<PAGE> 1
PROSPECTUS
DATED MAY 1, 1997
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, 1997, 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 34 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
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<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....................................... 13
Issuance of the Contract......................................................... 13
Free Look Privilege.............................................................. 14
Allocation of Net Purchase Payments and Cash Value............................... 14
Termination of the Contract...................................................... 17
Surrenders............................................................................ 17
Death Benefit......................................................................... 19
Death Benefit Provided by the Contract........................................... 19
Election and Effective Date of Election.......................................... 19
Payment of Death Benefit......................................................... 19
Charges and Deductions................................................................ 19
Deductions from Payments......................................................... 19
Charges Against Cash Value....................................................... 20
Mortality and Expense Risk Charge................................................ 22
Taxes............................................................................ 22
Investment Advisory Fee.......................................................... 23
Annuity Provisions.................................................................... 23
Annuity Commencement Date........................................................ 23
Election and Change of Settlement Option......................................... 24
Settlement Options............................................................... 24
Frequency of Annuity Payments.................................................... 25
Additional Provisions............................................................ 25
Other Provisions...................................................................... 25
Ownership........................................................................ 25
Provision Required by Section 72(s) of the Code.................................. 26
Provision Required by Section 401(a)(9) of the Code.............................. 26
Contingent Annuitant............................................................. 27
Effect of Contingent Annuitant's Becoming the Annuitant.......................... 27
Assignment....................................................................... 27
Change of Beneficiary............................................................ 27
Substitution of Securities....................................................... 28
Modification of the Contracts.................................................... 28
Change in Operation of Variable Accounts......................................... 28
Voting Rights......................................................................... 28
Distribution of the Contracts......................................................... 29
Federal Tax Status.................................................................... 29
Introduction..................................................................... 29
Tax Treatment of the Company..................................................... 30
Taxation of Annuities in General................................................. 30
Annuity Contracts Covered by Section 403(b) of the Code.......................... 31
Retirement Plans................................................................. 31
Performance Data...................................................................... 32
Additional Information................................................................ 32
Legal Proceedings..................................................................... 33
Financial Statements.................................................................. 33
Table of Contents of Statement of Additional Information.............................. 34
Calculation of Surrender Charge....................................................... A-1
</TABLE>
<PAGE> 3
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 20.)
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 13.) 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> 6
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 20.)
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 22.)
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 22.)
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 21.)
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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 19.)
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 29.)
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.
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
MONY VARIABLE ACCOUNT A
TABLE OF FEES FOR THE YEAR ENDED DECEMBER 31, 1996
<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, 1996
(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 (After reimbursement)***.............. .08% .06% .15% .05%
Management Fees................................ .40% .40% .40% .40%
--- --- --- ---
Total MONY Series Fund, Inc. Annual
Expenses (After reimbursement)..... .48% .46% .55% .45%
=== === === ===
</TABLE>
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THE ENTERPRISE ACCUMULATION TRUST
ANNUAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1996
(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............................. .06% .10% .04% .53% .25%
Management Fees...................... .75%++ .74%++ .70%++ .85% .60%
--- --- --- ---- ---
Total Accumulation Trust
Annual Expenses (After
Reimbursement)........... .81%+++ .84%+++ .74%+++ 1.38%+++ .85%+++
=== === === ==== ===
</TABLE>
- ---------------
* 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
ANNIVERSARIES SURRENDER
SINCE PURCHASE CHARGE
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>
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.)
<TABLE>
<C> <S>
** 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 -- .0061%
Long Term Bond -- .0046%; Government Securities -- .0243%; and Money Market -- .0049%,
which expenses are borne by the Investment Adviser pursuant to the Investment Advisory
Agreement.
+ 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 -- .81%; Small
Cap -- .84%; Managed -- .74%, International Growth -- 1.38%; and High Yield
Bond -- .94%. The Equity, Small Cap, and Managed Portfolio reimbursements relate to
mutual fund accounting expense.
</TABLE>
The purpose of the Table of Fees beginning on page 5 is to assist the
Contractholder in understanding the various costs and expenses that the
Contractholder will bear, directly or indirectly. The table reflects the
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<PAGE> 9
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 19 of this Prospectus. The expenses
borne by the MONY Series Fund, Inc. are explained under the caption "INVESTMENT
MANAGEMENT ARRANGEMENTS AND EXPENSES" at page 19 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 14 of the accompanying prospectus for
The Enterprise Accumulation 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.
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........................................... $ 85 $ 121 $ 161 $250
Small Cap........................................ $ 85 $ 122 $ 162 $253
Managed.......................................... $ 84 $ 119 $ 157 $243
International Growth............................. $ 91 $ 139 $ 189 $307
High Yield Bond.................................. $ 85 $ 123 $ 163 $254
Intermediate Term Bond........................... $ 81 $ 111 $ 144 $216
Long Term Bond................................... $ 81 $ 111 $ 143 $214
Government Securities............................ $ 82 $ 113 $ 147 $223
Money Market..................................... $ 81 $ 110 $ 142 $213
</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........................................... $ 85 $ 121 $ 116 $250
Small Cap........................................ $ 85 $ 122 $ 118 $253
Managed.......................................... $ 84 $ 119 $ 113 $243
International Growth............................. $ 91 $ 139 $ 145 $307
High Yield Bond.................................. $ 85 $ 123 $ 118 $254
Intermediate Term Bond........................... $ 81 $ 111 $ 100 $216
Long Term Bond................................... $ 81 $ 111 $ 99 $214
Government Securities............................ $ 82 $ 113 $ 103 $223
Money Market..................................... $ 81 $ 110 $ 98 $213
</TABLE>
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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........................................... $ 22 $68 $ 116 $250
Small Cap........................................ $ 22 $69 $ 118 $253
Managed.......................................... $ 21 $66 $ 113 $243
International Growth............................. $ 28 $85 $ 145 $307
High Yield Bond.................................. $ 22 $69 $ 118 $254
Intermediate Term Bond........................... $ 19 $58 $ 100 $216
Long Term Bond................................... $ 18 $57 $ 99 $214
Government Securities............................ $ 19 $60 $ 103 $223
Money Market..................................... $ 18 $57 $ 98 $213
</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.
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,
SUB-ACCOUNT INCEPTION 1987 1988 1989 1990 1991 1992 1993
- ---------------------------------------- --------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity.................................. $ 10.00 -- $10.15 $12.30 $11.88 $15.40 $17.94 $19.11
Small Cap............................... 10.00 -- 10.16 11.88 10.58 15.49 18.60 21.96
Intermediate Term Bond.................. 10.00 -- 10.09 11.13 11.76 13.40 14.15 15.07
Long Term Bond.......................... 10.00 -- 10.24 11.83 12.41 14.43 15.50 17.49
Government Securities................... 10.00 -- -- -- -- -- -- --
High Yield Bond......................... 10.00 -- -- -- -- -- -- --
International Growth.................... 10.00 -- -- -- -- -- -- --
Managed................................. 10.00 -- 10.39 13.61 12.96 18.70 21.92 23.90
Money Market............................ 10.00 $10.00 10.56 11.32 12.08 12.62 12.88 13.08
<CAPTION>
DEC. 31, DEC. 31, DEC. 31,
SUB-ACCOUNT 1994 1995 1996
- ---------------------------------------- -------- -------- --------
<S> <<C> <C> <C>
Equity.................................. $19.60 $26.82 $33.18
Small Cap............................... 21.69 24.05 26.43
Intermediate Term Bond.................. 14.66 16.62 17.02
Long Term Bond.......................... 16.21 20.84 20.51
Government Securities................... 9.99 10.94 11.20
High Yield Bond......................... 10.04 11.56 12.90
International Growth.................... 9.91 11.22 12.48
Managed................................. 24.21 35.15 42.88
Money Market............................ 13.42 14.01 14.54
</TABLE>
<TABLE>
<CAPTION>
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
- ---------------------------------------- -------- -------- -------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity.................................. -- 19,831 81,273 137,731 185,946 315,372 496,795 651,102
Small Cap............................... -- 4,653 34,030 53,185 80,022 198,539 529,142 742,341
Intermediate Term Bond.................. -- 31,007 84,415 129,272 186,026 243,826 354,965 398,645
Long Term Bond.......................... -- 7,680 75,208 215,001 276,879 377,464 499,364 476,335
Government Securities................... -- -- -- -- -- -- -- 2,571
High Yield Bond......................... -- -- -- -- -- -- -- 14,621
International Growth.................... -- -- -- -- -- -- -- 19,197
Managed................................. -- 42,537 471,771 813,411 972,640 1,571,876 2,941,211 3,528,618
Money Market............................ 11,301 123,834 218,778 299,411 456,647 570,819 620,100 872,441
<CAPTION>
DEC. 31, DEC. 31,
SUB-ACCOUNT 1995 1996
- ---------------------------------------- --------- ---------
<S> <<C> <C>
Equity.................................. 798,552 1,123,086
Small Cap............................... 807,452 837,807
Intermediate Term Bond.................. 398,283 381,313
Long Term Bond.......................... 495,169 503,775
Government Securities................... 83,571 162,102
High Yield Bond......................... 92,358 247,295
International Growth.................... 167,074 472,752
Managed................................. 4,253,824 5,150,485
Money Market............................ 1,227,811 1,355,274
</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
8
<PAGE> 11
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> 12
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 separate accounts of a life
insurance company affiliate of the Company that were established to fund certain
Flexible Payment Variable Annuity contracts and Flexible Premium Variable Life
Insurance 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
10
<PAGE> 13
Funds, or either of them, may withdraw from sale any or all of the respective
Portfolios in accordance with applicable law.
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 occurred 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> 14
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> 15
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.
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).
13
<PAGE> 16
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.
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.
14
<PAGE> 17
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. The Company reserves
the right to deny any telephone allocation request. If all telephone lines are
busy (which might occur, for example, during periods of substantial market
fluctuations), contractholders might not be able to request changes in
allocation of purchase payments by telephone and would have to submit written
requests. Any such change, whether made in writing or by telephone, will be
effective when recorded on the records of the Company in accordance with the
applicable requirements of state insurance departments and the Investment
Company Act of 1940. 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 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
15
<PAGE> 18
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 13.) After 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 17.) 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. The Company reserves the right to deny any telephone transfer
request. If all telephone lines are busy (which might occur, for example, during
periods of substantial market fluctuations), Contractholders might not be able
to request transfers by telephone and would have to submit written requests. 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
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<PAGE> 19
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 (including
any transfers made by telephone, if permitted by the Company) made during any
Contract Year. (See "Charges Against Cash Value -- Transfer Charge" at page 22.)
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 21.) 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 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.
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<PAGE> 20
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 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 in accordance with the requirements
of state insurance departments and the Investment Company Act of 1940.
Postponement is currently permissible under the Investment Company Act of 1940
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 23.)
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 29).
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<PAGE> 21
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 24.) 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 24.) 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> 22
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 22.)
If all or a portion of the Contract's Surrender Value (see "Surrenders" at
page 17) 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
24). 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 19.)
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 29.)
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> 23
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
ANNIVERSARIES SURRENDER
SINCE PURCHASE CHARGE
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
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<PAGE> 24
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 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 (including
transfers made by telephone, if permitted by the Company) 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 21.)
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 29.)
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<PAGE> 25
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 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 excess 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
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<PAGE> 26
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.
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 19 and "SURRENDERS" at page 17.)
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.
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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.
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 Contingent Annuitant's
executors or administrators, unless the Contractholder directed otherwise.
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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 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.
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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.
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,
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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.
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
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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 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
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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.
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 taxbenefitted 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
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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 permanently 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.
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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 "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.
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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.
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, 1997
<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
1740 Broadway
New York, New York 10019
Your name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City
- ---------------------------------------------------------------
State
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Zip
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Please send me a copy of the MONY Variable Account A Statement of
Additional Information.
Policy C3-88
FORM NO. 13456SL (5/97) #33-37722
34
<PAGE> 37
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>
AMOUNT AVAILABLE
ANNIVERSARIES SINCE AMOUNT FOR ALLOCATION
PURCHASE PAYMENT CONTRACT YEAR ALLOCATED 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
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.......... 1 200 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> 38
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
PURCHASE 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.
A-2
<PAGE> 39
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 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 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 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 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 0 6 0
</TABLE>
A-3
<PAGE> 40
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 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>
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................................ 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> 41
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> 42
THE MONYMASTER
STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1997
INDIVIDUAL FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACT
ISSUED BY
MONY VARIABLE ACCOUNT A
AND
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
This Statement of Additional Information is not a prospectus, but it
relates to, and should be read in conjunction with, the prospectus dated May 1,
1997 for the Individual Flexible Payment Variable Annuity Contract ("Contract")
issued by The Mutual Life Insurance Company of New York ("Company"). The
prospectus is available, at no charge, by writing the Company at 1740 Broadway,
New York, New York, 10019 or by calling 1-800-487-6669.
TABLE OF CONTENTS
<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
FORM NO. 13456 SL (5/97) 33-37722
</TABLE>
<PAGE> 43
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
The Mutual Life Insurance Company of New York ("Company") is a mutual life
insurance company organized under the laws of the state of New York in 1842. The
principal offices of the Company are at 1740 Broadway, New York, New York 10019.
The Company had consolidated assets at the end of 1996 of approximately $15.3
billion. The Company is licensed to sell insurance and annuities in all states
of the United States, the District of Columbia, Puerto Rico, the Virgin Islands
and all Provinces of Canada.
At May 1, 1997, the rating assigned to the Company by A.M. Best Company,
Inc., an independent insurance company rating organization, was Company A-
(Excellent) based upon an analysis of financial condition and operating
performance through the end of 1995. The A.M. Best rating of the Company should
be considered only as bearing on the ability of the Company to meet its
obligations under the Contracts.
MORE ABOUT THE COMPANY
The Company is one of America's oldest and most respected financial
institutions. It is geared to meet the needs of today's consumers and business
owners with an array of insurance products.
For over 150 years, this firm has had the distinction of being not only one
of the oldest insurance companies in America -- but also the first American
mutual life insurance company to issue life insurance to the general public.
Other important innovations include the fact that MONY was the first insurance
company to:
- offer a variable annuity with a choice of equity or fixed investments
- insure a woman
- insure a member of the armed forces
The Company's mission is to provide excellence and quality in products and
services through its network of highly trained insurance professionals that
include:
- Whole Life Insurance
- Universal Life insurance
- Qualified Retirement Plans
Through the Company's subsidiary, MONY Securities Corp., a wide variety of
investment products are also available which include:
- Mutual Funds and Investment Services
LEGAL OPINION
Legal matters relating to federal securities laws applicable to the issue
and sale of the Contract and all matters of New York law pertaining to the
Contract, including the validity of the Contract and the Company's right to
issue the Contract, have been passed upon by Willard G. Eldred, Esq., then Vice
President and Deputy General Counsel, of the Company.
INDEPENDENT ACCOUNTANTS
The financial statements included herein have been audited by Coopers &
Lybrand, L.L.P., independent accountants, and are included herein in reliance on
the reports of said firm given on the authority of that firm as experts in
accounting and auditing. Coopers & Lybrand's office is located at 1301 Avenue of
the Americas, New York, New York 10019.
(1)
<PAGE> 44
FEDERAL TAX STATUS
INTRODUCTION
The Contract is designed for use to fund retirement plans which may or may
not be Qualified Plans under the provisions of the Internal Revenue Code (the
"Code"). The ultimate effect of federal income taxes on the Contract value, on
annuity payments, and on the economic benefit to the Contractholder, Annuitant,
or Beneficiary depends on the type of retirement plan for which the Contract is
purchased and upon the tax and employment status of the individual concerned.
The discussion contained herein is general in nature and is not intended as tax
advice. Each person concerned should consult a competent tax adviser. No attempt
is made to consider any applicable state or other tax laws. Moreover, the
discussion herein is based upon the Company's understanding of current federal
income tax laws as they are currently interpreted. No representation is made
regarding the likelihood of continuation of those current federal income tax
laws or of the current interpretations by the Internal Revenue Service.
TAXATION OF ANNUITIES IN GENERAL
Section 72 of the Code governs taxation of annuities in general. Except in
the case of certain corporate and other non-individual Contractholders, there
are no income taxes on increases in the value of a Contract until a distribution
occurs, in the form of a full surrender, a partial surrender, a death benefit,
an assignment or gift of the Contract, or as annuity payments.
SURRENDERS, DEATH BENEFITS, ASSIGNMENTS AND GIFTS
A Contractholder who fully surrenders his or her Contract is taxed on the
portion of the payment that exceeds his or her cost basis in the Contract. For
Non-Qualified Contracts, the cost basis is generally the amount of the Purchase
Payments made for the Contract, and the taxable portion of the surrender payment
is taxed as ordinary income. For Qualified Contracts, the cost basis is
generally zero, except to the extent of non-deductible employer contributions,
and the taxable portion of the surrender payment is generally taxed as ordinary
income subject to special elective 5-year (and, for certain eligible persons,
10-year) income averaging in the case of Qualified Contracts. A Beneficiary
entitled to receive a lump sum death benefit upon the death of the Annuitant is
taxed on the portion of the amount that exceeds the Contractholder's cost basis
in the Contract. If the Beneficiary elects to receive annuity payments within 60
days of the Annuitant's death, different tax rules apply. (See "Annuity
Payments" below.)
Partial surrenders received under Non-Qualified Contracts prior to
annuitization are first included in gross income to the extent Surrender Value
exceeds Purchase Payments, less prior nontaxable distributions, and the balance
is treated as a nontaxable return of principal to the Contractholder. For
partial surrenders under a Qualified Contract, payments are generally prorated
between taxable income and nontaxable return of investment.
There are special rules for Qualified Plans or contracts involving 85
percent or more employee contributions. Since the cost basis of Qualified
Contracts is generally zero, however, partial surrender amounts will generally
be fully taxed as ordinary income.
A Contractholder who assigns or pledges a Non-Qualified Contract is treated
as if he or she had received the amount assigned or pledged and thus is subject
to taxation under the rules applicable to surrenders. A Contractholder who gives
away the Contract (i.e., transfers it without full and adequate consideration)
to anyone other than his or her spouse is treated for income tax purposes as if
he or she had fully surrendered the Contract.
ANNUITY PAYMENTS
The non-taxable portion of each annuity payment is determined by an
"exclusion ratio" formula which establishes the ratio that the cost basis of the
Contract bears to the total expected value of annuity payments for the term of
the annuity. The remaining portion of each payment is taxable. Such taxable
portion is taxed at
(2)
<PAGE> 45
ordinary income rates. For Qualified Contracts, the cost basis is generally
zero. With annuity payments based on life contingencies, the payments will
become fully taxable once the Annuitant lives longer than the life expectancy
used to calculate the non-taxable portion of the prior payments. Conversely, a
tax deduction in the Annuitant's last taxable year, equal to the unrecovered
cost basis, is available if the Annuitant does not live to life expectancy.
PENALTY TAX
Payments received by Contractholders, Annuitants, and Beneficiaries under
both Qualified and Non-Qualified Contracts may be subject to both ordinary
income taxes and a penalty tax equal to 10 percent of the amount received that
is includable in income. The penalty is not imposed on amounts received: (a)
after the taxpayer attains age 59 1/2; (b) in a series of substantially equal
payments made for life or life expectancy following separation from service; (c)
after the death of the Contractholder (or, where the Contractholder is not a
human being, the death of the Annuitant); (d) if the taxpayer is totally
disabled; (e) upon early retirement under the plan after the taxpayer's
attainment of age 55; or (f) which are used for certain medical care expenses.
Exceptions (e) and (f) do not apply to Individual Retirement Accounts and
Annuities and Non-Qualified Contracts. An additional exception for Non-Qualified
Contracts is amounts received as an immediate annuity.
INCOME TAX WITHHOLDING
The Company is required to withhold federal, and, where applicable, state,
income taxes on taxable amounts paid under the Contract unless the recipient
elects not to have withholding apply. The Company will notify recipients of
their right to elect not to have withholding apply.
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.
DIVERSIFICATION STANDARDS
The United States Secretary of the Treasury has the authority to set
standards for diversification of the investments underlying variable annuity
contracts (other than pension plan contracts). The Secretary of the Treasury has
issued certain regulations. Further regulations may be issued. The Funds are
designed to be managed to meet the diversification requirements for the Contract
as those requirements may change from time to time. The Company intends to
satisfy those requirements so that the Contract will be treated as an annuity
contract.
The Secretary of the Treasury has announced that he expects to issue
regulations or Revenue Rulings that will prescribe the circumstances in which a
Contractholder's control of the investments of a segregated asset account may
cause the Contractholder, rather than the insurance company, to be treated as
the owner of the assets of the account. The regulations or Revenue Rulings could
impose requirements that are not reflected in the Contract. The Company,
however, has reserved certain rights to alter the Contract and investment
alternatives so as to comply with such regulations or Revenue Rulings. Since the
regulations or Revenue Rulings have not been issued, there can be no assurance
as to the content of such regulations or
(3)
<PAGE> 46
Revenue Rulings or even whether application of the regulations or Revenue
Rulings will be prospective. For these reasons, Contractholders are urged to
consult with their own tax advisers.
QUALIFIED PLANS
The Contract is designed for use with several types of Qualified Plans. The
tax rules applicable to participants in such Qualified Plans vary according to
the type of plan and the terms and conditions of the plan itself. Moreover, many
of these tax rules were changed by the Tax Reform Act of 1986. Therefore, no
attempt is made herein to provide more than general information about the use of
the Contract with the various types of Qualified Plans. Participants under such
Qualified Plans as well as Contractholders, Annuitants, and Beneficiaries are
cautioned that the rights of any person to any benefits under such Qualified
Plans may be subject to the terms and conditions of the plans themselves,
regardless of the terms and conditions of the Contract issued in connection
therewith. Following are brief descriptions of the various types of Qualified
Plans and of the use of the Contract in connection therewith. Purchasers of the
Contract should seek competent advice concerning the terms and conditions of the
particular Qualified Plan and use of the Contract with that plan.
TAX-SHELTERED ANNUITIES
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable organizations specified in Section 501(c)(3) of the
Code and certain educational organizations to purchase annuity contracts and,
subject to certain contribution limitations, exclude the amount of Purchase
Payments from gross income for tax purposes. However, such Purchase Payments may
be subject to Social Security (FICA) taxes. These annuity contracts are commonly
referred to as "Tax-Sheltered Annuities." Effective January 1, 1989, the
Contracts have been withdrawn from sale to Qualified Plans which intend to
qualify for federal income tax advantages under Section 403(b).
H.R. 10 PLANS
The Self-Employed Individuals Tax Retirement Act of 1962, as amended, which
is commonly referred to as "H.R. 10," permits self-employed individuals to
establish Qualified Plans for themselves and their employees. The tax
consequences to participants under such plans depend upon the plan itself. In
addition, such plans are limited by law to maximum permissible contributions,
distribution dates, and tax rates applicable to distributions. In order to
establish such a plan, a plan document, usually in prototype form pre-approved
by the Internal Revenue Service, is adopted and implemented by the employer.
INDIVIDUAL RETIREMENT ACCOUNTS AND ANNUITIES
Section 408 of the Code permits eligible individuals to contribute to
individual retirement programs known as "Individual Retirement Accounts" and
"Individual Retirement Annuities." These Individual Retirement Accounts and
Annuities are subject to limitations on the amounts which may be contributed,
the persons who may be eligible, and on the time when distributions may
commence. In addition, distributions from certain types of Qualified Plans may
be placed on a tax-deferred basis into an Individual Retirement Account or
Annuity.
CORPORATE PENSION AND PROFIT-SHARING PLANS
Sections 401(a) and 403(a) of the Code permit corporate employers to
establish various types of retirement plans for employees. Such retirement plans
may permit the purchase of the Contract to provide benefits under the plans.
CERTAIN GOVERNMENTAL ENTITIES
Section 457 of the Code permits certain governmental entities to establish
deferred contribution plans. Such deferred contribution plans may permit the
purchase of the Contract to provide benefits under the plans.
(4)
<PAGE> 47
PERFORMANCE DATA
MONEY MARKET SUBACCOUNT
For the seven-day period ended December 31, 1996, the yield was 3.80% and
the effective yield was 3.88%.
The yield was calculated by dividing the result of subtracting the value of
one Unit at the end of the seven day period ("Seventh Day Value") from the value
of one Unit at the beginning of the seven day period ("First Day Value") by the
First Day Value (the resulting quotient being the "Base Period Return") and
multiplying the Base Period Return by 365 divided by 7 to obtain the annualized
yield.
The effective yield was calculated by compounding the Base Period Return
calculated in accordance with the preceding paragraph, adding 1 to the Base
Period Return, raising that sum to a power equal to 365 divided by 7 and
subtracting 1 from the result.
As the Money Market Subaccount invests only in shares of the Money Market
Portfolio of the MONY Series Fund, Inc. ("MONY Series Fund"), the First Day
Value reflects the per share net asset value of the Money Market Portfolio
(which will normally be $1.00) and the number of shares of the Money Market
Portfolio of the MONY Series Fund held in the Money Market Subaccount. The
Seventh Day Value reflects increases or decreases in the number of shares of the
Money Market Portfolio of the MONY Series Fund held in the Money Market
Subaccount due to the declaration of dividends (in the form of shares and
including dividends (in the form of shares) on shares received as dividends) of
the net investment income and the daily charges and deductions from the
Subaccount for mortality and expense risks and a deduction for the Annual
Contract Charge imposed on each Contract Anniversary which has been pro-rated to
reflect the shortened 7-day period and allocated to the Money Market Subaccount
in the proportion that the total value of the Money Market Subaccount bore to
the total value of the Variable Account at the end of the period indicated. Net
investment income reflects earnings on investments less expenses of the Fund
including the Investment Advisory Fee (which for calculating the yield and
effective yield quoted above is assumed to be .40 percent, the fee which would
be charged based upon the amount of assets under management on the last day of
the period for which the quoted yield is stated). Not reflected in either the
yield or effective yield are surrender charges, which will not exceed 7% of
total Purchase Payments made prior to the Contract Year of surrender and the
preceding 7 Contract Years.
(5)
<PAGE> 48
SUBACCOUNTS OTHER THAN MONEY MARKET SUBACCOUNT
TOTAL RETURN:
The average annual total return for the Subaccounts other than the Money
Market Subaccount, assuming that the Contracts remain in force throughout the
periods, is shown in the table below. This table does not reflect the impact of
the tax laws, if any, on total return as a result of the surrender.
MONY VARIABLE ACCOUNT A
TOTAL RETURN
(ASSUMING $1,000 PAYMENT AT BEGINNING OF
PERIOD AND SURRENDER AT END OF PERIOD)
<TABLE>
<CAPTION>
FOR THE
PERIOD SINCE
FOR THE FOR THE FOR THE INCEPTION
1 YEAR ENDED 5 YEARS ENDED 10 YEARS ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
SUBACCOUNT 1996 1996 1996 1996
- -------------------------------------- ------------ ------------- -------------- ------------
<S> <C> <C> <C> <C>
Equity................................ 16.88% 15.58% N/A 15.00%
Small Cap............................. 2.88% 10.12% N/A 11.96%
Managed............................... 14.06% 16.19% N/A 18.02%
International Growth.................. 4.72% N/A N/A 8.34%
High Yield Bond....................... 5.04% N/A N/A 10.19%
Intermediate Term Bond................ -4.43% 3.66% 5.31% 6.96%
Long Term Bond........................ -8.44% 6.12% 7.27% 9.23%
Government Securities................. -4.39% 2.93% N/A 4.27%
</TABLE>
Although MONY Variable Account A commenced operations in February 1991, the
total returns shown above reflect those operations as well as the historical
results for MONY Legacy Variable Account A. MONY Legacy Variable Account A
commenced operations on December 30, 1987 and the assets, reserves, and other
liabilities thereof became the assets, reserves, and other liabilities of the
MONY Variable Account A on February 28, 1991, the effective date of the merger
of MONY Legacy Life Insurance Company into the Company. Total return for the
period since inception reflects the average annual total return since the
inception (commencement of operations) of the corresponding portfolio of the
respective Fund, which is August 1988 for the Equity and Managed Portfolios,
September 1988 for the Small Cap Portfolio, March 1985 for the Intermediate Term
Bond and the Long Term Bond Portfolios, May 1991 for the Government Securities
Portfolio, and November 1994 for the International Growth and for the High Yield
Bond Portfolios. Total return is not indicative of future performance.
The table above assumes that a $1,000 payment was made to each Subaccount
at the beginning of the period shown, that no further payments were made, that
any distributions from the corresponding Portfolio of the Funds were reinvested,
and that the Contractholder surrendered the Contract for cash, rather than
electing commencement of annuity benefits in the form of one of the Settlement
Options available, at the end of the period shown. The total return percentages
shown in the table reflect the historical rates of return, deductions for all
charges, expenses, and fees of both the Funds (including the Investment Advisory
Fees described in the Prospectus (see "Investment Advisory Fee" at page 23) and
the Variable Account which would be imposed on the payment assumed, including a
contingent deferred sales (Surrender) charge imposed as a result of the full
surrender and a deduction for the Annual Contract Charge imposed on each
Contract Anniversary and upon full surrender and allocated to each Subaccount in
the proportion that the total value of that Subaccount bore to the total value
of the Variable Account at the end of the period indicated.
(6)
<PAGE> 49
The average annual total return for the Subaccounts other than the Money
Market Subaccount, assuming that the Contracts remain in force throughout the
periods indicated, is shown in the table below.
MONY VARIABLE ACCOUNT A
TOTAL RETURN
(ASSUMING $1,000 PAYMENT AT BEGINNING OF
PERIOD AND CONTRACT CONTINUES IN FORCE)
<TABLE>
<CAPTION>
FOR THE
PERIOD SINCE
FOR THE FOR THE FOR THE INCEPTION
1 YEAR ENDED 5 YEARS ENDED 10 YEARS ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
SUBACCOUNT 1996 1996 1996 1996
- ------------------------------------- ------------ ------------- -------------- -------------
<S> <C> <C> <C> <C>
Equity............................... 23.02% 16.02% N/A 15.00%
Small Cap............................ 9.12% 10.69% N/A 11.96%
Managed.............................. 20.22% 16.61% N/A 18.02%
International Growth................. 10.94% N/A N/A 10.72%
High Yield Bond...................... 11.26% N/A N/A 12.50%
Intermediate Term Bond............... 1.86% 4.41% 5.31% 6.96%
Long Term Bond....................... -2.13% 6.79% 7.27% 9.23%
Government Securities................ 1.90% 3.70% N/A 4.83%
</TABLE>
Although MONY Variable Account A commenced operations in February 1991, the
total returns shown above reflect those operations as well as the historical
results for MONY Legacy Variable Account A. MONY Legacy Variable Account A
commenced operations on December 30, 1987 and the assets, reserves, and other
liabilities thereof became the assets, reserves, and other liabilities of the
MONY Variable Account A on February 28, 1991, the effective date of the merger
of MONY Legacy Life Insurance Company into the Company. Total return for the
period since inception reflects the average annual total return since the
inception (commencement of operations) of the corresponding portfolio of the
respective Fund, which is August 1988 for the Equity and Managed Portfolios,
September 1988 for the Small Cap Portfolio, March 1985 for the Long Term Bond
and Intermediate Term Bond Portfolios, May 1991 for the Government Securities
Portfolio, and November 1994 for the International Growth and for the High Yield
Bond Portfolios. Total return is not indicative of future performance.
The table above reflects the same assumptions and results as the table
appearing on page 6, except that no contingent deferred sales (surrender) charge
has been deducted. The data reflected in the table above reflects the total
return a Contractholder would have received during that period if he did not
surrender his Contract.
In addition to the total returns shown above, total returns may also be
shown for the average purchase payment made by a purchaser of the Contract. For
1995, this amount was $25,000. The following tables show total returns
calculated on the same basis as the two tables above, except that the purchase
payment is $25,000.
(7)
<PAGE> 50
MONY VARIABLE ACCOUNT A
TOTAL RETURN
(ASSUMING $25,000 PAYMENT AT BEGINNING
OF PERIOD AND SURRENDER AT END OF PERIOD)
<TABLE>
<CAPTION>
FOR THE
PERIOD SINCE
FOR THE FOR THE FOR THE INCEPTION
1 YEAR ENDED 5 YEARS ENDED 10 YEARS ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
SUBACCOUNT 1996 1996 1996 1996
- ------------------------------------- ------------ ------------- -------------- -------------
<S> <C> <C> <C> <C>
Equity............................... 17.55% 16.14% N/A 15.44%
Small Cap............................ 3.60% 10.70% N/A 12.43%
Managed.............................. 15.76% 17.60% N/A 19.02%
International Growth................. 5.04% N/A N/A 8.78%
High Yield Bond...................... 5.32% N/A N/A 10.56%
Intermediate Term Bond............... -3.90% 4.16% 5.73% 7.29%
Long Term Bond....................... -7.89% 6.62% 7.69% 9.54%
Government Securities................ -3.96% 3.33% N/A 4.67%
</TABLE>
Although MONY Variable Account A commenced operations in February 1991, the
total returns shown above reflect those operations as well as the historical
results for MONY Legacy Variable Account A. MONY Legacy Variable Account A
commenced operations on December 30, 1987 and the assets, reserves, and other
liabilities thereof became the assets, reserves, and other liabilities of the
MONY Variable Account A on February 28, 1991, the effective date of the merger
of MONY Legacy Life Insurance Company into the Company. Total return for the
period since inception reflects the average annual total return since the
inception (commencement of operations) of the corresponding portfolio of the
respective Fund, which is August 1988 for the Equity and Managed Portfolios,
September 1988 for the Small Cap Portfolio, March 1985 for the Long Term Bond
and Intermediate Term Bond Portfolios, May 1991 for the Government Securities
Portfolio, and November 1994 for the International Growth and for the High Yield
Bond Portfolios. Total return is not indicative of future performance.
MONY VARIABLE ACCOUNT A
TOTAL RETURN
(ASSUMING $25,000 PAYMENT AT BEGINNING
OF PERIOD AND CONTRACT CONTINUES IN FORCE)
<TABLE>
<CAPTION>
FOR THE
PERIOD SINCE
FOR THE FOR THE FOR THE INCEPTION
1 YEAR ENDED 5 YEARS ENDED 10 YEARS ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
SUBACCOUNT 1996 1996 1996 1996
- ------------------------------------- ------------ ------------- -------------- -------------
<S> <C> <C> <C> <C>
Equity............................... 23.68% 16.57% N/A 15.44%
Small Cap............................ 9.83% 11.25% N/A 12.43%
Managed.............................. 21.91% 18.00% N/A 19.02%
International Growth................. 11.26% N/A N/A 11.01%
High Yield Bond...................... 11.54% N/A N/A 12.75%
Intermediate Term Bond............... 2.38% 4.89% 5.73% 7.29%
Long Term Bond....................... -1.58% 7.27% 7.69% 9.54%
Government Securities................ 2.32% 4.09% N/A 5.16%
</TABLE>
Although MONY Variable Account A commenced operations in February 1991, the
total shown above reflect those operations as well as the historical results for
MONY Legacy Variable Account A. MONY Legacy Variable Account A commenced
operations on December 30, 1987 and the assets, reserves, and other liabilities
thereof became the assets, reserves, and other liabilities of the MONY Variable
Account A on February 28, 1991, the effective date of the merger of MONY Legacy
Life Insurance Company into the Company. Total return for the period since
inception reflects the average annual total return since the inception
(commencement of operations) of the corresponding portfolio of the respective
Fund, which is August 1988 for the Equity and Managed Portfolios, September 1988
for the Small Cap
(8)
<PAGE> 51
Portfolio, March 1985 for the Intermediate Term Bond and the Long Term Bond
Portfolios, May 1991 for the Government Securities Portfolio and November 1994
for the International Growth and for the High Yield Bond Portfolio. Total return
is not indicative of future performance.
30-DAY YIELD:
The yield for the Intermediate Term Bond, Long Term Bond, Government
Securities and High Yield Bond Subaccounts is shown for the 30-day periods
indicated in the following table.
MONY VARIABLE ACCOUNT A
YIELD FOR 30-DAY PERIOD
<TABLE>
<CAPTION>
YIELD FOR
30 DAYS ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Intermediate Term Bond............................................... 4.65%
Long Term Bond....................................................... 5.33%
Government Securities................................................ 4.77%
High Yield Bond...................................................... 6.84%
</TABLE>
The 30-day yield is not indicative of future results.
The yield shown in the table above is computed by subtracting from the net
investment income of the corresponding Portfolio of the respective Fund charges
and expenses imposed by the Variable Account and dividing the result by the
value of the Subaccount. For the Intermediate Term Bond and Long Term Bond
Portfolios, net investment income is the net of interest earned on the
obligation held by the Portfolio and expenses accrued for the period. Interest
earned on the obligation is determined by (i) computing the yield to maturity
based on the market value of each obligation held in the corresponding Portfolio
at the close of business on the thirtieth day of the period (or as to
obligations purchased during that 30-day period, based on the purchase price
plus accrued interest); (ii) dividing the yield to maturity for each obligation
by 360; (iii) multiplying that quotient by the market value of each obligation
(including actual accrued interest) for each day of the subsequent 30-day month
that the obligation is in the Portfolio; and (iv) totaling the interest on each
obligation. Discount or premium amortization is recomputed at the beginning of
each 30-day period and with respect to discount and premium on mortgage or other
asset-backed obligations subject to monthly payment of principal and interest,
discount and premium is amortized on the remaining security, based on the cost
of the security, to the weighted average maturity date, if available, or to the
remaining term of the security, if the weighted average maturity date is not
available. Gain or loss attributable to actual monthly paydowns is reflected as
an increase or decrease in interest income during that period.
The yield shown reflects deductions for all charges, expenses, and fees of
both the Funds and the Variable Account other than the contingent deferred sales
(surrender) charge. The surrender charge will not exceed 7% of total Purchase
Payments made in the Contract Year of surrender and the preceding 7 Contract
Years.
Net investment income of the corresponding Portfolio less all charges and
expenses imposed by the Variable Account is divided by the product of the
average daily number of Units outstanding and the value of one Unit on the last
day of the period. The sum of the quotient and 1 is raised to the 6th power, 1
is subtracted from the result, and then multiplied by 2.
YEAR TO DATE TOTAL RETURN:
The tables below show total returns for the year to date (January 1, 1997
to February 14, 1997) which have not been annualized and which assume,
respectively, a $1,000 and a $25,000 payment made at the beginning of the period
and reflecting the same assumptions and results as the table appearing on page
6,
(9)
<PAGE> 52
except, in the case of the column headed "Contract In Force", no contingent
deferred sales (surrender) charge or annual contract charge has been deducted:
MONY VARIABLE ACCOUNT A
YEAR TO DATE TOTAL RETURN
(JANUARY 1 TO FEBRUARY 14, 1997)
(ASSUMING $1,000 PAYMENT AT BEGINNING OF PERIOD)
<TABLE>
<CAPTION>
SURRENDER AT CONTRACT
SUBACCOUNT END OF PERIOD IN FORCE
-------------------------------------------------------------- ------------- --------
<S> <C> <C>
Equity........................................................ -1.78% 5.18%
Small Cap..................................................... -3.64% 3.36%
Managed....................................................... -0.67% 7.36%
International Growth.......................................... -5.79% 0.84%
High Yield Bond............................................... -4.38% 2.22%
Intermediate Term Bond........................................ -5.71% 1.12%
Long Term Bond................................................ -5.05% 1.79%
Government Securities......................................... -5.79% 0.98%
</TABLE>
MONY VARIABLE ACCOUNT A
YEAR TO DATE TOTAL RETURN
(JANUARY 1 TO FEBRUARY 14, 1997
(ASSUMING $25,000 PAYMENT AT BEGINNING OF PERIOD)
<TABLE>
<CAPTION>
SURRENDER AT CONTRACT
SUBACCOUNT END OF PERIOD IN FORCE
-------------------------------------------------------------- ------------- --------
<S> <C> <C>
Equity........................................................ -1.11% 5.18%
Small Cap..................................................... -2.95% 3.36%
Managed....................................................... 1.04% 7.36%
International Growth.......................................... -5.47% 0.84%
High Yield Bond............................................... -4.08% 2.22%
Intermediate Term Bond........................................ -5.19% 1.12%
Long Term Bond................................................ -4.52% 1.79%
Government Securities......................................... -5.33% 0.98%
</TABLE>
OTHER NON-STANDARDIZED PERFORMANCE DATA:
From time to time, average annual total return or other performance data
may also be advertised in nonstandardized formats. Non-standard performance data
will be accompanied by standard performance data, and the period covered or
other non-standard features will be disclosed.
FINANCIAL STATEMENTS
The financial statements of the Company should be distinguished from the
financial statements of the Variable Account. The financial statements of the
Company should be considered only as bearing upon the ability of the Company to
meet its obligations under the Contracts and 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.
(10)
<PAGE> 53
FINANCIAL STATEMENTS AND NOTES TO FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
With respect to MONY Variable Account A
Report of Independent Accountants.................................................. F-2
Statements of assets and liabilities as of December 31, 1996....................... F-3
Statements of operations for the year ended December 31, 1996...................... F-6
Statements of changes in net assets for the years ended December 31, 1996 and
1995............................................................................ F-9
Notes to financial statements...................................................... F-13
With respect to The Mutual Life Insurance Company of New York:
Comment on financial statements of MONY............................................ F-16
Report of Independent Accountants.................................................. F-17
Balance sheets as of December 31, 1996 and 1995.................................... F-18
Statements of operations for the years ended December 31, 1996 and 1995............ F-19
Statements of surplus for the years ended December 31, 1996 and 1995............... F-20
Statements of cash flows for the years ended December 31, 1996 and 1995............ F-21
Notes to financial statements...................................................... F-22
</TABLE>
F-1
<PAGE> 54
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Mutual Life Insurance Company of New York and the
Contractholders of MONY Variable Account A:
We have audited the accompanying statements of assets and liabilities of
MONY Variable Account A (comprising, respectively, the MONY Series Fund, Inc.'s
Equity Growth, Equity Income, Intermediate Term Bond, Long Term Bond,
Diversified, Money Market and Government Securities Subaccounts; the Enterprise
Accumulation Trust's Equity, Small Cap, Managed, International Growth and High
Yield Bond Subaccounts; and the OCC Accumulation Trust's (formerly, the Quest
for Value Accumulation Trust) Money Market, Bond, Equity, Small Cap, and Managed
Subaccounts) as of December 31, 1996, the related statements of operations for
the year then ended and the statements of changes in net assets for each of the
two years in the period then ended. These financial statements are the
responsibility of MONY's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1996, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of each of the respective
subaccounts constituting MONY Variable Account A as of December 31, 1996, the
results of their operations for the year then ended, and the changes in their
net assets for each of the two years in the period then ended, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
February 14, 1997
F-2
<PAGE> 55
MONY
VARIABLE ACCOUNT A
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONY SERIES FUND, INC.
--------------------------------------------------------------------------------------------
EQUITY EQUITY INTERMEDIATE LONG TERM MONEY GOVERNMENT
GROWTH INCOME TERM BOND BOND DIVERSIFIED MARKET SECURITIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ------------ ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments at cost (Note 4)..... $146,407 $175,761 $6,220,549 $ 9,624,486 $151,866 $19,709,665 $1,767,192
======== ======== ========== =========== ======== =========== ==========
Investments in MONY Series Fund,
Inc., at net asset value (Note
2)............................. $247,389 $270,607 $6,491,557 $10,334,042 $180,006 $19,709,665 $1,814,770
Amount due from MONY............. 0 0 121 193 0 154,428 168
Amount due from MONY Series Fund,
Inc............................ 11 0 30 35 8 78,205 0
-------- -------- ---------- ----------- -------- ----------- ----------
Total assets............ 247,400 270,607 6,491,708 10,334,270 180,014 19,942,298 1,814,938
-------- -------- ---------- ----------- -------- ----------- ----------
LIABILITIES
Amount due to MONY............... 11 0 30 35 8 78,205 0
Amount due to MONY Series Fund,
Inc............................ 0 0 121 193 0 154,428 168
-------- -------- ---------- ----------- -------- ----------- ----------
Total liabilities....... 11 0 151 228 8 232,633 168
-------- -------- ---------- ----------- -------- ----------- ----------
Net assets....................... $247,389 $270,607 $6,491,557 $10,334,042 $180,006 $19,709,665 $1,814,770
======== ======== ========== =========== ======== =========== ==========
Net assets consist of:
Contractholders' net
payments..................... $ 64,005 $ 19,638 $4,951,377 $ 7,186,418 $(33,744) $17,600,536 $1,746,909
Undistributed net investment
income....................... 29,624 97,603 1,263,391 2,176,038 97,012 2,109,129 7,149
Accumulated net realized gain
on investments............... 52,778 58,520 5,781 262,030 88,598 0 13,134
Unrealized appreciation of
investments.................. 100,982 94,846 271,008 709,556 28,140 0 47,578
-------- -------- ---------- ----------- -------- ----------- ----------
Net assets....................... $247,389 $270,607 $6,491,557 $10,334,042 $180,006 $19,709,665 $1,814,770
======== ======== ========== =========== ======== =========== ==========
Number of units outstanding*..... 7,976 9,465 381,313 503,775 7,590 1,355,274 162,102
-------- -------- ---------- ----------- -------- ----------- ----------
Net asset value per unit
outstanding*................... $ 31.02 $ 28.59 $ 17.02 $ 20.51 $ 23.72 $ 14.54 $ 11.20
======== ======== ========== =========== ======== =========== ==========
</TABLE>
- ---------------
* Units outstanding have been rounded for presentation purposes.
See notes to financial statements.
F-3
<PAGE> 56
MONY
VARIABLE ACCOUNT A
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ENTERPRISE ACCUMULATION TRUST
--------------------------------------------------------------------
INTERNATIONAL HIGH YIELD
EQUITY SMALL CAP MANAGED GROWTH BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments at cost (Note 4).............. $29,460,211 $19,845,374 $165,506,442 $ 5,439,421 $3,093,095
=========== =========== ============ ========== ==========
Investments in Enterprise Accumulation
Trust at net asset value (Note 2)....... $37,267,237 $22,140,377 $220,849,725 $ 5,901,118 $3,189,944
Amount due from MONY...................... 17,906 3,133 67,101 572 0
Amount due from Enterprise Accumulation
Trust................................... 217 2,762 34,621 6,450 3
----------- ----------- ------------ ---------- ----------
Total assets.................... 37,285,360 22,146,272 220,951,447 5,908,140 3,189,947
----------- ----------- ------------ ---------- ----------
LIABILITIES
Amount due to MONY........................ 217 2,762 34,621 6,450 3
Amount due to Enterprise Accumulation
Trust................................... 17,906 3,133 67,101 572 0
----------- ----------- ------------ ---------- ----------
Total liabilities............... 18,123 5,895 101,722 7,022 3
=========== =========== ============ ========== ==========
Net assets................................ $37,267,237 $22,140,377 $220,849,725 $ 5,901,118 $3,189,944
=========== =========== ============ ========== ==========
Net assets consist of:
Contractholders' net payments........... $24,273,607 $16,695,775 $128,711,842 $ 5,275,664 $2,888,368
Undistributed net investment income..... 1,466,211 1,934,785 12,602,136 52,518 184,463
Accumulated net realized gain on
investments.......................... 3,720,393 1,214,814 24,192,464 111,239 20,264
Unrealized appreciation of
investments.......................... 7,807,026 2,295,003 55,343,283 461,697 96,849
----------- ----------- ------------ ---------- ----------
Net assets................................ $37,267,237 $22,140,377 $220,849,725 $ 5,901,118 $3,189,944
=========== =========== ============ ========== ==========
Number of units outstanding*.............. 1,123,086 837,807 5,150,485 472,752 247,295
----------- ----------- ------------ ---------- ----------
Net asset value per unit outstanding*..... $ 33.18 $ 26.43 $ 42.88 $ 12.48 $ 12.90
=========== =========== ============ ========== ==========
</TABLE>
- ---------------
* Units outstanding have been rounded for presentation purposes.
See notes to financial statements.
F-4
<PAGE> 57
MONY
VARIABLE ACCOUNT A
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
OCC ACCUMULATION TRUST
---------------------------------------------------------------
MONEY
MARKET BOND EQUITY SMALL CAP MANAGED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments at cost (Note 4)..................... $443,785 $565,925 $246,057 $264,999 $ 7,539,103
======== ======== ======== ======== ===========
Investments in OCC Accumulation Trust at net
asset value (Note 2)........................... $443,785 $569,120 $370,443 $340,536 $12,043,728
-------- -------- -------- -------- -----------
Net assets....................................... $443,785 $569,120 $370,443 $340,536 $12,043,728
======== ======== ======== ======== ===========
Net assets consist of:
Contractholders' net payments.................. $408,497 $467,993 $233,016 $229,281 $ 6,749,689
Undistributed/accumulated net investment income
(loss)...................................... 35,288 94,635 1,235 11,752 (968)
Accumulated net realized gain on investments... 0 3,297 11,806 23,966 790,382
Unrealized appreciation of investments......... 0 3,195 124,386 75,537 4,504,625
-------- -------- -------- -------- -----------
Net assets....................................... $443,785 $569,120 $370,443 $340,536 $12,043,728
======== ======== ======== ======== ===========
Number of units outstanding*..................... 33,041 35,119 11,304 11,883 284,927
======== ======== ======== ======== ===========
Net asset value per unit outstanding*............ $ 13.43 $ 16.21 $ 32.77 $ 28.66 $ 42.27
======== ======== ======== ======== ===========
</TABLE>
- ---------------
* Units outstanding have been rounded for presentation purposes.
See notes to financial statements.
F-5
<PAGE> 58
MONY
VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONY SERIES FUND, INC.
-------------------------------------------------------------------------------------------
EQUITY EQUITY INTERMEDIATE LONG TERM MONEY GOVERNMENT
GROWTH INCOME TERM BOND BOND DIVERSIFIED MARKET SECURITIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ------------ ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Dividend income................... $ 0 $ 494 $ 0 $ 0 $ 0 $ 864,440 $ 0
Mortality and expense risk charges
(Note 3)........................ 2,869 3,249 83,249 124,623 3,484 216,165 17,809
------- ------- ---------- ---------- -------- ----------- --------
Net investment income (loss)...... (2,869) (2,755) (83,249) (124,623) (3,484) 648,275 (17,809)
------- ------- ---------- ---------- -------- ----------- --------
Realized and unrealized gain
(loss) on investments (Note 2):
Proceeds from sales............. 6,072 26,215 2,973,676 2,919,071 185,051 73,953,662 712,090
Cost of shares sold............. 2,832 16,191 3,040,176 3,033,049 143,262 73,953,662 712,552
------- ------- ---------- ---------- -------- ----------- --------
Net realized gain (loss) on
investments..................... 3,240 10,024 (66,500) (113,978) 41,789 0 (462)
Net increase (decrease) in
unrealized appreciation of
investments..................... 40,185 35,971 287,901 58,274 (9,570) 0 57,310
------- ------- ---------- ---------- -------- ----------- --------
Net realized and unrealized gain
(loss) on investments........... 43,425 45,995 221,401 (55,704) 32,219 0 56,848
------- ------- ---------- ---------- -------- ----------- --------
Net increase (decrease) in net
assets resulting from
operations...................... $ 40,556 $ 43,240 $ 138,152 $ (180,327) $ 28,735 $ 648,275 $ 39,039
======= ======= ========== ========== ======== =========== ========
</TABLE>
See notes to financial statements.
F-6
<PAGE> 59
MONY
VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ENTERPRISE ACCUMULATION TRUST
------------------------------------------------------------------
INTERNATIONAL HIGH YIELD
EQUITY SMALL CAP MANAGED GROWTH BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Dividend income................................... $ 482,765 $ 358,525 $ 2,141,879 $ 21,339 $164,550
Mortality and expense risk charges (Note 3)....... 355,573 259,870 2,301,531 49,699 23,647
---------- ---------- ----------- -------- --------
Net investment income (loss)...................... 127,192 98,655 (159,652) (28,360) 140,903
---------- ---------- ----------- -------- --------
Realized and unrealized gain on investments (Note
2):
Proceeds from sales............................. 5,488,881 5,215,662 31,137,079 621,966 596,389
Cost of shares sold............................. 3,642,989 4,892,882 20,536,112 527,867 585,639
---------- ---------- ----------- -------- --------
Net realized gain on investments.................. 1,845,892 322,780 10,600,967 94,099 10,750
Net increase in unrealized appreciation of
investments..................................... 3,936,924 1,442,596 25,728,772 382,690 84,387
---------- ---------- ----------- -------- --------
Net realized and unrealized gain on investments... 5,782,816 1,765,376 36,329,739 476,789 95,137
---------- ---------- ----------- -------- --------
Net increase in net assets resulting from
operations...................................... $5,910,008 $1,864,031 $36,170,087 $ 448,429 $236,040
========== ========== =========== ======== ========
</TABLE>
See notes to financial statements.
F-7
<PAGE> 60
MONY
VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
OCC ACCUMULATION TRUST
--------------------------------------------------------------
MONEY
MARKET BOND EQUITY SMALL CAP MANAGED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Dividend income...................................... $ 19,562 $ 50,966 $ 8,381 $ 20,174 $ 247,649
Mortality and expense risk charges (Note 3).......... 5,557 8,504 4,195 4,215 149,713
---------- ---------- ---------- ---------- ----------
Net investment income................................ 14,005 42,462 4,186 15,959 97,936
---------- ---------- ---------- ---------- ----------
Realized and unrealized gain (loss) on investments
(Note 2):
Proceeds from sales................................ 40,765 279,505 21,332 180,861 1,919,534
Cost of shares sold................................ 40,765 279,691 13,598 160,666 1,224,282
---------- ---------- ---------- ---------- ----------
Net realized gain (loss) on investments.............. 0 (186) 7,734 20,195 695,252
Net increase (decrease) in unrealized appreciation of
investments........................................ 0 (44,748) 54,162 17,666 1,520,888
---------- ---------- ---------- ---------- ----------
Net realized and unrealized gain (loss) on
investments........................................ 0 (44,934) 61,896 37,861 2,216,140
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting from
operations......................................... $ 14,005 $ (2,472) $ 66,082 $ 53,820 $2,314,076
========== ========== ========== ========== ==========
</TABLE>
See notes to financial statements.
F-8
<PAGE> 61
MONY
VARIABLE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MONY SERIES FUND, INC.
------------------------------------------------------
INTERMEDIATE
EQUITY GROWTH EQUITY INCOME TERM BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- ------------------- ----------
1996 1995 1996 1995 1996
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
From operations:
Net investment income (loss)............................................. $ (2,869) $ 11,524 $ (2,755) $ 9,964 $ (83,249)
Net realized gain (loss) on investments.................................. 3,240 6,495 10,024 9,575 (66,500)
Net increase in unrealized appreciation of investments................... 40,185 27,822 35,971 43,846 287,901
-------- -------- -------- -------- ----------
Net increase (decrease) in net assets resulting from operations............ 40,556 45,841 43,240 63,385 138,152
-------- -------- -------- -------- ----------
From unit transactions:
Net proceeds from the issuance of units.................................. 0 14,140 521 0 2,126,818
Net asset value of units redeemed or used to meet contract obligations... (3,203) (13,354) (22,959) (41,390) (2,394,742)
-------- -------- -------- -------- ----------
Net increase (decrease) from unit transactions............................. (3,203) 786 (22,438) (41,390) (267,924)
-------- -------- -------- -------- ----------
Net increase (decrease) in net assets...................................... 37,353 46,627 20,802 21,995 (129,772)
Net assets beginning of year............................................... 210,036 163,409 249,805 227,810 6,621,329
-------- -------- -------- -------- ----------
Net assets end of year*.................................................... $247,389 $210,036 $270,607 $249,805 $6,491,557
======== ======== ======== ======== =========
Units outstanding beginning of year........................................ 8,091 8,121 10,336 12,401 398,283
Units issued during the year............................................... 0 602 20 0 128,432
Units redeemed during the year............................................. (115) (632) (891) (2,065) (145,402)
-------- -------- -------- -------- ----------
Units outstanding end of year.............................................. 7,976 8,091 9,465 10,336 381,313
======== ======== ======== ======== =========
- ---------------
*Includes undistributed net investment income of: $ 29,624 $ 32,493 $ 97,603 $100,358 $1,263,391
</TABLE>
<TABLE>
<CAPTION>
LONG TERM BOND
SUBACCOUNT
-------------------------
1995 1996 1995
---------- ----------- -----------
<S> <C> <C> <C>
From operations:
Net investment income (loss)............................................. $ 292,565 $ (124,623) $ 446,952
Net realized gain (loss) on investments.................................. (25,477) (113,978) (2,381)
Net increase in unrealized appreciation of investments................... 502,043 58,274 1,758,079
---------- ----------- -----------
Net increase (decrease) in net assets resulting from operations............ 769,131 (180,327) 2,202,650
---------- ----------- -----------
From unit transactions:
Net proceeds from the issuance of units.................................. 1,002,924 2,785,899 1,593,024
Net asset value of units redeemed or used to meet contract obligations... (993,119) (2,589,305) (1,201,141)
---------- ----------- -----------
Net increase (decrease) from unit transactions............................. 9,805 196,594 391,883
---------- ----------- -----------
Net increase (decrease) in net assets...................................... 778,936 16,267 2,594,533
Net assets beginning of year............................................... 5,842,393 10,317,775 7,723,242
---------- ----------- -----------
Net assets end of year*.................................................... $6,621,329 $10,334,042 $10,317,775
========= ========== ==========
Units outstanding beginning of year........................................ 398,645 495,169 476,335
Units issued during the year............................................... 62,985 139,629 86,051
Units redeemed during the year............................................. (63,347) (131,023) (67,217)
---------- ----------- -----------
Units outstanding end of year.............................................. 398,283 503,775 495,169
========= ========== ==========
- ---------------
*Includes undistributed net investment income of: $1,346,640 $ 2,176,038 $ 2,300,661
</TABLE>
See notes to financial statements.
F-9
<PAGE> 62
MONY
VARIABLE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MONY SERIES FUND, INC. (CONTINUED)
------------------------------------
DIVERSIFIED MONEY MARKET
SUBACCOUNT SUBACCOUNT
--------------------- ------------
1996 1995 1996
--------- --------- ------------
<S> <C> <C> <C>
From operations:
Net investment income (loss).............................................................. $ (3,484) $ 9,883 $ 648,275
Net realized gain (loss) on investments................................................... 41,789 19,241 0
Net increase (decrease) in unrealized appreciation of investments......................... (9,570) 34,672 0
--------- --------- ------------
Net increase in net assets resulting from operations........................................ 28,735 63,796 648,275
--------- --------- ------------
From unit transactions:
Net proceeds from the issuance of units................................................... 77,280 26,476 71,884,991
Net asset value of units redeemed or used to meet contract obligations.................... (180,942) (116,344) (70,019,648)
--------- --------- ------------
Net increase (decrease) from unit transactions.............................................. (103,662) (89,868) 1,865,343
--------- --------- ------------
Net increase (decrease) in net assets....................................................... (74,927) (26,072) 2,513,618
Net assets beginning of year................................................................ 254,933 281,005 17,196,047
--------- --------- ------------
Net assets end of year*..................................................................... $ 180,006 $ 254,933 $ 19,709,665
========= ========= ===========
Units outstanding beginning of year......................................................... 12,152 16,718 1,227,811
Units issued during the year................................................................ 3,635 1,375 5,032,568
Units redeemed during the year.............................................................. (8,197) (5,941) (4,905,105)
--------- --------- ------------
Units outstanding end of year............................................................... 7,590 12,152 1,355,274
========= ========= ===========
- ---------------
*Includes undistributed net investment income of: $ 97,012 $ 100,496 $ 2,109,129
<CAPTION>
GOVERNMENT
SECURITIES
SUBACCOUNT
---------------------
1995 1996 1995
------------ ---------- --------
<S> <C> <C> <C>
From operations:
Net investment income (loss).............................................................. $ 534,253 $ (17,809) $ 24,828
Net realized gain (loss) on investments................................................... 0 (462) 13,596
Net increase (decrease) in unrealized appreciation of investments......................... 0 57,310 (9,571)
------------ ---------- --------
Net increase in net assets resulting from operations........................................ 534,253 39,039 28,853
------------ ---------- --------
From unit transactions:
Net proceeds from the issuance of units................................................... 45,186,737 1,419,641 905,752
Net asset value of units redeemed or used to meet contract obligations.................... (40,234,100) (558,126) (46,064)
------------ ---------- --------
Net increase (decrease) from unit transactions.............................................. 4,952,637 861,515 859,688
------------ ---------- --------
Net increase (decrease) in net assets....................................................... 5,486,890 900,554 888,541
Net assets beginning of year................................................................ 11,709,157 914,216 25,675
------------ ---------- --------
Net assets end of year*..................................................................... $ 17,196,047 $1,814,770 $914,216
=========== ========= ========
Units outstanding beginning of year......................................................... 872,441 83,571 2,571
Units issued during the year................................................................ 3,284,314 129,566 85,300
Units redeemed during the year.............................................................. (2,928,944) (51,035) (4,300)
------------ ---------- --------
Units outstanding end of year............................................................... 1,227,811 162,102 83,571
=========== ========= ========
- ---------------
*Includes undistributed net investment income of: $ 1,460,854 $ 7,149 $ 24,958
</TABLE>
See notes to financial statements.
F-10
<PAGE> 63
MONY
VARIABLE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
ENTERPRISE ACCUMULATION TRUST
-----------------------------------------------------------------------------------
EQUITY SMALL CAP MANAGED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------------- ------------------------- ---------------------------
1996 1995 1996 1995 1996 1995
----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
From operations:
Net investment income (loss)........... $ 127,192 $ 977,788 $ 98,655 $ 895,086 $ (159,652) $ 8,252,036
Net realized gain on investments....... 1,845,892 703,043 322,780 150,075 10,600,967 4,218,503
Net increase in unrealized appreciation
of investments....................... 3,936,924 3,414,730 1,442,596 785,984 25,728,772 28,860,483
----------- ----------- ----------- ----------- ------------ ------------
Net increase in net assets resulting from
operations............................. 5,910,008 5,095,561 1,864,031 1,831,145 36,170,087 41,331,022
----------- ----------- ----------- ----------- ------------ ------------
From unit transactions:
Net proceeds from the issuance of
units................................ 13,430,622 5,740,714 5,146,904 4,091,027 59,678,401 35,331,913
Net asset value of units redeemed or
used to meet contract obligations.... (3,493,043) (2,181,404) (4,293,528) (2,597,244) (24,531,771) (12,561,716)
----------- ----------- ----------- ----------- ------------ ------------
Net increase from unit transactions...... 9,937,579 3,559,310 853,376 1,493,783 35,146,630 22,770,197
----------- ----------- ----------- ----------- ------------ ------------
Net increase in net assets............... 15,847,587 8,654,871 2,717,407 3,324,928 71,316,717 64,101,219
Net assets beginning of year............. 21,419,650 12,764,779 19,422,970 16,098,042 149,533,008 85,431,789
----------- ----------- ----------- ----------- ------------ ------------
Net assets end of year*.................. $37,267,237 $21,419,650 $22,140,377 $19,422,970 $220,849,725 $149,533,008
========== ========== ========== ========== =========== ===========
Units outstanding beginning of year...... 798,552 651,102 807,452 742,341 4,253,824 3,528,618
Units issued during the year............. 441,702 242,264 202,925 182,069 1,537,736 1,137,075
Units redeemed during the year........... (117,168) (94,814) (172,570) (116,958) (641,075) (411,869)
----------- ----------- ----------- ----------- ------------ ------------
Units outstanding end of year............ 1,123,086 798,552 837,807 807,452 5,150,485 4,253,824
========== ========== ========== ========== =========== ===========
- ---------------
*Includes undistributed net investment
income of:.............................. $ 1,466,211 $ 1,339,019 $ 1,934,785 $ 1,836,130 $ 12,602,136 $ 12,761,788
<CAPTION>
INTERNATIONAL HIGH YIELD
GROWTH BOND
SUBACCOUNT SUBACCOUNT
----------------------- -----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
From operations:
Net investment income (loss)........... $ (28,360) $ 81,000 $ 140,903 $ 42,638
Net realized gain on investments....... 94,099 17,598 10,750 9,514
Net increase in unrealized appreciation
of investments....................... 382,690 76,868 84,387 11,925
---------- ---------- ---------- ----------
Net increase in net assets resulting from
operations............................. 448,429 175,466 236,040 64,077
---------- ---------- ---------- ----------
From unit transactions:
Net proceeds from the issuance of
units................................ 3,893,317 1,635,614 2,209,079 870,043
Net asset value of units redeemed or
used to meet contract obligations.... (314,849) (127,032) (323,040) (13,019)
---------- ---------- ---------- ----------
Net increase from unit transactions...... 3,578,468 1,508,582 1,886,039 857,024
---------- ---------- ---------- ----------
Net increase in net assets............... 4,026,897 1,684,048 2,122,079 921,101
Net assets beginning of year............. 1,874,221 190,173 1,067,865 146,764
---------- ---------- ---------- ----------
Net assets end of year*.................. $5,901,118 $1,874,221 $3,189,944 $1,067,865
========= ========= ========= =========
Units outstanding beginning of year...... 167,074 19,197 92,358 14,621
Units issued during the year............. 332,329 160,171 182,283 78,634
Units redeemed during the year........... (26,651) (12,294) (27,346) (897)
---------- ---------- ---------- ----------
Units outstanding end of year............ 472,752 167,074 247,295 92,358
========= ========= ========= =========
- ---------------
*Includes undistributed net investment
income of:.............................. $ 52,518 $ 80,878 $ 184,463 $ 43,560
</TABLE>
See notes to financial statements.
F-11
<PAGE> 64
MONY
VARIABLE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
OCC ACCUMULATION TRUST
------------------------------------------------------------------
MONEY MARKET BOND EQUITY
SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------------- --------------------- -------------------
1996 1995 1996 1995 1996 1995
-------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
From operations:
Net investment income (loss)......................... $ 14,005 $ 17,046 $ 42,462 $ 39,877 $ 4,186 $ (2,184)
Net realized gain (loss) on investments.............. 0 0 (186) 3,624 7,734 4,084
Net increase (decrease) in unrealized
appreciation of investments........................ 0 0 (44,748) 66,019 54,162 75,352
-------- --------- --------- --------- -------- --------
Net increase (decrease) in net assets
resulting from operations............................ 14,005 17,046 (2,472) 109,520 66,082 77,252
-------- --------- --------- --------- -------- --------
From unit transactions:
Net proceeds from the issuance of units.............. 19,197 416,556 15,468 4,079 22,903 29,438
Net asset value of units redeemed or
used to meet contract obligations.................. (27,513) (469,730) (276,029) (140,292) (12,801) (19,982)
-------- --------- --------- --------- -------- --------
Net increase (decrease) from unit transactions......... (8,316) (53,174) (260,561) (136,213) 10,102 9,456
-------- --------- --------- --------- -------- --------
Net increase (decrease) in net assets.................. 5,689 (36,128) (263,033) (26,693) 76,184 86,708
Net assets beginning of year........................... 438,096 474,224 832,153 858,846 294,259 207,551
-------- --------- --------- --------- -------- --------
Net assets end of year*................................ $443,785 $ 438,096 $ 569,120 $ 832,153 $370,443 $294,259
======== ========= ========= ========= ======== ========
Units outstanding beginning of year.................... 33,665 37,816 51,825 60,890 10,944 10,593
Units issued during the year........................... 1,448 32,841 650 274 894 1,189
Units redeemed during the year......................... (2,072) (36,992) (17,356) (9,339) (534) (838)
-------- --------- --------- --------- -------- --------
Units outstanding end of year.......................... 33,041 33,665 35,119 51,825 11,304 10,944
======== ========= ========= ========= ======== ========
- ---------------
*Includes undistributed net investment income (loss)
of: $ 35,288 $ 21,283 $ 94,635 $ 52,173 $ 1,235 $ (2,951)
<CAPTION>
SMALL CAP MANAGED
SUBACCOUNT SUBACCOUNT
-------------------- -------------------------
1996 1995 1996 1995
--------- -------- ----------- -----------
<S> <C> <C> <C> <C>
From operations:
Net investment income (loss)......................... $ 15,959 $ (2,938) $ 97,936 $ (70,749)
Net realized gain (loss) on investments.............. 20,195 3,823 695,252 101,433
Net increase (decrease) in unrealized
appreciation of investments........................ 17,666 58,016 1,520,888 3,336,819
--------- -------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations............................ 53,820 58,901 2,314,076 3,367,503
--------- -------- ----------- -----------
From unit transactions:
Net proceeds from the issuance of units.............. 10,778 59,056 301,963 514,537
Net asset value of units redeemed or
used to meet contract obligations.................. (174,121) (60,028) (1,630,402) (465,075)
--------- -------- ----------- -----------
Net increase (decrease) from unit transactions......... (163,343) (972) (1,328,439) 49,462
--------- -------- ----------- -----------
Net increase (decrease) in net assets.................. (109,523) 57,929 985,637 3,416,965
Net assets beginning of year........................... 450,059 392,130 11,058,091 7,641,126
--------- -------- ----------- -----------
Net assets end of year*................................ $ 340,536 $450,059 $12,043,728 $11,058,091
========= ======== ========== ==========
Units outstanding beginning of year.................... 18,419 18,271 317,313 315,452
Units issued during the year........................... 484 2,780 8,688 17,915
Units redeemed during the year......................... (7,020) (2,632) (41,074) (16,054)
--------- -------- ----------- -----------
Units outstanding end of year.......................... 11,883 18,419 284,927 317,313
========= ======== ========== ==========
- ---------------
*Includes undistributed net investment income (loss)
of: $ 11,752 $ (4,207) $ (968) $ (98,904)
</TABLE>
See notes to financial statements.
F-12
<PAGE> 65
MONY
VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
MONY Variable Account A (the "Variable Account") is a separate investment
account established on November 28, 1990 by The Mutual Life Insurance Company of
New York ("MONY"), under the laws of the State of New York.
The Variable Account operates as a unit investment trust under the
Investment Company Act of 1940 (the "1940 Act"). The Variable Account holds
assets that are segregated from all of MONY's other assets and, at present, is
used only to support Flexible Payment Variable Annuity Policies. These policies
are issued by MONY. MONY is currently taxed as a life insurance company and will
include the Variable Account's operations in its tax return. MONY does not
expect, based upon current tax law, to incur any income tax burden upon the
earnings or realized capital gains attributable to the Variable Account. Based
on this expectation, no charges are currently being deducted from the Variable
Account for federal income tax purposes.
There are currently seventeen subaccounts within the Variable Account, each
invests only in a corresponding portfolio of the MONY Series Fund, Inc.
("Fund"), Enterprise Accumulation Trust ("Enterprise") or the OCC Accumulation
Trust ("OCC") (formerly the Quest for Value Accumulation Trust) collectively,
the "Funds". The Funds are registered under the 1940 Act as open end,
diversified, management investment companies.
2. SIGNIFICANT ACCOUNTING POLICIES
Investments:
The investment in shares of each of the respective portfolios is stated at
the net asset values of each portfolio. Except for the Money Market Portfolios,
net asset values are based upon market quotations of the securities held in each
of the corresponding portfolios of the Funds. For the Money Market Portfolios,
the net asset values are based on the amortized cost of the securities held
which approximates value.
3. RELATED PARTY TRANSACTIONS
MONY is the legal owner of the assets held by the Variable Account.
Purchase payments received from MONY by the Variable Account represent
gross purchase payments recorded by MONY less deductions retained for any
premium taxes.
A periodic deduction is made from the cash value of the contract for the
annual contract charge. The deduction is for the expenses of administration and
is treated by the Variable Account as a contractholder redemption. The amount
deducted for all subaccounts for 1996 was $205,276.
MONY receives from the Variable Account the amounts deducted for mortality
and expense risks at an annual rate of 1.25 percent of aggregate average daily
net assets. As MONY America, a wholly-owned subsidiary of MONY, acts as
investment adviser to the Fund, it receives amounts paid by the Fund for those
services.
Enterprise Capital Management, Inc., a wholly-owned subsidiary of MONY,
acts as investment adviser to Enterprise, and it receives amounts paid by
Enterprise for those services.
F-13
<PAGE> 66
MONY
VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENTS
Investments in MONY Series Fund, Inc. at cost, at December 31, 1996 consist
of the following:
<TABLE>
<CAPTION>
EQUITY EQUITY INTERMEDIATE LONG TERM MONEY GOVERNMENT
GROWTH INCOME TERM BOND BOND DIVERSIFIED MARKET SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ------------ ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares beginning of year:
Shares.................... 8,365 12,739 626,427 801,069 16,217 17,196,047 89,541
Amount.................... $ 149,239 $ 190,930 $ 6,638,222 $ 9,666,493 $ 217,223 $ 17,196,047 $ 923,948
-------- -------- ----------- ---------- --------- ------------ -----------
Shares acquired:
Shares.................... 0 25 248,085 241,598 4,847 75,602,840 151,259
Amount.................... $ 0 $ 528 $ 2,622,503 $ 2,991,042 $ 77,905 $ 75,602,840 $1,555,796
Shares received for
reinvestment of dividends:
Shares.................... 0 24 0 0 0 864,440 0
Amount.................... $ 0 $ 494 $ 0 $ 0 $ 0 $ 864,440 $ 0
Shares redeemed:
Shares.................... (219) (1,243) (282,216) (237,836) (11,058) (73,953,662) (69,272)
Amount.................... $ (2,832) $ (16,191) $(3,040,176) $(3,033,049) $ (143,262) $(73,953,662) $(712,552)
-------- -------- ----------- ---------- --------- ------------ -----------
Net change:
Shares.................... (219) (1,194) (34,131) 3,762 (6,211) 2,513,618 81,987
Amount.................... $ (2,832) $ (15,169) $ (417,673) $ (42,007) $ (65,357) $ 2,513,618 $ 843,244
-------- -------- ----------- ---------- --------- ------------ -----------
Shares end of year:
Shares.................... 8,146 11,545 592,296 804,831 10,006 19,709,665 171,528
Amount.................... $ 146,407 $ 175,761 $ 6,220,549 $ 9,624,486 $ 151,866 $ 19,709,665 $1,767,192
======== ======== =========== ========== ========= ============ ===========
</TABLE>
F-14
<PAGE> 67
MONY
VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENTS (CONTINUED)
Investments in Enterprise Accumulation Trust, Inc. at cost, at December 31,
1996 consist of the following:
<TABLE>
<CAPTION>
INTERNATIONAL HIGH YIELD
EQUITY SMALL CAP MANAGED GROWTH BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Shares beginning of year:
Shares....................................... 917,330 1,051,027 5,329,045 347,622 201,105
Amount....................................... $17,549,548 $18,570,563 $119,918,497 $ 1,795,214 $1,055,403
----------- ----------- ------------ ---------- ----------
Shares acquired:
Shares....................................... 567,664 296,363 2,055,304 732,866 459,848
Amount....................................... $15,070,887 $ 5,809,168 $ 63,982,178 $ 4,150,735 $2,458,781
Shares received for reinvestment of dividends:
Shares....................................... 16,728 17,731 62,427 3,527 30,679
Amount....................................... $ 482,765 $ 358,525 $ 2,141,879 $ 21,339 $ 164,550
Shares redeemed:
Shares....................................... (210,410) (270,146) (1,009,885) (108,624) (112,694)
Amount....................................... $(3,642,989) $(4,892,882) $(20,536,112) $ (527,867) $ (585,639)
----------- ----------- ------------ ---------- ----------
Net change:
Shares....................................... 373,982 43,948 1,107,846 627,769 377,833
Amount....................................... $11,910,663 $ 1,274,811 $ 45,587,945 $ 3,644,207 $2,037,692
----------- ----------- ------------ ---------- ----------
Shares end of year:
Shares....................................... 1,291,312 1,094,975 6,436,891 975,391 578,938
Amount....................................... $29,460,211 $19,845,374 $165,506,442 $ 5,439,421 $3,093,095
=========== =========== ============ ========== ==========
</TABLE>
Investments in OCC Accumulation Trust, Inc. at cost, at December 31, 1996
consist of the following:
<TABLE>
<CAPTION>
MONEY
MARKET BOND EQUITY SMALL CAP MANAGED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Shares beginning of year:
Shares................................................ 437,924 83,268 11,747 22,605 366,891
Amount................................................ $ 437,924 $ 783,901 $ 224,035 $392,188 $ 8,074,354
-------- --------- -------- --------- -----------
Shares acquired:
Shares................................................ 27,064 1,048 979 615 13,865
Amount................................................ $ 27,064 $ 10,749 $ 27,239 $ 13,303 $ 441,382
Shares received for reinvestment of dividends:
Shares................................................ 19,562 5,346 325 1,027 8,012
Amount................................................ $ 19,562 $ 50,966 $ 8,381 $ 20,174 $ 247,649
Shares redeemed:
Shares................................................ (40,765) (29,754) (732) (9,186) (56,160)
Amount................................................ $ (40,765) $(279,691) $ (13,598) $(160,666) $(1,224,282)
-------- --------- -------- --------- -----------
Net change:
Shares................................................ 5,861 (23,360) 572 (7,544) (34,283)
Amount................................................ $ 5,861 $(217,976) $ 22,022 $(127,189) $ (535,251)
-------- --------- -------- --------- -----------
Shares end of year:
Shares................................................ 443,785 59,908 12,319 15,061 332,608
Amount................................................ $ 443,785 $ 565,925 $ 246,057 $264,999 $ 7,539,103
======== ========= ======== ========= ===========
</TABLE>
F-15
<PAGE> 68
COMMENT ON FINANCIAL STATEMENTS OF MONY
The following financial statements relate to the condition and operations
of MONY and should be distinguished from the financial statements of MONY
Variable Account A. As explained on the preceding pages, the values of the
interests of Contractholders under the Contract described in this Prospectus are
affected by the investment results of MONY Variable Account A. Financial
statements on MONY should be considered only as bearing upon the ability of MONY
to meet its obligations under the Contract.
F-16
<PAGE> 69
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF TRUSTEES OF
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK:
We have audited the accompanying statutory statements of admitted assets,
liabilities, and surplus of The Mutual Life Insurance Company of New York as of
December 31, 1996 and 1995, and the related statutory statements of operations,
surplus, and cash flows for the years then ended. These statutory financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described more fully in Note 2 to the financial statements, the Company
prepared these financial statements using accounting practices prescribed or
permitted by the Insurance Department of the State of New York ("statutory"),
which practices differ from generally accepted accounting principles ("GAAP").
The effects on the financial statements of the variances between statutory and
GAAP, although not reasonably determinable, are presumed to be material.
In our report dated February 21, 1996, we expressed our opinion that the
1995 financial statements, prepared using statutory accounting, presented
fairly, in all material respects, the financial position of the Company as of
December 31, 1995, and the results of its operations, and its cash flows for the
year then ended in conformity with GAAP. As described in Note 2 to the financial
statements, financial statements of mutual life insurance enterprises issued or
reissued after 1996, which are prepared in accordance with statutory accounting,
are no longer considered to be presentations in conformity with GAAP.
Accordingly, our present opinion on the 1995 financial statements as presented
herein is different from that expressed in our previous report.
In our opinion, because of the effects of the matter discussed in the
second preceding paragraph, the statutory financial statements referred to above
do not present fairly, in conformity with GAAP, the financial position of the
Company as of December 31, 1996 and 1995, or the results of its operations and
its cash flows, for the years then ended.
In our opinion, the statutory financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended on the basis of accounting described in Note 2.
Our audits were conducted for the purpose of expressing an opinion on the
financial statements taken as a whole. The Supplemental Schedule of Selected
Financial Data is presented to comply with the NAIC's Annual Statement
Instructions and is not a required part of the basic financial statements. The
Supplemental Schedule of Selected Financial Data has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated, in all material respects, in relation to the
basic financial statements taken as a whole.
Coopers & Lybrand, L.L.P.
New York, New York
February 21,1997
F-17
<PAGE> 70
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND SURPLUS -- STATUTORY BASIS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
ASSETS 1996 1995
---------- ----------
<S> <C> <C>
Investments:
Cash and Short-term investments........................... $ 175,173 $ 265,870
Bonds..................................................... 4,328,623 3,769,905
Preferred stocks.......................................... 2,130 17,173
Common stocks............................................. 300,809 264,166
Subsidiary companies...................................... 170,760 135,875
Mortgage loans............................................ 1,509,181 1,636,538
Real estate............................................... 1,345,383 1,739,890
Policy loans.............................................. 1,189,851 1,180,454
Other invested assets..................................... 364,390 352,536
Investment income due and accrued.............................. 141,940 143,412
Premiums deferred and uncollected.............................. 196,926 207,142
Separate account assets........................................ 1,670,886 1,530,226
Amounts due from reinsurers.................................... 74,656 81,200
Other assets................................................... 49,065 46,705
---------- ----------
Total assets......................................... $11,519,773 $11,371,092
========== ==========
POLICY RESERVES, LIABILITIES AND SURPLUS
Policy reserves:
Life insurance and annuity reserves....................... $7,214,620 $7,316,732
Health insurance reserves................................. 155,670 146,802
Deposits left with the Company............................ 504,581 513,347
Liabilities:
Dividends to policyholders................................ 211,765 204,332
Policy claims in process of settlement.................... 74,213 66,003
Funds held under coinsurance.............................. 102,200 112,424
Taxes accrued............................................. 108,691 64,148
Notes payable and accrued interest........................ 33,076 76,405
Separate account liabilities.............................. 1,661,273 1,520,965
Other liabilities......................................... 347,679 289,684
Interest maintenance reserve.............................. 12,663 10,028
Investment reserves....................................... 90,000 90,000
Asset valuation reserve................................... 299,843 271,205
---------- ----------
Total policy reserves and liabilities................ $10,816,274 $10,682,075
Surplus:
Surplus notes............................................. 72,317 72,317
Special surplus funds..................................... 27,150 27,250
Unassigned surplus........................................ 604,032 589,450
---------- ----------
Surplus.............................................. 703,499 689,017
---------- ----------
Total policy reserves, liabilities and surplus....... $11,519,773 $11,371,092
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-18
<PAGE> 71
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS -- STATUTORY BASIS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1996 1995
--------- ---------
<S> <C> <C>
Premiums, annuity considerations and fund deposits............ $1,222,039 $1,214,625
Net investment income......................................... 640,484 627,609
Commission and expense allowance on reinsurance ceded......... 88,767 98,198
Adjustments on reinsurance ceded.............................. (119,907) (12,094)
Other income (net)............................................ 9,704 20,934
---------- ----------
$1,841,087 $1,949,272
---------- ----------
Policyholder and contractholder benefits...................... 1,292,572 1,517,313
Change in policy and contract reserves........................ (101,355) (56,389)
Commissions................................................... 53,599 62,211
Operating expenses............................................ 265,871 273,783
Reinsurance of group pension liabilities...................... 62,024 540,230
Transfer from separate accounts............................... (51,020) (677,525)
Other deductions (net)........................................ 7,374 7,094
---------- ----------
1,529,065 1,666,717
---------- ----------
Net gain from operations before dividends and federal income
taxes....................................................... 312,022 282,555
Dividends to policyholders.................................... 219,439 210,675
---------- ----------
Net gain from operations before federal income taxes.......... 92,583 71,880
Federal income taxes.......................................... 18,393 10,057
---------- ----------
Net gain from operations...................................... 74,190 61,823
Net realized capital losses (See Note 9).................... (19,550) (8,480)
---------- ----------
Net Income.................................................... $ 54,640 $ 53,343
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-19
<PAGE> 72
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF SURPLUS -- STATUTORY BASIS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Surplus, beginning of year............................... $689,017 $680,070
Net income............................................... 54,640 53,343
Change in net unrealized capital gains................... 34,232 10,220
Change in non-admitted assets............................ (1,275) (7,689)
Change in asset valuation reserve........................ (28,638) (41,057)
Change in policy reserve valuation basis................. -- 5,081
Settlements and provision for contingencies.............. (39,576) (11,300)
Other changes to surplus................................. (4,901) 349
-------- --------
Net change in surplus for the year....................... 14,482 8,947
-------- --------
Surplus, end of year..................................... $703,499 $689,017
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-20
<PAGE> 73
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS -- STATUTORY BASIS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOW PROVIDED FROM OPERATIONS:
Premiums, annuity considerations and fund deposits....... $1,233,947 $1,221,753
Investment income net of investment expenses............. 680,338 676,190
Adjustments on reinsurance ceded......................... (26,291) 121,818
Other income............................................. 31,373 53,323
Policy benefits paid..................................... (1,285,157) (1,526,851)
Transfers from (to) separate accounts.................... (5,035) 133,408
Commissions, other expenses and taxes paid............... (321,497) (325,056)
Dividends to policyholders............................... (212,006) (217,183)
Federal income taxes (excluding capital gains tax)....... 0 (51,395)
Other deductions......................................... (23,829) (32,777)
---------- ----------
Net cash from operations............................ 71,843 53,230
---------- ----------
CASH FROM INVESTMENTS:
Proceeds from Investments Sold, Matured or Repaid:
Bonds............................................... 516,929 685,588
Stocks.............................................. 199,598 81,590
Mortgage loans...................................... 293,113 190,373
Real estate......................................... 417,955 279,098
Other invested assets............................... 25,734 15,260
Other............................................... (8,652) (45,091)
---------- ----------
Total investment proceeds........................... 1,444,677 1,206,818
---------- ----------
Cost of investments acquired:
Bonds............................................... 1,063,983 879,648
Stocks.............................................. 205,496 137,745
Mortgage loans...................................... 172,644 117,247
Real estate......................................... 56,222 76,032
Other invested assets............................... 32,816 24,316
Miscellaneous....................................... 9,402 (2,647)
---------- ----------
Total investments acquired.......................... 1,540,563 1,232,341
---------- ----------
Net cash from investments...................... (95,886) (25,523)
---------- ----------
CASH FROM FINANCING AND MISCELLANEOUS SOURCES:
Cash Provided
Notes payable............................................ (43,293) 76,341
Other sources............................................ 15,432 34,438
---------- ----------
Total.................................................... (27,861) 110,779
---------- ----------
Other cash applied.......................................... 38,793 23,288
---------- ----------
Net cash from financing and other misc sources...... (66,654) 87,491
---------- ----------
Net change in cash and short-term investments............... (90,697) 115,198
Cash and short-term investments, beginning of year............ 265,870 150,672
---------- ----------
Cash and short-term investments, end of year.................. $ 175,173 $ 265,870
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-21
<PAGE> 74
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION:
The Mutual Life Insurance Company of New York (the "Company") is a mutual
life insurance company primarily engaged in the business of providing individual
life insurance and disability income protection and asset accumulation products.
The Company's principal markets consist of business owners, growing families,
and pre-retirees. The Company's insurance and financial products are marketed
and distributed directly to individuals primarily through the Company's career
agency sales force. These products are sold throughout the United States and
Puerto Rico.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying financial statements have been prepared in conformity with
accounting practices prescribed or permitted by the Insurance Department of the
State of New York ("statutory"), which practices were also considered to be in
conformity with generally accepted accounting principles ("GAAP") prior to the
issuance of the pronouncements described herein. In 1993, the Financial
Accounting Standards Board ("FASB") issued Interpretation No. 40 ("FIN 40"),
"Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises," which clarified that mutual life insurance
companies issuing financial statements described as prepared in conformity with
GAAP after 1995 are required to apply all applicable GAAP pronouncements in
preparing those financial statements. In January 1995, the FASB issued Statement
No. 120 ("SFAS 120"), "Accounting and Reporting by Mutual Life Insurance
Enterprises and by Insurance Enterprises for Certain Long-Duration Participating
Contracts," which, among other things, extended the applicability of certain
FASB Statements to mutual life insurance companies and deferred the effective
date of FIN 40 to financial statements issued or reissued after 1996. As
required by generally accepted auditing standards, the opinion expressed by our
independent accountants on the 1995 financial statements is different from that
expressed in their previous report.
In financial statements prepared in conformity with statutory accounting,
the accounting treatment of certain items is different than for financial
statements issued in conformity with GAAP. Some of the general differences
include:
- Policy acquisition costs, such as commissions and other costs incurred in
connection with acquiring new and renewal business, are expensed when
incurred; under GAAP, such costs are deferred and amortized over the
present value of expected gross margins.
- Premiums for universal life and investment-type products are recognized
as revenue when due; under GAAP, they are accounted for as deposits and
excluded from revenue.
- Policy reserves are based on statutory mortality and interest
requirements and without consideration of withdrawals and are reported
net of reinsurance reserve credits; under GAAP, the reserves are based on
expected investment yield, mortality and withdrawals and are reported
gross of reinsurance reserve credits.
- No provision is made for deferred income taxes; under GAAP, deferred
taxes result from temporary differences between the tax basis of assets
and liabilities and their reported amounts in the financial statements.
- An interest maintenance reserve ("IMR") is established as a liability to
capture realized investment gains and losses, net of tax, on the sale of
fixed maturities and mortgage loans resulting from changes in the general
level of interest rates, and is amortized into income over the remaining
years to expected maturity of the assets sold; no such reserve is
required under GAAP.
- An asset valuation reserve ("AVR"), based upon a formula prescribed by
the NAIC, is established as a liability to offset potential non-interest
related investment losses, and changes in the AVR are charged or credited
to surplus; no such reserve is required under GAAP.
F-22
<PAGE> 75
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
- Investment in bonds and preferred stocks are generally carried at
amortized cost; under GAAP, investments in bonds and preferred stocks,
other than those classified as held to maturity, are carried at fair
value.
- Certain assets, designated as nonadmitted, are excluded from assets by a
direct charge to surplus; under GAAP, such assets are carried on the
balance sheet with appropriate valuation allowances.
- Pension expense for the qualified defined pension plan ("Plan") is
recognized when pension contributions are deductible for federal income
tax purposes, rather than incurred over the service lives of employees
participating in the Plan, as is the case under GAAP.
- Postretirement benefits are recognized for vested employees and current
retirees, rather than accruing an obligation over the service period for
all eligible employees, as is the case under GAAP.
- In accordance with statutory accounting, the Company's subsidiaries are
not consolidated for statutory filing purposes; under GAAP,
majority-owned subsidiaries are consolidated.
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a description of the Company's principal statutory
accounting practices and procedures:
(a) Premiums are included in revenue over the premium payment periods
of the related policies. Annuity considerations and fund deposits are
included in revenue as received.
Commissions and other costs related to issuance, maintenance and
settlement of policies are charged to operations in the year incurred.
(b) Short-term investments are carried at cost and consist of
securities with maturities of three months or less. Bonds eligible for
amortization under rules promulgated by the National Association of
Insurance Commissioners ("NAIC") are carried at amortized cost, while all
other bonds are carried at values adopted by the NAIC, which approximate
fair market value. Loan backed bonds and structured securities are valued
at amortized cost using the effective interest method considering
anticipated prepayments at the date of purchase; significant changes in the
estimated cash flows from the original purchase assumptions are accounted
for using the retrospective method. Common stocks are carried at market
value except investments in subsidiaries, which are generally carried on
the equity basis. Preferred stocks are carried principally at cost except
for those securities in or near default which are valued at market. Policy
loans are carried at their unpaid balances.
Mortgage loans other than those in process of foreclosure are carried
at their unpaid balances adjusted for unamortized discount. Real estate
owned for investment is carried at depreciated cost, less encumbrances
($1.9 million in 1996 and $2.2 million in 1995). Joint ventures and limited
partnerships in real estate, cable television and energy are included in
other invested assets and are carried principally at their equity value.
Other investments are generally carried at cost.
Real estate acquired through foreclosure is carried at the lower of
cost or estimated fair value at the time of foreclosure, less accumulated
depreciation. Mortgage loans in process of foreclosure are also carried at
the lower of cost or estimated fair value. Fair value is determined by
using the estimated discounted cash flows expected from the underlying real
estate properties. These projected cash flows are based on estimates
regarding future operating expenses, lease rates, occupancy levels and
investors' targeted yields.
F-23
<PAGE> 76
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
The Company provides, through a direct charge to surplus, an
investment valuation reserve for permanent impairment of real estate
investments, joint ventures and limited partnerships in real estate and
mortgage loans delinquent for more than 60 days and restructured mortgage
loans. This reserve reflects, in part, the excess of the carrying value of
such assets over the estimated undiscounted cash flows expected from the
underlying real estate properties. These projected cash flows are based on
estimates similar to those described in the preceding paragraph. As of
December 31, 1996 and 1995, the Company's investment reserve for its
mortgage loan and real estate investments was $90 million.
(c) Realized investment gains and losses (net of tax) for bonds and
mortgage loans resulting from changes in interestrates are deferred, and
credited or charged to the Interest Maintenance Reserve ("IMR"). These
amounts are amortized into net income over the remaining years to expected
maturity of the assets sold. Unrealized capital gains and losses are
recorded directly to surplus.
The Asset Valuation Reserve ("AVR") is based upon a formula prescribed
by the NAIC and functions as a reserve for potential non-interest-related
investment losses. In addition, realized investment gains and losses (not
subject to the IMR) and unrealized gains and losses result in offsetting
increases and decreases in the AVR. These changes to the AVR are recorded
directly to surplus.
(d) Policy reserves for life insurance, annuities, and supplemental
benefits are computed by using prescribed statutory interest rates and
mortality factors. Reserves computed by a modified commissioners' reserve
valuation method represent approximately 75% and 74% of gross life
insurance reserves at December 31, 1996 and 1995 respectively.
Reserves for life insurance were principally determined by using the
1941, 1958 and 1980 Commissioners' Standard Ordinary Mortality and the
American Experience Tables and assumed interest rates ranging from 2.25% to
7%. Reserves for individual and group annuity mortality tables have assumed
interest rates ranging from 2.25% to 9.5%.
During 1995, the Company changed its methods of accounting for certain
minimum reserves with the approval of the New York State Insurance
Department. The Company incorporated 10-year select factors in its minimum
mortality standard for certain 1980 CSO products, resulting in an increase
in surplus of $5.1 million.
Policy claims in process of settlement include provisions for payments
to be made on reported claims and on claims incurred but not reported.
(e) The Company's subsidiaries are not consolidated. The subsidiaries
are carried principally on the statutory equity basis. Changes in the
Company's equity in subsidiaries are included in unrealized capital gains
and losses. Dividends from subsidiaries are recognized as investment income
when declared.
(f) Dividends to policyholders are determined annually by the Board of
Trustees.
(g) Certain assets designated as "non-admitted" assets (principally
miscellaneous receivables) are excluded from the statements of admitted
assets, liabilities and surplus.
(h) Separate account assets and liabilities represent segregated funds
administered and invested by the Company for the benefit of certain
contractholders. Approximately 99% of these assets consist of securities
reported at market value and 1% consist of fixed income securities carried
at amortized cost. Premiums, benefits and expenses of the separate accounts
are included in the Company's statements of operations.
(i) No deferred taxes are recognized for differences that exist between
financial reporting and taxable income.
F-24
<PAGE> 77
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(j) The Company uses the constant-yield method of depreciation for
substantially all investment real estate, real estate joint ventures and
cable television limited partnerships acquired prior to January 1, 1991.
Acquisitions subsequent to January 1, 1991 and foreclosed real estate are
depreciated on the straight line method. Real estate assets and
improvements are generally depreciated over ten to forty year periods and
leasehold improvements over the lives of the leases. Depreciation expense
related to investments in real estate was $39.1 million and $48.8 million
in 1996 and 1995, respectively; accumulated depreciation was $213.6 million
and $214.3 million at December 31, 1996 and 1995, respectively.
(k) Special surplus funds consist primarily of amounts required by the
State of New York to be assigned as surplus funds for group insurance,
separate accounts, and aviation reinsurance.
(l) Certain amounts for 1995 have been reclassified to conform to the
1996 presentation.
3. REINSURANCE OF GROUP PENSION BUSINESS:
On December 31, 1993, the Company entered into an agreement with AEGON USA,
Inc. ("AEGON USA") under which the Company agreed to transfer $6.3 billion in
group pension assets and liabilities, including $2.7 billion of general account
assets and $3.6 billion of separate account assets. Pursuant to the transaction,
the Company transferred substantially all of its group pension business and
operations, including its full service group pension contracts, consisting
primarily of tax-deferred annuity, 401(k) and managed funds lines of business,
to AEGON USA's wholly-owned subsidiary, AUSA Life Insurance Company, Inc. ("AUSA
Life"). AUSA Life also acquired the corporate infrastructure supporting the
group pension business, including personnel, data processing systems, facilities
and regional offices. In connection with the transaction, the Company and AEGON
USA have entered into certain service agreements. These agreements, among other
things, provide that the Company will continue to manage the transferred assets,
and that AUSA Life will continue to provide certain administrative services to
the Company's remaining group pension contracts not included in the transfer.
Effective with the agreement, AUSA reinsured, on an indemnity reinsurance
basis, the contract liabilities funded by such general account assets. AUSA
agreed to reinsure such general account liabilities on an assumption reinsurance
basis upon the consent of general account contractholders to assumption of their
contracts pursuant to the Group Pension Transaction. As of December 31, 1996,
substantially all of the contractholders have elected assumption reinsurance.
In connection with the transaction at December 31, 1993, the Company made a
$200 million capital investment in AEGON USA by purchasing $150 million of
Series A and $50 million of Series B notes, which have a term of nine years and
receive a market rate of interest. In addition to interest payments on the
notes, the Company has the right to receive certain payments based on the
profits of the transferred business in force on the transaction date, a future
payment tied to the determination of the value of the transferred business at
the end of nine years, and a potential payment based on new business growth. The
Company has the option to purchase additional Series A notes with payments from
the profits of the transferred business. Net operating losses, if any, on the
transferred business for any year will be carried forward to reduce profit
payments in subsequent years. Any deficit remaining at the end of the nine year
term and any adjustment related to the final value of the transferred business
may only be applied to reduce the principal amount of any outstanding Series A
notes. At December 31, 1996, the Company owned $319 million of Series A Notes.
During 1996 and 1995, the Company earned $65.9 million and $70.2 million,
respectively, based upon the profits of the transferred group pension business
and recorded this amount as revenue from ceded reinsurance in the statement of
operations.
F-25
<PAGE> 78
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
4. SUBSIDIARY COMPANIES:
At December 31, 1996 and 1995, the Company's investments in subsidiaries,
all of which are wholly-owned, consisted of the following:
<TABLE>
<CAPTION>
1996 1995
------ ------
(IN MILLIONS)
<S> <C> <C>
MONY Life Insurance Company of America................. $121.8 $115.6
Other subsidiaries..................................... 49.0 20.3
------ ------
$170.8 $135.9
====== ======
</TABLE>
At December 31, 1996, MONY Life Insurance Company of America ("MONY
America") had assets of $3.9 billion; including bonds ($1,048 million), mortgage
loans ($159 million) and separate account assets ($2,530 million); and
liabilities of $3.8 billion, primarily life insurance and annuity reserves ($1.3
billion) and separate account liabilities ($2.5 billion). Capital and surplus of
MONY America was $121.8 million. In 1996 and 1995, total revenues of MONY
America were $844 million and $715 million, benefits and expenses were $820
million and $701 million and net income, including realized capital losses, was
$8 million and $5 million, respectively.
During 1995, the Company contributed $10 million to the capital of MONY
America. During 1996 and 1995, the Company made aggregate capital contributions
of $27.7 million and $2.5 million to certain other subsidiaries. The Company
also received aggregate capital distributions of $5.3 million in 1995 from its
other subsidiaries.
During 1996, the Company purchased $44.2 million of commercial mortgages
(plus accrued interest) from MONY Funding Inc., a wholly owned subsidiary of the
Company, at book value.
The Company and MONY America are parties to an agreement dated February 28,
1995 whereby the Company agrees to reimburse MONY America to the extent that
MONY America's recognized loss as a result of mortgage loan default or
foreclosure or subsequent sale of the underlying collateral exceeds the 75% loan
to value ratio for each such mortgage loan at origination. Pursuant to the
agreement, the Company made payments to MONY America totaling $0.1 million in
1996 and $2.1 million in 1995.
5. COMMITMENTS AND CONTINGENCIES:
The Company has guaranteed to certain states that the surplus of MONY
America will be maintained at amounts at least equal to the minimum surplus
required for admission to those states.
On April 7, 1987 MONY Funding Inc. issued $125 million of 8.125% notes due
April 7, 1997 in the European markets. The Company has cumulatively repurchased
$35.8 million of these notes at December 31, 1996. The Company has guaranteed
the principal and interest of the remaining notes outstanding.
At December 31, 1996, the Company has guaranteed $34 million related to
real estate held by unrelated investors.
The Company maintains lines of credit with domestic banks totaling $100
million with scheduled renewal dates during 1997. The Company has not borrowed
against its credit lines since 1982.
In 1994, the Company reached an agreement for the transfer of the
management of its information systems operations to Computer Sciences
Corporation ("CSC"). Under the terms of this agreement to operate, manage and
enhance its information systems operations, the Company will pay CSC an
estimated $128 million over the remaining contract period. The total payments
under the contract may vary based upon certain factors, including the volume of
computing services and the introduction of new information systems technology.
F-26
<PAGE> 79
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
5. COMMITMENTS AND CONTINGENCIES (CONTINUED):
The Company is a defendant in various legal actions arising primarily from
its investment and insurance operations. Certain actions include claims of
multiple plaintiffs. In addition, insurance companies are subject to
assessments, up to statutory limits, by state guaranty funds for losses of
policyholders of insolvent insurance companies. In the opinion of management,
assessments and the outcome of the legal proceedings will not have a material
adverse effect on the financial position and the results of operations of the
Company.
During 1996, the Company established approximately $27 million in reserves
relating to the above contingencies through a direct charge to surplus.
Litigation settlements of $12.6 million related to prior years' events were
charged directly to surplus.
6. PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS:
Employee and Field Underwriter Retirement Plans
The Company has a qualified pension plan covering substantially all of its
salaried employees. The provisions of the plan provide both (a) defined benefit
accruals based on (i) years of service, (ii) the employee's final average annual
compensation and (iii) wage bases or benefits under Social Security and (b)
defined contribution accruals based on a Company matching contribution equal to
100% of the employee's elective deferrals under the incentive savings plan for
employees up to 3% of the employee's eligible compensation and an additional 2%
of eligible compensation for each active participant. The Company's funding and
accounting policies are to contribute annually the maximum amount that can be
deducted for federal income taxes and to charge expenses in the year in which
the contributions are made. No contributions were made in the current year or
prior year because the plan was subject to the full funding limitation under
Section 412 of the Internal Revenue Code. At December 31, 1995, the present
value of accumulated benefit obligation, determined in accordance with
Statements of Financial Accounting Standards and based on an assumed settlement
rate of 8.00%, was $242.8 million, including vested benefits of $232.2 million.
The fair value of Plan assets as of December 31, 1995 was $385.1 million.
The Company also has a qualified money purchase pension plan covering
substantially all career field underwriters. Company contributions of 5% of
earnings plus an additional 2% of such earnings in excess of the social security
wage base are made each year. In addition, after-tax voluntary field underwriter
contributions of up to 10% of earnings are allowed. At December 31, 1995, the
fair value of plan assets was $176.7 million.
The Company sponsors a non-qualified defined benefit pension plan, which
provides benefits in excess of Internal Revenue Service limits to certain
employees. The benefits are based on years of service and the employee's final
average annual compensation. Pension benefits are paid from the Company's
general account. The amounts accrued by the Company for this plan, based on an
assumed 7.42% weighted average interest rate for 1996 and 7.3% for 1995 were
$36.9 million and $33.1 million in 1996 and 1995, respectively. The Company also
maintains various non-qualified defined contribution plans for field
underwriters and key employees. The amounts accrued for these various plans were
$67.5 million and $54.2 million in 1996 and 1995, respectively.
Deferred Compensation Plan
The Company has incentive savings plans in which substantially all
employees and career field underwriters are eligible to participate. The Company
matches employee and field underwriter contributions up to 3% and 2%,
respectively, of eligible compensation as defined. In addition, for employees,
the Company contributes 2% of eligible compensation for non-officer employees,
and may contribute up to an additional 3%. In addition, the Company has two
compensation plans for key employees which allow deferral of current
compensation, as allowed by New York Insurance Law.
F-27
<PAGE> 80
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
6. PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS: (CONTINUED)
Postretirement Benefits
The Company provides certain health care and life insurance (postretirement
benefits) for retired employees and field underwriters. In accordance with NAIC
requirements, the Company accrues the estimated employee cost of retiree benefit
payments for current retirees and fully vested employees and field underwriters
by estimating the actuarial present value of benefits expected to be paid after
retirement.
At December 31, 1992, the Company determined that the total pre-tax
postretirement benefit obligation approximated $82.9 million. The Company has
elected to amortize this transition obligation over a period of twenty years as
an expense in its statement of operations. The amount of unrecognized transition
obligation was reduced by approximately $10.8 million due to plan amendments
adopted during 1995. The amount of transition obligation amortized in 1996 and
1995 totaled approximately $3.6 million. The total cost to provide life
insurance and health benefits for fully vested and retired employees and field
underwriters including the expense described above, was $10.6 million in 1996
and $9.2 million in 1995.
At December 31, 1996, the unfunded postretirement benefit obligation for
retirees and fully vested employees was $76.3 million, with $21.4 million
included in other liabilities. The discount rate used in determining the
accumulated postretirement benefit obligation was 7.5%, and the health care cost
trend rate was 11.0% graded to 6.0% over 13 years.
The health care cost trend rate assumption has an effect on the amounts
reported. To illustrate, an increase in the assumed health care cost trend rates
of one percentage point in each year would increase the estimated postretirement
benefit obligation as of December 31, 1996 by $0.8 million and the estimated
eligibility cost and interest cost components of net periodic postretirement
benefit cost for 1996 by $0.1 million.
7. FEDERAL INCOME TAXES:
The Company files a consolidated federal income tax return with its life
and non-life affiliates. The allocation of federal income taxes is based upon
separate return calculations with current credit for net losses. Intercompany
tax balances are settled annually in the first quarter.
The Company's federal income tax returns for years through 1989 have been
examined with no proposed material adjustments. In the opinion of management,
adequate provision has been made for any additional taxes which may become due
with respect to open years.
Pre-tax operating gains and pre-tax realized gains, as reported in the
accompanying statements of operations, differ from taxable income reported for
tax purposes. Significant differences include the deferral and amortization of
policy acquisition costs for tax purposes, the difference between statutory and
tax reserves, the taxable portion of the Company's surplus (as applicable to
mutual life insurers), depreciation expense and related recapture, capital gains
deferred to the IMR, alternative minimum tax preference items and equity in
partnerships and joint ventures.
8. LEASES:
The Company has entered into various operating lease agreements for office
space and furniture and equipment. These leases have remaining non-cancelable
lease terms in excess of one year. Total rental expense
F-28
<PAGE> 81
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
8. LEASES (CONTINUED):
for these operating leases amounted to $21.8 million in 1996 and $25.1 million
in 1995. The future minimum rental obligations under these leases at December
31, 1996 are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
1997................................................... $ 18.0
1998................................................... 16.2
1999................................................... 14.8
2000................................................... 15.1
2001................................................... 14.2
Later years............................................ 147.2
------
$ 225.5
======
</TABLE>
9. CAPITAL GAINS/(LOSSES):
The Company realized net capital losses (after tax and IMR) of $20 million
in 1996 and $8 million in 1995 as follows:
<TABLE>
<CAPTION>
REALIZED CAPITAL GAINS/(LOSSES) 1996 1995
------------------------------------------------------ ---- ----
(IN MILLIONS)
<S> <C> <C>
Bonds and preferred stock............................. $ (8) $ 1
Common stock.......................................... 22 8
Mortgage loans........................................ 3 (3)
Real estate........................................... (2) 0
Cable and other investments........................... 9 0
---- ---
24 6
Tax provision......................................... (39) (5)
Transferred to IMR, net of taxes...................... (5) (9)
---- ---
Net realized capital gains/(losses)................. $(20) $(8)
==== ===
</TABLE>
During 1996 and 1995, realized capital gains resulting from changes in
interest rates on fixed income securities of $5.3 million (net of $2.8 million
tax) and $9.2 million (net of $4.9 million tax), respectively, were transferred
to the Company's IMR for future amortization into net income.
The Company incurred net unrealized gains of $34 million and $10 million in
1996 and 1995. The 1996 and 1995 unrealized gains and losses include writedowns
of approximately $11 million and $13 million, respectively, on real estate
acquired through foreclosure and mortgage loans in process of foreclosure. These
gains and losses are detailed by asset type in the table below:
<TABLE>
<CAPTION>
UNREALIZED CAPITAL GAINS/(LOSSES) 1996 1995
------------------------------------------------------------ ----- -----
(IN MILLIONS)
<S> <C> <C>
Bonds and preferred stock................................... $18 $7
Common stock................................................ 21 10
Mortgage loans.............................................. (8) (13)
Real estate................................................. (3) 0
Subsidiaries................................................ 7 8
Other investments........................................... (1) (2)
----- -----
Total unrealized capital gains.................... $34 $10
==== ====
</TABLE>
F-29
<PAGE> 82
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
10. COMMON STOCKS:
Common stocks include marketable equity securities carried at market values
of $160.7 million and $136.3 million at December 31, 1996 and 1995,
respectively, and nonmarketable equity investments carried at estimated fair
values of $140.1 million and $127.9 million at December 31, 1996 and 1995,
respectively. The cost of marketable equity securities was $142.2 million and
$115.1 million at December 31, 1996 and 1995, respectively. At December 31,
1996, gross unrealized gains were $23.6 million, and gross unrealized losses
were $5.1 million for marketable equity securities.
11. FIXED INCOME SECURITIES:
Fixed Income Securities by Investment Type:
The amortized cost and estimated fair value (see note 14) of investments in
fixed income securities which include shortterm investments, bonds and preferred
stocks as of December 31, 1996 and December 31, 1995 are as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED GROSS
UNREALIZED ESTIMATED FAIR
AMORTIZED COST GAINS LOSSES VALUE
------------------ ---------------- -------------- ------------------
1996 1995 1996 1995 1996 1995 1996 1995
------- ------- ------ ------ ----- ----- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government agencies................. $ 201.3 $ 165.0 $ 1.5 $ 4.5 $ 0.5 $ 0.0 $ 202.3 $ 169.5
Collateralized Mortgage Obligations:
Government Agency-Backed............... 253.1 254.1 1.4 4.3 3.6 0.7 250.9 257.7
Non-Agency Backed...................... 66.0 66.3 1.3 2.4 0.1 0.2 67.2 68.5
Other asset-backed securities:
Government Agency-Backed............... 68.6 83.4 1.0 4.0 0.9 0.3 68.7 87.1
Non-Agency Backed...................... 295.9 221.7 7.7 13.3 1.4 0.3 302.2 234.7
Foreign governments........................ 4.5 4.5 0.1 0.1 0.0 0.0 4.6 4.6
Utilities.................................. 501.5 448.5 17.2 28.6 3.9 1.0 514.8 476.1
Affiliates................................. 5.8 30.2 0.0 0.7 0.0 0.0 5.8 30.9
Corporate bonds............................ 2,931.9 2,496.2 74.8 141.7 23.7 16.4 2,983.0 2.621.5
------- ------- ------ ------ ----- ----- ------- -------
Total bonds............................ 4,328.6 3,769.9 105.0 199.6 34.1 18.9 4,399.5 3,950.6
Redeemable preferred stock................. 2.1 17.2 0.0 0.3 0.4 0.5 1.7 17.0
Commercial paper........................... 137.8 248.7 0.0 0.0 0.0 0.0 137.8 248.7
------- ------- ------ ------ ----- ----- ------- -------
Total.................................. $4,468.5 $4,035.8 $105.0 $199.9 $34.5 $19.4 $4,539.0 $4,216.3
======= ======= ====== ====== ===== ===== ======= =======
</TABLE>
Amortized cost represents the principal amount of fixed income securities
adjusted by unamortized premium or discount and reduced by writedowns of $16.6
million and $33.5 million for bonds and $0.0 million and $0.8 million for
preferred stock at December 31, 1996 and 1995, respectively, as required by the
NAIC for securities which are in or near default.
At December 31, 1996, 79% of the Company's Collateralized Mortgage
Obligation (CMO) portfolio was held in U.S. government and government
agency-backed securities. The remainder of the CMO portfolio consisted of NAIC
category 1 investment grade securities.
F-30
<PAGE> 83
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
11. FIXED INCOME SECURITIES (CONTINUED):
Maturities of Fixed Income Securities:
The amortized cost of fixed income securities and estimated fair value by
maturity date (excluding scheduled sinking funds) as of December 31, 1996 is the
following:
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED COST FAIR VALUE
-------------- ----------
(IN MILLIONS)
<S> <C> <C>
Due in one year or less............................... $ 308.6 $ 310.1
Due after one year through five years................. 702.3 721.9
Due after five years through ten years................ 2,261.9 2,288.8
Due after ten years................................... 1,195.7 1,218.2
------- -------
$4,468.5 $4,539.0
======= =======
</TABLE>
Expected maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
Proceeds from sales of investments in debt securities during 1996 and 1995
were $173.8 million and $383.5 million, respectively. Gross gains of $3.8
million in 1996 and $10.2 million in 1995, and gross losses of $4.0 million in
1996 and $14.5 million in 1995 were realized on these sales.
12. OFF-BALANCE SHEET RISK AND CONCENTRATION OF CREDIT RISK:
Financial Instruments with Off-Balance Sheet Risk:
In 1992, the Company entered into an agreement with a bank to lend
securities to approved borrowers. There were no loaned securities as of December
31, 1996 or 1995.
At December 31, 1996 the Company had commitments to issue $24.6 million of
fixed rate farm loans with interest rates ranging from 7.72% to 8.75% and
durations of two to ten years. The Company also committed to $4.3 million of
commercial loan investments with interest rates of 8.25% and durations of 15
years. There were no outstanding bond commitments as of December 31, 1996.
Concentration of Credit Risk:
At December 31, 1996 and 1995, the Company had no single investment or
series of investments with a single issuer exceeding 3.7% and 2.9%,
respectively, of total general account assets.
The bond portfolio is diversified by industry type. The industries that
comprise more than 10% of the carrying value of the bond portfolio at December
31, 1996 are Financial Services of $640.2 million (14.8%), Government and
Agencies of $527.5 million (12.2%), Other Manufacturing of $524.0 million
(12.1%), Public Utilities of $501.5 million (11.6%), and Consumer goods and
services of $436.3 million (10.1%). At December 31, 1995, the industries
comprising in excess of 10% of the bond portfolio carrying value were Financial
Services of $555 million (14.7%), Government and Agencies of $507 million (13.5
%), Public Utilities of $449 million (11.9%), Other Manufacturing of $400
million (10.6%), and Consumer goods and services of $381 million ( 10.1%).
The Company holds below investment grade bonds of $290.2 million at
December 31, 1996. Below investment grade bonds are defined as those securities
rated in categories 3 through 6 by the NAIC, which are approximately equivalent
to bonds rated below BBB by rating agencies. These bonds consist mostly of
privately issued bonds, which are monitored by the Company through extensive
internal analysis of the financial condition of the borrowers, and which include
protective debt covenants. Of these bonds, $239.6
F-31
<PAGE> 84
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
12. OFF-BALANCE SHEET RISK AND CONCENTRATION OF CREDIT RISK (CONTINUED):
million are in category 3, which is considered to be medium quality by the NAIC.
At December 31, 1995, the Company's investments in below investment grade bonds
were $226.7 million.
The Company has significant investments in commercial and agricultural
mortgage loans and real estate (including joint ventures and partnerships).
Approximately 53.1% of the Company's real estate and mortgage portfolio is
invested in office building properties. The locations of property
collateralizing mortgage loans and real estate investment carrying values (in
millions) at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------------- -----------------
GEOGRAPHIC REGION $ % $ %
------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Southeast.................................. 794 24.7 982 26.4
Northeast.................................. 598 18.6 647 17.4
West....................................... 583 18.2 718 19.3
Mountain................................... 539 16.8 582 15.7
Midwest.................................... 356 11.1 392 10.6
Southwest.................................. 340 10.6 393 10.6
----- ----- -----
Total.................................... 3,210 100.0 3,714 100.0
===== ===== =====
</TABLE>
The states with the largest concentrations of mortgage loans and real
estate investments at December 31, 1996 are: California, $416 million (12.9%);
New York, $333 million (10.4%); Arizona, $279 million (8.7%); Texas, $279
million (8.7%); Florida, $213 million (6.7%); Illinois, $211 million (6.6%);
Georgia, $204 million (6.4%); Colorado, $154 million (4.8%).
13. MORTGAGE LOANS, REAL ESTATE AND OTHER INVESTED ASSETS:
The Company invests in mortgage loans collateralized by commercial and
agricultural real estate. Such mortgage loans consist primarily of first
mortgage liens on completed income producing properties. As of December 31,
1996, $391 million of mortgage loans have terms that require amortization, and
$1.1 billion of loans require partial amortization or are non-amortizing.
Mortgage loans delinquent over 90 days or in process of foreclosure were $15
million at December 31, 1996 and $48 million at December 31, 1995. Properties
acquired through foreclosure during the year amounted to $20 million and $47
million in 1996 and 1995, respectively.
The Company has performing restructured mortgage loans of $244 million as
of December 31, 1996 and $250 million as of December 31, 1995. The new terms
typically defer a portion of contract interest payments to future periods.
Interest is recognized in income based on the modified rate of the loan.
Deferred interest, which is the difference between the original contractual rate
and the modified rate, is excluded from income. Gross interest income on
restructured loans that would have been recorded in accordance with the loans'
original terms was approximately $23 million in 1996 and $24 million in 1995.
Gross interest income recognized in net income for the period from these loans
was approximately $16 million in 1996 and $17 million in 1995. There are no
commitments to lend additional funds to any debtor involved in a restructuring.
Other invested assets of $364 million and $353 million at December 31, 1996
and 1995, respectively, include, primarily, investments in real estate joint
ventures and limited partnerships.
14. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1996 and 1995. The
calculations of estimated fair values involve considerable
F-32
<PAGE> 85
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
14. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED):
judgement. Accordingly, these estimates of fair value are not necessarily
indicative of the values that could be negotiated in an actual sale.
<TABLE>
<CAPTION>
1996 1995
------------------------ ------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Assets:
Fixed income securities................. $4,328.6 $4,399.5 $3,769.9 $3,950.6
Preferred stocks........................ 2.1 1.7 17.2 17.0
Separate Account Assets................. 1,670.9 1,670.8 1,530.2 1530.9
Liabilities:
Investment-type contracts............... 1,274.7 1,269.8 1,511.1 1,515.1
Separate Account Liabilities............ 1,661.3 1,661.1 1,521.0 1,520.5
</TABLE>
The estimated fair values of cash, short term investments, unaffiliated
equity securities, mortgage loans, and short term notes payable approximate
their carrying amounts.
The methods and assumptions utilized in estimating these fair values of
financial instruments are summarized as follows:
Fixed Income Securities (See Note 11)
The estimated fair values of fixed income securities are based upon quoted
market prices, where available. The fair values of fixed income securities not
actively traded and other non-publicly traded securities are estimated using
values obtained from independent pricing services or, in the case of private
placements, by discounting expected future cash flows using a current market
interest rate commensurate with the credit quality and term of the investments.
Mortgage Loans
The fair value of mortgage loans is estimated by discounting expected
future cash flows, using current interest rates for similar loans to borrowers
with similar credit risk. Loans with similar characteristics are aggregated for
purposes of the calculations.
Policy Loans
Policy loans are an integral component of insurance contracts and have no
maturity dates. Management has determined that it is not practicable to estimate
the fair value of policy loans.
Separate Account
The estimated fair value of separate account assets and liabilities is
based upon estimates of values available upon full surrender.
Investment-type contract liabilities
The fair values of the Company's liabilities under investment-type
contracts are estimated by discounting expected cash outflows using interest
rates currently offered for similar contracts with maturities consistent with
those remaining for the contracts being valued, where appropriate. The fair
values of other investment-type contracts are based on estimates of the value of
payments available upon full surrender.
F-33
<PAGE> 86
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
15. RESERVES:
The withdrawal characteristics of the Company's annuity actuarial reserves
and deposit liabilities as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
RESERVES
--------------
<S> <C>
Not subject to discretionary withdrawal provision............... $1,105
Subject to discretionary withdrawal -- with adjustment:
- with market value adjustment........................ 259
- at book value less surrender charges................ 167
- at market value..................................... 1,004
------
Subtotal.................................... 1,430
Subject to discretionary withdrawal -- without adjustment:
- at book value (minimal or no charge or
adjustment)......................................... 856
------
Total annuity actuarial reserves and deposit liabilities
(gross)....................................................... 3,391
Less: Reinsurance................................ 178
------
Total annuity actuarial reserves and deposit liabilities
(net)......................................................... $3,213
======
</TABLE>
The amounts shown above are included in the Company's statement of admitted
assets, liabilities and surplus as life insurance and annuity reserves ($1.5
billion) and separate account liabilities ($1.7 billion).
16. REINSURANCE:
Life insurance business is ceded on a yearly renewable term basis under
various reinsurance contracts. The Company's practice is to retain no more than
$4 million of risk on any one person for individual products and $6 million for
last survivor products. The total amount of reinsured life insurance in force on
this basis was $7 billion and $8.2 billion at December 31, 1996 and 1995,
respectively. Premiums ceded under these contracts were $35.1 million and $34.3
million; benefit payments recovered were approximately $31.5 million and $30.2
million; policy reserve credits recorded were $30.9 million and $30.2 million;
and recoverable amounts on paid and unpaid losses were $10.5 million and $7.3
million in 1996 and 1995, respectively.
The Company reinsured certain whole life and endowment contracts issued
through 1974 under an agreement which combines the modified coinsurance and the
coinsurance bases. Reserves subject to this agreement were $936 million in 1996
and $963 million in 1995, for which the Company recorded policy reserve credits
of $44.0 million and $44.0 million in 1996 and 1995 respectively. Premiums ceded
under this contract were $22.3 million in 1996 and $35.6 million in 1995.
The Company also reinsured certain whole life and endowment contracts
issued through 1974 under an agreement which combines the modified coinsurance
and the coinsurance bases. Reserves subject to this agreement were $764 million
in 1996 and $785 million in 1995, for which the Company recorded policy reserve
credits of $34.2 million and $34.2 million in 1996 and 1995, respectively.
Premiums ceded under this contract were $19.9 million in 1996 and $30.5 million
in 1995.
Effective December 31, 1995, the reinsurance agreements discussed in the
two preceeding paragraphs were amended to provide reimbursements for dividends
as required by N.Y. Regulation 102. Pursuant to the amended agreements, the
reinsurers are required to reimburse the Company for their share of dividends
paid on participating policies under a formula based on the relationship between
actual dividends and the Company's general account earnings rate, which will in
most instances result in a payment equal to the reinsurer's percentage share of
the Company's actual dividends.
F-34
<PAGE> 87
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
16. REINSURANCE (CONTINUED):
Under one agreement, the Company holds the entire dividend liability as a
modified coinsurance liability. Under the other agreement, the reinsurer
coinsures $16 million of the Company's dividend liability with the balance of
the dividend liability subject to a modified coinsurance arrangement.
In view of these differences in the agreements, and the fact that these
reimbursements will not in all instances equal the reinsurers' share of the
Company's actual dividends, the Company considers all reimbursements under the
first agreement as miscellaneous income, while it has reported reimbursements
for which it has a coinsurance credit as dividends received with the remainder
accounted for as miscellaneous income.
The Company has entered into coinsurance agreements with other insurers
related to a portion of its disability income, extended term insurance,
guaranteed interest contract and long-term disability claim liabilities. Under
the terms of these agreements at December 31, 1996 and 1995, ceded premiums were
$44.3 million and $43.7 million, respectively. The total ceded reserves and
claims liabilities under these agreements were $246.4 million and $241.5 million
at December 31, 1996 and 1995, respectively.
During 1994, the Company entered into an agreement to reinsure
approximately 50% of its block of paid-up life insurance policies. The Company
transferred assets equal to the total liabilities ceded into a segregated
portfolio within its general account to secure benefit payments from the
reinsurer and established a funds withheld liability to the reinsurer for a
corresponding amount. Reserves ceded under this agreement were $96.9 and $103.5
million at December 31, 1996 and 1995, respectively.
The Company is contingently liable with respect to ceded insurance should
any reinsurer be unable to meet its obligations under these agreements.
17. NOTES PAYABLE:
The Company has an outstanding liability for borrowed money in the amount
of $33.1 million at December 31, 1996, which represents the remaining
outstanding floating rate notes that were issued by a Trust that qualifies as a
REMIC (Real Estate Mortgage Investment Conduit) under Section 860 of the
Internal Revenue Code. These notes are secured by $365.8 million of mortgage
loans the Company transferred to the Trust in 1995 as collateral. Interest on
these notes ranged from 5.56% to 6.07% during 1996. Proceeds of the assets of
the Trust will be the sole source of payment on the notes. The Company has not
guaranteed these notes or the mortgage loans transferred to the Trust. The notes
are scheduled to mature September 25, 1997. The Company has accounted for this
transaction by consolidating the Trust's mortgages and debt. The Insurance
Department of the State of New York has the authority to direct payment in full
of the aggregate outstanding principal balance on the notes and accrued interest
at any time prior to the maturity or payment in full of the outstanding notes.
18. SURPLUS NOTES:
In 1994, the Company completed the sale of $125 million of 30-year Surplus
Notes which generated net proceeds of $70 million after a discount of 42.146%
from the principal amount payable at maturity and issuance expenses of
approximately $2.3 million. The $70 million of net proceeds has increased the
Company's surplus by a corresponding amount. Following the discount period,
interest will begin to accrue on August 15, 1999; thereafter, interest on the
Notes is scheduled to be paid on February 15 and August 15 of each year,
commencing February 15, 2000, at a rate of 11.25% per annum. Each accrual and
payment of interest on the Notes may be made only with the prior approval of the
New York State Superintendent of Insurance. Accordingly, the Company has made no
charge against its surplus for the accretion of discount on the Notes as
authorized by the New York State Insurance Department.
F-35
<PAGE> 88
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL SCHEDULE OF SELECTED FINANCIAL DATA
FOR THE YEAR ENDED DECEMBER 31, 1996
(AMOUNTS IN $ THOUSANDS)
The following is a summary of certain financial data from the Company's
Annual Statement included in other exhibits and schedules subjected to audit
procedures by independent accountants and utilized by the Company's actuaries in
the determination of reserves:
<TABLE>
<S> <C>
INVESTMENT INCOME EARNED
U.S. Government Bonds............................................................................ 14,166
Other bonds (unaffiliated)....................................................................... 295,393
Bonds of affiliates.............................................................................. 2,133
Preferred stocks (unaffiliated).................................................................. 936
Preferred stocks of affiliates................................................................... 0
Common stocks (unaffiliated)..................................................................... 54,402
Common stocks of affiliates...................................................................... 6,112
Mortgage loans................................................................................... 136,404
Real estate...................................................................................... 255,929
Premium notes, policy loans and liens............................................................ 77,491
Collateral loans................................................................................. 0
Cash on hand and on demand....................................................................... 189
Short-term investments........................................................................... 16,333
Other Invested Assets............................................................................ 21,434
Derivative Instruments........................................................................... (119)
Aggregate write-ins for investment income........................................................ 2,642
----------
Gross investment income...................................................................... 883,445
==========
REAL ESTATE OWNED -- BOOK VALUE LESS ENCUMBRANCES.................................................... 1,345,383
MORTGAGE LOANS -- BOOK VALUE:
Farm mortgages................................................................................... 409,126
Residential mortgages............................................................................ 3,307
Commercial mortgages............................................................................. 1,097,901
----------
Total mortgage loans......................................................................... 1,510,334
==========
MORTGAGE LOANS BY STANDING -- BOOK VALUE:
Good standing.................................................................................... 1,251,520
Good standing with restructured terms............................................................ 244,071
Interest overdue more than three months, not in foreclosure...................................... 2,768
Foreclosure in process........................................................................... 11,975
OTHER LONG TERM ASSETS -- STATEMENT VALUE............................................................ 1,550,955
COLLATERAL LOANS..................................................................................... 0
BONDS AND STOCKS OF PARENTS, SUBSIDIARIES AND AFFILIATES -- BOOK VALUE
Bonds............................................................................................ 5,755
Preferred Stocks................................................................................. 0
Common Stocks.................................................................................... 266,417
BONDS AND SHORT-TERM INVESTMENTS BY CLASS AND MATURITY:
BONDS AND SHORT-TERM INVESTMENTS BY MATURITY -- STATEMENT VALUE
Due within one year or less...................................................................... 409,942
Over 1 year through 5 years...................................................................... 1,179,416
Over 5 years through 10 years.................................................................... 2,299,643
Over 10 years through 20 years................................................................... 436,805
Over 20 years.................................................................................... 140,632
----------
Total by Maturity................................................................................ 4,466,438
==========
</TABLE>
F-36
<PAGE> 89
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL SCHEDULE OF SELECTED FINANCIAL DATA -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
(AMOUNTS IN $ THOUSANDS)
<TABLE>
<S> <C>
BONDS AND SHORT-TERM INVESTMENTS BY CLASS -- STATEMENT VALUE
Class 1.......................................................................................... 2,478,002
Class 2.......................................................................................... 1,698,214
Class 3.......................................................................................... 239,640
Class 4.......................................................................................... 35,163
Class 5.......................................................................................... 2,337
Class 6.......................................................................................... 13,082
----------
Total by Class................................................................................... 4,466,438
==========
TOTAL BONDS AND SHORT-TERM INVESTMENTS -- PUBLICLY TRADED............................................ 2,038,984
TOTAL BONDS AND SHORT-TERM INVESTMENTS -- PRIVATELY PLACED........................................... 2,427,454
PREFERRED STOCKS -- STATEMENT VALUE.................................................................. 2,130
COMMON STOCKS -- MARKET VALUE........................................................................ 471,569
SHORT-TERM INVESTMENTS -- BOOK VALUE................................................................. 137,815
FINANCIAL OPTIONS OWNED -- STATEMENT VALUE........................................................... 0
FINANCIAL OPTIONS WRITTEN AND IN FORCE -- STATEMENT VALUE............................................ 0
FINANCIAL FUTURES CONTRACTS OPEN -- CURRENT PRICE.................................................... 0
CASH ON HAND & ON DEPOSIT............................................................................ 37,358
LIFE INSURANCE IN FORCE:
Industrial....................................................................................... 0
Ordinary......................................................................................... 67,071,986
Credit Life...................................................................................... 0
Group Life....................................................................................... 7,228,977
AMOUNT OF ACCIDENTAL DEATH INSURANCE IN FORCE UNDER ORDINARY POLICIES................................ 3,927,180
LIFE INSURANCE POLICIES WITH DISABILITY PROVISIONS IN FORCE:
Industrial....................................................................................... 0
Ordinary......................................................................................... 36,943,091
Credit Life...................................................................................... 0
Group Life....................................................................................... 148,106
SUPPLEMENTARY CONTRACTS IN FORCE:
Ordinary -- Not Involving Life Contingencies
Amount on Deposit............................................................................ 185,466
Income Payable............................................................................... 2,007
Ordinary -- Involving Life Contingencies Income Payable.......................................... 6,101
Group -- Not Involving Life Contingencies
Amount on Deposit............................................................................ 3,488
Income Payable............................................................................... 537
Group -- Involving Life Contingencies
Income Payable............................................................................... 7
Annuities:
Ordinary
Immediate -- Amount of Income Payable........................................................ 7,308
Deferred -- Fully Paid -Account Balance...................................................... 18,768
Deferred -- Not Fully Paid -- Account Balance................................................ 9,610
Group
Amount of Income Payable..................................................................... 27,377
Fully Paid -- Account Balance................................................................ 34,116
Not Fully Paid -- Account Balance............................................................ 0
</TABLE>
F-37
<PAGE> 90
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL SCHEDULE OF SELECTED FINANCIAL DATA -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
(AMOUNTS IN $ THOUSANDS)
<TABLE>
<S> <C>
ACCIDENT AND HEALTH INSURANCE -- PREMIUMS IN FORCE:
Ordinary......................................................................................... 78,903
Group............................................................................................ 3,465
Credit........................................................................................... 0
DEPOSIT FUNDS AND DIVIDEND ACCUMULATIONS:
Deposit Funds -- Account Balance................................................................. 705,688
Dividend Accumulations -- Account Balance........................................................ 298,888
CLAIM PAYMENTS 1996:
Group Accident and Health Year-Ended December 31, 1996
1996......................................................................................... 12,610
1995......................................................................................... 3,434
1994......................................................................................... 489
1993......................................................................................... 129
1992......................................................................................... 143
Prior........................................................................................ 1,770
CLAIM PAYMENTS 1996:
Other Accident and Health 1996................................................................... 1,985
1995......................................................................................... 4,308
1994......................................................................................... 2,538
1993......................................................................................... 2,032
1992......................................................................................... 1,567
Prior........................................................................................ 4,012
Other Coverages that use developmental methods to
calculate claims reserves 1996................................................................. 0
1995......................................................................................... 0
1994......................................................................................... 0
1993......................................................................................... 0
1992......................................................................................... 0
Prior........................................................................................ 0
</TABLE>
F-38
