------------
- ----------------------------------------------------
American General Finance Corp., 8.50%, 1998 --
300,000 300,000 -- 320,706 320,706
- -----------------------------------------------------------------------
- ----------------------------------------------------
Associates Corp. of North America, 7.40%, 1999 --
300,000 300,000 -- 316,149 316,149
- -----------------------------------------------------------------------
- ----------------------------------------------------
Avco Financial Services, Inc., 5.875%, 1997 --
500,000 500,000 -- 501,975 501,975
- -----------------------------------------------------------------------
- ----------------------------------------------------
Banque Nationale de Paris, 9.875%, 1998 --
205,000 205,000 -- 224,157 224,157
- -----------------------------------------------------------------------
- ----------------------------------------------------
Beneficial Corp., 12.875% Debs., 8/1/13 20,000 --
20,000 24,313 -- 24,313
- -----------------------------------------------------------------------
- ----------------------------------------------------
Beneficial Corp., 9.125%, 1998 --
500,000 500,000 -- 534,940 534,940
- -----------------------------------------------------------------------
- ----------------------------------------------------
BHP Finance (USA) Ltd., 8.50% Gtd. Debs.,
12/1/12 1,500,000 --
1,500,000 1,780,785 -- 1,780,785
- -----------------------------------------------------------------------
- ----------------------------------------------------
Countrywide Funding Corp., 6.57%, 1997 --
300,000 300,000 -- 304,269 304,269
- -----------------------------------------------------------------------
- ----------------------------------------------------
Enterprise Rent-A-Car USA Finance Co.,
7.875% Nts., 3/15/98(6) 1,500,000 --
1,500,000 1,554,709 -- 1,554,709
- -----------------------------------------------------------------------
- ----------------------------------------------------
Ford Motor Credit Co., 9.90% Medium-Term
Nts., 11/6/97 2,000,000 --
2,000,000 2,080,364 -- 2,080,364
- -----------------------------------------------------------------------
- ----------------------------------------------------
GE Capital Mortgage Services, Inc.,
6.50%, 2024 --
135,893 135,893 -- 135,596 135,596
- -----------------------------------------------------------------------
- ----------------------------------------------------
GPA Holland BV, 9.75% Medium-Term Nts.,
Series B, 6/10/96(6) 500,000 --
500,000 500,000 -- 500,000
- -----------------------------------------------------------------------
- ----------------------------------------------------
Green Tree Financial Corp., 7.70%, 2019 --
250,000 250,000 -- 260,232 260,232
- -----------------------------------------------------------------------
- ----------------------------------------------------
Household Financial Corporation Ltd.,
6.00%, 1998 --
250,000 250,000 -- 251,853 251,853
- -----------------------------------------------------------------------
- ----------------------------------------------------
Household International Netherlands BV,
6.00%, 1999 --
250,000 250,000 -- 251,222 251,222
- -----------------------------------------------------------------------
- ----------------------------------------------------
Housing Securities, Inc., 7.25%, 2012 --
193,964 193,964 -- 196,752 196,752
- -----------------------------------------------------------------------
- ----------------------------------------------------
Lehman Brothers Holdings, Inc., 8.375%
Nts., 2/15/99 300,000 --
300,000 318,942 -- 318,942
- -----------------------------------------------------------------------
- ----------------------------------------------------
Leucadia National Corp., 7.75% Sr. Nts.,
8/15/13 2,000,000 --
2,000,000 2,082,104 -- 2,082,104
- -----------------------------------------------------------------------
- ----------------------------------------------------
Merrill Lynch & Co., Inc., 8.25%, 1996 --
325,000 325,000 -- 330,912 330,912
- -----------------------------------------------------------------------
- ----------------------------------------------------
Midland American Capital Corp., 12.75%
Gtd. Nts., 11/15/03 205,000 --
205,000 241,118 -- 241,118
- -----------------------------------------------------------------------
- --------------------------------------------------
NationsBank Corp., 10.20% Sub. Nts., 7/15/15 1,300,000 --
1,300,000 1,759,866 -- 1,759,866
- -----------------------------------------------------------------------
- ----------------------------------------------------
Norwest Financial, Inc., 6.50%, 1997 --
325,000 325,000 -- 330,275 330,275
- -----------------------------------------------------------------------
- ----------------------------------------------------
PaineWebber Group, Inc., 7% Sr. Nts., 3/1/00 160,000 --
160,000 163,909 -- 163,909
- -----------------------------------------------------------------------
- ----------------------------------------------------
Penske Truck Leasing Co. LP, 7.75% Sr. Nts.,
5/15/99 1,500,000
325,000 1,825,000 1,583,350 339,417 1,922,767
- -----------------------------------------------------------------------
- ----------------------------------------------------
Ryder System, Inc., 8.75% Debs., Series J,
3/15/17 1,600,000 --
1,600,000 1,703,704 -- 1,703,704
- -----------------------------------------------------------------------
- ----------------------------------------------------
Ryland Mortgage Securities Corp., 8.339%,
2030 --
413,677 413,677 -- 417,167 417,167
- -----------------------------------------------------------------------
- ----------------------------------------------------
Salomon Brothers, Inc.:
0.00%, 2017 --
239,258 239,258 -- 174,881 174,881
12.50%, 2017 --
161,680 161,680 -- 44,664 44,664
- -----------------------------------------------------------------------
- ----------------------------------------------------
Source One Mortgage Services Corp., 9% Debs.,
6/1/12 1,250,000 --
1,250,000 1,485,481 -- 1,485,481
- -----------------------------------------------------------------------
- ----------------------------------------------------
Transamerica Finance Group, Inc., 7.42%,
1998 --
500,000 500,000 -- 517,065 517,065
- -----------------------------------------------------------------------
- ----------------------------------------------------
U.S. Leasing International Inc., 7.00%, 1997 --
500,000 500,000 -- 511,645 511,645
---------------------------------------
15,537,253 5,963,877 21,501,130
- -----------------------------------------------------------------------
- -------------------------------------------------------------
INSURANCE - 3.2%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Aetna Life & Casualty Co., 8% Debs., 1/15/17 1,000,000 --
1,000,000 1,060,133 -- 1,060,133
- -----------------------------------------------------------------------
- ----------------------------------------------------
Capital Holding Corp., 8.75% Debs., 1/15/17 1,200,000 --
1,200,000 1,272,654 -- 1,272,654
- -----------------------------------------------------------------------
- ----------------------------------------------------
CNA Financial Corp., 7.25% Debs., 11/15/23 2,000,000 --
2,000,000 1,990,074 -- 1,990,074
- -----------------------------------------------------------------------
- ----------------------------------------------------
SunAmerica Inc., 9.00%, 1999 --
370,000 370,000 -- 399,186 399,186
- -----------------------------------------------------------------------
- ----------------------------------------------------
Torchmark Corp., 7.875% Nts., 5/15/23 3,000,000 --
3,000,000 3,243,750 -- 3,243,750
---------------------------------------
7,566,611 399,186 7,965,797
- -----------------------------------------------------------------------
- -------------------------------------------------------------
HOUSING RELATED - 0.5%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
HOMEBUILDERS/REAL ESTATE - 0.5%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Saul (B.F.) Real Estate Investment Trust,
11.625% Sr. Sec. Nts., Series B, 4/1/02 1,125,000 --
1,125,000 1,153,125 -- 1,153,125
- -----------------------------------------------------------------------
- -------------------------------------------------------------
MANUFACTURING - 7.5%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
AEROSPACE/ELECTRONICS/COMPUTERS - 3.1%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Boeing Co., 7.50% Debs., 8/15/42 2,000,000 --
2,000,000 2,320,236 -- 2,320,236
- -----------------------------------------------------------------------
- ----------------------------------------------------
British Aerospace Finance BV, 8%, 1997 --
300,000 300,000 -- 309,000 309,000
- -----------------------------------------------------------------------
- ----------------------------------------------------
Coltec Industries Inc., 9.75%, 2000 --
250,000 250,000 -- 257,500 257,500
- -----------------------------------------------------------------------
- ----------------------------------------------------
General Electric Capital Corp., 8.75% Debs.,
5/21/07 1,000,000 --
1,000,000 1,216,910 -- 1,216,910
- -----------------------------------------------------------------------
- ----------------------------------------------------
McDonnell Douglas Corp., 9.25% Nts., 4/1/02 1,500,000 --
1,500,000 1,738,060 -- 1,738,060
- -----------------------------------------------------------------------
- ----------------------------------------------------
Rolls-Royce Capital, Inc., 7.125% Gtd.
Unsec. Unsub. Nts., 7/29/03 1,000,000 --
1,000,000 1,046,250 -- 1,046,250
- -----------------------------------------------------------------------
- ----------------------------------------------------
Tracor, Inc., 10.875% Sr. Sub. Nts., 8/15/01 500,000 --
500,000 516,250 -- 516,250
- -----------------------------------------------------------------------
- ----------------------------------------------------
Xerox Corp., 9.20%, 1999 --
270,000 270,000 -- 274,450 274,450
---------------------------------------
6,837,706 840,950 7,678,656
- -----------------------------------------------------------------------
- -------------------------------------------------------------
AUTOMOTIVE - 2.4%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Burmah Castrol Capital, Ltd., 7.00%, 1997 --
500,000 500,000 -- 513,800 513,800
- -----------------------------------------------------------------------
- ----------------------------------------------------
Chrysler Corp., 10.40% Nts., 8/1/99 1,000,000 --
1,000,000 1,069,464 -- 1,069,464
- -----------------------------------------------------------------------
- ----------------------------------------------------
Chrysler Corp., 10.95% Debs., 8/1/17 200,000 --
200,000 224,527 -- 224,527
- -----------------------------------------------------------------------
- ----------------------------------------------------
Foamex LP/Foamex Capital Corp., 11.25% Sr.
Nts., 10/1/02 500,000 --
500,000 482,500 -- 482,500
- -----------------------------------------------------------------------
- ----------------------------------------------------
Ford Motor Co., 8.875% Debs., 11/15/22 2,000,000 --
2,000,000 2,312,126 -- 2,312,126
- -----------------------------------------------------------------------
- ----------------------------------------------------
Ford Motor Co., 6.27%, 2000 --
286,301 286,301 -- 289,261 289,261
- -----------------------------------------------------------------------
- ----------------------------------------------------
General Motors Acceptance Corp., 5.50%
Nts., 12/15/01 100,000 --
100,000 96,549 -- 96,549
- -----------------------------------------------------------------------
- ----------------------------------------------------
General Motors Acceptance Corp., 7.75% Nts.,
4/15/97 300,000 --
300,000 305,708 -- 305,708
- -----------------------------------------------------------------------
- ----------------------------------------------------
General Motors Acceptance Corp., 5.65%, 1997 --
500,000 500,000 -- 500,675 500,675
---------------------------------------
4,490,874 1,303,736 5,794,610
- -----------------------------------------------------------------------
- -------------------------------------------------------------
CAPITAL GOODS - 2.0%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Caterpillar, Inc., 9.75% Debs., 6/1/19 1,750,000 --
1,750,000 2,035,827 -- 2,035,827
- -----------------------------------------------------------------------
- ----------------------------------------------------
First Brands Corp., 9.125%, 1999 --
265,000 265,000 -- 273,679 273,679
- -----------------------------------------------------------------------
- ----------------------------------------------------
Thomas & Betts Corp., 8.25% Sr. Nts., 1/15/04 1,000,000 --
1,000,000 1,125,063 -- 1,125,063
- -----------------------------------------------------------------------
- ----------------------------------------------------
Westinghouse Electric Corp., 8.375% Nts.,
6/15/02 1,000,000 --
1,000,000 1,022,800 -- 1,022,800
- -----------------------------------------------------------------------
- ----------------------------------------------------
Westinghouse Electric Corp., 7.75%, 1996 --
500,000 500,000 -- 502,105 502,105
---------------------------------------
4,183,690 775,784 4,959,474
- -----------------------------------------------------------------------
- -------------------------------------------------------------
MEDIA - 4.7%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
BROADCASTING - 0.5%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Paxson Communications Corp., 11.625% Sr.
Sub. Nts., 10/1/02(6) 750,000 --
750,000 757,500 -- 757,500
- -----------------------------------------------------------------------
- ----------------------------------------------------
United International Holdings, Inc., Zero
Coupon Sr. Sec. Disc. Nts., 12.982%,
11/15/99(3) 750,000 --
750,000 468,750 -- 468,750
---------------------------------------
1,226,250 -- 1,226,250
- -----------------------------------------------------------------------
- -------------------------------------------------------------
CABLE TELEVISION - 1.8%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Rogers Cablesystems Ltd., 10% Sr. Sec.
Second Priority Debs., 12/1/07 1,000,000 --
1,000,000 1,067,500 -- 1,067,500
- -----------------------------------------------------------------------
- ----------------------------------------------------
Tele-Communications, Inc., 5.28%
Medium-Term Nts., 8/20/96 1,000,000
315,000 1,315,000 996,207 313,743 1,309,950
- -----------------------------------------------------------------------
- ----------------------------------------------------
TeleWest PLC, 0%/11% Sr. Disc. Debs.,
10/1/07(8) 1,280,000 --
1,280,000 776,000 -- 776,000
- -----------------------------------------------------------------------
- ----------------------------------------------------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 1,000,000 --
1,000,000 1,176,779 -- 1,176,779
---------------------------------------
4,016,486 313,743 4,330,229
- -----------------------------------------------------------------------
- -------------------------------------------------------------
DIVERSIFIED MEDIA - 1.6%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Time Warner, Inc., 9.15% Debs., 2/1/23 3,100,000 --
3,100,000 3,534,961 -- 3,534,961
- -----------------------------------------------------------------------
- ----------------------------------------------------
Time Warner Inc., 7.45%, 1998 --
500,000 500,000 -- 513,925 513,925
---------------------------------------
3,534,961 513,925 4,048,886
- -----------------------------------------------------------------------
- -------------------------------------------------------------
PUBLISHING/PRINTING - 0.8%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Reed Publishing USA Inc., 7.24%, 1997 --
325,000 325,000 -- 330,986 330,986
- -----------------------------------------------------------------------
- ----------------------------------------------------
Valassis Communications, Inc., 9.55% Sr.
Nts., 12/1/03 1,500,000 --
1,500,000 1,543,258 -- 1,543,258
---------------------------------------
1,543,258 330,986 1,874,244
- -----------------------------------------------------------------------
- -------------------------------------------------------------
OTHER - 0.1%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
CONGLOMERATES - 0.1%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Textron, Inc., 9.55% Medium-Term Nts.,
3/19/01 500,000 --
500,000 579,296 -- 579,296
- -----------------------------------------------------------------------
- -------------------------------------------------------------
RETAIL - 1.2%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
DEPARTMENT STORES - 0.3%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Sears Canada Inc., 11.70% Debs., 7/10/00CAD 500,000 --
500,000 426,186 -- 426,186
- -----------------------------------------------------------------------
- ----------------------------------------------------
Sears, Roebuck & Co., 8.39%, 1999 --
300,000 300,000 -- 322,965 322,965
---------------------------------------
426,186 322,965 749,151
- -----------------------------------------------------------------------
- -------------------------------------------------------------
DRUG STORES - 0.2%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Hook-SupeRx, Inc., 10.125% Sr. Nts., 6/1/02 400,000 --
400,000 438,128 -- 438,128
- -----------------------------------------------------------------------
- -------------------------------------------------------------
SPECIALTY RETAILING - 0.3%
- -----------------------------------------------------------------------
- ----------------------------------------------------
May Department Stores Cos., 10.625% Debs.,
11/1/10 405,000 --
405,000 564,550 -- 564,550
- -----------------------------------------------------------------------
- ----------------------------------------------------
May Department Stores Cos., 9.875% Debs.,
6/1/17 250,000 --
250,000 265,491 -- 265,491
---------------------------------------
830,041 -- 830,041
- -----------------------------------------------------------------------
- -------------------------------------------------------------
SUPERMARKETS - 0.4%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Grand Union Co., 12% Sr. Nts., 9/1/04 500,000 --
500,000 435,000 -- 435,000
- -----------------------------------------------------------------------
- ----------------------------------------------------
Penn Traffic Co., 10.25% Sr. Nts., 2/15/02 500,000 --
500,000 478,750 -- 478,750
---------------------------------------
913,750 -- 913,750
- -----------------------------------------------------------------------
- -------------------------------------------------------------
TRANSPORTATION - 2.0%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
AIR TRANSPORTATION - 1.4%
- -----------------------------------------------------------------------
- ----------------------------------------------------
American Airlines, Inc., 9.73% Pass-Through
Certificates, Series 1991-C2, 9/29/14 1,000,000 --
1,000,000 1,118,750 -- 1,118,750
- -----------------------------------------------------------------------
- ----------------------------------------------------
Atlas Air, Inc., 12.25% Pass-Through
Certificates, 12/1/02 1,000,000 --
1,000,000 1,025,000 -- 1,025,000
- -----------------------------------------------------------------------
- ----------------------------------------------------
Delta Air Lines, Inc., 10.375% Debs., 2/1/11 550,000 --
550,000 707,854 -- 707,854
- -----------------------------------------------------------------------
- ----------------------------------------------------
Southwest Airlines Co., 9.25%, 1998 --
500,000 500,000 -- 533,600 533,600
---------------------------------------
2,851,604 533,600 3,385,204
- -----------------------------------------------------------------------
- -------------------------------------------------------------
RAILROADS - 0.6%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Canadian Pacific Ltd., 9.45% Debs., 8/1/21 1,000,000 --
1,000,000 1,304,000 -- 1,304,000
- -----------------------------------------------------------------------
- ----------------------------------------------------
Union Pacific Corp., 9.65% Medium-Term Nts.,
4/17/00 100,000 --
100,000 113,888 -- 113,888
---------------------------------------
1,417,888 -- 1,417,888
- -----------------------------------------------------------------------
- -------------------------------------------------------------
UTILITIES - 6.8%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
ELECTRIC UTILITIES - 1.4%
- -----------------------------------------------------------------------
- ----------------------------------------------------
Commonwealth Edison Co., 6.50% Nts., 7/15/97 225,000 --
225,000 226,315 -- 226,315
- -----------------------------------------------------------------------
- ----------------------------------------------------
Consumers Power Co., 8.75%, 1998 --
250,000 250,000 -- 263,335 263,335
- -----------------------------------------------------------------------
- ----------------------------------------------------
Long Island Lighting Co., 8.75%, 1996 --
500,000 500,000 -- 506,145 506,145
- -----------------------------------------------------------------------
- ----------------------------------------------------
Midwest Power Systems Inc., 6.25%, 1998 --
500,000 500,000 -- 505,235 505,235
- -----------------------------------------------------------------------
- ----------------------------------------------------
Public Service Co. of Colorado, 8.75% First
Mtg. Bonds, 3/1/22 250,000 --
250,000 284,110 -- 284,110
- -----------------------------------------------------------------------
- ----------------------------------------------------
Tenaga Nasional Berhad, 7.875% Nts.,
6/15/04(6) 1,000,000 --
1,000,000 1,106,039 -- 1,106,039
- -----------------------------------------------------------------------
- ----------------------------------------------------
Union Gas Ltd., 13% Debs., 6/30/03CAD 572,000 --
572,000 474,450 -- 474,450
----------------------------------------
2,090,914 1,274,715 3,365,629
- -----------------------------------------------------------------------
- -------------------------------------------------------------
TELECOMMUNICATIONS - 5.4%
- -----------------------------------------------------------------------
- ----------------------------------------------------
A+ Network, Inc., 11.875% Sr. Sub. Nts.,
11/1/05 1,000,000 --
1,000,000 1,012,500 -- 1,012,500
- -----------------------------------------------------------------------
- ----------------------------------------------------
Cellular Communications International, Inc.,
Zero Coupon Sr. Disc. Nts., 11.44%,
8/15/00(3) 500,000 --
500,000 301,250 -- 301,250
- -----------------------------------------------------------------------
- ----------------------------------------------------
GST Telecommunications, Inc., Units (each
unit consists of eight 0%/13.875% sr. disc.
nts., and one 0%/13.875% cv. sr. sub. disc.
nt., 12/15/05)(6)(8)(10) 900,000 --
900,000 470,000 -- 470,000
- -----------------------------------------------------------------------
- ----------------------------------------------------
GTE Corp., 8.85%, 1998 --
300,000 300,000 -- 319,845 319,845
- -----------------------------------------------------------------------
- ----------------------------------------------------
Horizon Cellular Telephone LP/Horizon
Finance Corp., 0%/11.375% Sr. Sub. Disc.
Nts., 10/1/00(8) 1,250,000 --
1,250,000 1,068,750 -- 1,068,750
- -----------------------------------------------------------------------
- ----------------------------------------------------
IntelCom Group (USA), Inc., 0%/13.50% Sr.
Disc. Nts., 9/15/05(6)(8) 600,000 --
600,000 346,500 -- 346,500
- -----------------------------------------------------------------------
- ----------------------------------------------------
MCI Communications Corp., 7.625%, 1996 --
300,000 300,000 -- 304,779 304,779
- -----------------------------------------------------------------------
- ----------------------------------------------------
New York Telephone Co., 9.375% Debs., 7/15/31 2,500,000 --
2,500,000 2,976,547 -- 2,976,547
- -----------------------------------------------------------------------
- ----------------------------------------------------
Nextel Communications, Inc., 0%/11.50%
Sr. Disc. Nts., 9/1/03(8) 1,000,000 --
1,000,000 618,750 -- 618,750
- -----------------------------------------------------------------------
- ----------------------------------------------------
Pacific Bell, 8.50% Debs., 8/15/31 2,000,000 --
2,000,000 2,234,214 -- 2,234,214
- -----------------------------------------------------------------------
- ----------------------------------------------------
PriCellular Wireless Corp., 0%/14% Sr. Sub.
Disc. Nts., 11/15/01(8) 1,000,000 --
1,000,000 880,000 -- 880,000
- -----------------------------------------------------------------------
- ----------------------------------------------------
Southern New England Telephone Co., 8.70%
Medium-Term Nts., 8/15/31 2,000,000 --
2,000,000 2,203,806 -- 2,203,806
- -----------------------------------------------------------------------
- ----------------------------------------------------
USA Mobile Communications, Inc. II, 9.50%
Sr. Nts., 2/1/04 500,000 --
500,000 497,500 -- 497,500
---------------------------------------
12,609,817 624,624 13,234,441
---------------------------------------
Total Corporate Bonds and Notes (Cost
$100,700,984, $22,975,602, Combined
$123,676,586)
107,296,972 22,810,437 130,107,409
UNITS
=======================================================================
=============================================================
RIGHTS, WARRANTS AND CERTIFICATES - 0.0%
- -----------------------------------------------------------------------
- -------------------------------------------------------------
Cellular Communications International, Inc
Wts., Exp. 8/03 500 --
500 11,250 -- 11,250
- -----------------------------------------------------------------------
- ----------------------------------------------------
IntelCom Group, Inc. Wts., Exp. 9/05(6) 1,980 --
1,980 7,920 -- 7,920
---------------------------------------
Total Rights, Warrants and Certificates
(Cost $0)
19,170 -- 19,170
- -----------------------------------------------------------------------
- ----------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $209,990,533,
$32,577,590, COMBINED $242,568,123) 103.7%
98.1% 102.9% 219,968,999 32,548,568 252,517,567
- -----------------------------------------------------------------------
- ----------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS/
OTHER ASSETS NET OF LIABILITIES (3.7)
1.9 (2.9) (7,751,705) 637,793 (7,113,912)
- --------------------------------------
- ---------------------------------------
NET ASSETS 100.0%
100.0% 100.0% $212,217,294 $33,186,361 $245,403,655
======================================
=======================================
<FN>
1. Face amount is reported in U.S. Dollars, except for those
denoted
in the following currencies:
AUD - Australian Dollar IDR - Indonesian Rupiah
CAD - Canadian Dollar NOK - Norwegian Krone
CLP - Chilean Peso NZD - New Zealand Dollar
2. Indexed instrument for which the principal amount and/or
interest
due at maturity is affected by the relative value of a foreign
currency.
3. For zero coupon bonds, the interest rate shown is the
effective
yield on the date of purchase.
4. Interest-Only Strips represent the right to receive the
monthly
interest payments on an underlying pool of mortgage loans. These
securities typically decline in price as interest rates decline.
Most
other fixed-income securities increase in price when interest
rates
decline. The principal amount of the underlying pool represents
the
notional amount on which current interest is calculated. The
price of
these securities is typically more sensitive to changes in
prepayment
rates than traditional mortgage-backed securities (for example,
GNMA
pass-throughs). Interest rates disclosed represent current yields
based
upon the current cost basis and estimated timing and amount of
future
cash flows.
5. When-issued security to be delivered and settled after
December 31, 1995.
6. Represents a security sold under Rule 144A, which is exempt
from
registration under the Securities Act of 1933, as amended. This
security has been determined to be liquid under guidelines
established
by the Board of Trustees. These securities amount to $8,950,045
or
4.22% (Combined 3.65%) of the Fund's net assets, at December 31,
1995.
7. Represents the current interest rate for a variable rate
security.
8. Denotes a step bond: a zero coupon bond that converts to
a fixed
rate of interest at a designated future date.
9. Identifies issues considered to be illiquid.
10. Units may be comprised of several components, such as debt
and
equity and/or warrants to purchase equity at some point in the
future.
For units which represent debt securities, face amount disclosed
represents total underlying principal.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES December 31, 1995
(Unaudited)
Oppenheimer Bond Fund and Connecticut Mutual Investment Accounts, Inc. -
Income Account
CONNECTICUT MUTUAL COMBINED
OPPENHEIMER INVESTMENT ACCOUNTS, OPPENHEIMER
BOND FUND INC.-INCOME ACCOUNT(1) BOND FUND
<S>
<C> <C> <C>
ASSETS
Investments, at value*
$219,968,999 $32,548,568 $252,517,567
Cash
-- -- --
Receivables:
Interest and principal paydowns
3,449,576 654,267 4,103,843
Shares of beneficial interest sold
502,558 4,629 507,187
Receivable from OppenheimerFunds, Inc.
20,522 -- 20,522
Other
25,430 -- 25,430
- ------------ ------------ ------------
Total assets
223,967,085 33,207,464 257,174,549
- ------------ ------------ ------------
LIABILITIES
Cash/Bank overdraft
306,908 (13,220) 293,688
Payables and other liabilities:
Investments purchased
10,088,020 -- 10,088,020
Dividends
610,049 -- 610,049
Shares of beneficial interest redeemed
545,312 -- 545,312
Distribution and service plan fees
110,630 -- 110,630
Transfer and shareholder servicing
agent fees
9,767 -- 9,767
Other
79,105 34,323 113,428
- ------------ ------------ ------------
Total liabilities
11,749,791 21,103 11,770,894
- ------------ ------------ ------------
NET ASSETS
$212,217,294 $33,186,361 $245,403,655
============ ============ ============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $169,059,333, $33,127,594
and $202,186,927 and 15,399,839, 3,478,038
and 18,416,924 shares of beneficial interest
outstanding for Oppenheimer Bond Fund, Connecticut
Mutual Investment Accounts, Inc. - Income Account
and Combined Oppenheimer Bond Fund, respectively)
$10.98 $ 9.52 $10.98
====== ====== ======
Class B Shares:
Net asset value and redemption price per share (based on net assets of
$39,187,315, $58,767 and $39,246,082 and 3,570,470, 6,150 and 3,575,822
shares
of beneficial interest outstanding for Oppenheimer Bond Fund, Connecticut
Mutual
Investment Accounts, Inc. - Income Account, respectively)
$10.98 $ 9.56 $10.98
====== ====== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES December 31, 1995
(Unaudited)
Oppenheimer Bond Fund and Connecticut Mutual Investment Accounts, Inc. -
Income Account
CONNECTICUT MUTUAL COMBINED
OPPENHEIMER INVESTMENT ACCOUNTS OPPENHEIMER
BOND FUND INC.-INCOME ACCOUNT(1) BOND FUND
<S>
<C> <C> <C>
Class C Shares:
Net asset value and redemption price per share (based on net assets of
$3,970,646 and 361,451 shares of beneficial interest outstanding for
Oppenheimer Bond Fund)
$10.99 N/A $10.99
====== ======
*Cost
$209,990,533 $32,577,590 $242,568,123
</TABLE>
(1) Connecticut Mutual Investment Accounts, Inc. - Income Account
Class A
shares will be exchanged for Oppenheimer Bond Fund Class A shares.
Connecticut Mutual Investment Accounts, Inc. - Income Account
Class B
shares will be exchanged for Oppenheimer Bond Fund Class B shares.
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINING STATEMENT OF OPERATIONS For the Year Ended December
31, 1995 (Unaudited)
Oppenheimer Bond Fund and Connecticut Mutual Investment Accounts, Inc. -
Income Account
CONNECTICUT MUTUAL COMBINED
OPPENHEIMER
INVESTMENT ACCOUNTS PRO FORMA OPPENHEIMER
BOND FUND
INC.-INCOME ACCOUNT ADJUSTMENTS BOND FUND
<S> <C>
<C> <C> <C>
INVESTMENT INCOME:
Interest (net of foreign
withholding taxes of $13,183) $10,089,605
$3,327,978 $13,417,583
EXPENSES:
Management fees 820,507
274,057 210,774 (1) 1,305,338
Distribution and service
plan fees:
Class A 287,716
114,143 (2) 401,859
Class B 127,308
112 127,420
Class C 4,560
4,560
Transfer and shareholder servicing
agent fees 247,878
61,100 308,978
Shareholder reports 147,863
7,400 155,263
Legal and audit fees 38,082
15,180 53,262
Trustees' fees and expenses 872
3,396 4,268
Custodian fees and expenses 32,880
26,900 59,780
Registration and filing fees:
Class A 22,344
23,316 45,660
Class B 10,705
10,705
Class C 1,358
1,358
Other 21,787
-- 21,787
-----------
------------ ------------- ----------
Total expenses 1,763,860
411,461 324,917 2,500,238
Less reimbursement (20,522)
(137,292) 157,814 (3) --
-----------
------------ ------------- ----------
Net expenses 1,743,338
274,169 482,731 2,500,238
NET INVESTMENT INCOME 8,346,267
3,053,809 (482,731) 10,917,345
-----------
------------ ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on:
Investments 566,180
(717,369) (151,189)
Closing of futures contracts (931,937)
-- (931,937)
Foreign currency transactions 64,980
-- 64,980
-----------
--------- ----------
Net realized loss (300,777)
(717,369) (1,018,146)
-----------
--------- -----------
Net change in unrealized
appreciation or depreciation
on:
Investments 12,202,101
2,639,614 14,841,715
Translation of assets and
liabilities denominated in
foreign currencies (136,201)
-- (136,201)
------------
------------- ------------
Net change 12,065,900
2,639,614 14,705,514
------------
------------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINING STATEMENT OF OPERATIONS For the Year Ended December
31, 1995 (Unaudited)
Oppenheimer Bond Fund and Connecticut Mutual Investment Accounts, Inc. -
Income Account
CONNECTICUT MUTUAL COMBINED
OPPENHEIMER
INVESTMENT ACCOUNTS PRO FORMA OPPENHEIMER
BOND FUND
INC.-INCOME ACCOUNT ADJUSTMENTS BOND FUND
<S> <C>
<C> <C> <C>
Net realized and unrealized
gain 11,765,123
1,922,245 13,687,368
------------
----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $20,111,390
$4,976,054 $(482,731) $24,604,713
============
=========== ========== ===========
</TABLE>
(1) Calculated in accordance with the investment advisory agreement
of
Oppenheimer Bond Fund (.75% on the first $200 million of net
assets with
a reduction of .03% on each $200 million thereafter to $800
million,
.60% on the next $200 million and .50% on net assets in excess of
$1
billion). This assumes that the management fee structure had been
in
place for the entire period.
(2) Amounts have been restated to reflect the fees that would have
been paid
in the absence of a temporary agreement by Connecticut Mutual
Financial
Services, L.L.C., distributor of Income Fund shares, not to impose
such
fees for the fiscal year ended December 31, 1995.
(3) Amounts have been restated to exclude the voluntary assumption of
expenses by Connecticut Mutual Financial Services, L.L.C., for
Income
Fund and OppenheimerFunds, Inc. for Bond Fund during the fiscal
year
ended December 31, 1995.
<PAGE>
OPPENHEIMER INTEGRITY FUNDS
FORM N-14
PART C
OTHER INFORMATION
Item 15. Indemnification
Reference is made to Article IV of Registrant's Declaration of Trust
filed as Exhibit 24(b)(1) to Registrant's Registration Statement and
incorporated herein by reference.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
Item 16. Exhibits
(1) Amended and Restated Declaration of Trust dated June 26, 1995:
Filed with Registrant's Post-Effective Amendment No. 25, 7/10/95, and
incorporated herein by reference.
(2) Registrant's By-Laws dated 6/25/91: Filed with Registrant's
Post-Effective Amendment No. 16, 5/1/92, and refiled pursuant to Item 102
of Regulation S-T with Registrant's Post-Effective Amendment No. 23,
4/28/95, and incorporated herein by reference.
(3) Not applicable.
(4) Agreement and Plan of Reorganization: See Annex A to Part A
of this Registration Statement.
(5)(i) Specimen Class A Share Certificate for Oppenheimer Bond
Fund: Filed with Registrant's Post-Effective Amendment No. 28, 10/2/95,
and incorporated herein by reference.
(ii) Specimen Class B Share Certificate for Oppenheimer Bond
Fund: Filed with Registrant's Post-Effective Amendment No. 28, 10/2/95,
and incorporated herein by reference.
(iii) Specimen Class C Share Certificate for Oppenheimer Bond
Fund: Filed with Registrant's Post-Effective Amendment No. 28, 10/2/95,
and incorporated herein by reference.
(6) Investment Advisory Agreement dated 7/10/95 for Oppenheimer
Bond Fund: Filed as Exhibit 5(i) of Registrant's Post-Effective Amendment
No. 25, 7/10/95, and incorporated herein by reference.
(7) (i) General Distributor's Agreement dated 10/13/92: Filed
with Registrant's Post-Effective Amendment No. 17, 2/26/93, and refiled
pursuant to Item 102 of Regulation S-T with Registrant's Post-Effective
Amendment No. 23, 4/28/95, and incorporated herein by reference.
(ii) Form of Oppenheimer Funds Distributor, Inc. Dealer
Agreement: Filed with Post-Effective Amendment No. 14 to the Registration
Statement of Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850),
9/30/94, and incorporated herein by reference.
(iii) Form of Oppenheimer Funds Distributor, Inc. Broker
Agreement: Filed with Post-Effective Amendment No. 14 to the Registration
Statement of Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850),
9/30/94, and incorporated herein by reference.
(iv) Form of Oppenheimer Funds Distributor, Inc. Agency
Agreement: Filed with Post-Effective Amendment No. 14 to the Registration
Statement of Oppenheimer Main Street Funds, Inc. (Reg. No. 33-17850),
9/30/94, and incorporated herein by reference.
(v) Broker Agreement between Oppenheimer Funds Distributor,
Inc. and Newbridge Securities, Inc. dated 10/1/86: Filed with Post-
Effective Amendment No. 25 to the Registration Statement of Oppenheimer
Growth Fund (Reg. No. 2-45272), 11/1/86, and refiled with Post-Effective
Amendment No. 45 to the Registration Statement of Oppenheimer Growth Fund
(Reg. No. 2-45272), 8/22/94, pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
(8) Not applicable.
(9) Custody Agreement dated 11/12/92, between the Registrant and
The Bank of New York: Filed with Registrant's Post-Effective Amendment No.
17, 2/26/93, and refiled with Post-Effective Amendment No. 23, 4/28/95
pursuant to Item 102 of Regulation S-T, and incorporated herein by
reference.
(10) (i) Service Plan and Agreement under Rule 12b-1 of the
Investment Company Act of 1940 for Class A shares of Oppenheimer
Investment Grade Bond Fund dated 6/22/93: Filed with Registrant's Post-
Effective Amendment No. 19, 3/1/94, and incorporated herein by reference.
(ii) Distribution and Service Plan and Agreement under Rule
12b-1 of the Investment Company Act of 1940 for Class B shares of
Oppenheimer Investment Grade Bond Fund dated 7/10/95: Filed with
Registrant's Post-Effective Amendment No. 25, 7/10/95, and incorporated
herein by reference.
(iii) Distribution and Service Plan and Agreement under Rule
12b-1 of the Investment Company Act of 1940 for Class C shares of
Oppenheimer Bond Fund dated 7/10/95: Filed with Registrant's Post-
Effective Amendment No. 25, 7/10/95, and incorporated herein by reference.
(11) Opinion and Consent of Counsel dated 2/11/91: Incorporated
herein by reference to Registrant's Rule 24f-2 Notice filed on 2/19/91.
(12) Tax Opinion Relating to the Reorganization: Draft Opinion
filed herewith.
(13) Not applicable.
(14) (i) Consent of Deloitte & Touche LLP: Filed herewith.
(ii) Consent of Arthur Andersen LLP: Filed herewith.
(15) Not applicable.
(16) Powers of Attorney and Certified Board Resolution: Filed
herewith (Bridget A. Macaskill) and previously filed (all other Trustees)
with Registrant's Post-Effective Amendment No. 19, 3/1/94, and
incorporated herein by reference.
(17) Declaration of Registrant under Rule 24f-2: Filed herewith.
Item 17. Undertakings
(1) Not applicable.
(2) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver and State of Colorado on
the 9th day of February, 1996.
OPPENHEIMER INTEGRITY FUNDS
By: /s/ James C. Swain*
----------------------------------
James C. Swain, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities on the dates indicated:
Signatures Title Date
/s/ James C. Swain* Chairman of the
- ------------------ Board of Trustees February 9, 1996
James C. Swain
/s/ Jon S. Fossel* Trustee February 9, 1996
- --------------------
Jon S. Fossel
/s/ George C. Bowen* Chief Financial
- ------------------- and Accounting February 9, 1996
George C. Bowen Officer
/s/ Robert G. Avis* Trustee February 9, 1996
- ------------------
Robert G. Avis
/s/ William A. Baker* Trustee February 9, 1996
- --------------------
William A. Baker
/s/ Charles Conrad, Jr.* Trustee February 9, 1996
- -----------------------
Charles Conrad, Jr.
/s/ Raymond J. Kalinowski* Trustee February 9, 1996
- -------------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Trustee February 9, 1996
- ------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee February 9, 1996
- ----------------------
Robert M. Kirchner
/s/ Bridget A. Macaskill* President
- ----------------------- and Trustee February 9, 1996
Bridget A. Macaskill
/s/ Ned M. Steel* Trustee February 9, 1996
- ----------------
Ned M. Steel
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER INTEGRITY FUNDS
EXHIBIT INDEX
Exhibit Description
- ------- -----------
16(12) Tax Opinion (Draft) Relating to the Reorganization
16(14)(i) Consent of Deloitte & Touche LLP
16(14)(ii) Consent of Arthur Andersen LLP
16(16) Power of Attorney - Bridget A. Macaskill
16(17) Declaration of Registrant under Rule 24f-2
MERGE\285ptc2
PRELIMINARY & TENTATIVE
[Date]
Oppenheimer Bond Fund
3410 South Galena Street
Denver, CO 80231
Oppenheimer Series Fund, Inc.
2 World Trade Center
New York, NY 10048
Gentlemen:
You have requested our opinion on certain federal income tax consequences
of the Agreement and Plan of Reorganization (the "Agreement") between
Oppenheimer Integrity Funds on behalf of Oppenheimer Bond Fund ("Bond
Fund") and Oppenheimer Series Fund, Inc. (the "Company") on behalf of
Connecticut Mutual Liquid Account ("Income Fund"), a series of the
Company, as more fully described below. We have not considered any non-
income tax, or state, local or foreign income tax consequences, and,
therefore, do not express an opinion regarding the treatment that would
be given the transaction by the applicable authorities on any non-income
tax or any state, local or foreign tax issue. We also express no opinion
on nontax issues, such as corporate law or securities law matters. We
express no opinion other than that as stated immediately above, and
neither this opinion nor any prior statements are intended to imply or to
be an opinion on any other matters.
In rendering our opinion, we have relied upon the facts as described
below; the information contained in the Agreement between Bond Fund and
Income Fund dated March 1, 1996; certain representations in the Arthur
Andersen LLP arrangement dated January 26, 1996; the Representation letter
dated [______________________]; and the Arthur Andersen LLP technical
memorandum dated February 1, 1996. You have represented to us that we
have been provided all of the facts and assumptions necessary for us to
form our opinion; however, we have not independently audited or otherwise
verified any of these facts or assumptions.
Proposed Transactions
Bond Fund and Income Fund have entered into an Agreement dated March 1,
1996, to be effective as of closing, ______________________. The
Agreement consists of the acquisition by Bond Fund of substantially all
the assets of Income Fund in exchange for voting shares of Bond Fund and
the assumption by the Bond Fund of certain liabilities of Income Fund, in
accordance with the Agreement.
Immediately prior to the valuation of Income Fund's assets, Income Fund
shall declare and pay dividends which, together with all previous
PRELIMINARY & TENTATIVE
Oppenheimer Bond Fund
Page 2
[Date]
dividends, shall have the effect of distributing to the Income Fund
shareholders of all Income Fund's investment company taxable income for
taxable years ending on or prior to the closing date and all of Income
Fund's net capital gain realized, if any, in taxable years ending on or
prior to the closing date.
Under the Agreement, Income Fund will retain a cash reserve of an amount
in its discretion, to be used for the payment of expenses associated with
its dissolution and for the payment of certain Income Fund liabilities not
assumed in the transaction. The reserve shall not exceed 1% of the value
of the net assets, nor 10% in value of the gross assets of Income Fund on
the day prior to the closing. Within one year after closing, Income Fund
will pay all outstanding liabilities and taxes from its cash reserve, and,
either transfer any remaining funds to Bond Fund or to Income Fund's prior
shareholders depending upon materiality of the amount.
As soon as practicable after the closing, Income Fund will distribute to
the shareholders of Income Fund on a pro rata basis the shares of Bond
Fund received.
Each party has been advised by Massachusetts Mutual Life Insurance Company
that it will assume liability for and pay all expenses associated with
this reorganization including legal and accounting expenses as well as the
costs of required tax opinions.
A misstatement or omission of any fact or a change or amendment in any of
the facts, assumptions or representations we have relied upon, may require
a modification of all or a part of this opinion.
Premise of Opinion
Our opinion is based on the Internal Revenue Code of 1986, as amended (the
"Code"), the regulations thereunder, reported judicial decisions, and the
current position of the Internal Revenue Services (the "IRS") in such
matters as reflected in published and private rulings as of the date of
this letter, all of which are subject to change. If there is a change,
including a change having retroactive effect, in the Code, Treasury
Regulations, Internal Revenue Service rulings or releases, or in the
prevailing judicial interpretation of the foregoing, the opinions
expressed herein would necessarily have to be re-evaluated in light of any
such changes. We have no responsibility to update this opinion for
changes in above-listed law and authority occurring after the above date.
The opinions expressed herein reflect what we regard to be the material
federal income tax effects to Bond Fund, Income Fund and their respective
shareholders of the transaction described herein; nevertheless, they are
opinions only and should not be taken as an assurance of the ultimate tax
treatment.
PRELIMINARY & TENTATIVE
Oppenheimer Bond Fund
Page 3
[Date]
The opinions expressed herein are not binding on the IRS and there can be
no assurance that the IRS will not take a position contrary to any of the
opinions expressed therein. Should the IRS challenge the tax treatment
of the merger, we believe that the treatment set forth in our opinion
would prevail.
Our opinion is as of [_________________] and we have no responsibility to
update this opinion for events, transactions, circumstances or changes in
any of the facts, assumptions or representations occurring after this
date.
Our opinions set forth below are subject to the following factual
assumptions being true and correct (including statements relating to
future actions and facts represented to be to the best knowledge of
management, whether or not known). Authorized representatives of Bond
Fund and Income Fund have represented to us by letters of even date
herewith that the following assumptions are true and correct:
1. There is no plan or intention by any fund shareholder who owns
5% or more of Income Fund's outstanding shares, and, to Income
Fund's best knowledge, there is no plan or intention on the part
of the remaining fund shareholders, to redeem, sell, exchange
or otherwise dispose of a number of Bond Fund shares received
in the transaction that would reduce Income Fund shareholders'
ownership of Bond Fund shares to a number of shares having a
value, as of the closing date, of less than 50% of the value of
all of the formerly outstanding fund shares as of the same date.
2. Both Bond Fund and Income Fund will qualify as regulated
investment companies or will meet the diversification test of
Section 368(a)(2)(F)(ii) of the Code.
3. After the consummation of the transactions under the Agreement,
Bond Fund intends to operate its business in a substantially
unchanged manner and to continue the historic business of Income
Fund.
4. Bond Fund has no plan or intention to dispose of any of the
assets transferred by Income Fund, other than in the ordinary
course of business.
5. Bond Fund has no plan or intention to redeem or reacquire any
of the shares issued by it in the reorganization other than
pursuant to valid requests of shareholders.
PRELIMINARY & TENTATIVE
Oppenheimer Bond Fund
Page 4
[Date]
Federal Income Tax Consequences of the Proposed Merger
Our opinion expressed below is addressed only to those federal income tax
aspects relating to the merger which in our judgment are material to Bond
Fund, Income Fund and their respective shareholders. On the basis of
andsubject to the foregoing and in reliance upon the representations
described above, and provided that any statement of fact represented to
be made to the best knowledge of management of Income Fund or Bond Fund
is in fact true and correct (whether or not known), we are of the opinion
that
1. The transfer of substantially all of Income Fund's assets in
exchange for Class A and Class B shares of Bond Fund and the
assumption by Bond Fund of certain identified liabilities of Income
Fund followed by the distribution by Income Fund of Class A and Class
B shares of Bond Fund to the Income Fund shareholders in exchange for
their Income Fund shares will constitute a "reorganization" within
the meaning of Section 368(a)(1) of the Code and Income Fund and Bond
Fund will each be a "party to a reorganization" within the meaning
of Section 368(b) of the Code.
2. Pursuant to Section 1032 of the Code, no gain or loss will be
recognized by Bond Fund upon the receipt of the assets of Income Fund
solely in exchange for Class A and Class B shares of Bond Fund and
the assumption by Bond Fund of the identified liabilities of Income
Fund.
3. Pursuant to Section 361(a) of the Code, no gain or loss will be
recognized by Income Fund upon the transfer of the assets of Income
Fund to Bond Fund in exchange for Class A and Class B shares of Bond
Fund and the assumption by Bond Fund of certain identified
liabilities of Income Fund or upon the distribution of Class A and
Class B shares of Bond Fund to Income Fund shareholders in exchange
for Income Fund shares.
4. Pursuant to Section 354(a) of the Code, no gain or loss will be
recognized by Income Fund shareholders upon the exchange of Income
Fund shares for the Class A and Class B shares of Bond Fund.
5. Pursuant to Section 358 of the Code, the aggregate tax basis for
Class A and Class B shares of Bond Fund received by each Income Fund
shareholder pursuant to the Reorganization will be the same as the
aggregate tax basis of Income Fund shares held by each such Income
Fund shareholder immediately prior to the Reorganization.
PRELIMINARY & TENTATIVE
Oppenheimer Bond Fund
Page 5
[Date]
6. Pursuant to Section 1223 of the Code, the holding period of
Class A and Class B shares of Bond Fund to be received by each Income
Fund shareholder will include the period during which Income Fund
shares surrendered in exchange therefor were held (provided such
Income Fund shares were held as capital assets on the date of the
Reorganization).
7. Pursuant to Section 362(b) of the Code, the tax basis of the
assets of Income Fund acquired by Bond Fund will be the same as the
tax basis of such assets of Income Fund immediately prior to the
Reorganization.
8. Pursuant to Section 1223 of the Code, the holding period of the
assets of Income Fund in the hands of Bond Fund will include the
period during which those assets were held by Income Fund.
9. Bond Fund will succeed to and take into account the items of
Income Fund described in Section 381(c) of the Code, including the
earnings and profits, or deficit in earnings and profits, of Income
Fund as of the date of the transactions. Bond Fund will take these
items into account subject to the conditions and limitations
specified in Sections 381, 382, 383 and 384 of the Code and
applicable regulations thereunder.
However, in the event that any of the remaining cash reserve of Income
Fund is distributed to Income Fund's shareholders, gain will be realized
by each of Income Fund's shareholders and recognized under Section
356(a)(1) of the Code to the extent of the cash received.
No opinion is expressed about the tax treatment of the transaction under
any other provisions of the Code and regulations or about the tax
treatment of any conditions existing at the time of, or effects from, the
transaction that are not specifically covered by the above opinion. These
opinions are solely for the benefit of Bond Fund, Income Fund and their
respective shareholders and are not intended to be relied upon by anyone
other than those parties specified. Except to the extent expressly
permitted hereby, and without the prior written consent of this firm, this
letter may not be quoted in whole or in part or otherwise referred to in
any documents or delivered to any other person or entity. Any other party
receiving a copy of this letter may consult and rely upon the advice of
his/her/its own counsel, accountant or other advisor.
ARTHUR ANDERSEN LLP
cc: P. Michael Baldasaro, New York
merge\285cmaa
INDEPENDENT AUDITORS' CONSENT
We consent to use in this Registration Statement of Oppenheimer Integrity
Funds on Form N-14 of our report dated January 22, 1996 appearing in the
December 31, 1995 Annual Report of Oppenheimer Bond Fund (a series of
Oppenheimer Integrity Funds), included as part of the Statement of
Additional Information, which is part of such Registration Statement.
/s/DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
February 14, 1996
MERGE/285cm.con
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement on Form N-14 of our report
dated February 9, 1996 included (or incorporated by reference), in the
Annual Report of Connecticut Mutual Investment Accounts, Inc. Income
Account for the year ended December 31, 1995, which is part of this
registration statement, and to all references to our Firm included in this
registration statement.
/s/ ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 15, 1996
MERGE/285CMCON
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Andrew J. Donohue or Robert G. Zack, and each of them, her true
and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for her and in her capacity as a trustee of
OPPENHEIMER INTEGRITY FUNDS, a Massachusetts business trust (the "Fund"), to
sign on her behalf any and all Registration Statements (including
any post-effective amendments to Registration Statements) under the
Securities Act of 1933, the Investment Company Act of 1940 and
any amendments and supplements thereto, and other documents in
connection thereunder, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be
done in and about the premises, as fully as to all intents and
purposes as she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and each of them,
may lawfully do or cause to be done by virtue hereof.
Dated this 24th day of October, 1995.
/s/ Bridget A. Macaskill
- ---------------------------------
Bridget A. Macaskill
merge\285power
February 28, 1995
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Attn.: Mr. Frank Donaty, Jr.
Mrs. Patricia P. Williams
Re: Oppenheimer Integrity Funds/Reg. No. 2-76547, File No. 811-3420
To the Securities and Exchange Commission:
Enclosed for your information and files is a copy of an electronic
("EDGAR") filing made pursuant to Rule 24f-2 of the Investment Company Act
of 1940 (the "1940 Act") on February 27, 1995 on behalf of Oppenheimer
Investment Grade Bond Fund and Oppenheimer Value Stock Fund, the two
series of Oppenheimer Integrity Funds (the "Fund"), accompanied by an
opinion of counsel for the registration of additional shares of each such
series. The filing fees of $619 and $1,917, respectively, calculated at
the rate of 1/29 of 1% of the value of the Fund's shares sold in excess
of the shares redeemed for the fiscal year ended December 31, 1994, were
wired to the SEC's account at Mellon Bank on February 21, 1995 (Fed Wire
Nos. 2733 and 2735) and referenced this filing. The Fund has previously
registered an indefinite number of shares pursuant to Rule 24f-2.
The purpose of the Notice is to make definite the registration of
shares in reliance on Rule 24f-2 as follows:
<TABLE>
<CAPTION>
Oppenheimer Investment Grade Bond Fund Oppenheimer Value Stock Fund
<S> <C>
Class A: 1,071,379 Class A: 1,880,960
Class B: 293,817 Class B: 499,617
</TABLE>
Very truly yours,
Katherine P. Feld
Vice President
& Associate Counsel
(212) 323-0252
KPF/gl
Enclosures
cc: Allan B. Adams, Esq.
Lynn Coluccy
Gloria LaFond
SEC/285325.24F
<PAGE>
Rule 24f-2 Notice for Oppenheimer Integrity Funds
for the account of Oppenheimer Investment Grade Bond Fund
3410 South Galena Street, Denver, Colorado 80231
(Registration No. 2-76547, File No. 811-3240)
NOTICE IS HEREBY GIVEN that Oppenheimer Integrity Funds for the account
of Oppenheimer Investment Grade Bond Fund having previously filed by post-
effective amendment to its registration statement a declaration that an
indefinite number of its shares of beneficial interest were being
registered pursuant to Rule 24f-2 of the Investment Company Act of 1940,
now elects to continue such indefinite registration.
(i) This Notice is being filed for the fiscal year ended December 31,
1994.
(ii) Shares registered other than pursuant to this Rule that remained
unsold at the beginning of the above fiscal year were as follows:
Class A: 0 Class B: 0
(iii) Shares registered other than pursuant to this Rule during the above
fiscal year were as follows:
Class A: 221,891 Class B: 0
(iv) The number of shares sold during the above fiscal year were as
follows: (1)
Class A: 1,071,379 Class B: 293,817
(v) Shares sold during the above fiscal year in reliance upon
registration pursuant to this Rule were as follows:
Class A: 1,071,379 Class B: 293,817
Pursuant to the requirements of the Investment Company Act of 1940, the
undersigned registrant has caused this notice to be signed on its behalf
this 22nd day of February, 1995.
Oppenheimer Integrity Funds
for the account of
Oppenheimer Investment Grade Bond Fund
By /s/ Robert G. Zack
-----------------------------------
Robert G. Zack, Assistant Secretary
__________________
(1) The calculation of the aggregate sales price is made pursuant to Rule
24f-2 of the Investment Company Act of 1940. Based upon an actual
aggregate sales price and redemption price for the respective class during
the previous fiscal year as shown below, the total filing fee (calculated
at the rate of 1/29 of 1%) is as given below. Class A shares to be re-
registered pursuant to Rule 24e-2 total 633,129.
<TABLE>
<CAPTION>
Difference
Value of Between Value
Value of Shares Sold & Value Filing
Shares Sold Redeemed Redeemed Fee
<S> <C> <C> <C> <C>
Class A $11,399,405 ($17,865,173) ($6,465,768) $-0-
Class B $ 3,089,618 ($ 1,294,834) $1,794,784 $619
Total $619
</TABLE>
SEC/285325.24F
<PAGE>
Rule 24f-2 Notice for Oppenheimer Integrity Funds
for the account of Oppenheimer Value Stock Fund
3410 South Galena Street, Denver, Colorado 80231
(Registration No. 2-76547, File No. 811-3420)
NOTICE IS HEREBY GIVEN that Oppenheimer Integrity Funds for the account
of Oppenheimer Value Stock Fund having previously filed by post-effective
amendment to its registration statement a declaration that an indefinite
number of its shares of beneficial interest were being registered pursuant
to Rule 24f-2 of the Investment Company Act of 1940, now elects to
continue such indefinite registration.
(i) This Notice is being filed for the fiscal year ended December 31,
1994.
(ii) Shares registered other than pursuant to this Rule that remained
unsold at the beginning of the above fiscal year were as follows:
Class A: 0 Class B: 0
(iii) Shares registered other than pursuant to this Rule during the above
fiscal year were as follows:
Class A: 0 Class B: 0
(iv) The number of shares sold during the above fiscal year were as
follows: (1)
Class A: 1,880,960 Class B: 499,617
(v) Shares sold during the above fiscal year in reliance upon
registration pursuant to this Rule were as follows:
Class A: 1,880,960 Class B: 499,617
Pursuant to the requirements of the Investment Company Act of 1940, the
undersigned registrant has caused this notice to be signed on its behalf
this 22nd day of February, 1995.
Oppenheimer Integrity Funds
for the account of
Oppenheimer Value Stock Fund
By /s/ Robert G. Zack
-----------------------------------
Robert G. Zack, Assistant Secretary
__________________
(1) The calculation of the aggregate sales price is made pursuant to Rule
24f-2 of the Investment Company Act of 1940. Based upon an actual
aggregate sales price and redemption price for the respective class during
the previous fiscal year as shown below, the total filing fee (calculated
at the rate of 1/29 of 1%) is as given below. Class A shares redeemed in
excess of shares sold to be re-registered total 43,398.
<TABLE>
<CAPTION>
Difference
Value of Between Value
Value of Shares Sold & Value Filing
Shares Sold Redeemed Redeemed Fee
<S> <C> <C> <C> <C>
Class A $27,564,846 ($27,939,743) ($ 374,897) $ -0-
Class B $ 7,201,783 ($ 1,642,398) $ 5,559,385 $ 1,917
Total $ 1,917
</TABLE>
SEC/285325.24F
<PAGE>
MYER, SWANSON, ADAMS & WOLF, P.C.
Attorneys At Law
The Colorado State Bank Building
1600 Broadway - Suite 1850
Denver, Colorado 80202-4918
Telephone (303) 866-9800
Facsimile (303) 866-9818
February 22, 1995
Oppenheimer Integrity Funds
3410 South Galena Street
Denver, Colorado 80231
Gentlemen:
In connection with the public offering of the no par value Class A and
Class B shares of the Oppenheimer Investment Grade Bond Fund series of
Oppenheimer Integrity Funds, a business trust organized under the laws of
the Commonwealth of Massachusetts (the "Trust"), as counsel for the Trust,
we have examined such records and documents and have made such further
investigation and examination as we deem necessary for the purpose of this
opinion.
As of the end of its fiscal year, the Trust was composed of two separate
series, the Oppenheimer Value Stock Fund and the Oppenheimer Investment
Grade Bond Fund. This opinion is rendered in connection with only the
Class A and Class B shares of the Oppenheimer Investment Grade Bond Fund
series.
We are advised that during the period ending December 31, 1994, the
following shares of Class A and Class B shares of beneficial interest in
the Oppenheimer Investment Grade Bond Fund series of the Trust were sold
in reliance on the registration of an indefinite number of shares pursuant
to Rule 24f-2 of the Investment Company Act of 1940:
Oppenheimer Investment Grade Bond Fund
Class A shares: 1,071,379
Class B shares: 293,817
It is our opinion that the said shares of beneficial interest in said
series sold by the Trust in reliance on Rule 24f-2 of the Investment
Company Act of 1940 are legally issued and, subject to the matters
mentioned in the next paragraph, fully paid and nonassessable by the
Trust.
Under Massachusetts law, shareholders of the Trust may, under certain
circumstances, be held personally liable as partners for the obligations
of the Trust. The Declaration of Trust does, however, contain an express
disclaimer of shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of
the trust property of any shareholder held personally liable for the
obligations of the Trust. The Declaration of Trust also provides that the
Trust shall, upon request, assume the defense of any claim made against
any shareholder for any act or obligation of the Trust and satisfy any
judgment thereon.
Sincerely,
/s/ Allan B. Adams
Allan B. Adams
of MYER, SWANSON, ADAMS & WOLF, P.C.
<PAGE>
MYER, SWANSON, ADAMS & WOLF, P.C.
Attorneys At Law
The Colorado State Bank Building
1600 Broadway - Suite 1850
Denver, Colorado 80202-4918
Telephone (303) 866-9800
Facsimile (303) 866-9818
February 22, 1995
Oppenheimer Integrity Funds
3410 South Galena Street
Denver, Colorado 80231
Gentlemen:
In connection with the public offering of the no par value Class A and
Class B shares of the Oppenheimer Value Stock Fund series of Oppenheimer
Integrity Funds, a business trust organized under the laws of the
Commonwealth of Massachusetts (the "Trust"), as counsel for the Trust, we
have examined such records and documents and have made such further
investigation and examination as we deem necessary for the purpose of this
opinion.
As of the end of its fiscal year, the Trust was composed of two separate
series, the Oppenheimer Value Stock Fund and the Oppenheimer Investment
Grade Bond Fund. This opinion is rendered in connection with only the
Class A and Class B shares of the Oppenheimer Value Stock Fund series.
We are advised that during the period ending December 31, 1994, the
following shares of Class A and Class B shares of beneficial interest in
the Oppenheimer Value Stock Fund series of the Trust were sold in reliance
on the registration of an indefinite number of shares pursuant to Rule
24f-2 of the Investment Company Act of 1940:
Oppenheimer Value Stock Fund
Class A shares: 1,880,960
Class B shares: 499,617
It is our opinion that the said shares of beneficial interest in said
series sold by the Trust in reliance on Rule 24f-2 of the Investment
Company Act of 1940 are legally issued and, subject to the matters
mentioned in the next paragraph, fully paid and nonassessable by the
Trust.
Under Massachusetts law, shareholders of the Trust may, under certain
circumstances, be held personally liable as partners for the obligations
of the Trust. The Declaration of Trust does, however, contain an express
disclaimer of shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of
the trust property of any shareholder held personally liable for the
obligations of the Trust. The Declaration of Trust also provides that the
Trust shall, upon request, assume the defense of any claim made against
any shareholder for any act or obligation of the Trust and satisfy any
judgment thereon.
Sincerely,
/s/ Allan B. Adams
Allan B. Adams
of MYER, SWANSON, ADAMS & WOLF, P.C.
SEC\285325.24F
