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The MONYMaster
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Prospectus Portfolio
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Individual Flexible
Payment Variable
Annuity Contracts
Issued by
The Mutual Life Insurance Company of New York
MONY Series Fund, Inc.
Enterprise Accumulation Trust
July 12, 1996
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PROSPECTUS
DATED JULY 12, 1996
INDIVIDUAL FLEXIBLE PAYMENT VARIABLE ANNUITY CONTRACTS
ISSUED BY
MONY VARIABLE ACCOUNT A
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
The Individual Flexible Payment Variable Annuity Contracts (the
"Contracts") described in this Prospectus provide for accumulation of cash value
on a variable basis and payment of annuity benefits. The Contracts are designed
for use by individuals in retirement plans that may or may not qualify for
special federal income tax treatment. The types of pension plans that may
purchase the Contracts are retirement plans which receive favorable tax
treatment under Sections 401, 403, 408, or 457 of the Internal Revenue Code.
(See "Definitions -- Qualified Plans" at page 2.)
At the election of the Contractholder, purchase payments for the Contracts
will be allocated to either (i) a segregated investment account of The Mutual
Life Insurance Company of New York (the "Company"), which account has been
designated MONY Variable Account A (the "Variable Account"), or (ii) the
Guaranteed Interest Account, which is a part of the Company's General Account or
to both as the Contractholder may determine. The Variable Account invests in
shares of MONY Series Fund, Inc. and The Enterprise Accumulation Trust at their
net asset value. (See "The Funds" at page 10.) Upon the issuance of the
Contract, purchase payments for the Contracts will be allocated to the Money
Market Subaccount of the Variable Account and will be held there pending
expiration of the Free Look Period. After expiration of the Free Look Period,
the Cash Value of the Contract will automatically be transferred to one or more
of the Subaccounts of the Variable Account in accordance with the instructions
of the Contractholder. (See "PAYMENT AND ALLOCATION OF NET PURCHASE PAYMENTS" at
page 14.) Contractholders bear the complete investment risk for all amounts
allocated to the Variable Account. This Prospectus generally describes only the
variable features of the Contract. (For a summary of the Guaranteed Interest
Account, see "Guaranteed Interest Account" at page 12.) This Prospectus sets
forth the basic information that a prospective purchaser should know before
investing. Please keep this Prospectus for future reference.
A Statement of Additional Information dated May 1, 1996, incorporated
herein by reference, and containing additional information about the Contracts,
has been filed with the Securities and Exchange Commission. The Statement of
Additional Information is available from the Company without charge upon written
request to the address shown on the request form on page 35 of this Prospectus
or by telephoning 1-800-487-6669. The Table of Contents of the Statement of
Additional Information can be found on page of this Prospectus.
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy the Contracts in any jurisdiction in which such may not be
lawfully made.
In pursuing its investment objective, the High-Yield Bond Subaccount
purchases shares of the High Yield Bond Portfolio which may invest significantly
in lower rated bonds, commonly referred to as "Junk Bonds". Bonds of this type
are considered to be speculative with regard to the payment of interest and
return of principal. Investment in these types of securities have special risks
and therefore, may not be suitable for all investors. Investors should carefully
assess the risks associated with allocating purchase payments to this
subaccount.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION, OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE. THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED
(OR PRECEDED) BY A CURRENT PROSPECTUS FOR MONY SERIES FUND, INC.
AND THE ENTERPRISE ACCUMULATION TRUST.
------------------------
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
1740 BROADWAY
NEW YORK, NEW YORK 10019
1-800-487-6669
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Definitions........................................................................... 1
Synopsis.............................................................................. 3
The Company and the Variable Account.................................................. 10
The Mutual Life Insurance Company of New York....................................... 10
MONY Variable Account A............................................................. 10
The Funds........................................................................... 10
Guaranteed Interest Account........................................................... 12
Payment and Allocation of Net Purchase Payments....................................... 14
Issuance of the Contract............................................................ 14
Free Look Privilege................................................................. 15
Allocation of Net Purchase Payments and Cash Value.................................. 15
Termination of the Contract......................................................... 18
Surrenders............................................................................ 18
Death Benefit......................................................................... 20
Death Benefit Provided by the Contract.............................................. 20
Election and Effective Date of Election............................................. 20
Payment of Death Benefit............................................................ 20
Charges and Deductions................................................................ 20
Deductions from Payments............................................................ 20
Charges Against Cash Value.......................................................... 21
Mortality and Expense Risk Charge................................................... 23
Taxes............................................................................... 23
Investment Advisory Fee............................................................. 23
Annuity Provisions.................................................................... 24
Annuity Commencement Date........................................................... 24
Election and Change of Settlement Option............................................ 25
Settlement Options.................................................................. 25
Frequency of Annuity Payments....................................................... 26
Additional Provisions............................................................... 26
Other Provisions...................................................................... 26
Ownership........................................................................... 26
Provision Required by Section 72(s) of the Code..................................... 26
Provision Required by Section 401(a)(9) of the Code................................. 27
Contingent Annuitant................................................................ 27
Assignment.......................................................................... 28
Change of Beneficiary............................................................... 28
Substitution of Securities.......................................................... 28
Modification of the Contracts....................................................... 29
Change in Operation of Variable Accounts............................................ 29
Voting Rights......................................................................... 29
Distribution of the Contracts......................................................... 30
Federal Tax Status.................................................................... 30
Introduction........................................................................ 30
Tax Treatment of the Company........................................................ 31
Taxation of Annuities in General.................................................... 31
Annuity Contracts Covered by Section 403(b) of the Code............................. 31
Retirement Plans.................................................................... 32
Performance Data...................................................................... 32
Additional Information................................................................ 33
Legal Proceedings..................................................................... 33
Financial Statements.................................................................. 34
Table of Contents of Statement of Additional Information.............................. 35
Calculation of Surrender Charge....................................................... A-1
</TABLE>
i
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DEFINITIONS
ANNUITANT -- The person upon whose continuation of life any annuity payment
depends.
ANNUITY COMMENCEMENT DATE -- The date on which annuity payments are to
commence.
BENEFICIARY -- The party entitled to receive benefits payable at the death
of the Annuitant or (if applicable) the Contingent Annuitant.
CASH VALUE -- The dollar value as of any Valuation Date of all amounts
accumulated under the Contract.
COMPANY -- The Mutual Life Insurance Company of New York.
CONTINGENT ANNUITANT -- The party designated by the Contractholder to
become the Annuitant, subject to certain conditions, on the death of the
Annuitant.
CONTRACT -- The Flexible Payment Variable Annuity Contract offered by the
Company and described in this Prospectus.
CONTRACT ANNIVERSARY -- An anniversary of the Contract Date of the
Contract.
CONTRACTHOLDER -- The person so designated in the application. If a
Contract has been absolutely assigned, the assignee becomes the Contractholder.
A collateral assignee is not the Contractholder.
CONTRACT DATE -- The date shown as the Contract Date in the Contract.
CONTRACT YEAR -- Any period of twelve (12) months commencing with the
Contract Date and each Contract Anniversary thereafter.
THE ENTERPRISE ACCUMULATION TRUST -- The Enterprise Accumulation Trust, a
Massachusetts business trust formerly Quest for Value Accumulation Trust, a
Massachusetts business trust.
FREE LOOK PERIOD -- A period which follows the application for the Contract
and its issuance to the Contractholder. The period runs to the date which 10
days (or longer in certain states) after the Contractholder receives the
Contract. (The Free Look Period is referred to in the Contract as the "Right to
Return Contract" period.) During the Free Look Period, the Contractholder may
cancel the Contract and receive a refund.
FUNDS -- MONY Series Fund, Inc. and The Enterprise Accumulation Trust.
GUARANTEED FREE SURRENDER AMOUNT --
For Non-Qualified Contract -- An amount, up to 10 percent of the Contract's
Cash Value on the date the first partial surrender request is received during a
Contract Year, that may be surrendered without the imposition of a Surrender
Charge. For the purposes of the Guaranteed Free Surrender Amount only, Non-
Qualified Contracts include Contracts issued for IRAs and SEP-IRAs.
For Qualified Contract -- An amount, up to the greater of $10,000 (but not
more than the Contract's Cash Value) or 10 percent of the Contract's Cash Value
(on the date the first partial surrender request is received during a Contract
Year), that may be surrendered without the imposition of a Surrender Charge. For
the purposes of the Guaranteed Free Surrender Amount only, Qualified Contracts
include Qualified Contracts issued on and after May 1, 1994 and exclude
Contracts issued for IRAs and SEP-IRAs.
GUARANTEED INTEREST ACCOUNT -- A part of the Company's general account, the
Guaranteed Interest Account pays interest at a rate declared by the Company,
which the Company guarantees will not be less than 4%. For Contracts issued on
or after May 1, 1994 (or on or after such later date as approval required in
certain states is obtained), the rate declared by the Company is guaranteed to
be not less than 3.5%.
HOME OFFICE -- The Company's administrative office at 1740 Broadway, New
York, N.Y. 10019. "Home Office" also includes the Company's Operations Center at
1 MONY Plaza, Syracuse, N.Y. 13202.
MONY SERIES FUND -- MONY Series Fund, Inc., a Maryland corporation.
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NET PURCHASE PAYMENT -- An amount equal to a Purchase Payment, less any
deduction for premium or similar taxes.
NON-QUALIFIED CONTRACTS -- Contracts issued under Non-Qualified Plans.
NON-QUALIFIED PLANS -- Retirement Plans that do not receive favorable tax
treatment under Sections 401, 403, or 408 of the Internal Revenue Code.
OPERATIONS CENTER -- The administrative office of the Company located at 1
MONY Plaza, Syracuse, New York 13202.
PORTFOLIO -- A separate investment portfolio of the Funds.
PURCHASE PAYMENT (PAYMENT) -- An amount paid to the Company by the
Contractholder or on the Contractholder's behalf as consideration for the
benefits provided by the Contract.
QUALIFIED CONTRACTS -- Contracts issued under Qualified Plans.
QUALIFIED PLANS -- Retirement plans that receive favorable tax treatment
under Sections 401, 403, 408, or 457 of the Internal Revenue Code.
SUBACCOUNT -- A subdivision of the Variable Account. Each Subaccount
invests exclusively in the shares of a corresponding Portfolio of the Funds.
SUCCESSOR CONTRACTHOLDER -- The living person who, at the death of the
Contractholder, becomes the new Contractholder.
SURRENDER CHARGE -- A contingent deferred sales charge that may be applied
against amounts surrendered. (See "Charges Against Cash Value -- Surrender
Charge" at page 21.)
SURRENDER VALUE -- The Contract's Cash Value, less (1) any applicable
Surrender Charge and (2) any applicable Annual Contract Charge.
UNIT -- The measure by which the Contract's interest in each Subaccount is
determined.
VALUATION DATE -- Each day that the New York Stock Exchange is open for
trading or any other day on which there is sufficient trading in the securities
of a Portfolio of the Fund to affect materially the value of the Units of the
corresponding Subaccount.
VARIABLE ACCOUNT -- A separate investment account of the Company,
designated as MONY Variable Account A, into which Net Purchase Payments will be
allocated.
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SYNOPSIS
THE CONTRACTS
The Individual Flexible Payment Variable Annuity Contracts (the
"Contracts") described in this Prospectus provide for the accumulation of values
on a variable basis or a guaranteed interest basis or a combination of both and
the payment of annuity benefits. The Contracts are designed for use in
connection with personal retirement plans, some of which (the "Qualified Plans")
may qualify for federal income tax advantages available under Sections 401, 403,
408 and 457 of the Internal Revenue Code (the "Code").
Effective January 1, 1989, the Contracts offered by this Prospectus have
been withdrawn from sale in connection with Qualified Plans which intend to
qualify for federal income tax advantages available under Section 403(b) of the
Code.
THE VARIABLE ACCOUNT
Net Purchase Payments for the Contracts will be allocated at the
Contractholder's option to Sub-accounts, made available therefor in accordance
with the terms of the Contracts, of a segregated investment account of The
Mutual Life Insurance Company of New York (the "Company"), which account has
been designated MONY Variable Account A (the "Variable Account") or to the
Guaranteed Interest Account, which is a part of the Company's general account
and consists of all the Company's assets other than assets allocated to
segregated investment accounts of the Company, including the Variable Account.
The Sub-accounts of the Variable Account invest in shares of MONY Series Fund,
Inc. (the "MONY Series Fund") and The Enterprise Accumulation Trust (the
"Accumulation Trust") (the MONY Series Fund and the Accumulation Trust are
collectively called the "Funds") at their net asset value. (See "The Funds" at
page 10). Contractholders bear the entire investment risk for all amounts
allocated to the Variable Account. Net Purchase Payments allocated to the
Guaranteed Interest Account will be credited with interest at rates guaranteed
by the Company for specified periods. (See "Guaranteed Interest Account" at page
12.)
PURCHASE PAYMENTS
For Non-Qualified Plans and individual retirement accounts and annuities
purchased by individuals under Section 408 of the Code (other than Simplified
Employee Pensions), the minimum initial Purchase Payment for the Contract is
$2,000, except that, on and after May 1, 1992, the minimum initial Purchase
Payment for individuals is $600 if Purchase Payments are made through automatic
checking account withdrawals. For H.R. 10 plans, certain corporate or
association retirement plans, Simplified Employee Pensions under Section 408 of
the Code, and annuity purchase plans sponsored by certain tax-exempt
organizations, governmental entities, or public school systems, the minimum
initial Purchase Payment is $600. Additional Purchase Payments of at least $100
may be made at any time. Different limits apply where certain automatic payment
plans are used. (See "Issuance of the Contract" at page 14.) The Company may
change any of these requirements in the future.
DEDUCTIONS FROM PURCHASE PAYMENTS
Deductions may be made from Purchase Payments for premium or similar taxes.
Currently, the Company makes no such deduction, but may do so with respect to
future payments. The amount of the deduction will vary from state to state, but
will generally range from 0 percent to 3.5 percent of Payments. Residents of the
Commonwealth of Pennsylvania should be aware that a tax on Purchase Payments has
been adopted; however, the Company currently is assuming responsibility for
payment of this tax. In the event that the Company will begin to make deductions
for such tax from future Purchase Payments, it will give notice to each affected
Contractholder.
FREE LOOK PRIVILEGE
Within ten days (or longer in certain states) of the day the Contract is
delivered to the Contractholder, it may be returned to the Company or to the
agent through whom it was purchased. When the Contract is
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<PAGE> 7
received by the Company, it will be voided as if it had never been in force.
Except for Contracts entered into in the Commonwealth of Pennsylvania, the
amount to be refunded is equal to the greater of: (i) all Purchase Payments; and
(ii) the Cash Value of the Contract (as of the date the returned Contract is
received at the Home Office or a local office of the Company, or by the agent
who sold the Contract, or, if returned by mail, upon being postmarked, properly
addressed, and postage prepaid) plus any deductions from Purchase Payments for
taxes applicable to annuity considerations that may have been deducted, any
mortality and expense risk charges deducted in determining the Unit value of the
Variable Account, and asset charges deducted in determining the share value of
the Fund. For Contracts entered into in the Commonwealth of Pennsylvania, the
amount to be refunded is described in clause (ii) of the immediately preceding
sentence.
SURRENDER CHARGE
A contingent deferred sales charge (called a "Surrender Charge") will be
imposed upon requests for surrenders or commencement of annuity benefits where
the amount requested exceeds the amount of Net Purchase Payments during the
Contract Year when the surrender or commencement of annuity benefits is
requested and during the seven preceding Contract Years.
The Surrender Charge, which otherwise would have been deducted, will not be
deducted to the extent necessary to permit the Contractholder to obtain, for
Qualified Contracts (other than Contracts issued for IRA and SEP-IRA) an amount
up to the greater of $10,000 (but not more than the Contract's Cash Value) or 10
percent of the Contract's Cash Value on the date the first partial surrender
request is received, and for Non-Qualified Contracts (and Contracts issued for
IRA and SEP-IRA and Qualified Contracts issued before May 1, 1994), an amount up
to 10% of the Cash Value of the Contract on the date the first partial surrender
request is received. The Company reserves the right to limit the number of
partial surrenders under this provision to 12 during any Contract Year. In
addition, the Contract details certain other circumstances under which a
surrender charge will not be imposed. The Surrender Charge is intended to
reimburse the Company for expenses incurred that are related to sales of the
Contract. In no event will the aggregate Surrender Charge exceed 7 percent of
the total Purchase Payments made in the Contract Year of the surrender and
during the 7 preceding Contract Years. (See "Charges Against Cash
Value -- Surrender Charge" at page 21.)
MORTALITY AND EXPENSE RISK CHARGE
A Mortality and Expense Risk Charge is deducted daily from the net assets
of the Variable Account for mortality and expense risks assumed by the Company.
This daily charge is equal to a charge on an annual basis of 1.25 percent of the
net assets of the Variable Account. (See "Mortality and Expense Risk Charge" at
page 23.)
TRANSFER CHARGE
Contract value may be transferred without charge as many as 4 times in any
Contract Year. For any additional transfer during a Contract Year, a transfer
charge is not currently imposed, but the Company has reserved the right to
impose a charge for each transfer in excess of 4, which will not exceed $25 per
transfer. If imposed, the transfer charge will be deducted from the Contract's
Cash Value. (See "Charges Against Cash Value -- Transfer Charge" at page 23.)
ANNUAL CONTRACT CHARGE
On each Contract Anniversary prior to the Annuity Commencement Date, on the
Annuity Commencement Date, and on full surrender of the Contract, the Company
deducts an Annual Contract Charge from the Cash Value, to reimburse the Company
for administrative expenses relating to the maintenance of the Contract. The
charge is currently $30, but the Company may in the future change the amount of
the charge. The charge will never, however, exceed $50. (See "Charges Against
Cash Value -- Annual Contract Charge" at page 22.)
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DEATH BENEFIT
In the event of death of the Annuitant (and the Contingent Annuitant, if
one has been named) prior to the Annuity Commencement Date, the Company will pay
a death benefit to the Beneficiary. If death of the Annuitant occurs after the
Annuity Commencement Date, no death benefit will be payable except as may be
payable under the settlement option selected. (See "Death Benefit" at page 20.)
TAX UPON SURRENDER
Amounts withdrawn may be subject to income tax. In addition, a penalty tax
may be payable pursuant to the Internal Revenue Code on withdrawal of amounts
accumulated under any annuity contract. (See "Federal Tax Status" at page 20.)
THE MERGER
Pursuant to an Agreement and Plan of Merger, entered into between MONY
Legacy Life Insurance Company ("MONY Legacy") and the Company, MONY Legacy was
merged ("Merger") into the Company on February 28, 1991. As a result of the
Merger, the Company became the depositor of, and became obligated under,
contracts issued by MONY Legacy ("Legacy Contracts") which are substantially
similar to the Contracts, and the assets, reserves, and other liabilities
allocated to the MONY Legacy Variable Account A (to which purchase payments made
for the Legacy Contracts were allocated prior to the Merger) became the assets,
reserves, and other liabilities of the Variable Account.
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THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
MONY VARIABLE ACCOUNT A
TABLE OF FEES FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
CONTRACTOWNER TRANSACTION EXPENSES:
Maximum Deferred Sales Load (Surrender Charge) (as a percentage of
amount surrendered).............................................................. 7%*
ANNUAL CONTRACT CHARGE................................................................ $30
SEPARATE ACCOUNT ANNUAL EXPENSES:
Mortality and Expense Risk Fees..................................................... 1.25%**
</TABLE>
ANNUAL EXPENSES OF MONY SERIES FUND, INC. AND THE ENTERPRISE ACCUMULATION TRUST:
MONY SERIES FUND, INC.
ANNUAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1995
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
INTERMEDIATE LONG TERM GOVERNMENT MONEY
TERM BOND BOND SECURITIES MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ --------- ---------- ---------
<S> <C> <C> <C> <C>
Expenses***.................................. .09% .08% .34% .06%
Management Fees.............................. .40% .40% .40% .40%
--- --- --- ---
Total MONY Series Fund, Inc. Annual
Expenses................................... .49% .48% .74% .46%
=== === === ===
</TABLE>
THE ENTERPRISE ACCUMULATION TRUST
PRO FORMA ANNUAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1995
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
SMALL INTERNATIONAL HIGH YIELD
EQUITY CAP MANAGED GROWTH BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO+ PORTFOLIO+
--------- --------- ------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Expenses........................... .09% .09% .07% .70% .25%
Management Fees.................... .80%++ .80%++ .76%++ .85% .60%
--- --- --- ---- ---
Total Accumulation Trust Annual
Expenses After Expense
Reimbursement.................... .89%+++ .89%+++ .83%+++ 1.55%+++ .85%+++
=== === === ==== ===
</TABLE>
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* The Surrender Charge percentage, which reduces to zero as shown in the table
below, is determined by the number of Contract Anniversaries since a
purchase payment was received.
SURRENDER CHARGE PERCENTAGE TABLE
<TABLE>
<CAPTION>
NUMBER OF CONTRACT SURRENDER
ANNIVERSARIES SINCE CHARGE
PURCHASE PAYMENT RECEIVED PERCENTAGE
- ------------------------- ----------
<S> <C>
0 7%
1 7
2 6
3 6
4 5
5 4
6 3
7 2
8 (or more) 0
</TABLE>
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The Surrender Charge may be reduced under certain circumstances which
include reduction in order to guarantee that certain amounts may be received
free of surrender charge. (See "Charges against Cash Value -- Guaranteed Free
Surrender Amount" at page 22.)
** The Mortality and Expense Risk charge is deducted at a daily rate which is
equivalent to an annual rate of 1.25 percent from the value of the net
assets of the Separate Account.
*** Includes custodial credit percentages as follows: Intermediate Term
Bond -- .0036 Long Term Bond -- .0020%; Government Securities -- .0040%;
and Money Market -- .0034%, which expenses are borne by the Investment
Adviser.
+ The Sub-accounts corresponding to these Portfolios first became available
for allocation in November 1994.
++ Management Fees reflect investment advisory fees which became effective on
and after May 1, 1996. Prior thereto, the investment advisory fees were
.60%. (See "CHARGES AND DEDUCTIONS -- Investment Advisory Fee" at page 23.)
+++ These expenses reflect expense reimbursements in effect on May 1, 1995.
Absent these expense reimbursements, expenses would have been as follows:
Equity -- .92%; Small Cap -- .92%; Managed -- .83%, International
Growth -- 2.21%; and High Yield Bond -- 1.59%. The Equity, Small Cap, and
Managed Portfolio reimbursements relate to mutual fund accounting expense.
The purpose of the Table of Fees beginning on page 6 is to assist the
Contractholder in understanding the various costs and expenses that the
Contractholder will bear, directly or indirectly. The table reflects the
expenses of the separate account as well as of MONY Series Fund, Inc. and The
Enterprise Accumulation Trust. MONY Series Fund, Inc. and The Enterprise
Accumulation Trust have provided information relating to their respective
operations. The expenses borne by the Separate Account are explained under the
caption "CHARGES AND DEDUCTIONS" at page 20 of this Prospectus. The expenses
borne by the MONY Series Fund, Inc. are explained under the caption "INVESTMENT
MANAGEMENT ARRANGEMENTS AND EXPENSES" at page 18 of the accompanying prospectus
for MONY Series Fund, Inc. The expenses borne by The Enterprise Accumulation
Trust assumes that the expense reimbursements in effect on and after May 1, 1990
for the Equity, Small Cap, and Managed Portfolios which limit the total annual
expenses to 1.00% of average net assets and expense reimbursements which limit
the total annual expenses of the International Growth Portfolio to 1.55% of
average net assets and the High Yield Bond Portfolio to .85% of average net
assets, will continue throughout the period shown and are explained under the
caption "MANAGEMENT OF THE FUND" at page of the accompanying prospectus for
The Enterprise Accumulation Trust. Effective on and after May 1, 1996 and at
least through April 1, 1997, as a part of the increase in investment advisory
fees, the investment adviser has agreed to reimburse The Enterprise Accumulation
Trust for expenses which exceed .95% of the average daily net assets of the
Equity, Small Cap, and Managed Portfoliios of the Trust. The table does not
reflect income taxes or penalty taxes which may become payable under the
Internal Revenue Code or premium or other taxes which may be imposed under state
or local laws.
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EXAMPLE
If you surrender your Contract at the end of the time periods shown below,
you would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
<TABLE>
<CAPTION>
AFTER AFTER AFTER AFTER
SUBACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity........................................... $ 86 $ 124 $ 166 $ 261
Small Cap........................................ $ 86 $ 124 $ 166 $ 261
Managed.......................................... $ 85 $ 123 $ 163 $ 254
International Growth............................. $ 92 $ 144 $ 199 $ 325
High Yield Bond.................................. $ 85 $ 123 $ 164 $ 256
Intermediate Term Bond........................... $ 82 $ 112 $ 145 $ 219
Long Term Bond................................... $ 82 $ 112 $ 145 $ 218
Government Securities............................ $ 84 $ 120 $ 158 $ 245
Money Market..................................... $ 81 $ 111 $ 144 $ 216
</TABLE>
If you annuitize at the end of the time periods shown below, you would pay
the following expenses on a $1,000 investment, assuming 5% annual return on
assets:
<TABLE>
<CAPTION>
AFTER AFTER AFTER AFTER
SUBACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity........................................... $ 86 $ 124 $ 122 $ 261
Small Cap........................................ $ 86 $ 124 $ 122 $ 261
Managed.......................................... $ 85 $ 123 $ 118 $ 254
International Growth............................. $ 92 $ 144 $ 154 $ 325
High Yield Bond.................................. $ 85 $ 123 $ 119 $ 256
Intermediate Term Bond........................... $ 82 $ 112 $ 101 $ 219
Long Term Bond................................... $ 82 $ 112 $ 101 $ 218
Government Securities............................ $ 84 $ 120 $ 114 $ 245
Money Market..................................... $ 81 $ 111 $ 100 $ 216
</TABLE>
If you do not surrender your Contract at the end of the time periods shown
below, you would pay the following expenses on a $1,000 investment, assuming 5%
annual return on assets:
<TABLE>
<CAPTION>
AFTER AFTER AFTER AFTER
SUBACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity........................................... $ 23 $ 71 $ 122 $ 261
Small Cap........................................ $ 23 $ 71 $ 122 $ 261
Managed.......................................... $ 22 $ 69 $ 118 $ 254
International Growth............................. $ 30 $ 91 $ 154 $ 325
High Yield Bond.................................. $ 23 $ 70 $ 119 $ 256
Intermediate Term Bond........................... $ 19 $ 59 $ 101 $ 219
Long Term Bond................................... $ 19 $ 58 $ 101 $ 218
Government Securities............................ $ 22 $ 66 $ 114 $ 245
Money Market..................................... $ 19 $ 58 $ 100 $ 216
</TABLE>
The examples above should not be considered a representation of past or
future expenses, and actual expenses may be greater or lesser than those shown.
All Variable Account expenses as well as portfolio company (MONY Series Fund and
The Enterprise Accumulation Trust) expenses, net of expense reimbursements, are
reflected in the examples. Not reflected in the examples which assume redemption
at the end of each time period are income taxes and penalty taxes which may
become payable under the Internal Revenue Code or premium or other taxes which
may be imposed under state or local laws.
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CONDENSED FINANCIAL INFORMATION
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
MONY VARIABLE ACCOUNT A
ACCUMULATION UNIT VALUES*
<TABLE>
<CAPTION>
UNIT VALUE**
-------------------------------------------------------------------------------------------------------------
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
SUB-ACCOUNT INCEPTION 1987 1988 1989 1990 1991 1992 1993 1994 1995
- ------------------- ---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity............. $10.00 -- $10.15 $12.30 $11.88 $15.40 $17.94 $19.11 $19.60 $26.82
Small Cap.......... 10.00 -- 10.16 11.88 10.58 15.49 18.60 21.96 21.69 24.05
Intermediate Term
Bond............. 10.00 -- 10.09 11.13 11.76 13.40 14.15 15.07 14.66 16.62
Long Term Bond..... 10.00 -- 10.24 11.83 12.41 14.43 15.50 17.49 16.21 20.84
Government
Securities....... 10.00 -- -- -- -- -- -- -- 9.99 10.94
High Yield Bond.... 10.00 -- -- -- -- -- -- -- 10.04 11.56
International
Growth........... 10.00 -- -- -- -- -- -- -- 9.91 11.22
Managed............ 10.00 -- 10.39 13.61 12.96 18.70 21.92 23.90 24.21 35.15
Money Market....... 10.00 $10.00 10.56 11.32 12.08 12.62 12.88 13.08 13.42 14.01
</TABLE>
<TABLE>
<CAPTION>
UNITS OUTSTANDING
-----------------------------------------------------------------------------------------------
DEC.
31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
SUB-ACCOUNT 1987 1988 1989 1990 1991 1992 1993 1994 1995
- -------------------- ------- -------- -------- -------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity.............. -- 19,831 81,273 137,731 185,946 315,372 496,795 651,102 798,552
Small Cap........... -- 4,653 34,030 53,185 80,022 198,539 529,142 742,341 807,452
Intermediate Term
Bond.............. -- 31,007 84,415 129,272 186,026 243,826 354,965 398,645 398,283
Long Term Bond...... -- 7,680 75,208 215,001 276,879 377,464 499,364 476,335 495,169
Government
Securities........ -- -- -- -- -- -- -- 2,571 83,571
High Yield Bond..... -- -- -- -- -- -- -- 14,621 92,358
International
Growth............ -- -- -- -- -- -- -- 19,197 167,074
Managed............. -- 42,537 471,771 813,411 972,640 1,571,876 2,941,211 3,528,618 4,253,824
Money Market........ 11,301 123,834 218,778 299,411 456,647 570,819 620,100 872,441 1,227,811
</TABLE>
- ---------------
* MONY Legacy Variable Account A commenced operations on December 30, 1987. The
Intermediate Term Bond, Long Term Bond, and Money Market Subaccounts became
available for allocation on that date, however, only the Money Market
Subaccount had operations in 1987. The Equity, Small Cap, and Managed
Subaccounts became available for allocation on August 1, 1988, and the
Government Securities, International Growth, and High Yield Bond Subaccounts
became available for allocation on November 16, 1994.
** This table reflects the Accumulation Unit Values for the Contracts prior to
the merger of MONY Legacy Life Insurance Company into the Company, which
became effective on February 28, 1991, as well as Accumulation Unit Values
resulting from operations thereafter. As a result of the merger, all assets,
reserves, and other liabilities, and, therefore, all Accumulation Unit
Values, became assets, reserves, and other liabilities, and accumulation unit
values of the MONY Variable Account A. The table reflects historical
performance and is not indicative of future results.
9
<PAGE> 13
THE COMPANY AND THE VARIABLE ACCOUNT
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
The Mutual Life Insurance Company of New York (the "Company") is a mutual
life insurance company organized in the state of New York in 1842. The Company
is currently licensed to sell life insurance and annuities in all states of the
United States, the District of Columbia, Puerto Rico, the Virgin Islands, and
all Provinces of Canada. The Company's financial statements may be found in the
Statement of Additional Information. The principal offices of the Company are at
1740 Broadway, New York, New York 10019.
MONY VARIABLE ACCOUNT A
The Company established MONY Variable Account A (the "Variable Account") on
November 28, 1990, under New York law as a separate investment account. The
Variable Account holds assets that are segregated from all of the Company's
other assets and at present is used only to support individual flexible payment
variable annuity contracts. As a result of the Merger, the Variable Account
received the assets, reserves, and other liabilities of the MONY Legacy Variable
Account A, the separate account to which purchase payments made pursuant to the
Contracts were allocated prior to the Merger.
The Company is the legal holder of the assets in the Variable Account and
will at all times maintain assets in the Variable Account with a total market
value at least equal to the contract liabilities for the Variable Account. The
obligations under the Contracts are obligations of the Company. Income, gains,
and losses, whether or not realized, from assets allocated to the Variable
Account, are, in accordance with the Contracts, credited to or charged against
the Variable Account without regard to other income, gains, or losses of the
Company. The assets in the Variable Account may not be charged with liabilities
which arise from any other business the Company conducts. The Variable Account's
assets may include accumulations of the charges the Company makes against
Contracts participating in the Variable Account. From time to time, any such
additional assets may be transferred in cash to the Company's General Account.
The Variable Account is registered with the Securities and Exchange
Commission ("SEC") under the Investment Company Act of 1940 ("1940 Act") as a
unit investment trust, which is a type of investment company. This does not
involve any supervision by the SEC of the management or investment policies or
practices of the Variable Account. For state law purposes, the Variable Account
is treated as a part or division of the Company. There are currently 14
Sub-accounts within the Variable Account. Not all Subaccounts are available to
the Contractholder.
THE FUNDS
Each available Subaccount of the Variable Account will invest only in the
shares of a corresponding Portfolio of MONY Series Fund, Inc. (the "MONY Series
Fund") or The Enterprise Accumulation Trust (the "Accumulation Trust") (the MONY
Series Fund and the Accumulation Trust are collectively called the "Funds"). The
Funds are registered with the SEC under the 1940 Act as open-end diversified
management investment companies. These registrations do not involve supervision
by the SEC of the management or investment practices or policies of the Funds.
Shares of the MONY Series Fund are currently sold to separate accounts of the
Company and to a life insurance company affiliate of the Company that were
established to fund certain Flexible Payment Variable Annuity contracts,
individual variable annuity contracts, Flexible Premium Variable Life Insurance
contracts, and Variable Life Insurance with Additional Premium Option contracts.
Until the close of business on June 24, 1994, shares of the MONY Series Fund
were also sold to Keynote Series Account, a separate account of the Company to
fund certain group variable annuity contracts issued by the Company. Shares of
the Accumulation Trust are currently sold to a separate account of a life
insurance company affiliate of the Company that was established to fund certain
Flexible Payment Variable Annuity contracts. Shares of the Funds may in the
future be sold to other separate accounts, and the Funds may in the future
create new Portfolios. In addition, the Company may make available additional
Subaccounts with differing or similar investment objectives. The Funds, or
either of them, may withdraw from sale any or all of the respective Portfolios
in accordance with applicable law.
10
<PAGE> 14
The Board of Directors of the MONY Series Fund and the Board of Trustees of
the Accumulation Trust each have undertaken to monitor the respective Fund for
the existence of any material irreconcilable conflict between the interests of
variable annuity contractholders and variable life insurance contractholders and
shall report any such conflict to the boards of the Company and its affiliates.
The Boards of Directors of the Company and its affiliates have agreed to be
responsible for reporting any potential or existing conflicts to the Directors
and Trustees, respectively, of each of the Funds and, at their own cost, to
remedy such conflict up to and including establishing a new registered
management investment company and segregating the assets underlying the variable
annuity contracts and the variable life insurance contracts.
The Variable Account will purchase and redeem shares from the Funds at net
asset value. Shares will be redeemed to the extent necessary for the Company to
collect charges under the Contracts, to pay Surrender Value upon full surrenders
of the Contracts, to fund partial surrenders, to provide benefits under the
Contracts, and to transfer assets from one Subaccount to another or between one
or more Subaccounts of the Variable Account and the Guaranteed Interest Account
as requested by Contractholders. Any dividend or capital gain distribution
received from a Portfolio of a Fund will be reinvested immediately at net asset
value in shares of that Portfolio and retained as assets of the corresponding
Subaccount.
Investment Advisers. The MONY Series Fund at present receives investment
advice with respect to each of its Portfolios from MONY Life Insurance Company
of America ("MONY America"), which acts as investment adviser to the MONY Series
Fund.
Effective September 16, 1994, the investment adviser with respect to the
Equity, Small Cap, and Managed Portfolios of the Accumulation Trust is
Enterprise Capital Management, Inc., a wholly-owned subsidiary of MONY
("Enterprise Capital"). Enterprise Capital has entered into a sub-advisory
agreement with respect to the Equity, and Managed Portfolios with OpCap
Advisors, formerly known as Quest for Value Advisors. OpCap Advisors is a
subsidiary of Oppenheimer Capital, which is a subsidiary of Oppenheimer
Financial Corp. Prior to that date, OpCap Advisors, then known as Quest for
Value Advisors, served as the investment adviser to the Accumulation Trust with
respect to the Equity, Small Cap, and Managed Portfolios. The change of name was
occasioned by the sale of certain of the operations of Quest for Value Advisors
to Oppenheimer Management Corporation in November 1995. No change in the
personnel responsible for the day-to-day management of the Equity, and Managed
Portfolios occured as a result of this change. Effective June 1, 1996, GAMCO
Investors, Inc., became the investment sub-adviser for the Small Cap Portfolio.
Enterprise Capital also acts as investment adviser with respect to the
International Growth and High Yield Bond Portfolios. It has entered into
sub-investment advisory agreements as follows: International Growth -- Brinson
Partners, and High Yield Bond -- Caywood-Scholl Capital Corporation.
Investment Objectives. The investment objectives of the Portfolios
currently available to Contractholders through corresponding Subaccounts of the
Variable Account are set forth in the accompanying prospectus for each of the
Funds and are described briefly below. There is no assurance that these
objectives will be met.
The investment objectives of each Portfolio are fundamental and may not be
changed without the approval of the holders of a majority of the outstanding
shares of the Portfolio affected (which, for each of the Funds means the lesser
of (1) 67 percent of the Portfolio shares represented at a meeting at which more
than 50 percent of the outstanding Portfolio shares are represented or (2) more
than 50 percent of the outstanding Portfolio shares).
Each Contractholder should periodically consider the allocation among the
Subaccounts and the Guaranteed Interest Account in light of current market
conditions and the investment risks attendant to investing in each of the Funds'
various Portfolios. A full description of each of the Funds, their investment
objectives, policies and restrictions, their expenses, the risks attendant to
investing in each of the Funds' Portfolios, and other aspects of their operation
is contained in the accompanying prospectus for each of the Funds, which should
be read together with this Prospectus.
11
<PAGE> 15
The investment objectives of each of the Portfolios of the Funds and
identification of which of the Funds offers the Portfolio is as follows:
Equity Portfolio: Long term capital appreciation through investment in a
diversified portfolio of primarily equity securities selected on the basis of a
value-oriented approach to investing. The Accumulation Trust offers this
Portfolio.
Small Cap Portfolio: Capital appreciation through investments in a
diversified portfolio of equity securities of companies with market
capitalizations of under $1 billion. The Accumulation Trust offers this
Portfolio.
Managed Portfolio: Growth of capital over time through investment in a
portfolio consisting of common stocks, bonds, and cash equivalents, the
percentages of which will vary over time based on the investment manager's
assessments of relative investment values. The Accumulation Trust offers this
Portfolio.
International Growth Portfolio: Capital appreciation, primarily through a
diversified portfolio of non-United States equity securities. The Accumulation
Trust offers this Portfolio.
High Yield Bond Portfolio: Maximum current income, primarily from debt
securities that are rated BA or lower by Moody's Investors Service, Inc. or BB
or lower by Standard & Poor's Corporation. The Accumulation Trust offers this
Portfolio.
Intermediate Term Bond Portfolio: The maximum income over the intermediate
term consistent with preservation of capital, through investment in highly rated
debt securities, U.S. Government obligations, and money market instruments,
together having a dollar-weighted average life of between 4 and 8 years. The
MONY Series Fund offers this Portfolio.
Long Term Bond Portfolio: The maximum income over the longer term
consistent with preservation of capital, through investment in highly rated debt
securities, U.S. Government obligations, and money market instruments, together
having a dollar-weighted average life of more than 8 years. The MONY Series Fund
offers this Portfolio.
Government Securities Portfolio: The maximum current income over the
intermediate term consistent with preservation of capital through investment in
highly-rated debt securities of the United States Government and its agencies
and money market instruments with a dollar weighted average life of up to ten
years at the time of purchase. The MONY Series Fund offers this Portfolio.
Money Market Portfolio: The maximum current income consistent with
preservation of capital and maintenance of liquidity, through investment in
money market instruments. The MONY Series Fund offers this Portfolio.
GUARANTEED INTEREST ACCOUNT
The Guaranteed Interest Account is a part of the Company's General Account
and consists of all the Company's assets other than assets allocated to
segregated investment accounts of the Company, including the Variable Account.
Crediting of Interest. Net Purchase Payments allocated by a Contractholder
to the Guaranteed Interest Account will be credited with interest at the rate
declared by the Company which the Company guarantees will not be less than 4%
(0.010746%, compounded daily). For Contracts issued on or after May 1, 1994 (or
on or after such later date as approval required in certain states is obtained),
the rate declared by the Company will not be less than 3.5% (0.009426%
compounded daily). Each interest rate declared by the Company will be applicable
for all Net Purchase Payments received or transfers from the Variable Account
completed within the period during which it is effective. Initial Net Purchase
Payments allocated to the Guaranteed Interest Account will be credited with
interest at the rate in effect for the date on which the Contract is issued (and
the funds transferred into the Money Market Subaccount) from and after the date
on which the Free Look Privilege expires on all funds transferred from the Money
Market Subaccount to the Guaranteed Interest Account. Amounts withdrawn from the
Guaranteed Interest Account as a result of a transfer, partial
12
<PAGE> 16
surrender, or any charge imposed in accordance with the Contract, will be deemed
to be withdrawals of amounts (and any interest credited thereon) most recently
credited to the Guaranteed Interest Account.
Prior to the expiration of the period for which a particular interest rate
was guaranteed, the Company will declare a renewal interest rate to be effective
for such succeeding period as the Company shall determine.
Descriptions of the Guaranteed Interest Account are included in this
Prospectus for the convenience of the purchaser. The Guaranteed Interest Account
and the general account of the Company are not registered under the Securities
Act of 1933 or the Investment Company Act of 1940. Accordingly, neither the
general account of the Company nor the Guaranteed Interest Account are generally
subject to the provisions of these Acts; however, disclosures regarding the
Guaranteed Interest Account and the general account of the Company may be
subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in
prospectuses. The staff of the Securities and Exchange Commission has not
reviewed the disclosures in this Prospectus which relate to the Guaranteed
Interest Account and the general account of the Company.
13
<PAGE> 17
PAYMENT AND ALLOCATION OF NET PURCHASE PAYMENTS
ISSUANCE OF THE CONTRACT
Individuals wishing to purchase a Contract must complete an application and
personally deliver it to a licensed agent of the Company who is also a
registered representative of MONY Securities Corp. ("MSC"), a wholly-owned
subsidiary of the Company, which is the principal underwriter for the Contracts,
or a registered broker-dealer which has been authorized by MSC to sell the
Contract. Except where certain automatic payment plans (i.e., government
allotment, payroll deduction, or automatic checking account withdrawal plans)
are used, the minimum initial Purchase Payment for the Contract is currently
$2,000 for Non-Qualified Plans, $2,000 for individual retirement accounts and
annuities purchased by individuals under Section 408 of the Code (other than
Simplified Employee Pensions), and $600 for H.R. 10 plans (self-employed
individuals' retirement plans under Sections 401 or 403(c) of the Code),
Simplified Employee Pensions under Section 408 of the Code, and annuity purchase
plans sponsored by certain tax-exempt organizations, governmental entities, or
public school systems under Section 403(b) of the Code ("Tax Sheltered
Annuities") and deferred compensation plans under Section 457 of the Code. These
minimum initial Payments must be paid with the application for the Contract.
Additional Payments may be made at any time in the minimum amount of $100. For
certain automatic payment plans, however, the minimum additional payment is $50.
Effective January 1, 1989, the Contracts offered by this Prospectus have
been withdrawn from sale in connection with Qualified Plans which intend to
qualify for federal income tax advantages available under Section 403 (b) of the
Code.
Different rules apply for government allotment, payroll deduction and
automatic checking account withdrawal plans. For payroll deduction and automatic
checking account withdrawal plans, Purchase Payments must be made at an
annualized rate of $600 (i.e., $600 per year, $300 semiannually, $150 for each
quarter year, or $50 per month). For government allotment plans, the minimum
Purchase Payment is $50 per month.
The Company reserves the right to revise its rules from time to time to
specify different minimum Purchase Payments.
In addition, the prior approval of the Company is required before it will
accept a Purchase Payment where, with that Payment, cumulative Purchase Payments
made under any one or more Contracts held by the Contractholder, less the amount
of any prior partial surrenders and their Surrender Charges, exceed $1,500,000.
The prior approval of the Company is also required before it will accept that
part of a payment (or transfer) which would cause amounts credited to the
Guaranteed Interest Account to exceed $250,000 on the date of payment (or
transfer).
The Company reserves the right to reject an application for any reason
permitted by law.
Net Purchase Payments received before the Contract Date will be held in the
Company's General Account and will be credited with interest at not less than
3.5 percent per annum if the Contract is issued by the Company and accepted by
the Contractholder. No interest will be paid if the Contract is not issued or if
it is declined by the Contractholder. If the application is approved and the
Contract is subsequently issued and accepted by the Contractholder, then on the
Contract Date, amounts allocable to the Contract held in the Company's General
Account will be transferred to the Money Market Subaccount of the Variable
Account. These amounts will be held in that Subaccount pending expiration of the
Free Look Period. (See "Free Look Privilege" below.) For purposes of crediting
interest on amounts held in the General Account, Purchase Payments will be
treated as received on the day of actual receipt at the Company's Operations
Center. If an application is not complete when received by the Company at its
Operations Center, and if it is not made complete within 5 days, the prospective
purchaser will be informed of the reasons for the delay and the initial Purchase
Payment will be returned in full (and the application will be declined), unless
the prospective purchaser consents to the Company's retaining the Purchase
Payment until the application is made complete.
14
<PAGE> 18
FREE LOOK PRIVILEGE
Within the period of 10 days (or longer in certain states) following the
day the Contract is delivered to the Contractholder (the "Free Look Period"),
the Contractholder may return the Contract to the Company or to the agent
through whom it was purchased. When the Contract is received by the Company, it
will be voided as if it had never been in force. Except for Contracts issued in
the Commonwealth of Pennsylvania, the amount to be refunded is equal to the
greater of: (i) all Purchase Payments; and (ii) the Cash Value of the Contract
(as of the date the returned Contract is received at the Home Office or a local
office of the Company, or by the agent who sold the Contract, or, if returned by
mail, upon being postmarked, properly addressed, and postage prepaid) plus any
deductions from Purchase Payments for taxes, any mortality and expense risk
charges deducted in determining the Unit value of the Variable Account, and
asset charges deducted in determining the share value of the Funds. For
Contracts entered into in the Commonwealth of Pennsylvania, the amount to be
refunded is described in clause (ii) of the immediately preceding sentence.
ALLOCATION OF NET PURCHASE PAYMENTS AND CASH VALUE
Allocation of Net Purchase Payments. The Contractholder may allocate on
the application Net Purchase Payments to the Subaccount(s) of the Variable
Account or to the Guaranteed Interest Account. Any Net Purchase Payments
received before the end of the Free Look Period (and any interest thereon) will
initially be allocated to the Money Market Subaccount of the Variable Account on
the later of (i) the Contract Date and (ii) the date the Payment is received at
the Company's Operations Center. Net Purchase Payments will continue to be
allocated to that Subaccount until the Free Look Period expires and, if the
allocation on the application is incomplete or incorrect, a complete and correct
allocation notification is received by the Company. (See "Free Look Privilege"
above.) After the Free Look Period has expired and, if applicable, the correct
and complete allocation notification has been received, the Contract's Cash
Value held in the Money Market Subaccount will automatically be transferred to
the Subaccount(s) of the Variable Account or to the Guaranteed Interest Account
in accordance with the Contractholder's percentage allocation.
After the Free Look Period, Net Purchase Payments under a nonautomatic
payment plan will be allocated in accordance with the Contractholder's most
recent instructions on record with the Company, unless the Contractholder at the
time a Purchase Payment is made specifies the amount (not less than $10.00 per
Subaccount) or the percentage (not less than 10 percent of the Payment) of the
Net Purchase Payment to be allocated among the Subaccount(s). If the specific
allocation is incorrect or incomplete, then that Net Purchase Payment will be
made in accordance with the most recent correct payment allocation on record.
For automatic payment plans, Net Purchase Payments will be allocated in
accordance with the Contractholder's most recent instructions on record.
The Contractholder may change the allocation formula specified in the
initial allocation notification, or as changed in any subsequent notification,
for future Net Purchase Payments at any time without charge by sending written
notification to the Company at the Operations Center. Prior allocation
instructions may also be changed by telephone, subject to the rules of the
Company and its right to terminate telephone allocations. Any such change,
whether made in writing or by telephone, will be effective not later than 7 days
after notification is received. The Company has adopted rules relating to
changes of allocations by telephone, which, among other things, outlines
procedures to be followed which are designed, and which the Company believes are
reasonable, to prevent unauthorized instructions. If these procedures are
followed, the Company shall not be liable for, and the Contractholder will
therefore bear the entire risk of, any loss as a result of the Company's
following telephone instructions in the event that such instructions prove to be
fraudulent. A copy of the rules and the Company's form for electing telephone
allocation privileges is available from licensed agents of the Company who are
also registered representatives of MSC or by calling 1-800-487-6669. The
Company's form must be signed and received at the Company's Syracuse Operations
Center before telephone allocation instructions will be accepted.
The minimum percentage of each Net Purchase Payment that may be allocated
to any Subaccount of the Variable Account or to the Guaranteed Interest Account
is 10 percent; all percentages must be expressed in
15
<PAGE> 19
whole numbers and must total 100 percent. The minimum amount of each Net
Purchase Payment that may be allocated to any Subaccount of the Variable Account
or to the Guaranteed Interest Account is $10.00.
Upon receipt of a Purchase Payment, the Net Purchase Payments allocated to
Subaccounts of the Variable Account will be credited to the designated
Subaccount(s) in the form of Units. The number of Units to be credited to a
Subaccount is determined by dividing the dollar amount allocated to the
particular Subaccount by the Unit value for the particular Subaccount for the
Valuation Date on which the Purchase Payment is received.
The Unit Value for each Subaccount was established at $10 for the first
Valuation Date. The Unit value for a Subaccount for any subsequent Valuation
Date is determined by subtracting (b) from (a) and dividing the result by (c),
where
(a) is the per share net asset value on the Valuation Date of the Fund
Portfolio in which the Subaccount invests times the number of such shares
held in the Subaccount before the purchase or redemption of any shares on
that Date;
(b) is the mortality and expense risk charge accrued as of that
Valuation Date (the daily mortality and expense risk charge is a percentage
of the Subaccount's net asset value on the previous Valuation Date. If the
previous day was not a Valuation Date, then the daily mortality and expense
risk charge is the applicable percentage times the number of days since the
last Valuation Date times the Subaccount's net asset value on the last
Valuation Date); and
(c) is the total number of Units held in the Subaccount on the
Valuation Date before the purchase or redemption of any Units on that Date.
The Unit Value for these Subaccounts may increase, decrease, or remain
constant from Valuation Date to Valuation Date, depending upon the investment
performance of the Portfolio of the Fund in which the Subaccount is invested and
any expenses and charges deducted from the Variable Account. The Contractholder
bears the entire investment risk. Contractholders should periodically review
their allocations of payments and values in light of market conditions and
overall financial planning requirements.
Net Purchase Payments to be allocated to the Guaranteed Interest Account
will be credited to that account on the date of receipt at the Operations
Center, if that date is a Valuation Date, and, if not, on the next Valuation
Date. Interest will be credited daily. In the event that allocation of a Net
Purchase Payment would cause the amounts credited to the Guaranteed Interest
Account to exceed the $250,000 limit imposed by the Company, that part of a Net
Purchase Payment allocated to the Guaranteed Interest Account which equals the
difference between $250,000 and the amount credited to the Guaranteed Interest
Account on the date the allocation is to be made will be accepted (and credited
to the Guaranteed Interest Account) but the remainder of such allocation will be
returned to the Contractholder.
Cash Value. The Contract's Cash Value will reflect the investment
performance of the selected Subaccount(s) of the Variable Account, amounts
credited to the Guaranteed Interest Account, any Net Purchase Payments, any
partial surrenders, and all charges imposed in connection with the Contract.
There is no guaranteed minimum Cash Value, except to the extent Net Purchase
Payments have been allocated to the Guaranteed Interest Account, and because a
Contract's Cash Value at any future date will be dependent on a number of
variables, it cannot be predetermined.
Determination of Cash Value. The Cash Value of the Contract is determined
on each Valuation Date. The Cash Value will be calculated first on the Contract
Date and thereafter on each Valuation Date. On the Contract Date, the Contract's
Cash Value will be the Net Purchase Payments received plus any interest credited
on those Payments. During the period when Net Purchase Payments are held in the
General Account, interest will be credited to the Contract. (See "Issuance of
the Contract" at page 14.) After
16
<PAGE> 20
allocation of the amounts in the General Account to the Variable Account or to
the Guaranteed Interest Account, on each Valuation Date, the Contract's Cash
Value will be:
(1) The aggregate of the Cash Values attributable to the Contract in
each of the Subaccounts on the Valuation Date, determined for each
Subaccount by multiplying the Subaccount's Unit value on that date by the
number of Subaccount Units allocated to the Contract; plus
(2) any amount credited to the Guaranteed Interest Account (which
shall be the aggregate of all Net Purchase Payments, plus interest
credited, if any, plus or minus amounts transferred, if any, less partial
surrenders, if any, less any charges and deductions imposed in accordance
with the Contract terms detailed in the Prospectus), plus
(3) any Net Purchase Payment received on that Valuation Date; less
(4) any partial surrender amount and its Surrender Charge made on that
Valuation Date; less
(5) any Annual Contract Charge deductible on that Valuation Date.
In computing the Contract's Cash Value, the number of Subaccount Units
allocated to the Contract is determined after any transfers among Subaccounts
(and deduction of transfer charges) or between one or more of the Subaccounts
and the Guaranteed Interest Account, but before any other Contract transactions,
such as receipt of Net Purchase Payments and partial surrenders, on the
Valuation Date. If the Contract's Cash Value is to be calculated for a day that
is not a Valuation Date, the next following Valuation Date will be used.
Transfers. After the Free Look Period has expired, the value attributable
to the Contract may be transferred among the Subaccounts of the Variable
Account. There is no minimum amount that need be transferred. The Company will
effectuate transfers and determine all values in connection with transfers among
the Subaccounts on the date on which the transfer request is received at the
Operations Center, if that date is a Valuation Date and, if not, on the next
Valuation Date. Different provisions apply to transfers involving the Guaranteed
Interest Account. (See "Allocation of Net Purchase Payments and Cash Value --
Transfers Involving the Guaranteed Interest Account" at page 18.) Transfers may
be made by sending a written request to the Operations Center or by telephone,
subject to the rules of the Company and its right to terminate telephone
transfers. If a written transfer request is incomplete or incorrect, no transfer
will be made and the request will be returned to the Contractholder. Telephone
transfer instructions will only be accepted if complete and correct. The Company
has adopted guidelines relating to telephone transfers which, among other
things, outlines procedures to be followed which are designed, and which the
Company believes are reasonable, to prevent unauthorized transfers. If these
procedures are followed, the Company shall not be liable for, and the
Contractholder will therefore bear the entire risk of any loss as a result of
the Company's, following telephone instructions in the event that such
instructions prove to be fraudulent. A copy of the guidelines and the Company's
form for electing telephone transfer privileges is available from licensed
agents of the Company who are also registered representatives of MSC or by
calling 1-800-487-6669. The Company's form must be signed and received at the
Company's Syracuse Operations Center before telephone transfers will be
accepted.
A transfer charge will not be imposed on the first 4 transfers made during
any Contract Year. (See "Charges Against Cash Value -- Transfer Charge" at page
23.) For any additional transfers during a Contract Year, a transfer charge is
not currently imposed, but the Company has reserved the right to impose a charge
for each transfer in excess of 4, which will not exceed $25 per transfer. If
imposed, the transfer charge will be deducted from the Subaccount(s) or the
Guaranteed Interest Account from which the amounts are transferred. This charge
is in addition to the amount transferred. If, however, there is insufficient
Cash Value in a Subaccount or in the Guaranteed Interest Account to provide for
its proportionate share of the charge, then the entire charge will be allocated
in the same manner as the Annual Contract Charge. (See "Charges Against Cash
Value -- Annual Contract Charge" at page 22.) All transfers included in a single
request are treated as one transfer transaction. A transfer resulting from the
first reallocation of Cash Value at the expiration of the Free Look Period will
not be subject to a transfer charge, nor will it be counted against the
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<PAGE> 21
4 transfers allowed in each Contract Year without charge. Under present law,
transfers are not taxable transactions.
Transfers Involving the Guaranteed Interest Account. Transfers to or from
the Guaranteed Interest Account are subject to the following limitations. The
prior approval of the Company is required before it will accept that part of a
transfer which would cause amounts credited to the Guaranteed Interest Account
to exceed $250,000. The portion of any transfer which cannot be made because of
such limitation will be allocated back to the Subaccounts designated in that
transfer as the Subaccounts from which amounts were to be transferred in the
proportion that the amount requested by the Contractholder to be transferred
from each Subaccount bears to the total amount transferred. Transfers of amounts
credited to the Guaranteed Interest Account to one or more Subaccounts may be
made once during each Contract Year, and the amount which may be transferred is
limited to the greater of (i) 25% of the amounts credited to the Guaranteed
Interest Account of the Contractholder on the date the transfer would take
effect or (ii) $5,000. Transfer requests involving the Guaranteed Interest
Account will be effective only on an anniversary of the Contract Date or on a
Valuation Date not more than 30 days thereafter. Requests received not more than
10 days before the anniversary of the Contract Date will be executed on the
anniversary of the Contract Date. Requests received within 30 days after the
anniversary of the Contract date will be executed on the Valuation Date which
coincides with or next follows the date the request is received. Requests
received more than thirty days before or after the anniversary of the Contract
Date will be returned to the Contractholder.
TERMINATION OF THE CONTRACT
The Contract will remain in force until the earlier of (1) the date the
Contract is surrendered in full, (2) the Annuity Commencement Date, (3) the
Contract Anniversary on which, after deduction for any Annual Contract Charge
then due, no Cash Value remains in the Contract, and (4) the date the Death
Benefit is payable under the Contract.
SURRENDERS
At any time on or before the Annuity Commencement Date and during the
lifetime of the Annuitant, the Contractholder may elect to make a surrender of
all or part of the Contract's value. Any such election shall specify the amount
of the surrender and will be effective on the date a proper request is received
by the Company at its Operations Center.
The amount of the surrender may be equal to the Contract's Surrender Value,
which is its Cash Value less (1) any applicable Surrender Charge and (2) (for a
full surrender) any Annual Contract Charge. The Surrender may also be for a
lesser amount (a "partial surrender") of at least $100. If a partial surrender
is requested, and that surrender would leave a Cash Value of less than $1,000,
then that partial surrender will be treated and processed as a full surrender,
and the entire Surrender Value will be paid to the Contractholder. For a partial
surrender, any Surrender Charge will be in addition to the amount requested by
the Contractholder.
A surrender will result in the cancellation of Units and the withdrawal of
amounts credited to the Guaranteed Interest Account, in accordance with the
directions of the Contractholder, with an aggregate value equal to the dollar
amount of the surrender plus, if applicable, the Annual Contract Charge and any
Surrender Charge. For a partial surrender, the Company will cancel Units of the
particular Subaccounts and withdraw amounts from the Guaranteed Interest Account
in accordance with the allocation specified by the Contractholder in written
notice to the Company at its Operations Center at the time the request for the
partial surrender is received; provided, however, that allocations by a
Contractholder against the Guaranteed Interest Account will be limited (the "GIA
Allocation Limitation") to that amount which bears the same proportion to the
total amount being surrendered as the amount credited to the Guaranteed Interest
Account of the Contractholder bears to the total of (i) all amounts credited to
the Guaranteed Interest Account of the Contractholder and (ii) the aggregate
value of Units held in all Subaccounts of the Contractholder, unless there is no
Cash Value in any Subaccount at the time the transfer request is received.
Allocations may be by either amount or percentage. Allocations by amount require
that at least $25 be allocated against the
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<PAGE> 22
Guaranteed Interest Account or any Subaccount designated by the Contractholder.
If there is insufficient Cash Value in the Contractholder's Guaranteed Interest
Account or a Subaccount to provide for the requested allocation against it, or
if the GIA Allocation Limitation is exceeded, or the request is incorrect, the
request will not be accepted. If an allocation is not requested, then the entire
amount of the partial surrender will be allocated against the Guaranteed
Interest Account and each Subaccount in the same proportion that the Contract's
Cash Value held in the Guaranteed Interest Account and each Subaccount bears to
the Contract's Cash Value.
Any Surrender Charge will be allocated against the Guaranteed Interest
Account and each Subaccount in the same proportion that the amount of a partial
surrender allocated against the Guaranteed Interest Account and each Subaccount
bears to the total amount of the partial surrender. In the event that an
allocation of the partial surrender is not made, or there is insufficient cash
value in the Guaranteed Interest Account or any Subaccount to provide for its
proportionate share of the Surrender Charge, then the entire Surrender Charge
will be allocated against the Guaranteed Interest Account and each Subaccount in
the same proportion that the Cash Value held in the Guaranteed Interest Account
and each Subaccount (after allocation of the partial surrender amount) bears to
the Contract's Cash Value.
Any cash surrender amount will be paid within seven (7) days from the date
the election becomes effective, except as the Company may be permitted to
postpone such payment in accordance with the Investment Company Act of 1940.
Postponement is currently permissible only (1) for any period (a) during which
the New York Stock Exchange is closed other than customary weekend and holiday
closings, or (b) during which trading on the New York Stock Exchange is
restricted as determined by the Securities and Exchange Commission, (2) for any
period during which an emergency exists as a result of which (a) disposal of
securities held by the Funds is not reasonably practicable, or (b) it is not
reasonably practicable to determine the value of the net assets of the Funds, or
(3) for such other periods as the Securities and Exchange Commission may by
order permit for the protection of Contractholders. Any cash surrender involving
payment from amounts credited to the Guaranteed Interest Account may, to the
extent amounts are paid from the Guaranteed Interest Account, be postponed, at
the option of the Company, for up to 6 months from the date the request for a
surrender or proof of death is received by the Company. The Contractholder may
elect to have the amount of a surrender settled under one of the Settlement
Options of the Contract. (See "Annuity Provisions" at page 24.)
Since the Contracts offered by this Prospectus may be issued in connection
with retirement plans that meet the requirements of certain sections of the
Internal Revenue Code, reference should be made to the terms of the particular
retirement plan for any limitations or restrictions on cash surrenders.
The tax consequences of a cash surrender should be carefully considered
(see "FEDERAL TAX STATUS" at page 30).
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<PAGE> 23
DEATH BENEFIT
DEATH BENEFIT PROVIDED BY THE CONTRACT
In the event of the death of the Annuitant (and the Contingent Annuitant,
if one has been named) (see "Contingent Annuitant" at page 27) prior to the
Annuity Commencement Date, the Company will pay a Death Benefit to the
Beneficiary. The amount of the Death Benefit will be the greater of (a) the Cash
Value on the date of the Annuitant's death, and (b) the Purchase Payments paid,
less any partial surrenders and their Surrender Charges. If the death of the
Annuitant occurs on or after the Annuity Commencement Date, no Death Benefit
will be payable except as may be provided under the Settlement Option elected.
ELECTION AND EFFECTIVE DATE OF ELECTION
During the lifetime of the Annuitant and prior to the Annuity Commencement
Date, the Contractholder may elect to have the Death Benefit of the Contract
applied under one or more Settlement Options to effect an annuity for the
Beneficiary as payee after the death of the Annuitant. (See "Settlement Options"
at page 25.) If no election of a Settlement Option for the Death Benefit is in
effect on the date when proceeds become payable, the Beneficiary may elect (a)
to receive the Death Benefit in the form of a cash payment; or (b) to have the
Death Benefit applied under one of the Settlement Options. (See "Settlement
Options" at page 25.) If an election by the payee is not received by the Company
within thirty (30) days following the date proceeds become payable, the payee
will be deemed to have elected a cash payment. Either election described above
may be made by filing with the Company a written election in such form as the
Company may require. Any proper election of a method of settlement of the Death
Benefit by the Contractholder will become effective on the date it is signed,
but any election will be subject to any payment made or action taken by the
Company before receipt of the notice at the Company's Operations Center.
Reference should be made to the terms of any applicable retirement plan and
any applicable legislation for any limitations or restrictions on the election
of a method of settlement and payment of the Death Benefit.
PAYMENT OF DEATH BENEFIT
If the Death Benefit is to be paid in cash to the Beneficiary, payment will
be made within seven (7) days of the date the election becomes effective or is
deemed to become effective and due proof of death is received, except as the
Company may be permitted to postpone such payment in accordance with the
Investment Company Act of 1940. If the Death Benefit is to be paid in one sum to
the Successor Beneficiary, or to the estate of the deceased Annuitant, payment
will be made within seven (7) days of the date due proof of the death of the
Annuitant and the Beneficiary is received by the Company. Interest at a rate
determined by the Company will be paid on any Death Benefit paid in one sum,
from the date of the Annuitant's (or Contingent Annuitant's, if applicable)
death to the date of payment. The interest rate will not be less than 2 3/4
percent annually.
CHARGES AND DEDUCTIONS
Charges may be assessed under the Contracts as follows:
DEDUCTIONS FROM PAYMENTS
A deduction may be made from each Purchase Payment for premium or similar
taxes prior to allocation of any Net Purchase Payment among the Subaccounts of
the Variable Account. Currently, the Company does not make such a deduction, but
may do so in the future. The Company will provide the Contractholder with
written notice of its intention to make deductions for premium or other taxes.
Any such deduction will apply only to Purchase Payments made after notice has
been sent by the Company. The amount of the deduction will vary from locality to
locality, but will generally range from 0 percent to 3.5 percent of Purchase
Payments. Residents of the Commonwealth of Pennsylvania should be aware that a
tax on Purchase Payments has been adopted; however, the Company currently is
assuming responsibility for payment of this tax. In the event that
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<PAGE> 24
the Company will begin to make deductions for such tax from future Purchase
Payments, it will give notice to each affected Contractholder.
CHARGES AGAINST CASH VALUE
Surrender Charge. The Contract imposes a contingent deferred sales charge,
called a "Surrender Charge," on full and partial surrenders and on the Annuity
Commencement Date. The Surrender Charge, which will never exceed 7 percent of
total Purchase Payments, is intended to reimburse the Company for expenses
incurred in distributing the Contract. To the extent such charge is insufficient
to cover all distribution costs, the Company will make up the difference using
funds from its General Account, which may contain funds deducted from the
Variable Account to cover mortality and expense risks borne by the Company. (See
"Mortality and Expense Risk Charge" at page 23.)
If all or a portion of the Contract's Surrender Value (see "Surrenders" at
page 18) is surrendered or if the Surrender Value is received at maturity on the
Annuity Commencement Date, a Surrender Charge will be calculated at the time of
surrender and will be deducted from the Cash Value. A Surrender Charge will not
be imposed against Cash Value surrendered in a Contract Year up to an amount
equal to Net Purchase Payments made by the Contractholder prior to the Contract
Year of the surrender and the preceding 7 Contract Years. In addition, the
Surrender Charge, which otherwise would have been deducted, will not be deducted
to the extent necessary to permit the Contractholder to obtain an amount equal
to the Guaranteed Free Surrender Amount (the "Guaranteed Free Surrender
Amount"). (See "Guaranteed Free Surrender Amount" at page 22.) No Surrender
Charge will be imposed if the surrender is a full surrender and the following
conditions are met: (i) the Annuitant is age 59 1/2 or older on the date of the
full surrender; (ii) the Contract has been in force for at least 10 Contract
Years; and (iii) one or more Purchase Payments were remitted during each of at
least 7 of the 10 Contract Years immediately preceding the date of surrender. In
addition, no Surrender Charge will be imposed if the Contract is surrendered
after the third Contract Year and the surrender proceeds are paid under either
Settlement Option 3 or Settlement Option 3A (See "Settlement Options" at page
25). In no event will the aggregate Surrender Charge exceed 7 percent of the
total Purchase Payments made in the Year of the surrender and during the 7
preceding Contract Years. The Contract Date and Contract Years shall remain
unchanged as a result of the Merger.
For a partial surrender, the Surrender Charge will be deducted from any
remaining Contract Value, if sufficient; otherwise, it will be deducted from the
amount surrendered. Any Surrender Charge will be allocated against the
Guaranteed Interest Account and each Subaccount of the Variable Account in the
same proportion that the amount of the partial surrender allocated against the
Guaranteed Interest Account and each Subaccount bears to the total amount of the
partial surrender. But, if there is insufficient cash value in the Guaranteed
Interest Account or any Subaccount to provide for its proportionate share of the
charge, then the entire charge will be allocated against the Guaranteed Interest
Account and each Subaccount in the same proportion that the Cash Value held in
the Guaranteed Interest Account and each Subaccount bears to the cash value in
the Guaranteed Interest Account and all Subaccounts.
No Surrender Charge will be deducted from Death Benefits. (See "Death
Benefit" at page 20.)
For purposes of determining the Surrender Charge, surrenders will be
attributed to payments on a first-in, first-out basis. Contractholders should
note that this is different from the allocation method that is used for
determining tax obligations. (See "FEDERAL TAX STATUS" at page 30.)
Amount of Surrender Charge. The amount of the Surrender Charge is
determined as follows:
Step 1. Allocate Purchase Payments on a first-in, first-out basis to the
amount surrendered (any Purchase Payments previously allocated to
calculate a surrender charge are unavailable for allocation to
calculate any future surrender charges); and
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<PAGE> 25
Step 2. Multiply each such allocated Purchase Payment by the appropriate
surrender charge percentage determined on the basis of the table
below:
SURRENDER CHARGE PERCENTAGE TABLE
<TABLE>
<CAPTION>
# OF CONTRACT SURRENDER
ANNIVERSARIES SINCE CHARGE
PURCHASE PAYMENT RECEIVED PERCENTAGE
- ------------------------- ----------
<S> <C>
0 7%
1 7
2 6
3 6
4 5
5 4
6 3
7 2
8 (or more) 0
</TABLE>
Step 3. Add the products of each multiplication in Step 2 above.
Guaranteed Free Surrender Amount. The Surrender Charge may be reduced by
using the Guaranteed Free Surrender Amount provided for in the Contract. For
Non-Qualified Contracts (and Contracts issued for IRA and SEP-IRA) in certain
states which have granted approval, the Guaranteed Free Surrender Amount
provides that an amount up to 10% of the Contract's Cash Value (on the date the
first partial surrender request is received during a Contract Year) may be
surrendered without application of a surrender charge. For Qualified Contracts
issued on or after May 1, 1994 (other than Contracts issued for IRA and SEP-IRA)
in certain states which have granted approval, the Guaranteed Free Surrender
Amount provides that the greater of $10,000 (but not more than the Contract's
Cash Value) or 10% of the Contract's Cash Value (on the date the first partial
surrender request is received during a Contract Year) may be surrendered without
application of surrender charge, provided no prior partial surrender was made
during that Contract year. (See a registered representative of MSC who is also a
licensed agent of the Company for which states have granted approval.) For
holders of Qualified Contracts issued before May 1, 1994 and for holders of
Contracts in those states where approval has not been granted, the Guaranteed
Free Surrender Amount provides that an amount up to 10% of the Contract's Cash
Value (on the date the partial surrender request is received) may be surrendered
without the application of a surrender charge, provided no prior partial
surrender was made during that Contract Year. The Company reserves the right to
limit the number of partial surrenders available under the Guaranteed Free
Surrender Amount to 12 per Contract Year. Since Purchase Payments are allocated
on a first-in, first-out basis, the free surrender amount will not reduce
surrender charges to the extent that any Cash Value in that amount is equal to
Purchase Payments received 8 or more Contract Anniversaries ago.
For illustrations of how the Surrender Charge is calculated, see Appendix A
on page A-1 of this Prospectus.
Annual Contract Charge. The Company has primary responsibility for the
administration of the Contract and the Variable Account. Ordinary administrative
expenses expected to be incurred include premium collection, recordkeeping,
processing death benefit claims and surrenders, preparing and mailing reports,
and overhead costs. In addition, the Company expects to incur certain additional
administrative expenses in connection with the issuance of the Contract,
including the review of applications and the establishment of Contract records.
The Company intends to administer the Contract itself.
An Annual Contract Charge will be deducted from the Contract's Cash Value
to help cover administrative expenses. Currently, the amount of the charge is
$30, but it may be increased to as much as $50 on 30 days' written notice to the
Contractholder. The charge will be deducted on (a) each Contract Anniversary
prior to the Annuity Commencement Date, (b) the Annuity Commencement Date, and
(c) the date of full surrender (if that date is not a Contract Anniversary). The
amount of the charge will be allocated against the Guaranteed Interest Account
and each Subaccount of the Variable Account in the same proportion that the
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<PAGE> 26
Cash Value in the Guaranteed Interest Account and each Subaccount bears to the
Cash Value of the Contract. The Company does not expect to make any profit from
the administrative cost deductions.
Transfer Charge. The Company has reserved the right to impose a transfer
charge, which will not exceed $25, for each transfer instructed by the
Contractholder among the Subaccounts or to or from the Guaranteed Interest
Account and one or more of the Subaccounts in excess of 4 transfers in a
Contract Year, to compensate the Company for the costs of effectuating the
transfer. Currently, the Company does not do so. The Company does not expect to
make a profit from the transfer charge. This charge will be deducted from the
Contract's Cash Value held in the Subaccount(s) from which the transfer is made,
or from the Guaranteed Interest Account if a transfer is made therefrom, and
will be allocated against these Subaccount(s) or the Guaranteed Interest Account
in the same proportion as the amounts transferred. If there is insufficient
value in a Subaccount or the Guaranteed Interest Account to provide for that
Subaccount's or the Guaranteed Interest Account's proportionate share of the
charge, then the entire charge will be allocated in the same manner as the
Annual Contract Charge. (See "Charges Against Cash Value -- Annual Contract
Charge" at page 22.)
MORTALITY AND EXPENSE RISK CHARGE
A daily charge will be deducted from the value of the net assets of the
Variable Account to compensate the Company for mortality and expense risks
assumed in connection with the Contract. This daily charge from the Variable
Account will be at the rate of 0.003425 percent (equivalent to an annual rate of
1.25 percent) of the average daily net assets of the Variable Account. Of the
1.25 percent charge, .80 percent is for assuming mortality risks, and .45
percent is for assuming expense risks. The daily charge will be deducted from
the net asset value of the Variable Account, and therefore the Subaccounts, on
each Valuation Date. These charges will not be deducted from the Guaranteed
Interest Account. Where the previous day (or days) was not a Valuation Date, the
deduction on the Valuation Date will be 0.003425 percent multiplied by the
number of days since the last Valuation Date.
The Company believes that this level of charge is within the range of
industry practice for comparable individual flexible payment variable annuity
contracts.
The mortality risk assumed by the Company is that Annuitants may live for a
longer time than projected, and that an aggregate amount of annuity benefits
greater than that projected will accordingly be payable. In making this
projection, the Company has used the mortality rates from the 1983 Table "a"
(discrete functions without projections for future mortality), with 3 1/2
percent interest. The expense risk assumed is that expenses incurred in issuing
and administering the Contracts will exceed the administrative charges provided
in the Contracts.
The Company does not expect to make a profit from the mortality and expense
risk charge. Should, however, the amount of the charge exceed the amount needed,
the excess will be retained by the Company in its general account. Should the
amount of the charge be inadequate, the Company will pay the difference out of
its General Account.
TAXES
Currently, no charge will be made against the Variable Account for federal
income taxes. The Company may, however, make such a charge in the future if
income or gains within the Variable Account will incur any federal income tax
liability. Charges for other taxes, if any, attributable to the Variable Account
may also be made. (See "FEDERAL TAX STATUS" at page 30.)
INVESTMENT ADVISORY FEE
Because the Variable Account purchases shares of the Funds, the net assets
of the Variable Account will reflect the investment advisory fee and other
expenses incurred by the Funds. MONY America, as investment adviser to the MONY
Series Fund, will receive monthly compensation with respect to the Intermediate
Term Bond, Long Term Bond, Government Securities, and Money Market Portfolios
that it advises at an annual
23
<PAGE> 27
rate of 0.40 percent of the first $400 million of the aggregate average daily
net assets of all MONY Series Fund Portfolios, 0.35 percent of the next $400
million of the aggregate average daily net assets of all MONY Series Fund
Portfolios, and 0.30 percent of the aggregate average daily net assets of all
MONY Series Fund Portfolios in excess of $800 million. Each daily charge for the
fee is divided among those Portfolios in proportion to their net assets on that
date. Enterprise Capital, as investment adviser to the Accumulation Trust, will
receive from the Accumulation Trust monthly compensation with respect to the
Equity, Small Cap and Managed Portfolios that it advises at an annual rate of
0.80 percent of the first $400 million of the aggregate average daily net assets
of those portfolios, 0.75 percent of the next $400 million of the aggregate
average daily net assets of those portfolios, and 0.70 percent of the aggregate
average daily net assets of those portfolios which exceed $800 million. OpCap
Advisors, a subsidiary of Oppenheimer Capital, as sub-investment adviser to the
Equity and Managed Portfolios of the Accumulation Trust will receive from
Enterprise Capital and not the Accumulation Trust 0.40 percent (0.30 percent of
assets in excess of $1 billion) of the aggregate average daily net assets of the
Equity, and Managed Portfolios. GAMCO Investors, Inc. as sub-investment adviser
to the Small Cap Portfolio of the Accumulation Trust, will receive from
Enterprise Capital and not the Accumulation Trust, 0.40 percent (0.30 percent of
assets in exceee of $1 billion) of the aggregate average daily net assets of the
Small Cap Portfolio. Enterprise Capital, as investment adviser to the
Accumulation Trust, will receive with respect to the High Yield Bond Portfolio
monthly compensation at an annual rate of 0.60 percent of the aggregate average
daily net assets of the High Yield Bond Portfolio, and Caywood-Scholl Capital
Corporation, as sub-investment adviser to the High Yield Bond Portfolio, will
receive from Enterprise Capital and not the Accumulation Trust, .30 percent of
the aggregate average daily net assets (.252 percent for assets in excess of
$100 million) of the High Yield Bond Portfolio. Enterprise Capital, as
investment adviser to the Accumulation Trust will receive with respect to the
International Growth Portfolio monthly compensation at an annual rate of .85
percent of the aggregate average daily net assets of the International Growth
Portfolio, and Brinson Partners, as sub-investment adviser to the International
Growth Portfolio, will receive from Enterprise Capital and not the Accumulation
Trust, .4495 percent (53% of the fee received by Enterprise Capital; the fee
paid to Brinson Partners declines as assets exceed $100 million) of the
aggregate average daily net assets of the International Growth Portfolio. The
investment advisers will reimburse the Funds for the amount, if any, by which
the aggregate ordinary operating expenses of any of these Portfolios incurred by
the Funds in any calendar year exceed the most restrictive expense limitations
then in effect under any state securities law or regulation. Currently, the most
restrictive expense limitation in effect limits expenses of each Fund Portfolio
to an amount equal to 2.5 percent of the first $30 million of average daily net
assets of the Portfolio, 2.0 percent of the next $70 million, and 1.5 percent of
the average daily net assets of the Portfolio in excess of $100 million.
ANNUITY PROVISIONS
ANNUITY COMMENCEMENT DATE
Annuity payments under a Contract will begin on the Annuity Commencement
Date that is selected by the Contractholder at the time the Contract is applied
for. The Annuity Commencement Date chosen may be no earlier than the Contract
Anniversary nearest the Annuitant's 10th birthday, and no later than the
Contract Anniversary nearest the Annuitant's 85th birthday. The minimum number
of years from the Contract Date to the Annuity Commencement Date is 10. The
Annuity Commencement Date may be advanced to a date not earlier than the 10th
Contract Anniversary or deferred from time to time by the Contractholder by
written notice to the Company, provided that (1) notice of such deferral or
advance is received by the Company prior to the then current Annuity
Commencement Date, and (2) the new Annuity Commencement Date is a date which is
not later than the Contract Anniversary nearest the Annuitant's 85th birthday. A
particular retirement plan may contain other restrictions.
On the Annuity Commencement Date, the Contract's Surrender Value will be
applied to provide an annuity or any other option previously chosen by the
Contractholder and permitted by the Company. A supplementary contract will be
issued, and that contract will set forth the terms of the settlement. No
payments may be requested under the Contract's surrender provisions after the
Annuity Commencement Date, and no surrender will be permitted except as may be
available under the Settlement Option elected.
For Contracts issued in connection with retirement plans, reference should
be made to the terms of the particular retirement plan for any limitations or
restrictions on the Annuity Commencement Date.
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<PAGE> 28
ELECTION AND CHANGE OF SETTLEMENT OPTION
During the lifetime of the Annuitant and prior to the Annuity Commencement
Date, the Contractholder may elect one or more of the Settlement Options
described below, or such other settlement option (including a lump-sum payment)
as may be agreed to by the Company. The Contractholder may also change any
election, but written notice of an election or change of election must be
received by the Company at its Operations Center prior to the Annuity
Commencement Date. If no election is in effect on the Annuity Commencement Date,
Settlement Option 3, for a Life Annuity with 10 years certain, based on the
Annuitant's life, will be deemed to have been elected.
Settlement Options may also be elected by the Contractholder or the
Beneficiary as provided in the Death Benefit and Surrender sections of this
Prospectus. (See "DEATH BENEFIT" at page 20 and "SURRENDERS" at page 18.)
Where applicable, reference should be made to the terms of a particular
retirement plan and any applicable legislation for any limitations or
restrictions on the options that may be elected.
SETTLEMENT OPTIONS
Proceeds settled under the Settlement Options listed below or otherwise
currently available will not participate in the investment experience of the
Variable Account.
Settlement Option 1 -- Interest Income: Interest on the proceeds at a rate
(not less than 2 3/4 percent per year) set by the Company each year.
Settlement Option 2 -- Income for Specified Period: Fixed monthly payments
for a specified period of time, as elected. The payments may, at the Company's
option, be increased by additional interest each year.
Settlement Option 3 -- Single Life Income: Payments for the life of the
payee and for a period certain. The period certain may be (a) 0 years, 10 years,
or 20 years, or (b) the period required for the total income payments to equal
the proceeds (refund period certain). The amount of the income will be
determined by the Company on the date the proceeds become payable.
Settlement Option 3A -- Joint Life Income: Payments during the joint
lifetime of the payee and one other person, and during the lifetime of the
survivor. The survivor's monthly income may be equal to either (a) the income
payable during the joint lifetime or (b) two-thirds of that income. If a person
for whom this option is chosen dies before the first monthly payment is made,
the survivor will receive proceeds instead under Settlement Option 3, with 10
years certain.
Settlement Option 4 -- Income of Specified Amount: Income, of an amount
chosen, for as long as the proceeds and interest last. The amount chosen to be
received as income in each year may not be less than 10 percent of the proceeds
settled. Interest will be credited annually on the amount remaining unpaid at a
rate determined annually by the Company. This rate will not be less than 2 3/4
percent per year.
The Contract contains annuity payment rates for Settlement Options 3 and 3A
described in this Prospectus. The rates show, for each $1,000 applied, the
dollar amount of the monthly fixed annuity payment, when this payment is based
on minimum guaranteed interest as described above.
The annuity payment rates may vary according to the Settlement Option
elected and the age of the payee. The mortality table used in determining the
annuity payment rates for Options 3 and 3A is the 1983 Table a (discrete
functions, without projections for future mortality), with 3 1/2 percent
interest.
Under Settlement Option 3, if income based on the period certain elected is
the same as the income provided by another available period or periods certain,
the Company will deem the election to have been made of the longest period
certain.
In Qualified Plans, settlement options available to Contractholders may be
restricted by the terms of the plans.
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<PAGE> 29
FREQUENCY OF ANNUITY PAYMENTS
Annuity payments will be paid as monthly installments unless the payee
requests quarterly, semiannual, or annual installments at the time the option is
chosen. However, if the net amount available to apply under any Settlement
Option under any circumstances is less than $1,000, the Company shall have the
right to pay such amount in one lump sum. In addition, if the payments provided
for would be less than $25, the Company shall have the right to change the
frequency of payments to such intervals as will result in payments of at least
$25.
ADDITIONAL PROVISIONS
The Company may require proof of age of the Annuitant before making any
life annuity payment provided for by the Contract. If the age of the Annuitant
has been misstated, the amount payable will be the amount that the amount
settled would have provided at the correct age. Once life income payments have
begun, any underpayments will be made up in one sum with the next annuity
payment; overpayments will be deducted from the future annuity payments until
the total is repaid.
The Contract must be returned to the Company upon any settlement. Prior to
any settlement of a death claim, due proof of the Annuitant's death must be
submitted to the Company.
Where any benefits under the Contract are contingent upon the recipient's
being alive on a given date, the Company may require proof satisfactory to it
that such condition has been met.
The Contracts described in this Prospectus contain annuity payment rates
that distinguish between men and women. On July 6, 1983, the Supreme Court held
in Arizona Governing Committee v. Norris that optional annuity benefits provided
under an employer's deferred compensation plan could not, under Title VII of the
Civil Rights Act of 1964, vary between men and women on the basis of sex.
Because of this decision, the annuity payment rates applicable to Contracts
purchased under an employment-related insurance or benefit program may in some
cases not vary on the basis of the Annuitant's sex. Unisex rates to be provided
by the Company will apply for Qualified Plans and those plans where an employer
believes that the Norris decision applies.
Employers and employee organizations should consider, in consultation with
legal counsel, the impact of Norris, and Title VII generally, and any comparable
state laws that may be applicable, on any employment-related plan for which a
Contract may be purchased.
OTHER PROVISIONS
OWNERSHIP
The Contractholder has all rights and may receive all benefits under the
Contract. During the lifetime of the Annuitant (and the Contingent Annuitant if
one has been named), the Contractholder shall be the person so designated in the
application, unless changed, or unless a Successor Contractholder becomes the
Contractholder. On and after the death of the Annuitant (and the Contingent
Annuitant, if applicable), the Beneficiary shall be the Contractholder.
The Contractholder may name a Successor Contractholder or a new
Contractholder at any time. If the Contractholder dies, the Successor
Contractholder, if living, becomes the Contractholder. Any request for change
must be: (1) made in writing; and (2) received at the Company. The change will
become effective as of the date the written request is signed. A new choice of
Contractholder or Successor Contractholder will not apply to any payment made or
action taken by the Company prior to the time a request for change is received.
Contractholders should consult a competent tax advisor prior to changing
Contractholders.
PROVISION REQUIRED BY SECTION 72(s) OF THE CODE
If the Contractholder of a Non-Qualified Plan dies before the Annuity
Commencement Date and while the Annuitant is living, and if that
Contractholder's spouse is not the Successor Contractholder as of the date
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<PAGE> 30
of that Contractholder's death (as evidenced by proof satisfactory to the
Company), then the Contract will be surrendered as of the date of that death. If
the Successor Contractholder is the Beneficiary, the surrender proceeds may, at
the option of the Successor Contractholder, be paid over the life of the
Successor Contractholder. Such payments must begin no later than one year after
such date of death. If the Successor Contractholder is a surviving spouse, then
the surviving spouse will be treated as the new Contractholder of the Contract.
Under such circumstances, it shall not be necessary to surrender the Contract.
If the spouse is not the Successor Contractholder and there is no designated
beneficiary, the proceeds must be distributed within 5 years after the date of
death. However, under the terms of the Contract, if the spouse is not the
Successor Contractholder, the Contract will be surrendered as of the date of
death and the proceeds will be paid to the Beneficiary. This provision shall not
extend the term of the Contract beyond the date when death proceeds become
payable.
Further, if the Contractholder dies on or after the Annuity Commencement
Date, then any remaining portion of the proceeds will be distributed at least as
rapidly as under the method of distribution being used as of the date of the
Contractholder's death.
PROVISION REQUIRED BY SECTION 401(a)(9) OF THE CODE
The entire interest of a Qualified Plan Participant under the contract will
be distributed to the Contractholder or his/her Designated Beneficiary either by
or beginning not later than April 1 of the calendar year following the calendar
year in which such Participant attains age 70 1/2. The period over which such
distribution will be made is the life of such Participant or the lives of such
Participant and Designated Beneficiary.
Where distributions have begun in accordance with the previous paragraph
and the Participant dies before Contractholder's entire interest has been
distributed to him/her, the remaining portion of such interest will be
distributed at least as rapidly as under the method of distribution being used
as of the date of the Participant's death. If the Participant dies before the
commencement of such distributions and there is no Designated Beneficiary, the
Contract will be surrendered as of the date of death. The surrender proceeds
must be distributed within 5 years after the date of death. But if there is a
Designated Beneficiary, the surrender proceeds may, at the option of the
Designated Beneficiary, be paid over the life of the Designated Beneficiary. In
such case, distributions will begin not later than one year after the
Participant's death. If the Designated Beneficiary is the surviving spouse of
the Participant, the date on which the distributions will begin shall not be
earlier than the date on which the Participant would have attained age 70 1/2.
If the surviving spouse dies before distributions to him/her begin, the
provisions of this paragraph shall be applied as if the surviving spouse were
the Participant. If the Plan is an IRA under Section 408 of the Code, the
surviving spouse may elect to forego distribution and treat the IRA as his/her
own Plan.
Qualified Plan Contracts include those qualifying for special treatment
under Sections 401, 403, and 408 of the Code.
It is the Contractholder's responsibility to assure that distribution rules
imposed by the Code will be met.
CONTINGENT ANNUITANT
Except where the Contract is issued in connection with a Qualified Plan, a
Contingent Annuitant may be designated by the Contractholder. Such designation
may be made once before annuitization, either (1) in the application for the
Contract, or (2) after the Contract is issued, by written notice to the Company
at its Operations Center. The Contingent Annuitant may be deleted by written
notice to the Company at its Operations Center. A designation or deletion of a
Contingent Annuitant will take effect as of the date the written election was
signed. The Company, however, must first accept and record the change at its
Operations Center. The change will be subject to any payment made by the Company
or action taken by the Company before receipt of the notice at the Company's
Operations Center. The Contingent Annuitant will be deleted from the Contract
automatically by the Company as of the Contract Anniversary nearest the
Contingent Annuitant's 85th birthday.
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<PAGE> 31
On the death of the Annuitant, the Contingent Annuitant will become the
Annuitant, under the following conditions:
(1) the death of the Annuitant must have occurred before the Annuity
Commencement Date;
(2) the Contingent Annuitant is living on the date of the Annuitant's
death;
(3) if the Annuitant was the Contractholder on the date of death, the
Successor Contractholder must have been the Annuitant's spouse; and
(4) if the Annuity Commencement Date is later than the Contract
Anniversary nearest the Contingent Annuitant's 85th birthday, the Annuity
Commencement Date will be automatically advanced to that Contract
Anniversary.
Effect of Contingent Annuitant's Becoming the Annuitant. If the Contingent
Annuitant becomes the Annuitant at the death of the Annuitant, in accordance
with the conditions specified above, the Death Benefit proceeds of the Contract
will be paid to the Beneficiary only on the death of the Contingent Annuitant.
If the Contingent Annuitant was the Beneficiary on the Annuitant's death, the
Beneficiary will be changed automatically to the person who was the Successor
Beneficiary on the date of death. If there was no Successor Beneficiary, then
the Contingent Annuitant's executors or administrators, unless the
Contractholder directed otherwise, will become the Beneficiary. All other rights
and benefits under the Contract will continue in effect during the lifetime of
the Contingent Annuitant as if the Contingent Annuitant were the Annuitant.
ASSIGNMENT
The Company will not be bound by any assignment until the assignment (or a
copy) is received by the Company at its Home Office. The Company is not
responsible for assessing the validity or effect of any assignment. The Company
shall not be liable as to any payment or other settlement made by the Company
before receipt of the assignment.
If the Contract is issued pursuant to certain retirement plans, then it may
not be assigned, pledged or otherwise transferred except under such conditions
as may be allowed under applicable law.
Because an assignment may be a taxable event, a Contractholder should
consult a competent tax advisor before assigning the Contract.
CHANGE OF BENEFICIARY
So long as the Contract is in force, the Beneficiary or Successor
Beneficiary may be changed by written request to the Company at its Operations
Center in a form acceptable to the Company. The Contract need not be returned
unless requested by the Company. The change will take effect as of the date the
request is signed, whether or not the Annuitant is living when the request is
received by the Company. The Company will not, however, be liable for any
payment made or action taken before receipt and acknowledgement of the request
at its Operations Center.
SUBSTITUTION OF SECURITIES
If the shares of any Portfolio of the Funds should no longer be available
for investment by the Variable Account or, if in the judgment of the Company's
Board of Trustees, further investment in shares of one or more of the Portfolios
of the Funds should become inappropriate in view of the purposes of the
Contract, the Company may substitute shares of another mutual fund for shares of
the Funds already purchased or to be purchased in the future by Purchase
Payments under the Contract. A substitution of securities in any Subaccount will
take place only with prior approval of the Securities and Exchange Commission
and under such requirements as it may impose.
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<PAGE> 32
MODIFICATION OF THE CONTRACTS
Upon notice to the Contractholder, the Contract may be modified by the
Company, but only if such modification (1) is necessary to make the Contract or
the Variable Account comply with any law or regulation issued by a governmental
agency to which the Company is subject or (2) is necessary to assure continued
qualification of the Contract under the Internal Revenue Code or other federal
or state laws relating to retirement annuities or annuity contracts or (3) is
necessary to reflect a change in the operation of the Variable Account or the
Subaccounts or the Guaranteed Interest Account or (4) provides additional
Settlement Options or fixed accumulation options. In the event of any
modification, the Company may make appropriate endorsement in the Contract to
reflect such modification.
CHANGE IN OPERATION OF VARIABLE ACCOUNTS
At the Company's election and subject to any necessary vote by persons
having the right to give instructions with respect to the voting of shares of
the Funds held by the Subaccounts, the Variable Account may be operated as a
management company under the Investment Company Act of 1940 or it may be
deregistered under the Investment Company Act of 1940 in the event registration
is no longer required. Deregistration of the Variable Account requires an order
by the Securities and Exchange Commission. In the event of any change in the
operation of the Variable Account pursuant to this provision, the Company may
make appropriate endorsement to the Contract to reflect the change and take such
other action as may be necessary and appropriate to effect the change.
VOTING RIGHTS
All of the assets held in the Subaccounts of the Variable Account will be
invested in shares of the corresponding Portfolios of the Funds. The Company is
the legal holder of those shares and as such has the right to vote to elect the
Board of Directors of MONY Series Fund and the Board of Trustees of the
Accumulation Trust, to vote upon certain matters that are required by the 1940
Act to be approved or ratified by the shareholders of a mutual fund, and to vote
upon any other matter that may be voted upon at a shareholder's meeting. To the
extent required by law, the Company will vote the shares of each of the Funds
held in the Variable Account (whether or not attributable to Contractholders) at
shareholder meetings of each of the Funds in accordance with the instructions
received from Contractholders. The number of votes will be determined as of the
record date selected by the Board of Directors or Board of Trustees of the
respective Fund. The Company will furnish Contractholders with the proper forms
to enable them to give it these instructions. Currently, the Company may
disregard voting instructions under the circumstances described in the following
paragraph.
The Company may, if required by state insurance officials, disregard voting
instructions if those instructions would require shares to be voted to cause a
change in the subclassification or investment objectives or policies of one or
more of the Portfolios of either or both of the Funds, or to approve or
disapprove an investment adviser or principal underwriter for either or both of
the Funds. In addition, the Company itself may disregard voting instructions
that would require changes in the investment objectives or policies of any
Portfolio or in an investment adviser or principal underwriter for either or
both of the Funds, if the Company reasonably disapproves those changes in
accordance with applicable federal regulations. If the Company does disregard
voting instructions, it will advise Contractholders of that action and its
reasons for the action in the next semiannual report to Contractholders.
Each Contractholder will have the equivalent of one vote per $100 of value
attributable to the Contract held in each Subaccount of the Variable Account,
with fractional votes for amounts less than $100. For voting purposes, this
value attributable to the Contract is equal to the Cash Value. These votes,
represented as votes per $100 of value in each Subaccount of the Variable
Account, are converted into a proportionate number of votes in shares of the
corresponding Portfolio of each of the Funds. Shares of each of the Funds held
in each Subaccount for which no timely instructions from Contractholders are
received will be voted by the Company in the same proportion as those shares in
that Subaccount for which instructions are received. Should
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<PAGE> 33
applicable federal securities laws or regulations permit, the Company may elect
to vote shares of each of the Funds in its own right.
The number of shares of the corresponding Portfolio of one of the Funds in
a Subaccount for which instructions may be given by a Contractholder is
determined by dividing the portion of the value attributable to the Contract
held in that Subaccount by the net asset value of one share in the corresponding
Portfolio of the respective Fund. In other words, if the value attributable to
the Contract held in the Subaccount were $540 and the net asset value of the
respective Fund's shares of the Portfolio held in that Subaccount were $20 per
share on the record date, then the Contractholder could issue instructions on
5.4 votes (representing votes per $100 of value attributable to the Contract
held in the Subaccount), which would be converted into instructions on 27 shares
of the respective Fund.
Matters on which Contractholders may give voting instructions include the
following: (1) approval of any change in the Investment Advisory Agreement and
Services Agreement for the Portfolio(s) of the Fund corresponding to the
Contractholder's selected Subaccount(s); (2) any change in the fundamental
investment policies of the Portfolio(s) corresponding to the Contractholder's
selected Subaccount(s); and (3) any other matter requiring a vote of the
shareholders of either of the Funds. With respect to approval of the Investment
Advisory Agreement or any change in a Portfolio's fundamental investment
policies, Contractholders participating in that Portfolio will vote separately
on the matter pursuant to the requirements of Rule 18f-2 under the 1940 Act.
DISTRIBUTION OF THE CONTRACTS
MONY Securities Corp. ("MSC"), a New York corporation which is a
wholly-owned subsidiary of the Company, will act as the principal underwriter of
the Contracts, pursuant to an underwriting agreement with the Company. MSC is
registered as a broker-dealer under the Securities Exchange Act of 1934 and is a
member of the National Association of Securities Dealers. The Contracts are sold
by individuals who are registered representatives of MSC and who are also
licensed as life insurance agents for the Company. The Contracts may also be
sold through other broker-dealers authorized by MSC and applicable law to do so.
Commissions and other expenses directly related to the sale of the Contract will
not exceed 6.0 percent of Purchase Payments. Additional compensation may be paid
for other services not directly related to the sale of the Contract. Such
services include the training of personnel and the production of promotional
literature.
FEDERAL TAX STATUS
INTRODUCTION
The Contracts described in this Prospectus are designed for use by
retirement plans that may or may not qualify for favorable tax treatment under
the provisions of Section 401, 403, 408(b), and 457 of the Code. The ultimate
effect of federal income taxes on the value of the Contract's Cash Value, on
annuity payments, and on the economic benefit to the Contractholder, the
Annuitant, and the Beneficiary may depend upon the type of retirement plan for
which the Contract is purchased and upon the tax and employment status of the
individual concerned.
The following discussion of the treatment of the Contracts and of the
Company under the federal income tax laws is general in nature, is based upon
the Company's understanding of current federal income tax laws, and is not
intended as tax advice. Any person contemplating the purchase of a Contract
should consult a qualified tax adviser. A more detailed description of the
treatment of the Contract under federal income tax laws is contained in the
Statement of Additional Information. THE COMPANY DOES NOT MAKE ANY GUARANTEE
REGARDING ANY TAX STATUS, FEDERAL, STATE, OR LOCAL, OF ANY CONTRACT OR ANY
TRANSACTION INVOLVING THE CONTRACTS.
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<PAGE> 34
TAX TREATMENT OF THE COMPANY
Under existing federal income tax laws, the income of the Variable
Accounts, to the extent that it is applied to increase reserves under the
Contracts, is substantially nontaxable to the Company.
TAXATION OF ANNUITIES IN GENERAL
The Contracts offered by this Prospectus are designed for use in connection
with Qualified Plans and Non-Qualified Plans. All or a portion of the
contributions to such plans will be used to make Purchase Payments under the
Contracts. In general, contributions to Qualified Plans and income earned on
contributions to all plans are tax-deferred until distributed to plan
participants or their beneficiaries. Such tax deferral is not, however,
available for Non-Qualified Plans if the Contractholder is other than a natural
person unless the Contract is held as an agent for a natural person. Annuity
payments made as retirement distributions under a Contract, except to the extent
of employee (in the case of Qualified Plans) or Contractholder (in the case of
Non-Qualified Plans) contributions, are generally taxable to the annuitant as
ordinary income. Contractholders, Annuitants, and Beneficiaries should seek
qualified advice about the tax consequences of distributions, withdrawals, and
payments under the retirement plans in connection with which the Contracts are
purchased.
The Company will withhold and remit to the United States Government and,
where applicable, to state governments part of the taxable portion of each
distribution made under a Contract unless the Contractholder or Annuitant
provides his or her taxpayer identification number to the Company and notifies
the Company that he or she chooses not to have amounts withheld.
Under the Technical and Miscellaneous Revenue Act of 1988 ("TAMRA"), for
purposes of determining the amount includible in gross income with respect to
distributions not received as an annuity, including deemed distributions
resulting from gratuitous transfers, all annuity contracts issued by the same
company to the same Contractholder during any 12 month period, other than those
issued to qualified retirement plans, will be treated as one annuity contract.
The IRS is given power to prescribe rules to prevent avoidance of this rule
through special purchases of contracts or otherwise. None of these rules is
expected to affect tax-benefitted plans.
Effective January 1, 1993, distributions of plan benefits from qualified
retirement plans, other than individual retirement arrangements ("IRAs"),
generally will be subject to mandatory federal income tax withholding unless
they either are:
1. Part of a series of substantially equal periodic payments (at least
annually) for the participant's life or life expectancy, the joint lives or
life expectancies of the participant and his/her beneficiary, or a period
certain of not less than 10 years; or
2. Required by the Code upon the participant's attainment of age
70 1/2 or death.
Such withholding will apply even if the distribution is rolled over into
another qualified plan, including an IRA. The withholding can be avoided if the
participant's interest is directly transferred by the old plan to another
eligible qualified plan, including an IRA. A direct transfer to the new plan can
be made only in accordance with the terms of the old plan. If withholding is not
avoided, the amount withheld may be subject to income tax and excise tax
penalties.
Under the generation skipping transfer tax, the Company may be liable for
payment of this tax under certain circumstances. In the event that the Company
determines that such liability exists, an amount necessary to pay the generation
skipping transfer tax may be subtracted from the death benefit proceeds.
ANNUITY CONTRACTS GOVERNED BY SECTION 403(b) OF THE CODE
An annuity contract will not be treated as a Qualified Contract under
Section 403(b) of the Code unless distributions which are attributable to a
contribution made pursuant to a salary reduction agreement may be paid only: (1)
when the Contractholder attains age 59 1/2; (2) when the Contractholder
separates from the service of his employer; (3) when the Contractholder dies;
(4) when the Contractholder becomes perma-
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<PAGE> 35
nently disabled within the meaning of Section 72(m) of the Code; or (5) in the
case of hardship. These restrictions generally apply to contributions made after
December 31, 1988 and to any increase in Cash Value of the Contract after
December 31, 1988. Therefore effective January 1, 1989 and thereafter, any
contributions made, or increase in Cash Value, on or after January 1, 1989 will
be restricted from withdrawal except upon attainment of age 59 1/2, separation
from service, death, disability or hardship (hardship withdrawals are to be
limited to the amount of the Contractholder's Purchase Payments). However, any
Purchase Payments that reflect employer contributions and the earnings thereon
will not be restricted unless specifically provided for by the applicable
employer's plan.
RETIREMENT PLANS
The Contracts described in this Prospectus are designed for use with the
following types of retirement plans:
(1) Pension and Profit-Sharing Plans established by business employers
and certain associations, as permitted by Sections 401(a) and 401(k) of the
Code, including those purchasers who would have been covered under the
rules governing H.R. 10 (Keogh) Plans;
(2) Individual Retirement Annuities permitted by Sections 219 and
408(b) of the Code, including Simplified Employee Pensions established by
employers pursuant to Section 408(k);
(3) Tax-Sheltered Annuity Plans established by certain educational and
tax-exempt organizations under Section 403(b) of the Code (effective
January 1, 1989, the Contracts offered by this Prospectus have been
withdrawn from sale in all states in connection with Qualified Plans which
intend to qualify for federal income tax advantages available under Section
403(b) of the Code);
(4) Deferred compensation plans provided by certain governmental
entities under Section 457 of the Code; and
(5) Non-Qualified Plans.
The tax rules applicable to participants in such retirement plans vary
according to the type of plan and its terms and conditions. Therefore, no
attempt is made herein to provide more than general information about the use of
Contracts with the various types of retirement plans. Participants in such plans
as well as Contractholders, Annuitants, and Beneficiaries are cautioned that the
rights of any person to any benefits under these plans are subject to the terms
and conditions of the plans themselves, regardless of the terms and conditions
of the Contracts. The Company will provide purchasers of Contracts used in
connection with Individual Retirement Annuities with such supplementary
information as may be required by the Internal Revenue Service or other
appropriate agency. Any person contemplating the purchase of a Contract should
consult a qualified tax adviser.
PERFORMANCE DATA
From time to time the performance of one or more of the Subaccounts may be
advertised. The performance data contained in these advertisements is based upon
historical earnings and is not indicative of future performance. The data for
each Subaccount reflects the results of the corresponding Portfolio of the Fund
and recurring charges and deductions borne by or imposed on the Portfolio and
the Subaccount. Set forth below for each Subaccount is the manner in which the
data contained in such advertisements will be calculated.
Money Market Subaccount. The performance data for this Subaccount will
reflect the "yield" and "effective yield". The "yield" of the Subaccount refers
to the income generated by an investment in the Subaccount over the seven day
period stated in the advertisement. This income is "annualized", that is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly, but, when annualized,
the income earned by an investment in the Subaccount is assumed to be
reinvested. The
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<PAGE> 36
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
Subaccounts other than the Money Market Subaccount. The performance data
for these Subaccounts will reflect the "yield" and "total return". The "yield"
of each of these Subaccounts refers to the income generated by an investment in
that Subaccount over the 30 day period stated in the advertisement and is the
result of dividing that income by the value of the Subaccount. The value of each
Subaccount is the average daily number of Units outstanding multiplied by the
Unit Value on the last day of the period. The "yield" reflects deductions for
all charges, expenses, and fees of both the Funds and the Variable Account other
than the Surrender Charge. "Total return" for each of these Subaccounts refers
to the return a Contractholder would receive during the period indicated if a
$1,000 Purchase Payment was made the indicated number of years ago. It reflects
historical investment results less charges and deductions of both the Funds and
the Variable Account, including any Surrender Charge imposed as a result of the
full Surrender, with the distribution being made in cash rather than in the form
of one of the settlement options, at the close of the period for which the
"total return" data is given.
Returns for periods exceeding one year reflect the average annual total
return for such period. Total return data may also be shown assuming that the
Contract continues in force (i.e., was not surrendered) beyond the close of the
periods indicated in which case that data would reflect all charges and
deductions of both the Funds and the Variable Account other than the Surrender
Charge. In addition to the total return data described above based upon a $1,000
investment, comparable data may also be shown for an investment equal to the
amount of the average purchase payment made by a purchase of a Contract during
the prior year.
Non-Standardized Performance Data. From time to time, average annual total
return or other performance data may also be advertised in non-standardized
formats. Non-standard performance data will be accompanied by standard
performance data, and the period covered or other non-standard features will be
disclosed.
In addition, reference in advertisements may be made to various indices,
including without limitation, the Standard & Poor's Indices and the Lehman
Brothers, Shearson, CDA/Wiesenberger, Russell, Merrill Lynch, and Wilshire
indices, and to various ranking services, including, without limitation, the
Lipper Annuity and Closed End Survey compiled by Lipper Analytical Services and
the VARDS report compiled by Variable Annuity Research and Data Service in order
to provide the reader a basis for comparison.
ADDITIONAL INFORMATION
This prospectus does not contain all the information set forth in the
registration statement, certain portions of which have been omitted pursuant to
the rules and regulations of the Securities and Exchange Commission. The omitted
information may be obtained from the Commission's principal office in
Washington, D.C., upon payment of the fees prescribed by the Commission.
For further information with respect to the Company and the Contracts
offered by this prospectus, including the Statement of Additional Information
(which includes financial statements relating to the Company), Contractholders
and prospective investors may also contact the Company at its address or phone
number set forth on the cover of this Prospectus for requesting such statement.
The Statement of Additional Information is available from the Company without
charge.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account or the
principal underwriter is a party. The Company is engaged in various kinds of
routine litigation which, in the opinion of the Company, are not of material
importance in relation to the total capital and surplus of the Company.
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FINANCIAL STATEMENTS
The financial statements for the Company, included in the Statement of
Additional Information should be considered only as bearing on the ability of
the Company to meet its obligations under the Contracts. The financial
statements of the Company should not be considered as bearing on the investment
performance of the assets held in the Variable Account. The financial statements
of the Company and the Variable Account are included in the Statement of
Additional Information.
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TABLE OF CONTENTS
OF
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1996
<TABLE>
<CAPTION>
ITEM PAGE
- -------------------------------------------------------------------------------------- ----
<S> <C>
The Mutual Life Insurance Company of New York......................................... 1
Legal Opinion......................................................................... 1
Independent Accountants............................................................... 1
Federal Tax Status.................................................................... 2
Performance Data...................................................................... 5
Financial Statements.................................................................. F-1
</TABLE>
If you would like to receive a copy of the MONY Variable Account A
Statement of Additional Information, please return this request to:
The Mutual Life Insurance Company of New York
Mail Drop 76-18
500 Frank W. Burr Boulevard
Teaneck, New Jersey 07666-6888
Your name_______________________________________________________________
Address_________________________________________________________________
City ____________________________________ State____________ Zip_______
Please send me a copy of the MONY Variable Account A Statement of
Additional Information.
Policy C3-88
FORM NO. 13456SL (5/96) #33-37722
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APPENDIX A
CALCULATION OF SURRENDER CHARGE
ILLUSTRATION 1
Suppose an initial Purchase Payment of $15,000 is the only payment made,
and no taxes are deducted from this payment. At the beginning of the third
Contract Year, the Cash Value of the Contract has grown to $18,000 and the
Contractholder requests a partial surrender of $2,000.
The Surrender Charge is determined as follows:
Step 1: Purchase Payments are allocated to the surrender amount, as
follows:
<TABLE>
<CAPTION>
ANNIVERSARIES SINCE AMOUNT AMOUNT AVAILABLE
PURCHASE PAYMENT CONTRACT YEAR ALLOCATED FOR ALLOCATION TO
RECEIVED BY US PAYMENT RECEIVED TO SURRENDER FUTURE SURRENDER
- ------------------- ---------------- ------------ -----------------
<S> <C> <C> <C>
0 3 $ 0 $ 0
1 2 0 0
2 1 2,000 13,000
</TABLE>
IF THE CONTRACT IS A NON-QUALIFIED CONTRACT --
Step 2: The Guaranteed Free Surrender Amount is calculated as 10% of the
Cash Value ($1,800). Reduce the resulting amount allocated to
surrender ($2,000) by the Guaranteed Free Surrender Amount
($1,800), and apply the Surrender Charge Percentages as follows:
<TABLE>
<CAPTION>
NUMBER OF CONTRACT AMOUNT OF
ANNIVERSARIES SINCE AMOUNT SURRENDER SURRENDER
PURCHASE PAYMENT CONTRACT YEAR ALLOCATED CHARGE CHARGE
RECEIVED BY US PAYMENT RECEIVED TO SURRENDER PERCENTAGE (AMT X PCT)
- ------------------- ---------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
0 3 $ 0 7% $ 0
1 2 0 7 0
2 1 200 6 12
</TABLE>
Step 3: Summing the resulting Amounts of Surrender Charge produces a total
Surrender Charge of $12.
The Surrender Charge, plus the amount of the surrender is then deducted
from the remaining Cash Value of the Non-Qualified Contract, for a total
withdrawal of $2,012.
IF THE CONTRACT IS A QUALIFIED CONTRACT --
Step 2: The Guaranteed Free Surrender Amount is calculated as up to the
greater of 10% of the Cash Value ($1,800) of the Qualified Contract
or up to $10,000. Since the partial surrender requested is less
than $10,000 (although it is greater than 10 percent), there is no
Surrender Charge.
Since there is no Surrender Charge, the entire amount requested is
available under the Guaranteed Free Surrender Amount provision of the Qualified
Contract.
Assuming that in the middle of the tenth Contract Year, a full surrender is
requested. The Cash Value at the time of full surrender is $28,000. Since this
is a full surrender, the Annual Contract Charge (currently $30) is deducted from
the Cash Value, leaving a remaining Cash Value balance of $27,970. For this
calculation, there is $13,000 of Purchase Payments made in the first Contract
Year.
A-1
<PAGE> 40
The Surrender Charge is determined as follows:
Step 1: Purchase Payments are allocated to the surrender amount, as
follows:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACT ANNIVERSARIES
SINCE PURCHASE AMOUNT
PAYMENT CONTRACT YEAR ALLOCATED
RECEIVED BY US PAYMENT RECEIVED TO SURRENDER
- ---------------------- ---------------- ------------
<S> <C> <C>
0 10 $ 0
1 9 0
2 8 0
3 7 0
4 6 0
5 5 0
6 4 0
7 3 0
8 (or more) 1 and 2 13,000
</TABLE>
IF THE CONTRACT IS A NON-QUALIFIED CONTRACT --
Step 2: The Guaranteed Free Surrender Amount is calculated as up to 10% of
the Cash Value ($2,800) of the Non-Qualified Contract. Reduce the
resulting amount allocated to surrender ($13,000) by the Guaranteed
Free Surrender Amount ($2,800), and apply the Surrender Charge
Percentages as follows:
<TABLE>
<CAPTION>
NUMBER OF CONTRACT AMOUNT OF
ANNIVERSARIES SINCE AMOUNT SURRENDER SURRENDER
PURCHASE PAYMENT CONTRACT YEAR ALLOCATED CHARGE CHARGE
RECEIVED BY US PAYMENT RECEIVED TO SURRENDER PERCENTAGE (AMT X PCT)
- ------------------------- ---------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
0 10 $ 0 7% $ 0
1 9 0 7 0
2 8 0 6 0
3 7 0 6 0
4 6 0 5 0
5 5 0 4 0
6 4 0 3 0
7 3 0 2 0
8 or more 1 and 2 10,200 0 0
</TABLE>
Step 3: Summing the resulting Amounts of Surrender Charge produces a total
Surrender Charge of $0.
IF THE CONTRACT IS A QUALIFIED CONTRACT --
Step 2: The Guaranteed Free Surrender Amount is calculated as up to the
greater of 10% of the Cash Value ($2,800) of the Qualified Contract
or up to $10,000. Reduce the resulting amount
A-2
<PAGE> 41
allocated to surrender ($13,000) by the Guaranteed Free Surrender
Amount ($10,000), and apply the Surrender Charge Percentages as
follows:
<TABLE>
<CAPTION>
NUMBER OF CONTRACT
ANNIVERSARIES AMOUNT OF
SINCE AMOUNT SURRENDER SURRENDER
PURCHASE PAYMENT CONTRACT YEAR ALLOCATED CHARGE CHARGE
RECEIVED BY US PAYMENT RECEIVED TO SURRENDER PERCENTAGE (AMT X PCT)
- ------------------ ---------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
0 10 $ 0 7% $ 0
1 9 0 7 0
2 8 0 6 0
3 7 0 6 0
4 6 0 5 0
5 5 0 4 0
6 4 0 3 0
7 3 0 2 0
8 or more 1 and 2 3,000 0 0
</TABLE>
Step 3: Summing the resulting Amounts of Surrender Charge produces a total
Surrender Charge of $0.
Since there are no Purchase Payments such that 7 or less policy
anniversaries had passed since they were received, no part of the surrender
proceeds are subject to a Surrender Charge. Hence, no Surrender Charge is
assessed on this full surrender.
ILLUSTRATION 2
Suppose Purchase Payments of $2,000 are made at the beginning of every
Contract Year. No taxes are deducted from these Payments. In the middle of the
third Contract Year, a partial surrender of $500 is requested. Suppose the Cash
Value has grown to $7,000 at the time of the partial surrender request.
The Surrender Charge is determined as follows:
Step 1: Purchase Payments are allocated to the surrender amount, as
follows:
<TABLE>
<CAPTION>
NUMBER OF CONTRACT
ANNIVERSARIES
SINCE AMOUNT AMOUNT AVAILABLE
PURCHASE PAYMENT CONTRACT YEAR ALLOCATED FOR ALLOCATION TO
RECEIVED BY US PAYMENT RECEIVED TO SURRENDER FUTURE SURRENDERS
- ------------------ ---------------- ------------ -----------------
<S> <C> <C> <C>
0 3 $ 0 $ 2,000
1 2 0 2,000
2 1 500 1,500
</TABLE>
IF THE CONTRACT IS A NON-QUALIFIED CONTRACT --
Step 2: The Guaranteed Free Surrender Amount is calculated as up to 10% of
the Cash Value ($700) of the Non-Qualified Contract. Reduce the
resulting amount allocated to surrender ($500) by the Guaranteed
Free Surrender Amount ($700), and apply the Surrender Charge
Percentages as follows:
<TABLE>
<CAPTION>
NUMBER OF CONTRACT
ANNIVERSARIES AMOUNT OF
SINCE AMOUNT SURRENDER SURRENDER
PURCHASE PAYMENT CONTRACT YEAR ALLOCATED CHARGE CHARGE
RECEIVED BY US PAYMENT RECEIVED TO SURRENDER PERCENTAGE (AMT X PCT)
- ------------------ ---------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
0 3 $0 7% $ 0
1 2 0 7 0
2 1 0 6 0
</TABLE>
Step 3: Summing the resulting Amounts of Surrender Charge produces a total
Surrender Charge of $0.
The partial surrender will be allocated to $500 of payments made in the
first Contract Year. But since 10 percent of the Cash Value ($700) of the
Non-Qualified Contract could be surrendered under the
A-3
<PAGE> 42
Guaranteed Free Surrender Amount Provision, the partial surrender of $500 could
be withdrawn without a surrender charge.
IF THE CONTRACT IS A QUALIFIED CONTRACT --
Step 2: The Guaranteed Free Surrender Amount is calculated as up to the
greater of 10% of the Cash Value ($700) of the Qualified Contract
or up to $10,000. Since the partial surrender requested is less
than $10,000 and less than 10% there is no surrender charge.
Since there is no Surrender Charge, the entire amount requested is
available under the Guaranteed Free Surrender Amount provision of the Qualified
Contract.
Assume that Purchase Payments of $2,000 have continually been made at the
beginning of each Contract Year, and that in the middle of the tenth Contract
Year, a partial surrender of $7,500 is requested. The Cash Value is $32,600 at
the time of the partial surrender request.
The Surrender Charge is determined as follows:
Step 1: Purchase Payments are allocated to the surrender amount, as
follows:
<TABLE>
<CAPTION>
AMOUNT
NUMBER OF CONTRACT AVAILABLE
ANNIVERSARIES SINCE AMOUNT FOR ALLOCATION TO
PURCHASE PAYMENT CONTRACT YEAR ALLOCATED FUTURE
RECEIVED BY US PAYMENT RECEIVED TO SURRENDER SURRENDERS
- ------------------------- ---------------- ------------ -----------------
<S> <C> <C> <C>
0 10 $ 0 $ 2,000
1 9 0 2,000
2 8 0 2,000
3 7 0 2,000
4 6 0 2,000
5 5 0 2,000
6 4 2,000 0
7 3 2,000 0
8 or more 1 and 2 3,500 0
</TABLE>
IF THE CONTRACT IS A NON-QUALIFIED CONTRACT --
Step 2: The Guaranteed Free Surrender Amount is calculated as 10% of the
Cash Value ($3,260) of the Non-Qualified Contract. Reduce the
resulting amount allocated to surrender ($3,500) in Contract Years
1 and 2 by the Guaranteed Free Surrender Amount ($3,260), and apply
the Surrender Charge Percentages as follows:
<TABLE>
<CAPTION>
NUMBER OF CONTRACT AMOUNT OF
ANNIVERSARIES SINCE AMOUNT SURRENDER SURRENDER
PURCHASE PAYMENT CONTRACT YEAR ALLOCATED CHARGE CHARGE
RECEIVED BY US PAYMENT RECEIVED TO SURRENDER PERCENTAGE (AMT X PCT)
- ------------------------- ---------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
6 4 $2,000 3% $60
7 3 2,000 2 40
8 or more 1 and 2 240 0 0
</TABLE>
Step 3: Summing the resulting Amounts of Surrender Charge produces a total
Surrender Charge of $100.
The Surrender Charge, plus the amount of the surrender is then deducted
from the remaining Cash Value of the Non-Qualified Contract, for a total
withdrawal of $7,600.
A-4
<PAGE> 43
IF THE CONTRACT IS A QUALIFIED CONTRACT --
Step 2: The Guaranteed Free Surrender Amount is calculated as up to the
greater of 10% of the Cash Value ($3,260) of the Qualified Contract
or up to $10,000. Since the partial surrender requested is less
than $10,000 (although it is greater than 10 percent), there is no
surrender charge.
Since there is no Surrender Charge, the entire amount requested is
available under the Guaranteed Free Surrender Amount provision of the Qualified
Contract.
Assuming that in the middle of the twelfth Contract Year, a full surrender
with the full proceeds being settled under Settlement Option 3, Single Life
Income for 10 years certain and during the balance of the annuitant's lifetime,
payments of $2,000 have continuously been made at the beginning of each contract
year. The Cash Value at the time of the full surrender is $26,000. Since this
example assumes a full surrender is being made, the Annual Contract Charge
(currently $30) is deducted from the Cash Value, leaving a remaining Cash Value
of $25,970.
Since the full proceeds are being applied to Settlement Option 3, the
Surrender Charge is $0. The entire remaining Cash Value of $25,970 is applied to
the settlement option.
A-5
<PAGE> 44
PROSPECTUS DATED MAY 1, 1996
MONY SERIES FUND, INC.
1740 BROADWAY
NEW YORK, NEW YORK 10019
1-800-487-6669
MONY Series Fund, Inc. (the "Fund"), a diversified open-end management
investment company, is intended to provide a wide range of investment
alternatives through its seven separate Portfolios, each of which is, for
investment and federal tax purposes, in effect a separate fund. A separate class
of stock will be issued for each Portfolio.
Shares of all Portfolios of the Fund are currently sold to MONY Life
Insurance Company of America ("MONY America") and The Mutual Life Insurance
Company of New York ("MONY") for allocation to MONY America Variable Account L
and MONY Variable Account L to fund the benefits under Flexible Premium Variable
Life Insurance Contracts issued by those companies and for allocation to MONY
America Variable Account A and MONY Variable Account A to fund benefits under
Flexible Payment Variable Annuity Contracts issued by those companies. Shares of
all Portfolios of the Fund, other than the Government Securities Portfolio, are
sold to MONY America and MONY for allocation to MONY America Variable Account S
and MONY Variable Account S to fund benefits under Variable Life Insurance with
Additional Premium Option contracts issued by those companies and to MONY for
allocation to Keynote Series Account ("Keynote") to fund benefits under
Individual Variable Annuity Contracts. These variable accounts ("Variable
Accounts") invest in shares of the Fund in accordance with allocation
instructions received from Contract holders. Such allocation rights are further
described in the attached prospectus for one of the contracts. The Variable
Accounts invest in shares of the Fund through subaccounts that correspond to the
Portfolios. The Variable Accounts will redeem shares of the Fund to the extent
necessary to provide benefits under the Contracts or for such other purposes as
may be consistent with the Contracts.
The investment objectives of the Portfolios are:
INTERMEDIATE TERM BOND PORTFOLIO: The maximum income over the
intermediate term consistent with preservation of capital, through
investment in highly-rated debt securities, U.S. Government obligations, and
money market instruments, together having a dollar-weighted average life of
between 4 and 8 years.
LONG TERM BOND PORTFOLIO: The maximum income over the longer term
consistent with preservation of capital, through investment in highly-rated
debt securities, U.S. Government obligations, and money market instruments,
together having a dollar-weighted average life of more than 8 years.
GOVERNMENT SECURITIES PORTFOLIO: The maximum current income over the
intermediate term consistent with preservation of capital, through
investment in highly-rated debt securities of the United States government
and its agencies and money market instruments, with a dollar-weighted
average life of up to ten years at the time of purchase.
MONEY MARKET PORTFOLIO: The maximum current income consistent with
preservation of capital and maintenance of liquidity, through investment in
money market instruments. The Money Market Portfolio is neither insured nor
guaranteed by the United States Government, and, while the Money Market
Portfolio seeks to maintain a stable net asset value of $1.00 per share,
there is no assurance that it will be able to do so.
There can be no assurance that the objective of any Portfolio will be realized.
See INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS at pages 8-9.
---------------------
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE FUND THAT A
PROSPECTIVE INVESTOR OUGHT TO KNOW BEFORE INVESTING. READ THIS PROSPECTUS
CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
---------------------
ADDITIONAL INFORMATION ABOUT THE FUND HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION AND IS AVAILABLE WITHOUT CHARGE BY CALLING
1-800-487-6669 OR BY SENDING A REQUEST TO: MONY SERIES FUND, INC., 1740
BROADWAY, NEW YORK, NEW YORK 10019. THE STATEMENT OF ADDITIONAL INFORMATION,
DATED MAY 1, 1996, IS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE> 45
MONY SERIES FUND, INC.
---------------------
PROSPECTUS
---------------------
NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR THE INVESTMENT
ADVISER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
---------------------
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.................................................................... 1
The Fund............................................................................ 1
The Accounts and the Contracts...................................................... 1
Investment Objectives and Risks of the Portfolios................................... 1
Investment Adviser.................................................................. 2
Investment Management Fees and Expenses............................................. 2
Responsibility for Day-to-Day Management of the Fund................................ 3
Purchase and Redemption of Shares................................................... 3
Financial Highlights................................................................ 3
Financial Highlights Table.......................................................... 4
STRUCTURE OF THE FUND................................................................. 8
INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS.................................. 8
Intermediate Term Bond Portfolio.................................................... 8
Long Term Bond Portfolio............................................................ 9
Government Securities Portfolio..................................................... 9
Money Market Portfolio.............................................................. 10
INVESTMENT RESTRICTIONS APPLICABLE TO THE PORTFOLIOS.................................. 10
Loans of Portfolio Securities....................................................... 11
State Law Restrictions.............................................................. 12
Federal Income Tax Status........................................................... 12
MANAGEMENT OF THE FUND................................................................ 13
Investment Management Arrangements and Expenses..................................... 13
Responsibility for Day-to-Day Management of the Fund................................ 15
Custodian, Transfer Agent, and Dividend Disbursing Agent............................ 15
PURCHASE AND REDEMPTION OF SHARES..................................................... 15
DETERMINATION OF NET ASSET VALUE...................................................... 16
Valuation of Intermediate Term Bond, Long Term Bond, and Government Securities
Portfolios....................................................................... 16
Valuation of Money Market Portfolio................................................. 16
SHARES IN THE FUND.................................................................... 17
Voting Rights....................................................................... 18
Dividends, Distributions, and Taxes................................................. 18
Shareholder Reports and Inquiries................................................... 19
CALCULATION OF PERFORMANCE OF THE PORTFOLIOS.......................................... 19
ADDITIONAL INFORMATION................................................................ 20
Appendix A: Securities in Which the Money Market Portfolio May Currently Invest....... A-1
Appendix B: Debt Ratings.............................................................. B-1
</TABLE>
(i)
<PAGE> 46
PROSPECTUS SUMMARY
The following summary should be read in conjunction with the detailed
information appearing elsewhere in this Prospectus.
THE FUND
MONY Series Fund, Inc. (the "Fund"), a diversified open-end management
investment company, is a Maryland corporation organized on December 14, 1984.
The Fund currently consists of seven (7) separate Portfolios: the Equity Income
Portfolio, the Equity Growth Portfolio, the Intermediate Term Bond Portfolio,
the Long Term Bond Portfolio, the Government Securities Portfolio, the Money
Market Portfolio, and the Diversified Portfolio. Each Portfolio is, for
investment and federal tax purposes, in effect a separate investment fund, and
the Fund will issue a separate class of capital stock for each Portfolio. In
other respects the Fund is treated as one entity. For more detailed information,
see STRUCTURE OF THE FUND at page 8.
THE ACCOUNTS AND THE CONTRACTS
Shares of all Portfolios in the Fund are currently sold to MONY Life
Insurance Company of America ("MONY America") and The Mutual Life Insurance
Company of New York ("MONY") for allocation to MONY America Variable Account L
and MONY Variable Account L to fund benefits under Flexible Premium Variable
Life Insurance Contracts issued by those companies and to those companies for
allocation to MONY America Variable Account A and MONY Variable Account A to
fund benefits under Flexible Payment Variable Annuity contracts issued by those
companies. Shares of all Portfolios, other than the Government Securities
Portfolio, are also sold to the MONY America and MONY for allocation to MONY
America Variable Account S and MONY Variable Account S to fund benefits under
Variable Life Insurance with Additional Premium Option contracts issued by those
companies. In addition, shares of the Fund are sold to MONY for allocation to
Keynote Series Account ("Keynote") to fund benefits under Individual Variable
Annuity Contracts and, until June 24, 1994, were sold to MONY for allocation to
Keynote Series Account to fund benefits under Group Annuity Contracts issued by
MONY. Each Contract holder allocates the net premiums and the assets relating to
these Contracts, within the limitations described in the Contracts, among the
subaccounts of these variable accounts ("Variable Accounts") which in turn are
invested in the corresponding Portfolios of the Fund. Contract holders should
consider that the investment return experience of the Portfolios will affect the
value of the Contracts and may affect the amount of benefits received under the
Contracts. The attached prospectus for the Contracts describes the Contracts and
the relationship between changes in the value of shares of each Portfolio and
changes in the benefits payable under the Contracts. The rights of the Variable
Accounts as shareholders should be distinguished from the rights of a Contract
holder which are described in the contracts. Because the shares of the Fund will
be sold to MONY America and MONY for allocation to the Variable Accounts, the
terms "shareholder" or "shareholders" in this Prospectus refer to those
Companies.
INVESTMENT OBJECTIVES AND RISKS OF THE PORTFOLIOS
Each of the Portfolios seeks to achieve a different investment objective.
Accordingly, each Portfolio can be expected to have different investment results
and to be subject to different financial and market risks and current income
volatility. Financial risk refers to the ability of an issuer of a debt security
to pay principal and interest on that security, and to the earnings stability
and overall financial soundness of an issuer of an equity security. Market risk
refers to the degree to which the price of a security will react to changes in
conditions in securities markets in general and, with particular reference to
debt securities, to changes in the overall level of interest rates. Current
income volatility refers to the degree and rapidity with which changes in the
overall level of interest rates become reflected in the level of current income
of the Portfolios.
The investment objectives and risks of the available Portfolios are:
Intermediate Term Bond Portfolio: The Intermediate Term Bond Portfolio,
having a dollar-weighted average life of between 4 and 8 years, seeks to
maximize income over the intermediate term consistent with
1
<PAGE> 47
preservation of capital. The Portfolio will invest primarily in intermediate
term bonds. The Intermediate Term Bond Portfolio should be subject to relatively
little financial risk and a moderate level of market risk.
Long Term Bond Portfolio: The Long Term Bond Portfolio, having a
dollar-weighted average life of more than 8 years, seeks to maximize income over
the longer term consistent with preservation of capital. The Portfolio will
invest primarily in long term bonds. The Long Term Bond Portfolio should be
subject to relatively little financial risk and a higher level of market risk
than the Intermediate Term Bond Portfolio.
Government Securities Portfolio: The Government Securities Portfolio seeks
to maximize current income over the intermediate term consistent with
preservation of capital, through investment in highly-rated debt securities of
the United States government and its agencies and money market instruments, with
a dollar-weighted average life of up to ten years at the time of purchase. The
Government Securities Portfolio should be subject to relatively little financial
risk and a moderate level of market risk.
Money Market Portfolio: The Money Market Portfolio seeks to maximize
current income consistent with the preservation of capital and the maintenance
of liquidity. The Portfolio will invest primarily in money market instruments.
The Money Market Portfolio should be subject to little market risk or financial
risk but should be subject to a high level of current income volatility.
There can be no assurance that the objectives of any Portfolio will be
realized. For more detailed information, see INVESTMENT OBJECTIVES AND POLICIES
OF THE PORTFOLIOS at pages 8-9 and INVESTMENT RESTRICTIONS APPLICABLE TO THE
PORTFOLIOS at pages 10-11.
INVESTMENT ADVISER
The Investment Adviser of all the Portfolios of the Fund is MONY America, a
wholly-owned subsidiary of MONY. MONY America has entered into a Services
Agreement with MONY for the provision of personnel, equipment, facilities and
other services in order to carry out its duties as investment adviser to the
Fund. For more detailed information, see INVESTMENT MANAGEMENT ARRANGEMENTS AND
EXPENSES at page 13.
INVESTMENT MANAGEMENT FEES AND EXPENSES
MONY America's fee for its investment management services to the Equity
Income, Equity Growth, Intermediate Term Bond, Long Term Bond, Government
Securities, Money Market, and Diversified Portfolios of the Fund is a daily
charge equal to an annual rate of .40 percent of the first $400 million of the
aggregate average daily net assets of those Portfolios, .35 percent of the next
$400 million of the aggregate average daily net assets of those Portfolios, and
.30 percent of the aggregate average daily net assets of those Portfolios in
excess of $800 million. MONY America has agreed to bear all expenses associated
with organizing the Fund, the initial registration of its securities, the
calculation of the net asset value of the Portfolios, and the compensation of
the Fund's directors, officers and employees who are interested persons of MONY
America. All other expenses will be borne by the Fund, subject to certain
limitations imposed by state law. For more detailed information, see INVESTMENT
MANAGEMENT ARRANGEMENTS AND EXPENSES at page 13.
RESPONSIBILITY FOR DAY-TO-DAY MANAGEMENT OF THE FUND
Day to day management of all the Portfolios of the Fund are undertaken by a
committee of MONY America, investment adviser to the Fund.
PURCHASE AND REDEMPTION OF SHARES
Shares in each of the Portfolios are offered continuously to MONY and MONY
America for allocation to the Variable Accounts at prices equal to their
respective net asset values per share, without the imposition of an additional
sales charge at the Fund level. The shares' redemption prices are also equal to
their respective net asset values per share as next determined after the receipt
of proper notice of redemption. For more detailed information, see DETERMINATION
OF NET ASSET VALUE at page 16.
2
<PAGE> 48
FINANCIAL HIGHLIGHTS
Set forth on the following pages are highlights of the operations of each
Portfolio of the Fund. Additional financial information is contained in the
Statement of Additional Information of the Fund and in the Annual Report of the
Fund, both of which are available, free of charge, by contacting the Fund at the
address or at the telephone number set forth on the cover of this Prospectus.
The Annual Report also contains a discussion of the performance of the Fund
during 1995 as well as line graphs which depict the value at inception and for
each year subsequent to inception of a $10,000 investment made in each Portfolio
of the Fund. These graphs also depict the performance of an investment over the
same period in securities which comprise a broad based, unmanaged securities
market index.
3
<PAGE> 49
MONY SERIES FUND, INC.
INTERMEDIATE TERM BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year............................... $ 9.75 $ 10.51 $ 10.33 $ 10.22 $ 9.69 $ 9.85
----------- ----------- ----------- ----------- ----------- -----------
Income from investment operations
Net investment income............. 0.63 0.60 0.47 0.59 0.77 0.84
Net gains (losses) on investments
(both realized and unrealized)... 0.82 (0.76) 0.34 0.11 0.71 (0.16)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations..................... 1.45 (0.16) 0.81 0.70 1.48 0.68
Less distributions
Dividends (from net investment
income).......................... (0.63) (0.60) (0.47) (0.59) (0.77) (0.84)
Distributions (from realized
capital gains)................... 0.00 0.00 (0.16) 0.00* 0.00 0.00
Distributions (from additional
paid-in capital)................. 0.00 0.00 0.00 0.00 (0.18) 0.00
----------- ----------- ----------- ----------- ----------- -----------
Total distributions............. (0.63) (0.60) (0.63) (0.59) (0.95) (0.84)
Net asset value, end of year........ $ 10.57 $ 9.75 $ 10.51 $ 10.33 $ 10.22 $ 9.69
=========== =========== =========== =========== =========== ===========
Total return.................... 14.82% (1.52%) 7.84% 6.85% 15.27% 6.90%
Ratios/Supplemental Data
Net assets, end of year............. $37,519,833 $32,283,693 $31,326,168 $20,911,161 $22,005,519 $20,260,361
Ratio of net investment income to
average net assets................. 6.10% 5.66% 5.26% 6.24% 7.88% 8.52%
Ratio of expenses to average net
assets............................. 0.49% 0.52% 0.52% 0.53% 0.51% 0.54%
Portfolio turnover rate............. 32.07% 25.41% 50.61% 62.27% 55.03% 20.06%
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1989 1988 1987 1986
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of
year............................... $ 9.63 $ 9.93 $ 12.15 $ 11.92
----------- ----------- ----------- -----------
Income from investment operations
Net investment income............. 0.90 0.86 0.89 0.98
Net gains (losses) on investments
(both realized and unrealized)... 0.22 (0.29) (0.88) 0.47
----------- ----------- ----------- -----------
Total from investment
operations..................... 1.12 0.57 0.01 1.45
Less distributions
Dividends (from net investment
income).......................... (0.90) (0.87) (1.59) (1.12)
Distributions (from realized
capital gains)................... 0.00 0.00 (0.64) (0.10)
Distributions (from additional
paid-in capital)................. 0.00 0.00 0.00 0.00
----------- ----------- ----------- -----------
Total distributions............. (0.90) (0.87) (2.23) (1.22)
Net asset value, end of year........ $ 9.85 $ 9.63 $ 9.93 $ 12.15
=========== =========== =========== ===========
Total return.................... 11.63% 5.74% 0.08% 12.16%
Ratios/Supplemental Data
Net assets, end of year............. $20,419,237 $23,192,883 $25,217,761 $27,051,933
Ratio of net investment income to
average net assets................. 8.67% 8.43% 8.18% 8.34%
Ratio of expenses to average net
assets............................. 0.60% 0.55% 0.60% 0.60%
Portfolio turnover rate............. 30.99% 24.77% 32.23% 81.92%
</TABLE>
- ---------------
* Less than $.01 per share.
4
<PAGE> 50
MONY SERIES FUND, INC.
LONG TERM BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year............................... $ 10.47 $ 12.05 $ 11.19 $ 11.03 $ 10.47 $ 10.70
----------- ----------- ----------- ----------- ----------- -----------
Income from investment operations
Net investment income............. 0.74 0.84 0.50 0.81 0.72 0.90
Net gains (losses) on investments
(both realized and unrealized)... 2.41 (1.58) 1.09 0.16 1.12 (0.23)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment
operations..................... 3.15 (0.74) 1.59 0.97 1.84 0.67
Less distributions
Dividends (from net investment
income).......................... (0.74) (0.84) (0.50) (0.74) (0.72) (0.90)
Distributions (from realized
capital gains)................... 0.00 0.00 (0.23) 0.00* (0.37) 0.00
Distributions (from additional
paid-in capital)................. 0.00 0.00 0.00 (0.07) (0.19) 0.00
----------- ----------- ----------- ----------- ----------- -----------
Total distributions............. (0.74) (0.84) (0.73) (0.81) (1.28) (0.90)
Net asset value, end of year........ $ 12.88 $ 10.47 $ 12.05 $ 11.19 $ 11.03 $ 10.47
=========== =========== =========== =========== =========== ===========
Total return.................... 30.04% (6.14%) 14.21% 8.79% 17.57% 6.26%
Ratios/Supplemental Data
Net assets, end of year............. $62,017,889 $44,012,329 $63,044,619 $29,564,159 $23,207,734 $20,532,817
Ratio of net investment income to
average net assets................. 6.58% 6.45% 5.69% 7.71% 8.12% 8.72%
Ratio of expenses to average net
assets............................. 0.48% 0.49% 0.48% 0.51% 0.51% 0.53%
Portfolio turnover rate............. 79.45% 110.19% 45.93% 0.17% 63.68% 27.49%
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1989 1988 1987 1986
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of
year............................... $ 9.97 $ 10.28 $ 12.87 $ 12.32
----------- ----------- ----------- -----------
Income from investment operations
Net investment income............. 0.96 0.96 0.92 1.02
Net gains (losses) on investments
(both realized and unrealized)... 0.73 (0.10) (1.11) 0.81
----------- ----------- ----------- -----------
Total from investment
operations..................... 1.69 0.86 (0.19) 1.83
Less distributions
Dividends (from net investment
income).......................... (0.96) (1.17) (1.58) (0.91)
Distributions (from realized
capital gains)................... 0.00 0.00 (0.82) (0.37)
Distributions (from additional
paid-in capital)................. 0.00 0.00 0.00 0.00
----------- ----------- ----------- -----------
Total distributions............. (0.96) (1.17) (2.40) (1.28)
Net asset value, end of year........ $ 10.70 $ 9.97 $ 10.28 $ 12.87
=========== =========== =========== ===========
Total return.................... 16.95% 8.37% (1.48%) 14.85%
Ratios/Supplemental Data
Net assets, end of year............. $20,770,552 $23,840,760 $26,798,016 $28,623,485
Ratio of net investment income to
average net assets................. 8.54% 9.04% 8.44% 8.27%
Ratio of expenses to average net
assets............................. 0.64% 0.54% 0.60% 0.60%
Portfolio turnover rate............. 36.00% 42.79% 128.24% 68.77%
</TABLE>
- ---------------
* Less than $.01 per share.
5
<PAGE> 51
MONY SERIES FUND, INC.
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ----------- ----------- ----------- ----------- -----------
Income from investment operations
Net investment income............... 0.05 0.03 0.01 0.03 0.06 0.07
Less distributions
Dividends (from net investment
income)............................ (0.05) (0.03) (0.01) (0.03) (0.06) (0.07)
------------ ----------- ----------- ----------- ----------- -----------
Net asset value, end of year.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ =========== =========== =========== =========== ===========
Total return...................... 5.57% 5.33% 2.75% 3.31% 5.60% 7.22%
Ratios/Supplemental Data
Net assets, end of year............... $110,366,978 $83,352,731 $65,474,860 $50,892,593 $34,642,974 $26,924,389
Ratio of net investment income to
average net assets.................. 5.30% 3.77% 2.62% 3.17% 5.80% 7.63%
Ratio of expenses to average net
assets.............................. 0.46% 0.49% 0.46% 0.48% 0.54% 0.54%
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------
1989 1988 1987 1986
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of year.... $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ---------- ---------- ----------
Income from investment operations
Net investment income............... 0.08 0.07 0.05 0.05
Less distributions
Dividends (from net investment
income)............................ (0.08) (0.07) (0.05) (0.05)
----------- ---------- ---------- ----------
Net asset value, end of year.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ========== ========== ==========
Total return...................... 8.20% 6.56% 5.34% 5.26%
Ratios/Supplemental Data
Net assets, end of year............... $10,817,623 $4,552,241 $2,883,644 $2,271,034
Ratio of net investment income to
average net assets.................. 8.06% 6.77% 5.36% 5.23%
Ratio of expenses to average net
assets.............................. 0.92% 1.08% 1.50% 1.50%
</TABLE>
6
<PAGE> 52
MONY SERIES FUND, INC.
GOVERNMENT SECURITIES PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:
<TABLE>
<CAPTION>
FOR THE
PERIOD
MAY 1, 1991**
FOR THE YEARS ENDED DECEMBER 31, THROUGH
------------------------------------------------------ DECEMBER 31,
1995 1994 1993 1992 1991
--------- --------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $ 9.51 $ 9.72 $ 9.66 $ 10.70 $ 10.00
---------- ---------- ----------- ----------- -----------
Income from investment operations
Net investment income................................ 0.34 0.05 0.52 1.00 0.27
Net gains (losses) on investments (both realized and
unrealized)......................................... 0.70 (0.21) 0.27 (0.25) 0.70
---------- ---------- ----------- ----------- -----------
Total from investment operations.................. 1.04 (0.16) 0.79 0.75 0.97
Less distributions
Dividends (from net investment income)............... (0.34) (0.05) (0.52) (1.00) (0.27)
Distributions (from realized capital gains).......... (0.00)* 0.00 (0.21) (0.79) 0.00
Distributions (in excess of realized capital
gains).............................................. (0.00) 0.00 0.00* 0.00 0.00
---------- ---------- ----------- ----------- -----------
Total distributions............................... (0.34) (0.05) (0.73) (1.79) (0.27)
Net asset value, end of period......................... $ 10.21 $ 9.51 $ 9.72 $ 9.66 $ 10.70
========== ========== =========== =========== ===========
Total return...................................... 10.89% (2.68%)++ 8.18% 7.01% 9.70%+
Ratios/Supplemental Data
Net assets, end of period.............................. $8,555,893 $1,204,231 $20,036,097 $19,096,791 $42,235,195
Ratio of net investment income to average net assets... 6.10% 5.43%++ 5.06% 6.25% 5.75%++
Ratio of expenses to average net assets................ 0.74% 0.57%++ 0.53% 0.50% 0.43%++
Portfolio turnover rate................................ 0.28% 7.82% 41.01% 28.28% 151.81%
</TABLE>
- ---------------
* Less than $.01 per share.
** Commencement of operations.
+ Average annual.
++ Annualized since Portfolio was dormant from June 24, 1994 to November 18,
1994.
++ Annualized.
7
<PAGE> 53
STRUCTURE OF THE FUND
The Fund, a Maryland corporation organized on December 14, 1984, currently
is composed of seven different Portfolios that are, in effect, separate
investment funds: the Equity Income Portfolio, the Equity Growth Portfolio, the
Intermediate Term Bond Portfolio, the Long Term Bond Portfolio, the Government
Securities Portfolio, the Money Market Portfolio, and the Diversified Portfolio.
Until November 18, 1994, the Government Securities Portfolio had been known as
the Intermediate Government Bond Portfolio. The Fund issues a separate class of
capital stock for each Portfolio. Each share of capital stock issued with
respect to a Portfolio will have a pro-rata interest in the assets of that
Portfolio and will have no interest in the assets of any other Portfolio. Each
Portfolio bears its own liabilities and also its proportionate share of the
general liabilities of the Fund. The Fund is registered under the Investment
Company Act of 1940 (the "1940 Act") as an open-end, diversified, management
investment company. This registration does not imply any supervision by the
Securities and Exchange Commission over the Fund's management or its investment
policies or practices.
Shares of the Fund allocated to Keynote were presented for redemption in
kind on June 24, 1994. This redemption is as a result of the sale by MONY of its
group pension operation to AEGON USA, Inc. ("AEGON") and the transfer of group
annuity contracts, the purchase payments for which are allocated to Keynote, to
a wholly-owned life insurance subsidiary of AEGON. As a part of the agreement of
sale, shares of another series mutual fund were substituted for shares of the
Fund allocated to Keynote.
INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS
Each Portfolio of the Fund has a different investment objective which it
pursues through separate investment policies as described below. Since each
Portfolio has a different investment objective, each can be expected to have
different investment results and incur different market and financial risks. The
Fund may in the future establish other Portfolios with different investment
objectives.
The investment objectives of each Portfolio are fundamental and may not be
changed without the approval of the holders of a majority of the outstanding
shares of the Portfolio affected (which for this purpose and under the 1940 Act
means the lesser of (i) 67 percent of the Portfolio shares represented at a
meeting at which more than 50 percent of the outstanding Portfolio shares are
represented or (ii) more than 50 percent of the outstanding Portfolio shares).
The policies by which a Portfolio seeks to achieve its investment objectives,
however, are not fundamental. They may be changed by the Board of Directors of
the Fund without shareholder approval.
Each Portfolio has a different portfolio turnover rate which is the
percentage computed by dividing the lesser of portfolio purchases or sales by
the average value of the Portfolio, in each case excluding securities with
maturities at the time of acquisition of one year or less. Brokerage expenses
can be expected to be higher as a result of higher turnover rates. The rate of
portfolio turnover is not a limiting factor when it is deemed appropriate to
purchase or sell securities of a Portfolio.
There is no guarantee that any of the objectives of any Portfolio will be
met. The following paragraphs describe the investment objectives, policies and
portfolio turnover rates of each available Portfolio.
INTERMEDIATE TERM BOND PORTFOLIO
The objective of the Intermediate Term Bond Portfolio is to maximize income
over the intermediate term consistent with preservation of capital.
The Intermediate Term Bond Portfolio seeks to achieve this objective by
following the policy of investing in (i) debt securities which, at the time of
purchase, have a rating within the four highest grades as determined by either
Moody's Investors Service, Inc. or Standard & Poor's Corporation as described in
Appendix B; (ii) obligations of the U.S. Government, its agencies or
instrumentalities; and (iii) high-quality, short-term obligations as described
in Appendix A. The Intermediate Term Bond Portfolio will be managed so as to
maintain a dollar-weighted average life of between 4 and 8 years.
8
<PAGE> 54
Since the value of fixed income securities generally fluctuates inversely
with changes in interest rates, the average life of the Intermediate Term Bond
Portfolio will vary to reflect the Investment Adviser's assessment of
prospective changes in interest rates, so that the Intermediate Term Bond
Portfolio may benefit from relative price appreciation when interest rates
decline and may protect capital value when interest rates rise. The success of
this strategy will depend on the Investment Adviser's ability to forecast
changes in interest rates, and there is a corresponding risk that the value of
the securities held in the Portfolio will decline. Because of their relatively
shorter maturities, the value of the bonds in this Portfolio will be less
sensitive to changes in interest rates than the longer-term bonds held in the
Long Term Bond Portfolio and similar to the bonds held in the Government
Securities Portfolio. Thus, compared to the Long Term Bond Portfolio, there will
be less of a risk that the value of the securities held in the Intermediate Term
Bond Portfolio will decline, but not as much of a likelihood for greater
appreciation in value. Compared to the Government Securities Portfolio, there
will be a similar risk that the value of the securities held in the Intermediate
Term Bond Portfolio will decline and a similar likelihood for appreciation in
value.
The annual portfolio turnover rate of the Intermediate Term Bond Portfolio
is not likely to exceed 100%.
LONG TERM BOND PORTFOLIO
The objective of the Long Term Bond Portfolio is to maximize income over
the longer term consistent with preservation of capital.
The Long Term Bond Portfolio seeks to achieve this objective by following
the policy of investing in
(i) debt securities which, at the time of purchase, have a rating within the
four highest grades as determined by either Moody's Investors Service, Inc. or
Standard & Poor's Corporation as described in Appendix B; (ii) obligations of
the U.S. Government, its agencies or instrumentalities; and (iii) high-quality,
short-term obligations as described in Appendix A. The Long Term Bond Portfolio
will be managed so as to maintain a dollar-weighted average life in excess of 8
years.
Since the value of fixed income securities generally fluctuates inversely
with changes in interest rates, the average life of the Long Term Bond Portfolio
will vary to reflect the Investment Adviser's assessment of prospective changes
in interest rates, so that the Long Term Bond Portfolio may benefit from
relative price appreciation when interest rates decline and may protect capital
value when interest rates rise. The success of this strategy will depend on the
Investment Adviser's ability to forecast changes in interest rates, and there is
a corresponding risk that the value of the securities held in the Long Term Bond
Portfolio will decline. Because of their relatively longer maturities, the value
of the bonds in this Portfolio will be more sensitive to changes in interest
rates than the relatively shorter-term bonds held in the Intermediate Term Bond
Portfolio and the Government Securities Portfolio. Thus, compared to the
Intermediate Term Bond Portfolio and the Government Securities Portfolio, there
will be more of a risk that the value of securities held in the Long Term Bond
Portfolio will decline, but more of a likelihood for greater appreciation in
value.
The annual portfolio turnover rate of the Long Term Bond Portfolio is not
likely to exceed 100 percent.
GOVERNMENT SECURITIES PORTFOLIO
The primary objective of the Government Securities Portfolio is to maximize
income over the intermediate term consistent with preservation of capital.
The Government Securities Portfolio will seek to achieve this objective by
following a policy of investing in highly-rated debt securities of the United
States government and its agencies; and money market instruments. The Government
Securities Portfolio will be managed so as to maintain a dollar-weighted average
life of up to ten years at time of purchase.
Since the value of fixed income securities generally fluctuates inversely
with changes in interest rates, the average life of the Government Securities
Portfolio will vary to reflect the Investment Adviser's assessment of
prospective changes in interest rates, so that the Government Securities
Portfolio may benefit from relative price appreciation when interest rates
decline and may protect capital value when interest rates rise. The success of
this strategy will depend on the Investment Adviser's ability to forecast
changes in interest rates,
9
<PAGE> 55
and there is a corresponding risk that the value of the securities held in the
Government Securities Portfolio will decline. Because of their relatively
shorter maturities, the value of the bonds in this Portfolio will be less
sensitive to changes in interest rates than the relatively longer-term bonds
held in the Long Term Bond Portfolio. Because of the relatively similar
maturities, the value of the bonds in this Portfolio will be similar to changes
in interest rates in the Intermediate Term Bond Portfolio. Thus, compared to the
Long Term Bond Portfolio, there will be less of a risk that the value of
securities held in the Government Securities Portfolio will decline, but not as
much of a likelihood for greater appreciation in value. Compared to the
Intermediate Term Bond Portfolio, there will be a similar risk that the value of
securities held in the Government Securities Portfolio will decline and a
similar likelihood for appreciation in value.
The annual portfolio turnover rate of the Government Securities Portfolio
is not likely to exceed 100 percent. For 1991, the portfolio turnover rate
exceeded 100 percent. The Government Securities Portfolio commenced operation on
May 1, 1991. On June 24, 1994, the Keynote Series Account requested redemption
of all shares of this Portfolio. Effective on and after November 18, 1994,
shares of the Portfolio will be offered to MONY America and MONY for allocation
to MONY America Variable Account A and MONY Variable Account A to fund Flexible
Payment Variable Annuity Contracts issued by those companies. As this Portfolio
is, in effect, a start-up fund, a larger than normal number of transactions can
be expected as the fund matures, and, therefore, the additional transaction
expenses associated with high portfolio turnover rates may adversely impact
purchasers of this Portfolio's shares.
MONEY MARKET PORTFOLIO
The objective of the Money Market Portfolio is to maximize current income
consistent with the preservation of capital and maintenance of liquidity.
The Money Market Portfolio seeks to achieve this objective by following the
policy of investing primarily in money market instruments denominated in U.S.
dollars that mature in one year or less from the date the Money Market Portfolio
acquires them. Money market instruments include short-term obligations of the
U.S. Government, its agencies or instrumentalities, of domestic corporations and
of banks. They also include commercial paper and other corporate obligations.
The Money Market Portfolio may also enter into repurchase and reverse repurchase
agreements. A detailed description of the money market instruments in which the
Money Market Portfolio may invest, of the repurchase and reverse repurchase
agreements it may enter into, and of the risks associated with those instruments
and agreements may be found in Appendix A. The dollar-weighted average life to
maturity of the securities held by the Money Market Portfolio is expected to be
less than 90 days.
Because of the high-quality, short-term nature of the Money Market
Portfolio's holdings, increases in the value of an investment in the Portfolio
will be derived almost entirely from interest on the securities held by it.
The Money Market Portfolio will attempt, consistent with preservation of
capital, to achieve the highest possible yield from its investments. Yield with
respect to the Money Market Portfolio normally will fluctuate, sometimes
substantially, on a daily basis and is affected by changes in interest rates on
money market instruments, average portfolio maturities, the type and quality of
portfolio securities held, and the expenses of the Money Market Portfolio.
Therefore, the yield for any given past period should not be considered as
representative of the yield for any future period.
Because of the short term nature of the securities in which the Money
Market Portfolio will invest, and because the Portfolio's investments will be
constantly changing in response to market conditions, an annual portfolio
turnover rate for the Money Market Portfolio would not be meaningful and will
not be determined. The Rules of the Securities and Exchange Commission reflect
that such calculations would not be meaningful and, therefore, do not require
calculation of turnover rates for securities with a maturity of one year or
less.
INVESTMENT RESTRICTIONS APPLICABLE TO THE PORTFOLIOS
The Fund has adopted restrictions relating to the investment of assets of
the Portfolios and their activities. The investment restrictions are fundamental
policies and may not be changed without the approval of a
10
<PAGE> 56
majority vote of the outstanding shares (as defined above at page 8) of each of
the Portfolios affected. (See VOTING RIGHTS at page 18.) These investment
restrictions, which apply to the Fund's seven current Portfolios, may be
different for any new portfolios that the Fund may create in the future.
Some of the Fund's investment restrictions have the effect of limiting
certain practices, while, however, allowing a portion of a Portfolio's net
assets to be at risk. These investment restrictions are:
1. The Portfolios will not purchase real estate or real estate
mortgages, except that the right is reserved for each Portfolio to purchase
and sell securities which are secured by real estate or real estate
mortgages and securities of real estate investment trusts or other issuers
that invest or deal in the foregoing. This restriction does not apply to
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. This restriction does not prohibit the Fund in the
future from establishing one or more real estate portfolios.
2. Loans, both short and long term, may be made by a Portfolio only
through the purchase or acquisition of privately placed bonds, debentures,
notes or other evidences of indebtedness that may or may not be convertible
into stock of a type customarily acquired by institutional investors,
provided, however, that no such purchase or acquisition will be made if, as
a result thereof, more than 10 percent of the value of the Portfolio's
assets would be so invested. Repurchase agreements are not subject to this
restriction.
3. Borrowing of money will not be made by any Portfolio, except as a
temporary position for emergency purposes (to facilitate redemptions but
not for leveraging or for investment) and then only from banks in an amount
not exceeding 10 percent of the value of a Portfolio's assets (including
the amount borrowed) less liabilities (not including the amount borrowed as
a result of the borrowing) at the time such borrowing is made, and during
any period when outstanding indebtedness for money borrowed shall exceed 5
percent of the value of its total assets, the Portfolio will make no
purchases of securities.
4. In general, the Portfolios will not invest more than 10 percent of
any Portfolio's total assets in illiquid assets, including illiquid
restricted securities, repurchase agreements maturing in more than seven
days, and nonnegotiable time deposits maturing in more than seven days.
More detailed information about these investment restrictions, as well as
other investment restrictions applicable to the Portfolios, is contained in the
Statement of Additional Information (INVESTMENT RESTRICTIONS). In addition, the
Fund intends to comply with the various requirements of the Internal Revenue
Code to qualify as a "regulated investment company" under the Code. For a
description of these requirements see FEDERAL INCOME TAX STATUS on page 12.
LOANS OF PORTFOLIO SECURITIES
Each Portfolio may from time to time lend the securities it holds to
broker-dealers, provided that the aggregate value of the securities so lent by
any Portfolio does not exceed 10 percent of the value of that Portfolio's assets
and further provided that such loans are made pursuant to written agreements and
are continuously secured by collateral in the form of cash, U.S. Government
securities, or irrevocable standby letters of credit in an amount equal to at
least the market value at all times of the loaned securities plus the accrued
interest and dividends. During the time securities are on loan, the Portfolio
will continue to receive the interest and dividends, or amount equivalent
thereto, on the loaned securities while receiving a fee from the borrower or
earning interest on the investment of the cash collateral. The right to
terminate the loan will be given to either party subject to appropriate notice.
Upon termination of the loan, the borrower will return to the lender securities
identical to the loaned securities. The Portfolio will not have the right to
vote securities on loan, but would terminate the loan and retain the right to
vote if that were considered important with respect to the investment.
The primary risk in lending securities is that the borrower may become
insolvent on a day on which the loaned security is rapidly advancing in price.
In such event, if the borrower fails to return the loaned securities, the
existing collateral might be insufficient to purchase back the full amount of
the security loaned, and the borrower would be unable to furnish additional
collateral. The borrower would be liable for any shortage; but
11
<PAGE> 57
the Portfolio would be an unsecured creditor with respect to such shortage and
might not be able to recover all or any of it. However, this risk may be
minimized by a careful selection of borrowers and securities to be lent and by
monitoring collateral.
No Portfolio will lend securities to broker-dealers affiliated with the
Fund or MONY. This will not affect the Fund's ability to maximize a Portfolio's
securities lending opportunities.
STATE LAW RESTRICTIONS
The investments of Keynote and the MONY Variable Accounts, and the MONY
America Variable Accounts are subject to the provisions of the New York and
Arizona insurance law, respectively, applicable to the investments of life
insurance company separate accounts. Although these state law investment
restrictions do not apply directly to the Fund, the Portfolios will comply,
without the approval of shareholders, with such statutory requirements, as they
exist or may be amended.
Under pertinent provisions of New York law, as they currently exist, the
assets of Keynote and the MONY Variable Accounts may be invested in any
investments (1) permitted by agreement between these Variable Accounts and their
Contract holders and (2) acquired in good faith and with that degree of care in
acquiring investments that an ordinarily prudent person in a like position would
use under similar circumstances. The only agreement with Contract holders
pertaining to investments permitted for the Variable Accounts is as described in
the prospectuses for the Contracts, namely that the Variable Accounts will
invest only in shares of the Fund. The investment of the assets of the Fund are
subject to the investment objectives, policies and restrictions applicable to
the Portfolios, as described in this Prospectus (see INVESTMENT OBJECTIVES AND
POLICIES OF THE PORTFOLIOS at page 8 and INVESTMENT RESTRICTIONS APPLICABLE TO
THE PORTFOLIOS at page 10) and in the Statement of Additional Information
(INVESTMENT RESTRICTIONS).
The pertinent provisions of Arizona law, as they currently exist, are in
summary form as follows:
The assets of variable accounts established by MONY America may be invested
in any investments that are of the kind permitted and that satisfy the
qualitative requirements, but without regard to quantitative restrictions.
Bonds, debentures, notes, commercial paper and other evidences of indebtedness,
and preferred, guaranteed or preference stocks must have received an investment
grade rating approved by the Director of Insurance. Funds may not be invested in
foreign banks (other than foreign branches of domestic banks) except that
investments may be made in obligations issued, assumed or guaranteed by the
International Bank for Reconstruction and Development. Investments not otherwise
permitted under Arizona law may be made in an amount not exceeding in the
aggregate 10 percent of assets and not exceeding 2 percent of assets as to any
one such investment.
Although compliance with New York and Arizona laws described above will
ordinarily result in compliance with any applicable laws of other states, under
some circumstances the laws of other states could impose additional
restrictions. Accordingly, if any state or other jurisdiction in which the
Variable Accounts propose to do business imposes limits applicable to the
Variable Accounts, in addition to any imposed by New York and Arizona law, the
Fund will comply with such further investment limits.
FEDERAL INCOME TAX STATUS
The Fund and each of its Portfolios intend to qualify as "regulated
investment companies" under the applicable provisions of the Internal Revenue
Code of 1986, as amended (the "Code"). To qualify for treatment as regulated
investment companies, the Fund and each of its Portfolios must, among other
things, satisfy the following requirements:
1. At least 90 percent of the gross income of each of the Portfolios
must be derived from dividends, interest, payments with respect to
securities loans (as defined in section 512(a)(5) of the Code), and gains
from the sale or other disposition of stock or securities (as defined in
section 2(a)(36) of the Investment Company Act of 1940, as amended) or
foreign currencies, or other income (including but not limited to gains
from options, futures, or forward contracts) derived with respect to its
business of
12
<PAGE> 58
investing in such stock, securities or currencies. For purposes of meeting
this requirement, foreign currency gains which are not ancillary to the
Portfolio's principal business of investing in stock or securities (or
options and futures with respect to stock or securities) may be excluded
from qualifying income.
2. Each Portfolio must derive less than 30 percent of its gross income
in each taxable year from the sale or other disposition of stock,
securities held for less than 3 months, options, futures, forward
contracts, or foreign currency gains not related to a Portfolio's principal
business of investing in stock or securities. No portfolio will be
disqualified under this test by reason of sales resulting from abnormal
redemptions on any day occurring before the close of the fifth business day
after such day if the sum of the percentages of assets redeemed, for any
day on which such percentage exceeds 1% for the day in question and any
prior day in the taxable year exceeds 30% and the Fund would meet this test
if all its portfolios were treated as a single company.
3. At the close of each calendar quarter, at least 50 percent of the
value of the total assets of each of the Portfolios must be represented by
cash and cash items (including receivables), Government securities,
securities of other regulated investment companies, and other securities
(limited for each portfolio in respect of any one issuer, to an amount not
greater in value than 5 percent of the value of the total assets of that
Portfolio and to not more than 10 percent of the outstanding voting
securities of the issuer).
4. At the close of each calendar quarter, no more than 25 percent of
the value of the total assets of each of the Portfolios may be invested in
the securities of any one issuer except that this limitation shall not
apply to Government securities or securities of other regulated investment
companies. In addition, at the close of each calendar quarter, no more than
25 percent of the value of the total assets of each of the Portfolios may
be invested in the securities of 2 or more issuers which the Portfolio
controls and which are engaged in the same or similar trades or businesses.
For substantially all federal income tax purposes, each Portfolio of the
Fund is a separate entity. This means that the investment results of each
Portfolio will be calculated separately from those of the other Portfolios for
purposes of determining whether each Portfolio qualifies as a regulated
investment company and for purposes of determining the net ordinary income (or
loss) and net realized capital gains (or losses).
For information regarding the federal income tax implications of the Fund
and its Portfolios qualifying as a regulated investment company, see DIVIDENDS,
DISTRIBUTIONS AND TAXES at pages 18.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code Sections and
Treasury Regulations. The Code and these Regulations are subject to change by
legislative, administrative or judicial actions.
MANAGEMENT OF THE FUND
The Board of Directors of the Fund is responsible for the management of the
business of the Fund under the laws of the State of Maryland, and it is
primarily responsible for reviewing the activities of the investment adviser.
INVESTMENT MANAGEMENT ARRANGEMENTS AND EXPENSES
The Fund has entered into an Investment Advisory Agreement with MONY
America under which MONY America will carry on the overall day-to-day management
of the Equity Income, Equity Growth, Intermediate Term Bond, Long Term Bond,
Government Securities, Money Market, and Diversified Portfolios of the Fund, and
provide investment advice and related services for each of those Portfolios. If
the Fund creates new portfolios in the future, MONY America may be appointed to
act as investment adviser and manager for those portfolios, as well, or the Fund
may appoint a different investment adviser for any new portfolio.
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MONY America receives an investment management fee as compensation for its
services to the Equity Income, Equity Growth, Intermediate Term Bond, Long Term
Bond, Government Securities, Money Market, and Diversified Portfolios of the
Fund. The fee is a daily charge equal to an annual rate of .40 percent of the
first $400 million of the aggregate average daily net assets of those
Portfolios, .35 percent of the next $400 million of the aggregate average daily
net assets of those Portfolios, and .30 percent of the aggregate average daily
net assets of those Portfolios in excess of $800 million. Each daily charge for
the fee is divided among those Portfolios in proportion to their net assets on
that date. MONY America has agreed to bear all expenses (i) for the Fund's
organization, (ii) related to initial registration and qualification under
federal and state securities laws, (iii) associated with calculating net asset
value of the Portfolios, and (iv) for compensation of the Fund's directors,
officers and employees who are interested persons (as defined by the 1940 Act)
of MONY America. All other expenses will be borne by the Fund, including any
extraordinary or non-recurring expenses. With respect to the expenses of
preparing, printing and mailing prospectuses, see PURCHASE AND REDEMPTION OF
SHARES at page 15. MONY America has agreed to reimburse the Fund for the amount,
if any, by which the aggregate ordinary operating expenses of any Portfolio in
any calendar year exceed the most restrictive expense limitations then in effect
under any state securities law or regulations. Under the most restrictive state
regulations currently in effect, the Adviser would be required to reimburse the
Fund for investment management fees received by the Adviser from the Fund, to
the extent that any Portfolio's aggregate ordinary operating expense (excluding
interest, taxes, brokerage fees and commissions, and extraordinary charges such
as litigation costs) exceed in any fiscal year 2.5 percent of the first
$30,000,000 of average daily net assets of such Portfolio, 2.0 percent of the
next $70,000,000 of average daily net assets of such Portfolio, and 1.5 percent
of the average daily net assets of such Portfolio in excess of $100,000,000. No
fee payments would be made to MONY America with respect to any Portfolio during
any calendar year to the extent that those payments would cause that Portfolio's
expenses to exceed the expense limitations applicable to the Portfolio.
MONY America, a wholly-owned subsidiary of MONY, is registered as an
investment adviser under the Investment Advisers Act of 1940 and, prior to
registration in 1985, had not performed services as an investment adviser. MONY
America has entered into a Services Agreement with MONY to provide it with
personnel, services, facilities, supplies, and equipment in order to carry out
many of its duties to provide investment management services under the
Investment Advisory Agreement. MONY America pays MONY for such services.
Because the Investment Advisory Agreement and the Services Agreement are
interrelated and dependent on each other, MONY may be deemed to be an investment
adviser of the Fund for certain federal regulatory purposes. MONY is registered
as an investment adviser under the Investment Advisers Act of 1940. Its
principal business address, as well as that of the Investment Adviser, is 1740
Broadway, New York, New York 10019.
Although MONY America's lack of previous experience in advising a mutual
fund might be considered a risk factor, it is anticipated that many of MONY
America's duties will be carried out by MONY and its personnel under the
Services Agreement and therefore MONY's experience as an investment manager
should also be considered. MONY is a mutual life insurance company organized
under the laws of New York in 1842 and licensed to do business in all fifty
states, the District of Columbia, Puerto Rico, the Virgin Islands and certain
Canadian provinces. MONY manages the investment of assets held in its own
general account, various separate accounts established by MONY, and the assets
of its employee thrift plan trust. From 1969 to 1981, MONY provided investment
advisory services to MONY Advisers, Inc. (a wholly-owned subsidiary of MONY)
which acted as investment adviser to The MONY Fund, Inc., a registered
diversified open-end management investment company. As of December 31, 1995,
total assets under management in the accounts managed by MONY were approximately
$18.9 billion and included common stocks with a value of approximately $773
million, long and medium term publicly-traded fixed income securities with a
value of approximately $6.5 billion, and short-term debt obligations with a
value of approximately $593 million. The size of the accounts and portfolios
managed by MONY or its personnel does not assure that a shareholder of the Fund
will realize any gain or be protected from any loss.
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The Investment Advisory Agreement was initially approved by the Fund's
Board of Directors, including a majority of the non-interested directors (as
defined by the 1940 Act), on January 2, 1985 and continuance for an additional
year was most recently approved on February 8, 1996. The Services Agreement was
similarly approved on January 2, 1985 and continuance for an additional year was
most recently approved by the Fund's Board of Directors on February 8, 1996.
Both Agreements will continue in effect if approved annually by (1) a majority
of the non-interested directors (as defined by the 1940 Act) of the Fund's Board
of Directors, and (2) a majority of the entire Board of Directors or a majority
vote of the voting shares of each Portfolio. If a majority of the voting shares
of any Portfolio vote to approve both Agreements, they will remain in effect
with respect to that Portfolio, even if they are not approved by a majority of
the voting shares of any other Portfolio or by a majority of the voting shares
of the entire Fund. The Agreements are not assignable. The Investment Advisory
Agreement may be terminated without penalty upon 60 days' notice by the Fund's
Board of Directors or by a majority vote of its shareholders, and upon 90 days'
notice by the Investment Adviser. The Services Agreement may be terminated
without penalty upon 60 days' notice by either party.
MONY America and MONY serve as investment managers or advisers in managing
their own assets and, in the case of MONY, the assets of separate accounts and
certain of its subsidiaries. In the future, MONY America and MONY may serve as
investment manager or adviser to other investment companies. When investment
opportunities arise that may be appropriate for more than one account or entity
for which MONY America or MONY serves as investment manager or adviser,
including for their own accounts, MONY America or MONY and their personnel will
not favor one over another and may allocate investments among them in an
impartial manner believed to be equitable to each entity involved. The
allocations will be based on each entity's investment objectives and its current
cash and investment positions. Because the various entities for which MONY
America or MONY acts or may act as investment manager or adviser, including for
their own accounts, have different investment objectives and positions, MONY
America or MONY may from time to time buy a particular security for one or more
such entities while at the same time it sells such securities for another.
RESPONSIBILITY FOR DAY-TO-DAY MANAGEMENT OF THE FUND
As investment adviser, MONY America is responsible for the day-to-day
management of each of the Portfolios of the Fund. Investment decisions are made
by a committee of the investment adviser.
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT
Chemical Bank, 277 Park Avenue, New York, New York 10172 is the custodian
of the securities held by the Portfolios of the Fund, and is authorized to use
the facilities of the Depository Trust Company and the facilities of the
book-entry system for the Federal Reserve Bank. The Fund acts as its own
transfer agent and dividend-disbursing agent.
PURCHASE AND REDEMPTION OF SHARES
Shares in the Fund are currently being offered continuously, without sales
charge at the Fund level, at prices equal to the respective net asset values of
the Portfolios to MONY and MONY America for allocation to the Variable Accounts
to fund benefits payable under the Contracts described in the attached
prospectus. The Fund sells its shares through MONY Securities Corp. ("MSC")
(which acts as "principal underwriter" of the Contracts and therefore of the
shares of the Fund) to MONY and MONY America, for allocation to the Variable
Accounts. MSC is registered as a broker-dealer under the Securities Exchange Act
of 1934 and is a member of the National Association of Securities Dealers. It is
expected that there will be no distribution expenses for the Fund, other than
expenses for preparing, printing and mailing prospectuses. These expenses, and
any other distribution expenses, will be borne by MSC pursuant to an
underwriting agreement that will comply with pertinent provisions of the 1940
Act and rules of the Securities and Exchange Commission under that Act. The Fund
may at some later date also offer its shares to other separate accounts of MONY,
MONY America, or other MONY subsidiaries.
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The Fund is required to redeem all full and fractional shares of the Fund
for cash within seven days of receipt of proper notice of redemption. The
redemption price is the net asset value per share next determined after the
initial receipt of proper notice of redemption.
The right to redeem shares or to receive payment with respect to any
redemption may be suspended only (i) for any period during which trading on the
New York Stock Exchange is restricted as determined by the Securities and
Exchange Commission or when the New York Stock Exchange is closed (other than
customary weekend and holiday closings), (ii) for any period during which an
emergency exists as defined by the Securities and Exchange Commission as a
result of which disposal of a Portfolio's securities or determination of the net
asset value of each Portfolio is not reasonably practicable, and (iii) for such
other periods as the Securities and Exchange Commission may by order permit for
the protection of shareholders of each Portfolio.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of each Portfolio will be determined by
the Investment Adviser once daily immediately after the declaration of
dividends, if any, at a time to be determined by the Fund's Board of Directors,
currently 4:00 p.m. New York City time, on each day during which the New York
Stock Exchange is open for business or on any other day in which there is
sufficient trading in the securities held by a Portfolio to result in a material
change in the value of such shares. The net asset value per share of each
Portfolio except the Money Market Portfolio is computed by adding the sum of the
value of the securities held by that Portfolio plus any cash or other assets it
holds, subtracting all its liabilities, and dividing the result by the total
number of shares outstanding of that Portfolio at such time. Expenses, including
the investment management fee payable to MONY America, are accrued daily.
High-quality, short-term debt obligations held in any of the Portfolios
with a remaining maturity of 60 days or less will be valued on an amortized-cost
basis. This means that each obligation will be valued initially at its purchase
price and thereafter by amortizing any discount or premium uniformly to
maturity, regardless of the impact of fluctuating interest rates on the market
value of the obligation. This highly practical method of valuation is in
widespread use and almost always results in a value that is extremely close to
the actual market value. The Fund's Board of Directors will review obligations
being valued under this method where credit or other factors may indicate the
method is not appropriate or where the rules of the Securities and Exchange
Commission require such examination. Short-term debt obligations with a
remaining maturity of more than 60 days will be valued in the same way as are
debt securities held in the Intermediate Term Bond, Long Term Bond and
Government Securities Portfolios, as described below in "Valuation of
Intermediate Term Bond, Long Term Bond and Government Securities Portfolios".
VALUATION OF INTERMEDIATE TERM BOND, LONG TERM BOND AND GOVERNMENT SECURITIES
PORTFOLIOS
In determining the net asset value of securities held in the Intermediate
Term Bond, Long Term Bond, and Government Securities Portfolios, securities will
be valued based on a decision as to the broadest and most representative market
for such security. The value will be based on either (i) the last available sale
price on a national securities exchange, (ii) in the absence of recorded sales,
the average of readily available closing bid and asked prices on national
securities exchanges, or (iii) the average of the quoted bid and asked prices in
the over-the-counter market. Securities or assets for which market quotations
are not readily available will be valued at fair value as determined by the
Investment Adviser under the direction of the Board of Directors of the Fund.
VALUATION OF MONEY MARKET PORTFOLIO
The net asset value of shares of the Money Market Portfolio will normally
remain at $1.00 per share, because the net investment income of this Portfolio
(including realized and unrealized gains and losses on Portfolio holdings) will
be declared as a dividend each time the Portfolio's net income is determined
(see DIVIDENDS, DISTRIBUTIONS AND TAXES, at page 18). If in the view of the
Board of Directors of the Fund it is inadvisable to continue to maintain the net
asset value of the Money Market Portfolio at $1.00 per
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share, the Board reserves the right to alter the procedure. The Fund will notify
Shareholders of any such alteration.
The Fund will value all short-term debt obligations held in the Money
Market Portfolio on an amortized-cost basis. The regulations of the Securities
and Exchange Commission (SEC) require that, as a condition for using amortized
cost valuation, the Money Market Portfolio (i) maintain a dollar-weighted
average portfolio maturity not exceeding 90 days, and (ii) limit its portfolio
investments to those United States dollar-denominated instruments determined to
present minimal credit risks and which at the time of acquisition are Eligible
Securities. Eligible Securities include any security (i) issued with, or with a
remaining maturity of, 397 days or less which is rated (or, if unrated, the
issuer of which also issues short-term securities any one of which, comparable
in priority and security, is rated) by an SEC designated statistical rating
organization in one of the two highest rating categories for short-term debt
obligations; or (ii) the issuer of which does not have any securities which have
a short term rating but which security is (x) comparable in priority and
security to a security which has been rated in one of the two highest rating
categories for short term debt obligations by an SEC designated statistical
rating organization, and (y) not a security which had an original maturity in
excess of 397 days and which received a rating as a long term debt obligation
from such a rating organization that was not within the two highest rating
categories. In the event of sizable changes in interest rates, however, the
value determined by amortized cost valuation may be higher or lower than the
price that would be received if the obligation were sold. On these occasions (if
any should occur) as a further condition to using amortized-cost valuation,
procedures have been established by the Board of Directors to determine whether
the deviation might be enough to affect the value of shares in the Money Market
Portfolio by more than one-half of one percent, and if it does, an appropriate
adjustment will be made in the value of the obligations.
SHARES IN THE FUND
The authorized capital stock of the Fund consists of 2 billion shares, par
value $.01 per share. The shares of capital stock are divided into seven
classes: Equity Income Portfolio Capital Stock (150 million shares); Equity
Growth Portfolio Capital Stock (150 million shares); Intermediate Term Bond
Portfolio Capital Stock (150 million shares); Long Term Bond Portfolio Capital
Stock (150 million shares); Government Securities Portfolio Capital Stock (150
million shares); Money Market Portfolio Capital Stock (250 million shares); and
Diversified Portfolio Capital Stock (150 million shares). The Fund may in the
future allocate some of the remaining authorized shares to these classes, or
create new classes of capital stock corresponding to new portfolios and allocate
some of the remaining authorized shares to such new classes and then issue
shares of such new classes. Each share of stock will have a pro-rata interest in
the assets of the Portfolio to which the stock of that class relates and will
have no interest in the assets of any other Portfolio. Holders of shares of any
Portfolio are entitled to redeem their shares as set forth under PURCHASE AND
REDEMPTION OF SHARES at page 15. The shares of each Portfolio, when issued, will
be fully paid and non-assessable, will have no preemptive, conversion, exchange
or similar rights, and will be freely transferable. The shares do not have
cumulative voting rights. Holders of more than 50 percent of the shares of the
Fund voting for the election of directors can, if they choose to do so, elect
all of the Fund's directors, and in such event the holders of the remaining
shares would not be able to elect any directors.
MONY provided the initial capital for each of the Fund's Portfolios. MONY
held shares attributable to its initial capital investment. At December 31,
1993, MONY had redeemed all shares attributable to its initial capital
investment, except that MONY provided $1,000,000 in capital to the Government
Securities Portfolio on November 18, 1994. Additional shares may be acquired by
MONY during the Fund's operation or any new portfolio's start-up period. The
acquisition of shares by MONY will enable the Portfolios (or any new portfolios)
to avoid an unrealistically poor investment performance that might otherwise
result because the amounts available for investment were too small, as well as
to satisfy the net worth requirements of the 1940 Act. MONY may also acquire
additional shares through dividend reinvestment in connection with the shares
acquired during the start-up period. Any shares acquired by MONY (other than for
allocation to MONY Variable Account A, MONY Variable Account L, MONY Variable
Account S, or the Keynote Series Account) will be acquired for investment and
can be disposed of only by redemption. They will not be redeemed
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by MONY until the other assets of the Portfolios are large enough so that
redemption will not have an adverse effect upon investment performance. MONY
will vote these shares in the same proportion as the shares held in the Variable
Accounts, which generally are voted in accordance with the instructions of
Contract holders.
VOTING RIGHTS
All shares of capital stock of the Fund have equal voting rights
(regardless of the net asset value per share) except that only shares of the
respective Portfolios are entitled to vote on matters concerning only that
Portfolio. Pursuant to the 1940 Act and the rules and regulations thereunder,
certain matters approved by a vote of all shareholders of the Fund may not be
binding on a Portfolio whose shareholders have not approved that matter. Each
outstanding share of each Portfolio is entitled to one vote and to participate
equally in dividends and distributions declared by that Portfolio and, upon
dissolution or liquidation, in the Portfolio's net assets after satisfying
outstanding liabilities.
The voting rights of Contract holders, and limitations on those rights, are
explained in the accompanying prospectus for the Contract. MONY and MONY America
as the owners of the assets in the Variable Accounts, are entitled to vote all
of the shares of the Fund attributable to the Variable Accounts, but they will
generally do so in accordance with the instructions of Contract holders. Under
certain circumstances, however, MONY and MONY America may disregard voting
instructions received from Contract holders. The Fund might under these
circumstances be deemed to be controlled by MONY and MONY America by virtue of
the definitions contained in the 1940 Act although the Fund disclaims that such
control exists.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund and each of its portfolios intend to qualify as "regulated
investment companies" under the applicable provisions of the Internal Revenue
Code of 1986, as amended (the "Code"). For a description of the restrictions
that apply to qualifying as a regulated investment company, see FEDERAL INCOME
TAX STATUS at page 12. Under those provisions, the Fund and each of its
portfolios will not be subject to federal income tax on the portion of its net
ordinary income and net realized capital gains that each portfolio distributes
to MONY and MONY America, for allocation to the Variable Accounts or to MONY
with respect to shares acquired with initial or additional capital. Since the
only shareholders of the Fund will be MONY and MONY America there is no
discussion in this Prospectus of the federal income tax consequences at the
shareholder level. For information concerning the federal tax consequences to
the Contract holders, see the attached prospectus for the Contracts.
The Fund intends to distribute as dividends substantially all the net
ordinary income, if any, of each Portfolio. For dividend purposes, net ordinary
income of each Portfolio, other than the Money Market Portfolio and the
short-term debt portion of any other Portfolio, consists of (i) all dividends
received (other than stock dividends), (ii) plus all interest and other ordinary
income accrued, (iii) plus all short-term capital gains realized, (iv) less the
expenses of such Portfolio (including fees payable to the Investment Adviser).
Net ordinary income of the Money Market Portfolio and the short-term debt
portion of any other Portfolio consists of (i) interest accrued and/or discount
earned (including both original issue and market discount), (ii) plus all
realized net short-term capital gains, (iii) less the expenses of the Portfolio
(including the fees payable to the Investment Adviser). Dividends on the Money
Market Portfolio will be declared and reinvested daily in additional full and
fractional shares of the Portfolio. Shares corresponding to the Money Market
Portfolio will begin accruing dividends on the day following the date on which
they are issued. Dividends from investment income of the other Portfolios will
be declared and reinvested in additional full and fractional shares annually,
although the Fund may make distributions more frequently, except that MONY may
elect to receive dividends on the shares acquired to provide operating capital
in cash.
The Fund will also declare and distribute annually before the close of its
fiscal year all net realized capital gains of each portfolio of the Fund (other
than short-term gains of the Money Market Portfolio, which are declared as
dividends daily). In determining the amount of capital gains to be distributed,
the realized capital gains and losses of each of the Portfolios are calculated
separately. This will not cause any of the Portfolios to
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have a different investment performance than it would if it were taxed, together
with the other Portfolios, as a single investment company and it will not affect
the value of Contract holders' interests under the Contracts.
The Fund and each of its Portfolios intend to declare dividends in December
of each calendar year to shareholders of record as of a specified date in such
month and distribute such dividends in January of the following calendar year.
In determining the capital gains distribution, the Fund and each of its
Portfolios will calculate net realized capital gains on the basis of the fiscal
year ending October 31 of the current calendar year.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code Sections and
Treasury Regulations. The Code and these Regulations are subject to change by
legislative, administrative or judicial actions.
SHAREHOLDER REPORTS AND INQUIRIES
The Fund will send each shareholder, at least annually, reports showing as
of a specified date the number of shares in each Portfolio credited to the
shareholder. The Fund will also send Contract holders semiannual reports showing
the financial condition of the Portfolios and the investments held in each. The
annual report may take the form of an updated copy of the Prospectus.
CALCULATION OF PERFORMANCE OF THE PORTFOLIOS
From time to time the performance of one or more of the Portfolios may be
advertised. The performance data contained in these advertisements is based upon
historical earnings and is not indicative of future performance. The data for
each Portfolio reflects the results of that Portfolio of the Fund and recurring
charges and deductions borne by or imposed on the Portfolio. Set forth below for
each Portfolio is the manner in which the data contained in such advertisements
will be calculated.
Money Market Portfolio. The performance data for this Portfolio will
reflect the "yield" and "effective yield". The "yield" of the Portfolio refers
to the income generated by an investment in the Portfolio over the seven day
period stated in the advertisement. This income is "annualized", that is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly, but, when annualized,
the income earned by an investment in the Portfolio is assumed to be reinvested.
The "effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
All Other Portfolios. The performance data for the Portfolios will reflect
the "yield" and "total return". The "yield" of each of the Portfolios (except
for a 7 day period for the Money Market Portfolio) refers to the income
generated by an investment in that Portfolio over the 30 day period stated in
the advertisement and is the result of dividing that income by the value of the
Portfolio. The value of each Portfolio is the average daily number of shares
outstanding multiplied by the net asset value on the last day of the period.
"Total return" for each of these Portfolios refers to the return a Shareholder
would receive during the period indicated if a $1,000 investment was made the
indicated number of years ago. It reflects investment results less charges and
deductions of the Fund. Returns for periods exceeding one year reflect the
average annual total return for such period. Total return data may also be shown
for larger investments which would reflect the average size purchase payment
made for Contracts, the purchasers of which may allocate purchase payments to
Subaccounts which purchase shares of the Portfolios of the Fund.
In addition, reference in advertisements may be made to various indices,
including, without limitation, the Standard & Poor's 500 Stock Index and the
Shearson Lehman Brothers, Government/Corporate Index, and to various ranking
services, including, without limitation, the Lipper Annuity and Closed End
Survey compiled by Lipper Analytical Services and the VARDS report compiled by
Variable Annuity Research and Data Service in order to provide the reader a
basis for comparison.
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ADDITIONAL INFORMATION
This Prospectus does not contain all the information set forth in the
registration statement, certain portions of which have been omitted pursuant to
the rules and regulations of the Securities and Exchange Commission. The omitted
information may be obtained from the Commission's principal office in
Washington, D.C., upon payment of the fees prescribed by the Commission.
For further information, including the Statement of Additional Information,
shareholders may also contact the Fund's office at the address or at the phone
number set forth on the cover of this Prospectus.
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APPENDIX A
SECURITIES IN WHICH THE MONEY MARKET
PORTFOLIO MAY CURRENTLY INVEST
The Money Market Portfolio, and the other Portfolios to the extent their
investment policies so provide, may invest in the following short-term, debt
securities regularly bought and sold by financial institutions:
1. U.S. Treasury Bills, other obligations issued or guaranteed by the
U.S. Government, obligations of U.S. agencies or instrumentalities which
are backed by the U.S. Treasury, and obligations issued or guaranteed by
U.S. agencies or instrumentalities and backed solely by the issuing agency
or instrumentality. These are debt securities (including bills,
certificates of indebtedness, notes, and bonds) issued or guaranteed by the
U.S. Treasury or by an agency or instrumentality of the U.S. Government
that is established under the authority of an act of Congress. Such
agencies or instrumentalities include, but are not limited to, the Federal
National Mortgage Association, the Federal Farm Credit Bank, the Federal
Home Loan Bank and the Government National Mortgage Association. Although
all obligations of agencies and instrumentalities are not direct
obligations of the U.S. Treasury, payment of the interest and principal on
them is generally backed directly or indirectly by the U.S. Treasury. This
support can range from the backing of the full faith and credit of the
United States, to U.S. Treasury guarantees, or to the backing solely of the
issuing agency or instrumentality itself.
2. Obligations (including certificates of deposit, bankers'
acceptances and time deposits) of any bank organized under the laws of the
United States or any state thereof or of foreign branches of such banks or
foreign banks, provided that such bank has, at the time of the Portfolio's
investment, total assets of at least $1 billion or the equivalent. The term
"certificates of deposit" includes both Eurodollar certificates of deposit,
which are traded in the over-the-counter market, and Eurodollar time
deposits, for which there is generally not a market. "Eurodollars" are
dollars deposited in banks outside the United States. An investment in
Eurodollar instruments involves risks that are different in some respects
from an investment in debt obligations of domestic issuers, including
future political and economic developments such as possible expropriation
or confiscatory taxation that might adversely affect the payment of
principal and interest on the Eurodollar instruments. In addition, foreign
branches of domestic banks and foreign banks may not be subject to the same
accounting, auditing and financial standards and requirements as domestic
banks. Finally, in the event of default, judgments against a foreign branch
or foreign bank might be difficult to obtain or enforce.
"Certificates of deposit" are certificates evidencing the indebtedness
of a commercial bank to repay funds deposited with it for a definite period
of time (usually from 14 days to one year). "Bankers' acceptances" are
credit instruments evidencing the obligation of a bank to pay a draft which
has been drawn on it by a customer. These instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity. "Time deposits" are non-negotiable deposits in a
bank for a fixed period of time.
3. Commercial paper issued by domestic corporations which at the date
of investment is rated (a) "high quality" by Moody's Investors Service,
Inc. ("Moody's") or Standard & Poor's Corporation ("S&P"), provided that in
no event will the Portfolio invest in commercial paper rated lower than
Prime 2 by Moody's or A-2 by S&P or, (b) if not rated, issued by domestic
corporations which have an outstanding senior long-term debt issue rated Aa
or better by Moody's or AA or better by S&P. See Appendix B for an
explanation of the ratings issued by Moody's and S&P. "Commercial paper"
consists of short-term (usually from 1 to 270 days) unsecured promissory
notes issued by corporations in order to finance their current operations.
4. Other corporate obligations issued by domestic corporations which
at the date of investment are rated Aa or better by Moody's or AA or better
by S&P. See Appendix B for rating information. "Corporate obligations" are
bonds and notes issued by corporations and other business organizations,
including business trusts, in order to finance their long-term credit
needs.
5. Repurchase Agreements. When the Money Market Portfolio purchases
money market securities of the types described above, it may on occasion
enter into a repurchase agreement with the seller wherein the seller and
the buyer agree at the time of sale to a repurchase of the security at a
mutually agreed upon
A-1
<PAGE> 67
time and price. The period of maturity is usually quite short, possibly
overnight or a few days, although it may extend over a number of months.
The resale price is in excess of the purchase price, reflecting an
agreed-upon market rate of interest effective for the period of time the
Portfolio's money is invested in the security, and is not related to the
coupon rate of the purchased security. Repurchase agreements may be
considered loans of money to the seller of the underlying security, which
are collateralized by the securities underlying the repurchase agreement.
The Fund will not enter into repurchase agreements unless the agreement is
"fully collateralized," i.e., the value of the securities is, and during
the entire term of the agreement remains, at least equal to the amount of
the "loan" including accrued interest. The Fund's custodian bank will take
possession of the securities underlying the agreement, and the Fund will
value them daily to assure that this condition is met. The Fund has adopted
standards for the parties with whom it will enter into repurchase
agreements which it believes are reasonably designed to assure that such a
party presents no serious risk of becoming involved in bankruptcy
proceedings within the time frame contemplated by the repurchase agreement.
In the event that a seller defaults on a repurchase agreement, the Fund may
incur a loss in the market value of the collateral, as well as disposition
costs; and, if a party with whom the Fund had entered into a repurchase
agreement becomes involved in bankruptcy proceedings, the Fund's ability to
realize on the collateral may be limited or delayed and a loss may be
incurred if the collateral security of the repurchase agreement declines in
value during the bankruptcy proceedings.
6. Reverse Repurchase Agreements. The Portfolio may enter into reverse
repurchase agreements with banks, which agreements have the characteristics
of borrowing and involve the sale of securities held by the Portfolio with
an agreement to repurchase the securities at an agreed-upon price and date,
which reflect a rate of interest paid for the use of funds for the period.
Generally, the effect of such a transaction is that the Portfolio can
recover all or most of the cash invested in the securities involved during
the term of the reverse repurchase agreement, while in many cases it will
be able to keep some of the interest income associated with those
securities. Such transactions are only advantageous if the Portfolio has an
opportunity to earn a greater rate of interest on the cash derived from the
transaction than the interest cost of obtaining that cash. The Portfolio
may be unable to realize a return from the use of the proceeds equal to or
greater than the interest required to be paid. Opportunities to achieve
this advantage may not always be available, and the Portfolio intends only
to use the reverse repurchase technique when it appears to be to its
advantage to do so. The use of reverse repurchase agreements may magnify
any increase or decrease in the value of the Portfolio's securities. The
Fund's custodian bank will maintain in a separate account securities of the
Portfolio that have a value equal to or greater than the Portfolio's
commitments under reverse repurchase agreements.
Notwithstanding the above, it is the present intention of the Fund that the
Money Market Portfolio continue to qualify under the requirements of Rule 2a-7
of the Securities and Exchange Commission ("SEC") which permits the Portfolio to
use the amortized cost method of valuation to calculate net asset value if the
Portfolio's funds are invested in accordance with its guidelines. Briefly, those
guidelines require investment in Eligible Securities (see VALUATION OF MONEY
MARKET PORTFOLIO at page 16 for a discussion of Eligible Securities) which
qualify as First or Second Tier securities under the Rule. First Tier securities
include any Eligible Security which (i) is rated (or, if unrated, the issuer of
which also issues short-term securities any one of which, comparable in priority
and security, is rated) by an SEC designated statistical rating organization in
its highest category for short-term debt obligations, or (ii) is a security
having a remaining maturity of 397 days or less when acquired but which has an
original maturity in excess of 397 days and which is now comparable in priority
and security to a short-term security of the same issuer which is rated by an
SEC designated statistical rating organization in the highest category for
short-term debt obligations; or (iii) is unrated as a short-term security (and,
if rated as a long-term security, received a rating in one of the two highest
categories) and is issued by an issuer which has no rated short-term debt
obligations comparable in priority and security. A Second Tier security is any
Eligible Security (see VALUATION OF MONEY MARKET PORTFOLIO at page 16 for a
discussion of Eligible Securities) which is not a First Tier security.
A-2
<PAGE> 68
APPENDIX B
DEBT RATINGS
Moody's Investors Service, Inc. describes the four highest grades of
corporate debt securities and "Prime-1" and "Prime-2" commercial papers as
follows:
BONDS:
<TABLE>
<S> <C>
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 issue.
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 are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds 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.
</TABLE>
COMMERCIAL PAPER:
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:
- Leading market positions in well-established industries.
- High rates of return of funds employed.
- Conservative capitalization structures 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 rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by any 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.
B-1
<PAGE> 69
Standard & Poor's Corporation describes the four highest grades of
corporate debt securities and A commercial paper as follows:
BONDS:
<TABLE>
<S> <C>
AAA -- Bonds rated AAA are highest grade obligations. They possess the ultimate degree
of protection as to principal and interest. Marketwise, they move with interest
rates, and hence provide the maximum safety on all counts.
AA -- Bonds rated AA also qualify as high grade options and in the majority of
instances differ from AAA issues only in small degree. Here, too, prices move
with the long term money market.
A -- Bonds rated A are regarded as upper medium grade. They have considerable
investment strength but are not entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal are regarded as safe. They
predominantly reflect money rates in their market behavior, but to some extent,
also economic conditions.
BBB -- The BBB, or medium grade category, is borderline between definitely sound
obligations and those where the speculative element begins to predominate. These
bonds have adequate asset coverage and normally are protected by satisfactory
earnings. Their susceptibility to changing conditions, particularly to
depressions, necessitates constant watching. Marketwise, the bonds are more
responsive to business and trade conditions than to interest rates. This group is
the lowest which qualifies for commercial bank investment.
</TABLE>
COMMERCIAL PAPER:
Commercial paper rated A by Standard & Poor's Corporation has the following
characteristics: Liquidity ratios are better than the industry average. Long
term senior debt rating is A or better. In some cases BBB credits may be
acceptable. The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with allowances
made for unusual circumstances. Typically, the issuer's industry is well
established, the issuer has a strong position within its industry and the
reliability and quality of management are unquestioned. Issues rated A are
further referred to by use of numbers 1, 2 and 3 to denote relative strength
within this classification.
B-2
<PAGE> 70
ENTERPRISE ACCUMULATION TRUST
ATLANTA FINANCIAL CENTER
3343 PEACHTREE ROAD, N.E., STE. 450
ATLANTA, GEORGIA 30326-1022
(800) 432-4320
------------------------
ENTERPRISE ACCUMULATION TRUST (the "Fund") is a registered open-end
diversified management investment company offering a broad range of investment
alternatives through its five Portfolios. It permits an investor the flexibility
of choosing among different investment objectives, through the following
Portfolios, each of which is a separate series of shares of beneficial interest
of the Fund ("Shares"). The Fund's principal Investment Adviser, Enterprise
Capital Management, Inc., selects, subject to shareholder approval, separate
sub-advisers referred to as "Portfolio Managers" that provide investment advice
for the Portfolios and that are selected on the basis of able investment
performance in their respective areas of responsibilities. The investment
objective of each Portfolio is as follows:
EQUITY PORTFOLIO: Seeks long term capital appreciation through
investment in a diversified portfolio of equity securities selected on the
basis of a value-oriented approach to investing.
SMALL CAP PORTFOLIO: Seeks capital appreciation through investment in
a diversified portfolio of equity securities of companies with market
capitalizations of under $1 billion.
INTERNATIONAL GROWTH PORTFOLIO: Seeks capital appreciation, primarily
through a diversified portfolio of non-United States equity securities.
MANAGED PORTFOLIO: Seeks growth of capital over time through
investment in a portfolio consisting of common stocks, bonds and cash
equivalents, the percentages of which will vary based on management's
assessments of relative investment values.
HIGH-YIELD BOND PORTFOLIO: Seeks maximum current income, primarily
from debt securities that are rated Ba or lower by Moody's Investor
Service, Inc. or BB by Standard & Poor's Corporation ("S&P").
Shares of the Fund are currently sold to variable accounts of The Mutual
Life Insurance Company of New York ("MONY") and a life insurance company
affiliate of MONY that were established to fund certain Flexible Payment
Variable Annuity and Life Insurance contracts (the "Contracts"). These variable
accounts (the "Variable Accounts") invest in Shares of the Fund in accordance
with allocation instructions received from holders (the "Contractholders") of
the Contracts. Allocation rights are further described in the attached
prospectus for the Contracts. The Variable Accounts will redeem Shares to the
extent necessary to provide benefits under the Contracts. In the future, Shares
may be sold to certain other variable accounts and affiliated entities of MONY.
It is possible, although not presently anticipated, that a material conflict
could arise between and among the various variable accounts which invest in the
Fund. Such conflict could cause the liquidation of assets of one or more of the
Fund Portfolios to raise cash at times not otherwise deemed advantageous by the
Investment Adviser or Portfolio Managers. See "Management of the Fund," p. 17.
This Prospectus sets forth concisely information about the Fund that a
prospective investor ought to know before investing, and offers of sales of
shares of the Fund, must be accompanied by a current prospectus for one of the
Contracts and both should be retained for future reference. A Statement of
Additional Information dated July 12, 1996 has been filed with the Securities
and Exchange Commission and is available without charge upon written request to
MONY, Maildrop 76-18, 500 Frank W. Burr Blvd., Teaneck, N.J. 07666-6888
[1-800-487-6669]. The Statement of Additional Information (which is incorporated
in its entirety by reference in this Prospectus) contains more detailed
information about the Fund and its management, including more complete
information about certain risk factors.
------------------------
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.
ENTERPRISE CAPITAL MANAGEMENT, INC.
INVESTMENT ADVISER
Prospectus dated July 12, 1996
IN PURSUING ITS INVESTMENT OBJECTIVE, THE HIGH-YIELD BOND PORTFOLIO MAY
INVEST SIGNIFICANTLY IN LOWER-RATED BONDS, COMMONLY REFERRED TO AS "JUNK BONDS."
BONDS OF THIS TYPE ARE CONSIDERED TO BE SPECULATIVE WITH REGARD TO THE PAYMENT
OF INTEREST AND RETURN OF PRINCIPAL. INVESTMENT IN THESE TYPES OF SECURITIES
HAVE SPECIAL RISKS AND THEREFORE, MAY NOT BE SUITABLE FOR ALL INVESTORS.
INVESTORS SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN
THIS PORTFOLIO. PLEASE REFER TO PAGE 15 OF THE PROSPECTUS.
<PAGE> 71
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................................................................... 1
Financial Highlights.................................................................. 3
Equity Portfolio...................................................................... 4
Small Cap Portfolio................................................................... 5
Managed Portfolio..................................................................... 6
International Growth Portfolio........................................................ 7
High-Yield Bond Portfolio............................................................. 8
Investment Objectives and Policies.................................................... 9
Investment Techniques and Associated Risks............................................ 12
Investment Restrictions............................................................... 17
Management of the Fund................................................................ 17
Determination of Net Asset Value...................................................... 19
Purchase of Shares.................................................................... 20
Redemption of Shares.................................................................. 20
State Law Restrictions................................................................ 20
Dividends, Distributions and Taxes.................................................... 21
Calculation of Performance............................................................ 21
Additional Information................................................................ 22
</TABLE>
i
<PAGE> 72
PROSPECTUS SUMMARY
The Fund............................ The Fund is a Massachusetts business
trust which issues its shares in
series as is designated as a
"Portfolio". Together, the five
Portfolios are designed to enable an
investor to choose a number of
investment alternatives to achieve
financial goals and to shift assets
conveniently among Portfolios when
and if investment aims or perception
of the marketplace change.
Investment Objectives and
Restrictions........................ The investment objective of each of the
Portfolios is set forth on the cover
page of this Prospectus. These
objectives are described in more
detail under the heading "Investment
Objectives and Policies." Although
each Portfolio will be actively
managed by experienced professionals,
there can be no assurance that the
objectives will be achieved.
The value of the portfolio securities
of each Portfolio and therefore the
Portfolio's net asset value per share
may increase or decrease because of
varying factors. There are generally
two types of risk associated with an
investment in one or more of the
Portfolios: market (or interest rate)
risk and financial (or credit) risk.
Market risk for equities is the risk
associated with movement of the stock
market in general. Market risk for
fixed income securities is the risk
that interest rates will change,
thereby affecting their value.
Generally, the value of fixed income
securities declines as interest rates
rise, and conversely, their value
rises as interest rates decline. The
second type of risk, financial or
credit risk, is associated with the
financial condition and profitability
of an individual equity or fixed
income issuer. The financial risk in
owning equities is related to
earnings stability and overall
financial soundness of individual
issuers and of issuers collectively
which are part of a particular
industry. For fixed income
securities, credit risk relates to
the financial ability of an issuer to
make periodic interest payments and
ultimately repay the principal at
maturity. The high-yield bonds in
which the High-Yield Bond Portfolio
will invest are subject to greater
risks than lower yielding, higher
rated fixed income securities. (See
"Additional Information on Investment
Objectives and Policies" for risk
aspects of the individual
Portfolios).
Investment Adviser.................. Enterprise Capital Management, Inc.
("Enterprise Capital"), the
investment adviser of each of the
Portfolios, serves also as investment
adviser to The Enterprise Group of
Funds, Inc., a registered investment
company consisting of approximately
$737 mil-
<PAGE> 73
lion of assets under management at
March 31, 1996. Enterprise Capital is
a subsidiary of The Mutual Life
Insurance Company of New York
("MONY") and has approximately $2.62
billion total assets under
management. Portfolio Managers are as
follows: OpCap Advisors for the
Equity, Small Cap and Managed
Portfolios; Brinson Partners, Inc.
for the International Growth
Portfolio; and Caywood-Scholl Capital
Management, Inc. for the High-Yield
Bond Portfolio.
Management Fee...................... Enterprise Capital receives a monthly
fee and pays a portion of such fee to
the respective Portfolio Manager from
each Portfolio at varying annual
percentage rates of average daily net
assets, as follows: .80 percent of
average daily net assets for the
Equity, Small Cap, and Managed
Portfolios up to $400 million; .75
percent for assets from $400 million
to $800 million; and .70 percent for
assets in excess of $800 million; .60
percent of average daily net assets
for the High-Yield Bond Portfolio and
.85 percent of average daily net
assets for the International Growth
Portfolio.
Purchases and Redemption of
Shares.............................. Currently, shares of the Fund are sold
at their net asset value per share,
without sales charge, for allocation
to the Variable Accounts as the
underlying investment for the
Contracts. Accordingly, the interest
of the Contractholder with respect to
the Fund is subject to the terms of
the Contract as described in the
accompanying Prospectus for the
Contract, which should be reviewed
carefully by a person considering the
purchase of a Contract. That
Prospectus describes the relationship
between increases or decreases in the
net asset value of Fund shares and
any distributions on such shares, and
the benefits provided under a
Contract. The rights of the Variable
Accounts as shareholders of the Fund
should be distinguished from the
rights of a Contractholder which are
described in the Contract. As long as
shares of the Fund are sold for
allocation to the Variable Accounts,
the terms "shareholder" or
"shareholders" in this Prospectus
shall refer to the Variable Accounts.
Shares are redeemed at their
respective net asset values as next
determined after receipt of proper
notice of redemption.
The above is qualified in its entirety by the detailed information
appearing elsewhere in this Prospectus, the Statement of Additional Information,
and the accompanying Prospectus for the Contract.
2
<PAGE> 74
FINANCIAL HIGHLIGHTS
The financial highlights for each of the years presented below have been
audited by the Fund's independent accountants. This information should be read
in conjunction with the Trust's 1995 financial statements, financial highlights
and related notes thereto included in the Statement of Additional Information.
Further information regarding the performance of each Portfolio is available in
the Fund's Annual Report. Annual Reports may be obtained without charge upon
written request to MONY, Maildrop 76-18, 500 Frank W. Burr Blvd., Teaneck, N.J.
07666-6888 (1-800-487-6669).
3
<PAGE> 75
ENTERPRISE ACCUMULATION TRUST
EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
-------- ------- ------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year....................... $ 18.14 $ 17.95 $ 17.23 $ 15.24 $ 11.92 $ 12.50 $10.19 $10.00#
-------- ------- ------- ------- ------- ------- ------ ------
Income from investment
operations:
Net investment income...... 0.33 0.28 0.18 0.17 0.24 0.30 0.26 0.00
Net realized and unrealized
gain (loss) on
investments.............. 6.38 0.41 1.13 2.49 3.42 (0.58) 2.05 0.19
-------- ------- ------- ------- ------- ------- ------ ------
Total from investment
operations......... 6.71 0.69 1.31 2.66 3.66 (0.28) 2.31 0.19
-------- ------- ------- ------- ------- ------- ------ ------
Less dividends and
distributions:
Dividends to shareholders
from net investment
income................... (0.49) (0.18) (0.17) (0.24) (0.34) (0.21) 0.00 0.00
Distributions to
shareholders from net
realized capital gains... (1.01) (0.32) (0.42) (0.43) 0.00 (0.09) 0.00 0.00
-------- ------- ------- ------- ------- ------- ------ ------
Total dividends and
distributions...... (1.50) (0.50) (0.59) (0.67) (0.34) (0.30) 0.00 0.00
-------- ------- ------- ------- ------- ------- ------ ------
Net asset value, end of
year....................... $ 23.35 $ 18.14 $ 17.95 $ 17.23 $ 15.24 $ 11.92 $12.50 $10.19
======== ======= ======= ======= ======= ======= ====== ======
Total return......... 38.4% 3.9% 7.8% 17.9% 31.2% (2.2)% 22.7% 1.9%
-------- ------- ------- ------- ------- ------- ------ ------
Net assets, end of year
(000)...................... $167,963 $88,583 $66,172 $33,581 $17,221 $10,248 $5,997 $1,059
-------- ------- ------- ------- ------- ------- ------ ------
Ratio of net operating
expenses to average net
assets..................... 0.69%(1) 0.67%(1) 0.72% 0.79% 0.86% 0.92%(1) 0.85%(1) 0.85%**(1)
-------- ------- ------- ------- ------- ------- ------ ------
Ratio of net investment
income to average net
assets..................... 1.94%(1) 1.81%(1) 1.47% 1.48% 2.09% 3.45%(1) 3.93%(1) 0.10%**(1)
-------- ------- ------- ------- ------- ------- ------ ------
Portfolio turnover........... 29% 38% 15% 27% 41% 49% 28% 0%
-------- ------- ------- ------- ------- ------- ------ ------
</TABLE>
- ---------------
# Initial public offering price per share.
** Annualized.
(1) During the years presented above, the Advisor voluntarily waived a portion
of its fees and reimbursed the Portfolio for a portion of its operating
expenses. If such waivers and reimbursements had not been in effect, the
ratios of net operating expenses to average net assets and the ratios of net
investment income to average net assets would have been .72% and 1.91%,
respectively in 1995; .69% and 1.79%, respectively, in 1994; .99% and 3.38%,
respectively, in 1990; 1.54% and 3.24%, respectively, in 1989; and 6.79% and
(5.84)% respectively, for the period 8/1/88 - 12/31/88.
4
<PAGE> 76
ENTERPRISE ACCUMULATION TRUST
SMALL CAP PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year.................. $ 17.56 $ 18.62 $ 16.72 $ 15.11 $10.46 $12.06 $10.19 $10.00#
-------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income.... 0.32 0.19 0.10 0.09 0.09 0.31 0.17 0.00
Net realized and
unrealized gain (loss)
on investments......... 1.75 (0.16) 2.98 3.05 4.86 (1.47) 1.70 0.19
-------- -------- -------- -------- -------- -------- -------- --------
Total from
investment
operations....... 2.07 0.03 3.08 3.14 4.95 (1.16) 1.87 0.19
-------- -------- -------- -------- -------- -------- -------- --------
Less dividends and
distributions:
Dividends to shareholders
from net investment
income................. (0.40) (0.10) (0.10) (0.10) (0.30) (0.15) 0.00 0.00
Distributions to
shareholders from net
realized capital
gains.................. (0.75) (0.99) (1.08) (1.43) 0.00 (0.29) 0.00 0.00
-------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions.... (1.15) (1.09) (1.18) (1.53) (0.30) (0.44) 0.00 0.00
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year..................... $ 18.48 $ 17.56 $ 18.62 $ 16.72 $15.11 $10.46 $12.06 $10.19
======== ======== ======== ======== ======== ======== ======== ========
Total return....... 12.3% 0.0% 19.5% 21.5% 48.1% (9.8)% 18.4% 1.9%
-------- -------- -------- -------- -------- -------- -------- --------
Net assets, end of year
(000).................... $166,061 $144,880 $105,635 $31,211 $9,777 $2,744 $2,302 $ 571
-------- -------- -------- -------- -------- -------- -------- --------
Ratio of net operating
expenses to average net
assets................... 0.69%(1) 0.66%(1) 0.74% 0.86% 1.00%(1) 1.02%(1) 0.95%(1) 0.95%**(1)
-------- -------- -------- -------- -------- -------- -------- --------
Ratio of net investment
income to average net
assets................... 1.86%(1) 1.30%(1) 1.06% 1.05% 1.41%(1) 3.32%(1) 2.48%(1) 0.23%**(1)
-------- -------- -------- -------- -------- -------- -------- --------
Portfolio turnover......... 70% 58% 70% 105% 120% 44% 58% 0%
-------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
- ---------------
# Initial public offering price per share.
** Annualized.
(1) During the years presented above, the Advisor voluntarily waived a portion
of its fees and reimbursed the Portfolio for a portion of its operating
expenses. If such waivers and reimbursements had not been in effect, the
ratios of net operating expenses to average net assets and the ratios of net
investment income to average net assets would have been .72% and 1.83%,
respectively in 1995; .67% and 1.29%, respectively, in 1994; 1.19% and
1.22%, respectively, in 1991; 1.62% and 2.38%, respectively, in 1990; 2.38%
and 1.05%, respectively, in 1989; and 9.22% and (8.04)%, respectively, for
the period 8/1/88 - 12/31/88.
5
<PAGE> 77
ENTERPRISE ACCUMULATION TRUST
MANAGED PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
---------- -------- -------- -------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year...... $ 20.82 $ 21.35 $ 20.11 $ 17.56 $ 12.43 $ 13.80 $ 10.44 $10.00#
---------- -------- -------- -------- ------- ------- ------- ------
Income from investment
operations:
Net investment
income............... 0.40 0.40 0.46 0.25 0.29 0.31 0.34 0.05
Net realized and
unrealized gain
(loss) on
investments.......... 8.97 0.15 1.55 2.95 5.31 (0.81) 3.06 0.39
---------- -------- -------- -------- ------- ------- ------- ------
Total from
investment
operations..... 9.37 0.55 2.01 3.20 5.60 (0.50) 3.40 0.44
---------- -------- -------- -------- ------- ------- ------- ------
Less dividends and
distributions:
Dividends to
shareholders from net
investment income.... (0.75) (0.46) (0.24) (0.27) (0.39) (0.28) (0.03) 0.00
Distributions to
shareholders from net
realized capital
gains................ (1.38) (0.62) (0.53) (0.38) (0.08) (0.59) (0.01) 0.00
---------- -------- -------- -------- ------- ------- ------- ------
Total dividends
and
distributions... (2.13) (1.08) (0.77) (0.65) (0.47) (0.87) (0.04) 0.00
---------- -------- -------- -------- ------- ------- ------- ------
Net asset value, end of
year................... $ 28.06 $ 20.82 $ 21.35 $ 20.11 $ 17.56 $ 12.43 $ 13.80 $10.44
========== ======== ======== ======== ======= ======= ======= ======
Total return..... 46.9% 2.6% 10.4% 18.6% 46.0% (3.6)% 32.6% 4.4%
---------- -------- -------- -------- ------- ------- ------- ------
Net assets, end of year
(000).................. $1,264,718 $689,252 $525,163 $236,175 $98,468 $45,955 $22,459 $3,238
---------- -------- -------- -------- ------- ------- ------- ------
Ratio of net operating
expenses to average net
assets................. 0.67%(1) 0.64%(1) 0.66% 0.69% 0.73% 0.80% 0.85%(1) 0.85%**(1)
---------- -------- -------- -------- ------- ------- ------- ------
Ratio of net investment
income to average net
assets................. 1.80%(1) 2.23%(1) 3.21% 2.06% 2.42% 3.79% 5.10%(1) 3.88%**(1)
---------- -------- -------- -------- ------- ------- ------- ------
Portfolio turnover....... 31% 33% 21% 23% 57% 112% 196% 38%
---------- -------- -------- -------- ------- ------- ------- ------
</TABLE>
- ---------------
# Initial public offering price per share.
** Annualized.
(1) During the years presented above, the Advisor voluntarily waived a portion
of its fees and reimbursed the Portfolio for a portion of its operating
expenses. If such waivers and reimbursements had not been in effect, the
ratios of net operating expenses to average net assets and the ratios of net
investment income to average net assets would have been .67% and 1.80%,
respectively, in 1995; .64% and 2.23%, respectively, in 1994; 1.05% and
4.09%, respectively, in 1989; and 3.37% and 1.36% for the period
8/1/88 - 12/31/88.
6
<PAGE> 78
ENTERPRISE ACCUMULATION TRUST
INTERNATIONAL GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
PERIOD OF
NOVEMBER 18, 1994
YEAR ENDED -
DECEMBER 31,1995 DECEMBER 31,1994
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of year................... $ 4.96 $ 5.00
----- -----
Income from investment operations:
Net investment income.............................. 0.04 0.00
Net realized and unrealized gain (loss) on
investments..................................... 0.67 (0.04)
----- -----
Total from investment operations........... 0.71 (0.04)
----- -----
Less dividends and distributions:
Dividends to shareholders from net investment
income.......................................... (0.04) 0.00
Distributions to shareholders from net realized
capital gains................................... (0.24) 0.00
----- -----
Total dividends and distributions.......... (0.28) 0.00
----- -----
Net asset value, end of year......................... $ 5.39 $ 4.96
----- -----
Total return............................... 14.6% (0.8)%*
----- -----
Net assets, end of year (000)........................ $18,598 $ 3,247
===== =====
Ratio of net operating expenses to average net
assets............................................. 1.55%(1) 1.55%**(1)
----- -----
Ratio of net investment income to average net
assets............................................. 1.17%(1) 0.80%**(1)
----- -----
Portfolio turnover................................... 27% 0%
----- -----
</TABLE>
- ---------------
* Not annualized.
** Annualized.
(1) During the years presented above, the Advisor voluntarily waived a portion
of its fees and reimbursed the Portfolio for a portion of its operating
expenses. If such waivers and reimbursements had not been in effect, the
ratios of net operating expenses to average net assets and the ratios of net
investment income to average net assets would have been 2.21% and .51%,
respectively, in 1995; and 8.85% and (6.34%), respectively, in 1994.
7
<PAGE> 79
ENTERPRISE ACCUMULATION TRUST
HIGH-YIELD BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
PERIOD OF
YEAR ENDED NOVEMBER 18, 1994 -
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -------------------
<S> <C> <C>
Net asset value, beginning of year..................... $ 4.98 $ 5.00
------- ------
Income from investment operations:
Net investment income................................ 0.45 0.04
Net realized and unrealized gain (loss) on
investments....................................... 0.35 (0.01)
------- ------
Total from investment operations............. 0.80 0.03
------- ------
Less dividends and distributions:
Dividends to shareholders from net investment
income............................................ (0.45) (0.05)
Distributions to shareholders from net realized
capital gains..................................... (0.02) 0.00
------- ------
Total dividends and distributions............ (0.47) (0.05)
------- ------
Net asset value, end of year........................... $ 5.31 $ 4.98
======= ======
Total return................................. 16.6% 0.5%*
------- ------
Net assets, end of year (000).......................... $15,223 $ 1,421
------- ------
Ratio of net operating expenses to average net
assets............................................... 0.85%(1) 0.85%**(1)
------- ------
Ratio of net investment income to average net assets... 8.51%(1) 7.84%**(1)
------- ------
Portfolio turnover..................................... 115% 0%
------- ------
</TABLE>
- ---------------
* Not annualized.
** Annualized.
(1) During the years presented above, the Advisor voluntarily waived a portion
of its fees and reimbursed the Portfolio for a portion of its operating
expenses. If such waivers and reimbursements had not been in effect, the
ratios of net operating expenses to average net assets and the ratios of net
investment income to average net assets would have been 1.59% and 7.77%,
respectively, in 1995; and 7.0% and .80%, respectively, in 1994.
8
<PAGE> 80
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of each Portfolio of the Fund are
described below. Investment objectives of each Portfolio are fundamental
policies which cannot be changed for any Portfolio without a majority vote of
the shareholders of that Portfolio; investment policies are not fundamental and
may be adjusted by the Portfolio Managers, subject to the oversight of
Enterprise Capital, at any time, usually in response to its perception of
developments in the securities markets. The extent to which a Portfolio will be
able to achieve its distinct investment objectives depend upon each Portfolio
Manager's ability to evaluate and develop the information it receives into a
successful investment program. Although each Portfolio will be managed by
experienced professionals, there can be no assurance that any Portfolio will
achieve its investment objectives. The values of the securities held in each
Portfolio will fluctuate and the net asset value per share at the time shares
are redeemed may be more or less than the net asset value per share at the time
of purchase. Investors should also refer to "Investment Techniques" for
additional information concerning the investment techniques employed for some or
all of the Portfolios.
EQUITY PORTFOLIO
The investment objective of the Equity Portfolio is long term capital
appreciation through investment in securities (primarily equity securities) of
companies that are believed by the Portfolio Manager to be undervalued in the
marketplace in relation to factors such as the companies' assets or earnings. It
is the Portfolio Manager's intention to invest in securities of companies which
in the Portfolio Manager's opinion possess one or more of the following
characteristics: undervalued assets, valuable consumer or commercial franchises,
securities valuation below peer companies, substantial and growing cash flow
and/or a favorable price to book value relationship. Investment policies aimed
at achieving the Portfolio's objective are set in a flexible framework of
securities selection which primarily includes equity securities, such as common
stocks, preferred stocks, convertible securities, rights and warrants in
proportions which vary from time to time. Under normal circumstances at least
65% of the Portfolio's assets will be invested in equity securities. The
Portfolio will invest primarily in stocks listed on the New York Stock Exchange.
In addition, it may also purchase securities listed on other domestic securities
exchanges, securities traded in the domestic over-the-counter market and foreign
securities provided that they are listed on a domestic or foreign securities
exchange or represented by American Depository Receipts listed on a domestic
securities exchange or traded in the United States over-the-counter market.
SMALL CAP PORTFOLIO
The investment objective of the Small Cap Portfolio is to seek capital
appreciation through investments in a diversified portfolio consisting primarily
of equity securities of companies with market capitalizations of under $1
billion. Smaller-capitalization companies are often under-priced for the
following reasons: (i) institutional investors, which currently represent a
majority of the trading volume in the shares of publicly traded companies, are
often less interested in such companies because in order to acquire an equity
position that is large enough to be meaningful to an institutional investor,
such an investor may be required to buy a large percentage of the company's
outstanding equity securities and (ii) such companies may not be regularly
researched by stock analysts, thereby resulting in greater discrepancies in
valuation. The Portfolio may also purchase securities in initial public
offerings, or shortly after such offerings have been completed, when the
Portfolio Manager believes that such securities have greater-than-average market
appreciation potential. Under normal circumstances at least 65% of the
Portfolio's assets will be invested in equity securities. The majority of
securities purchased by the Portfolio will be traded on the New York Stock
Exchange, the American Stock Exchange or in the over-the-counter market, and
will also include options, warrants, bonds, notes and debentures which are
convertible into or exchangeable for, or which grant a right to purchase or
sell, such securities. In addition, the Portfolio may also purchase foreign
securities provided that they are listed on a domestic or foreign securities
exchange or are represented by American Depository Receipts listed on a domestic
securities exchange or traded in the United States over-the-counter market.
In pursuing its objective, the Portfolio's strategy will be to invest in
stocks of companies with value that may not be fully reflected by current stock
price. The Portfolio Manager attempts to identify a universe of
9
<PAGE> 81
stocks for which the market has relatively low expectations as measured by
overall price relative to fundamental measures of growth and valuation. To
institute this strategy, the Portfolio Manager utilizes various proprietary
valuation tools centered around price/sales ratios to target investments in
companies whose growth potential exceeds commonly perceived expectations.
INTERNATIONAL GROWTH PORTFOLIO
The International Growth Portfolio seeks capital appreciation, primarily
through a diversified portfolio of non-United States equity securities. It is a
fundamental policy of the Portfolio that it will invest at least 80% of the
value of its assets (except when maintaining a temporary defensive position) in
equity securities of companies domiciled outside the United States. That portion
of the Portfolio not invested in equity securities is, in normal circumstances,
invested in U.S. and foreign government securities, high-grade commercial paper,
certificates of deposit, foreign currency, bankers' acceptances, cash and cash
equivalents, time deposits, repurchase agreements and similar money market
instruments, both foreign and domestic. The Portfolio may invest in convertible
debt securities of foreign issuers which are convertible into equity securities
at such time as a market for equity securities is established in the country
involved.
The Portfolio Manager's investment perspective for the Portfolio is to
invest in the equity securities of non-U.S. markets and companies which are
believed to be undervalued based upon internal research and proprietary
valuation systems. This international equity strategy reflects the Portfolio
Manager's decisions concerning the relative attractiveness of asset classes, the
individual international equity markets, industries across and within those
markets, other common risk factors within those markets and individual
international companies. The Portfolio Manager initially identifies those
securities which it believes to be undervalued in relation to the issuer's
assets, cash flow, earnings and revenues. The relative performance of foreign
currencies is an important factor in the Portfolio's performance. The Portfolio
Manager may manage the Portfolio's exposure to various currencies to take
advantage of different yield, risk and return characteristics. The Portfolio
Manager's proprietary valuation model determines which securities are potential
candidates for inclusion in the Portfolio.
The benchmark for the fund is the Morgan Stanley Capital International
Non-U.S. Equity (Free) Index (the "Benchmark"). The Benchmark is a market driven
broad based index which includes non-U.S. equity markets in terms of
capitalization and performance. The Benchmark is designed to provide a
representative total return for all major stock exchanges located outside the
U.S. From time to time, the Portfolio Manager may substitute securities in an
equivalent index when it believes that such securities in the index more
accurately reflect the relevant international market.
As a general matter, the Portfolio Manager will purchase for the Fund only
securities contained in the underlying index relevant to the Benchmark. The
Portfolio Manager will attempt to enhance the long-term return and risk
performance of the Portfolio relative to the Benchmark by deviating from the
normal Benchmark mix of country allocation and currencies in reaction to
discrepancies between current market prices and fundamental values. The active
management process is intended to produce a superior performance relative to the
Benchmark index.
The Portfolio Manager will purchase securities of companies domiciled in a
minimum of eight to 12 countries outside the United States.
MANAGED PORTFOLIO
The investment objective of the Managed Portfolio is to achieve growth of
capital over time through investment in a portfolio consisting of common stocks,
bonds and cash equivalents, the percentages of which will vary based on the
Portfolio Manager's assessments of the relative outlook for such investments. In
seeking to achieve its investment objective, the types of equity securities in
which the Portfolio may invest are likely to be the same as those in which the
Equity Portfolio invests, although securities of the type in which the Small Cap
Portfolio invests may, to a lesser extent, be included. Debt securities are
expected to be predominantly investment grade intermediate to long term U.S.
Government and corporate debt, although the Portfolio will also invest in
high-quality short-term money market and cash equivalent securities and may
invest almost all
10
<PAGE> 82
of its assets in such securities when the Portfolio Manager deems it advisable
in order to preserve capital. In addition, the Portfolio may also purchase
foreign securities provided that they are listed on a domestic or foreign
securities exchange or are represented by American Depository Receipts listed on
a domestic securities exchange or traded in the United States over-the-counter
market.
The allocation of the Portfolio's assets among the different types of
permitted investments will vary from time to time based upon the Portfolio
Manager's evaluation of economic and market trends and its perception of the
relative values available from such types of securities at any given time. There
is neither a minimum nor a maximum percentage of the Portfolio's assets that
may, at any given time, be invested in any of the types of investments
identified above. Consequently, while the Portfolio will earn income to the
extent it is invested in bonds or cash equivalents, the Portfolio does not have
any specific income objective.
HIGH-YIELD BOND PORTFOLIO
The investment objective of the High-Yield Bond Portfolio is maximum
current income, primarily from debt securities that are rated Ba or lower by
Moody's or BB or lower by S&P. It is a fundamental policy of the Portfolio that
it will invest at least 80% of the value of its total assets (except when
maintaining a temporary defensive position) in high-yielding, income-producing
corporate bonds that are rated B3 or better by Moody's or B- or better by S&P.
The corporate bonds in which the Portfolio invests are high-yielding but
normally carry a greater credit risk than bonds with higher ratings. In
addition, such bonds may involve greater volatility of price than higher-rated
bonds. For a discussion of High-Yield Securities and related risks, see
"Investment Techniques and Associated Risks -- High-Yield Securities" at page
15.
The Portfolio's investments are selected by the Portfolio Manager after
careful examination of the economic outlook to determine those industries that
appear favorable for investments. Industries going through a perceived decline
generally are not candidates for selection. After the industries are selected,
bonds of issuers within those industries are selected based on their
creditworthiness, their yields in relation to their credit and the relative
strength of their common stock prices. Companies near or in bankruptcy are not
considered for investment. The Portfolio does not purchase bonds which are rated
Ca or lower by Moody's or CC or lower by S&P or which, if unrated, in the
judgment of the Portfolio Manager have characteristics of such lower-grade
bonds. Should an investment purchased with the above-described credit quality
requisites be downgraded to Ca or lower or CC or lower, the Portfolio Manager
shall have discretion to hold or liquidate the security.
Subject to the restrictions described above, under normal circumstances, up
to 20% of the Portfolio's assets may include: (1) bonds rated Caa by Moody's or
CCC by S&P; (2) unrated debt securities which, in the judgment of the Portfolio
Manager have characteristics similar to those described above; (3) convertible
debt securities; (4) puts, calls and futures as hedging devices; (5) foreign
issuer debt securities; and (6) short-term money market instruments, including
certificates of deposit, commercial paper, U.S. Government Securities and other
income-producing cash equivalents. For a discussion on options and futures and
their related risks, see "Investment Techniques and Associated Risks," at page
12.
ADDITIONAL INFORMATION ON INVESTMENT OBJECTIVES AND POLICIES
For the Equity and Small Cap Portfolios, at times when the investment
climate is viewed as favorable, common stocks will be heavily emphasized. Under
normal circumstances, at least 65% of each Portfolio's total assets will be
invested in common stocks or securities convertible into common stocks.
Under normal conditions, no less than 80% of the total assets of the
International Growth and High-Yield Bond Portfolios will be invested in equity
or debt securities identified in the respective Portfolio policies listed above.
In the event that future economic or financial conditions adversely affect
equity securities, or stocks are considered overvalued, each of the Equity,
Small Cap, and International Growth Portfolios may temporarily invest a
substantial portion of its assets in debt securities, with an emphasis on money
market instruments or
11
<PAGE> 83
cash and cash equivalents until the Portfolio Manager determines, that market
conditions warrant returning to investments in equity securities. Please refer
to the discussion on Defensive Tactics at page 16.
Each Portfolio will in the normal course have varying amounts of cash
assets which have not yet been invested in accordance with its objectives. This
cash will be temporarily invested in high quality short term money market
securities and cash equivalents.
MANAGEMENT OF ASSETS
The Portfolio Managers intend to manage each Portfolio's assets by buying
and selling securities to help attain its investment objective. This may result
in increases or decreases in a Portfolio's current income available for
distribution to its shareholders. While none of the Portfolios is managed with
the intent of generating short-term capital gains, each of the Portfolios may
dispose of investments (including money market instruments) regardless of the
holding period if, in the opinion of the Portfolio Manager, an issuer's
creditworthiness or perceived changes in a company's growth prospects or asset
value make selling them advisable. Such an investment decision may result in
capital gains or losses and could result in a high portfolio turnover rate
during a given period, resulting in increased transaction costs related to
equity securities. Disposing of debt securities in these circumstances should
not increase direct transaction costs since debt securities are normally traded
on a principal basis without brokerage commissions. However, such transactions
do involve a mark-up or mark-down of the price.
During periods of unusual market conditions when the Portfolio Manager
believes that investing for defensive purposes is appropriate, or in order to
meet anticipated redemption requests, part or all of the assets of one or more
of the Portfolios may be invested in cash or cash equivalents including
obligations listed below.
The portfolio turnover rates of the Portfolios cannot be accurately
predicted. Nevertheless, it is anticipated that the International Growth
Portfolio will have an annual turnover rate (excluding turnover of securities
having a maturity of one year or less) of 100% or less. A 100% annual turnover
rate would occur, for example, if all the securities in a Portfolio's investment
portfolio were replaced once in a period of one year.
INVESTMENT TECHNIQUES AND ASSOCIATED RISKS
The investment techniques or instruments described below are used for the
Portfolios' investment programs:
Short-Term Investments. Each Portfolio typically invests a part of its
assets in various types of U.S. Government securities and high-quality,
short-term debt securities with remaining maturities of one year or less ("money
market instruments"). This type of short-term investment is made to provide
liquidity for the purchase of new investments and to effect redemptions of
shares. The money market instruments in which each Portfolio may invest include
government obligations, certificates of deposit, bankers' acceptances,
commercial paper, short-term corporate securities and repurchase agreements. The
International Growth Portfolio may invest in all of the above, both foreign and
domestic, including foreign currency, foreign time deposits, and foreign bank
acceptances.
Repurchase Agreements. Each Portfolio may acquire securities subject to
repurchase agreements. Under a typical repurchase agreement, a Portfolio would
acquire a debt security for a relatively short period (usually for one day and
not for more than one week) subject to an obligation of the seller to repurchase
and of the Portfolio to resell the debt security at an agreed-upon higher price,
thereby establishing a fixed investment return during the Portfolio's holding
period. A Portfolio will enter into repurchase agreements with member banks of
the Federal Reserve System having total assets in excess of $500 million and
with dealers registered with the Securities and Exchange Commission. Under each
repurchase agreement the selling institution will be required to maintain as
collateral securities whose market value is at least equal to the repurchase
price. Repurchase agreements could involve certain risks in the event of default
or insolvency of the selling institution, including costs of disposing of
securities held as collateral and any loss resulting from delays or restrictions
upon the Portfolio's ability to dispose of securities. Pursuant to guidelines
established by the Fund's Board of Trustees, the Portfolio Manager considers the
creditworthiness of those banks and non-
12
<PAGE> 84
bank dealers with which a Portfolio enters into repurchase agreements and
monitors on an ongoing basis the value of securities held as collateral to
ensure that such value is maintained at the required level. A Portfolio will not
enter into a repurchase agreement with a dealer if the agreement has a maturity
beyond seven days.
Loans of Portfolio Securities. Each Portfolio may lend its portfolio
securities if such loans are secured continuously by collateral (cash, U.S.
Government or agency obligations or letters of credit) maintained on a daily
basis in an amount at least equal at all times to the market value of the
securities loaned and if the Portfolio does not incur any fees (other than the
transaction fees of its custodian bank) in connection with such loans. A
Portfolio may call the loan at any time on five days' notice and reacquire the
loaned securities. During the loan period, the Portfolio would continue to
receive the equivalent of the interest paid by the issuer on the securities
loaned and would also have the right to receive the interest on investment of
the cash collateral in short-term debt instruments. A portion of either or both
kinds of such interest may be paid to the borrower of such securities. It is not
intended that the value of the securities loaned, if any, would exceed 10% of
the value of a Portfolio's total assets. Securities loans must also meet
applicable tests under the Internal Revenue Code of 1986, as amended (the
"Code"). A Portfolio could experience various costs or losses if a borrower
defaults on its obligation to return the borrowed securities.
Options and Futures. To the extent permitted by Arizona and New York law,
each of the Equity, Small Cap and International Growth Portfolios intend to
engage in futures contracts or options on futures contracts for bona fide
hedging or other purposes, and to write calls and puts on individual securities.
When either the Equity, Small Cap or International Growth Portfolio anticipates
a significant market or market sector advance, the purchase of a futures
contract affords a hedge against not participating in the advance at a time when
such Portfolio is not fully invested ("anticipatory hedge"). Such a purchase of
a futures contract would serve as a temporary substitute for the purchase of
individual securities, which then may be purchased in an orderly fashion once
the market has stabilized. As individual securities are purchased, an equivalent
amount of futures contracts could be terminated by offsetting sales. Any such
Portfolio may sell futures contracts in anticipation of or in a general market
or market sector decline that may adversely affect the market value of such
Portfolio's securities ("defensive hedge"). To the extent that the Equity, Small
Cap or International Growth Portfolio of securities changes in value in
correlation with the underlying security or index, the sale of futures contracts
would substantially reduce the risk to the Portfolios of a market decline and by
so doing, provide an alternative to the liquidation of securities positions in
the Portfolios with attendant transaction costs. So long as the Commodity
Futures Trading Commission rules so require, none of the Equity, Small Cap or
International Growth Portfolios will enter into any financial futures or options
contract unless such transactions are for bona-fide hedging purposes, or for
other purposes only if the aggregate initial margins and premiums required to
establish such non-hedging positions would not exceed 5% of the liquidation
value of such Portfolio's assets. When writing put options, a Portfolio will
maintain in a segregated account at its Custodian liquid assets with a value
equal to at least the exercise price of the option to secure its obligation to
pay for the underlying security. As a result, such Portfolio forgoes the
opportunity of trading the segregated assets or writing calls against those
assets. There may not be a complete correlation between the price of options and
futures and the market prices of the underlying securities. The Portfolio may
lose the ability to profit from an increase in the market value of the
underlying security or may lose its premium payment. If due to a lack of a
market a Portfolio could not effect a closing purchase transaction with respect
to an over-the-counter ("OTC") option, it would have to hold the callable
securities until the call lapsed or was exercised.
The Managed Portfolio is authorized to, but does not presently intend to,
purchase, sell and write options and purchase and sell futures contracts for
hedging and other purposes. In the event that the Portfolio Manager intends in
the future to engage in such transactions, appropriate disclosures will be made
to existing and prospective shareholders.
Except as otherwise indicated, the Portfolio Managers may engage in the
following hedging transactions to seek to hedge all or a portion of a
Portfolio's assets against market value changes resulting from changes in equity
values, interest rates and currency fluctuations utilizing covered options,
futures and forwards. Hedging is a means of offsetting, or neutralizing, the
price movement of an investment by making another investment, the price of which
should tend to move in the opposite direction from the original investment.
13
<PAGE> 85
CALL OPTIONS
The Portfolios may write (sell) call options that are listed on national
securities exchanges or are available in the over-the-counter market through
primary broker-dealers. Call options are short-term contracts with a duration of
nine months or less. Such Portfolios of the Fund may only write call options
which are "covered," meaning that the Portfolio either owns the underlying
security or has an absolute and immediate right to acquire that security,
without additional cash consideration, upon conversion or exchange of other
securities currently held in the Portfolio. In addition, no Portfolio will,
prior to the expiration of a call option, permit the call to become uncovered.
If a Portfolio writes a call option, the purchaser of the option has the right
to buy (and the Portfolio has the option to sell) the underlying security
against payment of the exercise price throughout the term of the option. The
Portfolio's obligation to deliver the underlying security against payment of the
exercise price would terminate either upon expiration of the option or earlier
if the Portfolio were to effect a "closing purchase transaction" through the
purchase of an equivalent option on an exchange. The Portfolio would not be able
to effect a closing purchase transaction after it had received notice of
exercise. The International Growth Portfolio may purchase and write covered call
options on foreign and U.S. securities and indices and enter into related
closing transactions.
Generally, such a Portfolio intends to write listed covered calls when it
anticipates that the rate of return from doing so is attractive, taking into
consideration the premium income to be received, the risks of a decline in
securities prices during the term of the option, the probability that closing
purchase transactions will be available if a sale of the securities is desired
prior to the exercise, or expiration of the options, and the cost of entering
into such transactions. A principal reason for writing calls on a securities
portfolio is to attempt to realize, through the receipt of premium income, a
greater return than would be earned on the securities alone. A covered call
writer such as a Portfolio, which owns the underlying security has, in return
for the premium, given the opportunity for profit from a price increase in the
underlying security above the exercise price, but it has retained the risk of
loss should the price of the security decline.
The writing of covered call options involves certain risks. A principal
risk arises because exchange and over-the-counter markets for options are a
relatively new and untested concept; it is impossible to predict the amount of
trading interest which may exist in such options, and there can be no assurance
that viable exchange and over-the-counter markets will develop or continue. The
Portfolios will write covered call options only if there appears to be a liquid
secondary market for such options. If, however, an option is written and a
liquid secondary market does not exist, it may be impossible to effect a closing
purchase transaction in the option. In that event, the Portfolio may not be able
to sell the underlying security until the option expires or the option is
exercised, even though it may be advantageous to sell the underlying security
before that time.
The Portfolios will only engage in hedging transactions against changes
resulting from market conditions in the values of securities owned or expected
to be owned by the Portfolios. Unless otherwise indicated, a Portfolio will not
enter into a hedging transaction (except for closing transactions) if,
immediately thereafter, the sum of the amount of the initial deposits and
premiums on open contracts and options would exceed 20% of the Portfolio's total
assets taken at current value.
PORTFOLIO TRANSACTIONS
The Portfolio Managers' primary consideration when executing security
transactions with broker-dealers is to obtain, and maintain the availability of,
execution at the most favorable prices and in the most effective manner
possible. A Portfolio Manager may select, under certain conditions, Oppenheimer
& Co., Inc., an affiliate of the OpCap Advisors, Inc., the Portfolio Manager of
the Equity, Small Cap and Managed Portfolios, to execute each Portfolio's
transactions. When selecting broker-dealers, other than Oppenheimer & Co., Inc.,
to execute a Portfolio's transactions, the Portfolio Managers may consider their
record of sales of shares of other investment company clients of the Portfolio
Managers. Selection of broker-dealers to execute portfolio transactions must be
done in a manner consistent with the foregoing primary consideration, the "Rules
of Fair Practice" of the National Association of Securities Dealers, Inc. and
such other policies as the Board of Trustees may determine. (For a further
discussion of portfolio trading, see the Statement of Additional Information,
"Investment Management and Other Services.")
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GENERAL RISKS ASSOCIATED WITH EQUITY (EQUITY, SMALL CAP, INTERNATIONAL GROWTH
AND MANAGED) PORTFOLIOS
The Equity Portfolios seek to reduce risk of loss of principal due to
changes in the value of individual stocks by investing in a diversified
portfolio of common stocks and through the use of options on stocks. Such
investment techniques do not, however, eliminate all risks. Investors should
expect the value of the Equity Portfolios and the net asset value of their
shares to fluctuate based on market conditions.
RISK ASPECTS OF THE INDIVIDUAL PORTFOLIOS
Small Cap Portfolio. The Small Cap Portfolio is expected to have greater
risk exposure and reward potential than a fund which invests primarily in
larger-capitalization companies. The trading volumes of securities of
smaller-capitalization companies are normally less than those of
larger-capitalization companies. This often translates into greater price
swings, both upward and downward. Since trading volumes are lower, new demand
for the securities of such companies could result in disproportionately large
increases in the price of such securities. The waiting period for the
achievement of an investor's objectives might be longer since these securities
are not closely monitored by research analysts and, thus, it takes more time for
investors to become aware of fundamental changes or other factors which have
motivated the Portfolio's purchase. Smaller-capitalization companies often
achieve higher growth rates and experience higher failure rates than do
larger-capitalization companies.
It is the present intention of the Equity, Small Cap, International Growth
and Managed Portfolio Managers with respect to each of the respective Portfolios
to invest no more than 5 percent of its net assets in bonds rated below Baa3 by
Moody's or BBB by S&P (commonly known as "junk bonds"). In the event that the
Portfolio Managers intend in the future to invest more than 5% of the net assets
of any such Portfolio in junk bonds, appropriate disclosures will be made to
existing and prospective shareholders. For information about the possible risks
of investing in junk bonds see "High-Yield Securities" below and "Investment of
the Assets" in the Statement of Additional Information.
International Growth Portfolio. The International Growth Portfolio carries
additional risks associated with possibly less stable foreign securities and
currencies. Refer to "Foreign Currency and Values" and "Foreign Securities"
sections of the Statement of Additional Information.
Managed Portfolio. An investment in the Managed Portfolio will entail both
market and financial risk, the extent of which depends on the amount of the
Portfolio's assets which are committed to equity, longer term debt or money
market securities at any particular time. The Managed Portfolio may invest in
mortgage-backed securities. Such securities, while similar to other fixed-income
securities, involve additional risk because mortgage prepayments are passed
through to the holder of the mortgage-backed security and must be reinvested.
When interest rates fall, prepayments tend to rise. The Portfolio may have to
reinvest that portion of its assets invested in such securities more frequently
when interest rates are low than when interest rates are high.
Although the Managed Portfolio seeks to reduce credit risks, i.e., failure
of obligors to pay interest and principal, through careful selection of
investments, and it seeks to reduce market risks resulting from fluctuations in
the principal value of debt obligations due to changes in prevailing interest
rates by careful timing of maturities of investments, such risks cannot be
eliminated, and these factors will affect the net asset value of shares in the
Managed Portfolio. The value of debt obligations has an inverse relationship
with prevailing interest rates. The risks of investing in fixed income
securities are greater when such securities are high-yield securities.
HIGH-YIELD SECURITIES
Notwithstanding the investment policies and restrictions applicable to the
High-Yield Bond Portfolio which are designed to reduce risks associated with
such investments, high-yield securities may carry higher levels of risk than
many other types of income producing securities. These risks are of three basic
types: the risk that the issuer of the high-yield bond will default in the
payment of principal and interest; the risk that the value of the bond will
decline due to rising interest rates, economic conditions, or public perception;
and the
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risk that the investor in such bonds may not be able to readily sell such bonds.
Each of the major categories of risk are impacted by various factors, as
discussed below:
High-Yield Bond Market
The high-yield bond market is relatively new and has grown in the context
of a long economic expansion. Any downturn in the economy may have a negative
impact on the perceived ability of the issuer to make principal and interest
payments which may adversely affect the value of outstanding high-yield
securities and reduce market liquidity.
Sensitivity to Interest Rate and Economic Changes
In general, the market prices of bonds bear an inverse relationship to
interest rates; as interest rates increase, the prices of bonds decrease. The
same relationship may hold for high-yield bonds, but in the past high-yield
bonds have been somewhat less sensitive to interest rate changes than treasury
and investment grade bonds. While the price of high-yield bonds may not decline
as much, relatively, as the prices of treasury or investment grade bonds decline
in an environment of rising interest rates, the market price, or value, of a
high-yield bond will be expected to decrease in periods of increasing interest
rates, negatively impacting the net asset value of the High-Yield Bond
Portfolio. High-yield bond prices may not increase as much, relatively, as the
prices of treasury or investment grade bonds in periods of decreasing interest
rates. Payments of principal and interest on bonds are dependent upon the
issuer's ability to pay. Because of the generally lower creditworthiness of
issuers of high-yield bonds, changes in the economic environment generally, or
in an issuer's particular industry or business, may severely impact the ability
of the issuer to make principal and interest payments and may depress the price
of high-yield securities more significantly than such changes would impact
higher rated, investment grade securities.
Payment Expectations
Many high-yield bonds contain redemption or call provisions which might be
expected to be exercised in periods of decreasing interest rates. Should bonds
in which the High-Yield Bond Portfolio has invested be redeemed or called during
such an interest rate environment, the Portfolio would have to sell such
securities without reference to their investment merit and reinvest the proceeds
received in lower-yielding securities, resulting in a decreased return for
investors in the High-Yield Bond Portfolio. In addition, such redemptions or
calls may reduce the High-Yield Bond Portfolio's asset base over which the
Portfolio's investment expenses may be spread.
Liquidity and Valuation
Because of periods of relative illiquidity, many high-yield bonds may be
thinly traded. As a result, the Board of Directors' ability to accurately value
high-yield bonds and determine the net asset value of the High-Yield Bond
Portfolio, as well as the Portfolio's ability to sell such securities, may be
limited. Public perception of and adverse publicity concerning high-yield
securities may have a significant negative impact on the value and liquidity of
high-yield securities, even though not based on fundamental investment analysis.
DEFENSIVE TACTICS
Any or all of the Portfolios may at times for defensive purposes, at the
determination of the Portfolio Manager, temporarily place all or a portion of
their assets in cash, short-term commercial paper (i.e. short-term unsecured
promissory notes issued by corporations to finance short-term credit needs),
United States Government Securities, high-quality debt securities (including
"Eurodollar" and "Yankee Dollar" obligations, i.e., U.S. issuer borrowings
payable overseas in U.S. funds and obligations of foreign issuers payable in
U.S. funds), non-convertible preferred stocks and obligations of banks when in
the judgment of the Portfolio Manager such investments are appropriate in light
of economic or market conditions. The International Growth Portfolio may invest
in all of the above, both foreign and domestic, including foreign currency,
foreign
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time deposits, and foreign bank acceptances. When a Portfolio takes a defensive
position, it may not be following the fundamental investment policy of the
Portfolio.
Tax Considerations
To the extent that the High-Yield Bond Portfolio invests in securities
structured as zero coupon bonds, the Portfolio will be required to report
interest income even though no cash interest payment is received until maturity
of the bond. Investors in the High-Yield Bond Portfolio would be taxed on this
interest income even though no cash distribution of such interest is received in
the year in which such income is taxed.
INVESTMENT RESTRICTIONS
Each Portfolio is subject to certain investment restrictions which,
together with its investment objective, are fundamental policies changeable only
by shareholder vote. Under some of those restrictions, each Portfolio may not:
1. Invest more than 5% of the value of its total assets in the securities
of any one issuer, or purchase more than 10% of the voting securities, or more
than 10% of any class of security, of any issuer (for this purpose all
outstanding debt securities of an issuer are considered as one class and all
preferred stock of an issuer are considered as one class).
2. Concentrate its investments in any particular industry, but if deemed
appropriate for attaining its investment objective, a Portfolio may invest up to
25% of its total assets (valued at the time of investment) in any one industry
classification used by that Portfolio for investment purposes.
3. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three years of
continuous operation.
4. Make loans, except through the purchase of U.S. Government securities
and corporate debt obligations, repurchase agreements or lending portfolio
securities as described above under "Loans of Portfolio Securities."
5. Borrow money in excess of 10% of the value of its total assets. It may
borrow only as a temporary measure for extraordinary or emergency purposes and
will make no additional investments while such borrowings exceed 5% of the total
assets. Such prohibition against borrowing does not prohibit escrow or other
collateral or margin arrangements in connection with the hedging instruments
which a Portfolio is permitted to use by any of its other fundamental policies.
6. Invest more than 10% of its net assets in illiquid securities
(securities for which market quotations are not readily available) and
repurchase agreements which have a maturity of longer than seven days. Other
investment restrictions are described in the Statement of Additional
Information.
All percentage limitations apply immediately after a purchase or initial
investment and any subsequent change in any applicable percentage resulting from
market fluctuations or other changes in the amount of total assets does not
require elimination of any security from a Portfolio.
MANAGEMENT OF THE FUND
The Fund's Board of Trustees has overall responsibility for the management
of the Fund under the laws of Massachusetts governing the responsibilities of
trustees of a Massachusetts business trust. In general, such responsibilities
are comparable to those of directors of a Massachusetts business corporation.
The Board of Trustees of the Fund has undertaken to monitor the Fund for the
existence of any material irreconcilable conflict between the interests of
variable annuity Contractholders and variable life insurance Contractholders and
shall report any such conflict to the boards of MONY and MONY America. The
Boards of Directors of those companies have agreed to be responsible for
reporting any potential or existing conflicts to the Trustees of the Fund and,
at their own cost, to remedy such conflict up to and including establishing a
new registered management investment company and segregating the assets
underlying the variable annuity contracts and the
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<PAGE> 89
variable life insurance contracts. The Statement of Additional Information
contains information about the Trustees and Officers of the Fund.
INVESTMENT ADVISER AGREEMENT
Enterprise Capital provides administrative services to the Portfolios,
subject to the direction of the Board and in keeping with the stated investment
objectives of each Portfolio. Enterprise Capital and the Fund have entered into
Portfolio Manager Agreements with each of the Portfolio Managers discussed
below.
Enterprise Capital is assisted in this duty by Evaluation Associates, Inc.,
which has had 24 years of experience in evaluating investment advisers for
individuals and institutional investors. The oversight and management services
provided by Enterprise Capital include (i) supervising the Portfolio Managers'
compliance with state and federal regulations, including the Investment Company
Act, (ii) evaluating the Portfolio Managers' performance, (iii) analyzing the
composition of the investment portfolios of each Portfolio of the Fund and
preparing reports thereon for the Board or any committee of the board, (iv)
evaluating each Portfolio's performance in comparison to similar mutual funds
and other market information, (v) conducting searches, upon a request of the
Board, for a replacement for any Portfolio Manager then serving the Fund, and
(vi) preparing presentations to shareholders which analyze the Fund's overall
investment program and performance.
Enterprise Capital is a subsidiary of MONY, one of the nation's largest
insurance companies. Enterprise Capital serves as the investment adviser to The
Enterprise Group of Funds, Inc., a registered investment company consisting of
ten separate investment portfolios with assets of $737 million at March 31,
1996. Total assets under management at March 31, 1996 are approximately $2.62
billion. Enterprise Capital's address is Atlanta Financial Center, 3343
Peachtree Road, Ste. 450, Atlanta, Georgia 30326-1022. MONY's address is 1740
Broadway, New York, New York 10019.
PORTFOLIO MANAGERS
Equity Portfolio
The Portfolio Manager of the Equity Portfolio is OpCap Advisors which is a
subsidiary of Oppenheimer Capital, a general partnership. The Portfolio Manager
and its affiliates have operated as investment advisers to both mutual funds and
other clients since 1968, and had approximately $40 billion under management as
of March 31, 1996. Eileen Rominger, Senior Vice President of Oppenheimer
Capital, is responsible for the day-to-day management of the Portfolio. Ms.
Rominger has more than 17 years experience in the investment industry. The
annual Management Fee is .80% of average daily net assets up to $400 million;
.75% of average daily net assets from $400 million to $800 million; and .70% of
average daily net assets in excess of $800 million, and the Portfolio Manager
receives .40% of average daily net assets up to $1,000,000,000 and .30%
thereafter. Usual investment minimum is $10 million. Representative clients
include Pacific Telesis Group, Caterpillar, Inc. and NY State Electric & Gas
OpCap's address is One World Financial Center, New York, New York 10281.
Small Cap Portfolio
The Portfolio Manager of the Small Cap Portfolio is GAMCO Investors, Inc.
("GAMCO"). Its offices are located at One Corporate Center, Rye, New York 10580.
GAMCO is a majority owned subsidiary of Gabelli Funds, Inc. GAMCO's predecessor,
Gabelli & Company, Inc., was founded in 1977 by Mario J. Gabelli, who served as
its chief investment officer since inception. Mr. Gabelli is responsible for the
day-to-day management of the Portfolio. He has more than 30 years experience in
the investment industry. Representative clients include: AT&T; Halliburton Co.
and ITT Corp. As of March 31, 1996, total assets under management for all
clients were $5.1 billion. Usual investment minimum is $1 million. The annual
Management Fee is .80% of average daily net assets up to $400 million; .75% of
average daily net assets from $400 million to $800 million; and .70% of average
daily net assets in excess of $800 million; and the Portfolio Manager receives
.40% of average daily net assets up to $1,000,000,000 and .30% thereafter.
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International Growth Portfolio
The Portfolio Manager of the International Growth Portfolio is Brinson
Partners, Inc. which is a wholly owned subsidiary of Brinson Holdings, Inc. and
is an acquisition of Swiss Bank Corporation presently pending. Investments of
the International Growth Portfolio are managed by a committee of the Portfolio
Manager. As of December 31, 1995, Brinson Partners Inc.'s assets under
management for all clients approximated $53 billion. Usual investment minimum:
$25 million. Representative clients not disclosed due to confidentiality
agreements. Brinson's address is 209 South LaSalle Street, Chicago, Illinois
60604. The annual Management Fee is .85% of average daily net assets, and the
Portfolio Manager receives 53% of that fee for assets under management up to
$100 million; 41% of that fee for assets under management from $100 million to
$200 million; 38% of that fee for assets from $200 million to $500 million; and
29% of that fee for assets greater than $500 million.
Managed Portfolio
The Portfolio Manager of the Managed Portfolio is OpCap Advisors, described
in the paragraph referencing the Equity Portfolio. Richard J. Glasebrook II,
Managing Director of Oppenheimer Capital, is responsible for the day-to-day
management of the Portfolio. He has more than 22 years of investment industry
experience. The annual Management Fee is .80% of average daily net assets up to
$400 million; .75% of average daily net assets from $400 million to $800
million; and .70% of average daily net assets in excess of $800 million, and the
Portfolio Manager receives .40% of average daily net assets up to $1,000,000,000
and .30% thereafter.
High-Yield Bond Portfolio
The Portfolio Manager of the High-Yield Bond Portfolio is Caywood-Scholl
Capital Management ("Caywood-Scholl"). This firm was formed in April 1986 and is
owned by its employees. Mr. Caywood, Managing Director and Chief Executive
Officer, is responsible for the day-to-day management of the Portfolio. He has
more than 27 years investment industry experience. Caywood-Scholl provides
investment advice exclusively with respect to high-yield, low grade fixed income
instruments. As of March 31, 1994, assets under management for all clients
approximated $643 million. Usual investment minimum: $1 million. Representative
clients include: Hospital Corporation of America; Colonial Penn Insurance; and
Golden Rule Insurance. The address of Caywood-Scholl Capital Management is 4350
Executive Drive, Suite 125, San Diego, California 92121. The annual Management
Fee is .60% of average daily net assets, and the Portfolio Manager receives 50%
of that fee for assets up to $100,000,000 and 42% of that fee for assets above
$100,000,000.
General Portfolio Information
Under the Investment Adviser Agreement, each Portfolio is responsible for
bearing organizational expenses, taxes and governmental fees; brokerage
commissions, interest and other expenses incurred in acquiring and disposing of
portfolio securities; Trustees' fees, out of pocket travel expenses and other
expenses for trustees who are not interested persons; legal, fund accounting and
audit expenses; custodian, dividend disbursing and transfer agent fees; and
other expenses not expressly assumed by Enterprise Capital under the Investment
Adviser Agreement.
The Statement of Additional Information contains more information about the
Investment Adviser Agreement, including a more complete description of the
management fee and expense arrangements, exculpation provisions and portfolio
transactions for the Fund.
DETERMINATION OF NET ASSET VALUE
The net asset value per share is calculated separately for each Portfolio.
The net asset value of each Portfolio is determined at the close of the regular
trading session ("Close") of the New York Stock Exchange ("NYSE") (currently
4:00 p.m. Eastern Time) each day the NYSE is open and on each other day on which
there is a sufficient degree of trading in any Portfolio's portfolio securities
affecting materially the value of
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such securities (if the Fund receives a request to redeem its shares that day),
by dividing the value of the Portfolio's net assets by the number of shares
outstanding. The Fund's Board of Trustees has established procedures to value
the Portfolios' securities to determine net asset value; in general, those
valuations are based on market value, with special provisions for (i) securities
(including restricted securities) not having readily available market quotations
and (ii) short-term debt securities. Further details are in the Statement of
Additional Information.
PURCHASE OF SHARES
Investments in the Fund may be made by the Variable Accounts. Persons
desiring to purchase Contracts funded by any Portfolio or Portfolios of the Fund
should read this Prospectus in conjunction with the Prospectus of the
Contract(s).
Shares of each Portfolio of the Fund are offered to the Variable Accounts
without sales charge at the respective net asset values of the Portfolios next
determined after receipt by the Fund of the purchase payment in the manner set
forth above under "Determination of Net Asset Value." Certificates representing
shares of the Fund will not be physically issued. Enterprise Fund Distributors,
Inc. acts without remuneration from the Fund as the exclusive Distributor of the
Fund's shares. The principal executive office of the Distributor is located at
Atlanta Financial Center, 3343 Peachtree Road, N.E., Suite 450, Atlanta, Georgia
30326-1022.
REDEMPTION OF SHARES
Shares of any Portfolio of the Fund can be redeemed by the Variable
Accounts at any time for cash, at the net asset value next determined after
receipt of the redemption request in proper form. The market value of the
securities in each of the Portfolios is subject to daily fluctuation and the net
asset value of each Portfolio's shares will fluctuate accordingly. The
redemption value of the Fund's shares may be either more or less than the
original cost to the Variable Account. Payment for redeemed shares is ordinarily
made within seven days after receipt by the Fund's transfer agent of redemption
instructions in proper form. The redemption privilege may be suspended and
payment postponed during any period when: (1) the New York Stock Exchange is
closed other than for customary weekend or holiday closings or trading thereon
is restricted as determined by the Securities and Exchange Commission; (2) an
emergency, as defined by the Securities and Exchange Commission exists making
trading of portfolio securities or valuation of net assets not reasonably
practicable; (3) the Securities and Exchange Commission has by order permitted
such suspension.
STATE LAW RESTRICTIONS
The investments of the MONY America Variable Accounts are subject to the
provisions of the New York and Arizona insurance law, respectively, applicable
to the investments of life insurance company separate accounts. Although these
state law investment restrictions do not apply directly to the Fund, the
Portfolios will comply, without the approval of shareholders, with such
statutory requirements, as they exist or may be amended.
Under pertinent provisions of New York law, as they currently exist, the
assets of the Variable Accounts of MONY may be invested in any investments (1)
permitted by agreement between these Variable Accounts and their Contractholders
and (2) acquired in good faith and with that degree of care in acquiring
investments that an ordinarily prudent person in a like position would use under
similar circumstances. The only agreement with Contractholders pertaining to
investments permitted for the Variable Accounts is as described in the
prospectuses for the Contracts, namely that the Variable Accounts will invest
only in shares of the Fund. The investment of the assets of the Fund are subject
to the investment objectives, policies and restrictions applicable to the
Portfolios, as described in this prospectus (see "Investment Objectives And
Policies" at page 9 and "Investment Restrictions" at page 17 and Statement of
Additional Information, "Investment Restrictions").
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The pertinent provisions of Arizona law, as they currently exist, are in
summary form as follows:
The assets of Variable Accounts established by MONY America may be
invested in any investments that are of the kind permitted and that satisfy
the quantitative requirements, but without regard to quantitative
restrictions. Bonds, debentures, notes, commercial paper and other
evidences of indebtedness, and preferred, guaranteed or preference stock
must have received an investment grade rating approved by the Director of
Insurance. Funds may not be invested in foreign banks (other than foreign
branches of domestic banks) except that investments may be made in
obligations issued, assumed or guaranteed by the International Bank for
Reconstruction and Development. Investments not otherwise permitted under
Arizona law may be made in an amount not exceeding in the aggregate 10
percent of assets and not exceeding 2 percent of assets as to any one such
investment.
Although compliance with New York and Arizona laws described above will
ordinarily result in compliance with any applicable laws of other states, under
some circumstances the laws of other states could impose additional
restrictions. Accordingly, if any state or other jurisdiction in which the
Variable Accounts propose to do business imposes limits applicable to the
Variable Accounts, in addition to any imposed by New York and Arizona law, the
Fund will comply with such further investment limits.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio intends to distribute substantially all of its net
investment income and any net realized capital gains. Dividends from net
investment income and any distributions of realized capital gains will be paid
in additional shares of the Portfolio paying the dividend or making the
distribution and credited to the shareholder's account unless the shareholder
elects to receive such dividends or distributions in cash.
Equity, Small Cap, International Growth and Managed Portfolios. Dividends
from net investment income, if any, on the Small Cap, Equity, International
Growth and Managed Portfolios will be declared and paid at least annually, and
any net realized capital gains will be declared and paid at least once per
calendar year.
High-Yield Bond Portfolio. Dividends from investment income are declared
and paid quarterly. Distributions of realized net short-term capital gains, if
any, and realized long-term capital gains will be declared and paid at least
once per calendar year.
Taxes. Because the Fund intends to distribute all of the net investment
income and capital gains of each Portfolio and otherwise qualify each Portfolio
as a regulated investment company under Subchapter M of the Internal Revenue
Code, it is not expected that any Portfolio of the Fund will be required to pay
any federal income tax on such income and capital gains. Since the Variable
Accounts are the shareholders of the Fund, no discussion is presented herein as
to the federal income tax consequences at the shareholder level. For information
concerning the federal income tax consequences to Contractholders, see the
accompanying Prospectus for the Contracts.
CALCULATION OF PERFORMANCE
From time to time the performance of one or more of the Portfolios may be
advertised. The performance data contained in these advertisements is based upon
historical earnings and is not indicative of future performance. The data for
each Portfolio reflects the results of that Portfolio of the Fund and recurring
charges and deductions borne by or imposed on the Portfolio. As the performance
for any Portfolio does not include charges and deductions under the Contracts,
comparisons with other portfolios used in connection with different variable
accounts may not be useful. Set forth below for each Portfolio is the manner in
which the data contained in such advertisements will be calculated.
The performance data for these Portfolios will reflect the "yield" and
"total return". The "yield" of each of these Portfolios refers to the income
generated by an investment in that Portfolio over the 30-day period stated in
the advertisement and is the result of dividing that income by the value of the
Portfolio. The value of each Portfolio is the average daily number of shares
outstanding multiplied by the net asset value per share on
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the last day of the period. "Total Return", for each of these Portfolios refers
to the value a Shareholder would receive on the date indicated if a $1,000
investment had been made the indicated number of years ago. It reflects
historical investment results less charges and deductions of the Fund.
In addition, reference in advertisements may be made to various indices,
including, without limitation, the Standard & Poor's 500 Stock Index, the
Russell 2000 and the Lehman Brothers Corporate/Government Index, and various
rankings by independent evaluators such as Morningstar and Lipper Analytical
Services, Inc. in order to provide the reader a basis for comparison.
ADDITIONAL INFORMATION
Organization of the Fund. The Fund, under the name of Quest for Value
Accumulation Trust, was organized as a Massachusetts business trust on March 2,
1988, and is registered with the Securities and Exchange Commission as an
open-end diversified management investment company. The Fund changed its name to
the Enterprise Accumulation Trust on September 16, 1994. When issued, shares are
fully paid and have no preemptive or conversion rights. The shares of beneficial
interest of the Fund, $0.01 par value, are divided into five separate series.
The shares of each series are freely transferable and equal as to earnings,
assets and voting privileges with all other shares of that series. There are no
conversion, preemptive or other subscription rights. Upon liquidation of the
Fund or any Portfolio, shareholders of a Portfolio are entitled to share pro
rata in the net assets of that Portfolio available for distribution to
shareholders after all debts and expenses have been paid. The shares do not have
cumulative voting rights.
The Fund's Board of Trustees, whose responsibilities are comparable to
those of directors of a Massachusetts corporation, is empowered to issue
additional classes of shares, which classes may either be identical except as to
dividends or may have separate assets and liabilities. Classes having separate
assets and liabilities are referred to as "series". The creation of additional
series and offering of their shares (the proceeds of which would be invested in
separate, independently managed portfolios with distinct investment objectives,
policies and restrictions) would not affect the interests of the current
shareholders in the existing Portfolios.
The assets received by the Fund on the sale of shares of each Portfolio and
all income, earnings, profits and proceeds thereof, subject only to the rights
of creditors, are allocated to each Portfolio, and constitute the assets of such
Portfolio. The assets of each Portfolio are required to be segregated on the
Fund's books of account. The Fund's Board of Trustees has agreed to monitor the
portfolio transactions and management of each of the Portfolios and to consider
and resolve any conflict that may arise. Direct expenses will be allocated to
each Portfolio and general expenses of the Fund will be prorated by total net
assets.
Voting. For matters affecting only one Portfolio, only the shareholders of
that Portfolio are entitled to vote. For matters relating to all the Portfolios
but affecting the Portfolios differently, separate votes by the Portfolio are
required. Approval of an Investment Management or Portfolio Manager Agreements
and a change in fundamental policies would be regarded as matters requiring
separate voting by each Portfolio. To the extent required by law, the Variable
Accounts, which are the shareholders of the Fund, will vote the shares of the
Fund, or any Portfolio of the Fund, held in the Variable Accounts in accordance
with instructions from Contractholders, as described under the caption "Voting
Rights" in the accompanying Prospectus for the Contracts. Shares for which no
instructions are received from Contractholders, as well as shares which
Enterprise Capital or its parent, MONY, may own, will be voted in the same
proportion as shares for which instructions are received. The Fund does not
intend to hold annual meetings of shareholders. However, the Board of Trustees
will call special meetings of shareholders for action by shareholder vote as may
be requested in writing by holders of 10% or more of the outstanding shares of a
Portfolio or as may be required by applicable laws or the Declaration of Trust
pursuant to which the Fund has been organized.
Under Massachusetts law shareholders could, in certain circumstances, be
held personally liable as partners for Fund obligations. The Fund's Declaration
of Trust contains an express disclaimer of shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given in
each instrument entered into or executed by the Fund. The Declaration of Trust
also provides for indemnification out of the Fund's property for any shareholder
held personally liable for any Fund obligation. Thus, the risk of
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loss to a shareholder from being held personally liable for obligations of the
Fund is limited to the unlikely circumstance in which the Fund itself would be
unable to meet its obligations.
Custodian and Transfer Agent. The custodian of the assets of the Fund is
State Street Bank and Trust Company, P.O. Box 8505, Boston, MA 02266-8505, which
also acts as transfer agent and shareholder servicing agent for the Fund.
Contractholder Inquiries. Inquiries concerning the purchase and sale of
shares of the Fund as well as inquiries concerning dividends and account
statements should be directed to MONY. Inquiries concerning management and
investment policies of the Fund should be directed to Enterprise Capital, 3343
Peachtree Road, Ste. 450, Atlanta, Georgia 30326; or telephone 1-800-432-4320.
Annual Report. The Fund's latest annual report, which includes the
Management's Discussion and Analysis, is available upon request and without
charge upon written request to MONY, Mail Drop 76-18, 500 Frank W. Burr Blvd.,
Teaneck, New Jersey 07666-6888.
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APPENDIX
DESCRIPTION OF COMMERCIAL PAPER AND CORPORATE BOND RATINGS
Commercial Paper Ratings
Moody's commercial paper ratings are opinions of the ability of issuers to
repay promissory obligations when due. Moody's employs the following three
designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers: Prime 1 -- Superior Ability for Repayment;
Prime 2 -- Strong Ability for Repayment; Prime 3 -- Acceptable Ability for
Repayment.
S & P's commercial paper rating is a current assessment of the likelihood
of timely payment. Ratings are graded into four categories, ranging from "A" for
the highest quality obligations to "D" for the lowest. Issues assigned the
highest rating, "A", are regarded as having the greatest capacity for timely
payment. Issues in this category are delineated with the numbers "1", "2", and
"3" to indicate the relative degree of safety. The designation "A-1" indicates
that the degree of safety regarding timely payment is either overwhelming or
very strong. The "A+" designation is applied to those issues rated "A-1" which
possess overwhelming safety characteristics. Capacity for timely payment on
issues with the designation "A-2" is strong. However, the relative degree of
safety is not as high as for issues designated "A-1."
Fitch's commercial paper ratings represent Fitch's assessment of the
issuer's ability to meet its obligations in a timely manner. The assessment
places emphasis on the existence of liquidity. Ratings range from "F-1+" which
represents exceptionally strong credit quality to "F-4" which represents weak
credit quality.
Duff's short-term ratings apply to all obligations with maturities of under
one year, including commercial paper, the uninsured portion of certificates of
deposit, unsecured bank loans, master notes, bankers' acceptances, irrevocable
letters of credit and current maturities of long-term debt. Emphasis is placed
on liquidity. Ratings range for Duff 1+ for the highest quality to Duff 5 for
the lowest, issuers in default. Issues rated Duff 1+ are regarded as having the
highest certainty of timely payment. Issues rated Duff 1 are regarded as having
very high certainty of timely payment.
Thomson's BankWatch, Inc. ("TBW") assigns only one Issuer Rating to each
company, based upon a qualitative and quantitative analysis of the consolidated
financials of an issuer and its subsidiaries. The rating incorporates TBW's
opinion of the vulnerability of the company to adverse developments which may
impact the marketability of its securities, as well as the issuer's ability to
repay principal and interest. Ratings range from "A" for highest quality to "E"
for the lowest, companies with very serious problems.
Bond Ratings
A bond rated "Aaa" by Moody's is judged to be the best quality. They carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin and principal is deemed secure. While
the various protective elements may change, such foreseeable changes are
unlikely to impair the fundamentally strong position of such issues. 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.
Margins of protection on "Aa" bonds may not be as large as on "Aaa" securities
or fluctuations of protective elements may be of greater magnitude or there may
be other elements present which make the long-term risks appear somewhat larger
than "Aaa" securities. Bonds which are rated "A" possess many favorable
investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment some time in the future. Bonds rated "Baa" are considered medium
grade obligations whose interest payments and principal security appear adequate
for the present but may lack certain protective elements or may be
characteristically unreliable over any great length of time. 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
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the issue ranks in the lower end of its generic rating category. Bonds rated
"Ba" are judged to have speculative elements and bonds rated below "Ba" are
speculative to a higher degree.
Debt rated "AAA" by S & P has the highest rating assigned by it. Capacity
to pay interest and repay principal is extremely strong. Debt rated "AA" has a
strong capacity to pay interest and repay principal and differs from "AAA"
issues only in small degree. 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. 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" and below is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal.
Debt rated "AAA", the highest rating by Fitch, is considered to be of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. Debt rated "AA" is regarded as very high credit quality. The
obligor's ability to pay interest and repay principal is very strong. Debt rated
"A" is of high credit quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than debt with higher ratings.
Debt rated "BBB" is of satisfactory credit quality. The obligor's ability to pay
interest and repay principal is adequate; however, a change in economic
conditions may adversely affect timely payment. Plus (+) and minus (-) signs are
used with a rating symbol (except "AAA") to indicate the relative position
within the category.
Debt rated "AAA", the highest rating by Duff's, is considered to be of the
highest credit quality. The risk factors are negligible being only slightly more
than for risk-free U.S. Treasury debt. Debt rated "AA" is regarded as high
credit quality. Protection factors are strong. Risk is modest but may vary
slightly from time-to-time because of economic conditions. Debt rated "A" is
considered to have average but adequate protection factors. Bonds rated "BBB"
are considered to have below average protection factors but still sufficient for
prudent investment. Bonds rated "BB" and below are below investment grade and
possess fluctuating protection factors and risk.
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The Mutual Life Insurance Company of New York --------------------
Administrative Offices
1740 Broadway, New York, NY 10019 Bulk Rate
U.S. Postage
P A I D
Permit No. 4238
Syracuse,
New York
--------------------
Form No. 13455 SL (7/96) [MONY LOGO]
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