<PAGE> 1
REGISTRATION NOS. 33-37722
811-6216
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 20 [X]
REGISTRATION STATEMENT
UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 27
(CHECK APPROPRIATE BOX OR BOXES.)
------------------------
MONY VARIABLE ACCOUNT A
(EXACT NAME OF REGISTRANT)
MONY LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
1740 BROADWAY
NEW YORK, NEW YORK 10019
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(212) 708-2000
(DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE)
FREDERICK C. TEDESCHI
VICE PRESIDENT AND CHIEF COUNSEL -- OPERATIONS
MONY LIFE INSURANCE COMPANY
1740 BROADWAY
NEW YORK, NEW YORK 10019
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: It is proposed that this
filing will become effective on May 1, 1999 pursuant to paragraph (b) of Rule
485.
------------------------
STATEMENT PURSUANT TO RULE 24f-2
THE REGISTRANT REGISTERS AN INDEFINITE NUMBER OR AMOUNT OF ITS FLEXIBLE
PAYMENT ANNUITY VARIABLE CONTRACTS UNDER THE SECURITIES ACT OF 1933 PURSUANT TO
RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940. THE RULE 24F-2 NOTICE FOR
REGISTRANT'S FISCAL YEAR ENDING DECEMBER 31, 1998 WAS FILED ON MARCH 29, 1999.
- --------------------------------------------------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
<PAGE> 3
CROSS REFERENCE SHEET
(REQUIRED BY RULE 495)
PART A
<TABLE>
<CAPTION>
ITEM NO. LOCATION
-------- --------
<C> <S> <C>
1. Cover Page.......................................... Cover Page
2. Definitions......................................... Definitions
3. Synopsis............................................ Summary of the Contracts
4. Condensed Financial Information..................... Condensed Financial Information
5. General Description of Registrant, Depositor,
and Portfolio Companies........................... MONY Life Insurance Company; MONY Variable
Account A; The Funds
6. Deductions and Expenses............................. Charges and Deductions
7. General Description of Variable Annuity Contracts... Payment and Allocation of Net Purchase
Payments; Other Provisions
8. Annuity Period...................................... Annuity Provisions
9. Death Benefit....................................... Death Benefit; Annuity Provisions
10. Purchases and Contract Value........................ Payment and Allocation of Net Purchase
Payments
11. Redemptions......................................... Surrenders
12. Taxes............................................... Federal Tax Status
13. Legal Proceedings................................... Legal Proceedings
14. Table of Contents of Statement of Additional
Information....................................... Table of Contents of Statement of
Additional Information
PART B
15. Cover Page.......................................... Cover Page
16. Table of Contents................................... Table of Contents
17. General Information and History..................... MONY Life Insurance Company
18. Services............................................ Not Applicable
19. Purchases of Securities Being Offered............... Not Applicable
20. Underwriters........................................ Prospectus -- MONY Life Insurance Company
21. Calculation of Performance Data..................... Performance Data
22. Annuity Payments.................................... Not Applicable
23. Financial Statements................................ Financial Statements
PART C
Information related to the following Items is set forth under the appropriate Item, so numbered, in
Part C to this Registration Statement.
24. Financial Statements and Exhibits
25. Directors and Officers of the Depositor
26. Persons Controlled by or Under Common Control with the Depositor or Registrant
27. Number of Contractowners
28. Indemnification
29. Principal Underwriters
30. Location of Accounts and Records
31. Management Services
32. Undertakings
</TABLE>
<PAGE> 4
PROSPECTUS
Dated May 1, 1999
Individual Flexible Payment Variable Annuity Contracts
Issued By
MONY Variable Account A
MONY Life Insurance Company
MONY Life Insurance Company issues the flexible payment variable annuity
contract described in this prospectus. Among the contract's many terms are:
Allocation of Purchase Payments and Surrender Value
- - You can tell us what to do with your purchase payments. You can also tell us
what to do with the Cash Value your contract may create for you resulting from
those purchase payments.
- You can tell us to place them into a separate account. That separate
account is called MONY Variable Account A.
- If you do, you can also tell us to place your purchase payments and
Cash Values into any or all of 9 different subaccounts. Each of these
subaccounts seeks to achieve a different investment objective. The
subaccounts invest in shares of the following portfolios of the MONY
Series Fund, Inc. and The Enterprise Accumulation Trust.
- MONY Series Fund, Inc.
- Money Market Portfolio, Government Securities Portfolio, Long Term Bond
Portfolio and Intermediate Term Bond Portfolio
- The Enterprise Accumulation Trust
- Equity Income Portfolio, Managed Portfolio, Small Company Growth
Portfolio, Small Company Value Portfolio, International Growth Portfolio
and High Yield Bond Portfolio
- You can also tell us to place some or all of your purchase payments and
Cash Values into our Guaranteed Interest Account. Our account will pay you
a guaranteed interest rate annually, and we will guarantee that those
purchase payments and Cash Values will not lose any value, so long as you
leave the purchase payments and Cash Values in the Account. Purchase
payments and Cash Values you place into the Guaranteed Interest Account
become part of our assets.
Living Benefits
- Annuity Benefits
- This contract is designed to pay to you the Cash Value in periodic
installments.
- Cash Value Benefits
- You may ask for some or all of the contract's Cash Value at any time.
If you do, we may deduct a surrender charge.
Death Benefit
- - We will pay a death benefit to your beneficiary upon the death of the person
you name as annuitant before the annuity commencement date.
Fees and Charges
- - The contract allows us to deduct certain charges from the surrender value.
These charges are detailed in this prospectus.
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information dated May 1, 1999 containing additional
information about the Contracts is incorporated herein by reference. It has been
filed with the Securities and Exchange Commission and is available from the
Company without charge upon written request to the address shown on the request
form on page 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 is not an offer to sell or a solicitation of an offer to buy the
Contracts in any jurisdiction where such may not be lawfully made.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense. This prospectus contains basic information that you should
know before investing. It comes with prospectuses for the MONY Series Fund,
Inc., Enterprise Accumulation Trust, the Guaranteed Interest Account and MONY
Life Insurance Company. You should read these prospectuses carefully and keep
them for future reference.
MONY Life Insurance Company
1740 Broadway, New York, New York 10019
1-800-487-6669
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of the Contract..................................... 1
Purpose of the Contract................................... 1
Purchase Payments and Cash Values......................... 1
MONY Variable Account A................................... 2
Guaranteed Interest Account............................... 2
Minimum Purchase Payments................................. 2
Transfer of Cash Values................................... 2
Surrender................................................. 3
Charges and Deductions.................................... 3
Right to Return Contract Provision........................ 3
Death Benefit............................................. 3
Detailed Information About the Company
and MONY Variable Account A............................... 9
MONY Life Insurance Company............................... 9
Year 2000 Issue........................................... 9
MONY Variable Account A................................... 11
The Funds................................................... 13
MONY Series Fund Inc. .................................... 13
Enterprise Accumulation Trust............................. 14
Purchase of Portfolio Shares by MONY Variable Account A... 15
Guaranteed Interest Account............................... 16
Detailed Information About the Policy....................... 17
Payment and Allocation of Purchase Payments............... 17
Surrenders.................................................. 22
Death Benefit............................................... 24
Death Benefit Provided by the Contract.................... 24
Election and Contract Date of Election.................... 24
Payment of Death Benefit.................................. 25
Charges and Deductions...................................... 25
Deductions from Purchase Payments......................... 25
Charges Against Cash Value................................ 26
Annuity Provisions.......................................... 29
Annuity Payments.......................................... 29
Election and Change of Settlement Option.................. 30
Settlement Options........................................ 30
Frequency of Annuity Payments............................. 31
Additional Provisions..................................... 31
Other Provisions............................................ 32
Ownership................................................. 32
Provision Required by Section 72(s) of the Code........... 32
Provision Required by Section 401(a)(9) of the Code....... 33
Contingent Annuitant...................................... 33
Assignment................................................ 34
Change of Beneficiary..................................... 34
Substitution of Securities................................ 35
</TABLE>
i
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Modification of the Contracts............................. 35
Change in Operation of MONY Variable Account A............ 35
Voting Rights............................................... 35
Distribution of the Contracts............................... 37
Federal Tax Status.......................................... 37
Introduction.............................................. 37
Tax Treatment of the Company.............................. 37
Taxation of Annuities in General.......................... 37
Annuity Contracts Governed by Section 403(b) of the
Code................................................... 38
Retirement Plans.......................................... 39
Special Exchange Offer...................................... 40
Performance Data............................................ 40
Additional Information...................................... 41
Legal Proceedings........................................... 41
Financial Statements........................................ 41
</TABLE>
ii
<PAGE> 7
SUMMARY OF THE CONTRACT
This summary provides you with a brief overview of the more important
aspects of your Contract. It is not intended to be complete. More detailed
information is contained in this prospectus on the pages following this Summary
and in your contract. This summary and the entire prospectus will describe the
part of the contract involving MONY Variable Account A. The prospectus also
briefly will describe the Guaranteed Interest Account And the portfolios offered
by MONY Series Fund, Inc. and Enterprise Accumulation Trust. More detailed
information about the Guaranteed Interest Account is contained in the prospectus
attached to this prospectus and in your contract. More detailed information
about the portfolios offered by MONY Series Fund, Inc. and Enterprise
Accumulation Trust is contained in the prospectus attached to this prospects.
DEFINITIONS
THIS PROSPECTUS CONTAINS SOME SPECIALIZED TERMS. WE HAVE DEFINED SPECIALIZED
TERMS ON THE PAGE WHERE THEY FIRST APPEAR. THE DEFINITIONS WILL APPEAR ON THE
PAGE IN A BOX LIKE THIS ONE.
PURPOSE OF THE CONTRACT
The Contract is an Individual Flexible Payment Variable Annuity Contract
(the "Contract" or "Contracts").
The Contract is designed to allow an Contractholder to make purchase
payments to the Company under the Contract. Those purchase payments are
allocated at the Contractholder's choice among the subaccounts of MONY Variable
Account A and the Guaranteed Interest Account. Those purchase payments can
accumulate for a period of time and create Cash Values for the Contractholder.
The Contractholder can chose the length of time that such purchase payments may
accumulate. The Contractholder may chose at some point in the future to receive
annuity benefits based upon those accumulated Cash Values.
An Contractholder may use the Contract's design to accumulate Cash Values
for various purposes including retirement or to supplement other retirement
programs. Some of these retirement programs (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").
QUALIFIED PLANS -- Retirement plans that receive favorable tax treatment under
Section 401, 403, 408 or 457 of the Internal Revenue Code.
QUALIFIED CONTRACTS -- Contracts issued under Qualified Plans.
The Contract is also designed to allow the Contractholder to request
payments of part or all of the accumulated Cash Values before the Contractholder
begins to receive annuity benefits. This payment may result in the imposition of
a surrender charge. It may also be subject to income and other taxes.
PURCHASE PAYMENTS AND CASH VALUES
The purchase payments you make for the Contract are received by the
Company. Currently those purchase payments are not subject to taxes imposed by
the United States Government or any state or local government.
You may allocate your purchase payments to one or more of the subaccounts
of MONY Variable Account A that are available under the Contract and/or to the
Guaranteed Interest Account. The purchase payments you allocate among the
various subaccounts of MONY Variable Account A may increase or decrease in value
on any day depending on the investment experience of the subaccounts you select.
There is
1
<PAGE> 8
no guarantee that the value of the purchase payments you allocate to any of the
subaccounts of MONY Variable Account A will increase or that the purchase
payments you make will not lose value.
Purchase payments you allocate to the Guaranteed Interest Account will be
credited with interest at a rate determined by the Company. That rate will not
be less than 3.5%.
MONY VARIABLE ACCOUNT A
MONY Variable Account A is a separate investment account of MONY Life
Insurance Company (the "Company"). MONY Variable Account A's assets are owned by
the Company, but are not chargeable with liabilities arising from any other
business the Company conducts.
The subaccounts of MONY Variable Account A invest in shares of MONY Series
Fund, Inc. and The Enterprise Accumulation Trust (collectively called the
"Funds") at their net asset value. (See "The Funds" at page ).
Contractholder bear the entire investment risk for all amounts allocated to MONY
Variable Account A subaccounts.
CONTRACTHOLDERS -- 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.
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.
GUARANTEED INTEREST ACCOUNT
The Guaranteed Interest Account is part of the Company's general account.
It consists of all the Company's assets other than assets allocated to
segregated investment accounts of the Company. 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 .)
CASH VALUE -- The dollar value as of any Valuation Date of all amounts
accumulated under the
Contract.
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 on a national or international securities exchange to
materially affect the value of the units of the corresponding subaccount.
MINIMUM PURCHASE PAYMENTS
The minimum purchase payment for individuals varies depending upon the
purchaser of the contract and the method of paying the purchase payments. See
"Payment and Allocation of Payment on page .
Additional purchase payments of at least $100 may be made at any time.
However, for certain automatic payment plans, the smallest additional payment is
$50. (See "Issuance of the Contract" at page .) The Company may change any
of these requirements in the future.
TRANSFER OF CASH VALUES
You may transfer Cash Value among the subaccounts and to or from the
Guaranteed Interest Account. Transfers may be made by telephone if the proper
form has been completed, signed, and received by the Company at its Operations
Center located at 1 MONY Plaza, Syracuse, New York 13202. See "Transfer of Cash
Value", page .
2
<PAGE> 9
SURRENDER
You may surrender all or part of the Contract at any time and receive its
surrender value while the annuitant is alive prior to the annuity commencement
date. We may impose a surrender charge. The amounts you receive upon surrender
may be subject to income taxes. (See "Federal Tax Status" at page .)
CHARGES AND DEDUCTIONS
The Contract provides for the deduction of various charges and expenses
from the Cash Value of the Contract. These deductions are summarized in the
table on pages - and discussed in greater detail beginning on page
.
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, 408, or 457 of the Internal Revenue Code.
RIGHT TO RETURN CONTRACT PROVISION
You have the right to examine the Contract when you receive it. You may
return the Contract for any reason within ten days from the day you receive it.
You will receive a full refund of the purchase payments received by the Company.
During the Free Look Period, purchase payments will be retained in the Money
Market Subaccount of Variable Account A.
DEATH BENEFIT
If the Annuitant (and the Contingent Annuitant, if any) dies before the
date the annuity payments start, the Company will pay a death benefit to the
Beneficiary. Under certain circumstances, an Enhanced Death Benefit may be
payable. If the Annuitant dies after annuity payments start, no death benefit is
payable except as may be payable under the settlement option selected. (See
"Death Benefit" at page and "Enhanced Death Benefit" at page .)
ANNUITANT -- The person upon whose continuation of life any annuity payment
depends.
CONTINGENT ANNUITANT -- The party designated by the Contractholder to become the
Annuitant, subject to certain conditions, on the death of the Annuitant.
BENEFICIARY -- The party entitled to receive benefits payable at the death of
the Annuitant or (if applicable) the Contingent Annuitant.
3
<PAGE> 10
MONY LIFE INSURANCE COMPANY
MONY VARIABLE ACCOUNT A
TABLE OF FEES FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
CONTRACTHOLDER TRANSACTION EXPENSES:
Maximum Deferred Sales Load (Surrender Charge)
(as a percentage of amount surrendered)................... 7%*
Maximum Annual Contract Charge.............................. $ 30**
Maximum Transfer Charge..................................... $ 25**
SEPARATE ACCOUNT ANNUAL EXPENSES:
Maximum Mortality and Expense Risk Fees..................... 1.25%***
Total Separate Account Annual Expenses...................... 1.25%***
ANNUAL EXPENSES OF MONY SERIES FUND, INC. AND THE ENTERPRISE
ACCUMULATION TRUST:
</TABLE>
MONY SERIES FUND, INC.
ANNUAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1998
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
GOVERNMENT
INTERMEDIATE TERM LONG TERM SECURITIES MONEY MARKET
BOND PORTFOLIO BOND PORTFOLIO PORTFOLIO PORTFOLIO
----------------- -------------- ---------- ------------
<S> <C> <C> <C> <C>
Expenses (After Reimbursement)........... .11%(1) .07%(1) .13%(1) .05%(1)
Management Fees.......................... .50% .50% .50% .40%
Total Annual Expenses.................... .61% .57% .63% .45%
</TABLE>
ENTERPRISE ACCUMULATION TRUST
ANNUAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1998
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
SMALL+ HIGH
COMPANY INTERNATIONAL YIELD
EQUITY VALUE MANAGED GROWTH BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Expenses.................................... .05%(2) .05%(2) .04%(2) .37%(2) .12%(2)
Management Fees............................. .78% .80% .72% .85% .60%
Total Accumulation Trust Annual Expenses
After Reimbursement....................... .83% .85% .76% 1.22% .72%
</TABLE>
- ---------------
* The Surrender Charge percentage, which reduces to zero as shown in the table
on page , is determined by the number of Contract Anniversaries since a
purchase payment was received. 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 .
** For Non-Qualified Contracts the Annual Contract Charge is currently $30. For
Qualified Contracts (other than those issued for IRA and SEP-IRA) the Annual
Contract Charge is $15 per contract year. However, the Company may in the
future change the amount of the charge to an amount not exceeding $50 per
contract year. See "Charges Against Cash Value -- Annual Contract Charge",
at page 26. The Transfer Charge currently is $0. However, the Company has
reserved the right to impose a charge for each transfer, which will not
exceed $25. See "Charges Against Cash Value -- Transfer Charge" at page 27.
*** The Mortality and Expense Risk charge is deducted daily equivalent to a
current annual rate of 1.25 percent from the value of the net assets of the
Separate Account.
+ The name, but not the investment objectives or policies, of the Small Cap
Portfolio was changed effective May 1, 1998 to the Small Company Value
Portfolio.
(1) Expenses also include custodial credit percentages as follows: Intermediate
Term Bond -- .009%; Long Term Bond -- .005%; Government Securities -- .012%;
Money Market -- .004%. Absent custodial credits, expenses would have been as
follows: Intermediate Term Bond -- .62%, Long Term Bond -- .58%, Government
Securities -- .64% and Money Market -- .45%.
(2) Reflects expense reimbursements in effect since May 1, 1996. Absent these
expense reimbursements, expenses would have been as follows: Equity -- .83%;
Small Company Value -- .85%; Managed -- .76%; International Growth -- 1.22%;
and High Yield Bond -- .72%. The Equity, Small Company Value, and Managed
Portfolio reimbursements relate to mutual fund accounting expense.
4
<PAGE> 11
The purpose of the Table of Fees beginning on page is to assist the
Contractholder in understanding the various costs and expenses that the
Contractholder will bear, directly or indirectly. The table reflects the
expenses of the separate account as well as of MONY Series Fund, Inc. and
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 of this Prospectus. The expenses
borne by the MONY Series Fund, Inc. are explained under the caption "Investment
Management Arrangements and Expenses" at page of the accompanying
prospectus for MONY Series Fund, Inc.. The expenses borne by the Enterprise
Accumulation Trust assume that the expense reimbursements in effect on and after
May 1, 1990 for the Equity, Small Company Value, and Managed Portfolios which
limit the total annual expenses to 1.00% of average net assets and expense
reimbursements which, on and after November 16, 1994 (commencement of
operations), limit the total annual expenses of the International Growth
Portfolio to 1.55% of average net assets and the High Yield Bond Portfolio to
..85% of average net assets, will continue throughout the period shown and are
explained under the caption "Management of the Fund" at page of the
accompanying prospectus for the Accumulation Trust. Effective on and after May
1, 1996 and at least through April 1, 1999, as a part of the increase in
investment advisory fees, the investment adviser has agreed to reimburse the
Accumulation Trust for expenses which exceed .95% of the average daily net
assets of the Equity, Small Company Value, and Managed Portfolios of the Trust.
The table does not reflect income taxes or penalty taxes which may become
payable under the Internal Revenue Code or premium or other taxes which may be
imposed under state or local laws.
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 $160 $248
Small Company Value......................................... $85 $121 $161 $250
Managed..................................................... $84 $119 $156 $241
International Growth........................................ $89 $133 $179 $288
High Yield Bond............................................. $83 $117 $154 $237
Intermediate Term Bond...................................... $82 $114 $149 $226
Long Term Bond.............................................. $82 $113 $147 $222
Government Securities....................................... $83 $115 $150 $229
Money Market................................................ $81 $109 $140 $208
</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 $115 $248
Small Company Value......................................... $85 $121 $116 $250
Managed..................................................... $84 $119 $112 $241
International Growth........................................ $89 $133 $135 $288
High Yield Bond............................................. $83 $117 $110 $237
Intermediate Term Bond...................................... $82 $114 $105 $226
Long Term Bond.............................................. $82 $113 $103 $222
Government Securities....................................... $83 $115 $106 $229
Money Market................................................ $81 $109 $ 96 $208
</TABLE>
5
<PAGE> 12
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 $67 $115 $248
Small Company Value......................................... $22 $68 $116 $250
Managed..................................................... $21 $65 $112 $241
International Growth........................................ $26 $79 $135 $288
High Yield Bond............................................. $21 $64 $110 $237
Intermediate Term Bond...................................... $20 $61 $105 $226
Long Term Bond.............................................. $19 $60 $103 $222
Government Securities....................................... $20 $62 $106 $229
Money Market................................................ $18 $56 $ 96 $208
</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,
Inc. and the Enterprise Accumulation Trust) expenses, net of expense
reimbursements, are reflected in the examples. Not reflected in the examples
which assume surrender 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
MONY LIFE INSURANCE COMPANY
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 1989 1990 1991 1992 1993 1994 1995
----------- --------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity.................................. $10.00 $12.30 $11.88 $15.40 $17.94 $19.11 $19.60 $26.82
Small Company Value..................... 10.00 11.88 10.58 15.49 18.60 21.96 21.69 24.05
Intermediate Term Bond.................. 10.00 11.13 11.76 13.40 14.15 15.07 14.66 16.62
Long Term Bond.......................... 10.00 11.83 12.41 14.43 15.50 17.49 16.21 20.84
Government Securities................... 10.00 -- -- -- -- -- 9.99 10.94
High Yield Bond......................... 10.00 -- -- -- -- -- 10.04 11.56
International Growth.................... 10.00 -- -- -- -- -- 9.91 11.22
Managed................................. 10.00 13.61 12.96 18.70 21.92 23.90 24.21 35.15
Money Market............................ 10.00 11.32 12.08 12.62 12.88 13.08 13.42 14.01
<CAPTION>
UNIT VALUE**
------------------------------
DEC. 31, DEC. 31, DEC. 31,
SUB-ACCOUNT 1996 1997 1998
----------- -------- -------- --------
<S> <C> <C> <C>
Equity.................................. $33.18 $41.22 $44.75
Small Company Value..................... 26.43 37.69 40.80
Intermediate Term Bond.................. 17.02 18.11 19.22
Long Term Bond.......................... 20.51 22.99 24.99
Government Securities................... 11.20 11.85 12.51
High Yield Bond......................... 12.90 14.45 14.78
International Growth.................... 12.48 12.98 14.72
Managed................................. 42.88 52.73 56.22
Money Market............................ 14.54 15.12 15.72
</TABLE>
6
<PAGE> 13
<TABLE>
<CAPTION>
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
SUB-ACCOUNT 1989 1990 1991 1992 1993 1994 1995 1996
----------- -------- -------- -------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Equity.................................. 81,273 137,731 185,946 315,372 496,795 651,102 798,552 1,123,086
Small Company Value..................... 34,030 53,185 80,022 198,539 529,142 742,341 807,452 837,807
Intermediate Term Bond.................. 84,415 129,272 186,026 243,826 354,965 398,645 398,283 381,313
Long Term Bond.......................... 75,208 215,001 276,879 377,464 499,364 476,335 495,169 503,775
Government Securities................... -- -- -- -- -- 2,571 83,571 162,102
High Yield Bond......................... -- -- -- -- -- 14,621 92,358 247,295
International Growth.................... -- -- -- -- -- 19,197 167,074 472,752
Managed................................. 471,771 813,411 972,640 1,571,876 2,941,211 3,528,618 4,253,824 5,150,485
Money Market............................ 218,778 299,411 456,647 570,819 620,100 872,441 1,227,811 1,355,274
<CAPTION>
DEC. 31, DEC. 31,
SUB-ACCOUNT 1997 1998
----------- --------- ---------
<S> <C> <C>
Equity.................................. 1,428,789 1,510,836
Small Company Value..................... 1,042,727 1,087,406
Intermediate Term Bond.................. 436,486 561,493
Long Term Bond.......................... 604,629 847,628
Government Securities................... 302,006 581,295
High Yield Bond......................... 502,892 732,343
International Growth.................... 664,152 711,551
Managed................................. 5,633,476 5,369,272
Money Market............................ 1,543,043 3,114,064
</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 Company Value, and
Managed Subaccounts became available for allocation on August 1, 1988, and
the Government Securities, International Growth, and High Yield Bond
Subaccounts became available for allocation on November 16, 1994.
** This table reflects the Accumulation Unit Values for the Contracts prior to
the merger of MONY Legacy Life Insurance Company into the Company, which
became effective on February 28, 1991, as well as Accumulation Unit Values
resulting from operations thereafter. As a result of the merger, all assets,
reserves, and other liabilities, and, therefore, all Accumulation Unit
Values, became assets, reserves, and other liabilities, and accumulation unit
values of the MONY Variable Account A. The table reflects historical
performance and is not indicative of future results.
7
<PAGE> 14
The following chart may help you understand how the contract works:
[MONY ORGANIZATIONAL CHART]
8
<PAGE> 15
DETAILED INFORMATION ABOUT THE COMPANY
AND MONY VARIABLE ACCOUNT A
MONY LIFE INSURANCE COMPANY
MONY Life Insurance Company issues the contract. In this prospectus MONY
Life Insurance Company is called the "Company". The Company is a stock life
insurance company organized in the State of New York. The Company is currently
licensed to sell life insurance and annuities in 50 states, the District of
Columbia, Puerto Rico, and the U.S. Virgin Islands.
The principal office of the Company is located at 1740 Broadway, New York,
New York. The Company was organized as a mutual life insurance company under the
laws of the State of New York in 1842 under the name The Mutual Life Insurance
Company of New York. In 1998, The Mutual Life Insurance Company of New York
converted to a stock company through demutualization and was renamed MONY Life
Insurance Company. The demutualization did not have any material effect on MONY
Variable Account A or the Contract.
At May 1, 1999, the rating assigned to the Company by A.M. Best Company,
Inc., an independent insurance company rating organization, was
A -- (Excellent). This rating is based upon an analysis of financial condition
and operating performance through the end of 1997. 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 policies.
YEAR 2000 ISSUE
The Year 2000 issue is the result of widespread use of computer programs
which use two digits (rather than four) to define a year. By use of a two-digit
field, the industry avoided the greater cost of additional mainframe capacity.
As a result, any of the Company's computer systems that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the Year
2000. This could result in a major system failure or in miscalculations.
State of Readiness
In 1996, the Company, on behalf of itself and its affiliates, initiated a
formal Year 2000 Project to resolve the Year 2000 issue. The scope of the
Project was identified, and funding was established. In early 1997, the Company
retained Command Systems, Inc., and Keane, Inc. to assist the Company in
bringing the Company's computer and information systems into Year 2000
compliance. The Company's overall goal for information technology ("IT") related
items is to have business-critical hardware and software compliant by December
31, 1998, with additional testing and enterprise end-to-end testing occurring in
1999. MONY has also retained Technology Resource Solutions to assist in the
evaluation of Year 2000 issues affecting the Company's non-IT systems in
facilities and equipment which may contain date logic in embedded chips. MONY's
overall goal is to have all non-IT systems compliant by mid-1999.
The scope of the Project includes:
- ensuring the compliance of all applications, operating systems and
hardware on mainframe, PC and LAN platforms;
- ensuring the compliance of voice and data network software and hardware;
addressing issues related to non-IT systems in buildings, facilities and
equipment which may contain date logic in embedded chips; and
- addressing the compliance of key vendors and other third parties.
The phases of the Project are:
(1) inventorying Year 2000 items and assigning priorities;
(2) assessing the Year 2000 compliance of items;
9
<PAGE> 16
(3) remediating or replacing items that are determined not to be Year
2000 compliant;
(4) testing items for Year 2000 compliance; and
(5) designing and implementing Year 2000 contingency and business
continuity plans.
To determine that all IT systems (whether internally developed or
purchased) are Year 2000 compliant, each system is tested using a standard
testing methodology which includes unit testing, baseline testing, and future
date testing. Future date testing includes critical dates near the end of 1999
and into the Year 2000, including leap year testing.
The inventory and assessment phases of the Project were completed prior to
mid 1998. At December 31, 1998, all of the Company's application systems had
been remediated, and current date tested. In addition, approximately 94% of the
Company's applications had been future date tested, with future date testing for
the remaining 6% scheduled for completion by mid-1999. New implemented
applications and new releases of software packages will be tested in 1999 as
part of the implementation process. Approximately 87% of the operating systems,
systems software, and hardware for mainframe, PC and LAN platforms were deemed
compliant based on information supplied by vendors verbally, in writing, or on
the vendor's Internet site. Of the IT business critical items, essentially all
were compliant and tested by December 31, 1998. The remaining items will be
resolved and tested in the first quarter of 1999. Approximately 50% of non-IT
business critical items had been remediated as of December 31, 1998. Ongoing
testing for Year 2000 compliance will continue in 1999, and is expected to be
completed by mid-1999.
As part of the Project, significant service providers, vendors, suppliers,
and other third parties that are believed to be critical to business operations
after January 1, 2000, have been identified and steps are being undertaken in an
attempt to reasonably ascertain their stage of Year 2000 readiness through
questionnaires, interviews, on-site visits, and other available means.
Costs
The estimated total cost of the Year 2000 Project is approximately $26.0
million. The total amount expended on the Project through December 31, 1998 was
$23 million which includes $16 million for external vendor costs, and $7 million
for internal costs. The estimated future cost of completing the Year 2000
Project is estimated to be approximately $3 million, which includes $1 million
for external vendor costs, and $2 million for internal costs. These amounts
include costs associated with the current development of contingency plans.
Risks
The Company believes that completed and planned modifications and
conversions of its internal systems and equipment will allow it to be Year 2000
compliant in a timely manner. There can be no assurance, however, that the
Company's internal systems or equipment or those third parties on which the
Company relies will be Year 2000 compliant in a timely manner or that the
Company's or third parties' contingency plans will mitigate the effects of any
noncompliance. The failure of the systems or equipment of the Company or third
parties (which the Company believes is the most reasonable likely worst case
scenario) could affect the distribution and sale of life insurance, annuity and
investment products and could have a material effect on the Company's financial
position and results of operations.
Contingency Plans
The Company has retained outside consultants to assist in the development
of Business Continuity Plans, which includes identification of third party
service providers, information systems, equipment, facilities, and other items
which are mission critical to the operation of the business. In conjunction with
this effort, the Company is developing a Year 2000 Contingency Plan to address
failures due to the Year 2000 problem of third parties and other items, which
are critical to the ongoing operation of the business. The Contingency Plan
includes the performance of alternate processing as well as consideration for
changing third party service providers, vendors, and suppliers if necessary. The
scheduled date for completion of the Contingency Plan is
10
<PAGE> 17
mid 1999. The Company believes that due to the pervasive nature of potential
Year 2000 issues, the contingency planning process is an ongoing one that will
require further modifications as the Company obtains additional information
regarding the status of third party Year 2000 readiness.
MONY Series Fund and the Accumulation Trust have reviewed their investment
advisers and other suppliers of services with respect to the Year 2000 issue.
MONY Series Fund and the Accumulation Trust prospectuses, which are included in
the Prospectus Portfolio, contain the results of these reviews. See MONY Series
Fund prospectus at page . Accumulation Trust prospectus at page .
MONY VARIABLE ACCOUNT A
MONY Variable Account A is a separate investment account of the Company.
Presently, only purchase payments for individual flexible payment variable
annuity contracts are permitted to be allocated to MONY Variable Account A. The
assets in MONY Variable Account A are kept separate from the general Account
Assets and other separate accounts of the Company.
The Company owns the assets in MONY Variable Account A. The Company is
required to keep assets in MONY Variable Account A that equal the total market
value of the contract liabilities funded by MONY Variable Account A. Realized or
unrealized income gains or losses of MONY Variable Account A are credited or
charged against MONY Variable Account A assets without regard to the other
income, gains or losses of the Company. Reserves and other liabilities under the
contracts are assets of MONY Variable Account A. MONY Variable Account A assets
are not chargeable with liabilities of the Company's other businesses. All
obligations under the contract are general corporate obligations of the Company.
The Company may accumulate in MONY Variable Account A proceeds from various
contract charges applicable to those assets. From time to time, any such
additional assets may be transferred in cash to the Company's General Account.
MONY Variable Account A was authorized by the Board of Directors of the
Company and established under New York law on November 28, 1990. MONY Variable
Account A is registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940 (the "1940 Act") as a unit investment
trust. A unit investment trust is a type of investment company. This does not
involve any supervision by the SEC or the management or investment policies or
practices of MONY Variable Account A. For state law purposes, MONY Variable
Account A is treated as a part or division of the Company.
MONY Variable Account A is divided into subdivisions called subaccount.
There are currently 9 subaccounts available to you. Each subaccount invests only
in shares of a designated portfolio of MONY Series Fund, Inc or the Enterprise
Accumulation Trust. For example, the Long Term Bond Subaccount invests solely in
shares of the MONY Series Fund, Inc. Long Term Bond Portfolio. These portfolios
serve only as the underlying investment for variable annuity and variable life
insurance contracts issued through separate accounts of the Company or other
life insurance companies. The portfolios may also be available to certain
pension accounts. The portfolios are not available directly to individual
investors. In the future, the Company may establish additional subaccounts of
MONY Variable Account A. Future subaccounts may invest in other portfolios of
the Funds or in other securities. MONY Series Fund, Inc. has a total of seven
portfolios. Only four of the seven portfolios are available to you.
The following table lists the subaccounts of MONY Variable Account A that
are available to you, their respective investment objectives, and which Fund
portfolio shares are purchased:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
SUBACCOUNT AND DESIGNATED PORTFOLIO INVESTMENT OBJECTIVE
--------------------------------------------------------------------------------------------
<S> <C> <C>
THE MONEY MARKET SUBACCOUNT Maximum current income consistent with
preservation of capital and maintenance of
This subaccount purchases shares of the liquidity. Tries to achieve objective by
MONY Series Fund, Inc. Money Market investing in money market instruments.
Portfolio.
--------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 18
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
SUBACCOUNT AND DESIGNATED PORTFOLIO INVESTMENT OBJECTIVE
--------------------------------------------------------------------------------------------
<S> <C> <C>
THE GOVERNMENT SECURITIES SUBACCOUNT Maximum current income over the
intermediate term consistent with the
This subaccount purchases shares of the preservation of capital. Tries to achieve
MONY Series Fund, Inc. Government objective through investment in
Securities Portfolio. highly-rated debt securities, U.S.
government obligations, and money market
instruments, with a dollar weighted
average life of up to ten years when
purchased.
--------------------------------------------------------------------------------------------
THE INTERMEDIATE TERM BOND SUBACCOUNT Maximize income over the intermediate term
consistent with the preservation of
This subaccount purchases shares of the capital. Seeks to achieve objective by
MONY Series Fund, Inc. Intermediate Term investing in highly rated debt securities,
Bond Portfolio. U.S. Government obligations, and money
market instruments, together having a
dollar-weighted average life of between 4
and 8 years.
--------------------------------------------------------------------------------------------
THE LONG TERM BOND SUBACCOUNT Maximize income over the longer term
consistent with preservation of capital.
This subaccount purchases shares of the Seeks to achieve objective by investing in
MONY Series Fund, Inc. Long Term Bond highly-rated debt securities, U.S.
Portfolio. Government obligations, and money market
instruments, together having a
dollar-weighted average life of more than
8 years.
--------------------------------------------------------------------------------------------
THE EQUITY SUBACCOUNT Long-term capital appreciation. Seeks to
achieve this objective by investing in a
This subaccount purchases shares of the diversified portfolio of primarily equity
Enterprise Accumulation Trust Equity securities selected on the basis of a
Portfolio. value-oriented approach to investing.
--------------------------------------------------------------------------------------------
THE MANAGED SUBACCOUNT Provide growth of capital over time. Seeks
to achieve investment objective by
This subaccount purchases shares of the investing in a portfolio consisting of
Enterprise Accumulation Trust Managed common stocks, bonds and cash equivalents,
Portfolio. the percentage of which vary over time
based on the investment manager assessment
of the relative investment values.
--------------------------------------------------------------------------------------------
THE SMALL COMPANY VALUE SUBACCOUNT Capital appreciation. Pursues its
investment objective by investing in a
This subaccount purchases shares of the diversified portfolio of primarily equity
Enterprise Accumulation Trust Small securities of companies with market
Company Value Portfolio. capitalization of under $1 billion.
--------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 19
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
SUBACCOUNT AND DESIGNATED PORTFOLIO INVESTMENT OBJECTIVE
--------------------------------------------------------------------------------------------
<S> <C> <C>
THE INTERNATIONAL GROWTH SUBACCOUNT Capital appreciation. Pursues its
investment objective primarily through a
This subaccount purchases shares of the diversified portfolio of non-United States
Enterprise Accumulation Trust equity securities.
International Growth Portfolio.
--------------------------------------------------------------------------------------------
THE HIGH YIELD BOND SUBACCOUNT Maximum current income. Seeks to meet its
investment objective primarily by
This subaccount purchases shares of the investing in debt securities that are
Enterprise Accumulation Trust High Yield rated Ba or lower by Moody's Investors
Bond Portfolio. Service, Inc. or BB or lower by Standard &
Poor's Corporation. These lower rated
bonds are 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 has special risks and
therefore, may not be suitable for all
investors. Investors should carefully
assess the risks associated with
allocating payments to this subaccount.
--------------------------------------------------------------------------------------------
</TABLE>
THE FUNDS
Each available subaccount of MONY Variable Account A will invest only in
the shares of the designated portfolio of MONY Series Fund, Inc. or The
Enterprise Accumulation Trust (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. The Funds,
or either of them, may withdraw from sale any or all the respective portfolios
as allowed by applicable law.
MONY SERIES FUND, INC.
Only shares of four of the seven portfolios of MONY Series Fund, Inc. can
be purchased by a subaccount available to you. Each of the portfolios has
different investment objectives and policies. MONY Life Insurance Company of
America, a wholly-owned subsidiary of the Company ("MONY America") is a
registered investment adviser under the Investment Advisers Act of 1940. MONY
America serves as investment adviser to MONY Series Fund, Inc. It paid all
expenses associated with organizing MONY Series Fund, Inc. when the Fund was
organized in 1985. Those expenses included the costs of the initial registration
of its securities. MONY America, as investment adviser, currently pays the
compensation of the Fund's directors, officers, and employees who are affiliated
in some way with the Company. MONY Series Fund, Inc. pays for all other expenses
including, for example, the calculation of the net asset value of the
portfolios. To carry out its duties as an investment adviser, MONY America has
entered into a Services Agreement with the Company to provide personnel,
equipment, facilities and other services. As the investment adviser to MONY
Series Fund, Inc., MONY America receives a daily investment advisory fee for
each portfolio (see chart below). Fees are deducted daily and paid to MONY
America monthly.
13
<PAGE> 20
The following table describes the portfolios available and their respective
investment advisers and the investment advisory fees:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
PORTFOLIO AND INVESTMENT ADVISER INVESTMENT ADVISORY FEE
- --------------------------------------------------------------------------------------------
<S> <C>
GOVERNMENT SECURITIES PORTFOLIO Annual rate of 0.50% of the first $400
million, 0.35% of the next $400 million, and
MONY Life Insurance Company of America is 0.30% in excess of $800 million of the
the Investment Adviser portfolio's aggregate average daily net
assets.
- --------------------------------------------------------------------------------------------
LONG TERM BOND PORTFOLIO Annual rate of 0.50% of the first $400
million, 0.35% of the next $400 million, and
MONY Life Insurance Company of America is 0.30% in excess of $800 million of the
the Investment Adviser. portfolio's aggregate average daily net
assets.
- --------------------------------------------------------------------------------------------
INTERMEDIATE TERM BOND PORTFOLIO Annual rate of 0.50% of the first $400
million, 0.35% of the next $400 million, and
MONY Life Insurance Company of America is 0.30% in excess of $800 million of the
the Investment Adviser. portfolio's aggregate average daily net
assets.
- --------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO Annual rate of 0.40% of the first $400
million, 0.35% of the next $400 million, and
MONY Life Insurance Company of America is 0.30% of assets in excess of $800 million of
the Investment Adviser. the portfolio's aggregate average daily net
assets.
- --------------------------------------------------------------------------------------------
</TABLE>
ENTERPRISE ACCUMULATION TRUST
Enterprise Accumulation Trust has ten portfolios, the shares of which can
all be purchased by the subaccounts available to you. Enterprise Capital
Management, Inc. ("Enterprise Capital"), a wholly owned subsidiary of MONY Life
Insurance Company, is the investment adviser of Enterprise Accumulation Trust.
Enterprise Capital is responsible for the overall management of the portfolios,
including meeting the investment objectives and policies of the portfolios.
Enterprise Capital contracts with sub-investment advisers to assist in managing
the portfolios. For information about the sub-advisers for each portfolio, see
page of the Enterprise Accumulation Trust prospectus which accompanies this
prospectus. Enterprise Accumulation Trust pays an investment advisory fee to
Enterprise Capital which in turn pays the sub-investment advisers. Fees are
deducted daily and paid to Enterprise Capital on a monthly basis. The
sub-investment adviser and daily investment advisory fees and sub-investment
advisory fees for each portfolio are shown in the table below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PORTFOLIO AND SUB-INVESTMENT ADVISER INVESTMENT ADVISER FEE SUB-INVESTMENT ADVISER FEE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY PORTFOLIO Annual rate of 0.80% of the Annual rate of 0.40% up to
first $400 million, 0.75% of $1 billion, and 0.30% in
OpCap Advisors (subsidiary of the next $400 million and excess of $1 billion of the
Oppenheimer Capital) is the 0.70% in excess of $800 portfolio's aggregate
sub-investment adviser. million of the portfolio's average daily net assets.
aggregate average daily net
assets.
- ------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 21
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PORTFOLIO AND SUB-INVESTMENT ADVISER INVESTMENT ADVISER FEE SUB-INVESTMENT ADVISER FEE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MANAGED PORTFOLIO Annual rate of 0.80% of the Annual rate of 0.40% up to
first $400 million, 0.75% of $1 billion, 0.30% in excess
OpCap Advisors (subsidiary of the next $400 million and of $1 billion, and 0.25% in
Oppenheimer Capital) is the 0.70% in excess of $800 excess of $2 billion of the
sub-investment adviser. million of the portfolio's portfolio's aggregate
aggregate average daily net average daily net assets.
assets.
- ------------------------------------------------------------------------------------------------------
SMALL COMPANY VALUE PORTFOLIO Annual rate of 0.80% of the Annual rate of 0.40% of the
portfolio's aggregate first $1 billion and 0.30%
Gabelli Asset Management, Inc. is average daily net assets. in excess of $1 billion of
the sub-investment adviser. the portfolio's aggregate
average daily net assets.
- ------------------------------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO Annual rate of 0.60% of the Annual rate of 0.30% of the
portfolio's aggregate first $100 million and 0.25%
Caywood Scholl Capital Corporation average daily net assets. in excess of $100 million of
is the sub-investment adviser. the portfolio's aggregate
average daily net assets.
- ------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH PORTFOLIO Annual rate of 0.85% of the Annual rate of 0.45% of the
portfolio's aggregate first $100 million of the
Vontobel USA Inc. is the average daily net assets. portfolio's aggregate
sub-investment adviser. average daily net assets
(fee declines as assets
exceed $100 million).
- ------------------------------------------------------------------------------------------------------
</TABLE>
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. For each of the Funds a majority means the
lesser of:
(1) 67% of the portfolio shares represented at a meeting at which more
than 50% of the outstanding portfolio shares are represented, or
(2) More than 50% of the outstanding portfolio shares.
Each Contractholder should periodically review their allocation of purchase
payments and Surrender Values among the subaccounts and the guaranteed interest
account in light of their current objectives, the current market conditions, and
the risks of investing in each of the Funds' various portfolios. A full
description of the objectives, policies, restrictions, risks and expenses for
each of the Funds' portfolios can be found in the accompanying prospectus for
each of the Funds. The prospectus for each of the Funds should be read together
with this prospectus.
PURCHASE OF PORTFOLIO SHARES BY MONY VARIABLE ACCOUNT A
MONY Variable Account A will buy and redeem shares from the Funds at net
asset value. Shares will be redeemed when needed for the Company to:
- Collect charges under the Contracts.
- Pay Surrender Value on full surrenders of the Contracts.
15
<PAGE> 22
- Fund partial surrenders.
- Provide benefits under the Contracts.
- Transfer assets from one subaccount to another or between one or more
subaccounts of MONY Variable Account A 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.
- Kept as assets of the corresponding subaccount.
SURRENDER VALUE -- The Contract's Cash Value, less (1) any applicable Surrender
Charge, (2) and any applicable Annual Contract Charge.
The Board of Directors of MONY Series Fund, Inc. and the Board of Trustees
of The Enterprise Accumulation Trust monitor the respective Fund for the
existence of material irreconcilable conflict between the interests of variable
annuity Contractholders and variable life insurance Contractholders. The Boards
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 of each of the Funds. The Boards of Directors of the Company and
its affiliates will remedy any conflict at their own cost. The remedy may
include establishing a new registered management investment company and
segregating the assets underlying the variable annuity contracts and the
variable life insurance contracts.
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 MONY Variable Account
A.
Crediting of Interest. Net purchase payments allocated by a Contractholder
to the Guaranteed Interest Account will be credited with interest at a rate
declared by us. We guarantee that the rate will not be less than 4% (0.010746%
compounded daily). For Contracts issued on and after May 1, 1994 (or on or after
such later date as approval required in certain states is obtained), the rate
declared by us is guaranteed not to be less than 3.5% (0.009426%, compounded
daily). Each interest rate we declare will apply to all net purchase payments
received or transfers from MONY Variable Account A 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, (1) the Contract is issued (and the funds transferred
into the Money Market Subaccount) and (2) 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 may be withdrawn from the
Guaranteed Interest Account as a result of:
- Transfer
- Partial surrender
- Any charge imposed in accordance with the Contract
Such withdrawals will be considered 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, we will declare a renewal interest rate. The renewal interest
rate will be effective for the succeeding period we determine.
The Guaranteed Interest Account is described in greater detail in a
separate prospectus attached to this prospectus for your convenience.
16
<PAGE> 23
DETAILED INFORMATION ABOUT THE POLICY
The Cash Value in MONY Variable Account A and in the Guaranteed Interest
Account provide many of the benefits of your Contract. The information in this
section describes the benefits, features, charges and major provisions of the
Contract and the extent to which those depend upon the Cash Value, particularly
the Cash Value in MONY Variable Account A. Attached to this prospectus is a
prospectus describing the Guaranteed Interest Account and its various features,
charges and major provisions.
PAYMENT AND ALLOCATION OF PURCHASE PAYMENTS
Issuance of the Contract
Individuals who want to buy a Contract must:
(1) Complete an application.
(2) Personally deliver the application to:
(a) A licensed agent of the Company who is also a registered
representative of the principal underwriter for the Contracts, MONY
Securities Corporation ("MSC"), or
(b) A registered representative of a broker dealer which had been
authorized by MSC to sell the Contract.
(3) Pay the minimum initial purchase payment.
The minimum purchase payment for individuals varies depending upon the use
of the Contract and the method of purchase. The chart below shows the minimum
purchase payment for each situation.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
USE OF CONTRACT OR
METHOD OF MAKING PURCHASE PAYMENT MINIMUM PURCHASE PAYMENT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Individual retirement accounts and annuities under $2,000
Section 408 of the Code (other than Simplified
Employee Pensions)
- -------------------------------------------------------------------------------------------------------
Non-Qualified Plans $2,000
- -------------------------------------------------------------------------------------------------------
H.R. 10 plans (self-employed individuals' retirement $600
plans under 401 or 403 (c) of the Code), certain
corporate or association retirement plans,
Simplified Employee Pensions under Section 408 of
the Code
- -------------------------------------------------------------------------------------------------------
Annuity purchase plans sponsored by certain $600
tax-exempt organizations, governmental entities, or
public school systems under Section 403(b) of the
Code, and deferred compensation plans under Section
457 of the Code
- -------------------------------------------------------------------------------------------------------
Payroll deduction and automatic checking account Annualized rate of $600 (i.e., $600 per year,
withdrawal plans $300 semiannually, $150 quarterly or $50 per
month)
- -------------------------------------------------------------------------------------------------------
Government Allotment Plans $50 per month
- -------------------------------------------------------------------------------------------------------
</TABLE>
Effective January 1, 1989, the Contracts offered by this Prospectus have
been withdrawn form sale in connections with Qualified Plans which intend to
qualify for federal income tax advantages available under Section 403(b) of the
Code.
GOVERNMENT ALLOTMENT PLANS -- Payroll deduction plans used for financial
products by government employees.
Additional purchase payments of at least $100 may be made at any time. However,
for certain automatic payment plans, the smallest additional payment is $50.
17
<PAGE> 24
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 needed before it will accept a Purchase Payment if, with that
Payment:
(1) Cumulative Purchase Payments made under any one or more Contracts
held by the Contract Contractholder, less
(2) The amount of any prior partial surrenders and their Surrender
Charges, exceed
(3) $1,500,000.
The Company reserves the right to reject an application for any reason
permitted by law.
CONTRACT DATE -- The date the contract begins as shown in the Contract.
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% per year if:
(1) The Contract is issued by the Company, and
(2) The Contract is accepted by the Contractholder.
No interest will be paid if the Contract is not issued or if it is declined by
the Contractholder. Net Purchase Payments will be held in the Money Market
Subaccount of MONY Variable Account A if:
(1) The application is approved,
(2) The Contract is issued, and
(3) The Contractholder accepts the Contract.
These amounts will be held in that Account pending end of the Free Look Period.
(See "Free Look Privilege" on page .) Interest will be credited on amounts
held in the General Account beginning on the date the amounts are received.
Amounts are received on the day of actual receipt at the Company's Operation
Center. The prospective buyer will be told the reasons for the delay, the
initial Purchase Payment will be returned in full and the application declined
if:
(1) The application is not complete when received, and
(2) The application is not completed within 5 days.
The application will not be declined if the prospective buyer consents to the
Company's keeping the Purchase Payment until the application is completed.
Free Look Privilege
The Contractholder may return the Contract within 10 days of the delivery
date. The Contract must be returned to the Company or any agent of the Company.
When the Company receives the Contract, it will be voided as if it were never in
effect. The amount to be refunded (except for contracts entered into in the
Commonwealth of Pennsylvania) is equal to the greater of:
(1) All purchase payments; and
(2) (a)Cash Value of the contract (as of the date received at the Home
Office or, if returned by mail, after being postmarked, properly addressed
and postage prepaid) plus (b) any deductions from purchase payments (i.e.
taxes for annuity considerations deducted, mortality and expense risk
charges deducted in determining Unit value of MONY Variable Account A, and
asset charges deducted in determining the share value of the Funds).
The amount to be refunded for contracts entered into in the Commonwealth of
Pennsylvania is described in (2) above.
18
<PAGE> 25
Allocation of Payments and Cash Value
Allocation of Payments. On the application, the Contractholder may
allocate Net Purchase Payments to the subaccount(s) of MONY Variable Account A
or to the Guaranteed Interest Account. Net Purchase Payments (and any interest
thereon) are held in the Money Market Subaccount of MONY Variable Account A if
they are received before the end of the Free Look Period. The Net Purchase
Payments will initially be allocated to the Money Market Subaccount beginning on
the later of:
(1) The Contract Date of the Contract, and
(2) 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 (See "Free Look Privilege" above.) After the
Free Look Period has expired and the correct and complete allocation
notification has been received, the Contract's Cash Value will automatically be
transferred to MONY Variable Account A subaccount(s) or to the Guaranteed
Interest Account according to the Contractholder's percentage allocation.
After the Free Look Period, under a non-automatic payment plan, if the
Contractholder does not:
(1) Specify the amount to be allocated among subaccounts, or
(2) Specify the percentage to be allocated among subaccounts, or
(3) The amount or percentage specified is incorrect or incomplete,
the Net Purchase Payments will be allocated under the Contractholder's most
recent instructions on record with the Company. The amount specified must not be
less than $10.00 and the percentage specified must not be less than 10% of the
Payment. For automatic payment plans, Net Purchase Payments will be allocated
according to the Contractholder's most recent instructions on record.
The Contractholder may change the specified allocation formula 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 allocation. The Company reserves the right to deny any
telephone allocation request. If all telephone lines are busy (for example,
during periods of substantial market fluctuations), Contractholders may be
unable to request telephone allocation changes by telephone. In such cases, a
Contractholder would submit a written request. 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 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 designed, and which the Company believes are reasonable, to prevent
unauthorized instructions. If these procedures are followed:
(1) The Company shall not be liable for any loss as a result of
following fraudulent telephone instructions, and
(2) The Contractholder will therefore bear the entire risk of loss due
to fraudulent telephone instructions.
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 registered
representatives of MSC or by calling 1-800-487-6669. The Company's form must be
signed and received at the Company's Operations Center before telephone
allocation instructions will be accepted.
Net Purchase Payments may be allocated in whole percentages to any number
of the available subaccounts and to the Guaranteed Interest Account. Allocations
must be in whole percentages, and no allocation may be for less than 10% of a
Net Purchase Payment. Allocation percentages must total 100%.
When allocated Purchase Payments are received they are credited to
subaccounts of MONY Variable Account A in the form of Units. The number of Units
is determined by dividing the dollar amount allocated to
19
<PAGE> 26
a particular subaccount by the unit value for that subaccount for the Valuation
Date on which the Purchase Payment is received.
Calculating Unit Values for Each Subaccount
The unit value of each subaccount on its first Valuation Date was set at
$10.00. The Company computes the unit value of a subaccount on any later
Valuation Date as follows:
(1) Calculate the value of the shares of the portfolio belonging to
the subaccount as of the close of business that Valuation Date. This
calculation is done before giving effect to any policy transactions for
that day, such as purchase payments or surrenders. For this purpose, the
net asset value per share reported to the Company by the managers of the
portfolio is used.
(2) Add the value of any dividends or capital gains distributions
declared and reinvested by the portfolio during the valuation period.
Subtract from this amount a charge for taxes, if any.
(3) Subtract a charge for the mortality and expense risk assumed by
the Company under the policy. If the previous day was not a Valuation Date,
then the charge is adjusted for the additional days between valuations.
(4) Divide the resulting amount by the 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 of these subaccounts may increase, decrease or remain the
same from Valuation Date to Valuation Date. The Unit value depends on the
investment performance of the portfolio of the Fund in which the subaccount
invests and any expenses and charges deducted from MONY Variable Account A. 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.
Calculation of Guaranteed Interest Account Cash Value
Net Purchase Payments to be allocated to the Guaranteed Interest Account
will be credited to that account on:
(1) The date received at the Operations Center, or
(2) If the day Payments are received is not a Valuation Date, then on
the next Valuation Date.
Interest will be credited daily. That part of a Net Purchase Payments allocated
to the Guaranteed Interest Account that exceeds the $250,000 limit imposed by
the Company will be returned to the Contractholder.
Calculation of Cash Value
The Contract's Cash Value will reflect:
- The investment performance of the selected subaccount(s) of MONY Variable
Account A.
- Amounts credited (including interest) to the Guaranteed Interest Account.
- Any Net Purchase Payments.
- Any Partial Surrenders.
- All Contract charges (including surrender charges) imposed.
There is no guaranteed minimum Cash Value, except to the extent Net Purchase
Payments have been allocated to the Guaranteed Interest Account. Because a
Contract's Cash Value at any future date will be dependent on a number of
variables, it cannot be predetermined.
The Cash Value will be computed 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
20
<PAGE> 27
credited on those Payments during the period when Net Purchase Payments are held
in the General Account. (See "Issuance of the Contract" at page .)
After allocation of the amounts in the General Account to MONY Variable
Account A or the Guaranteed Interest Account, on each Valuation Date, the
Contract's Cash Value will be computed as follows:
(1) Determine the aggregate of the Cash Values attributable to the
Contract in each of the subaccounts on the Valuation Date. This is done by
multiplying the subaccount's Unit value on that date by the number of
subaccount Units allocated to the Contract;
(2) Add any amount credited to the Guaranteed Interest Account. This
amount is the aggregate of all Net Purchase payments and:
- The addition of any interest credited.
- Addition or subtraction of any amounts transferred.
- Subtraction of any partial surrenders.
- Subtraction of any Contract charges, deductions.
(3) Add any Net Purchase Payment received on that Valuation Date;
(4) Subtract any partial surrender amount and its Surrender Charge
made on that Valuation Date;
(5) Subtract any Annual Contract Charge deductible on that Valuation
Date.
In computing the Contract's Cash Value, the number of subaccount Units
allocated to the Contracts is determined after any transfers among subaccounts
or between one or more of the subaccounts and the Guaranteed Interest Account.
Any transfer charges are also deducted. However, the computation of the
Contract's Cash Value is done before any other Contract transactions on the
Valuation Date, such as:
- Receipt of Net Purchase Payments.
- Partial Surrenders.
If a transaction would ordinarily require that the Contract's Cash Value be
computed for a day that is not a Valuation Date, the next following Valuation
Date will be used.
Transfers. You may transfer the value of the Contract among the
subaccounts after the Free Look Period has expired by sending a proper written
request to the Company's Operations Center. Transfers may be made by telephone
if you have proper authorization. The same rules apply as those for allocation
of payments by telephone. We will effectuate transfers at Unit values, and
determine all Unit values in connection with such transfers:
- At the close of the day that the transfer request is received at the
Operations Center, or
- If the date of receipt of the transfer request is not a Valuation Date,
on the next Valuation Date.
Different provisions apply to transfers involving the Guaranteed Interest
Account. (See "Payment and Allocation of Purchase Payments -- Transfers
Involving the Guaranteed Interest Account" at page .) There is no minimum
amount that need be transferred. Currently, there are no limitations on the
number of transfers between subaccounts.
A transfer charge is not currently imposed on transfers. (See "Charges
Against Cash Value -- Transfer Charge" at page .) However, the Company
reserves the right to impose a charge for transfer in excess of four which will
not exceed $25 per transfer. If imposed the charge will be deducted from the
first subaccount(s) or the Guaranteed Interest Account from which the amounts
are transferred. This charge is in addition to the amount transferred. If 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
21
<PAGE> 28
Charge" at page .) All transfers in a single request are treated as one
transfer transaction. A transfer resulting from the first reallocation of Cash
Value at the end 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.
CONTRACT YEAR -- Any period of twelve (12) months commencing with the Contract
Date and each Contract Anniversary thereafter.
Transfers Involving the Guaranteed Interest Account. Transfers to or from
the Guaranteed Interest Account are subject to the following limitations.
- Prior approval of the Company if part of the transfer will cause amounts
credited to the Guaranteed Interest Account to exceed $250,000.
- The portion in excess of the $250,000 limitation will be allocated
back to the subaccounts designated in that transfer as the
subaccounts from which amounts were to be transferred. The
allocation back will be in the proportion that the amount requested
to be transferred from each subaccount bears to the total amount
transferred.
- Transfers from the Guaranteed Interest Account to one or more subaccounts
may be made once during each Contract Year, and the amount which may be
transferred if limited to the greater of:
- 25% of the amounts credited to the Guaranteed Interest Account on
the date the transfer would take effect or
- $5,000.
- Transfers from the Guaranteed Interest Account to one or more subaccounts
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 Valuation Date which coincides with
or next follows the date the request is received.
- Requests more than 10 days before or 30 days after the anniversary of the
Contract Date will be returned to the Contractholder.
TERMINATION OF THE CONTRACT
The Contract will remain in effect until the earlier of:
(1) The date the Contract is surrendered in full,
(2) The date annuity payments start,
(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.
CONTRACT ANNIVERSARY -- An anniversary of the Contract Date of the Contract.
CONTRACT DATE -- The date shown as the Contract Date of the Contract.
SURRENDERS
The Contractholder may elect to make a surrender of all or part of the
Contract's value provided it is:
- On or before the annuity payments start, and
- During the lifetime of the Annuitant.
22
<PAGE> 29
Any such election shall specify the amount of the surrender. The surrender will
be effective on the date a proper written request is received by the Company at
its Operation 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. Requested partial surrenders that would leave a Cash Value of less
than $1,000 are treated and processed as a full surrender. In such case, the
entire Surrender Value will be paid to the Contractholder. For a partial
surrender, any Surrender Charge will be in addition to the amount requested by
the Contractholder.
A surrender will result in the cancellation of Units and the withdrawal of
amounts credited to the Guaranteed Interest Account in accordance with the
directions of the Contractholder. The aggregate value of the surrender will be
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 accumulation period under the allocation specified
by the Contractholder. The Unit value will be calculated as of the Valuation
Date the surrender request is received. Allocations may be by either amount or
percentage. Allocations by percentage must be in whole percentages (totaling
100%). At least 10% of the partial surrender must be allocated to any subaccount
designated by the Contractholder. Allocations by amount require that at least
$25 be allocated against the Guaranteed Interest Account or any subaccount. The
request will not be accepted if:
- There is insufficient Cash Value in the Guaranteed Interest Account or a
subaccount to provide for the requested allocation against it, or
- The Guaranteed Interest Account limitation is exceeded, or
- The request is incorrect.
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 said
accounts 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 each allocation bears to
the total amount of the partial surrender. If (1) an allocation of the partial
surrender is not made, or (2) there is insufficient cash value in any of the
Contractholder's accounts to provide for any accounts proportionate share of the
Surrender Charge, then the entire amount will be allocated against each account
in the same proportion that the Cash Value in each account 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. However,
the Company may be permitted to postpone such payment under the 1940 Act.
Postponement is currently permissible only for any period during which
(1) the New York Stock Exchange is closed other than customary weekend
and holiday closings, or
(2) trading on the New York Stock Exchange is restricted as determined
by the Securities and Exchange Commission, or
(3) an emergency exists as a result of which disposal of securities
held by the Fund is not reasonable practicable or it is not reasonably
practicable to determine the value of the net assets of the Fund, or
(4) for such other periods as the Securities and Exchange Commission
may by order permit for the protection of Contractholders.
23
<PAGE> 30
Any cash surrender involving payment from amounts credited to the Guaranteed
Interest Account may 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 .)
Contracts offered by this prospectus may be issued in connection with
retirement plans meeting the requirements of certain sections of the Internal
Revenue Code. Contractholders should refer to the terms of their particular
retirement plan for any limitations or restrictions on cash surrenders.
The tax results of a cash surrender should be carefully considered. (See
"Federal Tax Status" at page .)
DEATH BENEFIT
DEATH BENEFIT PROVIDED BY THE CONTRACT
The Company will pay a Death Benefit to the Beneficiary if:
- The Annuitant dies; and
- The death occurs before the annuity payments start.
The amount of the Death Benefit will be the greater of
(1) The Cash Value on the date of the Annuitant's death;
(2) The Purchase Payments paid, less any partial surrenders and their
Surrender Charges.
If the death of the Annuitant occurs on or after the annuity payments start, no
Death Benefit will be payable except as may be provided under the Settlement
Option elected.
ELECTION AND CONTRACT DATE OF ELECTION
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. The election must take
place:
- During the lifetime of the Annuitant, and
- Before the annuity payments start.
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
(1) to receive the Death Benefit in the form of a cash payment; or
(2) to have the Death Benefit applied under one of the Settlement
Options.
(See "Settlement Options" at page .) If an election by the payee is not
received by the Company within 30 days following the date proceeds become
payable, the payee will be considered to have elected a cash payment. Either
election described above may be made by filing a written election with the
Company in such form as it 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. However, any election will be subject to any payment made
or action taken by the Company before receipt of the notice at the Company's
Operation Center.
Settlement option availability may be restricted by 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.
24
<PAGE> 31
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
- the election is considered to become effective, and
- due proof of death is received.
The Company may be permitted to postpone such payment under the 1940 Act. 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 us 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% annually.
CHARGES AND DEDUCTIONS
The following table summarizes the charges and deductions under the
Contract:
- --------------------------------------------------------------------------------
DEDUCTIONS FROM PURCHASE PAYMENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Tax Charge State and local -- 0%-3.5% -- Company
currently assumes responsibility; current
charge to Contractholder 0%.
Federal -- Currently 0% (Company reserves
the right to charge in the future.)
</TABLE>
- --------------------------------------------------------------------------------
DAILY DEDUCTION FROM VARIABLE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Mortality & Expense Risk Charge Current daily rate -- 0.003425%
Annual Rate deducted daily from net assets Current Annual rate -- 1.25%
</TABLE>
- --------------------------------------------------------------------------------
DEDUCTIONS FROM CASH VALUE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Annual Contract Charge Non-Qualified Contracts -- $30 (subject to
Current charges listed may be increased to increase up to $50)
as much as $50 ($30 in certain states) on IRA and SEP-IRA -- $30 (subject to increase
30 days written notice. up to $50)
Qualified Contracts -- $15 (subject to
increase up to $50)
- -----------------------------------------------------------------------------------------------
Transaction and Other Charges $0
Transfer Charge (Company reserves the right to charge up to
$25)
- -----------------------------------------------------------------------------------------------
Surrender Charge See below for grading schedule. See page
Grades from 7% to 0% of Cash Value "Charges and Deductions -- Charges Against
surrendered based on a schedule. Cash Value" for details of how it is
computed.
</TABLE>
- --------------------------------------------------------------------------------
The following provides additional details of the charges and deductions
under the Contract.
DEDUCTIONS FROM PURCHASE PAYMENTS
Deductions may be made from purchase payments for premium or similar taxes
prior to allocation of any net purchase payment among the subaccounts.
Currently, the Company makes no deduction, but may do so with respect to future
payments. The amount of the deduction will vary from locality to locality.
Deductions will generally range from 0% to 3.5% of purchase payments. Residents
of the Commonwealth of Pennsylvania should be aware that a tax on purchase
payments has been adopted. However, we are currently assuming responsibility for
payment of this tax. If the Company is going to make deductions for such tax
from future purchase payments, it will give notice to each affected
Contractholder.
25
<PAGE> 32
CHARGES AGAINST CASH VALUE
Daily Deduction from MONY America Variable Account A
Mortality and Expense Risk Charge
The Company assumes mortality and expense risks. A charge for assuming such
risks is deducted daily from the net assets of MONY Variable Account A. This
daily charge from MONY Variable Account A is deducted at a current daily rate of
0.003425 percent (equivalent to an annual rate of 1.25%) from the value of the
net assets of MONY Variable Account A. Of the 1.25% charge, .80% is for assuming
mortality risks, and .45% is for assuming expense risks. The charge is deducted
from MONY Variable Account A, 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% 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. If that occurs, an aggregate amount of annuity
benefits greater than that projected will 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% 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. However, if the amount of the charge exceeds the amount needed, the
excess will be kept by the Company in its general account. If the amount of the
charge is inadequate, the Company will pay the difference out of its general
account.
Deductions from Surrender Value
Annual Contract Charge
The Company has primary responsibility for the administration of the
Contract and MONY Variable Account A. An annual Contract charge helps to
reimburse the Company for administrative expenses related to the maintenance of
the Contract. 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. It may buy
administrative services from such other sources as may be available.
An annual contract charge will be deducted from the Contract's Cash Value to
help cover administrative expenses. Currently, for Non-Qualified Contracts (and
contracts issued for IRA and SEP-IRA) the amount of the charge is $30. The
charge may be increased to as much as $50. For Qualified Contracts (other than
those issued for IRA and SEP-IRA) currently the amount of the charge is reduced
to $15. This charge may be increased to as much as $50, and will be increased to
$30 in the event the Contract is no longer a Qualified Contract. The
Contractholder will receive a written notice 30 days in advance of any change in
the charge.
The Annual Contract Charge is deducted from the Cash Value on the following
dates:
(1) Each Contract Anniversary before the date annuity payments start.
(2) On the day the annuity payments start.
The amount of the charge will be allocated against the Guaranteed Interest
Account and each subaccount of MONY Variable Account A in the same proportion
that the Cash Value in those accounts bears to the Cash
26
<PAGE> 33
Value of the Contract. The Company does not expect to make any profit from the
administrative cost deductions.
Transfer Charge
Contract value may be transferred among the subaccounts or to or from the
Guaranteed Interest Account and one or more of the subaccounts (including
transfers made by telephone, if permitted by the Company). The Company reserves
the right to impose a transfer charge for each transfer in excess of 4
instructed by the Contractholder in a Contract year. The transfer charge
compensates the Company for the costs of effecting the transfer. The transfer
charge will not exceed $25. The Company does not expect to make a profit from
the transfer charge. If imposed, the transfer charge will be deducted from the
Contract's Cash Value held in the subaccount(s) or from the Guaranteed Interest
Account from which the transfer is made. The transfer charge will be allocated
against these accounts in the same proportion as the amounts transferred. If
there is insufficient value in an 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.
Surrender Charge
A contingent deferred sales charge (called a "Surrender Charge") will be
imposed when a full or partial surrender is requested or at the start of annuity
benefits if it is during the first eight years of the contract.
The Surrender Charge will never exceed 7% of total purchase payments. The
Surrender Charge 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. The Company
will use funds from its General Account, which may contain funds deducted from
MONY Variable Account A to cover mortality and expense risks borne by the
Company. (See "Mortality and Expense Risk Charge" at page .)
A Surrender Charge will be computed when a surrender is made and will be
deducted from the Cash Value if:
(1) All or a part of the Contract's Surrender Value (See "Surrenders"
at page ) is surrendered, or
(2) The Surrender Value is received at maturity when the annuity
payments start.
A Surrender Charge will not be imposed:
(1) 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.
(2) To the extent necessary to permit the Contractholder to obtain an
amount equal to the Guaranteed Free Surrender Amount (See
"Guaranteed Free Surrender Amount" at page .)
(3) 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 .)
(4) If the surrender is a full surrender and the following conditions
are met:
(a) Annuitant is age 59 1/2 or older on the date of the full
surrender;
(b) the Contract has been in effect for at least 10 contract years;
and
(c) one or more purchase payments were remitted during each of at
least 7 of the 10 contract years immediately preceding the date
of the surrender.
In no event will the aggregate Surrender Charge exceed 7% of the Cash Value. The
amount deducted from the Cash Value to cover the surrender charge is not subject
to the surrender charge.
27
<PAGE> 34
For a partial surrender, the Surrender Charge will be deducted from any
remaining Contract Value, if sufficient. If the Contract Value is not
sufficient, it will be deducted from the amount surrendered. Any Surrender
Charge will be allocated against the Guaranteed Interest Account and each
subaccount of MONY America Variable Account A in the same proportion that the
amount of the partial surrender allocated against those accounts bears to the
total amount of the partial surrender. 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 said accounts in the same proportion that the Cash Value held in said
accounts 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 .)
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 .)
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
Step 2. Multiply each allocated purchase payment by the appropriate
surrender charge percentage determined on the basis of the table below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
SURRENDER CHARGE PERCENTAGE TABLE
- ----------------------------------------------------------------------------------------------
CONTRACT YEAR SURRENDER CHARGE 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. The
surrender charge will not be deducted in the following circumstances:
(1) 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, an amount up to the greater of:
(a) $10,000 (but not more than the Contract's Cash Value), or
(b) 10% of the Contract's Cash Value (at the time the first partial
surrender is request is received)
may be received in each Contract Year without a surrender charge.
28
<PAGE> 35
(2) For Qualified Contracts issued before May 1, 1994 and for holders
of contracts in states where approval has not been granted, an
amount up to 10% of the Cash Value of the Contract (on the date
the partial surrender is request is received) in each Contract
Year.
(3) For Non-Qualified Contracts (and Contracts issued for IRA and
SEP-IRA) in certain states which have granted approval, an amount
up to 10% of the Cash Value of the Contract may be received in
each Contract Year without a surrender charge.
We reserve the right to limit the number of partial surrenders under the
Guaranteed Free Surrender Amount to 12 during any 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
beginning on page A-1 of this prospectus.
Taxes
Currently, no charge will be made against MONY Variable Account A for
federal income taxes. However, the Company may make such a charge in the future
if income or gains within MONY Variable Account A will incur any federal income
tax liability. Charges for other taxes, if any, attributable to MONY Variable
Account A may also be made. (See "Federal Tax Status" at page .)
Investment Advisory Fee
Because MONY Variable Account A purchases shares of the Funds, the net
assets of MONY Variable Account A will reflect the investment advisory fee and
other expenses incurred by the Funds. See "Table of Fees" beginning at page
for a table which shows the fees and expenses incurred during 1998 and "The
Funds-MONY Series Fund, Inc." and "The Funds-Enterprise Accumulation Trust" at
pages - for a table setting forth the investment advisory fees.
ANNUITY PROVISIONS
ANNUITY PAYMENTS
Annuity payments under a Contract will begin on the date that is selected
by the Contractholder when the Contract is applied for. The date chosen for the
start of annuity payments may be:
(1) No earlier than the Contract Anniversary nearest the Annuitant's
10th birthday, and
(2) No later than the Contract Anniversary nearest the Annuitant's
95th birthday.
The minimum number of years from the Contract Date to the start of annuity
payments is 10. The date when annuity payments start may be:
(1) Advanced to a date that is not earlier than the 10th Contract
Anniversary.
(2) Deferred from time to time by the Contractholder by written notice
to the Company.
The date when annuity payments start will be advanced or deferred if:
(1) Notice of the advance or deferral is received by the Company prior
to the current date for the start of annuity payments.
(2) The new start date for annuity payments is a date which is not
later than the Contract Anniversary after the Annuitant's 95th
birthday.
A particular retirement plan may contain other restrictions.
When annuity payments start, the Contract's Surrender Value, less any state
taxes which may be imposed upon annuitization, 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. That contract
will
29
<PAGE> 36
describe the terms of the settlement. No payments may be requested under the
Contract's surrender provisions after annuity payments start. 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 when annuity payments start.
ELECTION AND CHANGE OF SETTLEMENT OPTION
During the lifetime of the Annuitant and prior to the start of annuity
payments, the Contractholder may elect:
- One or more of the Settlement Options described below, or
- Another settlement option as may be agreed to by the Company.
The Contractholder may also change any election if written notice of the change
is received by the Company at its Operation Center prior to the start of annuity
payments. If no election is in effect when annuity payments start, Settlement
Option 3, for a Life Annuity with 10 years certain, based on the Annuitant's
life, will be considered 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 and "Surrenders" at page .)
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
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 in the Contract.
30
<PAGE> 37
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 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 consider 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
At the time the Settlement Option is chosen, the payee may request that it
be paid:
- Quarterly
- Semiannually
- Annually
If the payee does not request a particular installment payment, the payments
will be made in monthly installments. However, if the net amount available to
apply under any Settlement Option is less than $1,000, the Company has 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 the payments to result in payments of at least $25.
ADDITIONAL PROVISIONS
The Company may require proof of the age of the Annuitant before making any
life annuity payment under the Contract. If the Annuitant's age has been
misstated, the amount payable will be the amount that would have been provided
under the Settlement Option at the correct age. Once life income payments begin,
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, 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 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 that apply 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.
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 apply, on any employment-related plan for which a Contract
may be purchased.
31
<PAGE> 38
OTHER PROVISIONS
OWNERSHIP
The Contractholder has all rights and may receive all benefits under the
Contract. During the lifetime of the Annuitant (and Contingent Annuitant if one
has been named), the Contractholder is the person so designated in the
application, unless:
(1) A change in Contractholder is requested, or
(2) A Successor Contractholder becomes the Contractholder.
On and after the death of the Annuitant (and Contingent Annuitant, if
applicable), the Beneficiary shall be the Contractholder.
The Contractholder may name a Successor Contractholder or a new
Contractholder at any time. If the Contractholder dies, the Successor
Contractholder, if living, becomes the Contractholder. Any request for change
must be:
(1) Made in writing; and
(2) Received at the Company.
The change will become effective as of the date the written request is signed. A
new choice of Contractholder or Successor Contractholder will apply to any
payment made or action taken by the Company after the request for the change is
received. Contractholders should consult a competent tax advisor prior to
changing Contractholders.
SUCCESSOR CONTRACTHOLDER -- The living person who, at the death of the
Contractholder, becomes the new Contractholder.
PROVISION REQUIRED BY SECTION 72(s) OF THE CODE
The Contract under a Non-Qualified Plan will be surrendered as of the date
of the Contractholder's death if:
- The Contractholder dies:
- Before the start of annuity payments, and
- While the Annuitant is living, and
- That Contractholder's spouse is not the Successor Contractholder as of
the date of the Contractholder's death.
- Satisfactory proof of death must be provided to the Company.
The surrender proceeds may be paid over the life of the Successor Contractholder
if:
- The Successor Contractholder is the Beneficiary, and
- The Successor Contractholder chooses that option.
Payments must begin no later than one year after the 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 is not necessary to surrender the Contract. The proceeds must be distributed
within 5 years after the date of death if:
- The spouse is not the Successor Contractholder, and
- There is no designated Beneficiary.
32
<PAGE> 39
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.
If the Contractholder dies on or after annuity payments start, any
remaining portion of the proceeds will be distributed using a method that is at
least as quick as the one 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.
Distribution will occur either by or beginning not later than April 1 of the
calendar year following the calendar year the Qualified Plan Participant attains
age 70 1/2. The interest is distributed:
- over the life of such Participant, or
- the lives of such Participant and Designated Beneficiary.
If (i) distributions have begun, and (ii) the Participant dies before the
Contractholder's entire interest has been distributed to him/her, the remaining
distributions will be made using a method that is at least as quick as that used
as of the date of the Participant's death. The Contract will be surrendered as
of the Participant's death if:
(1) The Participant dies before the start of such distributions, and
(2) There is no designated Beneficiary.
The surrender proceeds must be distributed within 5 years after the date of
death. But, the surrender proceeds may, be paid over the life of any Designated
Beneficiary at his/her option. 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, distributions will begin not 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 forgo distribution and treat the IRA as his/her own plan.
It is the Contractholder's responsibility to assure that distribution rules
imposed by the Code will be met. Qualified Plan Contracts include those
qualifying for special treatment under Sections 401, 403, and 408 of the Code.
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 Operation Center.
The Contingent Annuitant may be deleted by written notice to the Company at its
Operation Center. A designation or deletion of a Contingent Annuitant will take
effect as of the date the written election was
33
<PAGE> 40
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 the receipt of the notice at the
Company's Operation Center.
The Contingent Annuitant will be deleted from the Contract automatically by the
Company as of the Contract Anniversary following the Contingent Annuitant's 95th
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 annuity
payments start;
(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 date annuity payments start is later than the Contract
Anniversary nearest the Contingent Annuitant's 95th birthday, the
date annuity payments start will be automatically advanced to that
Contract Anniversary.
Effect of Contingent Annuitant's Becoming the Annuitant. If the Contingent
Annuitant becomes the Annuitant, the Death Benefit proceeds 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
automatically changed 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 determining the validity or effect of any assignment. The
Company shall not be liable for any payment or other settlement made by the
Company before receipt of the assignment.
If the Contract is issued under certain retirement plans, then it may not
be assigned, pledged or otherwise transferred except under conditions 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 effect, the Beneficiary or Successor
Beneficiary may be changed. A change is made by submitting a written request to
the Company at its Operation Center. The form of the request must be acceptable
to the Company. The Contract need not be returned unless requested by the
Company. The change will take effect as of the date the request is signed,
whether or not the Annuitant is living when the request is received by the
Company. The Company will not, however, be liable for any payment made or action
taken before receipt and acknowledgement of the request at its Operation Center.
34
<PAGE> 41
SUBSTITUTION OF SECURITIES
The Company may substitute shares of another mutual fund for shares of the
Funds already purchased or to be purchased in the future by Contract Purchase
Payments if:
(1) the shares of any portfolio of the Funds is no longer available
for investment by MONY Variable Account A or,
(2) in the judgment of the Company's Board of Directors, further
investment in shares of one or more of the portfolios of the Funds
is inappropriate based on the purposes of 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 MONY Variable Account A
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 MONY Variable
Account A 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 MONY VARIABLE ACCOUNT A
MONY Variable Account A may be operated as a management company under the
1940 Act or it may be deregistered under the 1940 Act in the event the
registration is no longer required
- at the Company's election, and
- subject to any necessary vote by persons having the right to give voting
instructions for shares of the Funds held by the subaccounts.
Deregistration of MONY Variable Account A requires an order by the Securities
and Exchange Commission. If there is a change in the operation of MONY Variable
Account A under 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 MONY Variable Account A will
be invested in shares of the designated portfolios of the Funds. The Company is
the legal holder of these shares. As such, it has the right to vote on the
following matters:
(1) Election of the Board of Directors of MONY Series Fund, Inc. or
the Board of Trustees of The Enterprise Accumulation Trust.
(2) Certain matters that are required by the 1940 Act to be approved
or ratified by the shareholders of a mutual fund.
(3) Any other matter that may be voted upon at a shareholders'
meeting.
35
<PAGE> 42
To the extent required by law, the Company will vote the shares of each of the
Funds held in MONY Variable Account A (whether or not attributable to
Contractholders). The Company will vote at shareholder meetings of each of the
Funds according to the instructions received from Contractholders. The number of
votes will be determined as of the record date selected by the Board of
Directors or the 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.
- 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 the above changes 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 MONY Variable Account
A.
- - Each Contractholder will have fractional votes for amounts less than $100.
- - For voting purposes, this value attributable to the Contract is equal to the
Cash Value.
- - The votes are represented as votes per $100 of value in each subaccount of
MONY Variable Account A. These votes are converted into a proportionate number
of votes in shares of the corresponding portfolio of each of the Funds.
- - Shares for which timely voting instructions are not received from
Contractholders will be voted by the Company. The Company will vote the shares
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 corresponding shares of the portfolio for which the
Contractholder may give instructions is computed by:
(1) Determining the value attributable to the Contract held in that
subaccount.
(2) Dividing that value by the net asset value of one share in the
designated portfolio of the respective Fund.
Example: Contract value held in subaccount = $540
Net asset value of portfolio shares = $20 per share on the record date
May give instructions on 5.4 votes ($540 divided by $100)
Converts into instructions on 27 shares of the Fund ($540 divided by
$20)
Matters on which Contractholders may give voting instructions include
the following:
(1) approval of any change in the Investment Advisory Agreement and
Services Agreement, if any, for the portfolio(s) of the Fund(s)
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.
36
<PAGE> 43
Contractholders participating in a particular portfolio will vote separately on
the following matters pursuant to the requirements of Rule 18f-2 under the 1940
Act:
(1) approval of the Investment Advisory Agreement, or
(2) any change in a portfolio's fundamental investment policies,
DISTRIBUTION OF THE CONTRACTS
MONY Securities Corporation ("MSC"), a New York corporation organized on
September 26, 1969 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 a registered 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 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% of Purchase Payments.
Additional compensation may be paid for persistency, sales quality, and contract
size and for other services not directly related to the sale of the Contract.
Such services include the training of personnel and the production of
promotional material.
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 (other than 403(b)), 408(b), and 457 of the Code.
The ultimate effect of federal income taxes on
- the value of the Contract's Cash Value,
- annuity payments, and
- economic benefit to the Contractholder, Annuitant, and the Beneficiary
may depend upon
- the type of retirement plan for which the Contract is purchased, and
- the tax and employment status of the individual concerned.
The following discussion of the treatment of Contracts and of the Company
under the federal income tax laws is general in nature. The discussion is based
on the Company's understanding of current federal income tax laws, and is not
intended as tax advice. Any person considering 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 MONY Variable Account
A, 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
37
<PAGE> 44
the contract is held as an agent for a natural person. Annuity payments made as
retirement distributions under a Contract are generally taxable to the annuitant
as ordinary income except to the extent of
- Participant contributions (in the case of Qualified Plans), or
- Contractholder contributions (in the case of Non-Qualified Plans).
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.
The Technical and Miscellaneous Revenue Act of 1988 ("TAMRA") has
requirements for determining the amount includable in gross income with respect
to distributions not received as an annuity. Distributions include those
resulting from gratuitous transfers. When computing the distributions for any 12
month period, distributions from all annuity contracts issued by the same
company to the Contractholder (other than those issued to qualified retirement
plans) will be treated as one annuity contract. The IRS is given power to
prescribe additional rules to prevent avoidance of this rule through serial
purchases of contracts or otherwise. None of these rules is expected to affect
tax-benefited plans.
Effective January 1, 1993, distributions of plan benefits from qualified
retirement plans, other than individual retirement arrangements ("IRAs"),
generally will be subject to mandatory federal income tax withholding unless
they either are:
1. Part of a series of substantially equal periodic payments (at least
annually) for
- the participant's life or life expectancy,
- the joint lives or life expectancies of the participant and
his/her beneficiary,
- or a period certain of not less than 10 years, or
2. Required by the Code upon the participant's attainment of age
70 1/2 or death.
Such withholding will apply even if the distribution is rolled over into
another qualified plan, including an IRA. The withholding can be avoided if the
participant's interest is directly transferred by the old plan to another
eligible qualified plan, including an IRA. A direct transfer to the new plan can
be made only in accordance with the terms of the old plan. If withholding is not
avoided, the amount withheld may be subject to income tax and excise tax
penalties.
Under the generation skipping transfer tax, the Company may be liable for
payment of this tax under certain circumstances. In the event that the Company
determines that such liability exists, an amount necessary to pay the generation
skipping transfer tax may be subtracted from the death benefit proceeds.
ANNUITY CONTRACTS GOVERNED BY SECTION 403(b) OF THE CODE
An annuity contract will not be treated as a Qualified Contract under
Section 403(b) of the Code unless distributions which are attributable to a
contribution made pursuant to a salary reduction agreement may be paid only:
(1) when the Contractholder attains age 59 1/2;
(2) when the Contractholder separates from the service of his employer;
(3) when the Contractholder dies;
38
<PAGE> 45
(4) when the Contractholder becomes permanently disabled within the meaning
of Section 72(m)(7) 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 the five sets of circumstances set forth above. Hardship
withdrawals are 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.
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 under Section 403(b) of the Code.
RETIREMENT PLANS
The Contracts described in this Prospectus currently 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 Section 408(b) of the
Code, including Simplified Employee Pensions established by
employers pursuant to Section 408(k);
(3) Deferred compensation plans provided by certain governmental
entities under Section 457;
(4) Non-Qualified Plans; And
(5) 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 under Section 403(b) of the Code).
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 here 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.
39
<PAGE> 46
SPECIAL EXCHANGE OFFER
Holders of flexible premium variable annuity contracts issued by us on and
after November 1, 1987 have a special right to exchange the contract which they
hold for a Contract. We will waive all charges imposed on the surrender of the
contract which they hold, provided that:
(1) an application for the Contract be submitted upon the exercise of this
special right, and
(2) the special right is exercised not later than the expiration of 60 days
from the later of:
(a) the date upon which the exchange program becomes effective, and
(b) the date the Contract becomes available in the state in which such
contractholder resides.
PERFORMANCE DATA
We may advertise the performance of the MONY America Variable Account A
subaccounts. We will also report performance to contract Contractholders and may
make performance information available to prospective purchasers. This
information will be presented in compliance with applicable law.
Performance information contained in these advertisements is based upon
historical earnings and is not indicative of future performance. The data for
each subaccount reflects the investment results of the designated 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
MONY America Variable Account A, 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. 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. Returns for periods exceeding one year reflect the average
annual total return for such period. 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 purchaser 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
40
<PAGE> 47
accompanied by standard performance data, and the period covered or other
non-standard features will be disclosed.
Performance information for MONY Variable Account A may be compared in
advertisements, sales literature, and reports to contract Contractholders to
various indices, including, without limitation, the Standard & Poor's 500
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 and to the Consumer Price Index (a measure for inflation)in
order to provide the reader a basis for comparison of performance. Reports and
promotional literature may also contain the Company's rating or a rating of the
Company's claims paying ability as determined by firms that analyze and rate
insurance companies and by nationally recognized statistical rating
organization.
ADDITIONAL INFORMATION
This Prospectus does not contain all the information set forth in the
registration statement, certain portions of which have been omitted pursuant to
the rules and regulations of the Securities and Exchange Commission. The omitted
information may be obtained from the Commission's principal office in
Washington, D.C., upon payment of the fees prescribed by the Commission.
For further information with respect to the Company and the Contracts
offered by this Prospectus, including the Statement of Additional Information
(which includes financial statements relating to the Company), Contractholders
and prospective investors may also contact the Company at its address or phone
number set forth on the cover of this Prospectus for requesting such statement.
The Statement of Additional Information is available from the Company without
charge.
LEGAL PROCEEDINGS
There are no legal proceedings to which MONY Variable Account A is a party.
The Company and the principal underwriter are engaged in various kinds of
routine litigation which, in the opinions of the Company and the principal
underwriter, are not of material importance in relation to the total capital and
surplus of the Company or the principal underwriter.
FINANCIAL STATEMENTS
The financial statements for the Company should be distinguished from the
financial statements of MONY Variable Account A and 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 MONY Variable
Account A. The financial statements of the Company and MONY Variable Account A
are included in the Statement of Additional Information.
41
<PAGE> 48
TABLE OF CONTENTS
OF
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
MONY Life Insurance Company................................. 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:
MONY Life Insurance Company
Mail Drop 8-27
1740 Broadway
New York, New York 10019
Your name
-----------------------------------------------------------------------
Address
-------------------------------------------------------------------------
City State Zip
------------------------------------------ --------- ------------
Please send me a copy of the MONY Variable Account A Statement of
Additional Information.
Policy C3-88
FORM NO. 13456SL (5/99) #33-37722
42
<PAGE> 49
APPENDIX A
CALCULATION OF SURRENDER CHARGE
ILLUSTRATION 1
Suppose an initial Purchase Payment of $15,000 is the only payment made,
and no taxes are deducted from this payment. At the beginning of the third
Contract Year, the Cash Value of the Contract has grown to $18,000 and the
Contractholder requests a partial surrender of $2,000.
The Surrender Charge is determined as follows:
Step 1: Purchase Payments are allocated to the surrender amount, as
follows:
<TABLE>
<CAPTION>
ANNIVERSARIES SINCE AMOUNT AMOUNT AVAILABLE
PURCHASE PAYMENT CONTRACT YEAR ALLOCATED FOR ALLOCATION TO
RECEIVED BY US PAYMENT RECEIVED TO SURRENDER FUTURE SURRENDER
- ------------------- ---------------- ------------ -----------------
<S> <C> <C> <C>
0........... 3 $ 0 $ 0
1........... 2 0 0
2........... 1 2,000 13,000
</TABLE>
If the Contract is a Non-Qualified Contract --
Step 2: The Guaranteed Free Surrender Amount is calculated as 10% of the
Cash Value ($1,800). Reduce the resulting amount allocated to surrender ($2,000)
by the Guaranteed Free Surrender Amount ($1,800), and apply the Surrender Charge
Percentages as follows:
<TABLE>
<CAPTION>
AMOUNT OF
NUMBER OF CONTRACT SURRENDER
ANNIVERSARIES SINCE AMOUNT SURRENDER CHARGE
PURCHASE PAYMENT CONTRACT YEAR ALLOCATED CHARGE (AMT X
RECEIVED BY US PAYMENT RECEIVED TO SURRENDER PERCENTAGE 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> 50
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>
AMOUNT OF
NUMBER OF CONTRACT SURRENDER
ANNIVERSARIES SINCE AMOUNT SURRENDER CHARGE
PURCHASE PAYMENT CONTRACT YEAR ALLOCATED CHARGE (AMT X
RECEIVED BY US PAYMENT RECEIVED TO SURRENDER PERCENTAGE 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> 51
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> 52
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> 53
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> 54
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 55
THE MONYMASTER
STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1999
INDIVIDUAL FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACT
ISSUED BY
MONY VARIABLE ACCOUNT A
AND
MONY LIFE INSURANCE COMPANY
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,
1999 for the Individual Flexible Payment Variable Annuity Contract ("Contract")
issued by MONY Life Insurance Company ("Company"). The prospectus is available,
at no charge, by writing the Company at 1740 Broadway, New York, New York,
10019, Mail Drop 8-27 or by calling 1-800-487-6669.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- --------
<S> <C>
MONY Life Insurance Company................................. 1
Legal Opinion............................................... 1
Independent Accountants..................................... 1
Federal Tax Status.......................................... 2
Performance Data............................................ 5
Financial Statements........................................ F-1
FORM NO. 13456 SL (5/99) 33-37722
</TABLE>
<PAGE> 56
MONY LIFE INSURANCE COMPANY
MONY Life Insurance Company ("Company") is a stock life insurance company.
It was organized under the laws of the state of New York in 1842 as a mutual
life insurance company under the name The Mutual Life Insurance Company of New
York. The principal offices of the Company are at 1740 Broadway, New York, New
York 10019. MONY converted from a mutual life insurance company in 1998 in a
process known as demutualization. The Company had consolidated assets at the end
of 1998 of approximately $25.0 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, 1998, 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 1996. 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.
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
PricewaterhouseCoopers LLP, 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. PricewaterhouseCoopers LLP's office is
located at 1177 Avenue of the Americas, New York, New York 10036.
(1)
<PAGE> 57
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> 58
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> 59
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> 60
PERFORMANCE DATA
MONEY MARKET SUBACCOUNT
For the seven-day period ended December 31, 1998, the yield was 3.69% and
the effective yield was 3.75%.
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> 61
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 1998 1998 1998 1998
---------- ------------ ------------- -------------- ------------
<S> <C> <C> <C> <C>
Equity................................ 1.59% 17.61% 15.56% 15.16%
Small Company Value................... 1.44% 12.16% 14.56% 14.30%
Managed............................... -1.35% 16.96% 17.47% 17.28%
International Growth.................. 6.87% N/A N/A 8.70%
High Yield Bond....................... -4.32% N/A N/A 8.82%
Intermediate Term Bond................ -0.55% 3.85% 6.34% 5.95%
Long Term Bond........................ 2.06% 6.33% 9.04% 8.48%
Government Securities................. -1.14% N/A N/A 4.28%
</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 each of the Subaccounts, which is
August 1988 for the Equity and Managed Subaccounts, September 1988 for the Small
Company Value Subaccount, March 1988 for the Intermediate Term Bond Subaccount,
February 1988 for the Long Term Bond Subaccount, December 1994 for the
Government Securities Portfolio, and November 1994 for the International Growth
and for the High Yield Bond. 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> 62
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 1998 1998 1998 1998
---------- ------------ ------------- -------------- -------------
<S> <C> <C> <C> <C>
Equity............................... 7.83% 18.01% 15.56% 15.16%
Small Company Value.................. 7.69% 12.68% 14.56% 14.30%
Managed.............................. 4.91% 17.38% 17.47% 17.28%
International Growth................. 13.08% N/A N/A 9.55%
High Yield Bond...................... 1.96% N/A N/A 9.67%
Intermediate Term Bond............... 5.71% 4.59% 6.34% 5.95%
Long Term Bond....................... 8.30% 6.99% 9.04% 8.48%
Government Securities................ 5.13% N/A N/A 5.31%
</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 each of the Subaccounts, which is
August 1988 for the Equity and Managed Subaccounts, September 1988 for the Small
Company Value Subaccount, March 1988 for the Long Term Bond Subaccount, February
1986 for the Intermediate Term Bond Subaccount, December 1994 for the Government
Securities Subaccount, and November 1994 for the International Growth and for
the High Yield Bond Subaccounts. 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
1997, 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> 63
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 1998 1998 1998 1998
---------- ------------ ------------- -------------- -------------
<S> <C> <C> <C> <C>
Equity............................... 2.28% 18.14% 15.98% 15.57%
Small Company Value.................. 2.00% 12.67% 14.90% 14.65%
Managed.............................. 0.30% 18.22% 18.35% 18.13%
International Growth................. 7.19% N/A N/A 9.04%
High Yield Bond...................... -3.99% N/A N/A 9.15%
Intermediate Term Bond............... -0.15% 4.24% 6.63% 6.24%
Long Term Bond....................... 2.49% 6.73% 9.32% 8.76%
Government Securities................ -0.74% N/A N/A 4.74%
</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 each of the Subaccounts, which is
August 1988 for the Equity and Managed Subaccounts, September 1988 for the Small
Company Value Subaccount, March 1988 for the Long Term Bond Subaccount, February
1988 for the Intermediate Term Bond Subaccount, December 1994 for the Government
Securities Subaccount, and November 1994 for the International Growth and for
the High Yield Bond Subaccounts. 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 1998 1998 1998 1998
---------- ------------ ------------- -------------- -------------
<S> <C> <C> <C> <C>
Equity............................... 8.52% 18.53% 15.98% 15.57%
Small Company Value.................. 8.25% 13.17% 14.90% 14.65%
Managed.............................. 6.55% 18.61% 18.35% 18.13%
International Growth................. 13.40% N/A N/A 9.82%
High Yield Bond...................... 2.29% N/A N/A 9.93%
Intermediate Term Bond............... 6.11% 4.97% 6.63% 6.24%
Long Term Bond....................... 8.72% 7.38% 9.32% 8.76%
Government Securities................ 5.52% N/A N/A 5.67%
</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 each of the Subaccounts, which is August 1988
for the Equity and Managed Subaccounts, September 1988 for the Small Company
Value Portfolio, March
(8)
<PAGE> 64
1988 for the Intermediate Term Bond Subaccount, February 1988 for the Long Term
Bond Subaccount, December 1994 for the Government Securities Subaccount and
November 1994 for the International Growth and for the High Yield Bond
Subaccounts. 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, 1998
-----------------
<S> <C>
Intermediate Term Bond...................................... 4.83%
Long Term Bond.............................................. 5.03%
Government Securities....................................... 3.39%
High Yield Bond............................................. 7.26%
</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, 1999
to February 12, 1999) 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> 65
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 12, 1999)
(ASSUMING $1,000 PAYMENT AT BEGINNING OF PERIOD)
<TABLE>
<CAPTION>
SURRENDER AT CONTRACT
SUBACCOUNT END OF PERIOD IN FORCE
---------- ------------- --------
<S> <C> <C>
Equity...................................................... -12.66% -5.60%
Small Company Value......................................... -8.03% -1.14%
Managed..................................................... -12.00% -3.97%
International Growth........................................ -8.87% -2.22%
High Yield Bond............................................. -4.83% 1.80%
Intermediate Term Bond...................................... -7.31% -0.59%
Long Term Bond.............................................. -9.30% -2.55%
Government Securities....................................... -7.13% -0.42%
</TABLE>
MONY VARIABLE ACCOUNT A
YEAR TO DATE TOTAL RETURN
(JANUARY 1 TO FEBRUARY 12, 1999
(ASSUMING $25,000 PAYMENT AT BEGINNING OF PERIOD)
<TABLE>
<CAPTION>
SURRENDER AT CONTRACT
SUBACCOUNT END OF PERIOD IN FORCE
---------- ------------- --------
<S> <C> <C>
Equity...................................................... -11.97% -5.60%
Small Company Value......................................... -7.47% -1.14%
Managed..................................................... -10.36% -3.97%
International Growth........................................ -8.55% -2.22%
High Yield Bond............................................. -4.50% 1.80%
Intermediate Term Bond...................................... -6.91% -0.59%
Long Term Bond.............................................. -8.88% -2.55%
Government Securities....................................... -6.73% -0.42%
</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> 66
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,
1998................................................... F-3
Statements of operations for the year ended December 31,
1998................................................... F-6
Statements of changes in net assets for the years ended
December 31, 1998 and 1997............................. F-9
Notes to financial statements............................. F-13
With respect to MONY Life Insurance Company:
Report of Independent Accountants......................... F-16
Consolidated balance sheets as of December 31, 1998 and
1997................................................... F-17
Consolidated statements of income and comprehensive income
for the years ended December 31, 1998, 1997 and 1996... F-18
Consolidated statements of changes in shareholder's equity
for the years ended December 31, 1998, 1997 and 1996... F-19
Consolidated statements of cash flows for the years ended
December 31, 1998, 1997 and 1996....................... F-20
Notes to consolidated financial statements................ F-22
</TABLE>
F-1
<PAGE> 67
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
MONY Life Insurance Company and the
Contractholders of MONY Variable Account A -- MONYMaster/ValueMaster:
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of each of the subaccounts
constituting MONY Variable Account A (comprising, respectively, MONYMaster's
Equity Growth, Equity Income, Intermediate Term Bond, Long Term Bond,
Diversified, Money Market, Government Securities, Equity, Small Cap, Managed,
International Growth, and High Yield Bond Subaccounts; and ValueMaster's Money
Market, Bond, Equity, Small Cap, and Managed Subaccounts) at December 31, 1998,
the results of each of their operations for the year then ended and the changes
in each of their net assets for each of the two years in the period then ended,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of MONY Life Insurance Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
February 12, 1999
F-2
<PAGE> 68
MONY
VARIABLE ACCOUNT A
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MONYMASTER
------------------------------------------------------------------
MONY SERIES FUND, INC.
------------------------------------------------------------------
EQUITY EQUITY INTERMEDIATE LONG TERM
GROWTH INCOME TERM BOND BOND DIVERSIFIED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments at cost (Note
4)...................... $201,356 $245,237 $10,403,051 $19,505,896 $ 83,261
======== ======== =========== =========== =========
Investments in MONY Series
Fund, Inc., at net asset
value (Note 2).......... $314,750 $338,543 $10,791,271 $21,185,984 $ 98,511
Amount due from MONY...... 0 0 25 152 0
Amount due from MONY
Series Fund, Inc. ...... 12 0 20 266 9
-------- -------- ----------- ----------- ---------
Total assets..... 314,762 338,543 10,791,316 21,186,402 98,520
-------- -------- ----------- ----------- ---------
LIABILITIES
Amount due to MONY........ 12 0 20 266 9
Amount due to MONY Series
Fund, Inc. ............. 0 0 25 152 0
-------- -------- ----------- ----------- ---------
Total
liabilities.... 12 0 45 418 9
-------- -------- ----------- ----------- ---------
Net assets................ $314,750 $338,543 $10,791,271 $21,185,984 $ 98,511
======== ======== =========== =========== =========
Net assets consist of:
Contractholders' net
payments.............. $ (3,943) $(29,782) $ 8,291,052 $15,321,887 $(172,517)
Undistributed net
investment income..... 89,650 174,268 1,867,789 3,313,808 130,644
Accumulated net realized
gain on investments... 115,649 100,751 244,210 870,201 125,134
Unrealized appreciation
of investments........ 113,394 93,306 388,220 1,680,088 15,250
-------- -------- ----------- ----------- ---------
Net assets................ $314,750 $338,543 $10,791,271 $21,185,984 $ 98,511
======== ======== =========== =========== =========
Number of units
outstanding*............ 6,343 8,207 561,493 847,628 2,754
-------- -------- ----------- ----------- ---------
Net asset value per unit
outstanding*............ $ 49.62 $ 41.25 $ 19.22 $ 24.99 $ 35.77
======== ======== =========== =========== =========
<CAPTION>
MONYMASTER VALUEMASTER
------------------------ -----------
MONY SERIES FUND, INC.
--------------------------------------
MONEY GOVERNMENT MONEY
MARKET SECURITIES MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ---------- -----------
<S> <C> <C> <C>
ASSETS
Investments at cost (Note
4)...................... $48,959,018 $7,067,782 $515,806
=========== ========== ========
Investments in MONY Series
Fund, Inc., at net asset
value (Note 2).......... $48,959,018 $7,270,313 $515,806
Amount due from MONY...... 40,177 701 0
Amount due from MONY
Series Fund, Inc. ...... 4,393 413 0
----------- ---------- --------
Total assets..... 49,003,588 7,271,427 515,806
----------- ---------- --------
LIABILITIES
Amount due to MONY........ 4,393 413 0
Amount due to MONY Series
Fund, Inc. ............. 40,177 701 0
----------- ---------- --------
Total
liabilities.... 44,570 1,114 0
----------- ---------- --------
Net assets................ $48,959,018 $7,270,313 $515,806
=========== ========== ========
Net assets consist of:
Contractholders' net
payments.............. $44,825,925 $6,814,440 $446,176
Undistributed net
investment income..... 4,133,093 144,739 69,630
Accumulated net realized
gain on investments... 0 108,603 0
Unrealized appreciation
of investments........ 0 202,531 0
----------- ---------- --------
Net assets................ $48,959,018 $7,270,313 $515,806
=========== ========== ========
Number of units
outstanding*............ 3,114,064 581,295 35,959
----------- ---------- --------
Net asset value per unit
outstanding*............ $ 15.72 $ 12.51 $ 14.34
=========== ========== ========
</TABLE>
- ---------------
* Units outstanding have been rounded for presentation purposes.
See notes to financial statements.
F-3
<PAGE> 69
MONY
VARIABLE ACCOUNT A
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MONYMASTER
----------------------------------------------------------------------
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)............ $61,161,723 $40,992,718 $276,708,551 $ 9,911,540 $11,305,992
=========== =========== ============ =========== ===========
Investments in Enterprise Accumulation
Trust, at net asset value (Note 2).... $67,605,479 $44,371,040 $301,871,363 $10,473,576 $10,823,683
Amount due from MONY.................... 60,789 4,202 68,903 553 547
Amount due from Enterprise Accumulation
Trust................................. 953 1,156 120,816 155 168
----------- ----------- ------------ ----------- -----------
Total assets.................. 67,667,221 44,376,398 302,061,082 10,474,284 10,824,398
----------- ----------- ------------ ----------- -----------
LIABILITIES
Amount due to MONY...................... 953 1,156 120,816 155 168
Amount due to Enterprise Accumulation
Trust................................. 60,789 4,202 68,903 553 547
----------- ----------- ------------ ----------- -----------
Total liabilities............. 61,742 5,358 189,719 708 715
----------- ----------- ------------ ----------- -----------
Net assets.............................. $67,605,479 $44,371,040 $301,871,363 $10,473,576 $10,823,683
=========== =========== ============ =========== ===========
Net assets consist of:
Contractholders' net payments......... $39,926,997 $26,151,662 $140,780,469 $ 8,616,077 $ 9,819,781
Undistributed net investment income... 5,015,479 7,097,100 42,513,586 591,208 1,376,102
Accumulated net realized gain on
investments........................ 16,219,247 7,743,956 93,414,496 704,255 110,109
Unrealized appreciation (depreciation)
of investments..................... 6,443,756 3,378,322 25,162,812 562,036 (482,309)
----------- ----------- ------------ ----------- -----------
Net assets.............................. $67,605,479 $44,371,040 $301,871,363 $10,473,576 $10,823,683
=========== =========== ============ =========== ===========
Number of units outstanding*............ 1,510,836 1,087,406 5,369,272 711,551 732,343
----------- ----------- ------------ ----------- -----------
Net asset value per unit outstanding*... $ 44.75 $ 40.80 $ 56.22 $ 14.72 $ 14.78
=========== =========== ============ =========== ===========
</TABLE>
- ---------------
* Units outstanding have been rounded for presentation purposes.
See notes to financial statements.
F-4
<PAGE> 70
MONY
VARIABLE ACCOUNT A
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VALUEMASTER
--------------------------------------------------
OCC ACCUMULATION TRUST
--------------------------------------------------
BOND EQUITY SMALL CAP MANAGED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
ASSETS
Investments at cost (Note 4)............................... $660,143 $213,100 $134,305 $ 7,339,760
======== ======== ======== ===========
Investments in OCC Accumulation Trust, at net asset value
(Note 2)................................................. $679,854 $333,320 $148,624 $10,429,231
-------- -------- -------- -----------
Net assets................................................. $679,854 $333,320 $148,624 $10,429,231
======== ======== ======== ===========
Net assets consist of:
Contractholders' net payments............................ $508,711 $ 70,554 $(11,738) $ 2,239,802
Undistributed net investment income...................... 154,732 29,660 32,390 694,423
Accumulated net realized gain (loss) on investments...... (3,300) 112,886 113,653 4,405,535
Unrealized appreciation of investments................... 19,711 120,220 14,319 3,089,471
-------- -------- -------- -----------
Net assets................................................. $679,854 $333,320 $148,624 $10,429,231
======== ======== ======== ===========
Number of units outstanding*............................... 37,207 7,358 4,781 193,049
-------- -------- -------- -----------
Net asset value per unit outstanding*...................... $ 18.27 $ 45.29 $ 31.09 $ 54.02
======== ======== ======== ===========
</TABLE>
- ---------------
* Units outstanding have been rounded for presentation purposes.
See notes to financial statements.
F-5
<PAGE> 71
MONY
VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MONYMASTER
------------------------------------------------------------------------------------
MONY SERIES FUND, INC.
------------------------------------------------------------------------------------
EQUITY EQUITY INTERMEDIATE LONG TERM MONEY
GROWTH INCOME TERM BOND BOND DIVERSIFIED MARKET
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dividend income........ $ 44,099 $ 51,132 $ 433,654 $ 838,752 $ 25,421 $ 1,686,933
Mortality and expense
risk charges (Note
3)................... (3,507) (4,063) (113,470) (208,599) (1,281) (411,381)
----------- ----------- ----------- ----------- ----------- -------------
Net investment
income............... 40,592 47,069 320,184 630,153 24,140 1,275,552
----------- ----------- ----------- ----------- ----------- -------------
Realized and unrealized
gain (loss) on
investments (Note 2):
Proceeds from
sales.............. 48,941 56,822 3,100,202 2,794,090 73,159 123,609,629
Cost of shares
sold............... (18,764) (27,642) (2,966,391) (2,286,745) (59,182) (123,609,629)
----------- ----------- ----------- ----------- ----------- -------------
Net realized gain on
investments.......... 30,177 29,180 133,811 507,345 13,977 0
Net increase (decrease)
in unrealized
appreciation of
investments.......... (7,398) (39,218) 74,736 203,832 (14,958) 0
----------- ----------- ----------- ----------- ----------- -------------
Net realized and
unrealized gain
(loss) on
investments.......... 22,779 (10,038) 208,547 711,177 (981) 0
----------- ----------- ----------- ----------- ----------- -------------
Net increase in net
assets resulting from
operations........... $ 63,371 $ 37,031 $ 528,731 $ 1,341,330 $ 23,159 $ 1,275,552
=========== =========== =========== =========== =========== =============
<CAPTION>
MONYMASTER VALUEMASTER
----------- -----------
MONY SERIES FUND, INC.
-------------------------
GOVERNMENT MONEY
SECURITIES MARKET
SUBACCOUNT SUBACCOUNT
----------- -----------
<S> <C> <C>
Dividend income........ $ 154,732 $ 23,710
Mortality and expense
risk charges (Note
3)................... (60,782) (6,605)
----------- -----------
Net investment
income............... 93,950 17,105
----------- -----------
Realized and unrealized
gain (loss) on
investments (Note 2):
Proceeds from
sales.............. 1,217,412 3,159,946
Cost of shares
sold............... (1,135,396) (3,159,946)
----------- -----------
Net realized gain on
investments.......... 82,016 0
Net increase (decrease)
in unrealized
appreciation of
investments.......... 72,464 0
----------- -----------
Net realized and
unrealized gain
(loss) on
investments.......... 154,480 0
----------- -----------
Net increase in net
assets resulting from
operations........... $ 248,430 $ 17,105
=========== ===========
</TABLE>
See notes to financial statements.
F-6
<PAGE> 72
MONY
VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MONYMASTER
-----------------------------------------------------------------------
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........................ $ 3,014,135 $ 2,731,100 $ 23,607,771 $ 500,167 $ 915,812
Mortality and expense risk charges
(Note 3)............................. (813,756) (538,544) (3,857,224) (119,164) (116,590)
------------ ----------- ------------ ----------- -----------
Net investment income.................. 2,200,379 2,192,556 19,750,547 381,003 799,222
------------ ----------- ------------ ----------- -----------
Realized and unrealized gain on
investments (Note 2):
Proceeds from sales.................. 20,934,612 13,561,684 102,710,901 2,186,169 2,265,437
Cost of shares sold.................. (13,018,209) (8,839,331) (57,973,576) (1,908,317) (2,217,960)
------------ ----------- ------------ ----------- -----------
Net realized gain on investments....... 7,916,403 4,722,353 44,737,325 277,852 47,477
Net increase in unrealized appreciation
(depreciation) of investments........ (5,669,218) (4,325,400) (48,532,620) 405,104 (710,908)
------------ ----------- ------------ ----------- -----------
Net realized and unrealized gain (loss)
on investments....................... 2,247,185 396,953 (3,795,295) 682,956 (663,431)
------------ ----------- ------------ ----------- -----------
Net increase in net assets resulting
from operations...................... $ 4,447,564 $ 2,589,509 $ 15,955,252 $ 1,063,959 $ 135,791
============ =========== ============ =========== ===========
</TABLE>
See notes to financial statements.
F-7
<PAGE> 73
MONY
VARIABLE ACCOUNT A
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
VALUEMASTER
-----------------------------------------------------
OCC ACCUMULATION TRUST
-----------------------------------------------------
BOND EQUITY SMALL CAP MANAGED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Dividend income...................................... $ 39,392 $ 21,800 $ 11,140 $ 466,768
Mortality and expense risk charges (Note 3).......... (7,444) (4,165) (2,410) (149,944)
----------- ----------- ----------- -----------
Net investment income................................ 31,948 17,635 8,730 316,824
----------- ----------- ----------- -----------
Realized and unrealized gain (loss) on investments
(Note 2):
Proceeds from sales................................ 78,315 131,436 139,670 4,335,672
Cost of shares sold................................ (75,328) (66,198) (87,742) (2,275,924)
----------- ----------- ----------- -----------
Net realized gain on investments..................... 2,987 65,238 51,928 2,059,748
Net increase (decrease) in unrealized appreciation of
investments........................................ 4,164 (46,441) (68,424) (1,784,329)
----------- ----------- ----------- -----------
Net realized and unrealized gain (loss) on
investments........................................ 7,151 18,797 (16,496) 275,419
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations......................................... $ 39,099 $ 36,432 $ (7,766) $ 592,243
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-8
<PAGE> 74
MONY
VARIABLE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MONYMASTER
-------------------------------------------------------------------------------------------------
MONY SERIES FUND, INC.
-------------------------------------------------------------------------------------------------
EQUITY GROWTH EQUITY INCOME INTERMEDIATE TERM LONG TERM BOND
SUBACCOUNT SUBACCOUNT BOND SUBACCOUNT SUBACCOUNT
------------------- ------------------- ------------------------- -------------------------
1998 1997 1998 1997 1998 1997 1998 1997
-------- -------- -------- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
From operations:
Net investment income....... $ 40,592 $ 19,434 $ 47,069 $ 29,596 $ 320,184 $ 284,214 $ 630,153 $ 507,617
Net realized gain on
investments............... 30,177 32,694 29,180 13,051 133,811 104,618 507,345 100,826
Net increase (decrease) in
unrealized appreciation of
investments............... (7,398) 19,810 (39,218) 37,678 74,736 42,476 203,832 766,700
-------- -------- -------- -------- ----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations... 63,371 71,938 37,031 80,325 528,731 431,308 1,341,330 1,375,143
-------- -------- -------- -------- ----------- ----------- ----------- -----------
From unit transactions:
Net proceeds from the
issuance of units......... 0 0 0 1,714 5,241,941 2,659,796 8,276,703 3,496,284
Net asset value of units
redeemed or used to meet
contract obligations...... (40,219) (27,729) (46,377) (4,757) (2,884,226) (1,677,836) (2,329,561) (1,307,957)
-------- -------- -------- -------- ----------- ----------- ----------- -----------
Net increase (decrease) from
unit transactions........... (40,219) (27,729) (46,377) (3,043) 2,357,715 981,960 5,947,142 2,188,327
-------- -------- -------- -------- ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets...................... 23,152 44,209 (9,346) 77,282 2,886,446 1,413,268 7,288,472 3,563,470
Net assets beginning of
year........................ 291,598 247,389 347,889 270,607 7,904,825 6,491,557 13,897,512 10,334,042
-------- -------- -------- -------- ----------- ----------- ----------- -----------
Net assets end of year*....... $314,750 $291,598 $338,543 $347,889 $10,791,271 $ 7,904,825 $21,185,984 $13,897,512
======== ======== ======== ======== =========== =========== =========== ===========
Units outstanding beginning of
year........................ 7,284 7,976 9,384 9,465 436,486 381,313 604,629 503,775
Units issued during the
year........................ 0 0 0 619 277,572 152,349 341,631 162,590
Units redeemed during the
year........................ (941) (692) (1,177) (700) (152,565) (97,176) (98,632) (61,736)
-------- -------- -------- -------- ----------- ----------- ----------- -----------
Units outstanding end of
year........................ 6,343 7,284 8,207 9,384 561,493 436,486 847,628 604,629
======== ======== ======== ======== =========== =========== =========== ===========
- ---------------
* Includes undistributed net
investment income of: $ 89,650 $ 49,058 $174,268 $127,199 $ 1,867,789 $ 1,547,605 $ 3,313,808 $ 2,683,655
</TABLE>
See notes to financial statements.
F-9
<PAGE> 75
MONY
VARIABLE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MONYMASTER
--------------------------------------------------
MONY SERIES FUND, INC.
--------------------------------------------------
DIVERSIFIED MONEY MARKET
SUBACCOUNT SUBACCOUNT
------------------- ----------------------------
1998 1997 1998 1997
-------- -------- ------------- ------------
<S> <C> <C> <C> <C>
From operations:
Net investment income.................................. $ 24,140 $ 9,492 $ 1,275,552 $ 748,412
Net realized gain on investments....................... 13,977 22,559 0 0
Net increase (decrease) in unrealized appreciation of
investments.......................................... (14,958) 2,068 0 0
-------- -------- ------------- ------------
Net increase in net assets resulting from operations..... 23,159 34,119 1,275,552 748,412
-------- -------- ------------- ------------
From unit transactions:
Net proceeds from the issuance of units................ 0 674 142,540,251 96,655,000
Net asset value of units redeemed or used to meet
contract obligations................................. (62,443) (77,004) (118,190,820) (93,779,042)
-------- -------- ------------- ------------
Net increase (decrease) from unit transactions........... (62,443) (76,330) 24,349,431 2,875,958
-------- -------- ------------- ------------
Net increase (decrease) in net assets.................... (39,284) (42,211) 25,624,983 3,624,370
Net assets beginning of year............................. 137,795 180,006 23,334,035 19,709,665
-------- -------- ------------- ------------
Net assets end of year*.................................. $ 98,511 $137,795 $ 48,959,018 $ 23,334,035
======== ======== ============= ============
Units outstanding beginning of year...................... 4,707 7,590 1,543,043 1,355,274
Units issued during the year............................. 0 34 9,230,746 6,511,788
Units redeemed during the year........................... (1,953) (2,917) (7,659,725) (6,324,019)
-------- -------- ------------- ------------
Units outstanding end of year............................ 2,754 4,707 3,114,064 1,543,043
======== ======== ============= ============
- ---------------
* Includes undistributed net investment income of: $130,644 $106,504 $ 4,133,093 $ 2,857,541
<CAPTION>
MONYMASTER VALUEMASTER
------------------------ -------------------------
MONY SERIES FUND, INC.
----------------------------------------------------
GOVERNMENT MONEY
SECURITIES MARKET
SUBACCOUNT SUBACCOUNT
------------------------ -------------------------
1998 1997 1998 1997
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
From operations:
Net investment income.................................. $ 93,950 $ 43,640 $ 17,105 $ 17,237
Net realized gain on investments....................... 82,016 13,453 0 0
Net increase (decrease) in unrealized appreciation of
investments.......................................... 72,464 82,489 0 0
----------- ---------- ----------- -----------
Net increase in net assets resulting from operations..... 248,430 139,582 17,105 17,237
----------- ---------- ----------- -----------
From unit transactions:
Net proceeds from the issuance of units................ 4,518,283 1,902,833 1,808,234 1,080,192
Net asset value of units redeemed or used to meet
contract obligations................................. (1,075,338) (278,247) (1,773,805) (1,076,942)
----------- ---------- ----------- -----------
Net increase (decrease) from unit transactions........... 3,442,945 1,624,586 34,429 3,250
----------- ---------- ----------- -----------
Net increase (decrease) in net assets.................... 3,691,375 1,764,168 51,534 20,487
Net assets beginning of year............................. 3,578,938 1,814,770 464,272 443,785
----------- ---------- ----------- -----------
Net assets end of year*.................................. $ 7,270,313 $3,578,938 $ 515,806 $ 464,272
=========== ========== =========== ===========
Units outstanding beginning of year...................... 302,006 162,102 33,429 33,041
Units issued during the year............................. 361,047 164,256 126,735 78,351
Units redeemed during the year........................... (81,758) (24,352) (124,205) (77,963)
----------- ---------- ----------- -----------
Units outstanding end of year............................ 581,295 302,006 35,959 33,429
=========== ========== =========== ===========
- ---------------
* Includes undistributed net investment income of: $ 144,739 $ 50,789 $ 69,630 $ 52,525
</TABLE>
See notes to financial statements.
F-10
<PAGE> 76
MONY
VARIABLE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MONYMASTER
-------------------------------------------------------------------------------------
ENTERPRISE ACCUMULATION TRUST
-------------------------------------------------------------------------------------
EQUITY SMALL CAP MANAGED
SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------------------- -------------------------- ---------------------------
1998 1997 1998 1997 1998 1997
------------ ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
From operations:
Net investment income.... $ 2,200,379 $ 1,348,889 $ 2,192,556 $ 2,969,759 $ 19,750,547 $ 10,160,903
Net realized gain on
investments............ 7,916,403 4,582,451 4,722,353 1,806,789 44,737,325 24,484,707
Net increase (decrease)
in unrealized
appreciation of
investments............ (5,669,218) 4,305,948 (4,325,400) 5,408,719 (48,532,620) 18,352,149
------------ ----------- ------------ ----------- ------------ ------------
Net increase in net assets
resulting from
operations............... 4,447,564 10,237,288 2,589,509 10,185,267 15,955,252 52,997,759
------------ ----------- ------------ ----------- ------------ ------------
From unit transactions:
Net proceeds from the
issuance of units...... 22,879,320 19,541,544 14,502,302 11,606,860 83,188,883 69,610,057
Net asset value of units
redeemed or used to
meet contract
obligations............ (18,619,183) (8,148,291) (12,018,701) (4,634,574) (94,338,742) (46,391,571)
------------ ----------- ------------ ----------- ------------ ------------
Net increase (decrease)
from unit transactions... 4,260,137 11,393,253 2,483,601 6,972,286 (11,149,859) 23,218,486
------------ ----------- ------------ ----------- ------------ ------------
Net increase in net
assets................... 8,707,701 21,630,541 5,073,110 17,157,553 4,805,393 76,216,245
Net assets beginning of
year..................... 58,897,778 37,267,237 39,297,930 22,140,377 297,065,970 220,849,725
------------ ----------- ------------ ----------- ------------ ------------
Net assets end of year*.... $ 67,605,479 $58,897,778 $ 44,371,040 $39,297,930 $301,871,363 $297,065,970
============ =========== ============ =========== ============ ============
Units outstanding beginning
of year.................. 1,428,789 1,123,086 1,042,727 837,807 5,633,476 5,150,485
Units issued during the
year..................... 526,017 526,272 373,071 347,201 1,521,008 1,464,377
Units redeemed during the
year..................... (443,970) (220,569) (328,392) (142,281) (1,785,212) (981,386)
------------ ----------- ------------ ----------- ------------ ------------
Units outstanding end of
year..................... 1,510,836 1,428,789 1,087,406 1,042,727 5,369,272 5,633,476
============ =========== ============ =========== ============ ============
- ---------------
* Includes undistributed
net investment income of: $ 5,015,479 $ 2,815,100 $ 7,097,100 $ 4,904,544 $ 42,513,586 $ 22,763,039
<CAPTION>
MONYMASTER
----------------------------------------------------
ENTERPRISE ACCUMULATION TRUST
----------------------------------------------------
INTERNATIONAL HIGH YIELD
GROWTH BOND
SUBACCOUNT SUBACCOUNT
------------------------- ------------------------
1998 1997 1998 1997
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
From operations:
Net investment income.... $ 381,003 $ 157,687 $ 799,222 $ 392,417
Net realized gain on
investments............ 277,852 315,164 47,477 42,368
Net increase (decrease)
in unrealized
appreciation of
investments............ 405,104 (304,765) (710,908) 131,750
----------- ----------- ----------- ----------
Net increase in net assets
resulting from
operations............... 1,063,959 168,086 135,791 566,535
----------- ----------- ----------- ----------
From unit transactions:
Net proceeds from the
issuance of units...... 2,826,722 3,852,044 5,348,741 3,929,223
Net asset value of units
redeemed or used to
meet contract
obligations............ (2,036,923) (1,301,430) (1,925,911) (420,640)
----------- ----------- ----------- ----------
Net increase (decrease)
from unit transactions... 789,799 2,550,614 3,422,830 3,508,583
----------- ----------- ----------- ----------
Net increase in net
assets................... 1,853,758 2,718,700 3,558,621 4,075,118
Net assets beginning of
year..................... 8,619,818 5,901,118 7,265,062 3,189,944
----------- ----------- ----------- ----------
Net assets end of year*.... $10,473,576 $ 8,619,818 $10,823,683 $7,265,062
=========== =========== =========== ==========
Units outstanding beginning
of year.................. 664,152 472,752 502,892 247,295
Units issued during the
year..................... 200,326 289,408 363,458 286,812
Units redeemed during the
year..................... (152,927) (98,008) (134,007) (31,215)
----------- ----------- ----------- ----------
Units outstanding end of
year..................... 711,551 664,152 732,343 502,892
=========== =========== =========== ==========
- ---------------
* Includes undistributed
net investment income of: $ 591,208 $ 210,205 $ 1,376,102 $ 576,880
</TABLE>
See notes to financial statements.
F-11
<PAGE> 77
MONY
VARIABLE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
VALUEMASTER
----------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
----------------------------------------------------------------------------------------------
BOND EQUITY SMALL CAP MANAGED
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------------------- -------------------- --------------------- -------------------------
1998 1997 1998 1997 1998 1997 1998 1997
-------- -------- --------- -------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
From operations:
Net investment income.......... $ 31,948 $ 28,149 $ 17,635 $ 10,790 $ 8,730 $ 11,908 $ 316,824 $ 378,567
Net realized gain (loss) on
investments.................. 2,987 (9,584) 65,238 35,842 51,928 37,759 2,059,748 1,555,405
Net increase (decrease) in
unrealized appreciation of
investments.................. 4,164 12,352 (46,441) 42,275 (68,424) 7,206 (1,784,329) 369,175
-------- -------- --------- -------- --------- --------- ----------- -----------
Net increase (decrease) in net
assets resulting from
operations..................... 39,099 30,917 36,432 88,907 (7,766) 56,873 592,243 2,303,147
-------- -------- --------- -------- --------- --------- ----------- -----------
From unit transactions:
Net proceeds from the issuance
of units..................... 116,160 20,982 32,150 4,581 33,004 0 1,794,905 1,042,873
Net asset value of units
redeemed or used to meet
contract obligations......... (65,871) (30,553) (127,289) (71,904) (137,264) (136,759) (4,139,893) (3,207,772)
-------- -------- --------- -------- --------- --------- ----------- -----------
Net increase (decrease) from unit
transactions................... 50,289 (9,571) (95,139) (67,323) (104,260) (136,759) (2,344,988) (2,164,899)
-------- -------- --------- -------- --------- --------- ----------- -----------
Net increase (decrease) in net
assets......................... 89,388 21,346 (58,707) 21,584 (112,026) (79,886) (1,752,745) 138,248
Net assets beginning of year..... 590,466 569,120 392,027 370,443 260,650 340,536 12,181,976 12,043,728
-------- -------- --------- -------- --------- --------- ----------- -----------
Net assets end of year*.......... $679,854 $590,466 $ 333,320 $392,027 $ 148,624 $ 260,650 $10,429,231 $12,181,976
======== ======== ========= ======== ========= ========= =========== ===========
Units outstanding beginning of
year........................... 34,521 35,119 9,563 11,304 7,532 11,883 238,580 284,927
Units issued during the year..... 6,460 1,264 729 153 991 0 35,581 21,763
Units redeemed during the year... (3,774) (1,862) (2,934) (1,894) (3,742) (4,351) (81,112) (68,110)
-------- -------- --------- -------- --------- --------- ----------- -----------
Units outstanding end of year.... 37,207 34,521 7,358 9,563 4,781 7,532 193,049 238,580
======== ======== ========= ======== ========= ========= =========== ===========
- ---------------
* Includes undistributed net
investment income of: $154,732 $122,784 $ 29,660 $ 12,025 $ 32,390 $ 23,660 $ 694,423 $ 377,599
</TABLE>
See notes to financial statements.
F-12
<PAGE> 78
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 MONY Life Insurance Company
("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 (MONYMaster and
ValueMaster). These policies are issued by MONY.
There are currently seventeen subaccounts within the Variable Account, each
invests only in a corresponding portfolio of the MONY Series Fund, Inc. (the
"Fund"), Enterprise Accumulation Trust ("Enterprise") or the OCC Accumulation
Trust ("OCC") (collectively, the "Funds"). The Funds are registered under the
1940 Act as open end, diversified, management investment companies.
On March 31, 1997, the Variable Account effected a substitution by
redeeming shares of the OCC Accumulation Trust Bond Portfolio and using the
redemption proceeds to purchase shares of the OCC Accumulation Trust U.S.
Government Income Portfolio. The substitution was effected through a redemption
of assets in-kind for the Variable Account and OCC.
On December 21, 1998, the Variable Account effected a substitution by
redeeming shares of the OCC Accumulation Trust Money Market Portfolio and using
the redemption proceeds to purchase shares of the MONY Series Fund, Inc. Money
Market Portfolio. The substitution was effected through a redemption of assets
in-kind for the Variable Account and OCC.
A full presentation of the related financial statements and footnotes of
the Fund, Enterprise and OCC are contained on pages hereinafter and should be
read in conjunction with these financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES
Investments:
The investment in shares of each of the respective Funds' portfolios is
stated at value which is the net asset value of each portfolio. Except for the
Money Market Portfolio, 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 Portfolio, the net asset value is based on the amortized cost of
the securities held which approximates value.
Taxes:
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.
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.
F-13
<PAGE> 79
MONY
VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. RELATED PARTY TRANSACTIONS (CONTINUED)
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 1998 was $277,212.
MONY receives from the Variable Account the amounts deducted for mortality
and expense risks at an annual rate of 1.25 percent of average daily net assets
of the subaccounts. 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.
4. INVESTMENTS
Investments in MONY Series Fund, Inc. at cost, at December 31, 1998 consist
of the following:
<TABLE>
<CAPTION>
MONYMASTER
----------------------------------------------------------------------------------------------
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................ 8,082 12,837 710,866 1,018,878 6,686 23,334,035 328,644
Amount................ $170,806 $215,365 $ 7,591,341 $12,421,256 $107,587 $ 23,334,035 $ 3,448,871
-------- -------- ----------- ----------- -------- ------------- -----------
Shares acquired:
Shares................ 154 252 479,109 615,493 527 147,547,679 418,403
Amount................ $ 5,215 $ 6,382 $ 5,344,447 $ 8,532,633 $ 9,435 $ 147,547,679 $ 4,599,575
Shares received for
reinvestment of
dividends:
Shares................ 1,302 1,980 40,491 64,420 1,439 1,686,933 14,625
Amount................ $ 44,099 $ 51,132 $ 433,654 $ 838,752 $ 25,421 $ 1,686,933 $ 154,732
Shares redeemed:
Shares................ (1,298) (2,023) (278,015) (203,662) (3,704) (123,609,629) (110,794)
Amount................ $(18,764) $(27,642) $(2,966,391) $(2,286,745) $(59,182) $(123,609,629) $(1,135,396)
-------- -------- ----------- ----------- -------- ------------- -----------
Net change:
Shares................ 158 209 241,585 476,251 (1,738) 25,624,983 322,234
Amount................ $ 30,550 $ 29,872 $ 2,811,710 $ 7,084,640 $(24,326) $ 25,624,983 $ 3,618,911
-------- -------- ----------- ----------- -------- ------------- -----------
Shares end of year:
Shares................ 8,240 13,046 952,451 1,495,129 4,948 48,959,018 650,878
Amount................ $201,356 $245,237 $10,403,051 $19,505,896 $ 83,261 $ 48,959,018 $ 7,067,782
======== ======== =========== =========== ======== ============= ===========
<CAPTION>
VALUEMASTER
-----------
MONEY
MARKET
PORTFOLIO
-----------
<S> <C>
Shares beginning of
year:
Shares................ 0
Amount................ $ 0
-----------
Shares acquired:
Shares................ 1,379,305
Amount................ $ 1,379,305
Shares received for
reinvestment of
dividends:
Shares................ 1,741
Amount................ $ 1,741
Shares redeemed:
Shares................ (865,240)
Amount................ $ (865,240)
-----------
Net change:
Shares................ 515,806
Amount................ $ 515,806
-----------
Shares end of year:
Shares................ 515,806
Amount................ $ 515,806
===========
</TABLE>
F-14
<PAGE> 80
MONY
VARIABLE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENTS (CONTINUED)
Investments in Enterprise Accumulation Trust at cost, at December 31, 1998
consist of the following:
<TABLE>
<CAPTION>
MONYMASTER
-----------------------------------------------------------------------
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..................................... 1,678,478 1,471,833 7,284,600 1,394,793 1,272,340
Amount..................................... $ 46,784,804 $31,594,208 $223,370,538 $ 8,462,886 $ 7,036,463
------------ ----------- ------------ ----------- -----------
Shares acquired:
Shares..................................... 657,270 554,898 2,070,044 424,520 991,885
Amount..................................... $ 24,380,993 $15,506,741 $ 87,703,818 $ 2,856,804 $ 5,571,677
Shares received for reinvestment of
dividends:
Shares..................................... 82,174 104,280 582,046 77,067 166,456
Amount..................................... $ 3,014,135 $ 2,731,100 $ 23,607,771 $ 500,167 $ 915,812
Shares redeemed:
Shares..................................... (581,815) (509,262) (2,494,102) (342,437) (415,098)
Amount..................................... $(13,018,209) $(8,839,331) $(57,973,576) $(1,908,317) $(2,217,960)
------------ ----------- ------------ ----------- -----------
Net change:
Shares..................................... 157,629 149,916 157,988 159,150 743,243
Amount..................................... $ 14,376,919 $ 9,398,510 $ 53,338,013 $ 1,448,654 $ 4,269,529
------------ ----------- ------------ ----------- -----------
Shares end of year:
Shares..................................... 1,836,107 1,621,749 7,442,588 1,553,943 2,015,583
Amount..................................... $ 61,161,723 $40,992,718 $276,708,551 $ 9,911,540 $11,305,992
============ =========== ============ =========== ===========
</TABLE>
Investments in OCC Accumulation Trust at cost, at December 31, 1998 consist
of the following:
<TABLE>
<CAPTION>
VALUEMASTER
-----------------------------------------------------------------
MONEY US GOVERNMENT
MARKET INCOME EQUITY SMALL CAP MANAGED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Shares beginning of year:
Shares......................................... 464,272 56,181 10,734 9,884 287,446
Amount......................................... $ 464,272 $574,919 $225,366 $177,907 $ 7,308,176
----------- -------- -------- -------- -----------
Shares acquired:
Shares......................................... 1,808,465 11,266 851 1,302 44,606
Amount......................................... $ 1,808,465 $121,160 $ 32,132 $ 33,000 $ 1,840,740
Shares received for reinvestment of dividends:
Shares......................................... 21,969 3,699 592 417 10,785
Amount......................................... $ 21,969 $ 39,392 $ 21,800 $ 11,140 $ 466,768
Shares redeemed:
Shares......................................... (2,294,706) (7,371) (3,565) (5,170) (104,400)
Amount......................................... $(2,294,706) $(75,328) $(66,198) $(87,742) $(2,275,924)
----------- -------- -------- -------- -----------
Net change:
Shares......................................... (464,272) 7,594 (2,122) (3,451) (49,009)
Amount......................................... $ (464,272) $ 85,224 $(12,266) $(43,602) $ 31,584
----------- -------- -------- -------- -----------
Shares end of year:
Shares......................................... 0 63,775 8,612 6,433 238,437
Amount......................................... $ 0 $660,143 $213,100 $134,305 $ 7,339,760
=========== ======== ======== ======== ===========
</TABLE>
F-15
<PAGE> 81
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
MONY Life Insurance Company
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income and comprehensive income, changes in
shareholder's equity and cash flows present fairly, in all material respects,
the financial position of MONY Life Insurance Company and Subsidiaries (the
"Company"), formerly known as The Mutual Life Insurance Company of New York and
subsidiaries at December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998, in conformity with generally accepted accounting principles. These
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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 4 to the consolidated financial statements, the
Company adopted in 1996, Statements of Financial Accounting Standards No. 120
(SFAS 120) and Financial Accounting Standards Board Interpretation No. 40 (FIN
40) which required implementation of several accounting pronouncements not
previously adopted. The effects of adopting SFAS 120 and FIN 40 were
retroactively applied to the Company's previously issued financial statements,
consistent with the implementation guidance of those standards.
PricewaterhouseCoopers LLP
New York, New York
February 15, 1999, except for Note 17(b)
as to which the date is March 22, 1999.
F-16
<PAGE> 82
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
($ IN MILLIONS)
<S> <C> <C>
ASSETS
Investments:
Fixed maturity securities available-for-sale, at fair
value.................................................. $ 3,132.0 $ 5,950.1
Equity securities available-for-sale at fair value........ 457.2 337.8
Mortgage loans on real estate (Note 12)................... 988.3 1,430.1
Policy loans.............................................. 61.1 1,247.2
Real estate to be disposed of (Note 12)................... 312.9 621.2
Real estate held for investment (Note 12)................. 321.3 495.9
Other invested assets..................................... 40.7 68.6
--------- ---------
5,313.5 10,150.9
--------- ---------
Cash and cash equivalents................................... 270.2 313.4
Accrued investment income................................... 68.9 182.8
Amounts due from reinsurers................................. 475.9 574.5
Premiums receivable......................................... 9.1 21.6
Deferred policy acquisition costs........................... 439.7 1,007.1
Other assets................................................ 316.5 243.0
Assets transferred in Group Pension Transaction (Note 9).... 5,751.8 5,714.9
Separate account assets..................................... 6,090.3 5,403.1
Closed Block assets (Note 19)............................... 6,161.2 --
--------- ---------
Total assets...................................... $24,897.1 $23,611.3
========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
Future policy benefits...................................... $ 960.0 $ 7,469.4
Policyholders' account balances............................. 1,991.7 2,352.8
Other policyholders' liabilities............................ 104.8 238.5
Amounts due to reinsurers................................... 93.4 104.3
Accounts payable and other liabilities...................... 518.3 539.0
Debt (Note 15).............................................. 375.4 423.6
Current federal income taxes payable........................ 79.1 120.5
Deferred federal income taxes (Note 7)...................... -- 11.5
Liabilities transferred in Group Pension Transaction (Note
9)........................................................ 5,678.5 5,638.7
Separate account liabilities................................ 6,078.1 5,392.4
Closed Block liabilities (Note 19).......................... 7,290.7 --
--------- ---------
Total liabilities................................. 23,170.0 22,290.7
Commitments and contingencies (Notes 8, 17)
Common stock, $1.00 par value; 2 million shares authorized,
issued and outstanding.................................... 2.0 --
Capital in excess of par.................................... 1,564.1 --
Retained earnings........................................... 8.6 1,202.5
Accumulated other comprehensive income...................... 152.4 118.1
--------- ---------
Total shareholder's equity........................ 1,727.1 1,320.6
--------- ---------
Total liabilities and shareholder's equity........ $24,897.1 $23,611.3
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-17
<PAGE> 83
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998
PRO FORMA*
1998 1997 1996 (UNAUDITED)
-------- -------- -------- -----------
($ IN MILLIONS)
<S> <C> <C> <C> <C>
REVENUES:
Premiums........................................ $ 621.7 $ 838.6 $ 859.8 $ 77.9
Universal life and investment-type product
policy fees................................... 151.6 127.3 100.9 151.6
Net investment income (Note 10)................. 688.3 733.0 751.6 361.1
Net realized gains on investments (Note 10)..... 168.7 72.1 75.9 160.9
Group Pension Profits........................... 56.8 60.0 59.5 56.8
Other income.................................... 162.6 145.4 117.3 161.3
Contribution from the Closed Block.............. 5.7 52.2
-------- -------- -------- --------
1,855.4 1,976.4 1,965.0 1,021.8
-------- -------- -------- --------
BENEFITS AND EXPENSES:
Benefits to policyholders....................... 679.8 840.1 872.2 124.4
Interest credited to policyholders' account
balances...................................... 112.7 125.9 146.9 105.0
Amortization of deferred policy acquisition
costs......................................... 122.0 181.2 158.2 52.2
Dividends to policyholders...................... 195.8 224.3 231.4 3.3
Other operating costs and expenses.............. 451.7 417.2 455.8 443.5
-------- -------- -------- --------
1,562.0 1,788.7 1,864.5 728.4
-------- -------- -------- --------
Income before income taxes and extraordinary
item.......................................... 293.4 187.7 100.5 293.4
Income tax expense.............................. 102.7 57.3 44.0 102.7
-------- -------- -------- --------
Income before extraordinary item................ 190.7 130.4 56.5 190.7
-------- -------- -------- --------
Extraordinary item -- demutualization expenses,
net (Note 4).................................. 27.2 13.3 -- --
-------- -------- -------- --------
Net income...................................... 163.5 117.1 56.5 $ 190.7
-------- -------- -------- ========
Other comprehensive income, net (Note 10)....... 34.3 33.0 (59.9)
-------- -------- --------
Comprehensive income............................ $ 197.8 $ 150.1 $ (3.4)
======== ======== ========
</TABLE>
- ---------------
* The pro forma information gives effect to the transactions referred to in
Notes 1 and 21.
See accompanying notes to consolidated financial statements.
F-18
<PAGE> 84
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
ACCUMULATED
CAPITAL OTHER TOTAL
COMMON IN EXCESS RETAINED COMPREHENSIVE SHAREHOLDER'S
STOCK OF PAR EARNINGS INCOME EQUITY
------ --------- --------- ------------- -------------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995....... $ $ $ 1,028.9 $145.0 $1,173.9
Comprehensive income:
Net income..................... 56.5 56.5
Other comprehensive income:
Unrealized losses on
investments, net of
unrealized gains,
reclassification
adjustments, and taxes
(Note 10)................. (59.9) (59.9)
---- -------- --------- ------ --------
Comprehensive income............. (3.4)
--------
Balance, December 31, 1996....... 1,085.4 85.1 1,170.5
Comprehensive income:
Net income..................... 117.1 117.1
Other comprehensive income:
Unrealized gains on
investments, net of
unrealized losses,
reclassification
adjustments, and taxes
(Note 10)................. 35.9 35.9
Minimum pension liability
adjustment................ (2.9) (2.9)
------ --------
Other comprehensive income:.... 33.0 33.0
---- -------- --------- ------ --------
Comprehensive income............. 150.1
--------
Balance, December 31, 1997....... 1,202.5 118.1 1,320.6
Demutualization Transaction...... 1,344.2 (1,357.4) (13.2)
Contribution from MONY Group..... 2.0 219.9 221.9
Comprehensive income:
Net income before
demutualization............. 154.9 154.9
Net income after
demutualization............. 8.6 8.6
---- -------- --------- ------ --------
Net income for the year..... 163.5 163.5
Other comprehensive income:
Unrealized losses on
investments, net of
unrealized gains,
reclassification
adjustments, and taxes
(Note 10)................. 31.4 31.4
Minimum pension liability
adjustment................ 2.9 2.9
------ --------
Other comprehensive income:.... 34.3 34.3
---- -------- --------- ------ --------
Comprehensive income............. 197.8
--------
Balance, December 31, 1998....... $2.0 $1,564.1 $ 8.6 $152.4 $1,727.1
==== ======== ========= ====== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-19
<PAGE> 85
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
($ IN MILLIONS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES (SEE NOTE 4):
Net income................................................ $ 163.5 $ 117.1 $ 56.5
Adjustments to reconcile net income to net cash provided
by operating activities:
Interest credited to policyholders' account balances.... 110.6 122.3 141.2
Universal life and investment-type product policy fee
income............................................... (123.6) (112.9) (98.4)
Capitalization of deferred policy acquisition costs..... (124.5) (141.0) (145.3)
Amortization of deferred policy acquisition costs....... 122.0 181.2 158.2
Provision for depreciation and amortization............. 41.4 55.0 53.8
Provision for deferred federal income taxes............. 11.4 (50.2) (32.6)
Net realized gains on investments....................... (168.7) (72.1) (75.9)
Non-cash distributions from investments................. (35.1) (31.1) (56.1)
Change in other assets and accounts payable and other
liabilities.......................................... (32.7) (177.5) 57.0
Change in future policy benefits........................ 136.2 206.9 191.7
Change in other policyholders' liabilities.............. 32.9 (17.4) 21.4
Change in current federal income taxes payable.......... (14.9) (11.2) 63.3
Initial cash transferred to the Closed Block............ (46.9) -- --
Contribution from the Closed block...................... (5.7) -- --
--------- --------- ---------
Net cash provided by operating activities................. 65.9 69.1 334.8
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales, maturities or repayments of:
Fixed maturities........................................ 887.3 952.0 690.1
Equity securities....................................... 177.4 246.7 170.7
Mortgage loans on real estate........................... 424.4 334.4 353.6
Real estate............................................. 578.3 430.8 442.4
Other invested assets................................... 46.0 5.0 13.3
Acquisitions of investments:
Fixed maturities........................................ (1,479.7) (1,336.2) (1,200.8)
Equity securities....................................... (230.5) (211.5) (119.7)
Mortgage loans on real estate........................... (422.4) (183.1) (166.8)
Real estate............................................. (39.5) (52.7) (63.6)
Other invested assets................................... (2.1) (1.7) (1.6)
Policy loans, net....................................... (17.8) (15.9) (12.7)
Other, net.............................................. 8.8 10.1 0.1
Property & equipment, net............................... (30.9) (35.8) (3.9)
Acquisition of subsidiaries, net of cash acquired....... (46.0) -- --
--------- --------- ---------
Net cash provided by investing activities................. $ (146.7) $ 142.1 $ 101.1
--------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-20
<PAGE> 86
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
($ IN MILLIONS)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt.......................................... -- 115.0 --
Repayments of debt........................................ (61.3) (126.0) (174.1)
Receipts from annuity and universal life policies credited
to policyholders' account balances...................... 1,254.0 1,226.4 1,204.9
Return of policyholders' account balances on annuity
policies and universal life policies.................... (1,377.0) (1,435.2) (1,584.1)
Other..................................................... -- 6.6 6.7
Contribution from MONY Group (Note 4)..................... 221.9 -- --
--------- --------- ---------
Net cash provided by/(used in) financing activities....... 37.6 (213.2) (546.6)
--------- --------- ---------
Net decrease in cash and cash equivalents................. (43.2) (2.0) (110.7)
Cash and cash equivalents, beginning of year.............. 313.4 315.4 426.1
--------- --------- ---------
Cash and cash equivalents, end of year.................... $ 270.2 $ 313.4 $ 315.4
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Income taxes.............................................. $ 97.4 $ 114.6 $ 13.6
Interest.................................................. $ 20.3 $ 20.8 $ 36.8
</TABLE>
See accompanying notes to consolidated financial statements.
F-21
<PAGE> 87
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND DESCRIPTION OF BUSINESS:
On November 16, 1998, pursuant to its Plan of Reorganization (the "Plan")
which was approved by the New York Superintendent of Insurance on the same day
(the "Plan Effective Date"), The Mutual Life Insurance Company of New York
("MONY") converted from a mutual life insurance company to a stock life
insurance company (the "Demutualization") and became a wholly owned subsidiary
of The MONY Group Inc., (the "MONY Group" or the "Holding Company"), a Delaware
corporation organized on June 24, 1997 for the purpose of becoming the parent
holding company of MONY. The MONY Group has no other operations or subsidiaries.
In connection with the Plan, MONY established a closed block, as more fully
discussed in Note 3, to fund the guaranteed benefits and dividends of certain
participating insurance policies, and eligible policyholders received cash,
policy credits, or shares of common stock of the MONY Group in exchange for
their membership interests in MONY (see Note 4). Also on November 16, 1998, the
MONY Group consummated an initial public offering (the "Offerings") of
approximately 12.9 million shares of its common stock (see Note 4) and MONY
changed its name to MONY Life Insurance Company (MONY Life Insurance Company and
its subsidiaries are hereafter collectively referred to as "MONY Life" or "the
Company"). The shares of common stock issued in the Offerings are in addition to
approximately 34.3 million shares of common stock of the MONY Group distributed
to the aforementioned eligible policyholders. The Plan and the Offerings are
hereafter collectively referred to as the "Transaction".
The Company is primarily engaged in the business of providing a wide range
of life insurance, annuity, and investment products to higher income
individuals, particularly family builders, pre-retirees, and small business
owners. The Company distributes its products primarily through its career agency
sales force. The Company primarily sells its products in all 50 of the United
States, the District of Columbia, the U.S. Virgin Islands, Guam and the
Commonwealth of Puerto Rico.
On December 31, 1998, MONY Life acquired Sagamore Financial Corporation,
the parent company of U.S. Financial Life Insurance Company ("USFL") for a
purchase price of $48 million. USFL is a special-risk carrier based in Ohio,
which distributes its products in 41 states through brokerage general agencies.
The acquisition was accounted for as a purchase. In conjunction therewith, MONY
Life recorded $18.8 million of goodwill which will be amortized over 20 years.
2. INVESTMENT AGREEMENT:
On December 30, 1997, affiliates of Goldman, Sachs & Co. (the "Investors"),
one of the underwriters for the Offerings, entered into an investment agreement
with MONY (the "Investment Agreement"), pursuant to which: (i) The Investors
purchased, for $115.0 million (the "Consideration"), Surplus Notes issued by
MONY (the "MONY Notes") with an aggregate principal amount equal to the
Consideration (see Note 15), and (ii) the Investor purchased, for $10.0 million,
warrants (the "Warrants") to purchase from the Holding Company (after giving
effect to the initial public offering) in the aggregate 7.0% of the fully
diluted Common Stock as of the first date following such effectiveness on which
shares of Common Stock were first issued to eligible policyholders (December 24,
1998).
3. THE CLOSED BLOCK:
On November 16, 1998, the Company established a closed block (the "Closed
Block") of certain participating insurance policies as defined in the Plan (the
"Closed Block Business"). In conjunction therewith, the Company allocated assets
to the Closed Block expected to produce cash flows which, together with
anticipated revenues from the Closed Block Business, are reasonably expected to
be sufficient to support the Closed Block Business, including but not limited
to, provision for payment of claims and surrender benefits, certain expenses and
taxes, and for continuation of current payable dividend scales in effect at the
date of Demutualization, assuming the experience underlying such dividend scales
continues, and for
F-22
<PAGE> 88
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
appropriate adjustments in such scales if the experience changes. The assets
allocated to the Closed Block and the aforementioned revenues inure solely to
the benefit of the owners of policies included in the Closed Block.
The assets and liabilities allocated to the Closed Block are recorded in
the Company's financial statements at their historical carrying values. The
carrying value of the assets allocated to the Closed Block are less than the
carrying value of the Closed Block liabilities at the Plan Effective Date. The
excess of the Closed Block liabilities over the Closed Block assets at the Plan
Effective Date represents the total estimated future post-tax contribution
expected to emerge from the operation of the Closed Block, which will be
recognized in the Company's income over the period the policies and the
contracts in the Closed Block remain in force.
In determining the amount of assets to be allocated to the Closed Block,
management made certain estimates and assumptions regarding the expected cash
flows from the Closed Block assets and the Closed Block Business, including
estimates and assumptions regarding investment cash flows, mortality,
persistency, and expenses which are to be funded in the Closed Block. The
estimated net cash flows assumed in determining the Closed Block funding
consisted of premiums from policies included in the Closed Block, investment
income from Closed Block assets, proceeds from maturities and dispositions of
Closed Block assets, less benefits paid on Closed Block policies, certain
expenses (including taxes) funded in the Closed Block, and dividends on Closed
Block policies based on current payable dividend scales. To the extent that the
actual cash flows, subsequent to the Plan Effective Date, from the assets
allocated to the Closed Block and the Closed Block Business are, in the
aggregate, more favorable than assumed in establishing the Closed Block, total
dividends paid to the Closed Block policyholders in future years will be greater
than the total dividends that would have been paid to such policyholders if the
current payable dividend scales had been continued. Conversely, to the extent
that the actual cash flows, subsequent to the Plan Effective Date, from the
assets allocated to the Closed Block and the Closed Block Business are, in the
aggregate, less favorable than assumed in establishing the Closed Block, total
dividends paid to the Closed Block policyholders in future years will be less
than the total dividends that would have been paid to such policyholders if the
current payable dividend scales had been continued. Accordingly, the recognition
of the aforementioned estimated future post-tax contribution expected to emerge
from the operation of the Closed Block is not affected by the aggregate actual
experience of the Closed Block assets and the Closed Block Business subsequent
to the Plan Effective Date, except in the unlikely event that the Closed Block
assets and the actual experience of the Closed Block Business subsequent to the
Plan Effective Date are not sufficient to pay the guaranteed benefits on the
Closed Block policies, in which case the Company will be required to fund any
such deficiency from its general account assets outside of the Closed Block.
In addition, MONY Life has undertaken to reimburse the Closed Block from
its general account assets outside the Closed Block for any reduction in
principal payments due on the Series A Notes (which have been allocated to the
Closed Block) pursuant to the terms thereof, as described in Note 9. Since the
Closed Block will be funded to provide for payment of guaranteed benefits and
the continuation of current payable dividends on the policies included therein,
it will not be necessary to use general funds to pay guaranteed benefits unless
the Closed Block Business experiences very substantial ongoing adverse
experience in investment, mortality, persistency or other experience factors.
The Company regularly (at least quarterly) monitors the experience from the
Closed Block and may make changes to the dividend scale, when appropriate, to
ensure that the profits are distributed to the Closed Block policyholders in a
fair and equitable manner. In addition, periodically the New York Insurance
Department requires the filing of an independent auditor's report on the
operations of the Closed Block.
The results of the Closed Block are presented as a single line item in the
Company's statements of income entitled, "Contribution from the Closed Block".
Prior to the establishment of the Closed Block the results of the assets and
policies comprising the Closed Block were reported in various line items in the
Company's income statements, including: premiums, investment income, net
realized gains and losses on investments, benefits, amortization of deferred
acquisition costs, etc. In addition, all assets and liabilities
F-23
<PAGE> 89
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
allocated to the Closed Block will be reported in the Company's balance sheet
separately under the captions "Closed Block assets" and "Closed Block
liabilities", respectively. Accordingly, certain line items in the Company's
financial statements subsequent to the establishment of the Closed Block reflect
material reductions in reported amounts, as compared to years prior to the
establishment of the Closed Block, while having no effect on net income.
The pre-tax Contribution from the Closed Block includes only those
revenues, benefit payments, dividends, premium taxes, state guaranty fund
assessments, and investment expenses considered in funding the Closed Block.
However, many expenses associated with operating the Closed Block and
administering the policies included therein were excluded from and, accordingly,
are not funded in the Closed Block. These expenses are reported in the Company's
statement of operations, outside of the Contribution from the Closed Block,
consistent with how they are funded. Such expenses are reported in the separate
line items to which they apply based on the nature of such expenses. Federal
income taxes applicable to the Closed Block, which are funded in the Closed
Block, are reflected as a component of federal income tax expense in the
Company's statement of operations. Since many expenses related to the Closed
Block are funded outside the Closed Block, operating costs and expenses outside
the Closed Block are disproportionate to the level of business outside the
Closed Block.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying consolidated financial statements have been prepared in
conformity with GAAP. Prior to 1996, MONY, as a mutual life insurance company,
prepared its financial statements in conformity with accounting practices
prescribed or permitted by the New York State Insurance Department ("SAP"),
which accounting practices were considered to be GAAP for mutual life insurance
companies. As of January 1, 1996, MONY adopted Financial Accounting Standards
Board ("FASB") Interpretation No. 40, Applicability of Generally Accepted
Accounting Principles to Mutual Life Insurance and Other Enterprises (the
"Interpretation"), and Statement of Financial Accounting Standards ("SFAS") No.
120, Accounting and Reporting by Mutual Life Insurance Enterprises and by
Insurance Enterprises for Certain Long Duration Participating Policies (the
"Standard"). The Interpretation and the Standard require mutual life insurance
companies to adopt all applicable authoritative GAAP pronouncements in their
general purpose financial statements. Accordingly, the initial effect of
applying the Interpretation and the Standard has been reported retroactively
through the restatement of previously issued financial statements presented
herein for comparative purposes (see Note 18). Certain reclassifications have
been made in the amounts presented for prior periods to conform those periods to
the current presentation.
During 1997, the Company adopted SFAS No. 130, Reporting Comprehensive
Income and SFAS 131, Disclosures about Segments of an Enterprise and Related
Information, which were issued by the FASB in June of 1997. SFAS No. 130
established standards for reporting and display of comprehensive income and its
components in general purpose financial statements. SFAS No. 131 established
standards for the way that public business enterprises report information about
operating segments in their annual and interim financial statements. SFAS No.
131 also established standards for disclosures about an enterprise's products
and services, geographic areas, and major customers. All periods presented
herein reflect the provisions of both SFAS No. 130 and SFAS 131.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure
about Pension and Other Postretirements Benefits", which is effective for fiscal
years beginning after December 15, 1997. SFAS 132 revises and standardizes
disclosure required by SFAS 87, SFAS 88 and SFAS 106. The Company had adopted
this standard for its 1998 fiscal year (see Note 6).
The preparation of financial statements in conformity with GAAP 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
F-24
<PAGE> 90
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and expenses during the reporting period. Actual results could differ
significantly from those estimates. The most significant estimates made in
conjunction with the preparation of the Company's financial statements include
those used in determining (i) deferred policy acquisition costs, (ii) the
liability for future policy benefits, and (iii) valuation allowances for
mortgage loans and real estate to be disposed of, and impairment writedowns for
real estate held for investment.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and those partnerships in which the Company has a majority voting
interest. All significant intercompany accounts and transactions have been
eliminated.
Minority interest related to partnerships that are consolidated, which is
included in Accounts Payable and Other Liabilities, amounted to $33.5 million
and $48.7 million at December 31, 1998 and 1997, respectively.
Transaction
In connection with the Demutualization on the Plan Effective Date, eligible
policyholders received, in the aggregate, approximately $20.6 million of cash,
$13.2 million of policy credits and 34.3 million shares of common stock of the
MONY Group in exchange for their membership interest in MONY. The
demutualization was accounted for as a reorganization. Accordingly, the
Company's retained earnings at the Plan Effective Date (net of aforementioned
cash payments and policy credits which were charged directly to retained
earnings) were reclassified to "Common stock" and "Capital in excess of par".
Also, on the Plan Effective Date, the MONY Group consummated the Offerings.
In conjunction therewith, approximately 12.9 million shares of its common stock
were issued at an initial public offering price of $23.50 per share. Net
proceeds from the Offerings totaled $282.5 million. Of the net proceeds,
approximately $221.9 million was contributed to the Company.
In addition, the capital of the Company includes $10.0 million relating to
the Warrants issued by MONY Group(see Note 2), which as a subsidiary of the
Company prior to the Plan Effective Date, was recorded in the Company's
consolidated financial statements as minority interest.
Valuation of Investments and Realized Gains and Losses
All of the Company's fixed maturity securities are classified as
available-for-sale and are reported at estimated fair value. The Company's
equity securities are comprised of investments in common stocks and limited
partnership interests. The Company's investments in common stocks are classified
as available-for-sale and are reported at estimated fair value. The Company
accounts for its investments in limited partnership interests in accordance with
the equity method of accounting or the cost method of accounting depending upon
the Company's percentage of ownership of the partnership and the date it was
acquired. In general, partnership interests acquired after May 18, 1995 are
accounted for in accordance with the equity method of accounting if the
Company's ownership interest exceeds 3 percent, whereas, if the partnership was
acquired prior to May 18, 1995, the equity method would be applied only if the
Company's ownership interest exceeded 20 percent. In all other circumstances the
Company accounts for its investment in limited partnership interests in
accordance with the cost method. Unrealized gains and losses on fixed maturity
securities and common stocks are reported as a separate component of other
comprehensive income, net of deferred income taxes and an adjustment for the
effect on deferred policy acquisition costs that would have occurred if such
gains and losses had been realized. The cost of fixed maturity securities and
common stock is adjusted for impairments in value deemed to be other than
temporary. These adjustments are reflected as realized losses on investments.
Realized gains and losses on sales of investments are determined on the basis of
specific identification.
F-25
<PAGE> 91
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Mortgage loans on real estate are stated at their unpaid principal
balances, net of valuation allowances. Valuation allowances are established for
the excess of the carrying value of a mortgage loan over its estimated fair
value when the loan is considered to be impaired. Mortgage loans are considered
to be impaired when, based on current information and events, it is probable
that the Company will be unable to collect all amounts due according to the
contractual terms of the loan agreement. Estimated fair value is based on either
the present value of expected future cash flows discounted at the loan's
original effective interest rate, or the loan's observable market price (if
considered to be a practical expedient), or the fair value of the collateral if
the loan is collateral dependent and if foreclosure of the loan is considered
probable. The provision for loss is reported as a realized loss on investment.
Loans in foreclosure and loans considered to be impaired, other than
restructured loans, are placed on non-accrual status. Interest received on
non-accrual status mortgage loans is included in investment income in the period
received. Interest income on restructured mortgage loans is accrued at the
restructured loans' interest rate.
Real estate held for investment, as well as related improvements, is
generally stated at cost less depreciation. Depreciation is determined using the
straight-line method over the estimated useful life of the asset (which may
range from 5 to 40 years). Cost is adjusted for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset may not
be recoverable. In performing the review for recoverability, management
estimates the future cash flows expected from real estate investments, including
the proceeds on disposition. If the sum of the expected undiscounted future cash
flows is less than the carrying amount of the real estate, an impairment loss is
recognized. Impairment losses are based on the estimated fair value of the real
estate, which is generally computed using the present value of expected future
cash flows from the real estate discounted at a rate commensurate with the
underlying risks. Real estate acquired in satisfaction of debt is recorded at
estimated fair value at the date of foreclosure. Real estate that management
intends to sell is classified as "to be disposed of ". Real estate to be
disposed of is reported at the lower of its current carrying value or estimated
fair value less estimated sales costs. Changes in reported values relating to
real estate to be disposed of and impairments of real estate held for investment
are reported as realized gains or losses on investments.
Policy loans are carried at their unpaid principal balances.
Cash and cash equivalents include cash on hand, amounts due from banks and
highly liquid debt instruments with an original maturity of three months or
less.
Recognition of Insurance Revenue and Related Benefits
Premiums from participating and non-participating traditional life, health
and annuity policies with life contingencies are recognized as premium income
when due. Benefits and expenses are matched with such income so as to result in
the recognition of profits over the life of the contracts. This match is
accomplished by means of the provision for liabilities for future policy
benefits and the deferral and subsequent amortization of policy acquisition
costs.
Premiums from universal life and investment-type contracts are reported as
deposits to policyholders' account balances. Revenue from these types of
products consists of amounts assessed during the period against policyholders'
account balances for policy administration charges, cost of insurance and
surrender charges. Policy benefits charged to expense include benefit claims
incurred in the period in excess of the related policyholders' account balance.
Deferred Policy Acquisition Costs ("DAC")
The costs of acquiring new business, principally commissions, underwriting,
agency, and policy issue expenses, all of which vary with and are primarily
related to the production of new business, are deferred.
F-26
<PAGE> 92
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For participating traditional life policies, DAC is amortized over the
expected life of the contracts (30 years) as a constant percentage based on the
present value of estimated gross margins expected to be realized over the life
of the contracts using the expected investment yield. At December 31, 1998, the
expected investment yield was 7.32%, for the year 1999 with subsequent years
grading down to an ultimate aggregate yield of 7.12% in year 2013. Estimated
gross margins include anticipated premiums and investment results less claims
and administrative expenses, changes in the net level premium reserve and
expected annual policyholder dividends.
For universal life products and investment-type products, DAC is amortized
over the expected life of the contracts (ranging from 15 to 30 years) as a
constant percentage based on the present value of estimated gross profits
expected to be realized over the life of the contracts using the initial locked
in contract rate. The contract rate is 8% for all products. Estimated gross
profits arise principally from investment results, mortality and expense margins
and surrender charges.
DAC is subject to recoverability testing at the time of policy issuance and
loss recognition testing at the end of each accounting period. The effect on the
amortization of DAC of revisions in estimated experience is reflected in
earnings in the period such estimates are revised. In addition, the effect on
the DAC asset that would result from the realization of unrealized gains
(losses) is recognized through an offset to Other Comprehensive Income as of the
balance sheet date.
Future Policy Benefits and Policyholders' Account Balances
Future policy benefit liabilities for participating traditional life
policies are calculated using a net level premium method on the basis of
actuarial assumptions equal to guaranteed mortality and dividend fund interest
rates. The liability for annual dividends represents the accrual of annual
dividends earned. Dividend fund interest assumptions range from 2.0 percent to
5.5 percent.
Policyholders' account balances for universal life and investment-type
contracts represent an accumulation of gross premium payments plus credited
interest less expense and mortality charges and withdrawals. The weighted
average interest crediting rate for universal life products was approximately
5.7 percent, 5.8 percent, and 5.8 percent for the years ended December 31, 1998,
1997, and 1996, respectively. The weighted average interest crediting rate for
investment-type products was approximately 5.6 percent for each of the years
ended December 31, 1998, 1997, and 1996, respectively.
Dividends to Policyholders
Dividends to policyholders, which are substantially all on the Closed Block
Business (see Note 3) are determined annually by the Board of Directors of MONY
Life. The aggregate amount of policyholders' dividends is related to actual
interest, mortality, morbidity and expense experience for the year.
Participating Business
At December 31, 1998 and 1997, participating business, substantially all of
which is in the Closed Block, represented approximately 72.6% and 81.0% of the
Company's life insurance in force, and 84.2% and 88.4% of the number of life
insurance policies in force, respectively. For each of the years ended December
31, 1998 and 1997, participating business, represented approximately 99.9% of
life insurance premiums.
Property, Equipment, and Leasehold Improvements
Property, equipment and leasehold improvements, which are reported in Other
Assets, are stated at cost less accumulated depreciation and amortization.
Depreciation is determined using the straight-line method over the estimated
useful lives of the related assets which generally range from 3 to 40 years.
Amortization of
F-27
<PAGE> 93
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
leasehold improvements is determined using the straight-line method over the
lesser of the unexpired lease term or the estimated useful life of the
improvement.
Accumulated depreciation of property and equipment and amortization of
leasehold improvements was $71.0 million and $58.5 million at December 31, 1998
and 1997, respectively. Related depreciation and amortization expense was $11.4
million, $8.8 million, and $5.9 million for the years ended December 31, 1998,
1997, and 1996, respectively.
Federal Income Taxes
The Company files a consolidated federal income tax return with its life
and non-life affiliates, except Sagamore Financial Corporation and its
subsidiaries. Deferred income tax assets and liabilities are recognized based on
the difference between financial statement carrying amounts and income tax bases
of assets and liabilities using enacted income tax rates and laws.
Reinsurance
The Company has reinsured certain of its life insurance and investment
contracts with other insurance companies under various agreements. Amounts due
from reinsurers are estimated based on assumptions consistent with those used in
establishing the liabilities related to the underlying reinsured contracts.
Policy and contract liabilities are reported gross of reserve credits. Gains on
reinsurance are deferred and amortized into income over the remaining life of
the underlying reinsured contracts.
In determining whether a reinsurance contract qualifies for reinsurance
accounting, SFAS No. 113 requires that there be a "reasonable possibility" that
the reinsurer may realize a "significant loss" from assuming insurance risk
under the contract. In making this assessment, the Company projects the results
of the policies reinsured under the contract under various scenarios and
assesses the probability of such results actually occurring. The projected
results represent the present value of all the cash flows under the reinsurance
contract. The Company generally defines a "reasonable possibility" as having a
probability of at least 10%. In assessing whether the projected results of the
reinsured business constitute a "significant loss", the Company considers: (i)
the ratio of the aggregate projected loss, discounted at an appropriate rate of
interest (the "aggregate projected loss"), to an estimate of the reinsurer's
investment in the contract, as hereafter defined, and (ii) the ratio of the
aggregate projected loss to an estimate of the total premiums to be received by
the reinsurer under the contract discounted at an appropriate rate of interest.
The reinsurer's investment in a reinsurance contract consists of amounts
paid to the ceding company at the inception of the contract (e.g. expense
allowances and the excess of liabilities assumed by the reinsurer over the
assets transferred to the reinsurer under the contract) plus the amount of
capital required to support such business consistent with prudent business
practices, regulatory requirements, and the reinsurer's credit rating. The
Company estimates the capital required to support such business based on what it
considers to be an appropriate level of risk-based capital in light of
regulatory requirements and prudent business practices.
Separate Accounts
Separate accounts are established in conformity with insurance laws and are
generally not chargeable with liabilities that arise from any other business of
the Company. Separate account assets are subject to general account claims only
to the extent that the value of such assets exceeds the separate account
liabilities. Investments held in separate accounts and liabilities of the
separate accounts are reported separately as assets and liabilities.
Substantially all separate account assets are reported at estimated fair value.
Investment income and gains or losses on the investments of separate accounts
accrue directly to contractholders and, accordingly, are not reflected in the
Company's consolidated statements of income and cash flows. Fees
F-28
<PAGE> 94
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
charged to the separate accounts by the Company (including mortality charges,
policy administration fees and surrender charges) are reflected in the Company's
revenues.
Consolidated Statements of Cash Flows -- Non-cash Transactions
For the years ended December 31, 1998, 1997, and 1996, respectively, real
estate of $5.0 million, $14.4 million, and $29.1 million was acquired in
satisfaction of debt. At December 31, 1998 and 1997, the Company owned real
estate acquired in satisfaction of debt of $143.2 million and $326.1 million,
respectively. Other non-cash transactions, which are reflected in the statement
of cash flows as a reconciling item from net income to net cash provided by
operating activities, consisted primarily of stock distributions from the
Company's partnership investments and payment-in-kind for interest due on
certain fixed maturity securities.
Extraordinary Item -- Demutualization Expenses
The accompanying consolidated statements of income and comprehensive income
reflect extraordinary charges (net of taxes) of $27.2 million and $13.3 million
for the years ended December 31, 1998 and 1997, respectively, relating to costs
associated with the Demutualization.
New Accounting Pronouncements
In January 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 97-3, "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments". SOP 97-3 provides guidance for
determining when an entity should recognize a liability for guaranty fund and
other insurance-related assessments and when it may recognize an asset for a
portion or all of the assessment liability or paid assessment that can be
recovered through premium tax offsets or policy surcharges. SOP 97-3 is
effective for fiscal years beginning after December 15, 1998. Adoption of SOP
97-3 is not expected to have a material effect on the Company's financial
condition or results of operations.
In March 1998, the American Institute of Certified Public Accountants
issued (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use". SOP 98-1 provides guidance for determining when an
entity should capitalize or expense external and internal costs of computer
software developed or obtained for internal use. SOP 98-1 is effective for
fiscal years beginning after December 15, 1998. Adoption of SOP 98-1 is not
expected to have a material effect on the Company's financial condition or
results of operations.
In June 1998, The FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires all derivatives to be
recognized in the statement of financial position as either assets or
liabilities and measured at fair value. The corresponding derivative gains and
losses should be reported based on the hedge relationship that exists, if there
is one. Changes in the fair value of derivatives that are not designated as
hedges or that do not meet the hedge accounting criteria in SFAS 133, are
required to be reported in earnings. SFAS 133 is effective for fiscal years
beginning after June 15, 1999. Adoption of SFAS 133 is not expected to have a
material effect on the Company's financial condition or results of operations.
F-29
<PAGE> 95
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. DEFERRED POLICY ACQUISITION COSTS:
Policy acquisition costs deferred and amortized in 1998, 1997 and 1996 are
as follows ($ in millions):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Balance, beginning of year.................................. $1,007.1 $1,095.2 $1,047.1
Balance transferred to the Closed Block at November 16,
1998...................................................... (562.3) -- --
-------- -------- --------
444.8 1,095.2 1,047.1
-------- -------- --------
Cost deferred during the year............................... 124.7 141.0 145.3
Amortized to expense during the year........................ (122.0) (181.2) (158.2)
Effect on DAC from unrealized gains (losses) (see Note 4)... (7.8) (47.9) 61.0
-------- -------- --------
Balance, end of year........................................ $ 439.7 $1,007.1 $1,095.2
======== ======== ========
</TABLE>
6. PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS:
Pension 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 did not make
any contribution in the current year or prior years under Section 404 of the
Internal Revenue Code ("IRC") because the plan was fully funded under Section
412 of IRC.
In April 1996, the Company offered special benefits to its employees who
elected by May 31, 1996, voluntary termination of employment (special
termination benefits). The special termination benefits represented benefits in
excess of that which would normally be due to employees electing to retire
early. These excess benefits were calculated based on grants of additional years
of service and age used in the benefit calculation. All of the special
termination benefits relating to the Company's qualified plan, which aggregated
$10.6 million, were paid from the plan's assets. All the benefits paid relating
to the Company's non-qualified plan, which aggregated $3.4 million, were paid
directly from the Company's assets. As a result of the aforementioned early
retirement offer, the Company recorded a charge of $14.0 million in 1996 and
reflected this amount in Other Operating Costs and Expenses.
The assets of the qualified pension plan are primarily invested in MONY
Pooled Accounts which include common stock, real estate, private placement debt
securities and bonds. At December 31, 1998 and 1997, $457.3 million and $430.3
million were invested in the MONY Pooled Accounts. Benefits of $26.3 million,
$24.2 million and $30.7 million were paid by this plan for the years ended
December 31, 1998, 1997, and 1996, respectively.
The Company also sponsors a non-qualified employee excess pension plan,
which provides both defined benefits and defined contribution accruals in excess
of Internal Revenue Service limits to certain employees. The benefits are based
on years of service and the employees final average annual compensation. Pension
benefits are paid from the Company's general account.
Postretirement Benefits --
The Company provides certain health care and life insurance for retired
employees and field underwriters. The Company amortizes its unamortized
postretirement transaction obligation over a period of twenty years.
F-30
<PAGE> 96
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plan. A one-percentage point change in
assumed health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1-PERCENTAGE- 1-PERCENTAGE-
POINT POINT
INCREASE DECREASE
------------- -------------
<S> <C> <C>
Effect on total of service and interest cost components..... $ 27,328 $ (29,218)
Effect on postretirement benefit obligation................. 294,001 (328,624)
</TABLE>
The following presents the change in the benefit obligation, change in plan
assets and other information with respect to the Company's qualified and
non-qualified defined benefit pension plans and other benefits which represents
the Company's postretirement benefit obligation:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
---------------- ------------------
1998 1997 1998 1997
------ ------ ------- -------
($ IN MILLIONS)
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year............... $390.1 $348.5 $ 101.1 $ 93.4
Service cost.......................................... 14.4 12.9 1.3 1.0
Interest cost......................................... 26.3 27.5 6.4 6.7
Actuarial (gain)/loss................................. 2.0 33.0 (3.0) 7.4
Benefit paid.......................................... (34.5) (31.8) (5.8) (7.4)
------ ------ ------- -------
Benefit obligation at end of year..................... 398.3 390.1 100.0 101.1
------ ------ ------- -------
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year........ $432.5 $393.4 $ $
Actual return on plan assets.......................... 56.7 66.5
Employer contribution................................. 5.1 4.4 5.8 7.4
Benefits and expenses paid............................ (34.5) (31.8) (5.8) (7.4)
------ ------ ------- -------
Fair value of plan assets at end of year.............. 459.8 432.5 -- --
------ ------ ------- -------
Funded status......................................... 61.5 42.4 (100.0) (101.1)
Unrecognized actuarial loss/(gain).................... 16.4 19.7 11.1 14.3
Unamortized transition obligation..................... (19.8) (27.3) 42.7 45.8
Unrecognized prior service cost....................... 9.7 10.7 0.0 0.0
------ ------ ------- -------
Net amount recognized................................. $ 67.8 $ 45.5 $ (46.2) $ (41.0)
====== ====== ======= =======
Amounts recognized in the statement of financial
position consist of:
Prepaid benefit cost.................................. $103.0 $ 89.4 $ 0.0 $ 0.0
Accrued benefit liability............................. (39.5) (45.3) (46.2) (41.0)
Intangible asset...................................... 1.4 4.3 0.0 0.0
Accumulated other comprehensive income................ 2.9 (2.9) 0.0 0.0
------ ------ ------- -------
Net amount recognized................................. $ 67.8 $ 45.5 $ (46.2) $ (41.0)
====== ====== ======= =======
</TABLE>
The Company's qualified plan had assets of $459.8 million and $432.5
million as of December 31, 1998 and December 31, 1997, respectively. The
projected benefit obligation and accumulated benefit obligation for the
qualified plan were $350.8 million and $311.5 million as of December 31, 1998
and $333.2 million and $306.3 million as of December 31, 1997, respectively.
F-31
<PAGE> 97
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The projected benefit obligation and accumulated benefit obligation for the
unfunded non-qualified defined benefit pension plan, which is unfunded, were
$47.5 million and $39.5 million as of December 31, 1998, and $56.9 million and
$45.3 million as of December 31, 1997, respectively.
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
---------------- --------------
1998 1997 1998 1997
------ ------ ----- -----
<S> <C> <C> <C> <C>
WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31:
Discount rate............................................... 6.75% 6.75% 6.75% 6.75%
Expected return on plan assets.............................. 10.0% 10.0% -- --
Rate of compensation increase............................... 5.0% 5.0% 5.0% 5.0%
</TABLE>
For measurement purposes, an 11% percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1998. The rate was
assumed to decrease gradually to 6% percent for 2010 and remain at that level
thereafter.
Components of net periodic benefit cost for the pension and other
post-retirement plans are as follows:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
-------------------------- -----------------------
1998 1997 1996 1998 1997 1996
------ ------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost............................ $ 14.4 $ 12.9 $ 13.9 $ 1.3 $ 1.0 $ 1.8
Interest cost........................... 26.3 27.5 25.1 6.4 6.7 6.4
Expected return on plan assets.......... (41.8) (38.0) (36.7) 0.0 0.0 0.0
Amortization of prior service cost...... 1.0 1.0 1.0 0.0 0.0 0.0
Special termination benefits............ 0.0 0.0 14.0 0.0 0.0 0.0
Recognized net actuarial loss........... 0.0 0.1 0.1 0.1 0.0 0.4
Amortization of transition items........ (7.5) (7.5) (7.5) 3.1 3.1 3.1
------ ------ ------ ----- ----- -----
Net periodic benefit cost............... $ (7.6) $ (4.0) $ 9.9 $10.9 $10.8 $11.7
====== ====== ====== ===== ===== =====
</TABLE>
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, 1998 and
1997, the fair value of plan assets was $222.2 million and $211.0 million,
respectively. For the years ended December 31, 1998, 1997, and 1996, the Company
contributed $3.2 million, $3.3 million and $3.7 million to the plan,
respectively, which amounts are reflected in Other Operating Costs and Expenses.
The Company has a non-qualified defined contribution plan, which is
unfunded. The non-qualified defined contribution plan projected benefit
obligation which equaled the accumulation benefit was $48.4 million and $42.9
million as of December 31, 1998 and 1997, respectively. The non-qualified
defined contribution plan's net periodic expense was $6.6 million, $9.4 million
and $7.2 million for the years ending December 31, 1998, 1997 and 1996,
respectively.
The Company also has incentive savings plans in which substantially all
employees and career field underwriters are eligible to participate. The Company
matches field underwriter contributions up to 2% of eligible compensation and
may also make an additional profit sharing contribution for non-officer
employees. As with the Employee Excess Plan, the Company also sponsors
non-qualified excess defined contribution plans for both the field underwriter
retirement plan and the incentive savings plan for field underwriters.
F-32
<PAGE> 98
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. FEDERAL INCOME TAXES:
The Company files a consolidated federal income tax return with its life
and non-life affiliates, except Sagamore Financial Corporation and its
subsidiaries.
Federal income taxes have been calculated in accordance with the provisions
of the Internal Revenue Code of 1986, as amended. A summary of the Federal
income tax expense (benefit) is presented below:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
($ IN MILLIONS)
<S> <C> <C> <C>
Federal income tax (benefit) expense:
Current................................................... $ 84.6 $104.1 $ 76.6
Deferred.................................................. 18.1 (46.8) (32.6)
------ ------ ------
Total............................................. $102.7 $ 57.3 $ 44.0
====== ====== ======
</TABLE>
Federal income taxes reported in the consolidated statements of income are
different from the amounts determined by multiplying the earnings before federal
income taxes by the statutory federal income tax rate of 35%. The sources of the
difference and the tax effects of each are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------ ----- ------
($ IN MILLIONS)
<S> <C> <C> <C>
Tax at statutory rate....................................... $102.7 $65.7 $ 35.2
Differential earnings amount................................ -- (5.8) 12.8
Dividends received deduction................................ (1.4) (0.5) (0.5)
Other....................................................... 1.4 (2.1) (3.5)
------ ----- ------
Provision for income taxes.................................. $102.7 $57.3 $ 44.0
====== ===== ======
</TABLE>
The Company's federal income tax returns for years through 1991 have been
examined by the Internal Revenue Service ("IRS"). No material adjustments were
proposed by the IRS as a result of these examinations. In the opinion of
management, adequate provision has been made for any additional taxes which may
become due with respect to open years.
The components of deferred tax liabilities and assets at December 31, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
($ IN MILLIONS)
<S> <C> <C>
Deferred policy acquisition costs........................... $127.9 $251.4
Fixed maturities and equity securities...................... 68.2 65.8
Other (net)(1).............................................. 71.3 27.3
Nonlife subsidiaries........................................ 8.3 0.0
------ ------
Total deferred tax liabilities.............................. 275.7 344.5
------ ------
Policyholder and separate account liabilities............... 113.8 176.0
Accrued expenses............................................ 70.4 55.2
Deferred compensation and benefits.......................... 24.0 8.6
Policyholder dividends...................................... 39.8 39.1
Real estate and mortgages................................... 29.4 54.1
------ ------
Total deferred tax assets................................... 277.4 333.0
------ ------
Net deferred tax asset/(liability).......................... $ 1.7 $(11.5)
====== ======
</TABLE>
- ---------------
(1) Includes $25.7 million and $20.9 million at December 31, 1998 and 1997 of
deferred taxes relating to net unrealized gains on fixed maturity securities
in the AEGON Portfolio (see Note 9).
F-33
<PAGE> 99
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is required to establish a valuation allowance for any portion
of the deferred tax asset that management believes will not be realized. In the
opinion of management, it is more likely than not that it will realize the
benefit of the deferred tax assets and, therefore, no such valuation allowance
has been established.
8. LEASES:
The Company has entered into various operating lease agreements for office
space, furniture and equipment. These leases have remaining non-cancelable lease
terms in excess of one year. Total rental expense for these operating leases
amounted to $8.6 million in 1998, $14.5 million in 1997 and $15.1 million in
1996. The future minimum rental obligations under these leases at December 31,
1998 are as follows ($ in millions):
<TABLE>
<S> <C>
1999........................................................ $ 8.6
2000........................................................ 7.3
2001........................................................ 6.1
2002........................................................ 7.7
2003........................................................ 7.5
Later years................................................. 106.7
------
$143.9
======
</TABLE>
9. THE GROUP PENSION TRANSACTION:
On December 31, 1993 (the "Group Pension Transaction Date"), the Company
entered into an agreement (the "Agreement") with AEGON USA, Inc. ("AEGON") under
which the Company transferred a substantial portion of its group pension
business (hereafter referred to as the "Group Pension Transaction"), including
its full service group pension contracts, consisting primarily of tax-deferred
annuity, 401(k) and managed funds lines of business, to AEGON's wholly owned
subsidiary, AUSA Life Insurance Company, Inc. ("AUSA"). The Company also
transferred to AUSA the corporate infrastructure supporting the group pension
business, including data processing systems, facilities and regional offices.
AUSA was newly formed by AEGON solely for the purpose of facilitating this
transaction. In connection with the transaction, the Company and AEGON 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 will continue to provide certain administrative services to the
Company's remaining group pension contracts not included in the transfer.
The transferred group pension business consisted of approximately $6.4
billion in group pension assets and liabilities, which was comprised of
approximately $2.8 billion of general account assets and liabilities, and $3.6
billion of separate account assets and liabilities. The transfer was initially
structured in the form of indemnity reinsurance, however, the Agreement
contemplated that the transfer would be restructured in the form of assumption
reinsurance as soon as practicable following the consent of contractholders to
assumption of their contracts. Substantially all of the contractholders
consented to the assumption of their contracts by AUSA.
In addition, pursuant to the Agreement, MONY agreed to make a $200 million
capital investment in AEGON by purchasing $150 million face amount of Series A
Notes and $50 million face amount of Series B Notes (hereinafter referred to as
the "Notes"). The Series A Notes pay interest at 6.44 percent per annum and the
Series B Notes pay interest at 6.24 percent per annum. Both the Series A Notes
and the Series B Notes mature on December 31, 2002. MONY's investment in the
Series A Notes was intended to provide AEGON with the funding necessary to
capitalize AUSA.
The Company entered into the Group Pension Transaction due to downgrades of
its financial strength ratings resulting from the deterioration of its financial
position during the period from 1989 through the early
F-34
<PAGE> 100
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1990s. The Company's group pension business was considered to be particularly
sensitive to heightened withdrawal and surrender activity due to requirements of
many pension fund advisors that insurance carriers have a minimum financial
strength rating consistent with a "AA" claims-paying ability rating from
Standard & Poor's. In light of the downgrades and certain highly publicized
failures of life insurance companies in the 1990s resulting from abnormally high
withdrawal and surrender activity, management became concerned with respect to
the Company's ability to sustain inordinate amounts of such activity and entered
into the Group Pension Transaction to preserve the value of such business. The
transaction allowed the Company to: (i) place the transferred Group Pension
Business in a higher rated entity which significantly diminished the risk of
adverse persistency with respect to such business, and (ii) retain all the
profits resulting from the $6.4 billion of deposits on contracts in force and
transferred to AEGON on the Group Pension Transaction Date (the "Existing
Deposits"). As consideration for the transaction, MONY remunerated AEGON by
transferring to AUSA (i) the intangible value associated with MONY's group
pension franchise, including established customer relationships, (ii) rights to
substantially all the profits associated with any new deposits made after the
Group Pension Transaction Date on the contracts which were in force and
transferred by MONY to AUSA on the Group Pension Transaction Date, and (iii)
rights to substantially all the profits on any new business generated subsequent
to the Group Pension Transaction Date.
In accordance with GAAP, the transaction did not constitute a sale because
the Company retained substantially all the risks and rewards associated with the
Existing Deposits. Accordingly, the Company continues to reflect the transferred
assets and liabilities on its balance sheet under separate captions entitled
"Assets transferred in Group Pension Transaction" and "Liabilities transferred
in Group Pension Transaction". In addition, the Company reports in its GAAP
earnings the profits from the Existing Deposits as discussed below.
Pursuant to the Agreement, MONY receives from AUSA (i) payments on an
annual basis through December 31, 2002 (the "Group Pension Payments") equal to
all of the earnings from the Existing Deposits, (ii) a final payment (the "Final
Value Payment") at December 31, 2002 based on the remaining fair value of the
Existing Deposits, and (iii) a contingent payment (the "New Business Growth
Payment") at December 31, 2002 based on new business growth subsequent to the
Transaction Date. However, the level of new business growth necessary for MONY
to receive the New Business Growth Payment make it unlikely that MONY will ever
receive any such payment.
With respect to the Group Pension Payments, the annual results from the
Existing Deposits are measured on a basis in accordance with the Agreement (such
basis hereafter referred to as the "Earnings Formula") which is substantially
the same as GAAP, except that; (i) asset impairments on fixed maturity
securities are only recognized when such securities are designated with an NAIC
rating of "6", and (ii) no impairment losses are recognized on mortgage loans
until such loans are disposed of or at the time, and in the calculation, of the
Final Value Payment.
Earnings which emerge from the Existing Deposits pursuant to the
application of the Earnings Formula are recorded in the Company's financial
statements only after adjustments (primarily to recognize asset impairments in
accordance with SFAS Nos. 114 and 115) to reflect such earnings on a basis
entirely in accordance with GAAP (such earnings hereafter referred to as the
"Group Pension Profits"). Losses which arise from the application of the
Earnings Formula for any annual period will be reflected in the Company's
results of operations (after adjustments to reflect such losses in accordance
with GAAP) only up to the amount for which the Company is at risk (as described
below), which at any time is equal to the then outstanding principal amount of
the Series A Notes.
Operating losses reported in any annual period pursuant to the Earnings
Formula are carried forward to reduce any earnings in subsequent years reported
pursuant to the Earnings Formula. Any resultant deficit remaining at December
31, 2002 will be deducted from the Final Value Payment and New Business Growth
Payment, if any, due to the Company. If a deficit still remains, it will be
applied (as provided for in the
F-35
<PAGE> 101
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Agreement) as an offset against the principal payment due to the Company upon
maturity of the Series A Notes.
For the years ended December 31, 1998, 1997 and 1996, AUSA reported
earnings to the Company pursuant to the application of the Earnings Formula of
$49.8 million, $55.7 million, and $66.7 million, respectively, and the Company
recorded Group Pension Profits of $56.8 million, $60.0 million and $59.5
million, respectively. In addition, the Company earned $12.8 million, $17.7
million, and $23.0 million of interest income on the Notes during the
aforementioned years. From 1994 through 1996, the Company reinvested an
aggregate of $169 million of the aforementioned profits and interest in
additional Series A notes (the "Additional Notes") with a face amount equal to
the amount reinvested. The Additional Notes paid interest at 1% above the
two-year U.S. Treasury rate in effect at the time of their issuance. All of the
Additional Notes were redeemed at face value by AEGON during 1997. At December
31, 1998, the remaining Series A notes held by the Company consisted of the
$150.0 million face amount of Series A Notes it acquired on December 31, 1993.
The following sets forth certain summarized financial information relating
to the Group Pension Transaction as of and for the periods indicated, including
information regarding: (i) the general account assets transferred to support the
Existing Deposits in the Group Pension Transaction (such assets hereafter
referred to as the "AEGON Portfolio"), (ii) the transferred separate account
assets and liabilities, and (iii) the components of revenue and expense
comprising the Group Pension Profits:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1998 1997
-------- --------
($ IN MILLIONS)
<S> <C> <C>
ASSETS:
General Account
Fixed maturities: available for sale, at estimated fair
value (amortized cost; $1,564.6 and $1,585.4,
respectively)......................................... $1,620.2 $1,645.0
Mortgage loans on real estate.......................... 214.8 347.9
Real estate held for investment........................ 37.9 50.4
Cash and cash equivalents.............................. 21.7 24.5
Accrued investment income.............................. 27.6 33.1
-------- --------
Total general account assets........................... 1,922.2 2,100.9
Separate account assets................................... 3,829.6 3,614.0
-------- --------
Total assets...................................... $5,751.8 $5,714.9
======== ========
LIABILITIES:
General Account(1)
Policyholders' account balances........................ $1,824.9 $1,991.0
Other liabilities...................................... 24.0 33.7
-------- --------
Total general account liabilities................. 1,848.9 2,024.7
Separate account liabilities(2)........................... 3,829.6 3,614.0
-------- --------
Total liabilities................................. $5,678.5 $5,638.7
======== ========
</TABLE>
- ---------------
(1) Includes general account liabilities transferred in connection with the
Group Pension Transaction pursuant to indemnity reinsurance of $121.7
million and $142.8 million as of December 31, 1998 and 1997, respectively.
F-36
<PAGE> 102
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) Includes separate account liabilities transferred in connection with the
Group Pension Transaction pursuant to indemnity reinsurance of $33.3 million
and $31.1 million as of December 31, 1998 and 1997, respectively.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C>
REVENUES:
Product policy fees......................................... $ 23.3 $ 23.7 $ 24.7
Net investment income....................................... 154.7 169.3 192.4
Net realized gains (losses) on investments.................. 7.2 7.1 (7.4)
------ ------ ------
Total revenues.................................... 185.2 200.1 209.7
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances........ 108.7 117.3 125.9
Other operating costs and expenses.......................... 19.7 22.8 24.3
------ ------ ------
Total benefits and expenses....................... 128.4 140.1 150.2
Group Pension Profits............................. $ 56.8 $ 60.0 $ 59.5
====== ====== ======
</TABLE>
Fixed Maturity Securities
At December 31, 1998 and 1997, there were no fixed maturity securities in
the AEGON Portfolio deemed to have other than temporary impairments in value. In
addition, there were no fixed maturity securities at such dates which have been
non-income producing for the preceding twelve months.
At December 31, 1998 and 1997, the carrying value of problem fixed
maturities (as hereafter defined -- see Note 11) held in the AEGON Portfolio was
$0.0 million and $24.4 million, respectively. In addition, at such dates the
carrying value of potential problem fixed maturities held in the AEGON Portfolio
was $3.7 million and $7.4 million, respectively. Also, none of the fixed
maturity securities held in the AEGON Portfolio at December 31, 1998 and 1997 or
prior thereto had been restructured.
The amortized cost and estimated fair value of fixed maturity securities
held in the AEGON Portfolio, by contractual maturity dates, (excluding scheduled
sinking funds), as of December 31, 1998 are as follows ($ in millions):
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
<S> <C> <C>
Due in one year or less..................................... $ 162.6 $ 164.1
Due after one year through five years....................... 752.2 778.2
Due after five years through ten years...................... 304.6 322.2
Due after ten years......................................... 37.7 38.3
-------- --------
Subtotal.................................................... 1,257.1 1,302.8
Mortgage and asset backed securities........................ 307.5 317.4
-------- --------
Total............................................. $1,564.6 $1,620.2
======== ========
</TABLE>
Fixed maturity securities that are not due at a single maturity date have
been included in the preceding table in the year of final maturity. Actual
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
F-37
<PAGE> 103
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The net change in unrealized investment gains (losses) represents the only
component of other comprehensive income generated by the AEGON Portfolio for the
years ended December 31, 1998, 1997, 1996 and prior thereto. Following is a
summary for the AEGON Portfolio of the change in unrealized investment gains
(losses) (see Note 10):
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- ------
($ IN MILLIONS)
<S> <C> <C> <C>
CHANGE IN UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Fixed maturities............................................ $(4.0) $(1.5) $(41.6)
----- ----- ------
</TABLE>
Mortgage Loans on Real Estate
Mortgage loans on real estate in the AEGON Portfolio at December 31, 1998
and 1997 consist of the following ($ in millions):
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1998 1997
------- -------
<S> <C> <C>
Mortgage loans.............................................. $230.8 $361.5
Less: valuation allowances.................................. (16.0) (13.6)
------ ------
Mortgage loans, net of valuation allowance.................. $214.8 $347.9
====== ======
</TABLE>
An analysis of the valuation allowances with respect to the AEGON Portfolio
for 1998, 1997 and 1996 is as follows ($ in millions):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-----------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Balance, beginning of year.................................. $13.6 $22.2 $31.8
Increase (decrease) in allowance............................ 2.9 (5.1) (8.7)
Reduction due to pay downs and pay offs..................... ( 0.5) (1.6) 0.0
Transfers to real estate.................................... 0.0 (1.9) (0.9)
----- ----- -----
Balance, end of year........................................ $16.0 $13.6 $22.2
===== ===== =====
</TABLE>
Impaired mortgage loans along with related valuation allowances with
respect to the AEGON Portfolio at December 31, 1998 and 1997 are as follows ($
in millions):
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Investment in impaired mortgage loans (before valuation
allowances):
Loans that have valuation allowances...................... $ 71.1 $ 56.6 $ 92.2
Loans that do not have valuation allowances............... 4.4 45.8 53.5
------ ------ ------
Subtotal.......................................... 75.5 102.4 145.7
Valuation allowances........................................ (11.4) (5.8) (9.8)
------ ------ ------
Impaired mortgage loans, net of valuation allowances........ $ 64.1 $ 96.6 $135.9
====== ====== ======
</TABLE>
Impaired mortgage loans that do not have valuation allowances are loans
where the net present value of the expected future cash flows related to the
loan or the fair value of the collateral equals or exceeds the recorded
investment in the loan. Such loans primarily consist of restructured loans.
During the years ended December 31, 1998, 1997, and 1996, the average
recorded investment in impaired mortgage loans with respect to the AEGON
Portfolio was approximately $80.4 million, $116.3 million, and
F-38
<PAGE> 104
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$127.4 million, respectively. For the years ended December 31, 1998, 1997, and
1996 approximately $4.5 million, $6.5 million, and $13.1 million, respectively,
of interest income on impaired loans with respect to the AEGON Portfolio was
earned.
At December 31, 1998 and 1997, the carrying values of mortgage loans which
were non-income producing for the twelve months preceding such dates with
respect to the AEGON Portfolio were $0.0 million and $21.6 million,
respectively.
At December 31, 1998 and 1997 the AEGON Portfolio held restructured
mortgage loans of $59.7 million and $88.5 million, respectively. Interest income
of $4.0 million, $6.6 million, and $10.4 million was recognized on restructured
mortgage loans for the years ended December 31, 1998, 1997, and 1996,
respectively. Gross interest income on these loans that would have been recorded
in accordance with the original terms of such loans amounted to approximately
$6.9 million, $9.2 million, and $11.1 million for the years ended December 31,
1998, 1997, and 1996, respectively.
The following table presents the maturity distribution of mortgage loans
held in the AEGON Portfolio as of December 31, 1998 ($ in millions).
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
CARRYING % OF
VALUE TOTAL
-------- -----
<S> <C> <C>
Due in one year or less..................................... $ 64.3 29.9%
Due after one year through five years....................... 101.2 47.1
Due after five years through ten years...................... 42.1 19.6
Due after ten years......................................... 7.2 3.4
------ -----
Total............................................. $214.8 100.0%
====== =====
</TABLE>
Real Estate
As of December 31, 1998 and 1997, the AEGON Portfolio had real estate held
for investment of $37.9 million and $50.4 million, respectively, which includes
$18.2 million and $25.6 million, respectively, of impairments taken upon
foreclosure of mortgage loans. Losses recorded during the years ended December
31, 1998, 1997 and 1996 related to impairments taken upon foreclosure were $0.0
million, $4.3 million, and $16.8 million, respectively.
Real estate is net of accumulated depreciation of $2.5 million, and $1.8
million at December 31, 1998 and 1997, respectively. Depreciation expense of
$1.1 million, $1.4 million, and $0.7 million, was recorded for the years ended
December 31, 1998, 1997, and 1996, respectively.
There was no real estate included in the AEGON Portfolio which was
non-income producing for the twelve months preceding December 31, 1998, 1997,
and 1996, respectively.
F-39
<PAGE> 105
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. INVESTMENT INCOME, REALIZED AND UNREALIZED INVESTMENT GAINS (LOSSES), AND
OTHER COMPREHENSIVE INCOME:
Net investment income for the years ended December 31, 1998, 1997 and 1996
was derived from the following sources ($ in millions):
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
NET INVESTMENT INCOME
Fixed maturities............................................ $418.1 $422.5 $392.4
Equity securities........................................... 53.6 53.5 54.5
Mortgage loans.............................................. 118.7 137.1 159.2
Real estate................................................. 44.4 56.2 84.1
Policy loans................................................ 72.5 82.2 80.2
Other investments (including cash & short-terms)............ 23.1 22.4 29.3
------ ------ ------
Total investment income..................................... 730.4 773.9 799.7
Investment expenses......................................... 42.1 40.9 48.1
------ ------ ------
Net investment income....................................... $688.3 $733.0 $751.6
====== ====== ======
</TABLE>
Net realized gains (losses) on investments for the years ended December 31,
1998, 1997 and 1996 are summarized as follows ($ in millions):
<TABLE>
<CAPTION>
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
NET REALIZED GAINS (LOSSES) ON INVESTMENTS
Fixed maturities............................................ $ 8.3 $ 7.3 $ 6.2
Equity securities........................................... 6.9 35.8 30.0
Mortgage loans.............................................. 5.4 10.4 8.4
Real estate................................................. 127.6 20.1 20.8
Other invested assets....................................... 20.5 (1.5) 10.5
------ ----- -----
Net realized gains on investments........................... $168.7 $72.1 $75.9
====== ===== =====
</TABLE>
Following is a summary of the change in unrealized investment gains
(losses), net of related deferred income taxes and adjustment for deferred
policy acquisition costs (see Note 5), which are reflected in Accumulated Other
Comprehensive Income for the periods presented. The net change in unrealized
investment gains (losses) and the change in the Company's minimum pension
liability represent the only
F-40
<PAGE> 106
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
components of other comprehensive income for the years ended December 31, 1998,
1997 and 1996 as presented below:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ -------
($ IN MILLIONS)
<S> <C> <C> <C>
OTHER COMPREHENSIVE INCOME
Change in Unrealized Gains (Losses):
Fixed maturities............................................ $ 66.8 $ 98.7 $(126.7)
Equity securities........................................... 24.2 0.6 13.8
Other....................................................... (1.8) 3.7 1.0
------ ------ -------
Subtotal.................................................... 89.2 103.0 (111.9)
AEGON Portfolio (See Note 9)................................ (4.0) (1.5) (41.6)
------ ------ -------
Subtotal.................................................... 85.2 101.5 (153.5)
Effect on unrealized gains (losses) on investments
attributable to:
DAC....................................................... (6.7) (47.9) 61.0
Deferred federal income taxes............................. (28.4) (17.7) 32.6
Net unrealized gains and DAC transferred to the Closed
Block..................................................... (18.7) -- --
------ ------ -------
Change in unrealized gains (losses) on investments, net..... 31.4 35.9 (59.9)
Minimum pension liability adjustment (See Note 6)........... 2.9 (2.9) --
------ ------ -------
Other comprehensive income............................. $ 34.3 $ 33.0 $ (59.9)
====== ====== =======
</TABLE>
The following table sets forth the reclassification adjustments required
for the years ended December 31, 1998, 1997, and 1996 to avoid double-counting
in comprehensive income items that are included as part of net income for a
period that also had been part of other comprehensive income in earlier periods
($ in millions):
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ -------
($ IN MILLIONS)
<S> <C> <C> <C>
RECLASSIFICATION ADJUSTMENTS
Unrealized gains (losses) on investments arising during
period.................................................... $ 39.3 $ 53.5 $ (44.8)
Reclassification adjustment for gains included in net
income.................................................... (7.9) (17.6) (15.1)
------ ------ -------
Unrealized gains (losses) on investments, net of
reclassification adjustments.............................. $ 31.4 $ 35.9 $ (59.9)
====== ====== =======
</TABLE>
Unrealized gains (losses) on investments, (excluding net unrealized gains
(losses) and DAC on assets allocated to the Closed Block), reported in the above
table for the years ended December 31, 1998, 1997 and 1996 are net of income tax
expense (benefit) of $24.1 million, $8.2 million, and $(40.8) million,
respectively, and $0.8 million, $(30.2) million, and $(75.5) million,
respectively, relating to the effect of such unrealized gains (losses) on DAC.
Reclassification adjustments, (excluding net unrealized gains (losses) and
DAC on assets allocated to the Closed Block), reported in the above table for
the years ended December 31, 1998, 1997 and 1996 are net of income tax expense
of $4.3 million, $9.5 million and $8.2 million, respectively, and $(7.5)
million, $(17.7) million and $(14.5) million, respectively, relating to the
effect of such amounts on DAC.
F-41
<PAGE> 107
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. INVESTMENTS:
Fixed Maturity Securities Available-For-Sale:
The amortized cost, gross unrealized gains and losses, and estimated fair
value of fixed maturity securities available for sale as of December 31, 1998
and 1997 are as follows ($ in millions):
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------------- --------------- ------------- -------------------
1998 1997 1998 1997 1998 1997 1998 1997
-------- -------- ------ ------ ----- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
US Treasury securities and obligations
of U.S government agencies.......... $ 63.8 $ 131.4 $ 3.2 $ 2.3 $ 0.0 $ 0.1 $ 67.0 $ 133.6
Collateralized mortgage Obligations:
Government agency-backed............ 180.2 398.9 3.3 6.6 0.0 0.3 183.5 405.2
Non-agency backed................... 85.7 112.4 3.4 4.4 0.0 0.0 89.1 116.8
Other asset-backed securities:
Government agency-backed............ 20.0 68.1 1.0 1.3 0.0 0.3 21.0 69.1
Non-agency backed................... 347.5 474.4 12.2 17.5 0.9 0.3 358.8 491.6
Foreign governments................... 16.6 0.0 1.2 0.0 0.6 0.0 17.2 0.0
Utilities............................. 385.2 719.1 17.2 30.6 5.1 2.2 397.3 747.5
Corporate bonds....................... 1,908.0 3,852.2 75.3 141.4 9.0 14.7 1,974.3 3,978.9
-------- -------- ------ ------ ----- ----- -------- --------
Total bonds.................. 3,007.0 5,756.5 116.8 204.1 15.6 17.9 3,108.2 5,942.7
Redeemable preferred stocks........... 23.5 7.9 0.6 0.1 0.3 0.6 23.8 7.4
-------- -------- ------ ------ ----- ----- -------- --------
Total........................ $3,030.5 $5,764.4 $117.4 $204.2 $15.9 $18.5 $3,132.0 $5,950.1
======== ======== ====== ====== ===== ===== ======== ========
</TABLE>
The carrying value of the Company's fixed maturity securities at December
31, 1998 and 1997 is net of adjustments for impairments in value deemed to be
other than temporary of $15.1 million and $7.3 million, respectively.
There were no fixed maturity securities at December 31, 1998 and 1997,
which have been non-income producing for the twelve months preceding such dates.
The Company classifies fixed maturity securities which, (i) are in default
as to principal or interest payments, or (ii) are to be restructured pursuant to
commenced negotiations, (iii) went into bankruptcy subsequent to acquisition, or
(iv) are deemed to have other than temporary impairments to value as "problem
fixed maturity securities". At December 31, 1998 and 1997, the carrying value of
problem fixed maturities held by the Company was $33.9 million and $30.2
million, respectively. In addition, at December 31, 1998 and 1997, the Company
held $8.6 million and $0.0 million of fixed maturity securities which had been
restructured. Gross interest income that would have been recorded in accordance
with the original terms of restructured fixed maturity securities amounted to
$0.9 million and $0.0 million for the years ended December 31, 1998 and 1997,
respectively. Gross interest income on these fixed maturity securities included
in net investment income aggregated $1.3 million and $0.0 million for the years
ended December 31, 1998 and 1997, respectively.
F-42
<PAGE> 108
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The amortized cost and estimated fair value of fixed maturity securities,
by contractual maturity dates (excluding scheduled sinking funds) as of December
31, 1998, are as follows ($ in millions):
<TABLE>
<CAPTION>
1998
-----------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
<S> <C> <C>
Due in one year or less..................................... $ 108.2 $ 108.4
Due after one year through five years....................... 667.9 685.9
Due after five years through ten years...................... 998.5 1,040.8
Due after ten years......................................... 622.5 644.5
-------- --------
Subtotal.......................................... 2,397.1 2,479.6
Mortgage- and asset-backed securities....................... 633.4 652.4
-------- --------
Total............................................. $3,030.5 $3,132.0
======== ========
</TABLE>
Fixed maturity securities that are not due at a single maturity date have
been included in the preceding table in the year of final maturity. Actual
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 fixed maturity securities including those in the
Closed Block during 1998, 1997 and 1996 were $396.9 million, $225.0 million and
$197.3 million, respectively. Gross gains of $10.6 million, $5.2 million, and
$4.1 million and gross losses of $2.9 million, $2.6 million, and $4.3 million
were realized on these sales, respectively.
Equity Securities
The cost, gross unrealized gains and losses, and estimated fair value of
marketable and nonmarketable equity securities at December 31, 1998 and 1997 are
as follows ($ in millions):
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------------- -------------- ------------- ---------------
1998 1997 1998 1997 1998 1997 1998 1997
------ ------ ------ ----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marketable equity securities....... $233.6 $165.3 $ 48.7 $30.2 $ 6.7 $ 4.9 $275.6 $190.6
Nonmarketable equity securities.... 128.2 101.4 65.7 53.0 12.3 7.2 181.6 147.2
------ ------ ------ ----- ----- ----- ------ ------
$361.8 $266.7 $114.4 $83.2 $19.0 $12.1 $457.2 $337.8
====== ====== ====== ===== ===== ===== ====== ======
</TABLE>
Proceeds from sales of equity securities during 1998, 1997 and 1996 were
$165.0 million, $234.1 million and $164.7 million, respectively. Gross gains of
$24.4 million, $44.4 million, and $35.9 million and gross losses of $17.2
million, $4.7 million, and $4.5 million were realized on these sales,
respectively.
12. MORTGAGE LOANS ON REAL ESTATE AND REAL ESTATE:
Mortgage loans on real estate at December 31, 1998 and 1997 consist of the
following ($ in millions):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Commercial mortgage loans................................... $ 546.1 $ 963.5
Agricultural and other loans................................ 465.4 521.5
-------- --------
Total loans................................................. 1,011.5 1,485.0
Less: valuation allowances.................................. ( 23.2) (54.9)
-------- --------
Mortgage loans, net of valuation allowances................. $ 988.3 $1,430.1
======== ========
</TABLE>
F-43
<PAGE> 109
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
An analysis of the valuation allowances for 1998, 1997 and 1996 is as
follows ($ in millions):
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Balance, beginning of year.................................. $54.9 $67.0 $79.6
Increase (decrease) in allowance............................ 11.9 1.4 (4.2)
Reduction due to pay downs and pay offs..................... (16.0) (12.7) (0.6)
Transfers to real estate.................................... (4.0) (0.8) (7.8)
Transfers to the Closed Block............................... (23.6) -- --
----- ----- -----
Balance, end of year........................................ $23.2 $54.9 $67.0
===== ===== =====
</TABLE>
Impaired mortgage loans along with related valuation allowances were as
follows ($ in millions):
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Investment in impaired mortgage loans (before valuation
allowances):
Loans that have valuation allowances........................ $116.7 $199.1
Loans that do not have valuation allowances................. 29.5 167.1
------ ------
Subtotal............................................... 146.2 366.2
Valuation allowances........................................ 10.9 32.8
------ ------
Impaired mortgage loans, net of valuations
allowances............................................ $135.3 $333.4
====== ======
</TABLE>
Impaired mortgage loans that do not have valuation allowances are loans
where the net present value of the expected future cash flows related to the
loan or the fair value of the collateral equals or exceeds the recorded
investment in the loan. Such loans primarily consist of restructured loans or
loans on which impairment writedowns were taken prior to the adoption of SFAS
No. 114, "Accounting by Creditors for Impairment of a Loan".
During 1998 and 1997, the average recorded investment in impaired mortgage
loans was approximately $300.1 million and $349.9 million, respectively
including Closed Block mortgages. During 1998, 1997, and 1996, the Company
recognized $24.2 million, $28.5 million, and $33.3 million, respectively, of
interest income on impaired loans. See Note 19.
At December 31, 1998 and 1997, the carrying values of mortgage loans which
were non-income producing for the twelve months preceding such dates were $12.9
million and $21.1 million, respectively.
At December 31, 1998 and 1997, the Company had restructured mortgage loans
of $110.6 million (excluding the Closed Block) and $242.7 million, respectively.
Interest income of $13.0 million, $20.3 million and $19.8 million was recognized
on restructured mortgage loans in 1998, 1997, and 1996, respectively. Gross
interest income on these loans that would have been recorded in accordance with
the original terms of such loans amounted to approximately $18.1 million, $26.7
million, and $26.3 million in 1998, 1997 and 1996, respectively.
F-44
<PAGE> 110
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the Company's real estate at December 31,
1998 and 1997:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1998 1997
------- -------
($ IN MILLIONS)
<S> <C> <C>
Real estate to be disposed of(1)............................ $393.7 $800.2
Impairment writedowns....................................... (50.2) (96.3)
Valuation allowance......................................... (30.6) (82.7)
------ ------
Carrying value of real estate to be disposed of............. $312.9 $621.2
====== ======
Real estate held for investment(2).......................... $381.9 $533.6
Impairment writedowns....................................... (60.6) (37.7)
------ ------
Carrying value of real estate held for investment........... $321.3 $495.9
====== ======
</TABLE>
- ---------------
(1) Amounts presented as of December 31, 1998 and 1997 are net of $29.0 million
and $75.0 million, respectively, relating to impairments taken upon
foreclosure of mortgage loans.
(2) Amounts presented as of December 31, 1998 and 1997 are net of $26.8 million
and $35.0 million, respectively, relating to impairments taken upon
foreclosure of mortgage loans.
An analysis of the valuation allowances relating to real estate classified
as to be disposed of for the years ended December 31, 1998, 1997 and 1996 is as
follows ($ in millions):
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Balance, beginning of year.................................. $82.7 $46.0 $49.1
Increase due to transfers of properties to real estate to be
disposed of during the year............................... 1.7 66.1 11.6
Increases (decreases) in valuation allowances from the end
of the prior period on properties to be disposed of....... 5.0 (2.3) 5.2
Decrease as a result of transfers of valuation allowances to
held for investment....................................... (13.5) 0.0 0.0
Decrease as a result of sale................................ (45.3) (27.1) (19.9)
----- ----- -----
Balance, end of year........................................ $30.6 $82.7 $46.0
===== ===== =====
</TABLE>
Real estate is net of accumulated depreciation of $290.1 million and $494.4
million for 1998 and 1997, respectively, and depreciation expense recorded was
$26.6 million, $45.1 million and $48.3 million for the years ended December 31,
1998, 1997 and 1996, respectively.
At December 31, 1998 and 1997, the carrying value of real estate which was
non-income producing for the twelve months preceding such dates was $12.5
million and $34.5 million, respectively. Approximately 77.8% of such real estate
at December 31, 1998 consisted of land and the balance consisted of vacant
buildings.
The carrying value of impaired real estate as of December 31, 1998 and 1997
was $78.4 million and $62.3 million, respectively. The depreciated cost of such
real estate as of December 31, 1998 and 1997 was $189.1 million and $196.4
million before impairment writedowns of $110.7 million and $134.0 million,
respectively. The aforementioned impairments occurred primarily as a result of
low occupancy levels and other market related factors. Losses recorded during
1998, 1997, and 1996 related to impaired real estate aggregated $5.9 million,
$0.0 million, and $3.8 million, respectively, and are included as a component of
net realized gains on investments.
F-45
<PAGE> 111
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair values of the Company's financial instruments
approximate their carrying amounts except for long-term debt as described below.
The methods and assumptions utilized in estimating the fair values of the
Company's financial instruments are summarized as follows:
Fixed Maturities and Equity Securities
The estimated fair values of fixed maturity securities are based upon
quoted market prices, where available. The fair values of fixed maturity
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. Equity securities primarily consist of investments in common
stocks and limited partnership interests. The fair values of the Company's
investment in common stocks are determined based on quoted market prices, where
available. The fair value of the Company's investments in limited partnership
interests are based on amounts reported by such partnerships to the Company.
Mortgage Loans
The fair values of mortgage loans are 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. The fair value of mortgages in process of
foreclosure is the estimated fair value of the underlying collateral.
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.
Long-term Debt
The fair value of long-term debt at December 31, 1998 was $419.9 million
and is determined based on contractual cash flows discounted at market rates.
The estimated fair values for non-recourse mortgage debt are determined by
discounting contractual cash flows at a rate which takes into account the level
of current market interest rates and collateral risk.
Separate Account Assets and Liabilities
The estimated fair value of assets held in Separate Accounts is based on
quoted market prices. The fair value of liabilities related to Separate Accounts
is the amount payable on demand, which includes surrender charges.
Investment-Type Contracts
The fair values of annuities are based on estimates of the value of
payments available upon full surrender. The fair values of the Company's
liabilities under guaranteed investment 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.
F-46
<PAGE> 112
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. REINSURANCE:
Life insurance business is ceded on a yearly renewable term basis under
various reinsurance contracts. The Company's general practice is to retain no
more than $4.0 million of risk on any one person for individual products and
$6.0 million for last survivor products.
The Company has entered into coinsurance agreements with other insurers
related to a portion of its extended term insurance, guaranteed interest
contract and long-term disability claim liabilities and reinsures approximately
50% of its block of paid-up life insurance policies.
The following table summarizes the effect of reinsurance for the years
indicated:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ ------
($ IN MILLIONS)
<S> <C> <C> <C>
Direct premiums (includes $78.4, $78.1 and $78.2 of accident
and health premiums for 1998, 1997, and 1996,
respectively)............................................. $ 728.7 $871.0 $889.4
Reinsurance Assumed......................................... 5.3 6.2 8.3
Reinsurance ceded (includes $(78.2), $(3.5), and $(3.4) of
accident and health premiums for 1998, 1997, and 1996,
respectively)............................................. (112.3) (38.6) (37.9)
------- ------ ------
Net premiums................................................ $ 621.7 $838.6 $859.8
======= ====== ======
Universal life and investment type product policy fee income
ceded..................................................... $ 8.9 $ 8.8 $ 8.5
======= ====== ======
Policyholders' benefits ceded............................... $ 107.3 $ 69.0 $ 44.6
======= ====== ======
Interest credited to policyholders' account balances
ceded..................................................... $ 6.5 $ 9.9 $ 14.5
======= ====== ======
</TABLE>
The Company is contingently liable with respect to ceded insurance should
any reinsurer be unable to meet its obligations under these agreements. To limit
the possibility of such losses, the Company evaluates the financial condition of
its reinsurers and monitors concentration of credit risk.
Effective December 31, 1997, the Company transferred all of its existing in
force disability income insurance business to a third party reinsurer under an
indemnity reinsurance contract and ceased writing new disability income
insurance business. As a result of this transaction, the Company recorded a loss
before tax of approximately $9.1 million for the year ended December 31, 1997.
15. DEBT:
The Company's debt at December 31, 1998 and 1997 consists of the following
($ in millions):
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
DEBT:
Surplus Notes............................................... $231.7 $219.6
Real Estate Mortgage Encumbrances........................... 94.6 155.8
Other....................................................... 49.1 48.2
------ ------
$375.4 $423.6
====== ======
</TABLE>
Surplus Notes
On December 31, 1997, the Company issued the MONY Notes in connection with
the Investment Agreement (see Note 2). The MONY Notes have a face amount of
$115.0 million, a coupon rate of interest of 9.5% per annum, and mature on
December 30, 2012. Interest on the MONY Notes is payable semi-
F-47
<PAGE> 113
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
annually and principal is payable at maturity. Payment of interest on the MONY
Notes may only be made upon the prior approval of the New York State
Superintendent of Insurance.
On August 15, 1994, the Company issued Surplus Notes due August 15, 2024
with a face amount of $125.0 million. The notes were issued at a discount of
42.1% from the principal amount payable at maturity, resulting in net proceeds
after issuance expenses of approximately $70.0 million. The amount of such
original issue discount represents a yield of 11.25% per annum for the period
from August 15, 1994 until August 15, 1999. Interest on the notes will not
accrue until 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.
Payment of interest on the notes may only be made upon the prior approval
of the New York State Superintendent of Insurance. The Company amortizes the
discount using the interest method. For the years ended December 31, 1998, 1997,
and 1996, the Company recorded interest expense of $12.1 million, $10.8 million,
and $9.7 million, respectively, related to these notes.
Real Estate Mortgage Encumbrances
The Company has mortgage loans on certain of its real estate properties.
The interest rates on these loans range from 7.9% to 8.7%. Maturities range from
June 2000 to July 2009. For the years ended December 31, 1998, 1997 and 1996,
interest expense on such mortgage loans aggregated $9.0 million, $12.3 million,
and $12.9 million, respectively.
Other
During 1989, the Company entered into a transaction which is accounted for
as a financing arrangement involving certain real estate properties held for
investment. Pursuant to the terms of the agreement, the Company effectively
pledged the real estate properties as collateral for a loan of approximately
$35.0 million bearing simple interest at a rate of 8% per annum. Interest is
cumulative. Periodic interest payments are not required. All principal and
interest are effectively due at the maturity of the obligation (March 30, 2000)
which is subject to extension at the option of the creditor. However, interest
may be paid periodically subject to available cash flow from the real estate
properties. At December 31, 1998 and 1997, the outstanding balance of the
obligation including accrued interest was $42.4 million and $41.3 million,
respectively. Interest expense on the obligation of $3.1 million, $3.0 million,
and $2.9 million is reflected in Other Operating Costs and Expenses on the
statements of income for the years ended December 31, 1998, 1997 and 1996,
respectively.
In 1988, the Company financed one of its real estate properties under a
sales/leaseback arrangement. The facility was sold for $66.0 million, $56.0
million of which was in the form of an interest bearing note receivable and
$10.0 million in cash. The note is due January 1, 2009. The transaction is
accounted for as a financing. Accordingly, the facility remains on the Company's
books and continues to be depreciated. An obligation representing the total
proceeds on the sale was recorded by the Company at the effective date of the
transaction, and is reduced based on payments under the lease. The lease has a
term of 20 years beginning December 21, 1988 and requires minimum annual rental
payments of $7.1 million in 1999, $7.3 million in 2000, $7.4 million in 2001,
$7.6 million in 2002, $7.7 million in 2003 and $41.0 million thereafter. The
Company has the option to renew the lease at the end of the lease term.
Prior to December 31, 1997, the Company had outstanding debt which
represented floating rate notes that were issued by a trust that qualified as a
Real Estate Mortgage Investment Conduit (REMIC) under Section 860 of the
Internal Revenue Code. For the years ended December 31, 1997 and 1996, the
Company recorded interest expense of $0.8 million and $3.3 million,
respectively, related to the REMIC. The weighted
F-48
<PAGE> 114
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
average interest rate on the notes for the years ended December 31, 1997 and
1996 was 5.9%, and 5.8%, respectively.
Prior to December 31, 1997, the Company had outstanding Eurobond debt. For
the years ended December 31, 1997 and 1996 interest expense on the Eurobonds
outstanding aggregated $2.1 million and $18.3 million, respectively. The
weighted average interest rate on such debt for the years ended December 31,
1997 and 1996 was 8.13%, and 8.2%, respectively.
At December 31, 1998, aggregate maturities of long-term debt based on
required principal payments for 1999 and the succeeding four years are $12.2
million, $87.0 million, $35.9 million, $0.5 million, and $0.5 million,
respectively, and $247.6 million thereafter.
16. OFF-BALANCE SHEET RISK AND CONCENTRATION OF CREDIT RISK:
Financial Instruments with Off-Balance Sheet Risk:
Pursuant to a securities lending agreement with a major financial
institution, the Company from time to time lends securities to approved
borrowers. At December 31, 1998 and 1997, securities loaned by the Company under
this agreement had a fair value of approximately $98.9 million and $36.4
million, respectively. The minimum collateral on securities loaned is 102
percent of the market value of the loaned securities. Such securities are marked
to market on a daily basis and the collateral is correspondingly increased or
decreased.
Concentration of Credit Risk:
At December 31, 1998 and 1997, the Company had no single investment or
series of investments with a single issuer (excluding U.S. Treasury securities
and obligations of U.S. government agencies) exceeding 3.5% and 1.9%,
respectively, of total cash and invested assets.
The Company's fixed maturity securities are diversified by industry type.
The industries that comprise 10% or more of the carrying value of the fixed
maturity securities at December 31, 1998 are Non-Government
Asset/Mortgage-Backed of $448.0 million (14.3%), Public Utilities of $412.9
million (13.2%), Consumer Goods and Services of $408.5 million (13.1%) and Other
Manufacturing of $391.3 million (12.5%).
At December 31, 1997 the industries that comprise 10% or more of the
carrying value of the fixed maturity securities were Other Manufacturing of
$804.9 million (13.5%), Public Utilities of $747.9 million (12.6%), Consumer
Goods and Services of $614.6 million (10.3%), Non-Government Asset/Mortgage-
Backed of $608.4 million (10.2%), and Government and Agencies of $607.9 million
(10.2%).
The Company holds below investment grade fixed maturity securities with a
carrying value of $252.0 million at December 31, 1998. These investments consist
mostly of privately issued bonds which are monitored by the Company through
extensive internal analysis of the financial condition of the issuers and which
generally include protective debt covenants. At December 31, 1997, the carrying
value of the Company's investments in below investment grade fixed maturity
securities amounted to $304.3 million.
F-49
<PAGE> 115
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has significant investments in commercial and agricultural
mortgage loans and real estate (including joint ventures and partnerships). The
locations of property collateralizing mortgage loans and real estate investment
carrying values (in millions) at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
------------------ -----------------
<S> <C> <C> <C> <C>
GEOGRAPHIC REGION:
Mountain.............................................. $ 392.5 24.2% $ 591.5 23.2%
West.................................................. 315.8 19.5 399.2 15.7
Southeast............................................. 292.2 18.0 616.3 24.2
Northeast............................................. 261.5 16.1 494.2 19.4
Midwest............................................... 220.7 13.6 253.7 10.0
Southwest............................................. 139.8 8.6 192.3 7.5
-------- ------ -------- -----
$1,622.5 100.0% $2,547.2 100.0%
======== ====== ======== =====
</TABLE>
The states with the largest concentrations of mortgage loans and real
estate investments at December 31, 1998 are: Arizona, $235.3 million (14.5%);
California $179.6 million (11.1%); New York, $140.7 million (8.7%); Georgia,
$96.9 million (6.0%); Illinois, $93.0 million (5.7%); New Jersey, $93.0 million
(5.7%); Texas, $91.1 million (5.6%).
As of December 31, 1998 and 1997, the real estate and mortgage loan
portfolio was also diversified as follows ($ in millions):
<TABLE>
<CAPTION>
1998 1997
------------------ -----------------
<S> <C> <C> <C> <C>
PROPERTY TYPE:
Office buildings...................................... $ 585.4 36.1% $1,092.4 42.9%
Agricultural.......................................... 459.7 28.4 515.0 20.2
Hotel................................................. 264.9 16.3 344.8 13.5
Retail................................................ 164.1 10.1 332.1 13.0
Industrial............................................ 51.0 3.1 111.4 4.4
Other................................................. 72.7 4.5 84.6 3.4
Apartment Buildings................................... 24.7 1.5 66.9 2.6
-------- ------ -------- -----
$1,622.5 100.0% $2,547.2 100.0%
======== ====== ======== =====
</TABLE>
17. COMMITMENTS AND CONTINGENCIES:
(a) In late 1995 and thereafter, a number of purported class actions were
commenced in various state and federal courts against the Company alleging that
the Company engaged in deceptive sales practices in connection with the sale of
whole and/or universal life insurance policies in the 1980s and 1990s. Although
the claims asserted in each case are not identical, they seek substantially the
same relief under essentially the same theories of recovery (i.e. breach of
contract, fraud, negligent misrepresentation, negligent supervision and
training, breach of fiduciary duty, unjust enrichment and/or violation of state
insurance and/or deceptive business practice laws). Plaintiffs in these cases
(including the Goshen case discussed below) seek primarily equitable relief
(e.g., reformation, specific performance, mandatory injunctive relief
prohibiting the Company from canceling policies for failure to make required
premium payments, imposition of a constructive trust and/or creation of a claims
resolution facility to adjudicate any individual issues remaining after
resolution of all class-wide issues) as opposed to compensatory damages,
although they also seek compensatory damages in unspecified amounts. The Company
has answered the complaints in each action (except for one recently filed action
and another being voluntarily held in abeyance), has denied any wrongdoing, and
has asserted numerous affirmative defenses.
F-50
<PAGE> 116
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On June 7, 1996, the New York State Supreme Court certified the Goshen
case, being the first of the aforementioned class actions filed, as a nationwide
class consisting of all persons or entities who have, or at the time of the
policy's termination had, an ownership interest in a whole or universal life
insurance policy issued by the Company and sold on an alleged "vanishing
premium" basis during the period January 1, 1982 to December 31, 1995. On March
27, 1997, the Company filed a motion to dismiss or, alternatively, for summary
judgment on all counts of the complaint. All of the other putative class actions
(with one exception discussed below) have been consolidated and transferred by
the Judicial Panel on Multidistrict Litigation to the United States District
Court for the District of Massachusetts, or are being voluntarily held in
abeyance pending the outcome of the Goshen case. The Massachusetts District
Court in the multidistrict litigation has entered an order essentially holding
all of the federal cases in abeyance pending the action of the Goshen case. On
October 21, 1997, the New York State Supreme Court granted the Company's motion
for summary judgment and dismissed all claims filed in the Goshen case against
the Company on the merits.
In addition to the matters discussed above, the Company is involved in
various other legal actions and proceedings in connection with its businesses.
The claimants in certain of these actions and proceedings seek damages of
unspecified amounts. During 1996, the Company paid $12.6 million to settle a
number of these claims in the state of Alabama and, accordingly, recorded such
amount in Other Operating Costs and Expenses for the year then ended.
With respect to all of the other aforementioned pending litigation, the
Company recorded a provision, which is reflected in Other Operating Costs and
Expenses, of $10.3 million, $0.0 million, and $27.6 million during the years
ended December 31, 1998, 1997 and 1996, respectively. While the outcome of such
matters cannot be predicted with certainty, in the opinion of management, any
additional liability beyond that recorded in the consolidated financial
statements at December 31, 1998, resulting from the resolution of these matters
will not have a material adverse effect on the Company's consolidated financial
position or results of operations.
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, such assessments will not have a
material adverse effect on the consolidated financial position and the results
of operations of the Company.
The Company maintains two lines of credit with domestic banks totaling
$150.0 million with scheduled renewal dates in September 1999 and September
2003. Under these lines of credit, the Company is required to maintain a certain
statutory tangible net worth and debt to capitalization ratio. The Company has
not borrowed against the lines of credit since their inception.
At December 31, 1998, the Company had commitments to issue $39.2 million of
fixed rate agricultural loans with periodic interest rate reset dates. The
initial interest rates on such loans range from approximately 6.7% to 7.7%. In
addition, the Company had commitments to issue $76.4 million of fixed rate
commercial mortgage loans with interest rates ranging from 7.0% to 8.1%. The
Company had no commitments outstanding to purchase private fixed maturity
securities as of December 31, 1998. At December 31, 1998, the Company had
commitments to contribute capital to its equity partnership investment of $100.8
million.
(b) The order, referred to above, by the New York State Supreme Court on
October 21, 1997 was affirmed by the New York State Appellate Division, First
Department on March 18, 1999. All actions before the United States District
Court for the District of Massachusetts are still pending. In addition, on or
about February 25, 1999, a purported class action was filed against MONY Life
Insurance Company of America ("MLOA") in Kentucky State Court covering
policyholders who purchased individual universal life insurance policies from
MLOA after January 1, 1998 claiming breach of contract and violations of the
Kentucky Consumer Protection Act. On March 26, 1999, MLOA removed that action to
the United States District Court for the Eastern District of Kentucky, requested
the Judicial Panel on multidistrict litigation to transfer
F-51
<PAGE> 117
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the action to the Judicial Panel of multidistrict litigation for the District of
Massachusetts and sought a stay of further proceedings in the Kentucky District
Court pending a determination on multidistrict transfer. The Company intends
vigorously to defend that litigation. Due to the early stage of this litigation
no determination can be made as to whether the Company will incur any loss with
respect to this matter.
18. STATUTORY FINANCIAL INFORMATION AND REGULATORY RISK-BASED CAPITAL:
Financial statements of the Company prepared in accordance with SAP for
filing with the New York State Insurance Department (the "Department") differ
from financial statements of the Company prepared in accordance with GAAP. The
principal differences result from the following: (i) subsidiaries are generally
accounted for under the equity method of accounting under SAP, whereas
subsidiaries in which the Company has a majority voting interest are
consolidated under GAAP; (ii) acquisition costs are charged to operations as
incurred under SAP rather than being amortized over the expected life of the
contracts under GAAP; (iii) certain assets designated as "non-admitted assets"
are charged directly to statutory surplus under SAP but are reflected as assets
under GAAP; (iv) federal income taxes are provided only on taxable income for
which income taxes are currently payable under SAP, whereas under GAAP deferred
income taxes are recognized; (v) an interest maintenance reserve ("IMR") and
asset valuation reserve ("AVR") are computed based on specific statutory
requirements and recorded under SAP, whereas under GAAP, such reserves are not
recognized; (vi) surplus notes are reported in statutory surplus under SAP,
whereas under GAAP, such notes are recorded as a liability; (vii) premiums for
universal life and investment-type products are recognized as revenue when due
under SAP, whereas under GAAP, such amounts are recorded as deposits and not
included in the Company's revenues; (viii) future policy benefit reserves are
based on specific statutory requirements regarding mortality and interest,
without consideration of withdrawals, and are reported net of reinsurance under
SAP, whereas, under GAAP, such reserves are calculated using a net level premium
method based on actuarial assumptions equal to guaranteed mortality and dividend
fund interest rates and are reported gross of reinsurance; (ix) investments in
bonds and redeemable preferred stocks are generally carried at amortized cost
under SAP, whereas under GAAP, such investments are classified as "available for
sale" and reported at estimated fair value; (x) pension expense for the
Company's qualified defined benefit pension plan is recognized when pension
contributions are deductible for federal income tax purposes, whereas under
GAAP, such expense is recognized over the service period for all eligible
employees; (xi) postretirement benefits are recognized for vested employees and
current retirees under SAP, whereas under GAAP, such expenses are recognized
over the service period for all eligible employees; (xii) methods used for
calculating real estate and mortgage loan impairments, valuation allowances, and
real estate depreciation under GAAP are different from those permitted under
SAP; and (xiii) certain contracts with reinsurers are accounted for as
reinsurance under SAP, whereas under GAAP, such contracts are accounted for as
deposits ("financial reinsurance").
MONY Life is restricted as to the amounts it may pay as dividends to the
MONY Group. Under the New York Insurance Law, the New York Superintendent has
broad discretion to determine whether the financial condition of a stock life
insurance company would support the payment of dividends to its shareholders.
The New York Insurance Department has established informal guidelines for the
Superintendent's determinations which focus upon, among other things, the
overall financial condition and profitability of the insurer under statutory
accounting practices.
F-52
<PAGE> 118
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Set forth below are reconciliations of the Company's combined capital and
surplus and the net change in capital and surplus, determined in accordance with
SAP, with its equity and net income reported in accordance with GAAP as of and
for each year ended December 31, 1998, 1997, and 1996, respectively.
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C>
Capital and surplus......................................... $1,015.8 $ 835.4 $ 703.5
AVR......................................................... 341.8 348.6 317.7
-------- -------- --------
Capital and surplus, and AVR................................ 1,357.6 1,184.0 1,021.2
Adjustments:
Future policy benefits and policyholders' account
balances............................................... (254.8) (386.5) (356.8)
Deferred policy acquisition costs......................... 439.7 1,007.1 1,095.2
Valuation of investments:
Real estate............................................ (182.1) (343.9) (372.7)
Mortgage loans......................................... (30.9) (77.1) (91.2)
Fixed maturity securities.............................. 55.8 154.4 39.9
Other.................................................. 25.8 12.0 12.7
Deferred federal income taxes............................. 12.4 (6.6) (42.6)
Reinsurance............................................... (106.7) (108.7) (141.0)
Surplus notes............................................. (231.7) (219.6) (93.8)
Pension and postretirement benefits....................... 89.4 71.3 66.2
Non-admitted assets....................................... 95.3 51.5 40.8
Other, net................................................ (10.0) (17.3) (7.4)
Closed Block:
Investments............................................... 123.1 -- --
Future Policy Benefits and Policyholders' account
balance................................................ (130.5) -- --
Deferred Policy Acquisition costs......................... 554.6 -- --
Deferred Federal income taxes............................. (61.2) -- --
Other..................................................... (18.7) -- --
-------- -------- --------
GAAP Equity................................................. $1,727.1 $1,320.6 $1,170.5
======== ======== ========
Net change in capital and surplus........................... $ 180.4 $ 131.9 $ 14.5
Change in AVR............................................... (6.8) 30.9 32.4
-------- -------- --------
Net change in capital and surplus, and AVR.................. 173.6 162.8 46.9
Adjustments:
Future policy benefits and policyholders' account
balances............................................... 1.2 (29.7) (9.9)
Reinsurance............................................... 2.0 32.3 5.3
Deferred policy acquisition costs......................... (6.5) (40.2) (12.9)
Valuation of investments
Real estate............................................ 161.8 28.8 12.0
Mortgage loans......................................... 8.0 14.1 15.0
Fixed maturity securities.............................. (13.8) 8.6 (13.6)
Other.................................................. 2.8 6.3 (2.0)
Deferred federal income taxes............................. (13.7) 53.4 35.3
Issuance of surplus notes................................. -- (115.0) --
Amortization of discount on surplus notes................. (12.1) (10.8) (9.7)
Pension and postretirement benefits....................... 18.1 5.1 (4.1)
</TABLE>
F-53
<PAGE> 119
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C>
Capital contribution...................................... (221.9) -- --
Policy credits............................................ 13.2 -- --
Change in non-admitted assets............................. 43.8 10.7 0.9
Other, net................................................ 7.0 (9.3) (6.7)
-------- -------- --------
Net income.................................................. $ 163.5 $ 117.1 $ 56.5
======== ======== ========
</TABLE>
The difference between statutory basis "net income" and the "net change in
capital and surplus, and AVR" reflected in the reconciliation above primarily
relates to the AVR, unrealized gains (losses) on equity securities, reinsurance
gains, and certain contingency provisions which for statutory reporting purposes
are charged directly to surplus and are not reflected in statutory basis net
income. The combined statutory net income reported by the Company for the years
ended December 31, 1998, 1997, and 1996 was $9.7 million, $88.5 million, and
$62.7 million, respectively.
In March 1998, the National Association of Insurance Commissioners ("NAIC")
voted to adopt its Codification of Statutory Accounting Principles project
(referred to hereafter as "codification"). Codification is a modified form of
statutory accounting principles that will result in changes to the current NAIC
Accounting Practices and Procedures Manual applicable to insurance enterprises.
Although adoption of codification by all states is not a certainty, the NAIC has
recommended that all states enact codification as soon as practicable with an
effective date of January 1, 2001. It is currently anticipated that codification
will become an NAIC state accreditation requirement starting in 2002. In
addition, the American Institute of Certified Public Accountants and the NAIC
have agreed to continue to allow the use of certain permitted accounting
practices when codification becomes effective in 2001. Any accounting
differences from codification principles, however, must be disclosed and
quantified in the footnotes to the audited financial statements. Therefore,
codification will likely result in changes to what are currently considered
prescribed statutory insurance accounting practices.
Each insurance company's state of domicile imposes minimum risk-based
capital requirements. The formulas for determining the amount of risk-based
capital specify various weighting factors that are applied to financial balances
or various levels of activity based on the perceived degree of risk. Regulatory
compliance is determined by a ratio of the Company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level risk-based
capital, as defined by the NAIC. Companies below specific trigger points or
ratios are classified within certain levels, each of which requires specified
corrective action. Each of the Company's insurance subsidiaries exceed the
minimum risk based capital requirements.
As part of their routine regulatory oversight, the Department recently
completed an examination of MONY for each of the five years in the period ended
December 31, 1996, and the Arizona State Insurance Department recently completed
an examination of MONY's wholly owned life insurance subsidiary, MONY Life
Insurance Company of America, for each of the three years in the period ended
December 31, 1996. The reports did not cite any matter which would result in a
material effect on the Company's financial condition or results of operations.
F-54
<PAGE> 120
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
19. CLOSED BLOCK -- SUMMARY FINANCIAL INFORMATION
Summarized financial information of the Closed Block as of December 31,
1998 and November 16, 1998 (date of establishment) and for the period from
November 16, 1998 through December 31, 1998 is presented below:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 16,
1998 1998
------------ ------------
($ IN MILLIONS)
<S> <C> <C>
ASSETS:
Fixed Maturities:
Available for sale, at estimated fair value (amortized
cost, $3,423.0 and $3,433.9)........................... $3,574.0 $3,586.5
Mortgage loans on real estate............................... 431.7 464.9
Policy loans................................................ 1,208.4 1,205.7
Cash and cash equivalents................................... 134.4 46.9
Premiums receivable......................................... 16.8 17.9
Deferred policy acquisition costs........................... 554.6 562.3
Other assets................................................ 241.3 249.2
-------- --------
Total Closed Block assets......................... $6,161.2 $6,133.4
======== ========
LIABILITIES:
Future policy benefits...................................... $6,715.6 $6,681.8
Policyholders' account balances............................. 298.0 296.4
Other policyholders' liabilities............................ 163.5 171.3
Other liabilities........................................... 113.6 109.7
-------- --------
Total Closed Block liabilities.................... $7,290.7 $7,259.2
======== ========
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 16,
1998 THROUGH
DECEMBER 31,
1998
---------------
($ IN MILLIONS)
<S> <C>
REVENUES:
Premiums.................................................... $100.1
Net investment income....................................... 46.6
Net realized gains (losses) on investments.................. 2.4
Other Income................................................ 0.6
------
Total revenues.................................... 149.7
------
BENEFITS AND EXPENSES:
Benefits to policyholders................................... 110.0
Interest credited to policyholders' account balances........ 1.0
Amortization of deferred policy acquisition costs........... 9.0
Dividends to policyholders.................................. 22.4
Other operating costs and expenses.......................... 1.6
------
Total benefits and expenses....................... $144.0
------
Contribution from the Closed Block.......................... $ 5.7
======
</TABLE>
F-55
<PAGE> 121
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1998 and November 16, 1998, there were no adjustments in
the value of fixed maturity securities in the Closed Block deemed to be other
that temporary or fixed maturities which have been non-income producing for the
twelve months preceding such date.
At December 31, 1998 and November 16, 1998, there were no problem fixed
maturities which were restructured.
The amortized cost and estimated fair value of fixed maturity securities in
the Closed Block, by contractual maturity dates, (excluding scheduled sinking
funds) as of December 31, 1998 are as follows ($ in millions):
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
<S> <C> <C>
Due in one year or less..................................... $ 47.0 $ 47.4
Due after one year through five years....................... 868.3 887.6
Due after five years through ten years...................... 1,443.4 1,524.8
Due after ten years......................................... 565.0 605.2
-------- --------
Subtotal.......................................... 2,923.7 3,065.0
Mortgage and asset backed securities........................ 499.3 509.0
-------- --------
$3,423.0 $3,574.0
======== ========
</TABLE>
Fixed maturity securities that are not due at a single maturity date have
been included in the preceding table in the year of final maturity. Actual
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
Mortgage loans on real estate in the Closed Block at December 31, 1998 and
November 16, 1998 consist of the following ($ in millions):
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 16,
1998 1998
------------ ------------
<S> <C> <C>
Commercial mortgage loans................................... $382.0 $395.7
Agricultural and other loans................................ 73.3 93.9
------ ------
Subtotal.......................................... 455.3 489.6
Less: valuation allowances.................................. 23.6 24.7
------ ------
Mortgage loans, net of valuation allowances................. $431.7 $464.9
====== ======
</TABLE>
An analysis of the valuation allowances for the period from November 16,
1998 through December 31, 1998 is as follows ($ in millions):
<TABLE>
<S> <C>
Beginning balance, November 16, 1998........................ $24.7
Increase (decrease) in allowance............................ (0.8)
Reduction due to pay downs and pay offs..................... (0.3)
-----
Balance, December 31, 1998.................................. $23.6
=====
</TABLE>
F-56
<PAGE> 122
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Impaired mortgage loans along with related valuation allowances were as
follows as of December 31, 1998 ($ in millions):
Investment in impaired mortgage loans (before valuation allowances):
<TABLE>
<S> <C>
Loans that have valuation allowances........................ $117.9
Loans that do not have valuation allowances................. 31.1
------
Subtotal.......................................... 149.0
Valuation allowances........................................ (17.5)
------
Impaired mortgage loans, net of valuation allowances........ $131.5
======
</TABLE>
Impaired mortgage loans that do not have valuation allowances are loans
where the net present value of the expected future cash flows related to the
loan or the fair value of the collateral equals or exceeds the recorded
investment in the loan. Such loans primarily consist of restructured loans or
loans on which impairment writedowns were taken prior to the adoption of SFAS
No. 114, "Accounting by Creditors for Impairment of a Loan".
During the period from November 16, 1998 through December 31, 1998, the
Closed Block's average recorded investment in impaired mortgage loans was
approximately $138.3 million and the Closed Block recognized $1.8 million of
interest income on impaired loans.
At December 31, 1998 the carrying values of mortgage loans in the Closed
Block which were non-income producing for the twelve months preceding such date
was $0.5 million, respectively.
At December 31, 1998, the Closed Block had restructured mortgage loans of
$54.8 million. Interest income of $0.7 million was recognized on such loans
during the period from November 16, 1998 through December 31, 1998. Gross
interest income on these loans that would have been recorded in accordance with
the original terms of such loans amounted to approximately $0.8 million.
20. SEGMENT INFORMATION:
The Company's business activities consist of the following: protection
product operations, accumulation product operations, mutual fund operations,
securities broker-dealer operations, insurance brokerage operations, and certain
insurance lines of business no longer written by the Company (the "run-off
businesses"). These business activities represent the Company's operating
segments. Except as discussed below, these segments are managed separately
because they either provide different products or services, are subject to
different regulation, require different strategies, or have different technology
requirements.
Management considers the Company's mutual fund operations to be an integral
part of the products offered by the Company's accumulation products segment,
since substantially all the mutual funds sold by the Company are offered
through, and in conjunction with, the products marketed by the accumulation
products segment. Accordingly, for management purposes (including, performance
assessment and making decisions regarding the allocation of resources), the
Company aggregates its mutual fund operations with its accumulation products
segment.
Of the aforementioned segments, only the protection products segment and
the accumulation products segment qualify as reportable segments in accordance
with FASB Statement No. 131. All of the Company's other segments are combined
and reported in an other products segment.
Products comprising the protection products segment primarily include a
wide range of individual life insurance products, including: permanent and last
survivor whole life, term life, universal life, variable universal life, group
life, and group universal life. In addition, included in the protection products
segment are: (i) the assets and liabilities transferred pursuant to the Group
Pension Transaction, as well as the Group
F-57
<PAGE> 123
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pension Profits (see Note 9), (ii) the Closed Block assets and liabilities, as
well as the Contribution from the Closed Block, and (iii) the Company's
disability income insurance business. Products comprising the accumulation
products segment primarily include fixed annuities, non-participating interest
sensitive products (including; single premium deferred annuities, flexible
premium deferred annuities, immediate annuities, and flexible premium variable
annuities), proprietary mutual funds, investment management services, and
certain other financial services products. The Company's other products segment
primarily consists of the securities broker-dealer operation, the insurance
brokerage operation, and the run-off businesses. The securities broker-dealer
operation markets the Company's proprietary investment products and, in
addition, provides customers of the Company's protection and accumulation
products access to other non-proprietary investment products (including stocks,
bonds, limited partnership interests, tax-exempt unit investment trusts and
other investment securities). The insurance brokerage operation provides the
Company's field agency force with access to life, annuity, small group health
and specialty insurance products written by other carriers to meet the insurance
and investment needs of its customers. The run-off businesses primarily consist
of group life and health business, as well as group pension business that was
not included in the Group Pension Transaction (see Note 9).
Set forth in the table below is certain financial information with respect
to the Company's operating segments as of and for each of the years ended
December 31, 1998, 1997 and 1996, as well as amounts not allocated to the
segments. Except for various allocations discussed below, the accounting
policies of the segments are the same as those described in the summary of
significant accounting policies. The Company evaluates the performance of each
operating segment based on profit or loss from operations before income taxes
and nonrecurring items (e.g. items of an unusual or infrequent nature). The
Company does not allocate certain nonrecurring items to the segments. In
addition, all segment revenues are from external customers.
Assets have been allocated to the segments in amounts sufficient to support
the associated liabilities of each segment. In addition, capital is allocated to
each segment in amounts sufficient to maintain a targeted regulatory risk-based
capital ("RBC") level for each segment (see Note 18). Allocations of net
investment income and net realized gains on investments were based on the amount
of assets allocated to each segment. Other costs and operating expenses were
allocated to each of the segments based on: (i) a review of the nature of such
costs, (ii) time studies analyzing the amount of employee compensation costs
incurred by each segment, and (iii) cost estimates included in the Company's
product pricing. Substantially all non-cash transactions and impaired real
estate (including real estate acquired in satisfaction of debt) have been
allocated to the Protection Products segment (see Note 4).
Amounts reported as "unallocated amounts" in the table below primarily
relate to: (i) contracts issued by MONY Life relating to its employee benefit
plans, (ii) expenses incurred in 1996 and 1995 relating to settlements and
reserves for various lawsuits and legal disputes, including lawsuits against the
Company alleging market conduct improprieties (see Note 17), and (iii) expenses
incurred in 1996 in connection with special termination benefits paid to certain
employees under an early retirement program (see Note 6).
SEGMENT SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
($ IN MILLIONS)
<S> <C> <C> <C>
PREMIUMS:
Protection Products....................................... $ 602.2 $ 817.0 $ 837.4
Accumulation Products..................................... 2.6 5.0 4.2
Other Products............................................ 16.9 16.6 18.2
--------- --------- ---------
$ 621.7 $ 838.6 $ 859.8
========= ========= =========
</TABLE>
F-58
<PAGE> 124
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
($ IN MILLIONS)
<S> <C> <C> <C>
UNIVERSAL LIFE AND INVESTMENT-TYPE PRODUCT POLICY FEES:
Protection Products....................................... $ 86.2 $ 74.9 $ 63.4
Accumulation Products..................................... 64.1 50.9 36.6
Other Products............................................ 1.3 1.5 0.9
--------- --------- ---------
$ 151.6 $ 127.3 $ 100.9
========= ========= =========
NET INVESTMENT INCOME AND NET REALIZED GAINS (LOSSES) ON
INVESTMENTS:
Protection Products....................................... $ 655.5 $ 611.9 $ 605.3
Accumulation Products..................................... 136.3 131.4 144.0
Other Products............................................ 63.0 59.9 74.6
Unallocated amounts....................................... 2.2 1.9 3.6
--------- --------- ---------
$ 857.0 $ 805.1 $ 827.5
========= ========= =========
OTHER INCOME:
Protection Products(1)(7)................................. $ 85.5 $ 94.9 $ 87.7
Accumulation Products..................................... 72.8 52.1 32.2
Other Products............................................ 61.1 53.1 52.2
Unallocated amounts....................................... 5.7 5.3 4.7
--------- --------- ---------
$ 225.1 $ 205.4 $ 176.8
========= ========= =========
AMORTIZATION OF DEFERRED POLICY ACQUISITION COSTS:
Protection Products....................................... $ 92.4 $ 146.8 $ 135.0
Accumulation Products..................................... 29.6 34.4 23.2
--------- --------- ---------
$ 122.0 $ 181.2 $ 158.2
========= ========= =========
BENEFITS TO POLICYHOLDERS:(2)
Protection Products....................................... $ 663.4 $ 821.1 $ 854.0
Accumulation Products..................................... 79.6 92.5 102.8
Other Products............................................ 41.6 45.2 54.1
Unallocated amounts....................................... 7.9 7.2 8.2
--------- --------- ---------
$ 792.5 $ 966.0 $ 1,019.1
========= ========= =========
OTHER OPERATING COSTS AND EXPENSES:
Protection Products....................................... $ 287.1 $ 281.0 $ 276.3
Accumulation Products..................................... 84.4 66.3 52.8
Other Products............................................ 80.2 66.2 81.9
Unallocated amounts....................................... 0.0 3.7 44.8
--------- --------- ---------
$ 451.7 $ 417.2 $ 455.8
========= ========= =========
INCOME BEFORE INCOME TAXES:
Protection Products....................................... $ 193.7 $ 129.0 $ 101.2
Accumulation Products..................................... 80.5 44.1 35.9
Other Products............................................ 19.2 18.3 8.1
Unallocated amounts....................................... 0.0 (3.7) (44.7)
--------- --------- ---------
$ 293.4 $ 187.7 $ 100.5
========= ========= =========
</TABLE>
F-59
<PAGE> 125
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
($ IN MILLIONS)
<S> <C> <C> <C>
ASSETS:
Protection Products(3)(8)................................. $16,578.7 $15,776.5 $15,158.5
Accumulation Products..................................... 6,171.3 5,757.9 4,747.2
Other Products............................................ 1,256.2 1,234.2 1,417.1
Unallocated amounts....................................... 890.9 842.7 820.7
--------- --------- ---------
$24,897.1 $23,611.3 $22,143.5
========= ========= =========
DEFERRED POLICY ACQUISITION COSTS:
Protection Products(9).................................... $ 857.6 $ 874.1 $ 961.8
Accumulation Products..................................... 136.7 133.0 133.4
--------- --------- ---------
$ 994.3 $ 1,007.1 $ 1,095.2
========= ========= =========
POLICYHOLDERS' LIABILITIES:
Protection Products(4)(10)................................ $10,267.0 $10,105.7 $ 9,996.2
Accumulation Products..................................... 1,318.6 1,416.1 1,601.7
Other Products............................................ 455.6 513.4 542.4
Unallocated amounts....................................... 17.4 16.5 88.3
--------- --------- ---------
$12,058.6 $12,051.7 $12,228.6
========= ========= =========
SEPARATE ACCOUNT LIABILITIES:(5)
Protection Products(6).................................... $ 4,056.8 $ 3,720.1 $ 3,393.0
Accumulation Products..................................... 4,452.6 4,002.6 2,851.4
Other Products............................................ 621.9 547.7 625.6
Unallocated amounts....................................... 776.4 736.0 650.4
--------- --------- ---------
$ 9,907.7 $ 9,006.4 $ 7,520.4
========= ========= =========
</TABLE>
- ---------------
(1) Includes Group Pension Profits of $56.8 million, $60.0 million and $59.5
million for the years ended December 31, 1998, 1997 and 1996, respectively.
(See Note 9).
(2) Includes interest credited to policyholders' account balances.
(3) Includes assets transferred in the Group Pension Transaction of $5,751.8
million, $5,714.9 million and $5,627.6 million as of December 31, 1998,
1997 and 1996, respectively.
(4) Includes policyholders' liabilities transferred in the Group Pension
Transaction of $1,824.9 million, $1,991.0 million and $2,158.1 million as
of December 31, 1998, 1997 and 1996 respectively.
(5) Each segment includes separate account assets in an amount not less than
the corresponding liability reported.
(6) Includes separate account liabilities transferred in the Group Pension
Transaction of $3,829.6 million, $3,614.0 million and $3,358.3 million as
of December 31, 1998, 1997 and 1996, respectively.
(7) Includes $5.7 million relating to the Contribution from the Closed Block
for the period from November 16, 1998 through December 31, 1998 (see Note 3
and Note 19).
(8) Includes Closed Block assets of $6,161.2 million as of December 31, 1998
(see Note 3 and Note 19).
(9) Includes deferred policy acquisition costs allocated to the Closed Block of
$554.6 million as of December 31, 1998 (see Note 3 and Note 19).
(10) Includes Closed Block policyholders' liabilities of $7,177.1 million as of
December 31, 1998 (see Note 3 and Note 19).
F-60
<PAGE> 126
MONY LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Substantially all of the Company's revenues are derived in the United
States. Revenue derived from outside the United States is not material and
revenue derived from any single customer does not exceed 10 percent of total
consolidated revenues.
21. PRO FORMA INFORMATION (UNAUDITED)
The unaudited pro forma earnings information give effect to the Transaction
as if it occurred January 1, 1998. Accordingly, pro forma earnings reflects the
elimination of demutualization expenses, which were assumed to have been fully
incurred prior to January 1, 1998, and the elimination of the differential
earnings (surplus) tax applied to mutual life insurance companies. MONY Life is
no longer subject to the differential earnings (surplus) tax as a stock life
insurance company.
The unaudited pro forma information is provided for information purposes
only and should not be construed to be indicative of the Company's consolidated
results of operation had the Transaction been consummated on the date assumed,
and does not in any way represents a projection or forecast of the Company's
consolidated results of operations as of any date for any future period.
The pro forma revenue and expenses of the Closed Block for the year ended
December 31, 1998, based on certain estimates and assumption that management
believes are reasonable, as if The Closed Block had been established on January
1, 1998, are summarized below:
<TABLE>
<S> <C>
Premiums.................................................... $ 643.9
Net Investment income....................................... 373.8
Net realized gain on investment............................. 10.2
Other income................................................ 1.9
--------
Total Revenue............................................. 1,029.8
--------
Benefits to policyholders................................... 665.4
Interest credited to policyholders' account balances........ 8.7
Amortization of deferred policy acquisition costs........... 78.8
Dividends to policyholders.................................. 214.9
Other operating cost and expenses........................... 9.8
--------
Total Benefits and Expenses............................... 977.6
--------
Contribution from the Closed Block..................... $ 52.2
========
</TABLE>
F-61
<PAGE> 127
Registrant hereby incorporates herein by reference the Prospectus and
Statement of Additional Information included in Post-Effective Amendment No. 20
to Registration Statement on Form N-4 (Registration No. 33-37722).
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) The following Financial Statements are included in this Registration
Statement:
(1) With respect to MONY Variable Account A
(a) Report of Independent Accountants
(b) Statements of assets and liabilities as of December 31, 1998
(c) Statements of operations for the year ended December 31, 1998
(d) Statements of changes in net assets for the years ended December 31,
1998 and 1997
(e) Notes to financial statements
(2) With respect to MONY Life Insurance Company:
(a) Report of Independent Accountants
(b) Consolidated balance sheets as of December 31, 1998 and 1997.
(c) Consolidated statements of income and comprehensive income for the
years ended December 31, 1998, 1997 and 1996.
(d) Consolidated statements of changes in shareholder's equity for the
years ended December 31, 1998, 1997 and 1996.
(e) Consolidated statements of cash flows for the years ended December
31, 1998, 1997 and 1996
(f) Notes to consolidated financial statements.
(B) Exhibits
(1) Resolutions of Board of Trustees of The Mutual Life Insurance Company
of New York ("Company") authorizing the establishment of MONY Variable Account A
("Variable Account"), adopted November 28, 1990, filed as Exhibit (1) to
Pre-Effective Amendment No. 1 to Registration Statement (Registration Nos.
33-37722 and 811-6216) dated December 17, 1990, are incorporated herein by
reference.
(2) Not applicable.
(3) (a) Underwriting Agreement between MONY Securities Corporation, The
Mutual Life Insurance Company of New York, and MONY Series Fund, Inc. filed as
Exhibit (3)(a) to Registration Statement (Registration No. 33-37718) dated
November 9, 1990, is incorporated herein by reference.
(b) Specimen Agreement with Registered Representatives filed as
Exhibit 3(b) to PreEffective Amendment No. 1, to Registration Statement
(Registration Nos. 33-37722 and 811-6216) dated December 17, 1990, is
incorporated herein by reference.
(c) Specimen Agreement (Career Contract) between the Company and
selling agents (with Commission Schedule), filed as Exhibit 3(c) to
Registration Statement Nos. 33-18626 and 811-5394, dated November 20, 1987,
is incorporated herein by reference.
(4) Proposed forms of Flexible Payment Variable Annuity Contracts, filed as
Exhibit (4) to Pre-Effective Amendment No. 1 to Registration Statement
(Registration Nos. 33-37722 and 811-6126) dated December 17, 1990, is
incorporated herein by reference.
(5) Proposed form of Application for Flexible Payment Variable Annuity
Contract (included in Exhibit 4).
II-1
<PAGE> 128
(6) Amended and Restated Charter and Amended and Restated By-Laws of MONY
Life Insurance Company filed as Exhibit 1.(6) to Registration Statement on Form
S-6, dated January 29, 1999 (Registration Nos. 333-71417 and 811-6217), is
incorporated herein by reference.
(7) Not applicable.
(8) Not applicable.
(9) Opinion and Consent of Edward P. Bank, Esq., as Vice President and
Deputy General Counsel, filed as Exhibit 9 to Post-Effective Amendment No. 2 to
Registration Statement (Registration Nos. 33-37722 and 811-6216) dated February
28, 1992, is incorporated herein by reference.
(10) Consent of PricewaterhouseCoopers LLP, Independent Accountants for
MONY Variable Account A. Consent of PricewaterhouseCoopers LLP, Independent
Accountants for MONY Life Insurance Company is filed herewith as Exhibit 10.
(11) Not applicable.
(12) Not applicable.
(13) Calculation of Performance Data.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
1. TRUSTEES
CLAUDE M. BALLARD Limited Partner, Goldman, Sachs & Company, New York, N.Y.
TOM H. BARRETT Former Chairman of the Board, President & Chief Executive
Officer, The Goodyear Tire & Rubber Company, Akron, Ohio.
DAVID L. CALL Ronald P. Lynch Dean Emeritus, Cornell University, College of
Agriculture and Life Sciences, Ithaca, New York.
G. ROBERT DURHAM Retired Chairman and Chief Executive Officer, Walter
Industries, Inc., Tampa, Florida and Retired Chairman and Chief Executive
Officer, Phelps Dodge Corporation.
JAMES B. FARLEY Retired Chairman and Chief Executive Office, MONY.
ROBERT HOLLAND, JR. President and Chief Executive Officer, WorkPlace
Integrators.
JAMES L. JOHNSON Chairman Emeritus, GTE Corporation, Stamford, Connecticut.
ROBERT R. KILEY President and Chief Executive Officer, The New York City
Partnership and Chamber of Commerce, Inc., New York, NY.
JOHN R. MEYER Emeritus Professor, Harvard University, Cambridge,
Massachusetts.
PAUL A. MILLER Chairman of the Executive Committee, Pacific Enterprises,
Los Angeles, California.
JANE C. PFEIFFER Management Consultant, Greenwich, Connecticut.
THOMAS C. THEOBALD Managing Director, William Blair Capital Partners,
L.L.C., Chicago, Illinois.
2. OFFICER-DIRECTOR
MICHAEL I. ROTH, Director, Chairman and Chief Executive Officer, The MONY
Group Inc.; Director, Chairman and Chief Executive Officer, MONY; Director,
Chairman of the Board, and Chief Executive Officer, MONY Life Insurance Company
of America; Director, MONY CS, Inc., and 1740 Advisers, Inc.
SAMUEL J. FOTI, Director, President and Operating Officer, The MONY Group
Inc.; Director, President and Chief Operating Officer, MONY; Director, President
and Chief Operating Officer, MONY Life Insurance Company of America; Director,
MONY Brokerage, Inc., Director and Chairman, MONY
II-2
<PAGE> 129
International Holdings, Inc., MONY Life Insurance Company of the Americas, Ltd.,
and MONY Bank & Trust Company of the Americas, Ltd.
KENNETH M. LEVINE, Director, Executive Vice President, The MONY Group Inc.;
Director, Executive Vice President and Chief Investment Officer, MONY; Director,
Chairman, and President, MONY Series Fund, Inc.; Director and Executive Vice
President, MONY Life Insurance Company of America, Director, 1740 Advisers,
Inc., MONY Funding, Inc., MONY Realty Partners, Inc., and 1740 Ventures, Inc.
3. OTHER OFFICERS
THOMAS J. CONKLIN, Senior Vice President and Secretary, The MONY Group
Inc.; Senior Vice President and Secretary, MONY.
RICHARD E. CONNORS, Senior Vice President, MONY; Director, MONY Life
Insurance Company of America.
RICHARD DADDARIO, Executive Vice President and Chief Financial Officer, The
MONY Group Inc.; Executive Vice President and Chief Financial Officer, MONY;
Vice President, MONY Advisers, Inc.; Director, Vice President and Controller,
MONY Life Insurance Company of America.
PHILLIP A. EISENBERG, Senior Vice President and Chief Actuary, MONY;
Director and Vice President, MONY Life Insurance Company of America.
STEPHEN J. HALL, Senior Vice President, MONY; Director, MONY Life Insurance
Company of America.
RICHARD E. MULROY, JR., Senior Vice President and General Counsel, The MONY
Group Inc.; Senior Vice President and General Counsel, MONY.
FRANCIS J. WALDRON, Senior Vice President, MONY.
DAVID V. WEIGEL, Vice President-Treasurer, The MONY Group, Inc.; Vice
President -- Treasurer, MONY; Vice President and Treasurer, MONY Credit
Corporation, MONY Realty Partners, Inc., and 1740 Ventures, Inc.; Treasurer,
1740 Advisers, Inc., MONY Life Insurance Company of America, MONY Series Fund,
Inc., MONY Brokerage, Inc., MONY-Rockville/GP, Inc., MONY Bloomfield Hills,
Inc., and MONY Funding, Inc.
For more than the past five years, the principal occupation of each of the
officers listed above has been an officer of MONY.
The business address for all officers and officer-trustees of the Company
is 1740 Broadway, New York, New York 10019.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
The following is a diagram showing all corporations directly or indirectly
controlled by or under common control with the Company, showing the state or
other sovereign power under the laws of which each is organized and the
percentage ownership of voting securities giving rise to the control
relationship. (See diagram on following page.) Omitted from the diagram are
subsidiaries of the Company that, considered in the aggregate, would not
constitute a "significant subsidiary" (as that term is defined in Rule 8b-2
under Section 8 of the Investment Company Act of 1940) of the Company.
II-3
<PAGE> 130
[ORGANIZATIONAL CHART-DECEMBER 31,1998]
II-4
<PAGE> 131
ITEM 27. NUMBER OF CERTIFICATE OWNERS:
As of December 31, 1998, MONY Variable Account A had 12,160 owners of
contracts.
ITEM 28. INDEMNIFICATION
The By-Laws of The Mutual Life Insurance Company of New York provide, in
Article XVI as follows:
Each person (and the heirs, executors and administrators of such person)
made or threatened to be made a party to any action, civil or criminal, by
reason of being or having been a trustee, officer, or employee of the
corporation (or by reason of serving any other organization at the request of
the corporation) shall be indemnified to the extent permitted by the law of the
State of New York and in the manner prescribed therein. To this end, and as
authorized by Chapter 513, 1986 Laws of New York, the Board of Trustees may
adopt all resolutions, authorize all agreements and take all actions with
respect to the indemnification of trustees and officers, and the advance payment
of their expenses in connection therewith.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification for such
liabilities (other than the payment by the Registrant of expense incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant, will (unless in the opinion of its counsel the
matter has been settled by controlling precedent) submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) MONY Securities Corporation ("MSC"), a wholly-owned subsidiary of MONY
Life Insurance Company ("MONY"), is the principal underwriter of the Registrant
and also acts as principal underwriter for MONY Series Fund, Inc. (the "Fund").
MONY acts as sub-investment adviser to the Fund through a services agreement.
(b) The names, titles, and principal business addresses of the officers of
MSC are listed on Schedule A of Form BD for MSC (Registration No. 8-15289)
(originally filed on behalf of MONY Sales, Inc. on November 23, 1969) and Form
U-4 filed by each individual officer, the text of which is hereby incorporated
by reference.
(c) The following table sets forth commissions and other compensation
received by the principal underwriter, directly or indirectly, from MONY
Variable Account A during fiscal year 1998.
<TABLE>
<CAPTION>
NET UNDERWRITING
DISCOUNTS AND COMPENSATION BROKERAGE OTHER
COMMISSIONS ON REDEMPTION COMMISSIONS COMPENSATION
---------------- ------------- ----------- ------------
NAME OF PRINCIPAL UNDERWRITER 1998 1998 1998 1998
- ----------------------------- ---------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
MONY Securities Corporation.............. 0 0 0 0
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Accounts, books, and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder
are maintained by MONY Life Insurance Company, in whole or in part, at its
principal offices at 1740 Broadway, New York, New York 10019 or at its
Operations Center at 1 MONY Plaza, Syracuse, New York 13202.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
II-5
<PAGE> 132
ITEM 32. UNDERTAKINGS
(a) Registrant hereby undertakes to file post-effective amendments to the
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted;
(b) Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a Statement of Additional
Information;
(c) Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
REPRESENTATIONS RELATING TO SECTION 26 OF
THE INVESTMENT COMPANY ACT OF 1940
Registrant and MONY Life Insurance Company represent that the fees and
charges deducted under the Contract, in the aggregate, are reasonsable in
relation to the expenses expected to be incurred, and the risks assumed by MONY
Life Insurance Company.
II-6
<PAGE> 133
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, MONY Variable Account A, has
duly caused this Post-Effective Amendment No. 20 to this Registration Statement
to be signed on its behalf by the undersigned thereunto duly authorized, in the
City of New York, State of New York, on this 16th day of April, 1999 and
Registrant hereby certifies that the requirements of Rule 485(b) have been met.
MONY VARIABLE ACCOUNT A
(Registrant)
MONY LIFE INSURANCE COMPANY
(Depositor)
By: /s/ MICHAEL I. ROTH
------------------------------------
Michael I. Roth, Trustee,
Chairman and Chief Executive Officer
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 20 to this Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MICHAEL I. ROTH Director, Chairman and Chief April 16, 1999
- --------------------------------------------------- Executive Officer
Michael I. Roth
/s/ SAMUEL J. FOTI Director, President and April 16, 1999
- --------------------------------------------------- Chief Operating Officer
Samuel J. Foti
/s/ KENNETH M. LEVINE Director, Executive Vice President April 16, 1999
- --------------------------------------------------- and Chief Investment Officer
Kenneth M. Levine
/s/ RICHARD DADDARIO Executive Vice President April 16, 1999
- --------------------------------------------------- and Chief Financial Officer
Richard Daddario
/s/ PHILLIP A. EISENBERG Senior Vice President April 16, 1999
- --------------------------------------------------- and Chief Actuary
Phillip A. Eisenberg
/s/ THOMAS J. CONKLIN Senior Vice President April 16, 1999
- --------------------------------------------------- and Secretary
Thomas J. Conklin
* Director April 16, 1999
- ---------------------------------------------------
Claude M. Ballard
* Director April 16, 1999
- ---------------------------------------------------
Tom H. Barrett
* Director April 16, 1999
- ---------------------------------------------------
David L. Call
* Director April 16, 1999
- ---------------------------------------------------
G. Robert Durham
</TABLE>
II-7
<PAGE> 134
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director April 16, 1999
- ---------------------------------------------------
James B. Farley
* Director April 16, 1999
- ---------------------------------------------------
Robert Holland, Jr.
* Director April 16, 1999
- ---------------------------------------------------
James L. Johnson
* Director April 16, 1999
- ---------------------------------------------------
John R. Meyer
* Director April 16, 1999
- ---------------------------------------------------
Jane C. Pfeiffer
* Director April 16, 1999
- ---------------------------------------------------
Thomas C. Theobald
*By: /s/ THOMAS J. CONKLIN April 16, 1999
- --------------------------------------------------
Thomas J. Conklin
Attorney-In-Fact
</TABLE>
II-8
<PAGE> 135
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
(10) Consent of PricewaterhouseCoopers LLP, Independent
Accountants
(13) Calculation of Performance Data
</TABLE>
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 20 to the registration
statement on Form N-4 (Registration No. 33-37722)(the "Registration Statement")
of our report dated February 12, 1999 relating to the financial statements of
MONY Variable Account A-MONY Master/ValueMaster and our report dated February
15, 1999, except for Note 17(b) as to which the date is March 22, 1999, relating
to the consolidated financial statements of MONY Life Insurance Company and
Subsidiaries, which appear in such Statement of Additional Information. We also
consent to the reference to our Firm under the headings "Independent
Accountants" in the Statement of Additional Information.
PricewaterhouseCoopers LLP
New York, New York
April 16, 1999
<PAGE> 1
EXHIBIT (13)
<TABLE>
<CAPTION>
ENTERPRISE
ACCUMULATION
SEC Yield Calculation MONY SERIES FUND, INC. TRUST
DECEMBER 31, 1998 --------------------------------------------------------------- -------------
LONG TERM INTERMEDIATE GOVERNMENT HIGH YIELD
BOND BOND SECURITIES BOND
<S> <C> <C> <C> <C>
( a - b ) 625,295.00 296,098.10 205,043.38 699,936.75
c 8,545,015.32200 5,225,768.39000 4,793,407.25200 18,709,185.70200
d 14.17000 11.33000 11.17000 5.37000
(c * d) 121,082,867.11 59,207,955.86 53,542,359.00 100,468,327.22
(a-b) / (c*d) 0.00516 0.00500 0.00383 0.00697
((a-b) / (c*d) +1) 1.00516 1.00500 1.00383 1.00697
((a-b) / (c*d) +1) /\6 1.03139 1.03038 1.02320 1.04254
(((a-b) / (c*d) + 1) /\6) - 1 0.03139 0.03038 0.02320 0.04254
2*((((a-b) / (c*d) + 1) /\6)-1) 0.06278 0.06077 0.04640 0.08507
- ------------------------------- --------------- --------------- --------------- ----------------
Yield Percentage 6.27759% 6.07671% 4.63969% 8.50705%
LESS MORTALITY AND EXPENSE RISK 1.25000% 1.25000% 1.25000% 1.25000%
30 DAY YIELD 5.02759% 4.82671% 3.38969% 7.25705%
</TABLE>
