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PROSPECTUS
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VARIABLE ACCUMULATION ANNUITY CONTRACTS
FOR SECTION 457 PLANS
Issued By
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
320 Park Avenue, New York, New York 10022
Through its
SEPARATE ACCOUNT NO. 2
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THE CONTRACTS--We offer group variable accumulation annuity contracts
(CONTRACTS) to fund deferred compensation plans that meet the requirements of
Section 457(b) of the Internal Revenue Code (PLANS).
A PARTICIPANT or YOU means an employee who is participating in an employer's
Plan. Your Deferred Compensation Amounts are:
- amounts the Contractholder (or your employer) contributes on your
behalf from salary that you have elected to defer, within the limits
of Section 457 and the Plan, and
- if a Plan permits, amounts your employer contributes on your behalf
that are in addition to the salary you have deferred.
A Contract can help you accumulate funds for retirement and other long-term
financial needs. You may apply your Account Balance for retirement benefits at a
future date, in the manner your Plan permits.
INVESTMENT ALTERNATIVES FOR YOUR ACCOUNT BALANCE--You may allocate your Account
Balance to any of the Funds of Mutual of America Separate Account No. 2 or to
our General Account. You may transfer all or any part of your Account Balance
among the available Investment Alternatives at any time, without charge. The
Separate Account Funds currently invest in these funds or portfolios of mutual
funds (the UNDERLYING FUNDS), which will have varying investment returns and
performance:
- MUTUAL OF AMERICA INVESTMENT CORPORATION: Equity Index Fund, All
America Fund, Mid-Cap Equity Index Fund, Aggressive Equity Fund,
Composite Fund, Bond Fund, Mid-Term Bond Fund, Short-Term Bond Fund
and Money Market Fund;
- SCUDDER VARIABLE LIFE INVESTMENT FUND: Capital Growth Portfolio, Bond
Portfolio and International Portfolio;
- FIDELITY INVESTMENTS-REGISTERED TRADEMARK- VARIABLE INSURANCE PRODUCTS
FUNDS: Equity-Income Portfolio of the Variable Insurance Products
Fund, and Contrafund Portfolio and Asset Manager Portfolio of the
Variable Insurance Products Fund II;
- CALVERT SOCIAL BALANCED PORTFOLIO of Calvert Variable Series, Inc.;
and
- AMERICAN CENTURY VP CAPITAL APPRECIATION FUND, of American Century
Variable Portfolios, Inc.
WE DO NOT GUARANTEE THE INVESTMENT PERFORMANCE OF ANY SEPARATE ACCOUNT FUND. You
have the entire investment risk, including the risk of a decline in value, for
amounts you allocate to a Separate Account Fund.
We pay a fixed rate of interest on your Account Balance in our General Account,
and we change the rate from time to time. This Prospectus describes the Separate
Account Fund Investment Alternatives, but there is a brief description of the
General Account under "Our General Account".
STATEMENT OF ADDITIONAL INFORMATION--You may obtain at no charge a Statement of
Additional Information (an SAI), dated May 1, 1999, about the Contracts and the
Separate Account by writing to us at the address at the top of this page or by
calling 1-212-224-1600. We have filed the SAI with the Securities and Exchange
Commission and incorporate it by reference into this Prospectus. The table of
contents for the SAI is at the end of this Prospectus for your review.
PROSPECTUSES--You should read this Prospectus before you purchase a Contract or
elect to become a Participant, and you should keep it for future reference. This
Prospectus is not valid unless the prospectuses of the Underlying Funds, which
you also should read, are attached to it.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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DATED: MAY 1, 1999
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
Page
---------
TABLE OF ANNUAL EXPENSES............................................... 1
SUMMARY OF INFORMATION IN THIS PROSPECTUS.............................. 3
ABOUT MUTUAL OF AMERICA AND THE SEPARATE ACCOUNT....................... 6
UNDERLYING FUNDS INVESTED IN BY OUR SEPARATE ACCOUNT................... 7
CHARGES YOU WILL PAY................................................... 11
Administrative Charges............................................. 11
Distribution Expense Charge........................................ 11
Mortality and Expense Risk Charges................................. 11
Expenses of the Underlying Funds................................... 12
Premium Taxes...................................................... 12
PURCHASE OF A CONTRACT AND DEFERRED COMPENSATION AMOUNTS............... 12
Purchase of a Contract; Participation.............................. 12
Payment of Deferred Compensation Amounts........................... 13
Limits on Deferred Compensation Amounts............................ 13
Allocation of Deferred Compensation Amounts........................ 13
YOUR ACCOUNT BALANCE IN THE SEPARATE ACCOUNT FUNDS..................... 14
OUR PAYMENT OF ACCOUNT BALANCE TO YOU OR A BENEFICIARY................. 15
Your Right to Transfer Among Investment Alternatives............... 15
Your Right to Make Withdrawals..................................... 15
When You Must Take Minimum Distributions........................... 16
How to Tell Us an Amount to Transfer or Withdraw................... 16
Death Benefit Prior to Annuity Commencement Date................... 16
Discontinuance of a Contract....................................... 17
When We May Postpone Payments...................................... 17
ACCOUNT BALANCE APPLIED FOR ANNUITY PAYMENTS........................... 18
Amount of Annuity Payments; Annuity Commencement Date.............. 18
Contractholder and Participant Payment Relationship................ 18
Available Forms of Annuity......................................... 18
Death Benefit After Annuity Commencement Date...................... 19
OUR GENERAL ACCOUNT.................................................... 19
HOW TO CONTACT US AND GIVE US INSTRUCTIONS............................. 20
ADMINISTRATIVE MATTERS................................................. 21
Year 2000 Compliance............................................... 21
Confirmation Statements to Participants............................ 21
Designation of Beneficiary......................................... 21
Certain Administrative Provisions.................................. 22
Participation in Divisible Surplus................................. 22
FEDERAL TAX INFORMATION FOR PARTICIPANTS............................... 23
YOUR VOTING RIGHTS FOR MEETINGS OF THE UNDERLYING FUNDS................ 24
PERFORMANCE INFORMATION FOR THE SEPARATE ACCOUNT FUNDS................. 24
FUNDING AND OTHER CHANGES WE MAY MAKE.................................. 25
DEFINITIONS WE USE IN THIS PROSPECTUS.................................. 26
OUR STATEMENT OF ADDITIONAL INFORMATION................................ 28
APPENDIX A: UNIT VALUE INFORMATION FOR THE SEPARATE ACCOUNT FUNDS...... 29
</TABLE>
THIS PROSPECTUS DOES NOT OFFER THE CONTRACTS IN ANY JURISDICTION WHERE WE MAY
NOT LAWFULLY OFFER THEM FOR SALE. WE HAVE NOT AUTHORIZED ANY SALESPERSON OR
OTHER PERSON TO GIVE INFORMATION OR MAKE REPRESENTATIONS ABOUT THE CONTRACTS
OTHER THAN AS IN THIS PROSPECTUS. IF YOU RECEIVE UNAUTHORIZED INFORMATION OR
REPRESENTATIONS, YOU MUST NOT RELY ON THEM IN MAKING YOUR PURCHASE DECISION.
<PAGE>
TABLE OF ANNUAL EXPENSES
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The first part of the table below shows the expenses of the Separate
Account Funds during 1998 and the second part shows the expenses of the
Underlying Funds during 1998, except that we have estimated the expenses
of the Mid-Cap Equity Index Fund because it began operations on May 1,
1999.
<TABLE>
<CAPTION>
INVESTMENT COMPANY
------------------------------------------------
ALL AMERICA,
COMPOSITE, MID-CAP FIDELITY
BOND, MID- EQUITY -------------------------------------
TERM BOND, INDEX AND VIP II
MONEY AND SHORT- EQUITY AGGRESSIVE VIP EQUITY- VIP II ASSET
MARKET TERM BOND INDEX EQUITY INCOME CONTRAFUND MANAGER
------ ------------- ---------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PARTICIPANT TRANSACTION EXPENSES
Sales Load or Deferred Sales
Load........................... None None None None None None None
Exchange Fee or Surrender Fee.... None None None None None None None
ANNUAL CONTRACT FEE(1)............. $ 24 $ 24 $ 24 $ 24 $ 24 $ 24 $ 24
------ ----- ----- ----- ----- ----- ---------
------ ----- ----- ----- ----- ----- ---------
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average
net assets)
Mortality and Expense Risk Fees.. .50% .50% .50% .50% .50% .50% .50%
------ ----- ----- ----- ----- ----- ---------
Account Fees and Expenses
Administrative Charges (after
reimbursement)(2)............ .40% .40% .40% .40% .30% .30% .30%
Distribution Expense Charge.... .35 .35 .35 .35 .35 .35 .35
------ ----- ----- ----- ----- ----- ---------
TOTAL ACCOUNT FEES AND
EXPENSES..................... .75 .75 .75 .75 .65 .65 .65
------ ----- ----- ----- ----- ----- ---------
Total Separate Account Expenses.. 1.25% 1.25% 1.25% 1.25% 1.15% 1.15% 1.15%
------ ----- ----- ----- ----- ----- ---------
------ ----- ----- ----- ----- ----- ---------
UNDERLYING FUND ANNUAL EXPENSES
(as a percentage of average net
assets)(3)
Management Fees.................. .25% .50% .125% .85% .49% .59% .54%
Other Expenses (after
reimbursement)(3).............. None None None None .09 .11 .10%
------ ----- ----- ----- ----- ----- ---------
TOTAL UNDERLYING FUND EXPENSES
(after reimbursement).......... .25% .50% .125% .85% .58%(4) .70%(4) .64%(4)
------ ----- ----- ----- ----- ----- ---------
------ ----- ----- ----- ----- ----- ---------
<CAPTION>
SCUDDER AMERICAN
---------------------------------- CENTURY VP CALVERT
CAPITAL CAPITAL SOCIAL
GROWTH BOND INTERNATIONAL APPRECIATION BALANCED
------- ------- -------------- ------------- --------
<S> <C> <C> <C> <C> <C>
PARTICIPANT TRANSACTION EXPENSES
Sales Load or Deferred Sales
Load........................... None None None None None
Exchange Fee or Surrender Fee.... None None None None None
ANNUAL CONTRACT FEE(1)............. $ 24 $ 24 $ 24 $ 24 $ 24
------- ------- ----- ----- --------
------- ------- ----- ----- --------
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average
net assets)
Mortality and Expense Risk Fees.. .50% .50% .50% .50% .50%
------- ------- ----- ----- --------
Account Fees and Expenses
Administrative Charges (after
reimbursement)(2)............ .40% .40% .40% .20% .40%
Distribution Expense Charge.... .35 .35 .35 .35 .35
------- ------- ----- ----- --------
TOTAL ACCOUNT FEES AND
EXPENSES..................... .75 .75 .75 .55 .75
------- ------- ----- ----- --------
Total Separate Account Expenses.. 1.25% 1.25% 1.25% 1.05% 1.25%
------- ------- ----- ----- --------
------- ------- ----- ----- --------
UNDERLYING FUND ANNUAL EXPENSES
(as a percentage of average net
assets)(3)
Management Fees.................. .46% .47% .86% 1.00% .70%
Other Expenses (after
reimbursement)(3).............. .04 .10 .18 None .18
------- ------- ----- ----- --------
TOTAL UNDERLYING FUND EXPENSES
(after reimbursement).......... .50% .57% 1.04% 1.00% .88%(5)
------- ------- ----- ----- --------
------- ------- ----- ----- --------
</TABLE>
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(1) You pay a monthly amount of $2.00, or 1/12 of 1% of your Account
Balance for the month if that amount would be less than $2.00. The
above table reflects for each Separate Account Fund the full
monthly charge, as though you had allocated your Account Balance
only to that Fund. We will waive the $2.00 charge for any month
when your Plan has at least 500 Participants or $5 million in Plan
assets. In addition, an employer may elect to pay your monthly
charges, in which case we do not deduct the monthly Participant
charge. See "Charges You Will Pay--Administrative Charges".
(2) The investment adviser for the American Century VP Capital
Appreciation Fund reimburses us at an annual rate of up to .20% for
administrative expenses, and the transfer agent and distributor for
the Fidelity Portfolios reimburse us at an annual rate of .10%, for
certain services we provide. The administrative expense for the
corresponding Separate Account Funds would be .40% if the
reimbursement arrangements ended.
(3) The investment adviser for the Investment Company voluntarily
limits the expenses of each Investment Company Fund to its
investment advisory fee. The investment adviser for the American
Century VP Capital Appreciation Fund pays the expenses of that Fund
other than the investment advisory fee. The prospectus of the
Underlying Funds, attached to this Prospectus, more fully describe
the Funds' management fees and other expenses.
(4) A portion of the brokerage commissions that these Portfolios pay
was used to reduce their expenses. In addition, the Portfolios have
entered into arrangements with their custodian and transfer agent
whereby interest earned on uninvested cash balances reduces
custodian and transfer agent expenses. Including these reductions,
total operating expenses for the VIP Equity-Income Portfolio and
the VIP II Contrafund and Asset Manager Portfolios for 1998 would
have been .57%, .66% and .63%, respectively.
(5) The Portfolio's total operating expenses have been restated to
reflect the elimination of the performance adjustment in its
management fees. The restatement includes the addition of 0.01% in
expenses to the Portfolio. "Other Expenses" reflects an indirect
fee, and the Portfolio's total operating expenses for 1998 after
reductions for fees paid indirectly would be 0.86%.
1
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EXAMPLES
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The examples below show the expenses that you would pay, assuming a $1,000
investment and a 5% annual rate of return on assets. We do not impose a
surrender charge when you make a withdrawal of Account Balance. As a result, the
expenses would be the same whether or not you surrender the Account Balance at
the end of the applicable time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
EXAMPLE FOR INVESTMENT COMPANY EQUITY INDEX AND MID-CAP EQUITY INDEX FUNDS
Expenses on a $1,000 investment, assuming a 5% annual return on assets: $ 16 $ 51 $ 89 $ 203
EXAMPLE FOR INVESTMENT COMPANY ALL AMERICA, BOND, SHORT-TERM BOND, MID-TERM
BOND AND COMPOSITE FUNDS
Expenses on a $1,000 investment, assuming a 5% annual return on assets: $ 20 $ 63 $ 110 $ 251
EXAMPLE FOR INVESTMENT COMPANY AGGRESSIVE EQUITY FUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets: $ 24 $ 74 $ 130 $ 296
EXAMPLE FOR INVESTMENT COMPANY MONEY MARKET FUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets: $ 17 $ 55 $ 96 $ 211
EXAMPLE FOR SCUDDER CAPITAL GROWTH FUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets: $ 20 $ 63 $ 110 $ 251
EXAMPLE FOR SCUDDER BOND FUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets: $ 21 $ 65 $ 114 $ 260
EXAMPLE FOR SCUDDER INTERNATIONAL FUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets: $ 26 $ 80 $ 141 $ 321
EXAMPLE FOR FIDELITY VIP EQUITY-INCOME FUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets: $ 20 $ 62 $ 109 $ 249
EXAMPLE FOR FIDELITY VIP II CONTRAFUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets: $ 21 $ 66 $ 117 $ 264
EXAMPLE FOR FIDELITY VIP II ASSET MANAGER FUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets: $ 20 $ 64 $ 113 $ 256
EXAMPLE FOR CALVERT SOCIAL BALANCED FUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets: $ 24 $ 75 $ 132 $ 300
EXAMPLE FOR AMERICAN CENTURY VP CAPITAL APPRECIATION FUND
Expenses on a $1,000 investment, assuming a 5% annual return on assets: $ 23 $ 73 $ 127 $ 290
</TABLE>
These examples are to assist you in understanding the various costs and expenses
that you will pay, directly or indirectly, under a Contract. The examples
reflect the expenses of the Separate Account, as well as those of the Underlying
Funds, as they were for the year ended December 31, 1998, except that the
expenses of the Mid-Cap Equity Index Fund are estimated because the Fund began
operations on May 1, 1999. ACTUAL EXPENSES FOR PERIODS AFTER 1998 MAY BE GREATER
OR LESS THAN THE EXPENSES ON WHICH WE BASED THE EXAMPLES.
We assumed a 5% annual rate of return in the examples for illustration purposes.
THE 5% RATE DOES NOT REPRESENT AND IS NOT A GUARANTEE OF THE SEPARATE ACCOUNT
FUNDS' PAST OR FUTURE INVESTMENT PERFORMANCE. Each example also assumed an
annual contract fee of $1.94 per $1,000 of value in the Separate Account Fund,
based on an average Account Balance of $12,375. The expenses shown do not
include any premium taxes that may be payable.
ACCUMULATION UNIT VALUES FOR THE SEPARATE ACCOUNT FUNDS
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For information about the Accumulation Unit values of each of the Separate
Account Funds over a period of time (other than for the Mid-Cap Equity Index
Fund, which commenced operations on May 1, 1999), you should see Appendix A to
this Prospectus. The Unit values reflect the investment performance and expenses
of the Underlying Funds and the charges we assess on the assets of the Separate
Account Funds. You may obtain a copy of the Separate Account's most recent
semi-annual or annual financial statements by calling us at 1-800-468-3785.
2
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SUMMARY OF INFORMATION IN THIS PROSPECTUS
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The discussion below is a summary of information in the Prospectus. The
references in the Summary direct you to particular sections in the Prospectus
where you will find more detailed explanations.
CONTRACT OFFERED
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We offer group annuity accumulation contracts for use with eligible deferred
compensation plans that employers have adopted pursuant to Section 457 of the
Code. Only States and state governmental entities (GOVERNMENTAL UNITS),
organizations exempt from taxation under the Code, and trustees of Plans adopted
by Governmental units or tax-exempt organizations qualify to be Contractholders.
We issue a Contract to a Contractholder, which owns the Contract.
An employee's participation in the Contractholder's deferred compensation plan
is usually voluntary.
Amounts that you and other Participants accumulate under a Contract, as well as
other assets of the Plan, belong to the Contractholder. The general rule is that
assets under a Contract are subject to the claims of the Contractholder's
creditors. Plans of Governmental units, however, must provide that all assets
will be held for the exclusive benefit of Participants in a trust or in a
custodial account or group annuity contract that are treated as trusts under
Section 457 of the Code. This requirement does not apply to a Plan maintained by
an organization exempt from taxation under the Code that is not a Governmental
unit.
You may obtain Federal income tax benefits provided under Section 457 of the
Code for your Deferred Compensation Amounts. Section 457 permits you to defer
the recognition of income if certain requirements are met. REFER TO "FEDERAL TAX
INFORMATION FOR PARTICIPANTS".
DEFERRED COMPENSATION AMOUNTS
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You may defer compensation in whatever amounts and at whatever frequency you
desire, subject to limitations under the Code and your Plan. If your Plan
permits, your employer also may send us Deferred Compensation Amounts for you
that are in addition to the salary you have deferred. The minimum remittance
that a Contractholder may send to us is $10. REFER TO "PURCHASE OF A CONTRACT
AND DEFERRED COMPENSATION AMOUNTS".
A Plan may provide that you must pay certain Plan expenses, such as accounting,
legal or consulting fees or expenses of a Deferred Compensation committee or
administrative board. The Contractholders may deduct those expenses before
sending Deferred Compensation Amounts to us.
The Contracts permit a Contractholder to send Deferred Compensation Amounts to
us from time to time. A Plan, the Code or State or local law may require a
Contractholder to send the Amounts within a certain time period.
INVESTMENT ALTERNATIVES FOR YOUR ACCOUNT BALANCE
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You may allocate your Account Balance among the General Account and one or more
of the Separate Account Funds (unless your Plan restricts use of any Investment
Alternative). You also may change your allocation instructions at any time for
future Deferred Compensation Amounts, and you may transfer all or part of your
Account Balance among the available Investment Alternatives at any time.
THE GENERAL ACCOUNT. We pay interest on the portion of your Account Balance you
allocate to our General Account, at an effective annual rate of at least 3%. In
our discretion, we change the current rate of interest from time to time. We
have the full investment risk for amounts you allocate to the General Account.
This Prospectus serves as a disclosure document for the Separate Account
Investment Alternatives under the Contracts. You may refer to "Our General
Account" for a brief description of the General Account.
THE SEPARATE ACCOUNT. The Separate Account has Funds, or sub-accounts. The name
of each Fund corresponds to the name of its Underlying Fund. When you allocate
Deferred Compensation Amounts or transfer Account Balance to a Separate Account
Fund, the Fund purchases shares in its Underlying Fund.
3
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A Separate Account Fund is called a "variable option", because you have the
investment risk that your Account Balance in the Fund will increase or decrease
based on the investment performance of the Underlying Fund. The Mid-Cap Equity
Index Fund will be available to you following approval by your state's insurance
department.
UNDERLYING FUNDS INVESTED IN BY THE SEPARATE ACCOUNT
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The Separate Account Funds currently invest in seventeen Underlying Funds, which
have different investment objectives, investment policies and risks. You should
refer to "Underlying Funds Invested in by Our Separate Account" for more
information about the Underlying Funds' investment objectives, and to the
prospectuses of the Underlying Funds that are attached to this Prospectus. The
Mid-Cap Equity Index Fund will be available to you when your State's insurance
department approves it.
CHARGES UNDER THE CONTRACTS
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We deduct several charges from the net assets of each Separate Account Fund.
REFER TO "CHARGES YOU WILL PAY". The charges include:
- an administrative expense charge at an annual rate of 0.40% (except
that currently the annual rate for the American Century VP Capital
Appreciation Fund is 0.20% and the annual rate for the Funds that
invest in the Fidelity Portfolios is 0.30%);
- a charge at an annual rate of 0.35% for expenses related to the
distribution of the Contracts; and
- a charge at an annual rate of 0.50% for assuming certain mortality and
expense risks under the Contracts.
We also deduct from your Account Balance a monthly administrative expense
charge. The charge is $2.00 if you have an Account Balance of $2,400 or more
during the month, or 1/12 of 1% of the Account Balance (which will be less than
$2.00) if your Account Balance is less than $2,400 in any month. We will waive
the $2.00 monthly charge if your Plan has 500 or more Participants or at least
$5 million in Plan assets during the month. REFER TO "CHARGES YOU WILL
PAY--ADMINISTRATIVE CHARGES".
RESERVATION OF RIGHTS. We reserve the right to increase or decrease the
administrative expense charge, the monthly administrative charge and the expense
risk charge within the limits imposed under the Contracts, and the right to
deduct from Deferred Compensation Amounts any applicable State premium taxes.
State insurance provisions or federal securities laws may limit the amount of
any additional charges that we may impose.
EXPENSES OF THE UNDERLYING FUNDS. A Separate Account Fund's value is based on
the shares it owns of the Underlying Fund. As a result, the investment
management fees and other expenses the Underlying Funds pay will impact the
value of the Separate Account Funds. You should refer to the attached
prospectuses of the Underlying Funds for a complete description of their
expenses and deductions from net assets.
TRANSFERS AND WITHDRAWALS OF ACCOUNT BALANCE
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During the Accumulation Period, you may transfer all or a portion of your
Account Balance from the Separate Account to the General Account, or from the
General Account to the Separate Account, or among the Funds of the Separate
Account. REFER TO "OUR PAYMENT OF ACCOUNT BALANCE TO YOU OR A BENEFICIARY--YOUR
RIGHT TO TRANSFER AMONG INVESTMENT ALTERNATIVES".
Unless your Plan has different provisions, you may withdraw all or any portion
of your Account Balance when
- your employment with the Contractholder (or sponsoring employer) ends
and you are no longer participating under the Plan,
- you reach age 70 1/2, or
4
<PAGE>
- you suffer an unforeseen emergency, as defined in the Code and its
regulations.
If you make partial withdrawals, you usually may tell us a fixed amount to
withdraw each month or a fixed time period in which we are to pay you your
Account Balance, and special rules may apply for the amount and timing of
subsequent withdrawals. REFER TO "OUR PAYMENT OF ACCOUNT BALANCE TO YOU OR A
BENEFICIARY-- YOUR RIGHT TO MAKE WITHDRAWALS".
You usually will have taxable income upon any withdrawal of your Account
Balance, payable at ordinary income tax rates on the amount withdrawn. In
addition, we may be required to withhold Federal income taxes or other Federal
or State taxes from the amount you withdraw.
If you reach age 70 1/2 or in certain other circumstances, the Code imposes
minimum distribution requirements for Plans and the Contracts. If you are age
70 1/2 and still employed with the Plan sponsor, you may postpone the minimum
distribution requirements until after you terminate employment. If you are
subject to minimum distribution requirements, you may be required to make
withdrawals of Account Balance, or you may choose to begin receiving Annuity
Payments (if your Plan permits) to meet the requirements. REFER TO "WHEN YOU
MUST TAKE MINIMUM DISTRIBUTIONS".
We may take up to seven days following receipt of your withdrawal request to
process the request and mail a check to you. We currently do not assess a charge
when you transfer Account Balance, but we reserve the right to impose a charge
in the future for transfers.
HOW TO MAKE ALLOCATION CHANGES, TRANSFERS AND WITHDRAWALS
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IN WRITING. You may give instructions in writing on our forms to change the
allocations among Investment Alternatives for future Deferred Compensation
Amounts, to transfer your Account Balance among Investment Alternatives or to
make withdrawals of Account Balance. REFER TO "HOW TO CONTACT US AND GIVE US
INSTRUCTIONS".
BY TELEPHONE. Using the Personal Identification Number (PIN) we have assigned,
you may call us at 1-800-468-3785 to change allocation instructions for future
Deferred Compensation Amounts and to transfer among Investment Alternatives. You
may not make withdrawals by telephone. REFER TO "HOW TO CONTACT US AND GIVE US
INSTRUCTIONS".
OUR HOME OFFICE, PROCESSING CENTER AND REGIONAL OFFICES. Our home office
address is 320 Park Avenue, New York, New York 10022. The address for our
Financial Transaction Processing Center, where you may send requests for
allocation changes or transfers among Investment Alternatives, is 1150 Broken
Sound Parkway, NW, Boca Raton, FL 33487. You may check the address for the
Regional Office that provides other services for your Contract by calling
1-800-468-3785 or by visiting our Web site at www.mutualofamerica.com.
CONFIRMATION STATEMENTS. We will send you confirmation statements (which may be
part of your quarterly statements) for your allocation changes and for your
Deferred Compensation Amounts, transfers of Account Balance and withdrawals of
Account Balance. You must promptly notify us of any error in a confirmation
statement (which may be a quarterly statement) or you will give up your right to
have us correct the error. REFER TO "ADMINISTRATIVE MATTERS--CONFIRMATION
STATEMENTS TO PARTICIPANTS".
DEATH BENEFITS DURING THE ACCUMULATION PERIOD
- --------------------------------------------------------------------------------
If you were to die before the Annuity Commencement Date, we will pay a death
benefit to your Beneficiary.
The amount of the death benefit will be your Account Balance as of the date we
receive proof of death and the election by the Beneficiary(ies) instructing us
how we should pay the death benefit. The Beneficiary will select the form of
death benefit, which may be a lump sum, a form of annuity or fixed payments.
REFER TO "OUR PAYMENT OF ACCOUNT BALANCE TO YOU OR A BENEFICIARY--DEATH BENEFIT
PRIOR TO ANNUITY COMMENCEMENT DATE" AND "FEDERAL TAX INFORMATION FOR
PARTICIPANTS".
5
<PAGE>
FORMS OF RETIREMENT BENEFITS OR WITHDRAWALS
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Your Plan will set forth the form in which you may make withdrawals or obtain
retirement benefits. Depending on your Plan, you may take your Account Balance
in one lump sum payment, in installment payments or otherwise over a period of
time. Some Plans allow you to apply your Account Balance for Annuity Payments
from us, with the amount of the monthly payments fixed at the same amount every
month and based on the form of annuity you select and your Account Balance at
the Annuity Commencement Date. REFER TO "OUR PAYMENT OF ACCOUNT BALANCE TO YOU
OR A BENEFICIARY" AND "ACCOUNT BALANCE APPLIED FOR ANNUITY PAYMENTS".
CANCELLATION RIGHT
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You may surrender for cancellation a 457 Plan Certificate within ten days after
you have received it (or within a longer period if your State requires it). We
will refund all Deferred Compensation Amounts you allocated to the General
Account, plus the value on the surrender date of your Account Balance allocated
to the Separate Account, unless your State requires that all Deferred
Compensation Amounts to the Separate Account be refunded.
ABOUT MUTUAL OF AMERICA AND THE SEPARATE ACCOUNT
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We are a mutual life insurance company organized under the laws of the State of
New York. We are authorized to transact business in 50 states and the District
of Columbia. Our home office address is 320 Park Avenue, New York, New York
10022. The Insurance Company was incorporated in 1945 as a nonprofit retirement
association to provide retirement and other benefits for non-profit
organizations and their employees in the health and welfare field. In 1978 we
reorganized as a mutual life insurance company.
We provide group and individual annuities and related services for the pension,
retirement, and long-range savings needs of non-profit, social welfare,
charitable, religious, educational and government organizations and their
employees. We invest the assets we derives from our business as permitted under
applicable state law. As of December 31, 1998, we had total assets, on a
consolidated basis, of approximately $10.1 billion. We are registered as a
broker-dealer under the Securities Exchange Act of 1934, and also are registered
as an investment adviser under the Investment Advisers Act of 1940.
Our operations as a life insurance company are reviewed periodically by various
independent rating agencies. These agencies, such as A.M. Best Company, Standard
& Poor's Insurance Rating Service and Duff & Phelps Credit Rating Company,
publish their ratings. From time to time we reprint and distribute the rating
reports in whole or in part, or summaries of them, to the public. The ratings
concern our operation as a life insurance company and do not imply any
guarantees of performance of the Separate Account.
OUR SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
We established the Separate Account under a resolution adopted by our Board of
Directors on September 22, 1983. The Separate Account is registered with the
Securities and Exchange Commission (COMMISSION) as a unit investment trust under
the Investment Company Act of 1940 (1940 ACT). The Commission does not supervise
the management or investment practices or policies of the Separate Account or
Mutual of America. The 1940 Act, however, does regulate certain actions by the
Separate Account.
We divide the Separate Account into distinct Funds. Each Fund invests its assets
in an Underlying Fund, and the name of each Separate Account Fund reflects the
name of the corresponding Underlying Fund. See "Underlying Funds Invested in by
Our Separate Account" below.
The assets of the Separate Account are our property. The Separate Account assets
attributable to Participants' Account Balances and attributable to any other
annuity contracts funded through the Separate Account cannot be charged with
liabilities from other businesses that we conduct. The income,
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capital gains and capital losses of each Fund of the Separate Account are
credited to, or charged against, the net assets held in that Fund. We separately
determine each Fund's net assets, without regard to the income, capital gains
and capital losses from any of the other Funds of the Separate Account or from
any other business that we conduct.
The Separate Account and Mutual of America are subject to supervision and
regulation by the Superintendent of Insurance of the State of New York, and by
the insurance regulatory authorities of each State.
OTHER VARIABLE ANNUITY CONTRACTS WE ISSUE
- --------------------------------------------------------------------------------
In addition to the Contracts described in this Prospectus, we offer other
individual and group variable annuity contracts, some of which are not described
in this Prospectus but which also participate in the Separate Account.
UNDERLYING FUNDS INVESTED IN BY OUR SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
Below are summaries of the Underlying Funds' investment objectives and certain
investment policies. The Underlying Funds sell their shares to the separate
accounts of insurance companies and do not offer them for sale to the general
public.
You will find more detailed information about the Underlying Funds in their
current prospectuses, which are attached to this Prospectus. You should read
each prospectus for a complete evaluation of the Underlying Funds, their
investment objectives, principal investment strategies and the risks related to
those strategies.
EQUITY INDEX FUND OF THE INVESTMENT COMPANY
- --------------------------------------------------------------------------------
The investment objective of the Equity Index Fund is to provide investment
results that correspond to the performance of the Standard & Poor's Composite
Index of 500 Stocks (the S&P 500 INDEX-REGISTERED TRADEMARK-).* The Fund invests
primarily in common stocks that are included in the S&P 500 Index.
ALL AMERICA FUND OF THE INVESTMENT COMPANY
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The investment objective of the All America Fund is to outperform the S&P 500
Index by investing in a diversified portfolio of primarily common stocks.
The Fund invests approximately 60% of its assets (the INDEXED ASSETS) to provide
investment results that correspond to the performance of the S&P 500 Index. The
Fund invests the remaining approximately 40% of its assets (the ACTIVE ASSETS)
to seek to achieve a high level of total return, through both appreciation of
capital and, to a lesser extent, current income, by means of a diversified
portfolio of primarily common stocks with a broad exposure to the market.
MID-CAP EQUITY INDEX FUND OF THE INVESTMENT COMPANY
- --------------------------------------------------------------------------------
The investment objective of the Mid-Cap Equity Index Fund is to provide
investment results that correspond to the performance of the S&P MidCap 400
Index-Registered Trademark-.* The Fund invests primarily in common stocks that
are included in the S&P MidCap 400 Index.
- ------------------------
* Standard & Poor's, S&P, S&P 500 and S&P MidCap 400 are trademarks of The
McGraw-Hill Companies, Inc. and have been licensed for use by the Investment
Company. Standard & Poor's does not sponsor, endorse, sell or promote the
Equity Index Fund, All America Fund or Mid-Cap Equity Index Fund. It has no
obligation or liability for the sale or operation of the Funds and makes no
representations as to the advisability of investing in the Funds.
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AGGRESSIVE EQUITY FUND OF THE INVESTMENT COMPANY
- --------------------------------------------------------------------------------
The investment objective of the Aggressive Equity Fund is capital appreciation,
by investing approximately 50% of its assets in companies believed to possess
above-average growth potential and approximately 50% of its assets in companies
believed to possess valuable assets or whose securities are undervalued in the
marketplace in relation to factors such as the company's assets, earnings or
growth potential. In utilizing the investment styles of growth and value stock
selection, the Adviser anticipates that the percentage of the Fund's assets in
either category will range between 40% and 60%.
COMPOSITE FUND OF THE INVESTMENT COMPANY
- --------------------------------------------------------------------------------
The investment objective of the Composite Fund is to achieve as high a total
rate of return, through both appreciation of capital and current income, as is
consistent with prudent investment risk by means of a diversified portfolio of
publicly-traded common stocks, debt securities and money market instruments. The
Fund seeks to achieve long-term growth of its capital and increasing income by
investments in common stock and other equity-type securities, and a high level
of current income through investments in publicly-traded debt securities and
money market instruments.
BOND FUND OF THE INVESTMENT COMPANY
- --------------------------------------------------------------------------------
The primary investment objective of the Bond Fund is to provide as high a level
of current income over time as is believed to be consistent with prudent
investment risk. A secondary objective is preservation of capital.
The Bond Fund seeks to achieve its objective by investing primarily in
investment grade, publicly-traded debt securities, such as bonds, U.S.
Government and agency securities, including mortgage-backed securities, and zero
coupon securities.
MID-TERM BOND FUND OF THE INVESTMENT COMPANY
- --------------------------------------------------------------------------------
The primary investment objective of the Mid-Term Bond Fund is to provide as high
a level of current income over time as is believed to be consistent with prudent
investment risk. A secondary objective is preservation of capital. The average
maturity of the Fund's securities will be between three and seven years.
The Mid-Term Bond Fund seeks to achieve its objective by investing primarily in
investment grade, publicly-traded debt securities, such as bonds, U.S.
Government and agency securities, including mortgage-backed securities, and zero
coupon securities.
SHORT-TERM BOND FUND OF THE INVESTMENT COMPANY
- --------------------------------------------------------------------------------
The primary investment objective of the Short-Term Bond Fund is to provide as
high a level of current income over time as is believed to be consistent with
prudent investment risk. A secondary objective is preservation of capital. The
average maturity of the Fund's securities will be between one and three years.
The Short-Term Bond Fund seeks to achieve its objective by investing primarily
in investment grade, publicly-traded debt securities, such as bonds, U.S.
Government and agency securities, including mortgage-backed securities, and in
money market instruments.
MONEY MARKET FUND OF THE INVESTMENT COMPANY
- --------------------------------------------------------------------------------
The investment objective of the Money Market Fund is the realization of high
current income to the extent consistent with the maintenance of liquidity,
investment quality and stability of capital.
The Money Market Fund invests only in money market instruments and other
short-term securities. Neither the Federal Deposit Insurance Corporation nor any
other U.S. Government agency insures or guarantees the Separate Account's
investments in shares of the Money Market Fund.
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SCUDDER CAPITAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
The investment objective of Scudder Capital Growth Portfolio is to maximize
long-term capital growth through a broad and flexible investment program.
The Portfolio invests in marketable securities, principally common stocks and,
consistent with its objective of long-term capital growth, preferred stocks. The
Portfolio may invest up to 25% of its assets in short-term debt instruments,
depending on market and economic conditions.
SCUDDER BOND PORTFOLIO
- --------------------------------------------------------------------------------
The investment objective of the Scudder Bond Portfolio is to invest for a high
level of income consistent with a high quality portfolio of debt securities.
To attempt to achieve its objective, the Portfolio invests principally in
investment grade bonds, including those issued by the U.S. Government and its
agencies and by corporations, and other notes and bonds paying high current
income. The Portfolio may invest up to 20% of its assets in non-investment grade
debt securities.
SCUDDER INTERNATIONAL PORTFOLIO
- --------------------------------------------------------------------------------
The investment objective of the Scudder International Portfolio is long-term
growth of capital primarily through diversified holdings of marketable foreign
equity investments.
The Portfolio invests primarily in equity securities of established companies
that do business primarily outside the United States and that are listed on
foreign exchanges. In the event of exceptional conditions abroad, the Portfolio
may temporarily invest all or a portion of its assets in Canadian or U.S.
Government obligations or currencies, or securities of companies incorporated in
and having their principal activities in Canada or the United States.
FIDELITY VIP EQUITY-INCOME PORTFOLIO
- --------------------------------------------------------------------------------
The investment objective of the Equity-Income Portfolio is reasonable income by
investing primarily in income-producing equity securities. In choosing these
securities, the Portfolio also considers the potential for capital appreciation.
The Portfolio's goal is to achieve a yield that exceeds the composite yield on
the securities comprising the S&P 500 Index.
FIDELITY VIP II CONTRAFUND PORTFOLIO
- --------------------------------------------------------------------------------
The investment objective of the Contrafund Portfolio is capital appreciation. It
seeks to increase the value of an investment in the Portfolio over the long term
by investing in securities of companies whose value its adviser believes is not
fully recognized by the public. These securities may be issued by domestic or
foreign companies and many may not be well known. The Portfolio normally invests
primarily in common stocks.
FIDELITY VIP II ASSET MANAGER PORTFOLIO
- --------------------------------------------------------------------------------
The investment objective of the Asset Manager Portfolio is high total return
with reduced risk over the long term by allocating its assets among domestic and
foreign stocks, bonds and short-term and money market instruments.
The Portfolio's adviser normally allocates the Portfolio's assets among the
three asset classes within the following investment parameters: 0-50% in
short-term/money market instruments; 20-60% in bonds; and 30-70% in stocks. The
expected "neutral mix", which the Portfolio's adviser would expect over the long
term, is 10% in short-term/money market instruments, 40% in bonds and 50% in
stocks.
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CALVERT SOCIAL BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
The investment objective of Calvert Social Balanced Portfolio is to achieve a
competitive total return through an actively managed non-diversified portfolio
of stocks, bonds and money market instruments that offer income and capital
growth opportunity and satisfy the social concern criteria established for the
Portfolio.
AMERICAN CENTURY VP CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------
The investment objective of the American Century VP Capital Appreciation Fund is
capital growth by investing primarily in common stocks that meet certain
fundamental and technical standards of selection and have, in the opinion of the
Fund's manager, better-than-average prospects for appreciation.
INVESTMENT ADVISERS FOR THE UNDERLYING FUNDS
- --------------------------------------------------------------------------------
MUTUAL OF AMERICA INVESTMENT CORPORATION: The Investment Company receives
investment advice from Mutual of America Capital Management Corporation (the
ADVISER), an indirect wholly-owned subsidiary of Mutual of America. For the
Active Assets of the All America Fund, the Adviser has entered into subadvisory
agreements with Palley-Needelman Asset Management, Inc., Oak Associates, Ltd.
and Fred Alger Management, Inc. Each of these subadvisers provides investment
advice for approximately 10% of the net assets of the All America Fund.
SCUDDER VARIABLE LIFE INVESTMENT FUND: The Scudder Capital Growth, Bond and
International Portfolios receive investment advice from Scudder Kemper
Investments, Inc.
FIDELITY PORTFOLIOS: The Equity-Income Portfolio, Contrafund Portfolio and
Asset Manager Portfolio receive investment advice from Fidelity Management &
Research Company.
CALVERT SOCIAL BALANCED PORTFOLIO: The Portfolio receives investment advice
from Calvert Asset Management Company, Inc., which has entered into a
subadvisory agreement with NCM Capital Management Group, Inc. for the equity
portion of the Portfolio.
AMERICAN CENTURY VP CAPITAL APPRECIATION FUND: The Fund receives investment
advice from American Century Investment Management, Inc.
SHARED AND MIXED FUND ARRANGEMENTS. Shares of the Fidelity Portfolios, the
Scudder Portfolios, the American Century VP Capital Appreciation Fund and the
Calvert Social Balanced Portfolio (together, the SHARED FUNDS) currently are
available to the separate accounts of a number of insurance companies. Shares of
Mutual of America Investment Corporation and shares of certain of the Shared
Funds (together, the MIXED FUNDS) currently are available to separate accounts
for both variable annuity and variable life insurance products.
The Board of Directors (or Trustees) of each Shared and Mixed Fund is
responsible for monitoring that Fund for the existence of any material
irreconcilable conflict between the interests of participants in all separate
accounts that invest in the Fund. The Board must determine what action, if any,
the Fund should take in response to an irreconcilable conflict. If we believe
that a response does not sufficiently protect our Contractholders or
Participants, we will take appropriate action, and we may modify or reduce the
Investment Alternatives available to you.
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CHARGES YOU WILL PAY
- --------------------------------------------------------------------------------
ADMINISTRATIVE CHARGES
- --------------------------------------------------------------------------------
We perform all administrative functions for the Contracts, including receiving
and allocating Deferred Compensation Amounts, making payments or Annuity
Payments as they become due, and preparing and filing all reports that the
Separate Account is required to file. The expenses we incur for administrative
functions include, but are not limited to, items such as state or other taxes,
salaries, rent, postage, telephone, travel, office equipment, costs of outside
legal, actuarial, accounting and other professional services, and costs
associated with determining the unit values of the Separate Account Funds.
We may increase or decrease the daily and monthly administrative charges
described below during the life of the Contract, subject to any limitations in
the Contract or Plan or under State insurance law. The aggregate fees and
charges we impose under the Contracts must be reasonable in relation to the
services we provide, the expenses we expect to incur, and the risks we have
assumed.
SEPARATE ACCOUNT CHARGE. We deduct, on each Valuation Day, from the value of
the net assets in each Fund of the Separate Account a charge for administrative
expenses at an annual rate of 0.40%, except that we reduce the administrative
charge to the extent we receive a reimbursement for administrative expenses.
- For the Separate Account Fund that invests in the American Century VP
Capital Appreciation Fund, the annual rate currently is 0.20%, because
the adviser for the American Century VP Capital Appreciation Fund
reimburses us at an annual rate of up to 0.20% for administrative
expenses.
- For the Funds that invest in the Fidelity Portfolios, the annual rate
currently is 0.30%, because the transfer agent and distributor for the
Fidelity Portfolios reimburse us at an aggregate annual rate of 0.10%
for administrative expenses.
PARTICIPANT CHARGE. We make an additional deduction from your Account Balance
for administrative expenses each month, unless the Contractholder has elected to
pay this charge on behalf of its Participants. The charge is $2.00 per month,
except that we will reduce the charge to 1/12 of 1.00% if your Account Balance
for the month is less than $2,400. We will waive the $2.00 charge for any month
when your Plan has at least $5 million in Plan assets or more than 500 active
Participants.
We deduct the monthly charge from your Account Balance allocated to the General
Account, if any. If you do not have any Account Balance in the General Account,
we will deduct the charge from your Account Balance allocated to one or more of
the Separate Account Funds, in a prescribed order we have established. (See the
Statement of Additional Information for the order of the Funds.)
DISTRIBUTION EXPENSE CHARGE
- --------------------------------------------------------------------------------
As principal underwriter, we perform all distribution and sales functions and
bear all distribution and sales expenses relative to the Contracts. These
expenses include the payment of that portion of the salaries of our registered
representatives attributable to the sale and distribution of Contracts, as well
as expenses for preparation of sales literature and other promotional
activities.
We deduct, on each Valuation Day, from the net assets in each Fund of the
Separate Account a charge at an annual rate of 0.35% to cover anticipated
distribution expenses.
MORTALITY AND EXPENSE RISK CHARGES
- --------------------------------------------------------------------------------
We bear certain mortality and expense risks under a Contract, including from our
guarantee to make Annuity Payments when available under a Plan in accordance
with tables provided in the Contract. Our mortality risk is that Annuitants as a
class will live longer than we had estimated actuarially, and as a result we
make Annuity Payments for longer than we had anticipated. Our assumption of this
risk relieves Participants (Annuitants) of the risk that they will outlive the
funds that they have accumulated for their
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retirement. We have estimated expenses we expect to incur over the period we may
make Annuity Payments, and we assume the risk that expenses will be higher than
we estimated.
For assuming mortality and expense risks under the Contracts, on each Valuation
Day we make a deduction at an annual rate of 0.50% of the net assets in each
Fund. The mortality risk charge of .35% will not increase during the life of a
Contract, and we have the right to increase the .15% expense risk charge,
subject to any limitations in a Plan or the Contract.
EXPENSES OF THE UNDERLYING FUNDS
- --------------------------------------------------------------------------------
Participants and the Separate Account Funds do not directly pay the advisory
fees and other expenses of the Underlying Funds. These fees and expenses are
deducted by the Underlying Funds and will impact the value of the shares the
Separate Account Funds own. See "Table of Annual Expenses" in this Prospectus,
which shows the expenses of the Underlying Funds for the most recent calendar
year. The prospectuses of the Underlying Funds, which are attached to this
Prospectus, contain a complete description of the Underlying Funds' fees and
expenses.
PREMIUM TAXES
- --------------------------------------------------------------------------------
We currently do not deduct state premium taxes from your Deferred Compensation
Amounts. We reserve the right to deduct all or a portion of the amount of any
applicable taxes, including state premium taxes, from Deferred Compensation
Amounts prior to their allocation among the Investment Alternatives. Currently,
most state premium taxes range from 2% to 4%.
PURCHASE OF A CONTRACT AND DEFERRED COMPENSATION AMOUNTS
- --------------------------------------------------------------------------------
PURCHASE OF A CONTRACT; PARTICIPATION
- --------------------------------------------------------------------------------
We issue Contracts as a funding vehicle for benefits under a Plan. A
Contractholder may be a Governmental unit, the trustees of a trust for a Plan
established by a Governmental unit, or any other organization that is exempt
from taxation under the Code.
Your eligibility for participation under your employer's Plan is determined in
accordance with the terms of the Plan. We or the Plan may require you to execute
agreements and applications on prescribed forms. You usually must enter into a
salary reduction agreement with the Contractholder for your Deferred
Compensation Amounts.
ACCEPTANCE OF INITIAL DEFERRED COMPENSATION AMOUNTS. When we receive your first
Deferred Compensation Amount and accompanying documentation, we will apply the
Deferred Compensation Amount to your specified Investment Alternatives within
two business days after we receive the Amount. If we do not receive necessary
documentation, we will retain the Deferred Compensation Amount for up to five
business days while we attempt to obtain the missing documentation. We will
apply the Deferred Compensation Amount within two business days after we receive
the documentation. If we do not obtain missing documentation for you within five
business days, we will return the Deferred Compensation Amount unless the
Contractholder consents to us holding it until additional documentation is
provided. We enter into agreements with Plan employers that utilize our
electronic processing system for the forwarding to us of applications and
information about Deferred Compensation Amounts.
CANCELLATION OF CERTIFICATE. You may surrender a 457 Plan Certificate for
cancellation within ten days after receipt. We will refund all Deferred
Compensation Amounts you allocated to the General Account, plus the value on the
date of surrender of your Account Balance credited to the Separate Account.
Several states, however, require that the amount of Contributions be refunded
without deductions, and you should consult the Contract for applicable
provisions. We will return to your employer the Deferred Compensation Amounts
that were sent to us by your employer on your behalf.
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PAYMENT OF DEFERRED COMPENSATION AMOUNTS
- --------------------------------------------------------------------------------
A Contractholder (or your employer, if different) sends to us your Deferred
Compensation Amounts. The Contractholder or employer is required to remit your
Deferred Compensation Amount within seven days, but no later than one month,
after the date on which the Amount is first available to the Contractholder for
remittance. A Plan may require the Contractholder or employer to send us your
Deferred Compensation Amounts at an earlier time, such as within two business
days.
If your Plan permits, your Contractholder or employer also may send to us on
your behalf amounts of Deferred Compensation that match or are in addition to
your Deferred Compensation Amounts.
In addition, we may accept Deferred Compensation Amounts transferred to us on
your behalf from any other eligible deferred compensation plan of the same
state, if your Plan permits transfers. Deferred Compensation Amounts transferred
must be at least $10 for each Participant.
LIMITS ON DEFERRED COMPENSATION AMOUNTS
- --------------------------------------------------------------------------------
The Code restricts the amount of compensation that you may defer under a Plan
during any tax year. The general rule is that your Deferred Compensation Amount
for a taxable year is limited to the LESSER OF
- $8,000 (which will be increased yearly by cost of living adjustments),
AND
- 33 1/3% of your includible compensation from your employer for the
year.
A Plan may adopt a special rule applicable to the last three years before you
reach normal retirement age as designated in the Plan. If your Plan has this
rule, you may defer, during one of these years, the LESSER OF
- $15,000 AND
- the amount you could defer under the general rule for that taxable
year plus the amounts you could have deferred under the general rule
but did not defer for each taxable year in which you were eligible to
participate (ELIGIBLE YEARS) in the Plan and, if you work for a
Governmental unit, other Section 457 plans sponsored by a public
employer in the same state under which you deferred amounts (using the
general rule). If your employer is not a Governmental unit, you may go
back to 1987 to begin determining eligible years. If your employer is
a Governmental unit, you may go back to 1979 to begin determining
eligible years.
You must reduce your Deferred Compensation Amount for a taxable year, calculated
under the general and special rules described above, by:
- any amount you exclude from your gross income for that year under
Sections 402(e)(3), 402(h)(1)(B), 403(b), 457(a) and 501(c)(18) of the
Code, and
- deferrals for that year under any other eligible deferred compensation
plan in which you participate, as required under Section 457 of the
Code.
ALLOCATION OF DEFERRED COMPENSATION AMOUNTS
- --------------------------------------------------------------------------------
You may allocate your Deferred Compensation Amounts among the General Account
and the Funds of the Separate Account. The Mid-Cap Equity Index Fund may not be
available to Participants in all States, due to delays from state insurance
department regulatory filings.
We will allocate a Deferred Compensation Amount when we receive it from the
Contractholder or your employer, according to instructions sent with the Amount,
or if no instructions are sent, on the basis of your allocation request
currently on file at our home office. Your request for allocation must specify
the percentage, in any whole percentage from 0% to 100%, of each Deferred
Compensation Amount to be allocated to each of the Investment Alternatives. The
percentages you give us must add up to 100%.
You may change the allocation instructions for future Deferred Compensation
Amounts from time to time. You should periodically review your allocations in
light of market conditions and your retirement plans and needs.
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YOUR ACCOUNT BALANCE IN THE SEPARATE ACCOUNT FUNDS
- --------------------------------------------------------------------------------
ACCUMULATION UNITS IN SEPARATE ACCOUNT FUNDS
- --------------------------------------------------------------------------------
We use Accumulation Units to represent Account Balances in each Separate Account
Fund. We separately value the Accumulation Unit for each Fund of the Separate
Account.
We determine your Account Balance in the Separate Account as of any Valuation
Day by multiplying the number of Accumulation Units credited to you in each Fund
of the Separate Account by the Accumulation Unit value of that Fund at the end
of the Valuation Day.
Investment experience by the Separate Account Funds does not impact the number
of Accumulation Units credited to your Account Balance. The value of an
Accumulation Unit for a Fund, however, will change as a result of the Fund's
investment experience, in the manner described below.
CALCULATION OF ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
We determine Accumulation Unit values for the Funds as of the close of business
on each Valuation Day (generally at the close of the New York Stock Exchange). A
Valuation Period is from the close of a Valuation Day until the close of the
next Valuation Day.
The dollar value of an Accumulation Unit for each Fund of the Separate Account
will vary from Valuation Period to Valuation Period. The changes in Accumulation
Unit values for the Separate Account Funds will reflect:
- changes in the net asset values of the Underlying Funds, depending on
the investment experience and expenses of the Underlying Funds, and
- Separate Account charges under the Contracts, with the annual rates
calculated as a daily charge. (See "Charges You Will Pay".)
You may refer to "Appendix A: Unit Value Information for the Separate Account
Funds" in this Prospectus to review changes in Accumulation Unit values for each
Fund over a period of time (except for the Mid-Cap Equity Index Fund, which
began operations on May 1, 1999).
ACCUMULATION UNIT VALUES FOR TRANSACTIONS
- --------------------------------------------------------------------------------
When you allocate Deferred Compensation Amounts to a Separate Account Fund or
transfer any part of your Account Balance to a Fund, we credit Accumulation
Units to your Account Balance. When you withdraw or transfer Account Balance
from a Separate Account Fund, we cancel Accumulation Units from your Account
Balance.
The Accumulation Unit value for a transaction is the Unit value for the
Valuation Period during which we receive the deposit or request. As a result, we
will effect the transaction at the Accumulation Unit value we determine at the
NEXT CLOSE of a Valuation Day (generally the close of the New York Stock
Exchange on that business day).
We calculate the number of Accumulation Units for a particular Fund by dividing
the dollar amount you have allocated to, or withdrawn from, the Fund during the
Valuation Period by the applicable Accumulation Unit value for that Valuation
Period. We round the resulting number of Accumulation Units to two decimal
places.
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OUR PAYMENT OF ACCOUNT BALANCE TO YOU OR A BENEFICIARY
- --------------------------------------------------------------------------------
YOUR RIGHT TO TRANSFER AMONG INVESTMENT ALTERNATIVES
- --------------------------------------------------------------------------------
You may transfer all or a portion of your Account Balance among Funds of the
Separate Account, and between the Separate Account and the General Account,
unless your Plan limits transfers. There are no tax consequences to you for
transfers among Investment Alternatives.
We currently do not impose a charge for transfers, but we reserve the right to
impose a transfer charge in the future.
Your request for a transfer will not be binding on us until we receive all
information necessary to process your request.
YOUR RIGHT TO MAKE WITHDRAWALS
- --------------------------------------------------------------------------------
Under Federal tax law, the general rule is that you may not withdraw all or any
portion of your Account Balance before the EARLIER OF
- the calendar year in which you reach age 70 1/2, or
- the date you retire or otherwise end employment with your employer
under the Plan.
If your Plan permits, you may withdraw from your Account Balance in the event
you have an UNFORESEEN EMERGENCY.
- An unforeseen emergency is a severe financial hardship arising from a
sudden and unexpected illness or an accident to you or to a dependent,
or the loss of your property due to casualty or other similar
extraordinary and unforeseeable circumstances arising from events
beyond your control.
- A severe financial hardship does not exist if your loss can be
relieved through reimbursement by insurance or by liquidation of your
other assets that does not cause severe financial hardship or the
cessation of your Deferred Compensation Amounts.
- The employer's deferred compensation board or committee will determine
whether you face an unforeseeable emergency as defined in the Plan.
- If you have an unforeseen emergency, you may withdraw from your
Account Balance up to the amount you need to meet the unforeseeable
emergency (limited to the amount of your Account Balance).
Your Plan also may provide for distribution of your Account Balance to you:
- if your Account Balance is $5,000 or less and you have had no new
Deferred Compensation Amounts in the past 24 months, or
- without your consent, if certain specified conditions are met,
although your Plan may provide that you can elect to defer receipt of
your Account Balance in certain circumstances.
A Plan may, but is not required to, provide that:
- You may choose to receive the Account Balance, when you have a right
to receive it, in a lump sum or in installment payments instead of by
receiving installment or Annuity Payments.
- You may elect to defer to a future date, after age 70 1/2 or the date
you terminate employment, when withdrawals of your Account Balance are
to begin. Your Plan, if it contains this provision, will specify the
time and manner for you to make this election and choose a form of
payment and may impose certain conditions, such as irrevocability of
the election. See "When You Must Take Minimum Distributions" below.
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- You may make one election to extend the date at which you will begin
receiving payments of your Account Balance.
We may take up to seven days following receipt of your withdrawal request to
process the request and mail a check to you.
PARTIAL WITHDRAWALS. If you are permitted to make withdrawals under your Plan,
you usually may specify a fixed amount of your Account Balance to be withdrawn
each month, or a fixed period during which we must pay out all of your Account
Balance. If your Plan permits, you may elect to make partial withdrawals under
our Specified Payments Option of at least $100 per month and you may tell us the
Investment Alternatives from which the withdrawals should be taken.
If you are subject to the minimum distribution rules under the Code, you should
ensure that your withdrawals for the year equal or exceed the minimum required
annual distribution. See "When You Must Take Minimum Distributions" below.
INCOME TAX CONSEQUENCES. You should consider the possible Federal income tax
consequences of any withdrawal. You will be taxed at ordinary income tax rates
on the portion of the withdrawal that is taxable, and all of the withdrawal will
be taxable in most circumstances (see "Federal Tax Information for
Participants").
WHEN YOU MUST TAKE MINIMUM DISTRIBUTIONS
- --------------------------------------------------------------------------------
A Plan is required to provide that distributions of your Account Balance must
begin by April 1 of the year following the year you turn age 70 1/2, in most
circumstances. For certain plans of Governmental units, distributions must begin
by April 1 of the year after your employment with the Governmental unit ends, if
earlier.
You can satisfy the minimum distribution requirements by either making a
withdrawal, if you are permitted to make withdrawals, or if permitted by your
Plan, receiving Annuity Payments as of the Annuity Commencement Date payable
for:
- your life, or
- the joint lives of you and the Beneficiary, or
- a period certain, not longer than your life expectancy or the joint
life expectancies of you and your Beneficiary.
HOW TO TELL US AN AMOUNT TO TRANSFER OR WITHDRAW
- --------------------------------------------------------------------------------
To tell us the amount of your Account Balance to transfer or withdraw, you may
specify to us:
- the dollar amount to be taken from each Investment Alternative,
- for Separate Account Funds, the number of Accumulation Units to be
transferred or withdrawn, or
- the percentage of your Account Balance in a particular Investment
Alternative to be transferred or withdrawn.
For transfers, you also must specify the Investment Alternative(s) to which you
are moving the transferred amount. Your request for a transfer or withdrawal is
not binding on us until we receive all information necessary to process your
request.
DEATH BENEFIT PRIOR TO ANNUITY COMMENCEMENT DATE
- --------------------------------------------------------------------------------
We will pay a death benefit to your designated Beneficiary upon your death
during the Accumulation Period.
We will pay the death benefit after we have received:
16
<PAGE>
- due proof of your death;
- notification of election by the Beneficiary(ies) of the form in which
we are to pay the death benefit; and
- all other information and documentation necessary for us to process
the death benefit request.
The amount of the death benefit will be the value of your Account Balance as of
the date on which we receive the items listed above. Until then, your Account
Balance will remain allocated as it was on the date of death.
We will pay the death benefit to the Beneficiary:
- in a single sum, no later than December 31 of the year in which the
fifth anniversary of the date of death occurs, or
- if the Beneficiary makes a death benefit payment choice, in payments
over a period that is not greater than either fifteen years or the
Beneficiary's life expectancy. If the Beneficiary is your spouse to
whom you were legally married, the death benefit must be payable over
a period that is not greater than the spouse's life expectancy.
DISCONTINUANCE OF A CONTRACT
- --------------------------------------------------------------------------------
A Contractholder, at its discretion, may discontinue a Contract as of the first
of a month that is at least 31 days after we receive notice of the
discontinuance. We may discontinue a Contract, in whole or in part, if
- the Contractholder does not follow the terms of the Contract, or
- we determine that a modification of the Contract is necessary to
comply with Federal or state requirements, and the Contractholder
refuses to accept a substantially similar Contract we offer that
incorporates that modification.
Our discontinuance of a Contract will be effective as of a date we specify in
writing that provides the Contractholder with at least 31 days' advance notice
in which to cure any remediable defaults.
We also have the right to discontinue a Contract if a Contractholder for an
entire year under its Plan does not send to us any Deferred Compensation
Amounts.
Discontinuance of a Contract does not relieve the Contractholder of its
obligations under the Contract or the Plan, and amounts accumulated for
Participants will remain under the Contract. Upon discontinuance:
- the Contractholder may not send any further Deferred Compensation
Amounts, and
- we may transfer to another insurance company or other financial
institution all amounts accumulated under the Contract. A transfer may
be made in any manner to which the Contractholder and we agree in
writing, and may require the consent of Participants and
Beneficiaries. A Participant or Beneficiary who does not consent to
the transfer may choose to leave the accumulated amounts on deposit
with us, or may withdraw the amount in whole or in part (subject to
any Federal tax law restrictions on withdrawals).
WHEN WE MAY POSTPONE PAYMENTS
- --------------------------------------------------------------------------------
We will pay any amounts due from the Separate Account for a withdrawal, death
benefit or termination, and will transfer any amount from the Separate Account
to the General Account, within seven days, unless:
- The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on that Exchange is restricted as determined by
the Commission; or
17
<PAGE>
- The Commission by order permits postponement for the protection of
Participants; or
- An emergency exists, as determined by the Commission, as a result of
which disposal of securities is not reasonably practicable or it is
not reasonably practicable to determine the value of the Separate
Account's net assets.
ACCOUNT BALANCE APPLIED FOR ANNUITY PAYMENTS
- --------------------------------------------------------------------------------
AMOUNT OF ANNUITY PAYMENTS; ANNUITY COMMENCEMENT DATE
- --------------------------------------------------------------------------------
If your Plan permits you to apply your Account Balance to obtain Annuity
Payments, you may elect after your Annuity Commencement Date to receive monthly
payments. The amount of each payment and the period during which we will make
payments will be based on the form of annuity you select and the amount of your
Account Balance as of the Annuity Commencement Date. We guarantee that the
purchase rates we use to determine the amount of Annuity Payments will never be
less favorable for you than the guaranteed rates in your Contract. Your Annuity
Payments begin as of your Annuity Commencement Date. Depending on the provisions
of your Plan, you may elect an Annuity Commencement Date that is:
- your normal retirement date, as stated in your employer's pension plan
if you are covered by that plan, or age 65 if there is no such plan or
coverage;
- an early retirement date, being the first day of any calendar month
following an early retirement age, if any, specified in the Plan, or
- a later retirement date, being the first day of a calendar month
following your normal retirement date.
CONTRACTHOLDER AND PARTICIPANT PAYMENT RELATIONSHIP
- --------------------------------------------------------------------------------
We will send Annuity Payments to the Contractholder for transmission to you. If
the Contractholder agrees, and to the extent permitted by the federal tax law,
we will instead send the Annuity Payments to you.
Until paid or otherwise made available to you, Annuity Payments are subject to
the claims of the Contractholders' general creditors, except that Plans
maintained by Governmental units are required to hold Plan assets for the
exclusive benefit of Participants in a trust or in a custodial account or group
annuity contract which are treated as trusts under Section 457 of the Code. As a
result, Annuity Payments under such Governmental Plans are not subject to the
claims of the Contractholder's general creditors.
We will issue to the Contractholder or your employer for delivery to you an
individual certificate setting forth the amount and terms of payment of your
annuity benefits. We will send Annuity Payments directly to you at your last
known address, as filed with us by you, the Contractholder or your employer.
AVAILABLE FORMS OF ANNUITY
- --------------------------------------------------------------------------------
Your Plan will specify the forms of Annuity that are available to you. A life
annuity protects an Annuitant from outliving the time period for receiving
monthly payments, because the payments continue for the life of the Annuitant.
Some forms of annuities that have a life contingency also have guaranteed
minimum time periods for payments, which provide that if an Annuitant (and
contingent Annuitant if a joint and survivor annuity) dies before the minimum
period has ended, the Beneficiary will receive the remaining Annuity Payments
due. You may select the annuity form when you designate the Annuity Commencement
Date.
Some of the forms of annuity we currently offer include: a Ten Years Certain and
Continuous Form (with annuity payments for the later of 10 years and the death
of the Annuitant); a Joint and 66 2/3% Survivor
18
<PAGE>
Life with Ten Year Period Certain Form (with annuity payments for the life of
the Annuitant or reduced to 66 2/3% if the joint Annuitant survives the
Annuitant, and made for the later of 10 years and the deaths of the Annuitant
and joint Annuitant); and a Non-Refund Life Annuity (with payments made until
the death of the Annuitant). In addition to these forms, we may in our
discretion offer additional forms of annuity at the time of your Annuity
Commencement Date. If your monthly Annuity Payment would be less than $20, we
may elect to pay a single sum instead of providing Annuity Payments.
DEATH BENEFIT AFTER ANNUITY COMMENCEMENT DATE
- --------------------------------------------------------------------------------
If you, as Annuitant, die (and the joint Annuitant dies, if the form is a joint
annuity) on or after the Annuity Commencement Date, your Beneficiary will
receive the death benefit (if any) provided by the form of annuity under which
we were making Annuity Payments.
OUR GENERAL ACCOUNT
- --------------------------------------------------------------------------------
SCOPE OF PROSPECTUS
- --------------------------------------------------------------------------------
We have not registered the Contracts under the Securities Act of 1933 for
allocations to the General Account, nor is the General Account registered as an
investment company under the 1940 Act. The staff of the Commission has not
reviewed the disclosures in this Prospectus that relate to the General Account.
Disclosures regarding the fixed portion of the Contracts and the General
Account, however, generally are subject to certain provisions of the Federal
securities laws relating to the accuracy and completeness of statements made in
prospectuses. This Prospectus serves as a disclosure document for the variable,
or Separate Account, interests under the Contracts. For more details regarding
the General Account, see the Contracts themselves.
GENERAL DESCRIPTION
- --------------------------------------------------------------------------------
Amounts under a Contract allocated to the General Account become part of our
general assets. Our General Account supports our insurance and annuity
obligations. The General Account consists of all of our general assets, other
than those in the Separate Account and other segregated asset accounts. We bear
the full investment risk for all amounts that Participants allocate to the
General Account. We have sole discretion to invest the assets of the General
Account, subject to applicable law. Your allocation of Account Balance to the
General Account does not entitle you to share in the investment experience of
the General Account.
We guarantee that we will credit interest to Participant Account Balances in the
General Account at an effective annual rate of at least 3%. In our sole
discretion, we may credit a higher rate of interest to Participant Account
Balances in the General Account, although WE ARE NOT OBLIGATED TO CREDIT
INTEREST IN EXCESS OF 3% PER YEAR. We credit interest daily and compound it
annually. We will send you notice when we change the current rate.
We reserve the right to credit a higher interest rate than the rate otherwise
set for amounts allocated to the General Account when the Contractholder uses
electronic media, in compliance with our established rules and requirements, for
the transmission and receipt of certain information regarding Participants,
Deferred Compensation Amounts and other Contract information.
TRANSFERS AND WITHDRAWALS
- --------------------------------------------------------------------------------
You may transfer Account Balance to and from the General Account and, to the
extent permitted by the Code and the Plan, may withdraw Account Balance from the
General Account prior to the Annuity Commencement Date. See "Your Right to
Transfer Among Investment Alternatives " and "Your Right to Make Withdrawals"
under "Our Payment of Account Balance to You or a Beneficiary". We have the
right to delay transfers and withdrawals from the General Account for up to six
months following the date that we receive the transaction request.
19
<PAGE>
HOW TO CONTACT US AND GIVE US INSTRUCTIONS
- --------------------------------------------------------------------------------
CONTACTING MUTUAL OF AMERICA
- --------------------------------------------------------------------------------
Participants and Contractholders must send in writing all notices, requests and
elections required or permitted under the Contracts, except that you may give
certain instructions by telephone, as described below. Our home office address
is:
Mutual of America Life Insurance Company
320 Park Avenue
New York, New York 10022
You can check the address for your Regional Office by calling 1-800-468-3785 or
by visiting our Web site at www.mutualofamerica.com.
TRANSFERS AND ALLOCATION CHANGES BY TELEPHONE
- --------------------------------------------------------------------------------
You may make requests by telephone for transfers of Account Balance or to change
the Investment Alternatives to which we will allocate your future Deferred
Compensation Amounts. You may not make withdrawal requests by telephone.
You must use a Personal Identification Number (PIN) to make telephone requests.
We automatically provide a PIN to you, and your use of the PIN constitutes
agreement to use the PIN in accordance with our rules and requirements. You may
call us to change or cancel the PIN that we have assigned. Our toll-free
telephone number for requests is 1-800-468-3785.
On any Valuation Day, we will consider requests by telephone that we receive by
4 p.m. Eastern Time (or the close of the New York Stock Exchange, if earlier) as
received that day. We will consider requests that we receive after 4 p.m. (or
the Exchange close) as received the next Valuation Day. We reserve the right to
suspend or terminate at any time the right of Participants to request transfers
or reallocations by telephone.
Although our failure to follow reasonable procedures may result in our liability
for any losses due to unauthorized or fraudulent telephone transfers, we will
not be liable for following instructions communicated by telephone that we
reasonably believe to be genuine. We will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. Those
procedures are to confirm your Social Security number, check the Personal
Identification Number, tape record all telephone transactions and provide
written confirmation of telephone transactions.
WHERE YOU SHOULD DIRECT REQUESTS
- --------------------------------------------------------------------------------
You should request an allocation change or a transfer of Account Balance among
Investment Alternatives by calling 1-800-468-3785 or writing to our Processing
Center. The address is:
Mutual of America Life Insurance Company
Financial Transaction Processing Center
1150 Broken Sound Parkway NW
Boca Raton, FL 33487-3598
For withdrawals, you must make your request according to our procedures, which
we may change from time to time. Under our current procedures, you should make a
withdrawal request in writing to your Regional Office.
You should use our forms to submit written requests to us.
20
<PAGE>
ADMINISTRATIVE MATTERS
- --------------------------------------------------------------------------------
YEAR 2000 COMPLIANCE
- --------------------------------------------------------------------------------
Many of the services that we provide to Participants and Contractholders depend
on the proper functioning of our computer and computer-based systems, as well as
those of our service providers. Many computer software programs, as initially
developed, could not distinguish the year 2000 from the year 1900. If not
corrected, this inability potentially could have an adverse impact on the
handling of Participant and Contractholder purchase, exchange and redemption
transactions, the crediting of Accumulation Units, accounting and other
recordkeeping services.
We have performed a comprehensive review of our computer systems, made the
necessary modifications or replacements and successfully completed system
testing of our in-house software, the largest and most critical project under
our Year 2000 program. For the balance of 1999, we will continue to monitor and
verify Year 2000 compliance. We also have contacted our vendors and service
providers as to the status of their Year 2000 compliance. Vendors and service
providers whose systems are material to our operations have confirmed they are,
or expect to, be year 2000 compliant. Although we anticipate that our computer
systems and those of our providers will be adapted in time for the year 2000, it
is possible Year 2000 problems still may occur. We have developed written
contingency plans to ensure our business continuity through the year 2000.
CONFIRMATION STATEMENTS TO PARTICIPANTS
- --------------------------------------------------------------------------------
We will send you a confirmation statement for each change in allocation
instructions, each time we receive a Deferred Compensation Amount for you and
each time you transfer Account Balance. A confirmation statement for a Deferred
Compensation Amount or a transfer may be part of your next quarterly account
statement. You must notify us of any error in a confirmation statement within 30
days after the date we processed the change or transaction, or within 30 days
after the end of the period covered by the quarterly statement that serves as
the confirmation statement, or you will lose the right to have us correct the
error.
DESIGNATION OF BENEFICIARY
- --------------------------------------------------------------------------------
You may designate a Beneficiary to receive any payments due to your Beneficiary,
subject to any limits under a Plan or the Code. You may change the Beneficiary
while you are living, either before or after the Annuity Commencement Date, by
providing us (or your Contractholder when the Contractholder has agreed to hold
such information) with written notice of the change. The designation or change
in designation will take effect as of the date we (or your Contractholder, if
applicable) receive notice, whether or not you are living at the time of such
receipt. We will not be liable, however, for any payment or settlement we make
before we receive the notice of Beneficiary or change of Beneficiary.
If no Beneficiary designated by you is living at the time of your death during
the Accumulation Period, or when the Annuitant dies (and the joint Annuitant, if
any dies) during the Annuity Period, unless your Plan provides otherwise we will
pay a single sum payment or the commuted value of any remaining periodic
payments to a Beneficiary or Beneficiaries determined under the Contract. The
Contract lists classes of Beneficiaries in an order of preference. We will pay
the surviving family member(s) in the first class of Beneficiaries we find, in
this order:
- your spouse; your children; your parents; and your brothers and
sisters.
If we do not find family members in these classes, we will pay the executors or
administrators of your estate.
21
<PAGE>
CERTAIN ADMINISTRATIVE PROVISIONS
- --------------------------------------------------------------------------------
ASSIGNMENT OF CONTRACT. Contractholders and Participants may not assign or
transfer a Contract or any rights under a Contract, except as otherwise required
by law.
MODIFICATION OF CONTRACTS. Our rights and obligations under a Contract cannot
be changed or waived, unless one of our duly authorized officers signs a written
agreement of the change or waiver.
We may change a Contract at any time by amendment or replacement, upon not less
than 31 days' written advance notice to the Contractholder, without the consent
of any Participant or the consent of any other person who is or may become
entitled to benefits under the Contract. Any change we make may not affect the
amount or the terms of Annuity Payments that began before such change.
EVIDENCE OF SURVIVAL. When payment of a benefit is contingent upon the survival
of any person, we may require that evidence of that person's survival be
furnished to us, either by personal endorsement of the check drawn for payment,
or by other means satisfactory to us.
MISSTATEMENT OF INFORMATION. If we pay a benefit under a Contract based on
information that you or a Beneficiary misstated to us, we will recalculate the
benefit when we learn of the misstatement. We will adjust the amount of the
benefit payments, or the amount applied to provide the benefit, or both, to the
proper amount we determine based on the corrected information.
If we underpaid benefits due to any misstatement, we will pay the amount of the
underpayment in full with the next payment due under the Contract. If we
overpaid any benefits due to a misstatement, we will deduct the overpayment to
the extent possible from payments as they become due under the Contract. We will
include interest on the amount of any underpayments or overpayments, at the
effective rate then required under State insurance law provisions.
INFORMATION AND DETERMINATION. Contractholders and Participants, as
appropriate, must furnish us with the facts and information that we may require
for the operation of the Contract including, upon request, the original or
photocopy of any pertinent records held by the Contractholder or Participant. A
Contractholder should report to us any determination that the Contractholder
makes pursuant to the terms of the Plan. We may rely on reports and other
information furnished by Contractholders or Participants and are not obligated
to inquire as to the accuracy or completeness of such reports and information.
PARTICIPATION IN DIVISIBLE SURPLUS
- --------------------------------------------------------------------------------
We are a mutual life insurance company and consequently have no stockholders.
Participants share in our earnings with respect to amounts they allocate to our
General Account. We can give no assurance as to the amount of divisible surplus,
if any, that will be available for distribution under the Contracts in the
future. The determination of such surplus is within the sole discretion of our
Board of Directors.
22
<PAGE>
FEDERAL TAX INFORMATION FOR PARTICIPANTS
- --------------------------------------------------------------------------------
For Federal income tax purposes, the Separate Account is not separate from us,
and its operations are considered part of our operations. Under existing Federal
income tax law, we do not pay taxes on the net investment income and realized
capital gains earned by the Separate Account. We reserve the right, however, to
make a deduction for taxes if in the future we must pay tax on the Separate
Account's operations.
OBTAINING TAX ADVICE
- --------------------------------------------------------------------------------
THE SUMMARY BELOW OF THE CURRENT FEDERAL TAX STATUS AND CONSEQUENCES FOR
PARTICIPANTS UNDER THE CONTRACTS IS NOT COMPREHENSIVE AND IS FOR INFORMATION
PURPOSES ONLY. TAX PROVISIONS AND REGULATIONS MAY CHANGE AT ANY TIME. Tax
results may vary depending upon your individual situation, and special rules may
apply to you in certain cases. You also may be subject to State and local taxes.
For these reasons, you or a Beneficiary should consult a qualified tax adviser
for complete tax information.
TAXATION OF YOUR ACCOUNT BALANCE AND WITHDRAWALS
- --------------------------------------------------------------------------------
The general rule is that you must receive a payment under a Plan in order to be
subject to income taxation. You do not include in your gross income any Deferred
Compensation Amounts sent to us by your employer on your behalf, or interest or
investment earnings we credit to your Account Balance, until you withdraw or
otherwise receive such amounts or have them made available to you.
When you receive a Plan distribution or Annuity Payments, the payment will be
taxable to you as ordinary income.
THE CONTRACT
- --------------------------------------------------------------------------------
We offer the Contract for use with an eligible deferred compensation plan
designed to meet the qualifications of Section 457(b) of the Code.
Contractholders or employers are responsible for establishing and administering
the Plan in accordance with Section 457. For example, a Contractholder or
employer must comply with the limitations on the amounts you may defer and
restrictions on withdrawals.
An eligible deferred compensation plan other than an eligible deferred
compensation plan established by a Governmental unit must provide that the
Account Balances under the Contract shall remain solely the property of the
Contractholder, subject only to the claims of the Contractholder's general
creditors, until made available to you or your Beneficiary. Eligible deferred
compensation plans established by Governmental units must provide that all plan
assets will be held for the exclusive benefit of plan participants in trusts or
in custodial accounts or group annuity contracts that are treated as trusts
under Section 457 of the Code. Such plan assets are not subject to the claims of
the Contractholder's general creditors.
WITHHOLDING ON WITHDRAWALS AND OTHER PAYMENTS
- --------------------------------------------------------------------------------
Generally, amounts of Account Balance that you withdraw or receive as Annuity
Payments are treated as wages for withholding purposes. We may be required to
withhold various taxes, including Federal income tax, and in some circumstances
Federal employment tax and Social Security (FICA) taxes. In addition, certain
states require us to withhold for state taxes if we withhold Federal taxes. The
same rules generally apply to payments of death benefits.
When you (or a Beneficiary) request withdrawals or Annuity Payments, you or the
Beneficiary should ask the employer's deferred compensation board or committee
about withholding requirements.
23
<PAGE>
YOUR VOTING RIGHTS FOR MEETINGS OF THE UNDERLYING FUNDS
- --------------------------------------------------------------------------------
We will vote the shares of the Underlying Funds owned by the Separate Account at
regular and special meetings of the shareholders of the Underlying Funds. We
will cast our votes according to instructions we receive from Participants. The
number of Underlying Fund shares that we may vote at a meeting of shareholders
will be determined as of a record date set by the Board of Directors or Trustees
of the Underlying Fund.
We will vote 100% of the shares that a Separate Account Fund owns. If you do not
send us voting instructions, we will vote the shares attributable to your
Account Balance in the same proportion as we vote shares for which we have
received voting instructions from Participants. We will determine the number of
Accumulation Units attributable to each Participant for purposes of giving
voting instructions as of the same record date used by the Underlying Fund.
Each Participant who has the right to give us voting instructions for a
shareholders' meeting of an Underlying Fund will receive information about the
matters to be voted on, including the Underlying Fund's proxy statement and a
voting instructions form to return to us.
We may elect to vote the shares of the Underlying Funds held by our Separate
Account in our own discretion if the Investment Company Act of 1940 is amended,
or if the present interpretation of the Act changes with respect to our voting
of these shares.
PERFORMANCE INFORMATION FOR THE SEPARATE ACCOUNT FUNDS
- --------------------------------------------------------------------------------
MONEY MARKET FUND
- --------------------------------------------------------------------------------
From time to time, we may include quotations of the YIELD and EFFECTIVE YIELD of
the Separate Account's Money Market Fund in advertisements, sales literature or
reports to Participants. These yield figures show historical performance of the
Fund assuming a hypothetical investment for the period indicated in the yield
quotation. Yield figures do not indicate future performance.
- The yield of the Money Market Fund refers to the net investment income
generated by the Fund over a specified seven-day period (with the
ending date stated). We then annualize this income. That is, we assume
that the amount of income the Fund generates during that week is
generated during each week in a 52-week period and we show the income
as a percentage.
- The effective yield is calculated similarly to yield, except that when
we annualize income, we assume that the income earned by an investment
in the Fund is reinvested. The effective yield will be slightly higher
than the yield because of the compounding effect of this assumed
reinvestment.
Yield and effective yield for the Money Market Fund will vary based on its
expenses and the performance of its the Investment Company Money Market Fund,
which reflects (among other things) changes in market conditions and the level
of its expenses.
TOTAL RETURN OF FUNDS
- --------------------------------------------------------------------------------
From time to time, we include quotations of a Separate Account Fund's TOTAL
RETURN in advertisements, sales literature or reports to Participants. Total
return figures for a Fund show historical performance of a Fund assuming a
hypothetical investment and that amounts under a Contract were allocated to the
Underlying Fund when the Separate Account Fund commenced operations. Total
return figures do not indicate future performance.
Total return quotations are expressed in terms of average annual compounded
rates of return for all periods quoted and assume that all dividends and capital
gains distributions were reinvested. Total return for a Separate Account Fund
will vary based on its expenses and the performance of its Underlying Fund,
which reflects (among other things) changes in market conditions and the level
of the Underlying Fund's expenses.
24
<PAGE>
For a detailed description of the methods we use to determine yield and total
return for the Separate Account's Funds, see the Statement of Additional
Information.
FUNDING AND OTHER CHANGES WE MAY MAKE
- --------------------------------------------------------------------------------
We reserve the right to make certain changes to the Separate Account Funds and
to the Separate Account's operations. In making changes, we will comply with
applicable law and will obtain the approval of Participants and/or the
Contractholders, if required. We may:
- create new investment funds of the Separate Account at any time;
- to the extent permitted by state and federal law, modify, combine or
remove investment funds in the Separate Account;
- transfer assets we have determined to be associated with the class of
contracts to which the Contracts belong from one investment fund of
the Separate Account to another investment fund;
- create additional separate accounts or combine any two or more
accounts including the Separate Account;
- transfer assets we have determined to be associated with the class of
contracts to which the Contracts belong from the Separate Account to
another separate account of ours by withdrawing the same percentage of
each investment in the Separate Account, with appropriate adjustments
to avoid odd lots and fractions;
- operate the Separate Account as a diversified, open-end management
investment company under the 1940 Act, or in any other form permitted
by law, and designate an investment advisor for its management, which
may be us, an affiliate of ours or another person;
- deregister the Separate Account under the 1940 Act; and
- operate the Separate Account under the general supervision of a
committee, any or all the members of which may be interested persons
(as defined in the 1940 Act) of ours or our affiliates, or discharge
the committee for the Separate Account.
25
<PAGE>
DEFINITIONS WE USE IN THIS PROSPECTUS
- --------------------------------------------------------------------------------
ACCOUNT BALANCE--The value of a Participant's Accumulation Units in the Separate
Account Funds plus the value of amounts held in the General Account for the
Participant, during the Accumulation Period. As used in this Prospectus, the
term "Account Balance" may mean all or any part of your total Account Balance.
ACCUMULATION PERIOD--For a Participant, the period under a Contract when
Deferred Compensation Amounts are made on behalf of a Participant. The
Accumulation Period ends at the Annuity Commencement Date, or the date the
Participant withdraws the Account Balance in full before the Annuity
Commencement Date.
ACCUMULATION UNIT--A measure we use to calculate the value of a Participant's
interest in each of the Funds of the Separate Account. Each Fund has its own
Accumulation Unit value.
ANNUITANT--A person who is receiving Annuity Payments or who will receive
Annuity Payments after the Annuity Commencement Date, if the Plan permits
Annuity Payments. A Participant must be the Annuitant under a Contract, and a
Beneficiary who has elected to receive a death benefit in the form of an annuity
may be the Annuitant or name another person as the Annuitant. You or a
Beneficiary also may name a joint Annuitant. We use the life expectancy of the
Annuitant(s) as a factor in determining the amount of monthly Annuity Payments
for annuities with a life contingency.
ANNUITY COMMENCEMENT DATE--The date Annuity Payments become payable under a
Contract or become payable as the death benefit for a Beneficiary. You (or the
Beneficiary entitled to a death benefit) select the Annuity Commencement Date,
or the Annuity Commencement Date may be imposed under Federal tax law provisions
in certain circumstances. On the Annuity Commencement Date, your Account Balance
is applied to provide Annuity Payments.
ANNUITY PAYMENTS--A series of equal monthly payments from us to an Annuitant.
The amount of the Annuity Payment will depend on your Account Balance on the
Annuity Commencement Date and the form of annuity selected. The Annuity Payments
may be for the Annuitant's life, for a minimum period of time, for the joint
lifetime of the Annuitant and the joint Annuitant, or for such other specified
period as we may permit.
BENEFICIARY(IES)--The person(s) named by a Participant to receive (1) during the
Accumulation Period, the death benefit under the Contract if the Participant
dies, or (2) after the Annuity Commencement Date, any remaining Annuity Payments
(or their commuted value) if the Annuitant dies and the joint Annuitant, if any,
dies.
CODE--The Internal Revenue Code of 1986, as amended. Depending on the context,
the term Code includes the regulations adopted by the Internal Revenue Service
for the Code section being discussed.
CONTRACT(S)--One (or more) of the group variable accumulation annuity contracts
described in this Prospectus.
CONTRACTHOLDER--An entity to which we have issued a Contract, which generally
will be the employer, agent or trustee of a trust established under a Plan. The
employer must be a Governmental unit or an organization exempt from Federal
income taxation under the Code.
DEFERRED COMPENSATION AMOUNTS (OR AMOUNTS)--Amounts deferred from a
Participant's compensation under a Plan and sent to us on the Participant's
behalf and amounts the Contractholder or employer sends on behalf of the
Participant in addition to the Participant's deferrals of salary.
FIDELITY PORTFOLIOS--The Equity-Income Portfolio of the Variable Insurance
Products Fund (FIDELITY VIP) and the Contrafund and Asset Manager Portfolios of
the Variable Insurance Products Fund II (FIDELITY VIP II).
FUND OF THE SEPARATE ACCOUNT (OR FUND)--One of the subaccounts of the Separate
Account. Each Fund is named for the Underlying Fund in which it invests.
26
<PAGE>
GENERAL ACCOUNT--Assets we own that are not in a separate account, but rather
are held as part of our general assets. We sometimes refer to the General
Account as the INTEREST ACCUMULATION ACCOUNT, because amounts you allocate to
the General Account earn interest at a fixed rate that we change from time to
time.
GOVERNMENTAL UNIT--A State, a political subdivision of a State, an agency or
instrumentality of a State, or an agency or instrumentality of a political
subdivision of a State.
INVESTMENT ALTERNATIVES--The General Account and the Funds of the Separate
Account. You may allocate your Deferred Compensation Amounts and transfer your
Account Balance among the Investment Alternatives, subject to any limitations
under your Plan.
INVESTMENT COMPANY--Mutual of America Investment Corporation.
PARTICIPANT--An employee or former employee who has entered into a salary
reduction agreement with a Contractholder and for whom we have received Deferred
Compensation Amounts under a Plan. The agreement must specify the amount of
earnings to be considered a Deferred Compensation Amount under the Plan.
PLAN--An eligible deferred compensation plan meeting the requirements of Section
457(b) of the Code.
SCUDDER PORTFOLIOS--The following three portfolios of the Scudder Variable Life
Investment Fund: the Capital Growth Portfolio, the Bond Portfolio and the
International Portfolio.
SEPARATE ACCOUNT--Mutual of America Separate Account No. 2, a separate account
established by us to receive and invest amounts contributed under variable
accumulation annuity contracts and other variable contracts. The assets of the
Separate Account are set aside and kept separate from our other assets.
UNDERLYING FUNDS--Currently, seventeen funds or portfolios invested in by the
Separate Account Funds.
VALUATION DAY--Each day that the New York Stock Exchange is open for business
until the close of the New York Stock Exchange that day. Valuation Period--A
period beginning on the close of business of a Valuation Day and ending on the
close of the next Valuation Day.
WE, US, OUR, MUTUAL OF AMERICA--Refer to Mutual of America Life Insurance
Company.
YOU, YOUR--Refer to a Participant.
27
<PAGE>
OUR STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
The Statement of Additional Information contains more information about the
Contracts and our operations.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Distribution of the Contracts Legal Proceedings
Calculation of Accumulation Unit Legal Matters
Values
Yield and Performance Information Experts
Safekeeping of Separate Account Additional
Assets Information
State Regulation Financial Statements
Periodic Reports
</TABLE>
HOW TO OBTAIN A STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
You may receive a copy of the Statement of Additional Information at no charge
by calling (212) 224-1600 or by completing the Form below and mailing it to
Mutual of America Life Insurance Company, 320 Park Avenue, New York, New York
10022.
The Securities and Exchange Commission has an Internet web site at
http://www.sec.gov. You may obtain our Registration Statement for the Contracts,
including the SAI, and the Separate Account's semi-annual and annual financial
statement reports through the Commission's Internet site. You also may obtain
copies of these documents, upon your payment of a duplicating fee, by writing to
the Commission's Public Reference Section, Washington, DC 20549-6009.
(PLEASE CUT HERE)
- ------------------------------------------------------------------------------
To: Mutual of America Life Insurance Company
Please send me a copy of the Statement of Additional Information dated May 1,
1999 for the Section 457 Plan Contract offered by Mutual of America. My name and
address are as follows:
- ------------------------------------------------------------------------------
Name
- ------------------------------------------------------------------------------
Street Address
- ------------------------------------------------------------------------------
City State Zip
28
<PAGE>
APPENDIX A
UNIT VALUE INFORMATION FOR THE SEPARATE ACCOUNT FUNDS
- --------------------------------------------------------------------------------
The tables below show changes in Accumulation Unit values and in the number of
units outstanding for each Separate Account Fund for the period from the
commencement of operations of that Fund to December 31, 1998. (The Mid-Cap
Equity Index Fund is not included because it began operations on May 1, 1999.)
Arthur Andersen LLP, the Funds' independent auditor, has audited the information
below for each of the years in the seven year period ended December 31, 1998.
The Funds' previous auditor audited information for each of the three years in
the period ended December 31, 1991. The Investment Company's financial
statements for the year ended December 31, 1998, along with Arthur Andersen
LLP's report thereon, are available to you by calling 1-800-468-3785.
We calculate Accumulation Unit values from the net asset values of the
Underlying Funds. The All America Fund (previously called the Stock Fund) of the
Investment Company changed its name and its investment objectives and policies
and added subadvisers on May 1, 1994. Prior to January 1, 1998, the Calvert
Social Balanced Portfolio was known as the Calvert Responsibly Invested Balanced
Portfolio, and prior to May 1, 1995, that Portfolio was known as the Calvert
Socially Responsible Series and had a different subadviser. Before May 1, 1997,
the American Century VP Capital Appreciation Fund was called the TCI Growth
Fund.
<TABLE>
<CAPTION>
INVESTMENT COMPANY ALL AMERICA FUND
------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year...... $ 6.76 $ 5.39 $ 4.52 $ 3.35 $ 3.36 $ 3.03 $ 2.97 $ 2.41 $ 2.47 $ 1.98
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Unit value, end of year............ $ 8.09 $ 6.76 $ 5.39 $ 4.52 $ 3.35 $ 3.36 $ 3.03 $ 2.97 $ 2.41 $ 2.47
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Thousands of accumulation units
outstanding, end of year.......... 49,275 51,312 49,798 43,620 38,669 36,510 32,352 26,173 20,973 20,157
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY COMPOSITE FUND
------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year...... $ 4.36 $ 3.75 $ 3.39 $ 2.82 $ 2.95 $ 2.55 $ 2.43 $ 2.08 $ 2.04 $ 1.73
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Unit value, end of year............ $ 4.93 $ 4.36 $ 3.75 $ 3.39 $ 2.82 $ 2.95 $ 2.55 $ 2.43 $ 2.08 $ 2.04
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Thousands of accumulation units
outstanding, end of year.......... 59,833 61,359 66,715 70,558 73,239 71,215 50,944 43,115 37,461 32,716
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY BOND FUND
--------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year...... $ 3.00 $ 2.75 $ 2.69 $ 2.28 $ 2.39 $ 2.13 $1.99 $1.73 $1.67 $1.49
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
Unit value, end of year............ $ 3.17 $ 3.00 $ 2.75 $ 2.69 $ 2.28 $ 2.39 $2.13 $1.99 $1.73 $1.67
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
Thousands of accumulation units
outstanding, end of year.......... 17,746 12,671 12,548 12,083 10,601 12,244 9,203 6,152 5,235 4,164
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY MONEY MARKET FUND
-----------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year...... $ 1.95 $ 1.87 $ 1.80 $ 1.72 $ 1.68 $ 1.65 $ 1.62 $ 1.54 $ 1.44 $1.33
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Unit value, end of year............ $ 2.03 $ 1.95 $ 1.87 $ 1.80 $ 1.72 $ 1.68 $ 1.65 $ 1.62 $ 1.54 $1.44
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Thousands of accumulation units
outstanding, end of year.......... 19,121 16,831 17,511 17,502 17,653 15,815 16,545 15,656 13,972 8,570
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY INVESTMENT COMPANY
EQUITY INDEX FUND MID-TERM BOND FUND
-------------------------------------------- ----------------------------------------
1998 1997 1996 1995 1994 1993* 1998 1997 1996 1995 1994 1993*
------ ------ ------ ------ ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period.... $ 2.26 $ 1.72 $ 1.42 $ 1.05 $1.05 $1.00 $1.26 $1.19 $1.16 $1.01 $1.06 $1.00
------ ------ ------ ------ ----- ----- ----- ----- ----- ----- ----- -----
------ ------ ------ ------ ----- ----- ----- ----- ----- ----- ----- -----
Unit value, end of period.......... $ 2.86 $ 2.26 $ 1.72 $ 1.42 $1.05 $1.05 $1.32 $1.26 $1.19 $1.16 $1.01 $1.06
------ ------ ------ ------ ----- ----- ----- ----- ----- ----- ----- -----
------ ------ ------ ------ ----- ----- ----- ----- ----- ----- ----- -----
Thousands of accumulation units
outstanding, end of period........ 94,019 68,462 35,660 17,109 4,644 2,135 7,325 4,478 3,828 2,848 1,444 1,411
------ ------ ------ ------ ----- ----- ----- ----- ----- ----- ----- -----
------ ------ ------ ------ ----- ----- ----- ----- ----- ----- ----- -----
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY INVESTMENT COMPANY
SHORT-TERM BOND FUND AGGRESSIVE EQUITY FUND
---------------------------------------- -------------------------------------
1998 1997 1996 1995 1994 1993* 1998 1997 1996 1995 1994*
----- ----- ----- ----- ----- ----- ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period.... $1.19 $1.14 $1.10 $1.03 $1.03 $1.00 $ 2.15 $ 1.80 $ 1.43 $ 1.05 $1.00
----- ----- ----- ----- ----- ----- ------ ------ ------ ------ -----
----- ----- ----- ----- ----- ----- ------ ------ ------ ------ -----
Unit value, end of year............ $1.24 $1.19 $1.14 $1.10 $1.03 $1.03 $ 2.02 $ 2.15 $ 1.80 $ 1.43 $1.05
----- ----- ----- ----- ----- ----- ------ ------ ------ ------ -----
----- ----- ----- ----- ----- ----- ------ ------ ------ ------ -----
Thousands of accumulation units
outstanding, end of period........ 3,164 2,355 2,129 1,447 1,132 747 63,176 71,468 49,800 20,858 9,145
----- ----- ----- ----- ----- ----- ------ ------ ------ ------ -----
----- ----- ----- ----- ----- ----- ------ ------ ------ ------ -----
</TABLE>
<TABLE>
<CAPTION>
SCUDDER BOND FUND
--------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year...... $12.37 $11.48 $11.30 $ 9.69 $10.32 $ 9.30 $8.78 $7.54 $7.05 $6.39
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
Unit value, end of year............ $13.02 $12.37 $11.48 $11.30 $ 9.69 $10.32 $9.30 $8.78 $7.54 $7.05
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
Thousands of accumulation units
outstanding, end of year.......... 1,757 1,484 1,362 1,269 1,169 1,277 1,053 600 354 221
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
SCUDDER CAPITAL GROWTH FUND
------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year...... $29.64 $22.11 $18.64 $14.67 $16.46 $13.80 $13.09 $ 9.48 $10.35 $ 8.53
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Unit value, end of year............ $36.07 $29.64 $22.11 $18.64 $14.67 $16.46 $13.80 $13.09 $ 9.48 $10.35
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Thousands of accumulation units
outstanding, end of year.......... 11,462 11,094 9,266 8,556 8,121 6,582 3,698 2,138 1,103 844
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
SCUDDER INTERNATIONAL FUND
--------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year...... $14.46 $13.43 $11.85 $10.80 $11.06 $ 8.13 $8.48 $7.68 $8.41 $6.14
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
Unit value, end of year............ $16.93 $14.46 $13.43 $11.85 $10.80 $11.06 $8.13 $8.48 $7.68 $8.41
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
Thousands of accumulation units
outstanding, end of year.......... 8,004 8,205 7,688 7,269 8,610 5,400 2,262 1,849 1,644 721
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
------ ------ ------ ------ ------ ------ ----- ----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
FIDELITY VIP EQUITY-INCOME FIDELITY VIP II ASSET MANAGER
FUND FIDELITY VIP II CONTRA FUND FUND
------------------------------ ------------------------------ ------------------------------
1998 1997 1996 1995* 1998 1997 1996 1995* 1998 1997 1996 1995*
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
period....................... $27.77 $21.93 $19.43 $16.30 $20.36 $16.59 $13.85 $11.43 $21.14 $17.72 $15.66 $14.04
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Unit value, end of period..... $30.65 $27.77 $21.93 $19.43 $26.16 $20.36 $16.59 $13.85 $24.04 $21.14 $17.72 $15.66
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Thousands of accumulation
units
outstanding, end of period... 4,018 3,491 2,342 728 6,742 5,656 3,880 1,792 1,488 1,150 613 184
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
CALVERT SOCIAL BALANCED FUND
---------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991*
------ ------ ------ ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period.... $ 2.65 $ 2.23 $ 2.01 $1.57 $1.64 $1.54 $1.44 $1.32
------ ------ ------ ----- ----- ----- ----- -----
------ ------ ------ ----- ----- ----- ----- -----
Unit value, end of period.......... $ 3.04 $ 2.65 $ 2.23 $2.01 $1.57 $1.64 $1.54 $1.44
------ ------ ------ ----- ----- ----- ----- -----
------ ------ ------ ----- ----- ----- ----- -----
Thousands of accumulation units
outstanding, end of period........ 14,257 12,479 10,713 7,849 5,986 5,151 2,742 678
------ ------ ------ ----- ----- ----- ----- -----
------ ------ ------ ----- ----- ----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
AMERICAN CENTURY VP CAPITAL APPRECIATION FUND
-----------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year...... $11.04 $11.53 $12.18 $ 9.39 $ 9.61 $ 8.81 $ 9.01 $ 6.40 $ 6.53 $5.11
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Unit value, end of year............ $10.69 $11.04 $11.53 $12.18 $ 9.39 $ 9.61 $ 8.81 $ 9.01 $ 6.40 $6.53
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Thousands of accumulation units
outstanding, end of year.......... 3,303 4,510 7,264 8,061 6,361 5,946 5,280 3,056 1,518 791
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
</TABLE>
* The dates the Funds of the Separate Account commenced operation are as
follows: Investment Company Money Market, All America, Bond and Composite
Funds--January 1, 1985; Scudder Capital Growth, Bond and International Funds
and American Century VP Capital Appreciation Fund--January 3, 1989; Calvert
Social Balanced Fund--May 13, 1991; Investment Company Equity Index,
Short-Term Bond and Mid-Term Bond Funds--February 5, 1993; Investment Company
Aggressive Equity Fund--May 2, 1994; Fidelity VIP Equity-Income Fund and
Fidelity VIP II Contra and Asset Manager Funds--May 1, 1995; and Investment
Company Mid-Cap Equity Index Fund--May 1, 1999.
30
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
FOR THE SECTION 457 PLAN
VARIABLE ACCUMULATION ANNUITY CONTRACTS
Issued By
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
320 Park Avenue
New York, New York 10022
Through its
SEPARATE ACCOUNT NO. 2
---------------------------------------------------------------------
This Statement of Additional Information expands upon subjects we discuss in the
current Prospectus for the Section 457 Plan variable accumulation annuity
contract (CONTRACT) that we offer.
You may obtain a copy of the Prospectus, dated May 1, 1999, by calling
1-800-468-3785, or by writing to Mutual of America Life Insurance Company, 320
Park Avenue, New York, New York 10022, Attn: Eldon Wonacott. The Prospectus
contains definitions of various terms, and we incorporate those terms by
reference into this Statement of Additional Information.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND YOU SHOULD READ
IT IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACTS.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Page
---------
Distribution of the Contracts........................................ 2
Calculation of Accumulation Unit Values.............................. 2
Yield and Performance Information.................................... 2
Safekeeping of Separate Account Assets............................... 7
State Regulation..................................................... 7
Periodic Reports..................................................... 8
Legal Proceedings.................................................... 8
Legal Matters........................................................ 8
Experts.............................................................. 8
Additional Information............................................... 9
Financial Statements................................................. 9
</TABLE>
- --------------------------------------------------------------------------------
DATED: MAY 1, 1999
<PAGE>
DISTRIBUTION OF THE CONTRACTS
- --------------------------------------------------------------------------------
We offer the Contracts for sale on a continuous basis through certain of our
employees. The only compensation we pay for sales of the Contracts is in the
form of salary. We also serve as principal underwriter of the Contracts.
We are registered with the Securities and Exchange Commission ("Commission") as
a broker-dealer and are a member of the National Association of Securities
Dealers, Inc. All persons engaged in selling the Contracts are our licensed
agents and are duly qualified registered representatives.
CALCULATION OF ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
When a Participant allocates or transfers Account Balance to a Separate Account
Fund, the Participant's interest in the Fund is represented by Accumulation
Units. Each Fund's Accumulation Units have a different value, based on the value
of the Fund's investment in shares of the related Underlying Fund and the
charges we deduct from the Separate Account. To determine the change in a Fund's
Accumulation Unit value from the close of one Valuation Day to the close of the
next Valuation Day (which we call a Valuation Period), we use an Accumulation
Unit Change Factor. The Accumulation Unit Change Factor for each Fund of the
Separate Account for any Valuation Period is:
(a) the ratio of (i) the asset value of that Fund at the end of the current
Valuation Period, before any amounts are allocated to or withdrawn from the
Fund with respect to that Valuation Period, to (ii) the asset value of the
Fund at the end of the preceding Valuation Period, after all allocations
and withdrawals were made for that period,
divided by
(b) 1.000000 plus the component of the annual rate of mortality and expense
risk, distribution expense and Separate Account administrative charges
against the Fund's assets for the number of days from the end of the
preceding Valuation Period to the end of the current Valuation Period.
YIELD AND PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
MONEY MARKET FUND
- --------------------------------------------------------------------------------
Regulations adopted by the Commission require us to disclose the current
annualized yield of the Money Market Fund of the Separate Account for a
seven-day period in a manner that does not take into consideration any realized
or unrealized gains or losses on shares of the Money Market Fund of the
Investment Company or on its portfolio securities. This is called YIELD. The
Commission also permits us to disclose the effective yield of the Money Market
Fund of the Separate Account for the same seven-day period, determined on a
compounded basis. This is called the EFFECTIVE YIELD.
Yield and effective yield reflect our deductions from the Separate Account Fund
for administrative and distribution expenses or services and the mortality and
expense risk charge accrued during the period. Because of these deductions, the
yield for the Money Market Fund
- 2 -
<PAGE>
of the Separate Account will be lower than the yield for the Money Market Fund
of the Investment Company.
From time to time, we will include quotations of the yield or performance of the
Separate Account's Money Market Fund in advertisements, sales literature or
shareholder reports. These performance figures are calculated in the following
manner:
A. YIELD is the net annualized yield based on a specified seven calendar-days
calculated at simple interest rates. Yield is calculated by determining the
net change, exclusive of capital changes, in the value of a hypothetical
preexisting account having a balance of one accumulation unit at the
beginning of the period and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period
return. The yield is annualized by multiplying the base period return by
365/7. The yield figure is stated to the nearest hundredth of one percent.
B. EFFECTIVE YIELD is the net annualized yield for a specified seven calendar
days, assuming a reinvestment of the income (compounding). Effective yield
is calculated by the same method as yield, except the yield figure is
compounded by adding 1, raising the sum to a power equal to 365 divided by
7, and subtracting one from the result, according to the following formula:
Effective Yield = [(Base Period Return +1) to the power of (365/7)]-1.
The current yield of the Money Market Fund of the Separate Account for the
seven-day period ended December 29, 1998 was 3.61%.
Yield and effective yield are based on historical earnings and show the
performance of a hypothetical investment. The yield on amounts held in the Money
Market Fund of the Separate Account normally will fluctuate on a daily basis,
and therefore the yield for any past period is not an indication or
representation of future yield. The Money Market Fund's actual yield and
effective yield are affected by changes in interest rates on money market
securities, average portfolio maturity of the Money Market Fund of the
Investment Company, the types and quality of portfolio securities held by the
Money Market Fund of the Investment Company, and its operating expenses.
When communicating total return to current or prospective Participants, we also
may compare the Money Market Fund's figures to the performance of other variable
annuity accounts tracked by mutual fund rating services or to unmanaged indices
that may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
BOND FUNDS
- --------------------------------------------------------------------------------
From time to time, we may include quotations of the yield of the Separate
Account's Investment Company Bond Funds and Scudder Bond Fund in advertisements,
sales literature or shareholder reports. Yield is computed by annualizing net
investment income, as determined by the Commission's formula, calculated on a
per Accumulation Unit basis, for a recent one month or 30-day period and
dividing that amount by the unit value of the Fund at the end of the period.
- 3 -
<PAGE>
FUNDS OTHER THAN MONEY MARKET
- --------------------------------------------------------------------------------
From time to time, we may include quotations of a Fund's TOTAL RETURN in
advertisements, sales literature or shareholder reports. These performance
figures are calculated in the following manner:
A. AVERAGE ANNUAL TOTAL RETURN is the average annual compounded rate of return
for the periods of one year, five years and ten years, if applicable, all
ended on the date of a recent calendar quarter. In addition, the total
return for the life of the Fund is given. Total return quotations reflect
changes in the price of a Fund's shares and assume that all dividends and
capital gains distributions during the respective periods were reinvested in
Fund shares. Total return is calculated by finding the average annual
compounded rates of return of a hypothetical investment over such periods,
according to the following formula (total return is then expressed as a
percentage):
T = (ERV/P) to the power of (1/n) - 1
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made at the
beginning of the applicable period.
B. CUMULATIVE TOTAL RETURN is the compound rate of return on a hypothetical
initial investment of $1,000 for a specified period. Cumulative total return
quotations reflect changes in the value of a Fund's unit values and assume
that all dividends and capital gains distributions during the period were
reinvested in Fund shares. Cumulative total return is calculated by finding
the compound rates of return of a hypothetical investment over such periods,
according to the following formula (cumulative total return is then expressed
as a percentage):
C = (ERV/P) - 1.
Where:
C = Cumulative Total Return
P = hypothetical initial payment of $1,000
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made at the
beginning of the applicable period.
- 4 -
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
FUND ONE YEAR FIVE YEARS TEN YEARS LIFE OF FUND INCEPTION DATE
- ------------------------------------------------------- -------- ---------- --------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Investment Company Equity Index........................ 26.6% 22.0% N/A 19.2% 02/05/93
Investment Company All America......................... 19.4% 18.9% 14.7% 15.1% 01/01/85
Investment Company Aggressive Equity................... (6.6)% N/A N/A 15.9% 05/02/94
Investment Company Composite........................... 12.7% 10.5% 10.6% 11.1% 01/01/85
Investment Company Bond................................ 5.6% 5.6% 7.5% 7.6% 01/01/85
Investment Company Mid-Term Bond....................... 4.8% 4.3% N/A 4.6% 02/05/93
Investment Company Short-Term Bond..................... 4.1% 3.6% N/A 3.5% 02/05/93
Scudder Capital Growth................................. 21.4% 16.7% 15.1% 15.1% 01/03/89
Scudder Bond........................................... 5.0% 4.5% 7.0% 7.0% 01/03/89
Scudder International.................................. 16.7% 8.6% 10.3% 10.3% 01/03/89
Fidelity VIP Equity-Income............................. 10.1% N/A N/A 18.5% 05/01/95
Fidelity VIP II Contra................................. 28.1% N/A N/A 25.0% 05/01/95
Fidelity VIP II Asset Manager.......................... 13.4% N/A N/A 15.5% 05/01/95
Calvert Social Balanced................................ 14.5% 12.9% N/A 12.2% 05/23/93
American Century VP Capital Appreciation............... (3.4)% 1.9% 7.3% 6.6% 01/03/89
</TABLE>
CUMULATIVE TOTAL RETURNS
FOR PERIODS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
FUND ONE YEAR FIVE YEARS TEN YEARS LIFE OF FUND INCEPTION DATE
- ------------------------------------------------------- -------- ------------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
Investment Company Equity Index........................ 26.6% 169.8% N/A 182.7% 02/05/93
Investment Company All America......................... 19.4% 138.1% 294.1% 652.6% 01/01/85
Investment Company Aggressive Equity................... (6.6)% N/A N/A 99.2% 05/02/94
Investment Company Composite........................... 12.7% 65.1% 175.1% 335.4% 01/01/85
Investment Company Bond................................ 5.6% 41.2% 105.1% 180.3% 01/01/85
Investment Company Mid-Term Bond....................... 4.8% 23.4% N/A 30.6% 02/05/93
Investment Company Short-Term Bond..................... 4.1% 19.1% N/A 22.8% 02/05/93
Scudder Capital Growth................................. 21.4% 116.4% 309.2% 309.2% 01/03/89
Scudder Bond........................................... 5.0% 24.7% 97.1% 97.1% 01/03/89
Scudder International.................................. 16.7% 51.2% 165.8% 165.8% 01/03/89
Fidelity VIP Equity-Income............................. 10.1% N/A N/A 86.4% 05/01/95
Fidelity VIP II Contra................................. 28.1% N/A N/A 126.7% 05/01/95
Fidelity VIP II Asset Manager.......................... 13.4% N/A N/A 69.2% 05/01/95
Calvert Social Balanced................................ 14.5% 83.2% N/A 51.1% 05/13/91
American Century VP Capital Appreciation............... (3.4)% 9.9% 101.9% 89.5% 01/03/89
</TABLE>
The returns for the All America Fund (previously called the "Stock Fund") prior
to May 1, 1994 reflect the results of the Underlying Fund prior to a change in
its investment objectives and policies and the addition of subadvisers on that
date. The commencement dates are for the Funds in Separate Account No. 2. The
Mid-Cap Equity Index Fund is not included in the tables because it commenced
operations on May 1, 1999.
- 5 -
<PAGE>
The above figures for the Money Market and other Funds, both for average annual
total return and cumulative total return, reflect charges made to the Separate
Account, including a monthly service charge. In the above table, we deducted the
$2.00 monthly contract fee from each Separate Account Fund, calculated as a cost
per $1,000 based on the average Account Balance for all of our individually
allocated contracts. For any Participant, the actual treatment of the monthly
contract fee and its effect on total return will depend on the Participant's
actual allocation of Account Balance.
If you have Account Balance in the General Account, the monthly contract fee
would be deducted from the General Account, not any Separate Account Fund.
Accordingly, the illustration of your Account Balance held in any of the Funds
of the Separate Account would experience a higher total return than shown above.
If you do not have Account Balance allocated to the General Account, but you do
have Account Balance allocated to more than one Fund of the Separate Account,
the fee would only be deducted from one of the Funds so that an illustration of
total return figures of the other Funds would be higher than shown above and the
Separate Account Fund from which the fee was deducted would illustrate a lower
total return than shown above.
If you do not have any Account Balance in the General Account, we will deduct
the $2.00 monthly charge from your Account Balance allocated to one or more of
the Separate Account Funds, in the following order:
(a) Investment Company Money Market Fund,
(b) Investment Company Short-Term Bond Fund,
(c) Investment Company Mid-Term Bond Fund,
(d) Investment Company Bond Fund,
(e) Scudder Bond Fund,
(f) Investment Company Composite Fund,
(g) Fidelity VIP II Asset Manager Fund,
(h) Calvert Social Balanced Fund,
(i) Fidelity VIP Equity-Income Fund,
(j) Investment Company All America Fund,
(k) Investment Company Equity Index Fund,
(l) Investment Company Mid-Cap Equity Index Fund,
(m) Fidelity VIP II Contra Fund,
(n) Investment Company Aggressive Equity Fund,
(o) Scudder Capital Growth Fund,
(p) Scudder International Fund, and
(q) American Century VP Capital Appreciation Fund.
Performance figures are based on historical earnings and are not guaranteed to
reoccur. They are not necessarily indicative of the future investment
performance of a particular Fund. Total return and yield for a Fund will vary
based on changes in market conditions and the
- 6 -
<PAGE>
performance of the Underlying Fund. Unit values will fluctuate so that, when
redeemed, they may be worth more or less than their original cost.
When communicating total return to current or prospective Participants, we also
may compare a Fund's figures to the performance of other variable annuity
accounts tracked by mutual fund rating services or to unmanaged indices that may
assume reinvestment of dividends but generally do not reflect deductions for
administrative and management costs.
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
- --------------------------------------------------------------------------------
We hold title to the Separate Account's assets, including shares of the
Underlying Funds. We maintain records of all purchases and redemptions of
Underlying Fund shares by each of the Separate Account Funds.
STATE REGULATION
- --------------------------------------------------------------------------------
We are subject to regulation by the New York State Superintendent of Insurance
("Superintendent") as well as by the insurance departments of all the other
states and jurisdictions in which we does business.
We must file with the Superintendent an annual statement on a form specified by
the National Association of Insurance Commissioners. We also must file with New
York and other states a separate statement covering the separate accounts that
we maintain, including the Separate Account. Our books and assets are subject to
review and examination by the Superintendent and the Superintendent's agents at
all times. The Superintendent makes a full examination into our affairs at least
every five years. Other states also may periodically conduct a full examination
of our operations.
The laws of New York and of other states in which we are licensed to transact
business specifically provide for regulation and supervision of the variable
annuity activities of life insurance companies. Regulations require certain
contract provisions and require us to obtain approval of contract forms. State
regulation does not involve any supervision or control over the investment
policies of the Separate Account, or the selection of investments therefor,
except for verification that any such investments are permissible under
applicable law. Generally, the states in which we do business apply the laws of
New York in determining permissible investments for us.
- 7 -
<PAGE>
PERIODIC REPORTS
- --------------------------------------------------------------------------------
Prior to your Annuity Commencement Date, we will provide you, at least
quarterly, with a statement as of a specified date covering the period since the
last statement. The statement will set forth, for the covered period:
(1) Amounts added to your Account Balance, which will be Deferred Compensation
deposits under 457 Contracts or Contributions under Thrift, IRA, FPA and TDA
Contracts made by you or on your behalf, including
- the allocation of contributed amounts to the Separate and General
Accounts;
- the date Deferred Compensation was deducted from your salary or the
Contribution was made; and
- the date the amount was credited to your account.
(2) Interest accrued on amounts allocated for you to the General Account.
(3) The number and dollar value of Accumulation Units credited to you in each
Fund of the Separate Account; and
(4) The total amounts of all withdrawals and transfers from the General Account
and each Fund.
We have advised Employers that they should remit your Contributions to us within
seven days of the date the Contribution was withheld from your pay.
The statement we send to you also will specify your Account Balance available to
provide a periodic benefit, cash return or death benefit. We will transmit to
Participants, at least semi-annually, reports showing the financial condition of
the Separate Account and showing the schedules of investments held in each
Underlying Fund.
LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
We are engaged in litigation of various kinds, which in our judgment is not of
material importance in relation to our total assets. There are no legal
proceedings pending to which the Separate Account is a party.
LEGAL MATTERS
- --------------------------------------------------------------------------------
All matters of applicable state law pertaining to the Contracts, including our
right to issue the Contracts, have been passed upon by Patrick A. Burns, Senior
Executive Vice President and General Counsel of Mutual of America. Legal matters
relating to Federal securities laws have been passed upon by Stanley M.
Lenkowicz, Senior Vice President and Deputy General Counsel of Mutual of
America.
EXPERTS
- --------------------------------------------------------------------------------
Arthur Andersen LLP, our independent public accountants, have audited the
financial statements included in this Statement of Additional Information, as
indicated in their reports relating to the statements. We have included the
reports of Arthur Andersen LLP in reliance upon the authority of the firm as
experts in giving such reports.
- 8 -
<PAGE>
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
We have filed with the Commission a registration statement under the Securities
Act of 1933, as amended, concerning to the Contracts. Not all of the information
set forth in the registration statement, amendments and exhibits thereto has
been included in this Statement of Additional Information or in the current
Prospectus for the Contracts. Statements contained herein concerning the content
of the Contracts and other legal instruments are intended to be summaries. For a
complete statement of the terms of those documents, reference should be made to
the materials filed with the Commission. The Commission has an Internet web site
at http://www.sec.gov, or you may write to the Commission's Public Reference
Section, Washington, DC 20549-6009 and obtain copies upon payment of a
duplicating fee.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
When you allocate Account Balance to the Separate Account Funds, the value of
the Account Balance in those Funds is impacted primarily by the investment
results of the Underlying Fund(s). Financial Statements of the Separate Account
for 1998 are included as follows:
Financial Statements of the Separate Account for 1998 are included as follows:
<TABLE>
<S> <C>
Statement of Assets and Liabilities.................................... 10
Statement of Operations................................................ 12
Statements of Changes in Net Assets.................................... 14
Notes to Financial Statements.......................................... 17
Report of Independent Public Accountants............................... 23
</TABLE>
You should consider our financial statements included in this Statement of
Additional Information as bearing on our ability to meet our obligations under
the Contracts and to support our General Account.
Financial Statements of Mutual of America for 1998 are included as follows:
<TABLE>
<S> <C>
Report of Independent Public Accountants............................... 24
Consolidated Statements of Financial Condition......................... 25
Consolidated Statements of Operations and Surplus...................... 26
Consolidated Statements of Cash Flows.................................. 27
Notes to Consolidated Financial Statements............................. 28
</TABLE>
- 9 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MUTUAL OF AMERICA
---------------------------------------------------------------
MONEY MARKET ALL AMERICA EQUITY INDEX BOND
FUND FUND FUND FUND
------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Assets:
Investments in Mutual of America Investment
Corporation at market value
(Cost:
Money Market Fund--$39,380,057
All America Fund--$314,846,209
Equity Index Fund--$208,860,111
Bond Fund--$57,089,249)
(Notes 1 and 2)............................... $38,794,254 $ 400,667,622 $ 268,859,036 $ 56,229,192
Due From (To) Mutual of America General
Account....................................... 60,443 (1,972,421) 427,185 53,002
------------- -------------- -------------- ----------------
Net Assets...................................... $38,854,697 $ 398,695,201 $ 269,286,221 $ 56,282,194
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
Unit Value at December 31, 1998 (Note 5)........ $ 2.03 $ 8.09 $ 2.86 $ 3.17
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
Number of Units Outstanding at December 31, 1998
(Note 5)...................................... 19,121,114 49,275,431 94,019,102 17,745,706
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
MUTUAL OF AMERICA
---------------------------------------------------------------
AGGRESSIVE
SHORT-TERM MID-TERM COMPOSITE EQUITY
BOND FUND BOND FUND FUND FUND
------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Assets:
Investments in Mutual of America Investment
Corporation at market value
(Cost:
Short-Term Bond Fund--$3,989,514
Mid-Term Bond Fund--$10,128,129
Composite Fund--$279,954,844
Aggressive Equity Fund--$126,609,916)
(Notes 1 and 2)............................... $ 3,915,558 $ 9,709,998 $ 294,734,308 $ 127,225,340
Due From (To) Mutual of America General
Account....................................... 22,080 (15,440) 158,200 144,542
------------- -------------- -------------- ----------------
Net Assets...................................... $ 3,937,638 $ 9,694,558 $ 294,892,508 $ 127,369,882
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
Unit Value at December 31, 1998 (Note 5)........ $ 1.24 $ 1.32 $ 4.93 $ 2.02
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
Number of Units Outstanding at December 31, 1998
(Note 5)...................................... 3,164,391 7,325,150 59,833,037 63,175,525
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 10 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SCUDDER AMERICAN CENTURY
--------------------------------------------- ----------------
CAPITAL VP CAPITAL
BOND GROWTH INTERNATIONAL APPRECIATION
FUND FUND FUND FUND
------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Assets:
Investments in Scudder Portfolios and American
Century VP Capital Appreciation Fund at market
value
(Cost:
Scudder Bond Fund--$22,860,803
Scudder Capital Growth Fund-- $269,953,351
Scudder International Fund-- $122,545,170
American Century VP Capital Appreciation
Fund--$37,696,440)
(Notes 1 and 2)............................... $ 22,876,887 $ 413,363,547 $ 135,499,688 $ 35,269,693
Due From (To) Mutual of America General
Account....................................... 989 91,296 (18,735) 24,550
------------- -------------- -------------- ----------------
Net Assets...................................... $ 22,877,876 $ 413,454,843 $ 135,480,953 $ 35,294,243
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
Unit Value at December 31, 1998 (Note 5)........ $ 13.02 $ 36.07 $ 16.93 $ 10.69
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
Number of Units Outstanding at December 31, 1998
(Note 5)...................................... 1,757,491 11,462,117 8,004,295 3,302,870
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
CALVERT FIDELITY
------------- ------------------------------------------------
SOCIAL VIP VIP II VIP II
BALANCED EQUITY-INCOME CONTRA ASSET MANAGER
FUND FUND FUND FUND
------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Assets:
Investments in Calvert Responsibly Invested
Portfolio and Fidelity Portfolios at market
value
(Cost:
Calvert Responsibly Invested Portfolio--
$36,579,163
VIP Equity-Income Fund--$102,105,966
VIP II Contra Fund--$122,795,284
VIP II Asset Manager Fund-- $32,517,836)
(Notes 1 and 2)............................. $ 43,340,973 $ 123,143,902 $ 175,975,729 $ 35,916,658
Due From (To) Mutual of America General
Account....................................... 9,166 9,264 359,027 (149,852)
------------- -------------- -------------- ----------------
Net Assets...................................... $ 43,350,139 $ 123,153,166 $ 176,334,756 $ 35,766,806
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
Unit Value at December 31, 1998 (Note 5)........ $ 3.04 $ 30.65 $ 26.16 $ 24.04
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
Number of Units Outstanding at December 31, 1998
(Note 5)...................................... 14,257,171 4,018,401 6,741,574 1,487,673
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 11 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MUTUAL OF AMERICA
-------------------------------------------------------------
MONEY MARKET ALL AMERICA EQUITY INDEX BOND
FUND FUND FUND FUND
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Investment Income and Expenses:
Income (Notes 1 and 4):
Dividends........................................ $ 1,752,196 $ 47,402,384 $ 20,729,224 $ 3,838,355
------------- ------------- ------------- ----------------
Total income....................................... 1,752,196 47,402,384 20,729,224 3,838,355
------------- ------------- ------------- ----------------
Expenses (Note 3):
Fees............................................. 439,058 4,632,136 2,649,161 568,911
Administrative Expenses.......................... 71,769 178,081 121,206 65,912
------------- ------------- ------------- ----------------
Total Expenses..................................... 510,827 4,810,217 2,770,367 634,823
------------- ------------- ------------- ----------------
Net Investment Income (Loss)....................... 1,241,369 42,592,167 17,958,857 3,203,532
------------- ------------- ------------- ----------------
Net Realized and Unrealized Gain (Loss) on
Investments (Note 1):
Net realized gain (loss) on investments.......... 94,044 10,190,529 3,546,239 196,930
Net unrealized appreciation (depreciation) of
investments.................................... (8,215) 12,779,143 26,951,145 (981,434)
------------- ------------- ------------- ----------------
Net Realized and Unrealized Gain (Loss) on
Investments...................................... 85,829 22,969,672 30,497,384 (784,504)
------------- ------------- ------------- ----------------
Net Increase (Decrease) in Net Assets Resulting
from Operations.................................. $ 1,327,198 $ 65,561,839 $ 48,456,241 $ 2,419,028
------------- ------------- ------------- ----------------
------------- ------------- ------------- ----------------
<CAPTION>
MUTUAL OF AMERICA
-------------------------------------------------------------
AGGRESSIVE
SHORT-TERM MID-TERM COMPOSITE EQUITY
BOND FUND BOND FUND FUND FUND
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Investment Income and Expenses:
Income (Notes 1 and 4):
Dividends........................................ $ 179,684 $ 508,247 $ 12,314,050 $ 1,141,598
------------- ------------- ------------- ----------------
Total income....................................... 179,684 508,247 12,314,050 1,141,598
------------- ------------- ------------- ----------------
Expenses (Note 3):
Fees............................................. 41,775 92,737 3,545,242 1,700,257
Administrative Expenses.......................... 8,743 11,324 207,511 57,962
------------- ------------- ------------- ----------------
Total Expenses..................................... 50,518 104,061 3,752,753 1,758,219
------------- ------------- ------------- ----------------
Net Investment Income (Loss)....................... 129,166 404,186 8,561,297 (616,621)
------------- ------------- ------------- ----------------
Net Realized and Unrealized Gain (Loss) on
Investments (Note 1):
Net realized gain (loss) on investments.......... 3,822 (28,267) 554,735 (632,431)
Net unrealized appreciation (depreciation) of
investments.................................... (6,616) (46,309) 24,996,236 (8,050,244)
------------- ------------- ------------- ----------------
Net Realized and Unrealized Gain (Loss) on
Investments...................................... (2,794) (74,576) 25,550,971 (8,682,675)
------------- ------------- ------------- ----------------
Net Increase (Decrease) in Net Assets Resulting
from Operations.................................. $ 126,372 $ 329,610 $ 34,112,268 $ (9,299,296)
------------- ------------- ------------- ----------------
------------- ------------- ------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 12 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
AMERICAN
SCUDDER CENTURY CALVERT
------------------------------------------ ------------- ------------
CAPITAL VP CAPITAL SOCIAL
BOND GROWTH INTERNATIONAL APPRECIATION BALANCED
FUND FUND FUND FUND FUND
------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Investment Income and Expenses:
Income (Notes 1 and 4):
Dividends............................... $ 1,222,480 $ 21,046,614 $ 15,648,053 $ 2,169,052 $ 3,132,097
------------ ------------- ------------- ------------- ------------
Total income.............................. 1,222,480 21,046,614 15,648,053 2,169,052 3,132,097
------------ ------------- ------------- ------------- ------------
Expenses (Note 3):
Fees.................................... 252,137 4,669,765 1,625,423 406,935 475,473
Administrative Expenses................. 36,639 95,388 16,719 8,081 60,528
------------ ------------- ------------- ------------- ------------
Total Expenses............................ 288,776 4,765,153 1,642,142 415,016 536,001
------------ ------------- ------------- ------------- ------------
Net Investment Income (Loss).............. 933,704 16,281,461 14,005,911 1,754,036 2,596,096
------------ ------------- ------------- ------------- ------------
Net Realized and Unrealized Gain (Loss) on
Investments (Note 1):
Net realized gain (loss) on
investments........................... (12,188) 7,179,053 7,712,372 (1,068,586) 276,019
Net unrealized appreciation
(depreciation) of investments......... 56,186 46,681,634 (2,792,240) (2,044,118) 2,332,229
------------ ------------- ------------- ------------- ------------
Net Realized and Unrealized Gain (Loss) on
Investments............................. 43,998 53,860,687 4,920,132 (3,112,704) 2,608,248
------------ ------------- ------------- ------------- ------------
Net Increase (Decrease) in Net Assets
Resulting from Operations............... $ 977,702 $ 70,142,148 $ 18,926,043 $ (1,358,668) $ 5,204,344
------------ ------------- ------------- ------------- ------------
------------ ------------- ------------- ------------- ------------
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
--------------------------------------------
VIP VIP II VIP II
EQUITY-INCOME CONTRA ASSET MANAGER
FUND FUND FUND
------------- ------------- --------------
<S> <C> <C> <C>
Investment Income and Expenses:
Income (Notes 1 and 4):
Dividends........................................................ $ 6,472,639 $ 6,753,142 $ 3,312,566
------------- ------------- --------------
Total income....................................................... 6,472,639 6,753,142 3,312,566
------------- ------------- --------------
Expenses (Note 3):
Fees............................................................. 1,322,031 1,599,575 355,427
Administrative Expenses.......................................... 144,647 69,906 54,809
------------- ------------- --------------
Total Expenses..................................................... 1,466,678 1,669,481 410,236
------------- ------------- --------------
Net Investment Income (Loss)....................................... 5,005,961 5,083,661 2,902,330
------------- ------------- --------------
Net Realized and Unrealized Gain (Loss) on Investments (Note 1):
Net realized gain (loss) on investments.......................... 853,854 2,644,396 (12,448)
Net unrealized appreciation (depreciation) of investments........ 4,356,202 27,595,754 895,986
------------- ------------- --------------
Net Realized and Unrealized Gain (Loss) on Investments............. 5,210,056 30,240,150 883,538
------------- ------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations.... $10,216,017 $ 35,323,811 $ 3,785,868
------------- ------------- --------------
------------- ------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 13 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
INVESTMENT COMPANY
--------------------------------------------------------------------------------------
MONEY MARKET FUND ALL AMERICA FUND EQUITY INDEX FUND
-------------------------- ---------------------------- ----------------------------
1998 1997 1998 1997 1998 1997
------------ ------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net
Assets:
From Operations:
Net investment income
(loss).................... $ 1,241,369 $ 1,562,015 $ 42,592,167 $ 38,428,360 $ 17,958,857 $ 1,775,466
Net realized gain (loss) on
investments............... 94,044 132,331 10,190,529 6,823,750 3,546,239 1,092,959
Net unrealized appreciation
(depreciation) of
investments............... (8,215) (446,463) 12,779,143 22,669,697 26,951,145 24,542,212
------------ ------------ ------------- ------------- ------------- -------------
Net Increase (Decrease) in net
assets resulting from
operations................... 1,327,198 1,247,883 65,561,839 67,921,807 48,456,241 27,410,637
------------ ------------ ------------- ------------- ------------- -------------
From Unit Transactions:
Contributions............... 7,176,418 5,788,009 33,052,837 31,724,926 38,144,487 22,975,557
Withdrawals................. (4,295,360) (4,229,179) (27,468,692) (21,956,687) (16,569,868) (6,932,093)
Net transfers............... 1,797,850 (2,770,906) (19,139,304) 360,521 44,795,692 49,789,027
------------ ------------ ------------- ------------- ------------- -------------
Net Increase (Decrease) from
unit transactions............ 4,678,908 (1,212,076) (13,555,159) 10,128,760 66,370,311 65,832,511
------------ ------------ ------------- ------------- ------------- -------------
Net Increase (Decrease) in Net
Assets....................... 6,006,106 35,807 52,006,680 78,050,567 114,826,552 93,243,148
Net Assets:
Beginning of Year............. 32,848,591 32,812,784 346,688,521 268,637,954 154,459,669 61,216,521
------------ ------------ ------------- ------------- ------------- -------------
End of Year................... $ 38,854,697 $ 32,848,591 $ 398,695,201 $ 346,688,521 $ 269,286,221 $ 154,459,669
------------ ------------ ------------- ------------- ------------- -------------
------------ ------------ ------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
------------------------------------------------------------------------------
BOND FUND SHORT-TERM BOND FUND MID-TERM BOND FUND
-------------------------- ------------------------ ------------------------
1998 1997 1998 1997 1998 1997
------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss).......... $ 3,203,532 $ 1,945,958 $ 129,166 $ 133,338 $ 404,186 $ 278,336
Net realized gain (loss) on
investments......................... 196,930 111,901 3,822 17,305 (28,267) (98,969)
Net unrealized appreciation
(depreciation) of investment........ (981,434) 889,880 (6,616) (40,822) (46,309) 101,700
------------ ------------ ----------- ----------- ----------- -----------
Net Increase (Decrease) in net assets
resulting from operations.............. 2,419,028 2,947,739 126,372 109,821 329,610 281,067
------------ ------------ ----------- ----------- ----------- -----------
From Unit Transactions:
Contributions......................... 7,033,074 4,701,303 734,187 668,221 1,120,290 813,398
Withdrawals........................... (4,982,221) (4,020,196) (427,168) (647,104) (627,755) (586,994)
Net transfers......................... 13,841,212 (136,699) 696,139 252,496 3,231,316 585,047
------------ ------------ ----------- ----------- ----------- -----------
Net Increase (Decrease) from unit
transactions........................... 15,892,065 544,408 1,003,158 273,613 3,723,851 811,451
------------ ------------ ----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets... 18,311,093 3,492,147 1,129,530 383,434 4,053,461 1,092,518
Net Assets:
Beginning of Year....................... 37,971,101 34,478,954 2,808,108 2,424,674 5,641,097 4,548,579
------------ ------------ ----------- ----------- ----------- -----------
End of Year............................. $ 56,282,194 $ 37,971,101 $ 3,937,638 $ 2,808,108 $ 9,694,558 $ 5,641,097
------------ ------------ ----------- ----------- ----------- -----------
------------ ------------ ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 14 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
INVESTMENT COMPANY
----------------------------------------------------------
COMPOSITE FUND AGGRESSIVE EQUITY FUND
---------------------------- ----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss)...... $ 8,561,297 $ 55,725,648 $ (616,621) $ 13,631,161
Net realized gain (loss) on
investments..................... 554,735 3,228,464 (632,431) 808,445
Net unrealized appreciation
(depreciation) of investments... 24,996,236 (20,441,501) (8,050,244) 5,321,047
------------- ------------- ------------- -------------
Net Increase (Decrease) in net
assets resulting from operations... 34,112,268 38,512,611 (9,299,296) 19,760,653
------------- ------------- ------------- -------------
From Unit Transactions:
Contributions..................... 25,635,215 23,905,684 28,696,822 29,301,342
Withdrawals....................... (23,076,061) (24,479,468) (12,588,115) (9,246,392)
Net transfers..................... (9,295,063) (20,666,992) (33,256,371) 24,458,890
------------- ------------- ------------- -------------
Net Increase (Decrease) from unit
transactions....................... (6,735,909) (21,240,776) (17,147,664) 44,513,840
------------- ------------- ------------- -------------
Net Increase (Decrease) in Net
Assets............................. 27,376,359 17,271,835 (26,446,960) 64,274,493
Net Assets:
Beginning of Year................... 267,516,149 250,244,314 153,816,842 89,542,349
------------- ------------- ------------- -------------
End of Year......................... $ 294,892,508 $ 267,516,149 $ 127,369,882 $ 153,816,842
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
SCUDDER
--------------------------------------------------------------------------------------
BOND FUND CAPITAL GROWTH FUND INTERNATIONAL FUND
-------------------------- ---------------------------- ----------------------------
1998 1997 1998 1997 1998 1997
------------ ------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss).......... $ 933,704 $ 791,376 $ 16,281,461 $ 14,929,366 $ 14,005,911 $ 1,048,262
Net realized gain (loss) on
investments......................... (12,188) (87,907) 7,179,053 3,989,169 7,712,372 10,918,585
Net unrealized appreciation
(depreciation) of investments....... 56,186 447,914 46,681,634 53,719,471 (2,792,240) (3,147,476)
------------ ------------ ------------- ------------- ------------- -------------
Net Increase (Decrease) in net assets
resulting from operations.............. 977,702 1,151,383 70,142,148 72,638,006 18,926,043 8,819,371
------------ ------------ ------------- ------------- ------------- -------------
From Unit Transactions:
Contributions......................... 3,111,360 2,487,844 45,075,165 34,121,380 15,352,696 15,851,344
Withdrawals........................... (1,812,991) (1,538,662) (27,386,892) (19,076,131) (11,406,891) (9,604,601)
Net transfers......................... 2,253,912 610,052 (3,209,197) 36,296,377 (6,070,868) 377,532
------------ ------------ ------------- ------------- ------------- -------------
Net Increase (Decrease) from unit
transactions........................... 3,552,281 1,559,234 14,479,076 51,341,626 (2,125,063) 6,624,275
------------ ------------ ------------- ------------- ------------- -------------
Net Increase (Decrease) in Net Assets... 4,529,983 2,710,617 84,621,224 123,979,632 16,800,980 15,443,646
Net Assets:
Beginning of Year....................... 18,347,893 15,637,276 328,833,619 204,853,987 118,679,973 103,236,327
------------ ------------ ------------- ------------- ------------- -------------
End of Year............................. $ 22,877,876 $ 18,347,893 $ 413,454,843 $ 328,833,619 $ 135,480,953 $ 118,679,973
------------ ------------ ------------- ------------- ------------- -------------
------------ ------------ ------------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 15 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
AMERICAN CENTURY CALVERT
---------------------------- --------------------------
VP CAPITAL
APPRECIATION FUND SOCIAL BALANCED FUND
---------------------------- --------------------------
1998 1997 1998 1997
------------- ------------- ------------ ------------
Increase (Decrease) in Net Assets:
<S> <C> <C> <C> <C>
From Operations:
Net investment income (loss)................................... $ 1,754,036 $ 710,068 $ 2,596,096 $ 1,887,424
Net realized gain (loss) on investments........................ (1,068,586) 1,238,144 276,019 235,099
Net unrealized appreciation (depreciation) of investments...... (2,044,118) (4,227,421) 2,332,229 2,600,706
------------- ------------- ------------ ------------
Net Increase (Decrease) in net assets resulting from
operations...................................................... (1,358,668) (2,279,209) 5,204,344 4,723,229
------------- ------------- ------------ ------------
From Unit Transactions:
Contributions.................................................. 5,340,709 8,707,773 7,547,920 6,373,996
Withdrawals.................................................... (4,483,088) (6,920,015) (2,809,892) (2,497,692)
Net transfers.................................................. (13,981,957) (33,483,832) 365,285 521,192
------------- ------------- ------------ ------------
Net Increase (Decrease) from unit transactions................... (13,124,336) (31,696,074) 5,103,313 4,397,496
------------- ------------- ------------ ------------
Net Increase (Decrease) in Net Assets............................ (14,483,004) (33,975,283) 10,307,657 9,120,725
Net Assets:
Beginning of Year................................................ 49,777,247 83,752,530 33,042,482 23,921,757
------------- ------------- ------------ ------------
End of Year...................................................... $ 35,294,243 $ 49,777,247 $ 43,350,139 $ 33,042,482
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
-------------------------------------------------------------------------------------
VIP VIP II VIP II
EQUITY-INCOME CONTRA ASSET MANAGER
FUND FUND FUND
--------------------------- ---------------------------- --------------------------
1998 1997 1998 1997 1998 1997
------------- ------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss).......... $ 5,005,961 $ 4,699,779 $ 5,083,661 $ 1,128,152 $ 2,902,330 $ 1,194,878
Net realized gain (loss) on
investments......................... 853,854 278,906 2,644,396 992,567 (12,448) 25,536
Net unrealized appreciation
(depreciation) of investments....... 4,356,202 11,806,259 27,595,754 16,333,421 895,986 1,637,367
------------- ------------ ------------- ------------- ------------ ------------
Net Increase (Decrease) in net assets
resulting from operations.............. 10,216,017 16,784,944 35,323,811 18,454,140 3,785,868 2,857,781
------------- ------------ ------------- ------------- ------------ ------------
From Unit Transactions:
Contributions......................... 22,499,025 16,485,680 25,700,149 21,050,465 8,419,597 5,663,920
Withdrawals........................... (9,180,957) (5,431,923) (11,133,735) (6,172,824) (2,785,815) (1,306,235)
Net transfers......................... 2,658,613 17,763,089 11,315,492 17,442,009 2,047,842 6,221,869
------------- ------------ ------------- ------------- ------------ ------------
Net Increase (Decrease) from unit
transactions........................... 15,976,681 28,816,846 25,881,906 32,319,650 7,681,624 10,579,554
------------- ------------ ------------- ------------- ------------ ------------
Net Increase (Decrease) in Net Assets... 26,192,698 45,601,790 61,205,717 50,773,790 11,467,492 13,437,335
Net Assets:
Beginning of Year....................... 96,960,468 51,358,678 115,129,039 64,355,249 24,299,314 10,861,979
------------- ------------ ------------- ------------- ------------ ------------
End of Year............................. $ 123,153,166 $ 96,960,468 $ 176,334,756 $ 115,129,039 $ 35,766,806 $ 24,299,314
------------- ------------ ------------- ------------- ------------ ------------
------------- ------------ ------------- ------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 16 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
Separate Account No. 2 of Mutual of America Life Insurance Company ("the
Company") was established in conformity with New York Insurance Law and
commenced operations on June 4, 1984. On October 31, 1986, Separate Account No.
2 was reorganized into a unit investment trust consisting of four Funds: the
Money Market Fund, the All America Fund, the Bond Fund and the Composite Fund.
These Funds invest in corresponding funds of Mutual of America Investment
Corporation ("Investment Company"). Prior to May 2, 1994, the All America Fund
was known as the Stock Fund and had different investment objectives and no
sub-advisors.
On January 3, 1989, the following funds became available to Separate Account No.
2 as investment alternatives: Scudder Bond, Scudder Capital Growth, Scudder
International and VP Capital Appreciation Fund. The Scudder Funds invest in
corresponding portfolios of Scudder Variable Life Investment Fund ("Scudder").
The VP Capital Appreciation Fund invests in a corresponding fund of American
Century Variable Portfolios Inc. ("American Century"). Effective May 13, 1991,
the Calvert Social Balanced Fund (formerly, Calvert Responsibly Invested
Balanced Portfolio) became available as an investment alternative. The Calvert
Social Balanced Fund invests in a corresponding fund of Calvert Social Balanced
Portfolio of Calvert Variable Series, Inc. (formerly, the Calvert Responsibly
Invested Balanced Portfolio of Acacia Capital Corporation) ("Calvert").
On February 5, 1993 the Mutual of America Equity Index, Short-Term Bond and
Mid-Term Bond funds became available to Separate Account No. 2 as investment
alternatives. On May 2, 1994 the Mutual of America Aggressive Equity Fund became
available. These funds invest in corresponding funds of the Investment Company.
On May 1, 1995, Fidelity Investments Equity-Income, Contrafund and Asset Manager
portfolios became available. The Fidelity Equity-Income Portfolio invests in a
corresponding portfolio of Fidelity Variable Insurance Products Fund and the
Contrafund Portfolio and Asset Manager Portfolio invest in corresponding
portfolios of Fidelity Variable Insurance Products Fund II (collectively,
"Fidelity").
Separate Account No. 2 was formed by the Company to support the operations of
the Company's group and individual variable accumulation annuity contracts
("Contracts"). The assets of Separate Account No. 2 are the property of the
Company. The portion of Separate Account No. 2's assets applicable to the
Contracts will not be charged with liabilities arising out of any other business
the Company may conduct.
The significant accounting policies of Separate Account No. 2 are as follows:
INVESTMENT VALUATION--Investments are made in shares of the Investment Company,
Scudder, American Century, Calvert and Fidelity and are valued at the reported
net asset values of the respective funds or portfolios.
INVESTMENT TRANSACTIONS--Investment transactions are recorded on the trade date.
Realized gains and losses on sales of investments are determined based on the
average cost of the investment sold.
- 17 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED)
FEDERAL INCOME TAXES--Separate Account No. 2 will be treated as a part of the
Company and will not be taxed separately as a "regulated investment company"
under existing law. The Company is taxed as a life insurance company under the
life insurance tax provisions of the Internal Revenue Code of 1986. No provision
for income taxes is required in the accompanying financial statements.
2. INVESTMENTS
The number of shares owned by Separate Account No. 2 and their respective net
asset values (rounded to the nearest cent) per share at December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
NUMBER OF NET ASSET
SHARES VALUE
-------------- -----------
<S> <C> <C>
Investment Company Funds:
Money Market Fund............................................ 32,754,324 $ 1.18
All America Fund............................................. 138,352,892 2.90
Equity Index Fund............................................ 109,673,279 2.45
Bond Fund.................................................... 39,470,522 1.42
Short-Term Bond Fund......................................... 3,804,353 1.03
Mid-Term Bond Fund........................................... 10,667,632 0.91
Composite Fund............................................... 165,687,292 1.78
Aggressive Equity Fund....................................... 84,338,638 1.51
Scudder Portfolios:
Bond Portfolio............................................... 3,325,129 6.88
Capital Growth Portfolio--Class "A".......................... 17,259,438 23.95
International Portfolio--Class "A"........................... 9,306,297 14.56
American Century VP Capital Appreciation Fund.................. 3,910,166 9.02
Calvert Social Balanced Portfolio.............................. 20,281,223 2.14
Fidelity Portfolios:
Equity-Income--"Initial" Class............................... 4,844,371 25.42
Contrafund--"Initial" Class.................................. 7,200,316 24.44
Asset Manager--"Initial" Class............................... 1,977,790 18.16
</TABLE>
3. EXPENSES
Administrative Charges--In connection with its administrative functions, the
Company deducts daily, at an annual rate of .40%, an amount from the value of
the net assets of all funds except the American Century VP Capital Appreciation
Fund for which the annual rate is .20% and each Fidelity fund, for which the
annual rate is .30%.
In addition, a deduction of up to $2.00 may be made at the end of each month
from a participant's account, except that such charge shall not exceed 1/12 of
1% of the balance in such account in any month.
Distribution Expense Charge--As principal underwriter, the Company performs all
distribution and sales functions and bears all distribution and sales expenses
relative to the Contracts. For
- 18 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. EXPENSES (CONTINUED)
providing these services, the Company deducts daily, at an annual rate of .35%,
an amount from the value of the net assets of each fund to cover such expenses.
Mortality and Expense Risk Charge--The Company assumes the risk to make annuity
payments in accordance with annuity tables provided in the Contracts regardless
of how long a participant lives and also assumes certain expense risks
associated with such annuity payments. For assuming this risk, the Company
deducts daily, at an annual rate of .50%, an amount from the value of the net
assets of each fund.
4. DIVIDENDS
All dividend distributions are reinvested in additional shares of the respective
funds or portfolios at net asset value. On December 31, 1998 a dividend
distribution was made by the Investment Company to shareholders of record as of
December 30, 1998. Prior thereto, the Investment Company declared and paid a
dividend distribution on September 15, 1998. The combined amount of these
dividends was as follows:
<TABLE>
<S> <C>
Money Market Fund.......................................... $ 1,752,196
All America Fund........................................... 47,402,384
Equity Index Fund.......................................... 20,792,224
Bond Fund.................................................. 3,838,355
Short-Term Bond Fund....................................... 179,684
Mid-Term Bond Fund......................................... 508,247
Composite Fund............................................. 12,314,050
Aggressive Equity Fund..................................... 1,141,598
</TABLE>
On January 28, 1998, February 25, 1998, April 28, 1998, July 29, 1998 and
October 28, 1998, dividends were paid by the Scudder Bond Portfolio. The
combined amount of the dividends was $1,222,480.
On January 28, 1998, February 25, 1998, April 28, 1998, July 29, 1998 and
October 28, 1998, dividends were paid by the Scudder Capital Growth Portfolio.
The combined amount of the dividends was $21,046,614.
On February 25, 1998, a dividend was paid by the Scudder International
Portfolio. The amount of the dividend was $15,648,053.
On March 13, 1998, a dividend was paid by the American Century VP Capital
Appreciation Fund. The amount of the dividend was $2,169,052.
On December 30, 1998, a dividend was paid by the Calvert Social Balanced
Portfolio. The amount of the dividend was $3,132,097.
On February 6, 1998, a dividend was paid by the Fidelity Equity-Income
Portfolio. The amount of the dividend was $6,472,639.
On February 6, 1998, a dividend was paid by the Fidelity Contrafund Portfolio.
The amount of the dividend was $6,753,142.
- 19 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. DIVIDENDS (CONTINUED)
On February 6, 1998, a dividend was paid by the Fidelity Asset Manager
Portfolio. The amount of the dividend was $3,312,566.
5. FINANCIAL HIGHLIGHTS
Shown below are financial highlights for a Unit outstanding throughout each of
the five years ended December 31, 1998, or, if not in existence a full year, the
initial period ended December 31:
<TABLE>
<CAPTION>
INVESTMENT COMPANY MONEY MARKET FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 1.95 $ 1.87 $ 1.80 $ 1.72 $ 1.68
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 2.03 $ 1.95 $ 1.87 $ 1.80 $ 1.72
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 19,121 16,831 17,511 17,502 17,653
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
INVESTMENT COMPANY ALL AMERICA FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 6.76 $ 5.39 $ 4.52 $ 3.35 $ 3.36
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 8.09 $ 6.76 $ 5.39 $ 4.52 $ 3.35
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 49,275 51,312 49,798 43,620 38,669
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
INVESTMENT COMPANY EQUITY INDEX FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 2.26 $ 1.72 $ 1.42 $ 1.05 $ 1.05
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 2.86 $ 2.26 $ 1.72 $ 1.42 $ 1.05
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 94,019 68,462 35,660 17,109 4,644
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
INVESTMENT COMPANY BOND FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 3.00 $ 2.75 $ 2.69 $ 2.28 $ 2.39
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 3.17 $ 3.00 $ 2.75 $ 2.69 $ 2.28
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 17,746 12,671 12,548 12,083 10,601
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
INVESTMENT COMPANY SHORT-TERM BOND FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 1.19 $ 1.14 $ 1.10 $ 1.03 $ 1.03
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 1.24 $ 1.19 $ 1.14 $ 1.10 $ 1.03
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 3,164 2,355 2,129 1,447 1,132
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- 20 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
INVESTMENT COMPANY MID-TERM BOND FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 1.26 $ 1.19 $ 1.16 $ 1.01 $ 1.06
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 1.32 $ 1.26 $ 1.19 $ 1.16 $ 1.01
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 7,325 4,478 3,828 2,848 1,444
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
INVESTMENT COMPANY COMPOSITE FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 4.36 $ 3.75 $ 3.39 $ 2.82 $ 2.95
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 4.93 $ 4.36 $ 3.75 $ 3.39 $ 2.82
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 59,833 61,359 66,715 70,558 73,239
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
INVESTMENT COMPANY AGGRESSIVE EQUITY FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 2.15 $ 1.80 $ 1.43 $ 1.05 $ 1.00
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 2.02 $ 2.15 $ 1.80 $ 1.43 $ 1.05
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 63,176 71,468 49,800 20,858 9,145
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
SCUDDER BOND FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 12.37 $ 11.48 $ 11.30 $ 9.69 $ 10.32
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 13.02 $ 12.37 $ 11.48 $ 11.30 $ 9.69
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 1,757 1,484 1,362 1,269 1,169
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
SCUDDER CAPITAL GROWTH FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 29.64 $ 22.11 $ 18.64 $ 14.67 $ 16.46
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 36.07 $ 29.64 $ 22.11 $ 18.64 $ 14.67
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 11,462 11,094 9,266 8,556 8,121
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
SCUDDER INTERNATIONAL FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 14.46 $ 13.43 $ 11.85 $ 10.80 $ 11.06
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 16.93 $ 14.46 $ 13.43 $ 11.85 $ 10.80
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 8,004 8,205 7,688 7,269 8,610
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- 21 -
<PAGE>
MUTUAL OF AMERICA SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
AMERICAN CENTURY
-----------------------------------------------------
VP CAPITAL APPRECIATION FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 11.04 $ 11.53 $ 12.18 $ 9.39 $ 9.61
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 10.69 $ 11.04 $ 11.53 $ 12.18 $ 9.39
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 3,303 4,510 7,264 8,061 6,361
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
CALVERT
-----------------------------------------------------
SOCIAL BALANCED FUND
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $ 2.65 $ 2.23 $ 2.01 $ 1.57 $ 1.64
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Unit value, end of year..................................... $ 3.04 $ 2.65 $ 2.23 $ 2.01 $ 1.57
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Thousands of units outstanding, end of year................. 14,257 12,479 10,713 7,849 5,986
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
---------------------------------------
VIP EQUITY-INCOME FUND
---------------------------------------
1998 1997 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Unit value, beginning of year............................... $27.77 $21.93 $19.43 $16.30
------ ------ ------ ------
------ ------ ------ ------
Unit value, end of year..................................... $30.65 $27.77 $21.93 $19.43
------ ------ ------ ------
------ ------ ------ ------
Thousands of units outstanding, end of year................. 4,018 3,491 2,342 728
------ ------ ------ ------
------ ------ ------ ------
<CAPTION>
FIDELITY
---------------------------------------
VIP II CONTRA FUND
---------------------------------------
1998 1997 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Unit value, beginning of year............................... $20.36 $16.59 $13.85 $11.43
------ ------ ------ ------
------ ------ ------ ------
Unit value, end of year..................................... $26.16 $20.36 $16.59 $13.85
------ ------ ------ ------
------ ------ ------ ------
Thousands of units outstanding, end of year................. 6,742 5,656 3,880 1,792
------ ------ ------ ------
------ ------ ------ ------
<CAPTION>
FIDELITY
---------------------------------------
VIP II ASSET MANAGER FUND
---------------------------------------
1998 1997 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Unit value, beginning of year............................... $21.14 $17.72 $15.66 $14.04
------ ------ ------ ------
------ ------ ------ ------
Unit value, end of year..................................... $24.04 $21.14 $17.72 $15.66
------ ------ ------ ------
------ ------ ------ ------
Thousands of units outstanding, end of year................. 1,488 1,150 613 184
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
- 22 -
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Mutual of America Life Insurance Company:
We have audited the accompanying statement of assets and liabilities of Mutual
of America Separate Account No. 2 as of December 31, 1998, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Separate
Account's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Mutual
of America Separate Account No. 2 as of December 31, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
[SIGNATURE]
New York, New York
February 19, 1999
- 23 -
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Mutual of America Life Insurance Company:
We have audited the accompanying consolidated statements of financial condition
of Mutual of America Life Insurance Company and its subsidiaries as of December
31, 1998 and 1997, and the related consolidated statements of operations and
surplus and cash flows for the years then ended. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1, the accompanying statutory-basis financial statements
were prepared in conformity with the accounting practices prescribed or
permitted by the State of New York Insurance Department which practices differ
from generally accepted accounting principles. The variances between such
practices and generally accepted accounting principles and the effects on the
accompanying financial statements are described in Note 9.
In our opinion, because of the effects of the matter described in the third
paragraph and more fully discussed in Note 9, the financial statements referred
to above do not present fairly, in conformity with generally accepted accounting
principles, the financial position of Mutual of America Life Insurance Company
and its subsidiaries as of December 31, 1998 and 1997, or the results of their
operations or their cash flows for the years then ended. Furthermore, in our
opinion, the supplemental data included in Note 9 reconciling net income and
surplus as shown in the financial statements to net income and surplus as
determined in conformity with generally accepted accounting principles, present
fairly, in all material respects, the information shown therein.
However, in our opinion, the statutory-basis consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Mutual of America Life Insurance Company and its subsidiaries as of
December 31, 1998 and 1997, and the results of their operations and their cash
flows for the years then ended in conformity with accounting practices
prescribed or permitted by the State of New York Insurance Department.
[SIGNATURE]
New York, New York
February 19, 1999
- 24 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------------- ------------------
<S> <C> <C>
ASSETS
GENERAL ACCOUNT ASSETS
Bonds and notes...................................................... $ 4,874,244,008 $ 4,795,022,564
Common stocks........................................................ 339,524,394 413,939,170
Preferred stocks..................................................... 55,771,462 59,466,239
Cash and short-term investments...................................... 98,685,966 67,164,422
Guaranteed funds transferable (Note 3)............................... 115,902,196 121,130,991
Mortgage loans....................................................... 19,289,253 41,315,430
Real estate.......................................................... 324,024,030 331,991,341
Policy loans......................................................... 100,633,395 97,854,314
Other invested assets................................................ 33,606,096 20,137,960
Investment income accrued............................................ 90,018,584 79,087,631
Receivables.......................................................... 8,363,971 9,307,851
Other assets......................................................... 10,847,128 31,266,929
------------------- ------------------
Total general account assets....................................... 6,070,910,483 6,067,684,842
SEPARATE ACCOUNT ASSETS................................................ 4,039,275,044 3,456,072,983
------------------- ------------------
TOTAL ASSETS........................................................... $ 10,110,185,527 $ 9,523,757,825
------------------- ------------------
------------------- ------------------
LIABILITIES AND SURPLUS
GENERAL ACCOUNT LIABILITIES
Insurance and annuity reserves....................................... $ 4,925,407,081 $ 4,929,073,256
Other contract liabilities and reserves.............................. 12,086,713 11,303,835
Dividends payable to contract and policyholders...................... 93,791 106,329
Note payable (Note 5)................................................ 137,021,175 137,021,175
Interest maintenance reserve......................................... 213,674,120 253,944,200
Other liabilities.................................................... 69,310,429 95,801,345
------------------- ------------------
Total general account liabilities.................................. 5,357,593,309 5,427,250,140
SEPARATE ACCOUNT RESERVES AND OTHER LIABILITIES........................ 4,039,275,044 3,456,072,983
------------------- ------------------
Total liabilities.................................................. 9,396,868,353 8,883,323,123
------------------- ------------------
ASSET VALUATION RESERVE................................................ 118,485,383 116,494,396
------------------- ------------------
SURPLUS
Assigned surplus..................................................... 1,150,000 1,150,000
Unassigned surplus................................................... 593,681,791 522,790,306
------------------- ------------------
Total surplus...................................................... 594,831,791 523,940,306
------------------- ------------------
TOTAL LIABILITIES AND SURPLUS.......................................... $ 10,110,185,527 $ 9,523,757,825
------------------- ------------------
------------------- ------------------
</TABLE>
See accompanying notes to consolidated financial statements.
- 25 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS AND SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------------ ------------------
<S> <C> <C>
INCOME
Annuity considerations and deposits.................................... $ 824,131,791 $ 740,959,658
Life and disability insurance premiums................................. 27,318,300 28,214,541
------------------ ------------------
Total considerations and premiums.................................... 851,450,091 769,174,199
Separate account investment and administration fees.................... 43,186,358 35,376,990
Net investment income (Notes 2 and 3).................................. 414,565,840 441,059,670
Other, net............................................................. (1,966,715) (336,265)
------------------ ------------------
Total income......................................................... 1,307,235,574 1,245,274,594
------------------ ------------------
DEDUCTIONS
Increase in insurance and annuity reserves............................. 81,812,257 41,301,697
Annuity and surrender benefits......................................... 999,743,408 973,365,824
Death and disability benefits.......................................... 20,153,378 20,161,949
Operating expenses..................................................... 151,448,387 147,172,396
------------------ ------------------
Total deductions..................................................... 1,253,157,430 1,182,001,866
------------------ ------------------
Net gain before dividends............................................ 54,078,144 63,272,728
DIVIDENDS TO CONTRACT AND POLICYHOLDERS.................................. 117,182 147,104
------------------ ------------------
Net gain from operations............................................. 53,960,962 63,125,624
FEDERAL INCOME TAX BENEFIT............................................... 1,150,189 367,818
NET REALIZED CAPITAL GAINS (Note 2)...................................... 16,642,540 10,778,415
------------------ ------------------
Net income........................................................... 71,753,691 74,271,857
SURPLUS TRANSACTIONS
Change in asset valuation reserve...................................... (1,990,987) (8,818,100)
Change in net unrealized capital gains................................. 7,239,633 32,160,963
Change in non-admitted assets and other, net........................... (6,110,852) (4,719,810)
------------------ ------------------
Net change in surplus................................................ 70,891,485 92,894,910
SURPLUS, AT BEGINNING OF YEAR............................................ 523,940,306 431,045,396
------------------ ------------------
SURPLUS, AT END OF YEAR.................................................. $ 594,831,791 $ 523,940,306
------------------ ------------------
------------------ ------------------
</TABLE>
See accompanying notes to consolidated financial statements.
- 26 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------------ -------------------
<S> <C> <C>
CASH PROVIDED
Premium and annuity funds received................................... $ 851,727,947 $ 769,846,793
Investment income received........................................... 338,956,078 437,472,096
Separate account investment and administrative fees.................. 43,186,358 35,376,990
Other, net........................................................... 1,739,776 (1,619,142)
------------------ -------------------
Total receipts..................................................... 1,235,610,159 1,241,076,737
------------------ -------------------
Benefits paid........................................................ 1,019,758,402 989,719,884
Dividends paid to contract and policyholders......................... 129,722 147,127
Insurance and operating expenses paid................................ 155,490,995 146,405,004
Net transfers to separate accounts................................... 84,395,589 286,778,743
------------------ -------------------
Total payments..................................................... 1,259,774,708 1,423,050,758
------------------ -------------------
Net cash used by operations........................................ (24,164,549) (181,974,021)
Proceeds from long-term investments sold, matured or repaid.......... 4,672,189,185 10,907,067,504
Proceeds from dollar roll transactions--repurchase agreements........ -- 700,714,763
Other, net........................................................... 47,407,939 44,741,139
------------------ -------------------
Total cash provided................................................ 4,695,432,575 11,470,549,385
------------------ -------------------
CASH APPLIED
Cost of long-term investments acquired............................... 4,606,240,005 10,730,606,933
Repayment of dollar roll transactions--repurchase agreements......... -- 700,714,763
Other, net........................................................... 57,671,026 32,548,605
------------------ -------------------
Total cash applied................................................. 4,663,911,031 11,463,870,301
------------------ -------------------
Net change in cash and short-term investments...................... 31,521,544 6,679,084
CASH AND SHORT-TERM INVESTMENTS
Beginning of year.................................................... 67,164,422 60,485,338
------------------ -------------------
End of year.......................................................... $ 98,685,966 $ 67,164,422
------------------ -------------------
------------------ -------------------
</TABLE>
See accompanying notes to consolidated financial statements.
- 27 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the consolidated accounts of
Mutual of America Life Insurance Company ("Mutual of America") and its wholly
owned subsidiaries (collectively referred to as the "Company"). Significant
intercompany balances and transactions have been eliminated in consolidation.
NATURE OF OPERATIONS
Mutual of America provides retirement and employee benefit plans in the small to
medium size case area, principally to employees in the not-for-profit social
health and welfare field. In recent years, through a wholly owned subsidiary,
the Company has expanded the scope of the field it serves to include for-profit
organizations in the small to medium size case area. The principal insurance
companies in the group are licensed in all fifty states and the District of
Columbia. Operations are conducted primarily through a network of regional field
offices staffed by salaried consultants.
BASIS OF PRESENTATION
The financial statements are presented in conformity with statutory accounting
practices prescribed or permitted by the State of New York Insurance Department,
which practices differ from generally accepted accounting principles ("GAAP").
The variances between such practices and GAAP and the effects on the
accompanying financial statements are described in Note 9. The ability of the
Company to fulfill its obligations to contractholders and policyholders is of
primary concern to insurance regulatory authorities. As such, the financial
statements are oriented to the insuring public.
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Certain 1997 amounts included in the accompanying consolidated financial
statements have been reclassified to conform with the 1998 presentation.
Accounting policies applied in the preparation and presentation of these
financial statements follow.
ASSET VALUATIONS
Investment valuations are prescribed by the National Association of Insurance
Commissioners ("NAIC"). Bonds qualifying for amortization are stated at
amortized cost; short-term investments in good standing are stated at cost. Fair
value for these securities (approximately $5.0 billion in 1998 and $4.9 billion
in 1997) is determined by reference to market prices quoted
- 28 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
by the NAIC. If quoted market prices are not available, fair value is determined
using quoted prices for similar securities. All other bonds and short-term notes
are stated at market value which approximates fair value.
Common stocks in good standing are stated at market value, which approximates
fair value. Market value is determined by reference to valuations quoted by the
NAIC. Unrealized gains and losses are applied directly to unassigned surplus.
Mortgage loans are carried at amortized indebtedness. Fair value for these loans
(approximately $19.6 million in 1998 and $46.8 million in 1997) is determined by
discounting the expected future cash flows using the current rate at which
similar loans would be made to borrowers with similar credit ratings and
remaining maturities. Impairments of individual assets that are considered other
than temporary are recognized when incurred. There were no impairments recorded
during 1998 or 1997.
Real estate, which is classified as Company occupied property, is carried at
cost, including capital improvements, net of accumulated depreciation, and
depreciated on a straight line basis over 39 years. Tenant improvements on real
estate investments are depreciated over the shorter of the lease term or the
estimated life of the improvement.
Policy loans are stated at the unpaid balance of the loan. The majority of such
loans are issued with variable interest rates which are periodically adjusted
based on changes in the rates credited to these policies and therefore are
considered to be stated at fair value.
Certain other assets, such as furniture and fixtures and prepaid expenses, are
excluded from the consolidated statements of financial condition ("non-admitted
assets").
INTEREST MAINTENANCE AND ASSET VALUATION RESERVES
Realized gains and losses, net of applicable taxes, arising from changes in
interest rates are accumulated in the Interest Maintenance Reserve ("IMR") and
are amortized into net investment income over the estimated remaining life of
the investment sold. All other realized gains and losses are reported in the
consolidated statements of operations and surplus.
An Asset Valuation Reserve ("AVR") applying to the specific risk characteristics
of all invested asset categories excluding cash, policy loans and investment
income accrued has been established based on a statutory formula. Realized and
unrealized gains and losses arising from changes in the creditworthiness of the
borrower are included in the appropriate subcomponent of the AVR. Changes in the
AVR are applied directly to unassigned surplus.
GUARANTEED FUNDS TRANSFERABLE
Guaranteed funds transferable consist of funds held by a former reinsurer and
are stated at the total principal amount of future guaranteed transfers to
Mutual of America, which approximates fair value.
- 29 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEPARATE ACCOUNT OPERATIONS
Certain annuity considerations may be invested at the participant's discretion
in separate accounts; either a multifund account, which is managed by Mutual of
America Capital Management Corporation, or certain other funds, which are
managed by outside investment advisors. All of the funds' investment experience,
including net realized and unrealized capital gains in the separate accounts
(net of investment advisory fees and administration fees assessed), is allocated
to participants. Charges for investment advisory fees and administration fees
are assessed as a percentage of the assets under management and vary based upon
the investment objectives of the fund and level of administrative services
provided. During 1998 and 1997 such fees were equal to approximately 1.10% of
the total average assets under management.
Investments held in the separate accounts are stated at market value, which
approximates fair value. Participants' corresponding equity in the separate
accounts are reported as liabilities in the accompanying statements. Premiums
and benefits related to the separate accounts are combined with the general
account in the accompanying statements. Net operating gains are offset by
increases to reserve liabilities in the respective separate accounts.
INSURANCE AND ANNUITY RESERVES
Reserves for annuity contracts are computed on the net single premium method and
represent the estimated present value of future retirement benefits. These
reserves are based on mortality and interest rate assumptions (ranging
predominately from 5.00% to 9.25%) which meet or exceed statutory requirements.
Reserves for contractual funds not yet used for the purchase of annuities are
accumulated at various interest rates which, during 1998 and 1997, averaged
5.00% and 5.50%, respectively and are deemed sufficient to provide for
contractual surrender values of these funds. Reserves for life and disability
insurance are based on mortality, morbidity and interest rate assumptions which
meet statutory requirements.
Contractual funds not yet used to purchase retirement annuities and other
deposit liabilities are stated at their cash surrender value, which approximates
fair value ($7.6 billion and $7.0 billion), at December 31, 1998 and 1997,
respectively. The fair value of annuity contracts (approximately $1.6 billion
and $1.5 billion at December 31, 1998 and 1997, respectively) was determined by
discounting expected future retirement benefits using current mortality tables
and interest rates based on the duration of expected future benefits. Weighted
average interest rates of 5.38% and 6.12% were used at December 31, 1998 and
1997, respectively.
PREMIUMS, ANNUITY CONSIDERATIONS, INVESTMENT INCOME AND EXPENSES
Insurance premiums and annuity considerations derived from defined contribution
plans are recognized as income when due. Voluntary savings-type and defined
benefit considerations and other deposits are recognized as income when
received. Group life and disability insurance premiums are recognized as income
over the contract period.
- 30 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
General account investment income is reported as earned and is presented net of
related investment expenses; operating expenses, including acquisition costs for
new business and income taxes, are charged to operations as incurred.
DIVIDENDS
Dividends are based on formulas and scales approved by the Board of Directors
and are accrued currently for payment subsequent to plan anniversary dates.
2. FIXED MATURITY AND EQUITY SECURITIES
The statement values and NAIC market values of investments in fixed maturity
securities (bonds and notes) at December 31, 1998 are shown below. Excluding
U.S. government and government agency investments, the Company is not exposed to
any significant concentration of credit risk.
<TABLE>
<CAPTION>
GROSS GROSS
STATEMENT UNREALIZED UNREALIZED NAIC
CATEGORY VALUE GAINS LOSSES MARKET VALUE
- ---------------------------------------------------------- ------------- ----------- ----------- -------------
(000'S OMITTED)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies.................... $ 2,030,666 $ 15,527 $ 1,071 $ 2,045,122
Obligations of states and political subdivisions.......... 10,727 2,086 -- 12,813
Debt securities issued by foreign governments............. 106,243 6,112 -- 112,355
Corporate securities...................................... 2,834,819 50,542 33,067 2,852,294
------------- ----------- ----------- -------------
Total................................................. $ 4,982,455 $ 74,267 $ 34,138 $ 5,022,584
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
</TABLE>
Short-term fixed maturity securities with a statement value and NAIC market
value of $108.2 million at December 31, 1998 are included in the above table. As
of December 31, 1998, the Company had $6.2 million (par value $6.0 million) of
its long-term fixed maturity securities on deposit with various state regulatory
agencies.
The statement values and NAIC market values of investments in fixed maturity
securities by contractual maturity (except for mortgage-backed securities which
are stated at expected maturity) at December 31, 1998 are shown below. Expected
maturities may differ from
- 31 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
2. FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
contractual maturities because borrowers may have the right to prepay
obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
STATEMENT NAIC
VALUE MARKET VALUE
------------- -------------
(000'S OMITTED)
<S> <C> <C>
Due in one year or less..................................... $ 261,253 $ 263,498
Due after one year through five years....................... 1,553,255 1,567,426
Due after five years through ten years...................... 1,417,466 1,498,422
Due after ten years......................................... 1,750,481 1,693,238
------------- -------------
Total................................................... $ 4,982,455 $ 5,022,584
------------- -------------
------------- -------------
</TABLE>
Proceeds from the sale of investments in fixed maturity securities during 1998
were $4.2 billion. Gross gains of $20.0 million and gross losses of $6.0 million
were realized on these sales, of which $14.0 million of gains were accumulated
in the IMR. Such amounts will be amortized into net investment income over the
estimated remaining life of the investment sold.
During 1998, $54.2 million of the IMR was amortized and included in net
investment income. Included in IMR amortization income for the year is a $34.5
million net adjustment related to realized capital gains that should have been
exempted from IMR since they were associated with higher than normal general
account withdrawal activity (including transfers to the Separate Account) that
occurred last year.
The statement values and NAIC market values of investments in fixed maturity
securities at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS
STATEMENT UNREALIZED UNREALIZED NAIC
CATEGORY VALUE GAINS LOSSES MARKET VALUE
- ---------------------------------------------------------- ------------- ----------- ----------- -------------
(000'S OMITTED)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies.................... $ 2,414,115 $ 7,846 $ 412 $ 2,421,549
Obligations of states and political subdivisions.......... 13,421 1,704 -- 15,125
Debt securities issued by foreign governments............. 101,186 4,624 28 105,782
Corporate securities...................................... 2,329,186 25,640 9,123 2,345,703
------------- ----------- ----------- -------------
Total................................................. $ 4,857,908 $ 39,814 $ 9,563 $ 4,888,159
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
</TABLE>
Short-term fixed maturity securities with a statement value and NAIC market
value of $62.9 million at December 31, 1997, are included in the above table. As
of December 31, 1997, the Company had $6.2 million (par value $6.0 million) of
its long-term fixed maturity securities on deposit with various state regulatory
agencies.
- 32 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
2. FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
Proceeds from the sale of investments in fixed maturity securities during 1997
were $11.1 billion. Gross gains of $145.1 million and gross losses of $16.0
million were realized on those sales, of which $126.4 million of gains were
accumulated (net of applicable tax benefits of $2.7 million) in the IMR. Such
amounts will be amortized into net investment income over the estimated
remaining life of the investment sold. During 1997, $18.0 million of the IMR was
amortized and included in net investment income.
Net realized capital gains (losses) reflected in the statements of operations
for the years ended December 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
(000'S OMITTED)
<S> <C> <C>
Equity securities (common and preferred stocks).................... $ 16,010 $ 19,606
Mortgage loans and other........................................... 633 (8,828)
--------- ---------
Net realized capital gains..................................... $ 16,643 $ 10,778
--------- ---------
--------- ---------
</TABLE>
At December 31, 1998 and 1997, net unrealized appreciation of common equity
securities was $51.3 million and $44.1 million, respectively.
3. REINSURANCE AND RELATED TRANSACTIONS
In 1980, Mutual of America terminated a reinsurance arrangement and assumed
direct ownership of funds held by the reinsurer and direct liability for the
contractual obligations of the reinsurer. Such amounts are reported as
guaranteed funds transferable and as insurance and annuity reserves in the
consolidated statements of financial condition.
The guaranteed funds are transferable to Mutual of America over time and are
stated at the total principal amount of future guaranteed transfers to Mutual of
America of $115.9 million and $121.1 million at December 31, 1998 and 1997,
respectively.
The guaranteed interest and other allocated investment earnings on the funds
held by the reinsurer, amounting to $12.2 million and $33.8 million in 1998 and
1997, respectively, are included in net investment income. Such amounts include
participating dividends from a contingency fund that was previously held by the
reinsurer (but not recorded as an asset of Mutual of America) of $25.9 million
in 1997. This amount includes the receipt of a $21.5 million special dividend
related to the termination of the contingency fund previously held by the
reinsurer.
4. REAL ESTATE
Real estate consists primarily of an office building that Mutual of America
purchased for its corporate headquarters. The purchase price of the building was
fully financed. The Company occupies approximately one-third of this office
building as its corporate headquarters and leases the remaining space.
Depreciation expense for 1998 and 1997 was $5.2 million in both years.
- 33 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
5. NOTE PAYABLE
In connection with the acquisition of its corporate headquarters, Mutual of
America obtained a $135.0 million, seven-year, 6.91% fixed rate secured term
note. Fair value of the note was approximately $137.0 million at December 31,
1998 and 1997. The note matures and is payable in full on October 15, 1999 and
is not redeemable prior to that date. Interest on the note is payable
semiannually in April and October. The terms of the note require that Mutual of
America pledge collateral, consisting of securities issued by the United States
Government or its agencies. The aggregate book and market values of the
collateral must be maintained at a level greater than or equal to 100% and 110%,
respectively, of the outstanding balance of the note. At December 31, securities
with a book and market value of approximately $166.7 million and $169.9 million
in 1998 and $167.9 million and $167.5 million in 1997, respectively, were
pledged as collateral.
6. PENSION PLAN AND POSTRETIREMENT BENEFITS
The Company has a qualified, non-contributory defined benefit pension plan
covering virtually all employees. Benefits are generally based on years of
service and final average salary. The Company's funding policy is to contribute
annually, at a minimum, the amount necessary to satisfy the funding requirements
under the Employee Retirement Income Security Act of 1974 ("ERISA"). The Company
also maintains two non-qualified defined benefit pension plans. The first
provides benefits to employees whose total compensation exceeds the maximum
allowable compensation limits for qualified retirement plans under ERISA. The
second provides benefits to non-employee members of the Board of Directors.
The Company has two defined benefit postretirement plans covering substantially
all salaried employees. Employees may become eligible for such benefits upon
attainment of retirement age while in the employ of the Company and upon
satisfaction of service requirements. One plan provides medical and dental
benefits and the second plan provides life insurance benefits. The
postretirement plans are contributory for those individuals who retire with less
than twenty years of eligible service, with retiree contributions adjusted
annually and contain other cost-sharing features, such as deductibles and
coinsurance.
Pension expense for all pension plans in 1998 and 1997 was $8.9 million and $5.4
million, respectively. The 1998 amount includes $2.8 million of expense related
to the lump-sum settlement of approximately $24.2 million in pension benefits
during the year. Prior to 1997, pension plan expense was computed on a modified
GAAP basis. Effective January 1, 1997 the expense and liability related to all
of the Company's pension plans and its long term incentive compensation plan
(described below) are calculated in accordance with GAAP. This change resulted
in a charge to surplus, net of the change in the prepaid pension cost, of $9.7
million at January 1, 1997.
- 34 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
6. PENSION PLAN AND POSTRETIREMENT BENEFITS (CONTINUED)
The components of net pension expense related to all of the Company's pension
plans are as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
(000'S OMITTED)
<S> <C> <C>
Service cost........................................................ $ 5,353 $ 4,596
Interest cost on projected benefit obligation....................... 6,189 5,159
Expected return on plan assets...................................... (6,870) (5,469)
Amortization of initial net asset................................... (211) (211)
Amortization of unrecognized loss................................... 1,639 1,291
Settlement loss..................................................... 2,768 --
--------- ---------
Net pension expense............................................. $ 8,868 $ 5,366
--------- ---------
--------- ---------
</TABLE>
The funded status of all of the Company's pension plans at December 31, 1998 and
1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
(000'S OMITTED)
<S> <C> <C>
Projected benefit obligation..................................... $ (93,544) $ (77,322)
Plan assets at fair value........................................ 60,470 58,619
---------- ----------
Projected benefit obligation in excess of plan assets............ (33,074) (18,703)
Remaining unrecognized initial net asset......................... (450) (841)
Unrecognized prior service cost.................................. 4,564 5,177
Unrecognized net loss from past experience different from that
assumed........................................................ 40,079 17,546
---------- ----------
Prepaid pension cost, end of year................................ $ 11,119 $ 3,179
---------- ----------
---------- ----------
</TABLE>
For financial reporting purposes, the prepaid pension cost at December 31, 1998
and 1997, has been classified as a non-admitted asset. At December 31, 1998 all
of the qualified pension plan assets are invested in one of the Company's
separate accounts (consisting primarily of equity securities) and participation
in certain other funds managed by outside investment advisors.
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 6.80% and 7.25% at December 31, 1998 and 1997,
respectively. This .45% decrease in the discount rate together with a change in
employee mortality and turnover rates resulted in a $17.3 million increase in
the projected benefit obligation (PBO) for the year. The assumed rate of
increase in future compensation levels was 4.00% in 1998 and 1997. The
- 35 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
6. PENSION PLAN AND POSTRETIREMENT BENEFITS (CONTINUED)
assumed long-term rate of return on assets used in determining the net periodic
pension cost was 11.30% in 1998 and 1997. The change in the PBO during 1998 and
1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ---------
(000'S OMITTED)
<S> <C> <C>
January 1 balance................................................. $ 77,322 $ 60,351
Service cost...................................................... 5,353 4,596
Interest cost..................................................... 6,189 5,159
Change in assumptions............................................. 17,298 7,850
Actuarial loss.................................................... 11,775 4,326
Benefits and expenses paid........................................ (24,393) (4,960)
---------- ---------
December 31 balance............................................... $ 93,544 $ 77,322
---------- ---------
---------- ---------
</TABLE>
The Company funds the qualified non-contributory defined benefit pension plan in
accordance with the requirements of ERISA. Plan assets at fair value for the
qualified pension plan were $52.3 million and $47.4 million at December 31, 1998
and 1997, respectively. The actuarial present value of accumulated benefits for
the qualified pension plan were $32.6 million and $50.0 million at December 31,
1998 and 1997, respectively. During 1998 and 1997, the Company made
contributions to the qualified plan of $13.3 million and $4.4 million,
respectively.
The change in plan assets for all of the Company's pension plans is as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ---------
(000'S OMITTED)
<S> <C> <C>
January 1 balance................................................. $ 58,619 $ 43,718
Employer contributions............................................ 16,807 12,127
Return on Plan assets............................................. 9,437 7,734
Benefits and expenses paid........................................ (24,393) (4,960)
---------- ---------
December 31 balance............................................... $ 60,470 $ 58,619
---------- ---------
---------- ---------
</TABLE>
In addition to the above noncontributory plans, all employees may participate in
a 401(k) savings plan under which the Company matches half of the employees'
basic contribution up to 6% of salary. The cost of this plan was approximately
$1.7 million and $1.6 million in 1998 and 1997, respectively. The Company also
has a long-term performance based incentive compensation plan for certain
employees. Shares are granted each year and generally vest over a three-year
period. The value of such shares is based upon increases in the Company's
statutory surplus and the maintenance of certain financial ratios. Compensation
expense recognized in 1998 and 1997 related to this plan was $3.2 million and
$3.0 million respectively.
- 36 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
6. PENSION PLAN AND POSTRETIREMENT BENEFITS (CONTINUED)
The components of net postretirement benefit cost are as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
(000'S OMITTED)
<S> <C> <C>
Service cost.......................................................... $ 609 $ 600
Interest cost on projected benefit obligation......................... 1,272 1,175
Actuarial loss........................................................ 156 --
--------- ---------
Net postretirement benefit cost....................................... $ 2,037 $ 1,775
--------- ---------
--------- ---------
</TABLE>
The following table shows the plans' combined status reconciled with the amounts
reported in the Company's consolidated statements of financial condition:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
(000'S OMITTED)
<S> <C> <C>
Accumulated postretirement benefit obligation ("APBO"):
Retirees......................................................... $ 7,854 $ 5,911
Fully eligible active plan participants.......................... 3,367 3,456
Other active plan participants................................... 6,817 6,239
--------- ---------
Total APBO................................................... 18,038 15,606
Plan assets at fair value.......................................... -- --
--------- ---------
APBO in excess of plan assets...................................... 18,038 15,606
Unrecognized net loss.............................................. (5,615) (4,920)
--------- ---------
Accrued postretirement obligation.................................. $ 12,423 $ 10,686
--------- ---------
--------- ---------
</TABLE>
The weighted average annual assumed rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) for the medical plan is
approximately 7.00% in 1998. The health care cost trend rate assumption has a
significant affect on the amounts reported. For example, increasing the assumed
health care cost trend rate by one percentage point in each year would increase
the accumulated postretirement obligation for the plan as of December 31, 1998
by $1.3 million and the aggregate of the service and interest cost components of
the net periodic benefit cost for 1998 by $.3 million.
The discount rate used in determining the APBO was 6.80% at December 31, 1998
and 7.25% at December 31, 1997.
7. COMMITMENTS AND CONTINGENCIES
Rental expenses were $17.3 million and $16.7 million in 1998 and 1997,
respectively. The approximate minimum rental commitments under noncancelable
operating leases are as follows: 1999, $2.8 million, 2000, $2.1 million, 2001,
$1.7 million, 2002, $1.6 million and 2003,
- 37 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
$1.0 million, and 2004 and beyond, $.8 million. Such leases are principally for
leased office space, furniture and equipment. Certain office space leases
provide for adjustments to reflect changes in real estate taxes and other
operating expenses.
The Company is involved in various legal actions which have arisen in the course
of the Company's business. In the opinion of management, the ultimate liability
with respect to such lawsuits as well as other contingencies is not considered
to be material in relation to the Company's consolidated financial statements.
8. FEDERAL INCOME TAXES
Mutual of America's pension business was exempt from federal income taxation
under Section 501(a) of the Internal Revenue Code ("Code") in 1997. Effective
January 1, 1998 Mutual of America's pension business became subject to federal
income tax. Mutual of America and its life subsidiary file federal tax returns
on a separate company basis. Mutual of America's non-insurance subsidiaries file
a consolidated tax return. The Federal income tax benefit for the year ended
December 31, 1998 amounted to $1.2 million as compared to benefit of $.4 million
in 1997. The 1998 and 1997 tax benefits reflected in the accompanying statements
of operations and surplus arose principally from the operating results of its
insurance and non-insurance subsidiaries.
The difference between the actual tax benefit reflected in the accompanying
consolidated statements of operations and the expected tax provision computed by
applying the statutory rate of 35% to operating income arises principally from
the differing statutory and tax treatment of IMR income and realized capital
gains and losses on investment transactions and from the differences between the
tax and statutory basis of Mutual of America's assets and liabilities. Such
differences resulted from transition rules under the Code as of January 1, 1998,
which accompanied the change in taxation of Mutual of America's pension
business. These transition rules will moderate Mutual of America's tax expense
over the next several years.
9. RECONCILIATION OF STATUTORY BASIS FINANCIAL RESULTS TO A GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES BASIS
The accompanying financial statements are presented in conformity with statutory
accounting practices prescribed or permitted by the State of New York Insurance
Department which practices differ from GAAP. The variances between such
practices and GAAP and the effects on the accompanying financial statements
follow:
ASSET VALUATIONS AND INVESTMENT INCOME RECOGNITION
GAAP requires the Company's bonds and notes to be classified as either held to
maturity ("HTM") or available for sale ("AFS"); whereas for statutory accounting
no such classification is required. In addition, for GAAP, AFS bonds and notes
are carried at their fair market value
- 38 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
9. RECONCILIATION OF STATUTORY BASIS FINANCIAL RESULTS TO A GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES BASIS (CONTINUED)
with the unrealized gains and losses applied directly to surplus; whereas for
statutory accounting all bonds and notes are carried at their amortized cost.
Realized capital gains and losses, net of applicable taxes, arising from changes
in interest rates are recognized in income currently for GAAP accounting, rather
than accumulated in the IMR and amortized into income over the remaining life of
the security sold for statutory accounting. Additionally, capital gains and
losses are not recognized when a security is sold and the same or substantially
the same security is repurchased, unless the repurchase occurs after a
reasonable exposure to market risk.
A general formula based Asset Valuation Reserve (AVR) is recorded for statutory
accounting purposes, whereas such reserves are established under GAAP only when
an asset's impairment is considered to be other than temporary.
Certain assets, principally furniture and fixtures and prepaid expenses, for
statutory accounting, are excluded from the statement of financial condition by
a charge to surplus; whereas under GAAP, such assets are carried at their
amortized cost.
POLICY ACQUISITION COSTS
Under GAAP, policy acquisition costs that are directly related to and vary with
the production of new business are deferred and amortized over the estimated
life of the applicable policies, rather than being expensed as incurred.
INSURANCE AND ANNUITY RESERVES
Under statutory accounting practices the interest rates and mortality and
morbidity assumptions used are those which are prescribed or permitted by the
State of New York Insurance Department. Under GAAP, for annuities the interest
rate assumptions used are generally those assumed in the pricing of the contract
at issue; for disability benefits the interest rates assumed are those
anticipated to be earned over the duration of the benefit period. Mortality and
morbidity assumptions are based on Company experience.
PREMIUM RECOGNITION
Insurance contracts that do not subject the insurer to significant mortality or
morbidity risk are considered, under GAAP, to be primarily investment contracts.
GAAP requires all amounts received from policyholders under these investment
contracts to be recorded as a policyholder deposit rather than as premium
income.
- 39 -
<PAGE>
MUTUAL OF AMERICA LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
9. RECONCILIATION OF STATUTORY BASIS FINANCIAL RESULTS TO A GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES BASIS (CONTINUED)
DEFERRED INCOME TAXES
GAAP requires that a deferred tax asset or liability be established to provide
for temporary differences between the tax and financial reporting bases of
assets and liabilities. Deferred income taxes are not recorded for statutory
accounting purposes.
The tables that follow provide a reconciliation of the 1998 and 1997 statutory
financial results reflected in the accompanying financial statements to a GAAP
basis (000's omitted):
<TABLE>
<CAPTION>
RECONCILIATION OF STATUTORY TO GAAP SURPLUS 1998 1997
- -------------------------------------------------------------- ------------- -----------
<S> <C> <C>
STATUTORY SURPLUS............................................. $ 594,832 $ 523,940
Market value adjustment related to AFS bonds and notes...... 170,821 160,980
Realized capital gains...................................... 136,019 163,422
AVR......................................................... 118,485 116,494
Deferred policy acquisition costs........................... 39,761 36,905
Policy reserve adjustments.................................. (21,815) (17,510)
Non-admitted assets......................................... 16,196 9,563
Federal income taxes........................................ 163,130 (20,571)
Other....................................................... 1,663 1,135
------------- -----------
GAAP SURPLUS.................................................. $ 1,219,092 $ 974,358
------------- -----------
------------- -----------
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION OF STATUTORY TO GAAP NET INCOME 1998 1997
- ---------------------------------------------------------------- ----------- -----------
<S> <C> <C>
STATUTORY NET INCOME............................................ $ 71,754 $ 74,272
Investment income adjustments................................. (52,750) (8,020)
Realized capital gains........................................ 25,342 145,791
Policy reserve adjustments.................................... (3,463) 3,781
Deferred acquisition costs.................................... 5,969 2,518
Deferred income taxes......................................... 237,051 (6,559)
Dividend related to termination of contingency fund (Note
3).......................................................... -- (20,920)
Other......................................................... (1,488) (4,485)
----------- -----------
GAAP NET INCOME................................................. $ 282,415 $ 186,378
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION OF GAAP TO STATUTORY PREMIUMS 1998 1997
- ---------------------------------------------------------------- ----------- -----------
<S> <C> <C>
GAAP PREMIUM INCOME............................................. $ 61,073 $ 104,129
Premiums from investment contracts............................ 790,377 665,045
----------- -----------
STATUTORY PREMIUM INCOME........................................ $ 851,450 $ 769,174
----------- -----------
----------- -----------
</TABLE>
- 40 -
