<PAGE>
As filed with the Securities and Exchange Commission on March 2, 2000
Registration No. 33-6486
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [_]
[X]
Post-Effective Amendment No. 18
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 19
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Mutual of America Investment Corporation
(Exact name of Registrant as Specified in Charter)
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320 Park Avenue
New York, New York 10022
(Address of Principal Executive Office)( Zip Code)
(212) 224-1600
(Depositor's Telephone Number, including Area Code)
---------------
Dolores J. Morrissey, President
Mutual of America Investment Corporation
320 Park Avenue
New York, New York 10022
(Name and Address of Agent for Service)
---------------
Copy to:
Deborah S. Becker, Esq.
Senior Vice President and
Associate General Counsel
Mutual of America Life Insurance Company
320 Park Avenue
New York, New York 10022
---------------
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the Registration Statement.
It is proposed that this filing will become effective: (check appropriate
space)
[_]immediately upon filing pursuant to paragraph (b).
[_]on (date) pursuant to paragraph (b)
[_]60 days after filing pursuant to paragraph (a)(1)
[X]on April 30, 2000 pursuant to paragraph (a)(1)
[_]75 days after filing pursuant to paragraph (a)(2)
[_]on (date) pursuant to paragraph (a)(2) of Rule 485
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<PAGE>
MUTUAL OF AMERICA INVESTMENT CORPORATION
Cross-Reference Sheet
<TABLE>
<CAPTION>
Items in
Part A of
Form N-1A Caption in Form N-1A Caption or Location in Prospectus
--------- -------------------- ---------------------------------
<C> <C> <S>
1 Front and Back Cover Pages....... Front and Back Covers
2 Risk/Return Summary: Investments,
Risks, and Performance........... Summary of How Our Funds Invest
3 Risk/Return Summary: Fee Table... Not Applicable (shares only to
Separate Accounts)
4 Investment Objectives, Principal
Investment Strategies, and Details about How Our Funds
Related Risks.................... Invest and Related Risks
5 Management's Discussion of Fund Not Applicable (Included in
Performance...................... Annual Report)
6 Management, Organization, and
Capital Structure................ Management of the Funds
7 Shareholder Information.......... Information on Fund Shares
8 Distribution Agreements.......... Not Applicable
9 Financial Highlights
Information...................... Financial Highlights
<CAPTION>
Items in Caption or Location in
Part B of Statement of Additional
Form N-1A Caption in Form N-1A Information
--------- -------------------- -----------------------
<C> <C> <S>
10 Cover Page and Table of
Contents......................... Cover
11 Fund History..................... Investment Company's Form of
Operations
12 Description of the Fund and Its
Investments and Risks............ Investment Strategies and Related
Risks; Fundamental Investment
Restrictions; Non-Fundamental
Investment Policies; Description
of Corporate Bond Ratings; Use of
Standard & Poor's Indices
13 Management of the Fund........... Management of the Investment
Company
14 Control Persons and Principal Investment Company's Form of
Holders of Securities............ Operations
15 Investment Advisory and Other
Services......................... Investment Advisory Arrangements;
Independent Auditors; Legal
Matters; Custodian
16 Brokerage Allocation and Other Portfolio Transactions and
Practices........................ Brokerage
17 Capital Stock and Other Investment Company's Form of
Securities....................... Operations
18 Purchase, Redemption, and Pricing Purchase, Redemption and Pricing
of Shares........................ of Shares
19 Taxation of the Fund............. Taxation of the Investment
Company
20 Underwriters..................... Distribution Arrangements
21 Calculation of Performance Data.. Yield and Performance Information
22 Financial Statements............. Financial Statements
<CAPTION>
Items in
Part C of
Form N-1A Caption in Form N-1A and in Part C of Registration Statement
--------- ------------------------------------------------------------
<C> <C> <S>
23 Exhibits
24 Persons Controlled by or Under Common Control with the Fund
25 Indemnification
26 Business and Other Connections of the Investment Adviser
27 Principal Underwriters
28 Location of Accounts and Records
29 Management Services
30 Undertakings
</TABLE>
<PAGE>
Mutual of America Investment Corporation
320 Park Avenue, New York, New York 10022
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Mutual of America Investment Corporation is a mutual fund. It currently has
these nine Funds:
.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
.Money Market Fund
The Funds serve as investment vehicles for account balances under variable
accumulation annuity contracts and variable life insurance policies issued by
Mutual of America Life Insurance Company and The American Life Insurance
Company of New York (the Insurance Companies). Separate Accounts of the
Insurance Companies purchase Fund shares.
This Prospectus has information a contractholder or policyowner should know
before allocating account balance to the Separate Account Funds that invest in
shares of the Funds. You should read this Prospectus carefully and keep it for
future reference.
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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Prospectus dated May 1, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary of How Our Funds Invest...................................... 1
Equity Index Fund................................................... 1
All America Fund.................................................... 1
Mid-Cap Equity Index Fund........................................... 2
Aggressive Equity Fund.............................................. 2
Composite Fund...................................................... 2
Bond Fund........................................................... 2
Mid-Term Bond Fund.................................................. 3
Short-Term Bond Fund................................................ 3
Money Market Fund................................................... 4
Annual Total Returns................................................ 4
Average Annual Total Returns........................................ 7
Management of the Funds.............................................. 9
The Adviser......................................................... 9
Subadvisers for a Portion of the All America Fund................... 9
Portfolio Managers.................................................. 10
Details about How Our Funds Invest and Related Risks................. 11
Investment Objectives and Strategies................................ 11
Equity Index Fund.................................................. 11
All America Fund................................................... 11
Mid-Cap Equity Index Fund.......................................... 13
Aggressive Equity Fund............................................. 14
Composite Fund..................................................... 14
Bond Fund.......................................................... 15
Mid-Term Bond Fund................................................. 15
Short-Term Bond Fund............................................... 16
Money Market Fund.................................................. 16
Risks of Investing in Stock Funds................................... 17
Risks of Investing in Bond Funds.................................... 17
Specific Investments or Strategies, and Related Risks............... 18
Information About Fund Shares........................................ 20
Pricing of Funds' Shares............................................ 20
Purchase of Shares.................................................. 20
Redemption of Shares................................................ 20
Dividends, Capital Gains Distributions and Taxes.................... 20
Financial Highlights................................................. 21
You May Obtain More Information...................................... Back cover
</TABLE>
<PAGE>
SUMMARY OF HOW OUR FUNDS INVEST
Each Fund of Mutual of America Investment Corporation (the Investment Company)
has its own investment objective and tries to achieve its objective with
certain investment strategies. The Funds' different investment strategies will
affect the return of the Funds and the risks of investing in each Fund.
A Fund may not achieve its objective. An investment in any of the Funds could
decline in value.
Equity Index Fund
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The Fund seeks investment results that correspond to the investment performance
of the Standard & Poor's Composite Index of 500 Stocks (the S&P 500(R) Index).
The Fund invests primarily in the 500 common stocks included in the S&P 500
Index.
. Securities in the S&P 500 Index generally are
issued by companies with large market
capitalizations.
. Securities are included in the Index based on
industry weightings and the issuers' leading
positions in those industries.
An investment in the Equity Index Fund is subject to market risk and financial
risk, as defined below.
All America Fund
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The Fund attempts to outperform the S&P 500 Index, by investing in a
diversified portfolio of primarily common stocks.
. Approximately 60% of the Fund's assets are invested
to replicate the S&P 500 Index by investing in the
500 common stocks included in the S&P 500 Index.
. Approximately 40% of the Fund's assets are invested
by the Adviser and two Subadvisers, each segment
having approximately 10% of the Fund's assets, with
an objective of capital appreciation and, to a
lesser extent, current income. The Adviser invests
one segment primarily in small capitalization value
stocks and another segment primarily in large
capitalization value stocks; one Subadviser invests
primarily in small capitalization growth stocks;
and the other Subadviser invests primarily in mid-
and large capitalization growth stocks.
An investment in the All America Fund is subject to market and financial risk,
as defined below. Approximately 20% of the All America Fund's assets are
invested in small capitalization growth and value stocks, many of which trade
over-the-counter, and this portion of its portfolio will have more market and
financial risk than the portion invested in mid and large capitalization
stocks. Equity securities that trade over-the-counter may be more difficult to
sell than equity securities that trade on a national securities exchange.
..............................................................
Risks Defined for Investing in Equity Securities
-- Market Risk refers to how much the value of a security changes
(volatility of price) when conditions in the securities markets change or
the economic environment changes. Stocks of companies with smaller market
capitalizations generally have more market risk than stocks of companies
with larger market capitalizations. Market capitalization refers to the
aggregate market value of the equity securities (stock) that a company has
issued.
-- Financial (or credit) risk refers to the earning stability and overall
financial soundness of an issuer of an equity security.
-1-
<PAGE>
Mid-Cap Equity Index Fund
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The Fund seeks investment results that correspond to the investment performance
of the S&P MidCap 400 Index.
. The Fund invests primarily in the 400 common stocks
included in the S&P MidCap 400 Index.
. These stocks are issued by companies with mid-sized
market capitalizations.
An investment in the MidCap Equity Index Fund is subject to market and
financial risk (as defined on page 1).
Aggressive Equity Fund
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The Fund seeks capital appreciation by investing primarily in growth and value
common stocks. Many of the stocks purchased are issued by companies that have
small market capitalizations and are traded over-the-counter.
The Fund uses two different investment styles to seek its investment objective:
. The Fund invests in growth stocks issued by
companies the Adviser believes to possess above-
average growth potential.
. The Fund invests in value stocks issued by
companies the Adviser believes to be undervalued in
the marketplace in relation to factors such as the
company's assets, earnings, or growth potential.
An investment in the Aggressive Equity Fund is subject to market and financial
risk (as defined on page 1). The Aggressive Equity Fund has more market risk
and financial risk than our other stock funds, because it generally invests in
small capitalization growth and value equity securities that often trade over-
the-counter.
Composite Fund
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The Fund seeks capital appreciation and current income by investing in a
diversified portfolio of common stocks, debt securities and money market
instruments. The portion of the Fund's assets invested in each category of
securities will vary, based on the Adviser's view of current economic and
market conditions.
. The current investment strategy for the equity
portion on the Fund is to invest in approximately
25 stocks in the S&P 500 Index that are the largest
in the Index by market capitalization, and in
approximately 50-75 additional stocks that also are
included in the S&P 500 Index, as selected by the
Adviser.
. The current investment strategy for the fixed
income portion of the Fund is to invest primarily
in investment grade debt securities issued by U.S.
corporations or by the U.S. Government or its
agencies, including mortgage-backed securities.
An investment in the Composite Fund has market risk. By investing in equity
securities and debt securities, the Fund tries to reduce the market risk that
would exist for an investment in either a stock fund or a bond fund. An
investment in the Composite Fund has moderate financial risk, based on the
Fund's purchase of equity securities included in the S&P 500 Index and its
purchase of investment grade debt securities. Refer to "Risks Defined for
Investing in Equity Securities" on page 1 and "Risks of Investing in any of the
Bond Funds" on page 3.
Bond Fund
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The Fund seeks current income, with preservation of shareholders' capital a
secondary objective. The Fund's securities holdings will have an average
maturity that varies according to the Adviser's view of current market
conditions. The Fund invests primarily in publicly-traded, investment grade
debt securities.
. The Fund invests in corporate, U.S. Government
securities and U.S. Government agency securities,
such as bonds, notes, debentures, zero coupon
securities and mortgage-backed securities.
. The Fund may have a significant portion of its
assets invested in a particular type of debt
security, such as U.S. Government agency mortgage-
backed securities, zero coupon securities or
securities rated BBB.
-2-
<PAGE>
. The Adviser evaluates individual securities and
selects securities based on interest income to be
generated and does not time purchases and sales
based on interest rate predictions.
You should refer to "Risks of Investing in any of the Bond Funds" below.
Mid-Term Bond Fund
- --------------------------------------------------------------------------------
The Fund seeks current income, with preservation of shareholders' capital a
secondary objective. The Fund's securities holdings will have an average
maturity of three to seven years. The Fund invests primarily in publicly-
traded, investment grade debt securities.
. The Fund invests in corporate, U.S. Government
securities and U.S. Government agency securities,
such as bonds, notes, debentures, zero coupon
securities and mortgage-backed securities.
. The Fund may have a significant portion of its
assets invested in a particular type of debt
security, such as U.S. Government agency mortgage-
backed securities, zero coupon securities or
securities rated BBB.
. The Adviser generally selects securities based on
interest income to be generated and does not time
purchases and sales based on interest rate
predictions.
You should refer to "Risks of Investing in any of the Bond Funds" below.
Short-Term Bond Fund
- --------------------------------------------------------------------------------
The Fund seeks current income, with preservation of shareholders' capital a
secondary objective. The Fund's securities holdings will have an average
maturity of one to three years. The Fund invests primarily in publicly-traded,
investment grade debt securities.
. The Fund invests in corporate, U.S. Government
securities, U.S. Government agency securities and
money market instruments, such as bonds, notes,
zero coupon securities, mortgage-backed securities
and commercial paper.
. The Fund may have a significant portion of its
assets invested in a particular debt security, such
as U.S. Government or agency securities, which also
may be mortgage-backed securities.
. The Adviser selects securities based on income to
be generated and does not time purchases and sales
based on interest rate predictions.
You should refer to "Risks of Investing in any of the Bond Funds" below.
Risks of Investing in any of the Bond Funds
An investment in any of the Bond Funds is subject to market risk, which
includes changes in the overall level of interest rates. Interest rate
increases usually cause a decline in the value of debt securities, with the
amount of the decline greater for securities with longer terms to maturity. For
this reason, the Bond Fund has more market risk than the Mid-Term Bond Fund,
and the Mid-Term Bond Fund has more market risk than the Short-Term Bond Fund.
Lower rated investment grade debt securities, which the Bond Fund and the Mid-
Term Bond Fund purchase, may be subject to a greater market risk than higher
rated debt securities. Zero coupon securities, which the Bond Fund and Mid-Term
Bond Fund also may purchase, may be subject to a greater market risk than
securities that pay interest on a regular basis. Mortgage-backed securities or
certificates, which all of the Funds may purchase and in which the Short-Term
Bond Fund from time to time invests a significant portion of its assets, are
subject to prepayment risk (shortening the term to maturity) when interest
rates fall and to extension risk (lengthening the term to maturity) when
interest rates rise.
An investment in any of the Bond Funds also involves credit risk, which refers
to the ability of the issuer of a security to pay principal and interest as it
becomes due. Securities rated BBB have more credit risk than higher-rated
investment grade securities.
-3-
<PAGE>
Money Market Fund
- --------------------------------------------------------------------------------
The Fund seeks current income and preservation of principal by investing in
money market instruments that meet certain requirements for liquidity,
investment quality and stability of capital.
. The average maturity of the instruments the Fund
holds will be short-term -- 90 days or less.
. The Fund will purchase only securities that are
rated in one of the two highest rating categories
by at least two rating agencies, with most
securities rated in the highest category.
. The Fund will diversify its investments, limiting
holdings in the securities of any one issuer
(except the U.S. Government or its agencies) to 5%
of assets.
The Money Market Fund pays dividends of income earned on an annual basis,
rather than declaring dividends daily to maintain a stable net asset value of
$1.00.
. The Fund's net asset value will generally rise
during the year as the Fund earns income, before
dividends are paid.
. The Fund's net asset value will decline when the
Fund declares dividends and pays income to
shareholders at the end of December each year.
A shareholder's investment in the Fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation, the U.S. Government or any other
government agency.
An investment in the Money Market Fund has a small amount of market risk and
financial risk, because the Fund holds high quality securities with short terms
to maturity. The Fund has a high level of current income volatility, because
its securities holdings are short term and it reinvests at current interest
rates as its holdings mature.
Annual Total Returns
- --------------------------------------------------------------------------------
The bar charts below show the annual return of each Fund for the past ten
years, or for the years the Fund has been in operation if less than ten years.
A chart indicates the risks of investing in a particular Fund by showing
changes in the Fund's performance from year-to-year during the period, but a
Fund's past performance does not necessarily indicate how it will perform in
the future.
Below each chart is the Fund's highest total return for any calendar quarter
during the period covered by the chart, called the best quarter return, and the
Fund's lowest total return for any calendar quarter during the period covered,
called the worst quarter return. These returns are an indication of the
volatility of a Fund's total returns. The numbers in parentheses are negative,
representing a loss of principal.
The total returns shown do not include charges against the assets of the
Separate Accounts that purchase Fund shares. If these charges were reflected,
returns would be less than those shown.
a
Equity Index Fund:
[BAR CHART]
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
1.5% 36.6% 22.7% 33.1% 28.6%
Best quarter return: 21.4% during fourth quarter 1998
Worst quarter return: (9.9%) during third quarter 1998
-4-
<PAGE>
All America Fund:
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(3.8%) 22.6% 3.2% 12.0% 1.3% 36.6% 20.7% 26.8% 21.3%
Best quarter return: 22.1% during fourth quarter 1998
Worst quarter return: (14.3%) during third quarter 1998
Mid-Cap Equity Index Fund:
1999
The Mid-Cap Equity Index Fund began operations on May 3, 1999
0% ------------
Best quarter return:
Worst quarter return:
Aggressive Equity Fund:
[BAR CHART]
1995 1996 1997 1998 1999
- ---- ---- ---- ---- ----
38.2% 27.1% 21.2% (5.1%)
Best quarter return: 26.9% during fourth quarter 1998
Worst quarter return: (26.2%) during third quarter 1998
-5-
<PAGE>
Composite Fund:
[BAR CHART]
1990 1.5%
1991 16.4%
1992 5.9%
1993 16.9%
1994 3.0%
1995 21.9%
1996 11.9%
1997 17.7%
1998 14.5%
1999
Best quarter return: 8.8% during fourth quarter 19__
Worst quarter return: (6.9%) during third quarter 1990
[BAR CHART]
Bond Fund:
1990 3.5%
1991 14.0%
1992 8.6%
1993 13.1%
1994 (3.2%)
1995 19.4%
1996 3.5%
1997 10.4%
1998 7.2%
1999
Best quarter return: 7.0% during fourth quarter 1998
Worst quarter return: (2.9%) during third quarter 1994
[BAR GRAPH]
Mid-Term Bond Fund
1994 (3.7)%
1995 16.3%
1996 3.9%
1997 7.3%
1998 6.4%
1999
Best quarter return: 6.1% during second quarter 1995
Worst quarter return: (3.0%) during first quarter 1994
-6-
<PAGE>
Short-Term Bond Fund:
[CHART]
1994 1.4%
1995 7.7%
1996 4.9%
1997 6.0%
1998 5.7%
1999
Best quarter return: 2.6% during second quarter 1995
Worst quarter return: (0.3%) during first quarter 1994
Money Market Fund:
[CHART]
1990 6.8%
1991 4.4%
1992 3.3%
1993 2.9%
1994 4.1%
1995 5.8%
1996 5.3%
1997 5.5%
1998 5.4%
1999
Best quarter return: __during fourth quarter 19_
Worst quarter return: (0.7%) during third quarter 1993
Average Annual Total Returns (for periods ended December 31, 1999)
- --------------------------------------------------------------------------------
The table below shows the average annual total returns of each Fund for the
past one, five and ten years, if the Fund was operating for those periods, and
the return for the period of the Fund's operations.
The table indicates the risks of investing in the Funds by comparing, for the
same periods, each Fund's returns to those of a broad-based, unmanaged index,
or to Treasury Bills for money market investments. A Fund's past performance
does not necessarily indicate how it will perform in the future.
The average annual total returns shown do not include charges against the
assets of the Separate Accounts that purchase Fund shares. If these charges
were reflected, returns would be less than those shown.
-7-
<PAGE>
<TABLE>
<CAPTION>
Past Past Past For Life
Fund/Comparative Index(es) One Year Five Years Ten Years of Fund*
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity-Index Fund....................... % % N/A %
S&P 500 Index.......................... % % %
- -------------------------------------------------------------------------------
All America Fund**...................... % % % %
S&P 500 Index(1)....................... % % % %
- -------------------------------------------------------------------------------
Mid-Cap Equity Index Fund............... % N/A N/A %
S&P MidCap 400 Index(2)................ % %
- -------------------------------------------------------------------------------
Aggressive Equity Fund.................. % % N/A %
Russell 2000 Index(3).................. % % %
- -------------------------------------------------------------------------------
Composite Fund.......................... % % % %
S&P 500 Index.......................... % % % %
Lehman Brothers Gov't./Corp. Bond
Index(4).............................. % % % %
90-day Treasury Bill Rate.............. % % % %
- -------------------------------------------------------------------------------
Bond Fund............................... % % % %
Lehman Brothers Gov't./Corp. Bond
Index................................. % % % %
- -------------------------------------------------------------------------------
Mid-Term Bond Fund...................... % % N/A %
Salomon Brothers 3-7 Year Bond
Index(5).............................. % % %
- -------------------------------------------------------------------------------
Short-Term Bond Fund.................... % % N/A %
Salomon Brothers 1-3 Year Bond
Index(5).............................. % % %
- -------------------------------------------------------------------------------
Money Market Fund....................... % % % %
90-day Treasury Bill Rate.............. % % % %
7-day current yield for period ended
12/30/99 was %
7-day effective yield (reflecting the
compounding of interest) for period
ended 12/30/99 was %
- -------------------------------------------------------------------------------
</TABLE>
N/A = Not applicable
* The Funds commenced operations on the following dates: All America,
Composite, Bond and Money Market Funds -- January 1, 1985; Equity Index,
Mid-Term Bond and Short-Term Bond Funds -- February 5, 1993; Aggressive
Equity Fund -- May 2, 1994; and Mid-Cap Equity Index Fund -- May 3, 1999.
** Prior to May 2, 1994, the All America Fund was known as the Stock Fund, had
a different investment objective and did not have any subadvisers.
(1) The S&P 500 Index is the Standard & Poor's Composite Index of 500 Stocks,
a market value-weighted index of the common stock prices of companies
included in the S&P 500.
(2) The S&P MidCap 400 Index is the Standard & Poor's MidCap 400 Index, a
market value-weighted index of 400 stocks issued by U.S. companies with
medium market capitalizations.
(3) The Russell 2000 Index is a market capitalization-weighted index of common
stock prices of the smallest 2000 companies in the Russell 3000, generally
with capitalizations of $1 billion or less.
(4) The Lehman Brothers Government/Corporate Bond Index is an index of U.S.
Government and corporate bond prices of investment grade bonds with
maturities greater than one year and face values over $1 million.
(5) The Salomon Brothers Bond Index, for 1-3 years and for 3-7 years, is a
market capitalization-weighted index of Treasury, Agency, mortgage and
corporate bonds in the Salomon Brothers Broad Investment-Grade Bond Index
with the same maturities and values of $25-$50 million (at least $200
million for mortgage-backed bonds).
-8-
<PAGE>
MANAGEMENT OF THE FUNDS
The Adviser
- --------------------------------------------------------------------------------
Mutual of America Capital Management Corporation, 320 Park Avenue, New York,
New York 10022 (the Adviser or Capital Management) is the investment adviser
for the Funds of the Investment Company. The Adviser had total assets under
management of approximately $ billion at December 31, 1999. As Adviser,
Capital Management:
. Company's Board of Directors,
. supplies administrative, accounting and
recordkeeping services for the Funds, and
. provides the office space, facilities,
. places orders for the purchase and sale of
securities,
. engages in securities research,
. makes recommendations to and reports to the
Investment equipment, material and personnel
necessary to perform its duties.
For its investment management services, the Adviser receives compensation from
each Fund at an annual rate of the Fund's net assets, calculated as a daily
charge. These annual rates, which were applicable during 1998, are:
. All America, Composite, Bond, Mid-Term Bond and
Short-Term Bond Funds -- .50%
. Aggressive Equity Fund -- .85%
. Equity Index and Mid-Cap Equity Index Funds --
.125%
. Money Market Fund -- .25%
The Adviser voluntarily limits the expenses of each Fund, other than for
brokers' commissions, transfer taxes and other fees relating to portfolio
transactions, to the amount of the investment advisory fee paid by the Fund to
the Adviser. The Adviser may discontinue this expense limitation at any time.
Subadvisers for a Portion of the All America Fund
- --------------------------------------------------------------------------------
The Adviser has delegated its investment advisory responsibilities for a
portion of the All America Fund to two Subadvisers. Each Subadviser provides
investment advice for approximately 10% of the assets of the All America Fund.
The Adviser pays the Subadvisers for their advisory services to the All America
Fund.
. Fred Alger Management, Inc., One World Trade
Center, New York, New York 10048, is a small
capitalization growth adviser for its portion of
the All America Fund. It provides investment
management services to institutional, corporate and
individual clients, including other registered
management investment companies. At December 31,
1999, Alger Management had assets under management
of approximately $ billion.
. Oak Associates, Ltd., 3875 Embassy Parkway, Suite
250, Akron, Ohio 44333, is a mid- and large
capitalization growth adviser for its portion of
the All America Fund. It provides investment
management services for individual and corporate
clients, primarily in connection with retirement
plans. At December 31, 1999, Oak Associates had
assets under management of approximately $
billion.
-9-
<PAGE>
Portfolio Managers
- --------------------------------------------------------------------------------
The person(s) primarily responsible for the day-to-day management of the Funds'
investment portfolios are listed below. No information is given for the Money
Market Fund because of the type of investments it makes. No information is
given for the Equity Index Fund, the Indexed Assets of the All America Fund or
the Mid-Cap Equity Index Fund, because the investment objective for each is to
replicate the performance of an index.
All America Fund
Thomas P. Larsen, Executive Vice President of the Adviser, is responsible for
managing the Adviser's portion of the actively managed assets of the Fund. Mr.
Larsen joined the Adviser in June 1998 from his position as Senior Vice
President of Desai Capital Management. He has almost 30 years of experience in
selecting securities for and managing equity portfolios.
David D. Alger, President and Chief Executive Officer of Alger Management, is
primarily responsible for the day-to-day management of the Alger Management
portion of the Fund. He has been employed by Alger Management as Executive Vice
President and Director of Research since 1971 and as President since 1995, and
he serves as portfolio manager for other mutual funds and investment accounts
managed by Alger Management.
James D. Oelschlager is the portfolio manager of the Oak Associates portion of
the Fund. Since establishing Oak Associates in 1985, Mr. Oelschlager has served
as its portfolio manager. Previously, he served as the Assistant Treasurer of
Firestone Tire & Rubber Company, where he was directly responsible for the
management of the company's pension assets. Mr. Oelschlager is assisted with
portfolio management responsibilities by Donna Barton, trading, Margaret
Ballinger, new accounts, and Doug MacKay, equity research. These individuals
have combined experience of over seventy years in the investment business and
play a key role in the day-to-day management of the firm's portfolios.
Aggressive Equity Fund
Thomas P. Larsen, Executive Vice President of the Adviser, has responsibility
for managing the Fund. Mr. Larsen, who has almost 30 years of experience in
selecting securities for and managing equity portfolios, joined the Adviser in
June 1998 and before that was Senior Vice President of Desai Capital
Management.
Composite Fund
Thomas P. Larsen, Executive Vice President of the Adviser, is responsible for
managing the equity portion of the Fund. Mr. Larsen, who joined the Adviser in
June 1998 and whose most recent prior position was as Senior Vice President of
Desai Capital Management. He has almost 30 years of experience in selecting
securities for and managing equity portfolios.
Andrew L. Heiskell, Executive Vice President of the Adviser, is responsible for
managing the fixed income portion of the Fund. Mr. Heiskell has more than 30
years of experience in selecting securities for and managing fixed-income
portfolios.
Bond Fund, Mid-Term Bond Fund and Short-Term Bond Fund
Andrew L. Heiskell, Executive Vice President of the Adviser, has responsibility
for setting the fixed income investment strategy and overseeing the day-to-day
operations of the Bond Fund, the Mid-Term Bond Fund and the Short-Term Bond
Fund. He has been the portfolio manager for the Bond Fund since February 1991
and of the Mid-Term and Short-Term Bond Funds since their inception in 1993.
Mr. Heiskell has more than 30 years of experience in selecting securities for
and managing fixed-income portfolios.
-10-
<PAGE>
DETAILS ABOUT HOW OUR FUNDS INVEST AND RELATED RISKS
Investment Objectives and Strategies
- --------------------------------------------------------------------------------
Equity Index Fund: The investment objective of the Equity Index Fund is to
provide investment
results that correspond to the performance of the S&P 500 Index.
The Fund seeks to achieve its objective primarily by:
. Purchasing shares of the 500 common stocks that are
included in the S&P 500 Index.
.Stocks are selected in the order of their
weightings in the S&P 500 Index, beginning with
the heaviest weighted stocks.
.The percentage of the Fund's assets invested in
each of the selected stocks will be approximately
the same as the percentage the stock represents
in the S&P 500 Index.
.The Fund attempts to be fully invested at all
times, and at least 80% of the Fund's net assets
will be invested in the stocks that comprise the
S&P 500 Index.
. Purchasing futures contracts on the S&P 500 Index
and options on futures contracts on the S&P 500
Index to invest cash prior to the purchase of
common stocks, in an attempt to have the Fund's
performance more closely correlate with the
performance of the S&P 500 Index.
The Adviser uses a computer program to determine which stocks are to be
purchased or sold to copy the S&P 500 Index. From time to time, the Fund makes
adjustments in its portfolio (rebalances) because of changes in the composition
of the S&P 500 Index or in the valuations of the stocks within the Index
relative to other stocks within the Index.
The Fund's investment performance may not precisely duplicate the performance
of the S&P 500 Index, due to cash flows in and out of the Fund and investment
timing considerations. The Fund also pays investment advisory expenses that are
not applicable to an unmanaged index such as the S&P 500 Index.
All America Fund: 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.
At least 65% of the All America Fund's total assets will be invested in equity
securities under normal market conditions. The issuers of at least 80% of the
Fund's total assets will be United States corporations or entities.
Indexed Assets. The Fund invests approximately 60% of its assets to provide
investment results that correspond to the performance of the S&P 500 Index.
This portion of the All America Fund is called the Indexed Assets. The Fund
invests Indexed Assets in the 500 common stocks included in the S&P 500 Index
and in futures contracts on the S&P 500 Index. The Fund attempts to match the
weightings of stocks in the Indexed Assets with the weightings of those stocks
in the S&P 500 Index, and it periodically rebalances the Indexed Assets to
maintain those weightings.
Active Assets. The Fund invests approximately 40% of its 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. The Adviser and
two Subadvisers actively manage this portion of the All America Fund, which is
called the Active Assets.
..............................................................
Standard & Poor's(R) (S&P(R)) does not sponsor,
endorse, sell or promote the Equity Index Fund, All
America Fund or Mid-Cap Equity Index Fund. Standard &
Poor's, S&P, the S&P 500 Index and the S&P MidCap 400
Index are trademarks of The McGraw-Hill Companies,
Inc. and have been licensed for use by the Investment
Company. Standard & Poor's has no obligation or
liability for the sale or operation of the Equity
Index Fund, All America Fund or Mid-Cap Equity Index
Fund and makes no representation as to the
advisability of investing in the Funds.
-11-
<PAGE>
The Fund tries to maintain, to the extent possible, approximately equal amounts
in each segment of the Active Assets. The Adviser periodically rebalances
assets in the All America Fund to retain the approximate 60%/40% relationship
between Indexed Assets and Active Assets, based on then current market values.
Adviser -- Small Capitalization Value Stocks. The Adviser generally invests in
stocks that it considers undervalued and with the potential for above average
investment returns, issued by companies with small market capitalizations. Some
of the companies whose stocks the Adviser selects may have limited Wall Street
coverage and low institutional ownership, which may make the stocks more
difficult to sell in certain market conditions.
. The Adviser seeks securities with a depressed
valuation compared to their previous valuations or
compared to a universe of peer companies. The
Adviser determines depressed valuation primarily
through consideration of earnings, cash flow or net
equity.
. Issuers must have executive management that the
Adviser considers strong and capable of executing a
clear business strategy for the company.
The Adviser may at times actively trade the securities in this segment of the
All America Fund, depending on market conditions.
Adviser -- Large Capitalization Value Stocks. The Adviser invests this portion
of Active Assets in stocks it considers to be of high quality with lower than
average price volatility and low price/earning ratios, issued by companies with
large market capitalizations. Companies generally will have:
. below market debt levels,
. earnings growth of 10% or more,
. current yield greater than the average of the S&P
500, and
. market capitalization not less than that of any
company included in the S&P Barra Value Index,
updated quarterly.
The Adviser may at times actively trade the securities in this segment of the
All America Fund, depending on market conditions.
Fred Alger Management, Inc. -- Small Capitalization Growth Stocks. This
Subadviser invests in stocks that it considers to be fundamentally sound with
the potential for strong growth and for earnings in excess of market
expectations, issued by companies with small market capitalizations.
. The securities of these companies often are traded
in the over-the-counter market.
. Except during temporary defensive periods, at least
65% of the assets in the Fred Alger portfolio will
be invested in equity securities of companies that,
at the time of the Fund's purchase, have total
market capitalization within the range of
capitalization of the companies included in the
Russell 2000 Growth Index or the S&P SmallCap 600
Index, updated quarterly. During defensive periods,
Fred Alger may not achieve the investment objective
for its portion of the All America Fund.
Fred Alger uses a bottom-up approach in selecting stocks for its portion of the
Fund. Through in-house research by analysts who are organized according to
industry groups, it develops stock selection recommendations that are presented
to executive officers and portfolio managers for evaluation and discussion. The
portfolio manager for the Fred Alger portion of the Fund then determines the
individual stocks that are appropriate for purchase. Fred Alger actively trades
the securities in its portion of the All America Fund, and its portfolio
turnover rate generally will be higher than the portfolio turnover rate for the
other Subadvisers.
-12-
<PAGE>
Oak Associates, Ltd. -- Mid- and Large Capitalization Growth Stocks. This
Subadviser invests in mid- and large capitalization stocks, which often have
low current income and the potential for significant growth. Its approach is
to:
. monitor 400 stocks,
. at any one time to invest in approximately 15-25
common stocks without regard for market industry
weighting, and
. usually hold securities that have appreciated in
value, rather than selling them to realize capital
gains.
Oak Associates identifies industries it believes are attractive from a long-
term perspective, based on the direction of interest rates, the overall stock
market environment, the inflation rate and evolving relationships of economic
sectors. In selecting individual stocks, Oak Associates evaluates companies'
growth prospects and utilizes relative valuation measures such as price to
earnings ratio as compared to long-term growth rate, historical levels and the
S&P 500 Index.
Active trading of the Active Assets, if it occurs, will result in higher
transaction costs for the Fund.
Mid-Cap Equity Index Fund: 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.
The Fund seeks to achieve its objective primarily by:
. Purchasing shares of the 400 common stocks that are
part of the S&P MidCap 400 Index.
.Stocks are selected in the order of their
weightings in the S&P MidCap 400 Index, beginning
with the heaviest weighted stocks.
.The percentage of the Fund's assets invested in
each of the selected stocks will be approximately
the same as the percentage the stock represents
in the S&P MidCap 400 Index.
.The Fund attempts to be fully invested at all
times, and at least 80% of the Fund's net assets
will be invested in the stocks that comprise the
S&P MidCap 400 Index.
. Purchasing futures contracts on the S&P MidCap 400
Index and options on futures contracts on the S&P
400 Index to invest cash prior to the purchase of
common stocks, in an attempt to have the Fund's
performance more closely correlate with the
performance of the S&P MidCap 400 Index.
The Adviser uses a computer program to determine which stocks are to be
purchased or sold to copy the S&P MidCap 400 Index. From time to time, the Fund
makes adjustments in its portfolio (rebalances) because of changes in the
composition of the S&P MidCap 400 Index or in the valuations of the stocks
within the Index relative to other stocks within the Index.
There is a risk that the Fund's investment performance may not precisely
duplicate the performance of the S&P MidCap 400 Index, due to cash flows in and
out of the Fund and investment timing considerations. The Fund also pays
investment advisory expenses that are not applicable to an unmanaged index such
as the S&P MidCap 400 Index.
-13-
<PAGE>
Aggressive Equity Fund: The investment objective of the Aggressive Equity Fund
is capital appreciation.
The Fund invests in growth stocks and value stocks, and the Adviser determines
the percentage of the Fund's assets invested in growth stocks or value stocks
at any one time. At least 85% of the Aggressive Equity Fund's total assets will
be invested in equity securities under normal market conditions.
. Growth stocks are stocks that the Adviser considers
to have above-average growth potential, based on
earnings, sales or prospective economic or
political changes.
. Value stocks are stocks that the Adviser views as
undervalued, based on the issuer's assets, earnings
or growth potential.
The Adviser uses a "bottom-up" approach in selecting stocks for the Fund (see
definition below). The Adviser continually reviews the universe of companies
with small market capitalization to identify securities with growth or value
characteristics that meet its requirements. In evaluating an individual
security, the Adviser determines the security's valuation relative to other
securities in the same sector or industry.
Some of the stocks the Fund purchases have small market capitalizations and may
be traded-over-the counter instead of on an exchange. During different market
cycles, either growth or value stocks may be out of favor with investors and
may have more market risk (price volatility) than larger capitalization stocks.
Composite Fund: 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 common stocks, debt securities
and money market instruments.
The Adviser varies the portion of the Fund's assets invested in each category
of securities, based on economic conditions, the general level of common stock
prices, interest rates and other relevant considerations.
. The Fund invests in publicly-traded common stocks
for long-term growth of capital and, to a lesser
extent, income from dividends.
. It invests in publicly-traded, investment grade
debt securities and money market instruments for
current income.
. At December 31, 1999, the Fund's net assets were
% invested in equity securities, % invested in
fixed-income securities and % invested in money
market instruments.
For defensive purposes, the Fund may invest up to 75% of its assets in common
stock and other equity-type securities, or up to 75% of its assets in debt
securities with a remaining maturity of more than one year, or 100% of its
assets in money market instruments.
The Fund's current strategy for its equity investments is to invest in
approximately 75 to 100 stocks, all of which are included in the S&P 500 Index.
. The Fund selects approximately 25 stocks of
companies with the largest market capitalizations
and invests in these stocks in a range by market
weight of 50%-150% of the S&P 500 Index market
weight for these stocks.
. The Adviser selects approximately 50 to 75
additional stocks, based on its stock selection
analysis. The Fund invests in these stocks in a
range by economic sector weighting of 65% to 135%
of the economic sector weightings of the S&P 500
Index.
The Fund's current strategy for its fixed income investments is to invest
primarily in investment grade debt securities of U.S. corporations, the U.S.
Government and U.S. Government agencies. The Adviser manages this portion of
the Composite Fund in substantially the same way as it manages the Bond Fund,
described below.
-14-
<PAGE>
Bond Fund: 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 shareholders' capital.
The average maturity of the debt securities held by the Bond Fund will vary
according to market conditions and the stage of the interest rate cycle. The
Fund's Adviser anticipates that the average maturity of the Fund's securities
holdings will be between five and ten years. The average maturity for the Bond
Fund will be longer than the average maturity of the debt securities held by
the Mid-Term Bond Fund.
..............................................................
Definition We Use
-- Bottom-up investing means that the Adviser evaluates an issuer of
securities before purchasing those securities for the Fund, without taking
into account possible changes in the general economy.
The Fund invests at least 80% of its assets in investment grade debt
obligations issued by U.S. corporations or by the U.S. Government or its
agencies.
. The Fund invests in various types of debt
securities, including bonds, mortgage-backed
securities, zero coupon securities and asset-backed
securities, with ratings that range from AAA to BBB
at the time of purchase.
. The percentage of the Fund's portfolio invested in
corporate securities and the percentage invested in
U.S. Government and agency securities will vary,
depending on market conditions and the Adviser's
assessment of the income and returns available from
corporate securities in relation to the risks of
investing in these securities.
. At December 31, 1999, the Bond Fund had
approximately % of its net assets invested in
zero coupon securities, % of its net assets in
U.S. Government agency mortgage-backed securities,
and % of its net assets in corporate obligations
rated BBB. In addition, % of its net assets were
invested in corporate obligations rated below BBB.
The Adviser uses a "bottom-up" approach in selecting debt securities for the
Fund (see definition on page 14). The Adviser's approach generally is to
purchase securities for income. In selecting an individual security, it reviews
historical financial measures and considers the price and yield relationship to
other securities to determine a proper relative value for the security.
The Fund does not generally purchase and sell securities in anticipation of
interest rate changes in the economy. The Adviser may sell a security that it
considers to have become overvalued relative to alternative investments, and
reinvest in an alternative security.
Mid-Term Bond Fund: The primary investment objective of the 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 shareholders' capital. The average maturity of the Fund's
securities holdings will be between three and seven years.
The Fund invests at least 80% of its assets in investment grade debt
obligations issued by United States corporations or issued by the U.S.
Government or its agencies.
. The Fund invests in various types of debt
securities, including bonds, mortgage-backed
securities, zero coupon securities and asset-backed
securities, with ratings that range from AAA to
BBB.
. The percentage of the Fund's portfolio invested in
corporate securities and the percentage invested in
U.S. Government and agency securities will vary,
depending on market conditions and the Adviser's
assessment of the income and returns available from
corporate securities in relation to the risks of
investing in these securities.
. At December 31, 1999, the Mid-Term Bond Fund had no
investment in zero coupon securities, approximately
% of its net assets in U.S. Government agency
mortgage-backed securities and % of its net
assets in corporate obligations rated BBB.
The Adviser uses a "bottom-up" approach in selecting securities for the Mid-
Term Bond Fund. Its approach generally is to purchase securities for income. In
selecting an individual security, the Adviser reviews historical financial
measures and considers the price and yield relationship to other securities to
determine a proper relative value for the security.
The Fund generally does not purchase and sell securities in anticipation of
interest rate changes in the economy. The Adviser may sell a security in the
Fund's portfolio that the Adviser considers to have become overvalued relative
to alternative investments.
-15-
<PAGE>
Short-Term Bond Fund: The primary investment objective of the 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 shareholders' capital. The average maturity of
the Fund's securities holdings will be between one and three
years.
The Fund invests at least 80% of its assets in investment grade debt
obligations issued by United States corporations or by the U.S. Government or
its agencies and in money market instruments of the type that the Money Market
Fund purchases.
. At times, the Fund may invest a significant portion
of its assets in mortgage-backed securities.
. At December 31, 1999, the Short-Term Bond Fund had
approximately % of its net assets in U.S.
Government securities and % of its net assets in
U.S. Government agency mortgage-backed securities.
Most of the mortgage-backed securities the Fund purchases are considered to be
U.S. Government agency securities, with issuers such as Ginnie Mae and Fannie
Mae. U.S. Government and agency securities have little financial risk, but
mortgage-backed securities do have market risk and the prepayment risks
specific to mortgage-backed securities. When interest rates change, mortgage-
backed securities may prepay at a faster or slower rate than originally
anticipated, which may negatively affect their yield and price.
Money Market Fund: The investment objective of the Fund is to realize high
current income to the
extent consistent with the maintenance of liquidity, investment
quality and stability of capital.
In selecting specific investments for the Fund, the Adviser seeks securities or
instruments with the highest yield or income that meet the following
requirements.
. The Fund invests only in money market instruments
and other short-term debt securities including
commercial paper issued by U.S. corporations and
Treasury securities issued by the U.S. Government.
At December 31, 1999, the Fund was % invested in
commercial paper.
. All of the securities the Fund purchases have a
rating in one of the two highest rating categories
from at least two nationally recognized rating
agencies, and sustantially all (at least 95%) have
a rating in the highest category from at least two
of these rating agencies.
. At the time of purchase, a security must mature in
13 months or less (or 25 months for U.S. Government
securities). The dollar-weighted average maturity
of the Fund's securities must be 90 days or less.
. The Fund will not invest more than 5% of its total
assets in the securities of any one issuer, other
than U.S. Government or agency securities.
The Fund does not maintain a stable net asset value. The Fund does not declare
dividends daily, and income the Fund earns on its portfolio holdings increases
the Fund's net asset value per share until the Fund declares a dividend. At
least yearly the Fund distributes investment income to its shareholders, and
the Fund's net asset value per share declines as a result of the distribution.
The Fund uses the amortized cost method of valuing securities that have a
remaining term to maturity of 60 days or less. Because the Fund uses market
value for securities that mature in more than 60 days, the Fund does not invest
more than 20% of its assets in these securities, to limit the possibility of a
decline in the Fund's net asset value.
An investment in the Fund has little market or financial risk but a relatively
high level of current income volatility, because its portfolio holdings are
high quality instruments that have a short time to maturity. Investments in the
Money Market Fund are not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other U.S. Government agency.
-16-
<PAGE>
Risks of Investing in Stock Funds
- --------------------------------------------------------------------------------
When you invest in a stock fund, and for the equity portion of a composite
fund, you should consider that:
. The fund is subject to market risk -- the value of your investment will go
up or down, depending on movements in the stock markets. As a result, you
may lose money from your investment, or your investment may increase in
value.
. The investment results for a particular Fund may be better or worse than
the results for the stock markets taken as a whole, depending on the type
of securities in which the Fund invests.
. The investment results for a particular Fund may be better or worse than
the results of other funds that invest in the same types of securities. In
other words, stock selection by a Fund's investment adviser(s) will impact
the Fund's performance.
. The prices and investment performance of stocks that are issued by
companies with smaller market capitalizations may fluctuate more than the
prices and investment performance of stocks that are issued by companies
with larger market capitalizations.
. A Fund may have more difficulty selling a small cap stock or any stock
that trades "over-the-counter", as compared to larger capitalization
stocks or stocks that trade on a national or regional stock exchange.
. Value stocks and growth stocks usually have different investment results,
and either investment style may become out of favor with stock investors
at a given time.
Risks of Investing in Bond Funds
- --------------------------------------------------------------------------------
When you invest in a bond fund, and for the debt securities portion of a
composite fund, you should consider that:
. The fund has market risk -- the value of your investment will go up or
down depending on movements in the bond markets. As a result, you may lose
money from your investment, or your investment may increase in value.
. The investment results for a particular Fund may be better or worse than
the results for the comparable bond market taken as a whole, depending on
the type of debt securities in which the Fund invests.
. The investment results for a particular Fund may be better or worse than
the results of other funds that invest in the same types of securities. In
other words, security selection by a Fund's investment adviser will impact
the Fund's performance.
. Changes in prevailing interest rates usually will impact the value of debt
securities. The longer the time period before the security matures (or is
expected to be redeemed), the more impact interest rate changes will have
on the price of the bond. When interest rates rise, the prices of
outstanding debt securities tend to fall. When interest rates fall, the
prices of outstanding debt securities tend to rise.
. Mortgage-backed securities or certificates are subject to prepayment or
extension risk when interest rates change. When interest rates fall, the
underlying mortgages may be prepaid at a faster rate than previously
assumed in pricing the mortgage-backed security, which would shorten the
period to maturity of the security. When interest rates rise, the
underlying mortgages may be prepaid at a slower rate than previously
assumed, which would lengthen the period to maturity of the security.
. In periods of economic uncertainty, investors may favor U.S. government
debt securities over debt securities of corporate issuers, in which case
the value of corporate debt securities would decline in relation to the
value of U.S. government debt securities.
. Zero coupon securities and discount notes do not pay interest, and they
may fluctuate more in market value and be more difficult for a Fund to
resell during periods of interest rate changes than comparable securities
that pay interest in cash at regular intervals. In addition, the Fund may
lose a portion of the principal amount of a zero coupon security if it
sells the security after an increase in interest rates.
. Unrated securities or securities rated below investment grade may be
subject to a greater market risk than higher rated (lower yield)
securities. Since lower rated and unrated securities are generally issued
by corporations that are not as creditworthy or financially secure as
issuers of higher rated securities, there is a greater risk that issuers
of lower rated (higher yield) securities will not be able to pay the
principal and interest due on such securities, especially during periods
of adverse economic conditions.
. The market for debt securities may be subject to significant volatility,
and volatility has generally increased in recent years.
-17-
<PAGE>
Specific Investments or Strategies, and Related Risks
- --------------------------------------------------------------------------------
This section provides additional information about certain of the principal
investment strategies used by the Funds and additional investment strategies
the Funds may use from time to time.
Options and Futures Contracts
Investment Strategies. All of the Funds may purchase and sell put and call
options contracts, futures contracts and options on futures contracts.
Depending on the types of securities in which a Fund invests, the contracts
relate to fixed-income securities (including U.S. Government and agency
securities), equity securities or indexes of securities. All contracts must
relate to U.S. issuers or U.S. stock indexes.
A put option on a security gives the Fund the right to sell the security at a
certain price. The purchase of a put option on a security protects the Fund
against declines in the value of the security. A Fund may buy a put option
contract on a security only if it holds the security in its portfolio.
A call option on a security gives the Fund the right to buy the security at a
certain price. The purchase of a call option on a security protects the Fund
against increases in the value of the security that it is considering
purchasing. A Fund may sell a call option contract on a security only if it
holds the security in its portfolio (a covered call).
A Fund may use futures contracts, or options on futures contracts, to protect
against general increases or decreases in the levels of securities prices:
. When a Fund anticipates a general decrease in the
market value of portfolio securities, it may sell
futures contracts. If the market value falls, the
decline in the Fund's net asset value may be
offset, in whole or in part, by corresponding gains
on the futures position.
. When a Fund projects an increase in the cost of
fixed-income securities or stocks to be acquired in
the future, the Fund may purchase futures contracts
on fixed-income securities or stock indexes. If the
hedging transaction is successful, the increased
cost of securities subsequently acquired may be
offset, in whole or in part, by gains on the
futures position.
Risks from Options and Futures Contracts. Risks to a Fund in options and
futures transactions include:
. The securities held in a Fund's portfolios may not
exactly duplicate the security or securities
underlying the options, futures contracts or
options on futures contracts traded by the Fund,
and as a result the price of the portfolio
securities being hedged will not move in the same
amount or direction as the underlying index,
securities or debt obligation.
. A Fund purchasing an option may lose the entire
amount of the premium plus transaction costs.
. If a Fund has written a covered call option and the
price of the underlying security increases
sufficiently, the option may be exercised. The Fund
will be required to sell the security at a price
below current market value with the loss offset
only by the amount of the premium the Fund received
from writing the option.
Zero Coupon Securities and Discount Notes
The Bond Funds and the fixed income portion of the Composite Fund, as well as
the All America Fund and the Aggressive Equity Fund to the extent they invest
in fixed income securities, may invest in discount notes and zero coupon
securities. Discount notes mature in one year or less from the date of
issuance. Zero coupon securities may be issued by corporations, the U.S.
Government or certain U.S. Government agencies. Discount notes and zero coupon
securities do not pay interest. Instead, they are issued at prices that are
discounted from the principal (par) amount due at maturity.
Risks from Zero Coupon Securities and Discount Notes. Zero coupon securities
and discount notes may fluctuate more in market value and be more difficult for
a Fund to resell during periods of interest rate changes in the economy than
comparable securities that pay interest in cash at regular intervals. The
market values of outstanding debt securities generally decline when interest
rates are rising, and during such periods a Fund may lose more investment
capital if it sells zero coupon securities prior to their maturity date or
expected redemption date than if it sells comparable interest-bearing
securities. In general, the longer the remaining term to maturity or expected
redemption of a security, the greater the impact on market value from rising
interest rates.
-18-
<PAGE>
Redeemable Securities
An issuer of debt securities, including zero coupon securities, often has the
right after a period of time to redeem (call) securities prior to their stated
maturity date, either at a specific date or from time to time. When interest
rates rise, an issuer of debt securities generally is less likely to redeem
securities that were issued at a lower interest rate, or for a lower amount of
original issue discount in the case of zero coupon securities. In such
instance, the period until redemption or maturity of the security may be longer
than the purchaser initially anticipated, and the market value of the debt
security may decline. If an issuer redeems a security when prevailing interest
rates are relatively low, a Fund may be unable to reinvest proceeds in
comparable securities with similar yields.
American Depository Receipts ("ADRs")
ADRs are dollar-denominated receipts that U.S. banks generally issue. An ADR
represents the deposit with the bank of a security of a foreign issuer. ADRs
are publicly traded on exchanges or are traded over-the-counter in the United
States. An ADR has currency risk, because its value is based on the value of
the security issued by a foreign issuer. The All America Fund and Aggressive
Equity Fund intend to invest a small percentage of their total assets in ADRs.
ADRs are subject to many of the same risks as foreign securities, such as
possible:
. unavailability of financial information,
. changes in currency or exchange rates, and
. difficulty by the Adviser or a Subadviser in
assessing economic or political trends in a foreign
country.
Mortgage-Backed Securities
The Bond Funds and the fixed income portion of the Composite Fund, as well as
the All America and Aggressive Equity Funds to the extent they invest in debt
securities, may invest in mortgage-backed securities. These securities
represent interests in pools of mortgage loans, or they may be collateralized
mortgage obligations secured by pools of mortgage loans (CMOs). Holders of
mortgage-backed securities receive periodic payments that consist of both
interest and principal from the underlying mortgages.
Some mortgage-backed securities are issued by private corporations. Mortgage-
backed securities also include securities guaranteed by the Government National
Mortgage Association (Ginnie Maes), securities issued by the Federal National
Mortgage Association (Fannie Maes), and participation certificates issued by
the Federal Home Loan Mortgage Corporation (Freddie Macs). The timely payment
of principal and interest is backed by the full faith and credit of the U.S.
Government (full faith and credit) in the case of Ginnie Maes, but Fannie Maes
and Freddie Macs are not full faith and credit obligations.
Risks from Mortgage-Backed Securities. Characteristics of underlying mortgage
pools will vary, and it is not possible to precisely predict the realized yield
or average life of a particular mortgage-backed security, because of the
principal prepayment feature inherent in the security.
. A decline in interest rates may lead to increased
prepayment of the underlying mortgages, and the
securityholder may have to reinvest proceeds
received at lower yields. Unscheduled or early
payments on the underlying mortgages may shorten
the effective maturity of a mortgage-backed
security and impact the yield and price of the
security.
. An increase in interest rates may lead to
prepayment of the underlying mortgages over a
longer time period than was assumed when the
mortgage-backed security was purchased, and the
securityholder may not receive payments to reinvest
at higher rates of return. Delay in payments on the
underlying mortgages may lengthen the effective
maturity of the security and impact the price and
yield of the security.
. Mortgage-backed securities issued by private
corporations generally will have more credit risk
than securities issued by U.S. Government agencies.
Fannie Mae and Freddie Mac mortgage-backed
securities, which are not full faith and credit
obligations, may have more credit risk than Ginnie
Mae securities.
-19-
<PAGE>
INFORMATION ABOUT FUND SHARES
Pricing of Funds' Shares
- --------------------------------------------------------------------------------
The purchase or redemption price of a Fund share is equal to its net asset
value that we calculate after we receive the purchase or redemption order. A
Fund's net asset value per share is equal to the sum of the value of the
securities it holds plus any cash or other assets (including accrued interest
and dividends), minus all liabilities (including accrued expenses) divided by
the number of shares outstanding. The Adviser determines a Fund's net asset
value as of the close of trading on the New York Stock Exchange on each day the
New York Stock Exchange is open for trading (a Valuation Day).
In determining a Fund's net asset value, the Adviser uses market value. If a
money market security has a remaining maturity of 60 days or less, the Adviser
will use the amortized cost method of valuation to approximate market value
(the Adviser assumes constant proportionate amortization in value until
maturity of any discount or premium).
If there are any equity or debt securities or assets for which market
quotations are not readily available, the Adviser will use fair value pricing,
as determined in good faith by, or under the direction of, the Board of
Directors of the Investment Company or its Valuation Committee.
Purchase of Shares
- --------------------------------------------------------------------------------
The Investment Company offers shares in the Funds, without sales charge, only
to the Insurance Companies for allocation to their Separate Accounts.
Acceptance by an Insurance Company of an order for allocating account balance
to one of the Separate Account Funds constitutes a purchase order for shares of
the corresponding Fund of the Investment Company.
Redemption of Shares
- --------------------------------------------------------------------------------
The Investment Company redeems all full and fractional shares of the Funds for
cash. The redemption price is the net asset value per share we next determine.
We do not impose any deferred sales charge on redemptions.
We pay redemption proceeds normally within seven days of receipt of the
redemption request, unless the Investment Company suspends or delays payment of
redemption proceeds as permitted in accordance with SEC regulations. Acceptance
by an Insurance Company of an order for withdrawal of account balance from one
of the Separate Account Funds constitutes a redemption order for shares of the
corresponding Fund of the Investment Company.
Dividends, Capital Gains Distributions and Taxes
- --------------------------------------------------------------------------------
For each Fund, the Investment Company declares dividends at least annually to
pay out substantially all of the Fund's net investment income (dividends) and
net realized short and long term capital gains (capital gains distributions).
All dividends and capital gains distributions are reinvested in additional
shares of the distributing Fund.
The Investment Company is not subject to Federal income tax on ordinary income
and net realized capital gains that it distributes to shareholders, as long as
the distributions meet Federal tax law requirements for amount and source of
income. Each Fund is treated as a separate corporation for Federal income tax
purposes and must satisfy the tax requirements independently.
The Insurance Companies, through the Separate Accounts, are the shareholders of
the Investment Company's Funds. Under current Federal tax law, the Separate
Accounts do not pay taxes on the net investment income and realized capital
gains they receive through ownership of the Investment Company's shares.
A contractholder or policyowner should refer to the Contract prospectus or
brochure for a summary discussion of the tax consequences for increases in
account balance and distributions under the Contract.
-20-
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the Funds'
financial performance for the past 5 years, or for the period of a Fund's
operations if shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the particular Fund
(assuming reinvestment of all dividends and distributions). This information
has been audited by Arthur Andersen LLP, whose report, along with the
Investment Company's financial statements, are included in the annual report,
which is available upon request.
The total returns shown below do not include charges and expenses imposed at
the Separate Account level. Therefore, the returns do not represent the rate
that a contractholder or policyowner would have earned or lost on the portion
of the account balance allocated to the corresponding Separate Account Fund.
All America Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------
1999 1998 1997 1996 1995
---- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year........ $ 2.71 $ 2.44 $ 2.13 $ 1.61
------ ------ ------ ------
Income From Investment Operations:
Net Investment Income.................... .03 .03 .03 .03
Net Gains or Losses on Securities
(realized and unrealized)............... .54 .62 .41 .56
------ ------ ------ ------
Total From Investment Operations........ .57 .65 .44 .59
------ ------ ------ ------
Less Dividend Distributions:
From net investment income............... (.03) (.03) (.03) (.03)
From capital gains....................... (.35) (.35) (.10) (.04)
------ ------ ------ ------
Total Distributions..................... (.38) (.38) (.13) (.07)
------ ------ ------ ------
Net Asset Value, End of Year.............. $ 2.90 $ 2.71 $ 2.44 $ 2.13
====== ====== ====== ======
Total Return.............................. 21.3% 26.8% 20.7% 36.6%
Ratios/Supplemental Data
Net Assets, End of Year ($ millions)...... $ 732 $ 700 $ 637 $ 533
Ratio of Expenses to Average Net Assets... .50% .50% .50% .50%
Ratio of Net Income to Average Net
Assets................................... .84% .98% 1.26% 1.57%
Portfolio Turnover Rate(a)................ 40.47% 28.64% 28.35% 33.63%
</TABLE>
-21-
<PAGE>
Equity Index Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------
1999 1998 1997 1996 1995
---- ------ ------ ----- ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year......... $ 2.08 $ 1.59 $1.35 $ 1.02
--- ------ ------ ----- ------
Income From Investment Operations:
Net Investment Income..................... .03 .03 .03 .02
Net Gains or Losses on Securities
(realized and unrealized)................ .55 .50 .27 .36
--- ------ ------ ----- ------
Total From Investment Operations......... .58 .53 .30 .38
--- ------ ------ ----- ------
Less Dividend Distributions
From net investment income................ (.03) (.03) (.03) (.03)
From capital gains........................ (.17) (.01) (.03) (.02)
--- ------ ------ ----- ------
Total Distributions...................... (.20) (.04) (.06) (.05)
--- ------ ------ ----- ------
Net Asset Value, End of Year............... $ 2.45 $ 2.08 $1.59 $ 1.35
=== ====== ====== ===== ======
Total Return............................... 28.6% 33.1% 22.7% 36.6%
Ratios/Supplemental Data
Net Assets, End of Year ($ millions)....... $ 411 $ 237 $ 102 $ 43
Ratio of Expenses to Average Net Assets.... .13% .13% .13% .13%
Ratio of Net Income to Average Net Assets.. 1.57% 1.86% 2.19% 2.50%
Portfolio Turnover Rate(a)................. 11.68% 14.17% 5.85% 13.99%
</TABLE>
Mid-Cap Equity Index Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
December 31, 1999*
------------------
<S> <C>
Net Asset Value, Beginning of Year..........................
---
Income From Investment Operations:
Net Investment Income......................................
Net Gains or Losses on Securities (realized and
unrealized)...............................................
---
Total From Investment Operations..........................
---
Less Dividend Distributions
From net investment income.................................
From capital gains.........................................
---
Total Distributions.......................................
---
Net Asset Value, End of Year................................
===
Total Return................................................
Ratios/Supplemental Data
Net Assets, End of Year ($ millions)........................
Ratio of Expenses to Average Net Assets.....................
Ratio of Net Income to Average Net Assets...................
Portfolio Turnover Rate(a)..................................
</TABLE>
- ------
* The Fund commenced operations on May 3, 1999.
** Total Return is not annualized.
-22-
<PAGE>
Aggressive Equity Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------
1999 1998 1997 1996 1995
---- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year/Period.......................... $ 1.61 $ 1.47 $ 1.35 $ 1.05
--- ------- ------ ------- -------
Income From Investment Operations:
Net Investment Income................ -- .01 .01 .01
Net Gains or Losses on Securities
(realized and unrealized)........... (.09) .31 .36 .39
--- ------- ------ ------- -------
Total From Investment Operations.... (.09) .32 .37 .40
--- ------- ------ ------- -------
Less Dividend Distributions:
From net investment income........... -- (.01) (.01) (.01)
From capital gains................... (.01) (.17) (.24) (.09)
--- ------- ------ ------- -------
Total Distributions................. (.01) (.18) (.25) (.10)
--- ------- ------ ------- -------
Net Asset Value, End of Year/Period... $ 1.51 $ 1.61 $ 1.47 $ 1.35
=== ======= ====== ======= =======
Total Return.......................... (5.1)% 21.2% 27.1% 38.2%
Ratios/Supplemental Data
Net Assets, End of Year/Period ($
millions)............................ $ 205 $ 287 $ 136 $ 59
Ratio of Expenses to Average Net
Assets............................... .85% .85% .85% .85%
Ratio of Net Income to Average Net
Assets............................... .18% .33% .45% .65%
Portfolio Turnover Rate(a)............ 144.05% 80.94% 103.68% 116.52%
</TABLE>
Composite Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------
1999 1998 1997 1996 1995
---- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year....... $ 1.62 $ 1.77 $ 1.81 $ 1.57
--- ------ ------- ------ ------
Income From Investment Operations:
Net Investment Income................... .07 .07 .07 .08
Net Gains or Losses on Securities
(realized and unrealized).............. .17 .24 .14 .27
--- ------ ------- ------ ------
Total From Investment Operations....... .24 .31 .21 .35
--- ------ ------- ------ ------
Less Dividend Distributions:
From net investment income.............. (.07) (.07) (.08) (.08)
From capital gains...................... (.01) (.39) (.17) (.03)
--- ------ ------- ------ ------
Total Distributions.................... (.08) (.46) (.25) (.11)
--- ------ ------- ------ ------
Net Asset Value, End of Year............. $ 1.78 $ 1.62 $ 1.77 $ 1.81
=== ====== ======= ====== ======
Total Return............................. 14.5% 17.7% 11.9% 21.9%
Ratios/Supplemental Data
Net Assets, End of Year ($ millions)..... $ 336 $ 305 $ 283 $ 276
Ratio of Expenses to Average Net Assets.. .50% .50% .50% .50%
Ratio of Net Income to Average Net
Assets.................................. 3.68% 3.57% 3.63% 4.30%
Portfolio Turnover Rate(a)............... 73.85% 104.04% 69.79% 76.84%
</TABLE>
-23-
<PAGE>
Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------
1999 1998 1997 1996 1995
---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year............ $1.43 $1.38 $1.43 $1.27
--- ----- ----- ----- -----
Income From Investment Operations:
Net Investment Income........................ .10 .09 .09 .09
Net Gains or Losses on Securities (realized
and unrealized)............................. -- .06 (.04) .16
--- ----- ----- ----- -----
Total From Investment Operations............ .10 .15 .05 .25
--- ----- ----- ----- -----
Less Dividend Distributions:
From net investment income................... (.10) (.09) (.09) (.09)
From capital gains........................... (.01) (.01) (.01) --
--- ----- ----- ----- -----
Total Distributions......................... (.11) (.10) (.10) (.09)
--- ----- ----- ----- -----
Net Asset Value, End of Year.................. $1.42 $1.43 $1.38 $1.43
=== ===== ===== ===== =====
Total Return.................................. 7.2% 10.4% 3.5% 19.4%
Ratios/Supplemental Data
Net Assets, End of Period ($ millions)........ $ 465 $ 414 $ 329 $ 311
Ratio of Expenses to Average Net Assets....... .50% .50% .50% .50%
Ratio of Net Income to Average Net Assets..... 6.73% 6.69% 6.70% 6.64%
Portfolio Turnover Rate(a).................... 21.60% 57.71% 30.14% 41.93%
</TABLE>
Mid-Term Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------
1999 1998 1997 1996 1995
---- ----- ----- ------ -----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year........... $ .90 $ .90 $ 1.00 $ .91
--- ----- ----- ------ -----
Income From Investment Operations:
Net Investment Income....................... .05 .05 .14 .06
Net Gains or Losses on Securities (realized
and unrealized)............................ .01 .01 (.10) .09
--- ----- ----- ------ -----
Total From Investment Operations........... .06 .06 .04 .15
--- ----- ----- ------ -----
Less Dividend Distributions:
From net investment income.................. (.05) (.06) (.14) (.06)
From capital gains.......................... -- -- -- --
--- ----- ----- ------ -----
Total Distributions........................ (.05) (.06) (.14) (.06)
--- ----- ----- ------ -----
Net Asset Value, End of Year................. $ .91 $ .90 $ .90 $1.00
=== ===== ===== ====== =====
Total Return................................. 6.4% 7.3% 3.9% 16.3%
Ratios/Supplemental Data
Net Assets, End of Year ($ millions)......... $ 15 $ 15 $ 13 $ 24
Ratio of Expenses to Average Net Assets...... .50% .50% .50% .50%
Ratio of Net Income to Average Net Assets.... 5.76% 5.87% 5.80% 5.73%
Portfolio Turnover Rate(a)................... 23.09% 12.89% 144.55% 73.72%
</TABLE>
-24-
<PAGE>
Short-Term Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------
1999 1998 1997 1996 1995
---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year............ $1.02 $1.03 $1.02 $1.00
--- ----- ----- ----- -----
Income From Investment Operations:
Net Investment Income........................ .05 .07 .04 .06
Net Gains or Losses on Securities (realized
and unrealized)............................. .01 (.01) .01 .02
--- ----- ----- ----- -----
Total From Investment Operations............ .06 .06 .05 .08
--- ----- ----- ----- -----
Less Dividend Distributions:
From net investment income................... (.05) (.07) (.04) (.06)
From capital gains........................... -- -- -- --
--- ----- ----- ----- -----
Total Distributions......................... (.05) (.07) (.04) (.06)
--- ----- ----- ----- -----
Net Asset Value, End of Year.................. $1.03 $1.02 $1.03 $1.02
=== ===== ===== ===== =====
Total Return.................................. 5.7% 6.0% 4.9% 7.7%
Ratios/Supplemental Data
Net Assets, End of Year ($ millions).......... $ 22 $ 15 $ 16 $ 3
Ratio of Expenses to Average Net Assets....... .50% .50% .50% .50%
Ratio of Net Income to Average Net Assets..... 5.46% 5.81% 5.42% 4.65%
Portfolio Turnover Rate(a).................... 91.35% 74.95% 6.68% 16.47%
</TABLE>
Money Market Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------
1999 1998 1997 1996 1995
---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year............ $1.18 $1.19 $1.18 $1.19
--- ----- ----- ----- -----
Income From Investment Operations:
Net Investment Income........................ .06 .07 .06 .07
Net Gains or Losses on Securities (realized
and unrealized)............................. -- -- -- --
--- ----- ----- ----- -----
Total From Investment Operations............ .06 .07 .06 .07
--- ----- ----- ----- -----
Less: Dividend Distributions From Net
Investment Income............................ (.06) (.08) (.05) (.08)
--- ----- ----- ----- -----
Total Distributions......................... (.06) (.08) (.05) (.08)
--- ----- ----- ----- -----
Net Asset Value, End of Year.................. $1.18 $1.18 $1.19 $1.18
=== ===== ===== ===== =====
Total Return.................................. 5.4% 5.5% 5.3% 5.8%
Ratios/Supplemental Data
Net Assets, End of Year ($ millions).......... $ 81 $ 68 $ 78 $ 73
Ratio of Expenses to Average Net Assets....... .25% .25% .25% .25%
Ratio of Net Income to Average Net Assets..... 5.26% 5.32% 5.21% 5.66%
Portfolio Turnover Rate(a).................... N/A N/A N/A N/A
</TABLE>
- ------
N/A = Not Applicable
(a)Portfolio turnover rate excludes all short-term securities.
-25-
<PAGE>
Investment Company
Mutual of America Investment Corporation
Investment Adviser
Mutual of America Capital Management Corporation
Subadvisers for a portion of the All America Fund
Fred Alger Management, Inc.
Oak Associates Ltd.
Independent Auditors
Arthur Andersen LLP
Custodian
The Chase Manhattan Bank
The Investment Company sells shares of its Funds only to the Separate Accounts
of Mutual of America Life Insurance Company and The American Life Insurance
Company of New York for the variable accumulation annuity and variable
universal life insurance products they issue.
<PAGE>
Mutual of America Investment Corporation
320 Park Avenue, New York, New York 10022
You May Obtain More Information
- -------------------------------------------------------------------------------
Registration Statement. We have filed with the Securities and Exchange
Commission (the Commission) a Registration Statement about the Investment
Company. The Registration Statement includes this prospectus, a Statement of
Additional Information (the SAI), and exhibits. You may examine and copy the
Registration Statement at the Commission's Public Reference Room in
Washington, DC. You may call 1-800-SEC-0330 to learn about the operation of
the Public Reference Room.
Statement of Additional Information. The SAI contains additional information
about the Investment Company and its Funds. We incorporate the SAI into this
Prospectus by reference.
Semi-annual and Annual Reports. Additional information about the Funds'
investments is available in the Investment Company's annual and semi-annual
reports to shareholders. In the annual reports, you will find a discussion
(for all Funds except the Money Market Fund) of the market conditions and
investment strategies that significantly affected the Funds' performance
during its last fiscal year.
How to obtain the SAI and Reports. You may obtain a free copy of the SAI or of
the Investment Company's most recent annual and semi-annual financial
statements, by:
. writing to us at 320 Park Avenue, New York, NY 10022, Attn: Investment
Company,
or
. calling 1-212-224-1600 and asking for the Investment Company.
The Commission has an Internet web site at http://www.sec.gov. You may obtain
the Investment Company's Registration Statement, including the SAI, and its
semi-annual and annual 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.
Where to direct Questions. If you have questions about the operations of the
Investment Company, you should contact your representative at Mutual of
America Life Insurance Company.
Investment Company Act of 1940 Act File Number 811-5084
- -------------------------------------------------------------------------------
Prospectus dated May 1, 2000
<PAGE>
Mutual of America Investment Corporation
320 Park Avenue, New York, New York 10022
(212) 224-1600
Equity Index Fund Bond Fund
All America Fund Mid-Term Bond Fund
Mid-Cap Equity Index Fund Short-Term Bond Fund
Aggressive Equity Fund Money Market Fund
Composite Fund
Statement of Additional Information
May 1, 2000
This Statement of Additional Information is not a prospectus. You should read
it in conjunction with the Mutual of America Investment Corporation Prospectus
dated May 1, 2000, and you should keep it for future use. We incorporate the
Prospectus by reference into this Statement of Additional Information.
A copy of the Prospectus is available to you at no charge. To obtain a copy,
you may write to the Mutual of America Investment Corporation at the above
address or call the telephone number listed above.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Company's Form of Operations.................................... 2
Investment Strategies and Related Risks.................................... 2
Additional Permitted Investments.......................................... 2
Additional Investment Strategies.......................................... 5
Additional Information about Specific Types of Securities................. 9
Insurance Law Restrictions................................................ 12
Fundamental Investment Restrictions........................................ 13
Non-Fundamental Investment Policies........................................ 13
Management of the Investment Company....................................... 15
Investment Advisory Arrangements........................................... 16
Portfolio Transactions and Brokerage....................................... 18
Purchase, Redemption and Pricing of Shares................................. 20
Taxation of the Investment Company......................................... 21
Distribution Arrangements.................................................. 21
Yield and Performance Information.......................................... 22
Description of Corporate Bond Ratings...................................... 25
Independent Auditors....................................................... 26
Legal Matters.............................................................. 26
Custodian.................................................................. 26
Use of Standard & Poor's Indices........................................... 26
Financial Statements....................................................... 27
</TABLE>
<PAGE>
INVESTMENT COMPANY'S FORM OF OPERATIONS
History and Operating Form
- -------------------------------------------------------------------------------
Mutual of America Investment Corporation (the Investment Company) was formed
on February 21, 1986 as a Maryland corporation. It is a diversified, open-end
management investment company registered under the Investment Company Act of
1940 (the 1940 Act). The Investment Company is a successor to Separate Account
No. 2 of Mutual of America Life Insurance Company (Mutual of America).
The Investment Company issues separate classes (or series) of stock, each of
which represents a separate Fund of investments. There are currently nine
Funds: the 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. Prior to May 1, 1994, the All America
Fund was known as the Stock Fund, had different investment objectives and did
not have any subadvisers.
Offering of Shares
- -------------------------------------------------------------------------------
The Investment Company offers Fund shares only to separate accounts of Mutual
of America and Mutual of America's indirect wholly-owned subsidiary, The
American Life Insurance Company of New York (American Life). In this Statement
of Additional Information, Mutual of America and American Life are referred to
as the Insurance Companies and the separate accounts of the Insurance
Companies are referred to as the Separate Accounts.
Contractholders, participants and policyowners of variable annuity contracts
and variable life policies issued by the Insurance Companies allocate their
contributions and premiums to funds of the Separate Accounts. Each Separate
Account has nine Funds that purchase shares in the corresponding Funds of the
Investment Company. The Insurance Companies are the record holders of the
Investment Company Funds' shares.
Description of Shares
- -------------------------------------------------------------------------------
The authorized capital stock of the Investment Company consists of one billion
shares of common stock, $.01 par value. The Investment Company currently has
nine classes of common stock, with each class representing a Fund. The
Investment Company may establish additional Funds and may allocate its
authorized shares either to new classes or to one or more of the existing
classes.
All shares of common stock, of whatever class, are entitled to one vote. The
votes of all classes are cast on an aggregate basis, except that if the
interests of the Funds differ, the voting is on a Fund-by-Fund basis. Examples
of matters that would require a Fund-by-Fund vote are changes in the
fundamental investment policy of a particular Fund and approval of the
Investment Advisory Agreement or a Subadvisory Agreement for the Fund.
The shares of each Fund, when issued, will be fully paid and nonassessable and
will have no preference, preemptive, conversion, exchange or similar rights.
Shares do not have cumulative voting rights.
Each issued and outstanding share in a Fund is entitled to participate equally
in dividends and distributions declared by the Fund and in the net assets of
that Fund upon liquidation or dissolution remaining after satisfaction of
outstanding liabilities. Accrued liabilities that are not allocable to one or
more Funds will generally be allocated among the Funds in proportion to their
relative net assets. In the unlikely event that any Fund incurred liabilities
in excess of its assets, the other Funds could be liable for the excess.
INVESTMENT STRATEGIES AND RELATED RISKS
The Prospectus describes each Fund's principal investment strategy(ies) and
the related risks. You should refer to "Summary of How Our Funds Invest" and
"Details about How Our Funds Invest and Related Risks" in the Prospectus to
learn about those strategies and risks.
Additional Permitted Investments
- -------------------------------------------------------------------------------
The Investment Company's Funds may use investment strategies and purchase
types of securities in addition to those discussed in the Prospectus.
2
<PAGE>
Equity Index Fund and Mid-Cap Equity Index Fund: In addition to common stocks
and futures contracts, the Funds may invest in:
. money market instruments and
. U.S. Government and U.S. Government agency obligations.
All America Fund: In addition to common stocks, the Adviser and two
Subadvisers who manage approximately 40% of the net assets of the All America
Fund (the Active Assets) may invest assets in:
. securities convertible into common stocks, including warrants and
convertible bonds,
. bonds,
. money market instruments,
. U.S. Government and U.S. Government agency obligations,
. foreign securities and ADRs,
. futures and options contracts, and
. preferred stock.
The portion of the All America Fund invested to replicate the S&P 500 Index
(the Indexed Assets) also may be invested in:
. money market instruments, and
. U.S. Government and U.S. Government agency obligations.
The Adviser may manage cash allocated to the Active Assets prior to investment
in securities by the Subadvisers.
Aggressive Equity Fund: In addition to common stocks, the Aggressive Equity
Fund may invest in:
. securities convertible into common stocks, including warrants and
convertible bonds,
. bonds,
. money market instruments,
. U.S. Government and U.S. Government agency obligations,
. foreign securities and ADRs,
. futures and options contracts, and
. preferred stock.
Composite Fund: In addition to common stocks, the equity portion of the
Composite Fund may be invested in:
. securities convertible into common stocks, including warrants,
. preferred stock,
. money market instruments,
. U.S. Government and U.S. Government agency obligations,
. foreign securities and ADRs, and
. futures and options contracts.
In addition to investment grade debt securities of the type described in the
Prospectus, the fixed-income portion of the Composite Fund may be invested in:
. asset-backed securities,
. money market instruments,
. non-investment grade securities,
. foreign securities,
. options, futures contracts and options on futures contracts, and
. equipment trust certificates.
3
<PAGE>
Bond Fund, Mid-Term Bond Fund and Short-Term Bond Fund (the "Bond Funds"): In
addition to investment grade debt securities of the type described in the
Prospectus, each Bond Fund may invest in :
. asset-backed securities,
. non-investment grade securities, for up to 20% of its assets,
. foreign securities,
. cash and money market instruments,
. stocks acquired either by conversion of fixed-income securities or
by the exercise of warrants attached to fixed income securities,
. preferred stock,
. options, futures contracts and options on futures contracts, and
. equipment trust certificates.
Money Market Fund: In addition to commercial paper and U.S. Treasury Bills,
the Fund may invest in any of the following kinds of money market instruments,
payable in United States dollars:
. securities issued or guaranteed by the U.S. Government or a U.S.
Government agency or instrumentality;
. negotiable certificates of deposit, bank time deposits, bankers'
acceptances and other short-term debt obligations of domestic
banks and foreign branches of domestic banks and U.S. branches of
foreign banks, which at the time of their most recent annual
financial statements show assets in excess of $5 billion;
. certificates of deposit, time deposits and other short-term debt
obligations of domestic savings and loan associations, which at
the time of their most recent annual financial statements show
assets in excess of $1 billion;
. repurchase agreements covering government securities, certificates
of deposit, commercial paper or bankers' acceptances;
. variable amount floating rate notes; and
. debt securities issued by a corporation.
The Money Market Fund may enter into transactions in options, futures
contracts and options on futures contracts on United States Treasury
securities.
Under the Money Market Fund's investment policy, money market instruments and
other short-term debt securities means securities that have a remaining term
to maturity of up to 13 months (25 months in the case of government
securities). The dollar-weighted average maturity of the securities held by
the Money Market Fund will not exceed 90 days.
The securities in the Money Market Fund must meet the following quality
requirements--
. All of the securities held by the Money Market Fund must have
received (or be of comparable quality to securities which have
received), at the time of the purchase, a rating in one of the two
highest categories by any two nationally recognized statistical
rating agencies; and
. At least 95% of the securities held by the Money Market Fund must
have received (or be of comparable quality to securities which
have received), at the time of purchase, a rating in the highest
category by any two such rating agencies.
The Board of Directors of the Investment Company must approve or ratify the
purchase of any security (other than any U.S. government security) that has
not received a rating or that has been rated by only one rating agency. The
Fund will sell any securities that are subsequently downgraded below the two
highest categories as soon as practicable, unless the Board of Directors
determines that sale of those securities would not be in the best interests of
the Fund.
The Money Market Fund will not invest more than 5% of its total assets in
securities of, or subject to puts from, any one issuer (other than U.S.
government securities and repurchase agreements fully collateralized by U.S.
government securities) provided that (a) the Fund may invest up to 10% of its
total assets in securities issued or guaranteed by a single issuer with
respect to which the Fund has purchased an unconditional put and (b) with
respect to 25% of its total assets the Fund may, with respect to securities
meeting the highest investment criteria, exceed the 5% limit for up to three
business days.
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Additional Investment Strategies
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Lending of Securities
The Funds have the authority to lend their securities. The Funds will not lend
any securities until the Investment Company's Board of Directors approves a
form of securities lending agreement. Refer to "Fundamental Investment
Restrictions", paragraph 9, and "Non-Fundamental Investment Policies",
paragraph 9, for descriptions of the fundamental and current restrictions on
lending by the Funds.
Upon lending securities, a Fund must receive as collateral cash, securities
issued or guaranteed by the United States Government or its agencies or
instrumentalities, or letters of credit of certain banks selected by the
Adviser. The collateral amount at all times while the loan is outstanding must
be maintained in amounts equal to at least 100% of the current market value of
the loaned securities.
The Fund will continue to receive interest or dividends on the securities
lent. In addition, it will receive a portion of the income generated by the
short-term investment of cash received as collateral, or, alternatively, where
securities or a letter of credit are used as collateral, a lending fee paid
directly to the Fund by the borrower of the securities. A Fund will have the
right to terminate a securities loan at any time. The Fund will have the right
to regain record ownership of loaned securities in order to exercise
beneficial rights, such as voting rights or subscription rights.
Loans of securities will be made only to firms that the Adviser deems
creditworthy. There are risks of delay in recovery and even loss of rights in
the collateral, however, if the borrower of securities defaults, becomes the
subject of bankruptcy proceedings or otherwise is unable to fulfill its
obligations or fails financially.
Repurchase Agreements
The Funds have the authority to enter into repurchase agreements. A Fund may
not invest more than 10% of its total assets in repurchase agreements or time
deposits that mature in more than seven days. The Funds will not enter into
any repurchase agreements until the Investment Company's Board of Directors
approves a form of Repurchase Agreement and authorizes entities as
counterparties.
Under a repurchase agreement, a Fund acquires underlying debt instruments for
a relatively short period (usually not more than one week and never more than
one year) subject to an obligation of the seller to repurchase (and the Fund
to resell) the instrument at a fixed price and time, thereby determining the
yield during the Fund's holding period. This results in a fixed rate of return
insulated from market fluctuation during such period. Accrued interest on the
underlying security will not be included for purposes of valuing a Fund's
assets.
Repurchase agreements have the characteristics of loans by a Fund and will be
fully collateralized (either with physical securities or evidence of book
entry transfer to the account of the custodian bank) at all times. During the
term of the repurchase agreement, the Fund retains the security subject to the
repurchase agreement as collateral securing the seller's repurchase
obligation, continually monitors the market value of the security subject to
the agreement and requires the Fund's seller to deposit with the Fund
additional collateral equal to any amount by which the market value of the
security subject to the repurchase agreement falls below the resale amount
provided under the repurchase agreement.
The Funds will enter into repurchase agreements only with member banks of the
Federal Reserve System and with dealers in U.S. Government securities whose
creditworthiness has been reviewed and found satisfactory by the Adviser and
the Board of Directors of the Investment Company.
Securities underlying repurchase agreements will be limited to certificates of
deposit, commercial paper, bankers' acceptances, or obligations issued or
guaranteed by the United States Government or its agencies or
instrumentalities, in which the Funds may otherwise invest.
A seller of a repurchase agreement could default and not repurchase from a
Fund the security that is the subject of the agreement. The Fund would look to
the collateral underlying the seller's repurchase agreement, including the
securities subject to the repurchase agreement, for satisfaction of the
seller's obligation to the Fund. In such event, the Fund might incur
disposition costs in liquidating the collateral and might suffer a loss if the
value of the collateral declines. There is a risk that if the issuer of the
repurchase agreement becomes involved in bankruptcy proceedings, the Fund
might be delayed or prevented from liquidating the underlying security or
otherwise obtaining it for its own purposes, if the Fund did not have actual
or book entry possession of the security.
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Rule 144A Investments, Section 4(2) Commercial Paper and Illiquid Securities
Each Fund, with respect to not more than 10% of its total assets, may purchase
securities that are not readily marketable, or are "illiquid". Repurchase
agreements of more than seven days' duration and variable and floating rate
demand notes not requiring receipt of the principal note amount within seven
days' notice are considered illiquid. A Fund may incur higher transaction
costs and require more time to complete transactions for the purchase and sale
of illiquid securities than for readily marketable securities. When a Fund
determines to sell an illiquid security within a relatively short time period,
it may have to accept a lower sales price than if the security were readily
marketable. Refer to "Non-Fundamental Investment Policies", paragraph 10.
The Adviser will make a factual determination as to whether securities with
contractual or legal restrictions on resale purchased by a Fund are liquid,
based on the frequency of trades and quotes, the number of dealers and
potential purchasers, dealer undertakings to make a market, and the nature of
the security and the marketplace, pursuant to procedures adopted by the Board
of Directors of the Investment Company.
Securities that are eligible for purchase and sale under Rule 144A of the
Securities Act of 1933 (the 1933 Act) shall be considered liquid, provided the
Adviser has not made a contrary determination regarding liquidity in
accordance with the Board's procedures. Rule 144A permits certain qualified
institutional buyers to trade in securities even though the securities are not
registered under the 1933 Act. In addition, commercial paper privately placed
in accordance with Section 4(2) of the 1933 Act also will be considered
liquid, provided the requirements set forth in the Board's procedures are
satisfied.
Options and Futures Contracts
Each of the Funds may purchase and sell options and futures contracts, as
described below. Refer to "Non-Fundamental Investment Policies" below,
paragraph 1, for a description of the current restrictions on the Funds'
purchase of options and futures contracts.
Each Fund may sell a call option contract on a security it holds in its
portfolio (called a covered call), and it may buy a call option contract on
the security to close out a position created by the sale of a covered call.
. A call option is a short-term contract (generally having a
duration of nine months or less) which gives the purchaser of the
option the right to purchase the underlying security at a fixed
exercise price at any time prior to the expiration of the option
regardless of the market price of the security during the option
period. As consideration for writing a covered call option, a Fund
(the seller) receives from the purchaser a premium, which the Fund
retains whether or not the option is exercised. The seller of the
call option has the obligation, upon the exercise of the option by
the purchaser, to sell the underlying security at the exercise
price at any time during the option period.
Each Fund may buy a put option contract on a security it holds in its
portfolio, and it may sell a put option contract on the security to close out
a position created by the purchase of the put option contract.
. A put option is a similar short-term contract that gives the
purchaser of the option the right to sell the underlying security
at a fixed exercise price at any time prior to the expiration of
the option regardless of the market price of the security during
the option period. As consideration for the put option, a Fund
(the purchaser) pays the seller a premium, which the seller
retains whether or not the option is exercised. The seller of the
put option has the obligation, upon the exercise of the option by
the purchaser, to purchase the underlying security at the exercise
price at any time during the option period. The buying of a
covered put contract limits the downside exposure for the
investment in the underlying security to the combination of the
exercise price less the premium paid.
Each Fund may purchase and sell futures contracts, and purchase options on
futures contracts, on fixed-income securities or on an index of securities,
such as the Standard & Poor's 100 Index, the Standard & Poor's 500 Index or
the New York Stock Exchange Composite Index.
. A futures contract on fixed income securities requires the seller
to deliver, and the purchaser to accept delivery of, a stated
quantity of a given type of fixed income security for a fixed
price at a specified time in the future. A futures contract or
option on a stock index provides for the making and acceptance of
a cash settlement equal to the change in value of a hypothetical
portfolio of stocks between the time the contract is entered into
and the time it is liquidated, times a fixed multiplier. Futures
contracts may be traded domestically only on exchanges which have
been designated as "contract markets" by the Commodity Futures
Trading Commission, such as the Chicago Board of Trade.
6
<PAGE>
. An option on a futures contract provides the purchaser with the
right, but not the obligation, to enter into a "long" position in
the underlying futures contract (in the case of a call option on a
futures contract), or a "short" position in the underlying futures
contract (in the case of a put option on a futures contract), at a
fixed price up to a stated expiration date. Upon exercise of the
option by the holder, the contract market clearing house
establishes a corresponding short position for the writer of the
option, in the case of a call option, or a corresponding long
position in the case of a put option. In the event that an option
is exercised, the parties are subject to all of the risks
associated with the trading of futures contracts, such as payment
of margin deposits.
. A Fund does not pay or receive a payment upon its purchase or sale
of a futures contract. Initially, a Fund will be required to
deposit with the Fund's custodian in the broker's name an amount
of cash or U.S. Treasury bills equal to approximately 5% of the
contract amount. This amount is known as "initial margin."
. While a futures contract is outstanding, there will be subsequent
payments, called "maintenance margin", to and from the broker.
These payments will be made on a daily or intraday basis as the
price of the underlying instrument or stock index fluctuates
making, the long and short positions in the futures contract more
or less valuable. This process is known as "mark to market". At
any time prior to expiration of the futures contract, a Fund may
elect to close the position by taking an opposite position, which
will operate to terminate the Fund's position in the futures
contract and may require additional transaction costs. A final
determination of margin is then made, additional cash is required
to be paid by or released to the Fund, and the Fund realizes a
loss or gain.
A Fund may use futures contracts to protect against general increases or
decreases in the levels of securities prices, in the manner described below.
. When a Fund anticipates a general decrease in the market value of
portfolio securities, it may sell futures contracts. If the market
value falls, the decline in the Fund's net asset value may be
offset, in whole or in part, by corresponding gains on the futures
position.
. A Fund may sell futures contracts on fixed-income securities in
anticipation of a rise in interest rates, that would cause a
decline in the value of fixed-income securities held in the
Fund's portfolio.
. A Fund may sell stock index futures contracts in anticipation of
a general market wide decline that would reduce the value of its
portfolio of stocks.
. When a Fund projects an increase in the cost of fixed-income
securities or stocks to be acquired in the future, the Fund may
purchase futures contracts on fixed-income securities or stock
indexes. If the hedging transaction is successful, the increased
cost of securities subsequently acquired may be offset, in whole
or in part, by gains on the futures position.
. Instead of purchasing or selling futures contracts, a Fund may
purchase call or put options on futures contracts in order to
protect against declines in the value of portfolio securities or
against increases in the cost of securities to be acquired.
. Purchases of options on futures contracts may present less risk
in hedging a portfolio than the purchase and sale of the
underlying futures contracts, since the potential loss is
limited to the amount of the premium paid for the option, plus
related transaction costs.
. As in the case of purchases and sales of futures contracts, a
Fund may be able to offset declines in the value of portfolio
securities, or increases in the cost of securities acquired,
through gains realized on its purchases of options on futures.
. The Funds also may purchase put options on securities or stock
indexes for the same types of securities for hedging purposes. The
purchase of a put option on a security or stock index permits a
Fund to protect against declines in the value of the underlying
security or securities in a manner similar to the sale of futures
contracts.
. In addition, the Funds may write call options on portfolio
securities or on stock indexes for the purpose of increasing their
returns and/or to protect the value of their portfolios.
7
<PAGE>
. When a Fund writes an option which expires unexercised or is
closed out by the Fund at a profit, it will retain the premium
paid for the option, less related transaction costs, which will
increase its gross income and will offset in part the reduced
value of a portfolio security in connection with which the
option may have been written.
. If the price of the security underlying the option moves
adversely to the Fund's position, the option may be exercised
and the Fund will be required to sell the security at a
disadvantageous price, resulting in losses which may be only
partially offset by the amount of the premium.
. A call option on a security written by a Fund will be covered
through ownership of the security underlying the option or
through ownership of an absolute and immediate right to acquire
such security upon conversion or exchange of other securities
held in its portfolio.
Risks in futures and options transactions include the following:
. There may be a lack of liquidity, which could make it difficult or
impossible for a Fund to close out existing positions and realize
gains or limit losses.
The liquidity of a secondary market in futures contracts or options on
futures contracts may be adversely affected by "daily price fluctuation
limits," established by the exchanges on which such instruments are
traded, which limit the amount of fluctuation in the price of a
contract during a single trading day. Once the limit in a particular
contract has been reached, no further trading in such contract may
occur beyond such limit, thus preventing the liquidation of positions,
and requiring traders to make additional variation margin payments.
Market liquidity in options, futures contracts or options on futures
contracts may also be adversely affected by trading halts, suspensions,
exchange or clearing house equipment failures, government intervention,
insolvency of a brokerage firm or clearing house or other disruptions
of normal trading activity.
. The securities held in a Fund's portfolios may not exactly
duplicate the security or securities underlying the options,
futures contracts or options on futures contracts traded by the
Fund, and as a result the price of the portfolio securities being
hedged will not move in the same amount or direction as the
underlying index, securities or debt obligation.
. A Fund purchasing an option may lose the entire amount of the
premium plus related transaction costs.
. For options on futures contracts, changes in the value of the
underlying futures contract may not be fully reflected in the
value of the option.
. With respect to options and options on futures contracts, the
Funds are subject to the risk of market movements between the time
that the option is exercised and the time of performance
thereunder.
. In writing a covered call option on a security or a stock index, a
Fund may incur the risk that changes in the value of the
instruments used to cover the position will not correlate
precisely with changes in the value of the option or underlying
the index or instrument.
. The opening of a futures position and the writing of an option are
transactions that involve substantial leverage. As a result,
relatively small movements in the price of the contract can result
in substantial unrealized gains or losses.
8
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Additional Information about Specific Types of Securities
- -------------------------------------------------------------------------------
Non-Investment Grade Securities
The Bond Funds may purchase non-investment grade debt securities. In addition,
the Bond Funds and the other Funds that purchase debt securities may hold a
security that becomes non-investment grade as a result of impairments of the
issuer's credit.
Fixed-income securities that are rated in the lower rating categories of the
nationally recognized rating services (Ba or lower by Moody's and BB or lower
by Standard & Poor's), or unrated securities of comparable quality, are
commonly known as non-investment grade securities or "junk bonds". Junk bonds
are regarded as being predominantly speculative as to the issuer's ability to
make payments of principal and interest. Investment in non-investment grade
securities involves substantial risk. Junk bonds may be issued by less
creditworthy companies or by larger, highly leveraged companies, and are
frequently issued in corporate restructurings, such as mergers and leveraged
buy-outs. Such securities are particularly vulnerable to adverse changes in
the issuer's industry and in general economic conditions. Junk bonds
frequently are junior obligations of their issuers, so that in the event of
the issuer's bankruptcy, claims of the holders of junk bonds will be satisfied
only after satisfaction of the claims of senior security holders.
Non-investment grade bonds tend to be more volatile than higher-rated fixed-
income securities, so that adverse economic events may have a greater impact
on the prices of junk bonds than on higher-rated fixed-income securities. Junk
bonds generally are purchased and sold through dealers who make a market in
such securities for their own accounts. However, there are fewer dealers in
the non-investment grade bond market, and the market may be less liquid than
the market for higher-rated fixed-income securities, even under normal
economic conditions. Also, there may be significant disparities in the prices
quoted for junk bonds by various dealers. Adverse economic conditions or
investor perceptions (whether or not based on economic fundamentals) may
impair the liquidity of this market, and may cause the prices that a Fund may
receive for any non-investment grade bonds to be reduced, or might cause a
Fund to experience difficulty in liquidating a portion of its portfolio.
The Investment Company currently anticipates that no Fund will invest more
than 5% of its total assets in non-investment grade debt securities.
U.S. Government and U.S. Government Agency Obligations
All of the Funds may invest in U.S. Government and U.S. Government agency
obligations. Some of these securities also may be considered money market
instruments. Some also may be mortgage-backed securities or zero coupon
securities.
U.S. Government Obligations: These securities are issued or guaranteed as to
principal and interest by the United States Government. They include a variety
of Treasury securities, which differ only in their interest rates, maturities
and times of issuance. Treasury bills have a maturity of one year or less.
Treasury notes at the time of issuance have maturities of one to seven years
and Treasury bonds generally have a maturity of greater than five years.
U.S. Government Agency Obligations: Agencies of the United States Government
that issue or guarantee obligations include, among others, Export-Import Bank
of the United States, Farmers Home Administration, Federal Housing
Administration, Government National Mortgage Association, Student Loan
Marketing Association, Maritime Administration, Small Business Administration
and the Tennessee Valley Authority. Instrumentalities of the United States
Government that issue or guarantee obligations include, among others, Federal
Farm Credit Banks, Federal National Mortgage Association, Federal Home Loan
Banks, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit
Banks, Federal Land Banks and Banks for Cooperatives.
Some of the securities issued by U.S. Government agencies and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others are supported by the right of the issuer to borrow from the
Treasury, while others are supported only by the credit of the instrumentality
that issued the obligation.
Money Market Instruments
All of the Funds may purchase money market instruments, which include the
following.
Certificates of Deposit. Certificates of deposit are generally short term,
interest-bearing negotiable certificates issued by banks or savings and loan
associations against funds deposited in the issuing institution.
9
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Time Deposits. Time deposits are deposits in a bank or other financial
institution for a specified period of time at fixed interest rate, for which
no negotiable certificate is received.
Bankers' Acceptance. A bankers' acceptance is a draft drawn on a commercial
bank by a borrower usually in connection with an international commercial
transaction (to finance the import, export, transfer or storage of goods). The
borrower is liable for payment as well as the bank, which unconditionally
guarantees to pay the draft at its face amount on the maturity date. Most
acceptances have maturities of six months or less and are traded in secondary
markets prior to maturity.
Commercial Paper. Commercial paper refers to short-term, unsecured promissory
notes issued by corporations to finance short-term credit needs. Commercial
paper is usually sold on a discount basis and has a maturity at the time of
issuance not exceeding nine months.
Variable Amount Floating Rate Notes. Variable floating rate notes are short-
term, unsecured promissory notes issued by corporations to finance short-term
credit needs. These are interest-bearing notes on which the interest rate
generally fluctuates on a weekly basis.
Corporate Debt Securities. Corporate debt securities with a remaining maturity
of less than one year tend to become extremely liquid and are traded as money
market securities.
Treasury Bills. See "U.S. Government and U.S. Government Agency Obligations"
above.
Because the Money Market Fund and the other Funds generally will purchase only
money market instruments that are rated high quality and have short terms to
maturities, these money market instruments are considered to have low levels
of market risk and credit risk.
Zero Coupon Securities and Discount Notes; Redeemable Securities
The Bond Funds and the fixed income portion of the Composite Fund, and the All
America Fund and Aggressive Equity Fund to the extent they invest in fixed
income securities, may invest in discount notes and zero coupon securities.
Discount notes mature in one year or less from the date of issuance. Zero
coupon securities may be issued by corporations or by certain U.S. Government
agencies.
Discount notes and zero coupon securities do not pay interest. Instead, they
are issued at prices that are discounted from the principal (par) amount due
at maturity. The difference between the issue price and the principal amount
due at maturity (or the amount due at the expected redemption date in some
cases if the securities are callable) is called "original issue discount". A
Fund must accrue original issue discount as income, even if the Fund does not
actually receive any payment under the security during the accrual period. The
purchase price paid for zero coupon securities at the time of issuance, or
upon any subsequent resale, reflects a yield-to-maturity required by the
purchaser from the purchase date to the maturity date (or expected redemption
date).
Foreign Securities and American Depository Receipts (ADRs)
In addition to investing in domestic securities, each of the Funds other than
the Equity Index Fund, Mid-Cap Equity Index Fund and the Money Market Fund may
invest in securities of foreign issuers, including securities traded outside
the United States. Foreign issues guaranteed by domestic corporations are
considered to be domestic securities.
ADRs are dollar-denominated receipts issued generally by domestic banks and
representing the deposit with the bank of a security of a foreign issuer. ADRs
are publicly traded on exchanges or over-the-counter in the United States.
The Investment Company has a non-fundamental investment policy that limits
foreign securities, including foreign exchange transactions, and ADRs to 25%
of a Fund's total assets. (See "Non-Fundamental Investment Policies",
paragraph 2.) The Investment Company currently anticipates that no Fund will
invest more than 10% of its total assets in foreign securities or foreign
exchange transactions.
The Investment Company will consider special factors before investing in
foreign securities and ADRs. These include:
. changes in currency rates or currency exchange control
regulations,
. the possibility of expropriation,
10
<PAGE>
. the unavailability of financial information or the difficulty of
interpreting financial information prepared under foreign
accounting standards,
. less liquidity and more volatility in foreign securities markets
(not applicable to ADRs),
. the impact of political, social or diplomatic developments, and
. the difficulty of assessing economic trends in foreign countries.
The Funds could encounter greater difficulties in bringing legal processes
abroad than would be encountered in the United States. In addition, transaction
costs in foreign securities may be higher.
Convertible Securities
The Bond Funds and the fixed income portion of the Composite Fund, as well as
the All America and Aggressive Equity Funds to the extent they invest in debt
securities, may invest in convertible securities. Convertible securities can be
converted by the holder into common stock of the issuer, at the price and on
the terms set forth by the issuer when the convertible securities are initially
sold. Convertible securities normally provide a higher yield than the
underlying stock but a lower yield than a fixed-income security without the
convertibility feature. The price of the convertible security normally will
vary to some degree with changes in the price of the underlying stock, although
the higher yield tends to make the convertible security less volatile than the
underlying common stock. The price of the convertible security also will vary
to some degree inversely with interest rates.
Equipment Trust Certificates
The Bond Funds and the fixed income portion of the Composite Fund, may invest
in equipment trust certificates. The proceeds of those certificates are used to
purchase equipment, such as railroad cars, airplanes or other equipment, which
in turn serve as collateral for the related issue of certificates.
The equipment subject to a trust generally is leased by a railroad, airline or
other business, and rental payments provide the projected cash flow for the
repayment of the equipment trust certificates. Holders of equipment trust
certificates must look to the collateral securing the certificates, and any
guarantee provided by the lessee or any parent corporation for the payment of
lease amounts, in the case of default in the payment of principal and interest
on the certificates.
The Investment Company currently has a non-fundamental investment policy that
no Fund will invest more than 5% of its total assets in equipment trust
certificates.
Asset-backed Securities
The Bond Funds and the fixed income portion of the Composite Fund, may invest
in securities backed by consumer or credit card loans or other receivables or
may purchase interests in pools of such assets.
Changes in interest rates may significantly affect the value of these
securities, and prepayment rates will impact the yield and price of the
securities. A decline in interest rates may result in increases in prepayment,
and a Fund will have to invest prepayment proceeds at the prevailing lower
interest rates. Asset-backed securities generally are not expected to prepay to
the same extent as mortgage-backed securities in such circumstances. An
increase in interest rates may result in prepayment at a rate slower than was
assumed when the security was purchased. The creditworthiness of an issuer of
asset-backed securities also may impact the value of they securities.
The Investment Company currently has a non-fundamental investment policy that
no Fund will:
. invest more than 10% of its total assets in asset-backed
securities,
. invest in interest-only strips or principal-only strips of asset-
backed securities, or
. purchase the most speculative series or class of asset-backed
securities issues.
Mortgage-Backed Securities
The Bond Funds and the fixed income portion of the Composite Fund, as well as
the All America and Aggressive Equity Funds to the extent they invest in debt
securities, may invest in mortgage-backed securities. You should refer to the
discussion of Mortgage-Backed Securities in the Prospectus under "Details about
How Our Funds Invest and Related Risks--Specific Investments or Strategies and
Related Risks".
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The Investment Company currently has a non-fundamental investment policy that
no Fund will:
. if the Fund invests primarily in fixed income securities, invest
more than 10% of its total assets in mortgage-backed securities
that are not also considered to be U.S. Government or U.S.
Government agency securities,
. if the Fund invests primarily in equity securities, invest in
mortgage-backed securities unless they are also considered to be
U.S. Government Securities,
. invest in interest-only strips or principal-only strips of
mortgage-backed securities, or
. purchase the most speculative series or class of collateralized
mortgage obligation issues or other mortgage-backed securities
issues.
Warrants
The All America Fund and Bond Fund may acquire warrants. A warrant is an
option to purchase common stock of an issuer and is issued in conjunction with
another security, such as a debt obligation. A warrant specifies the price at
which the holder may purchase shares of common stock and usually expires after
a period of time. A warrantholder generally may pay cash for the common stock
to be purchased or may surrender principal amount of the related debt security
the warrantholder owns equal to the purchase price for the stock.
The common stock underlying a warrant may not increase in value after the date
the warrant was issued, or may not increase up to the warrant exercise price.
In this case, the warrant generally would have little value and could expire
unexercised.
The Investment Company currently has a non-fundamental investment policy that
no Fund will invest more than 5% of its assets in warrants.
Preferred Stock
The All America Fund and Bond Fund may purchase preferred stock. A corporation
may issue a form of equity security called preferred stock. Compared to common
stock, preferred stock has advantages in the receipt of dividends and in the
receipt of the corporation's assets upon liquidation. Preferred stockholders,
however, usually do not have voting rights at meetings of the corporation's
shareholders.
An issuer of preferred stock must pay a dividend to holders of preferred stock
before it distributes a dividend to holders of common stock. When a
corporation issues preferred stock, it sets a dividend rate, or a formula to
determine the rate. If a corporation does not have sufficient earnings to pay
the specified dividend to preferred stockholders, the unpaid dividend may
accrue (cumulate) and become payable when the corporation's earnings increase.
Bondholders, in contrast, are entitled to receive interest and principal due,
regardless of the issuer's earnings.
Some issues of preferred stock give the holder the right to convert the
preferred stock into shares of common stock, when certain conditions are met.
A holder of preferred stock that is not convertible, or of preferred stock
that is convertible but has not met the conditions for conversion, does not
share in the earnings of the issuer other than through the receipt of
dividends on the preferred stock. The market value of convertible preferred
stock generally fluctuates more than the market value of nonconvertible
preferred stock, because the value of the underlying common stock will affect
the price of the convertible stock.
Preferred stock has the risk that a corporation may not have earnings from
which to pay the dividends as they become due. Even if a corporation is paying
dividends, if the dividend rate is fixed (and not variable), changes in
interest rates generally will affect the market value of the preferred stock
in the same manner as for debt obligations.
The Investment Company currently has a non-fundamental investment policy that
no Fund will invest more than 10% of its assets in preferred stock.
Insurance Law Restrictions
- -------------------------------------------------------------------------------
Insurance laws and regulations in States where the Insurance Companies operate
govern investments by Separate Accounts. If necessary in order for shares of
the Investment Company's Funds to remain eligible investments for the Separate
Accounts, a Fund may from time to time limit the amount of its investments in
certain types of securities, such as foreign securities and debt or equity
securities of certain issuers.
12
<PAGE>
FUNDAMENTAL INVESTMENT RESTRICTIONS
The following investment restrictions are fundamental policies. The Funds may
not change these policies unless a majority of the outstanding voting shares
of each affected Fund approves the change. No Fund will:
1. underwrite the securities issued by other companies, except to the extent
that the Fund's purchase and sale of portfolio securities may be deemed to
be an underwriting;
2. purchase physical commodities or contracts involving physical commodities;
3. based on its investments in individual issuers, be non-diversified as
defined under the 1940 Act, which currently restricts a Fund, with respect
to 75% of the value of its total assets, from investing more than 5% of its
total assets in the securities of any one issuer, other than (i) securities
issued or guaranteed by the United States Government or its agencies or
instrumentalities ("U.S. Government Securities"), and (ii) securities of
other registered investment companies; in addition the Money Market Fund
will not invest in any securities that would cause it to fail to comply with
applicable diversification requirements for money market funds under the
1940 Act and rules thereunder, as amended from time to time;
4. based on its investment in an issuer's voting securities, be non-
diversified as defined under the 1940 Act, which currently restricts a
Fund, with respect to 75% of the value of its total assets, from
purchasing more than 10% of the outstanding voting securities of any one
issuer other than (i) U.S. Government Securities, and (ii) securities of
other registered investment companies, and imposes additional restrictions
on the Money Market Fund;
5. issue senior securities, except as permitted under the 1940 Act and the
rules thereunder as amended from time to time;
6. invest more than 25% of its assets in the securities of issuers in one
industry, other than U.S. Government Securities, except that the Money
Market Fund may invest more than 25% of its total assets in the financial
services industry;
7. purchase real estate or mortgages directly, but a Fund may invest in
mortgage-backed securities and may purchase the securities of companies
whose businesses deal in real estate or mortgages, including real estate
investment trusts;
8. borrow money, except to the extent permitted by the 1940 Act and rules
thereunder, as amended from time to time, which currently limit a Fund's
borrowing to 33 1/3% of total assets (including the amount borrowed) minus
liabilities (other than borrowings) and require the reduction of any
excess borrowing within three business days; or
9. lend assets to other persons (with a Fund's entry into repurchase
agreements or the purchase of debt securities not being considered the
making of a loan), except to the extent permitted by the 1940 Act and
rules thereunder, as amended from time to time, which currently limit a
Fund's lending to 33 1/3% of its total assets, or pursuant to any
exemptive relief granted by the SEC.
NON-FUNDAMENTAL INVESTMENT POLICIES
The following investment restrictions are not fundamental policies. They may
be changed without shareholder approval by a vote of the Board of Directors of
the Investment Company, subject to any limits imposed by the 1940 Act or
applicable regulatory authorities and subject to each Fund's investment
objectives and permitted investments. No Fund will:
1. purchase or sell options or futures contracts or options on futures
contracts unless the options or contracts relate to U.S. issuers or U.S.
stock indexes and are not for speculation, and in addition (i) a Fund may
write only covered call options and may buy put options only if it holds
the related securities, (ii) a Fund may invest in futures contracts to
hedge not more than 20% of its total assets, and (iii) premiums paid on
outstanding options contracts may not exceed 5% of the Fund's total
assets;
2. invest in foreign exchange nor invest more than 25% of its total assets in
securities of foreign issuers and American Depository Receipts (ADRs);
3. invest for the purpose of exercising control over management of an issuer
(either separately or together with any other Funds);
13
<PAGE>
4. make short sales, except when the Fund owns or has the right to obtain
securities of equivalent kind and amount that will be held for as long as
the Fund is in a short position;
5. if its investment policy is to invest primarily in equity securities,
purchase mortgage-backed securities unless they are also U.S. Government
Securities, or if its investment policy is to invest primarily in fixed
income securities, invest more than 10% of its total assets in mortgage-
backed securities that are not also U.S. Government Securities;
6. invest in the securities of any registered investment company except as
permitted under the Investment Company Act of 1940 and the rules
thereunder, as amended from time to time, or by any exemptive relief
granted by the SEC;
7. purchase securities on margin, except that credits for the clearance of
portfolio transactions and the making of margin payments for futures
contracts and options on futures contracts shall not constitute the
purchasing of securities on margin;
8. borrow money except for temporary or emergency purposes (not for investment
or leveraging) or under any reverse repurchase agreement, provided that a
Fund's aggregate borrowings may not exceed 10% of the value of the Fund's
total assets and it may not purchase additional securities if its
borrowings exceed that limit;
9. lend more than 10% of its assets;
10. invest more than 10% of its total assets in securities that are considered
to be illiquid because they are subject to legal or contractual
restrictions on resale or are otherwise not readily marketable, including
repurchase agreements and time deposits that do not mature within seven
days but excluding Rule 144A securities and other restricted securities
that are determined to be liquid pursuant to procedures adopted by the
Board of Directors;
11. invest more than 5% of its total assets in equipment trust certificates;
12. invest more than 10% of its total assets in asset-backed securities or
purchase the most speculative series or class of asset-backed securities
issues;
13. purchase the most speculative series or class of collateralized mortgage
obligation issues or other mortgage-backed securities issues;
14. invest in interest-only strips or principal only strips of asset-backed
securities, mortgage-backed securities or other debt securities;
15. invest more than 5% of its assets in warrants; or
16. invest more than 10% of its assets in preferred stock.
14
<PAGE>
MANAGEMENT OF THE INVESTMENT COMPANY
The Directors of the Investment Company consist of six individuals, four of
whom are not "interested persons" of the Investment Company as defined in the
1940 Act. The Directors are responsible for the overall supervision of the
Investment Company's operations and perform the various duties imposed on the
directors of investment companies by the 1940 Act. The Directors elect
officers of the Investment Company.
The Directors and Officers of the Investment Company and their principal
employment are as follows:
<TABLE>
<CAPTION>
Position Held with the Principal Occupations
Name, Address and Age Investment Company During Past 5 Years
<S> <C> <C>
Dolores J. Morrissey*, Chairman of the Board, President, Mutual of America
age 71 320 Park Avenue President and Director Securities Corporation, since August
New York, NY 10022 1996; Executive Vice President and
Assistant to the President of the
Adviser March 1996 to December 1996;
prior thereto, President and Chief
Executive Officer of the Adviser
Manfred Altstadt*, age Senior Executive Vice Senior Executive Vice President and
50 320 Park Avenue President, Chief Chief Financial Officer of the
New York, NY 10022 Financial Officer, Adviser, Mutual of America Life and
Treasurer and Director American Life
Peter J. Flanagan, age Director President Emeritus and Consultant, The
69 Life Insurance Council of New York
551 Fifth Avenue (LICONY), since November 1999; prior
New York, NY 10176 thereto, President of LICONY
George J. Mertz, age 71 Director Retired; formerly President and CEO of
Ridgewood, NJ 07450 National Industries for the Blind
Robert J. McGuire, age Director Counsel, Morvillo, Abramowitz, Grand,
63 Iason & Silverberg (law firm), since
565 Fifth Avenue January 1998; prior thereto,
New York, NY 10017 President, Knoll Associates
Howard J. Nolan, age 62 Director President and C.E.O., United Way of
P.O. Box 898 San Antonio and Bexar County
San Antonio, TX 78293
Patrick A. Burns, age 53 Senior Executive Vice Senior Executive Vice President and
320 Park Avenue President and General General Counsel of the Adviser; Senior
New York, NY 10022 Counsel Executive Vice President and General
Counsel of Mutual of America Life and
American Life
Stanley M. Lenkowicz, Senior Vice President, Senior Vice President and Deputy
age 57 320 Park Avenue Deputy General Counsel General Counsel of Mutual of America
New York, NY 10022 and Secretary Life
</TABLE>
- --------
* Mr. Altstadt and Ms. Morrissey are "interested persons" within the meaning
of the 1940 Act.
The officers and directors of the Investment Company own none of its
outstanding shares. The Investment Company has no Audit Committee, and the
entire Board of Directors fulfills the obligations that an Audit Committee
would have.
Officers and Directors who are participants under group or individual variable
accumulation annuity contracts issued by Mutual of America Life or American
Life may allocate portions of their account balances to one or more of the
Investment Company's Funds. Mutual of America Life and its subsidiary American
Life, through their Separate Accounts, own 100% of the shares of the Funds.
15
<PAGE>
Set forth below is a table showing compensation paid to the directors during
1999.
<TABLE>
<CAPTION>
Total Compensation
Aggregate from
Compensation Pension or Estimated Investment Company and
from Retirement Benefits Benefits Other Investment
Investment Accrued as Part of Upon Companies in
Name of Director Company Fund Expenses Retirement Complex(3)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Manfred Altstadt........ None (1) None None None (1)
Dolores J. Morrissey.... None (1) None None None (1)
Peter J. Flanagan....... $18,375(2) None None $18,375(2)
George J. Mertz......... $18,149(2) None None $18,149(2)
James J. Needham (4).... $19,013(2) None None $19,013(2)
Howard J. Nolan......... $16,854(2) None None $16,854(2)
</TABLE>
- --------
(1) As employees of the Adviser's affiliates and as "interested persons" of
the Investment Company, Ms. Morrissey and Mr. Altstadt serve as directors
of the Investment Company without compensation.
(2) Directors who are not "interested persons" of the Investment Company
received from the Investment Company an annual retainer of $10,000 and a
fee of $1,000 for each Board or Committee meeting they attended in 1999
and will receive an annual retainer of $16,000 and a fee of $1,500 for
each Board or Committee meeting they attend in 2000. In addition, they
receive business travel and accident insurance and life insurance coverage
of $75,000.
(3) Directors who are not interested persons of the Investment Company do not
serve on the Board of any other investment company in the same complex as
the Investment Company.
(4) Mr. McGuire was elected as a director on February 28, 2000, to serve in
place of Mr. Needham, who retired.
INVESTMENT ADVISORY ARRANGEMENTS
Investment Adviser. The Investment Company's investment adviser is Mutual of
America Capital Management Corporation (the Adviser or Capital Management), an
indirect wholly-owned subsidiary of Mutual of America Life. The Adviser's
address is 320 Park Avenue, New York, New York 10022. The Adviser is a
registered investment adviser under the Investment Advisers Act of 1940.
Capital Management has served as Adviser since November 1993, when it assumed
investment management obligations for the Investment Company from Mutual of
America Life. The Adviser provides investment management services to the
Investment Company, Mutual of America Institutional Funds, Inc. and the
General Accounts of Mutual of America Life and American Life.
The Adviser provides advisory services for the Investment Company's Funds, in
accordance with the Funds' investment policies, objectives and restrictions as
set forth in the Prospectus and this Statement of Additional Information. The
Adviser has delegated some of its advisory responsibilities for a portion of
the All America Fund to the Subadvisers named below. The Adviser's activities
are subject at all times to the supervision and approval of the Investment
Company's Board of Directors.
Under the Investment Advisory Agreement, the Adviser agrees to provide
investment management services to the Investment Company. These services
include:
. performing investment research and evaluating pertinent economic,
statistical and financial data;
. consultation with the Investment Company's Board of Directors and
furnishing to the Investment Company's Board of Directors
recommendations with respect to the overall investment plan;
. implementation of the overall investment plan, including carrying
out decisions to acquire or dispose of investments;
. management of investments;
. reporting to the Investment Company's Board of Directors on a
regular basis on the implementation of the investment plan and the
management of investments;
. maintaining all required records;
. making arrangements for the safekeeping of assets; and
. providing office space facilities, equipment, material and personnel
necessary to fulfill its obligations.
The Adviser is responsible for all expenses incurred in performing the
investment advisory services, including compensation of officers and payment
of office expenses, and for providing investment management services.
16
<PAGE>
The Adviser has entered into an arrangement with Mutual of America for the
provision of investment accounting and recordkeeping, legal and certain other
services.
Advisory Fees. As compensation for its services to each of the Funds of the
Investment Company, the Funds pay the Adviser a fee at the following annual
rates of net assets, calculated as a daily charge:
Equity Index and Mid-Cap Equity Index Funds -- .125%
All America, Composite, Bond, Mid-Term Bond and Short-Term Bond Funds --
.50%
Aggressive Equity Fund -- .85%
Money Market Fund -- .25%
Investment Advisory Fees Paid by Funds to Adviser
For Past Three Years
<TABLE>
<CAPTION>
Fund 1999 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Index $ $ 412,769 $ 221,763
- -------------------------------------------------------------------------------------------
All America $ $ 3,559,615 $3,487,086
- -------------------------------------------------------------------------------------------
Mid-Cap Equity Index $ N/A* N/A*
- -------------------------------------------------------------------------------------------
Aggressive Equity $ $ 2,007,629 $1,955,550
- -------------------------------------------------------------------------------------------
Composite $ $ 1,601,894 $1,464,132
- -------------------------------------------------------------------------------------------
Bond $ $ 2,245,279 $1,850,985
- -------------------------------------------------------------------------------------------
Mid-Term Bond $ $ 68,431 $ 73,392
- -------------------------------------------------------------------------------------------
Short-Term Bond $ $ 91,736 $ 78,795
- -------------------------------------------------------------------------------------------
Money Market $ $ 173,091 $ 199,652
- -------------------------------------------------------------------------------------------
Total Fees $ $10,160,444 $9,331,355
</TABLE>
*The Mid-Cap Equity Index Fund began operations on May 3, 1999.
Other Fund Expenses. Each Fund is responsible for paying its advisory fee and
other expenses incurred in its operation, including:
. brokers' commissions, transfer taxes and other fees relating to
the Fund's portfolio transactions,
. directors' fees and expenses,
. fees and expenses of its independent certified public
accountants
. fees and expenses of its legal counsel,
. the cost of the printing and mailing semi-annual reports to
shareholders, Proxy Statements, Prospectuses, Prospectus
Supplements and Statements of Additional Information,
. the cost of preparation and filing registration statements and
amendments thereto,
. bank transaction charges and custodian's fees,
. any proxy solicitors' fees and expenses,
. SEC filing fees,
. any federal, state or local income or other taxes,
. any membership or licensing fees of the Investment Company
Institute and similar organizations,
. fidelity bond and directors' liability insurance premiums, and
. any extraordinary expenses, such as indemnification payments or
damages awarded in litigation or settlements made.
Expense Reimbursement by the Adviser. The Adviser voluntarily limits the
expenses of each Fund, other than for brokers' commissions, transfer taxes and
other fees relating to the Fund's portfolio transactions, to the amount of the
investment advisory fee paid by the Fund to the Adviser. The Adviser may
discontinue or modify its policy of paying expenses of the Funds at any time.
17
<PAGE>
Subadvisers for Portion of the All America Fund. For approximately 20% of the
assets of the All America Fund (the Active Assets), the Adviser has entered
into Subadvisory Agreements with Fred Alger Management, Inc. (Alger
Management) and Oak Associates, Ltd. (Oak Associates) (each a Subadviser, and
together the Subadvisers). Each Subadviser is registered as an investment
adviser under the Investment Advisers Act of 1940.
Each of the Subadvisers for its portion of the All America Fund provides
investment advisory services, including research, making recommendations and
regular reports to the Board of Directors of the Investment Company,
maintenance of records, and providing all the office space, facilities,
equipment, material and personnel necessary to fulfill its obligations under
the Subadvisory Agreement. The Subadvisers are subject to the supervision of
the Adviser and the Board of Directors of the Investment Company.
Subadvisory Fees. The Adviser, not the Investment Company, pays the
Subadvisers for advisory services they provide to the portion of the All
America Fund they manage at the following annual rates of net assets under
management, calculated as a daily charge:
.Fred Alger Management -- .45%
.Oak Associates -- .30%
Fees Paid by Adviser to Subadvisers
For Past Three Years
<TABLE>
<CAPTION>
Subadviser 1999 1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Fred Alger Management, Inc. $ $317,439 $294,755
- ---------------------------------------------------------------------------------
Oak Associates, Ltd. $ $204,454 $208,892
- ---------------------------------------------------------------------------------
Palley-Needelman Asset Management, Inc.* $ $221,149 $208,284
- ---------------------------------------------------------------------------------
Total $ $743,042 $711,931
</TABLE>
* A Subadviser until February 1, 2000.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Selection of Brokers and Dealers
- -------------------------------------------------------------------------------
The Adviser and each Subadviser are responsible for decisions to buy and sell
securities for the Funds of the Investment Company for which they provide
services as well as for selecting brokers and, where applicable, negotiating
the amount of the commission rate paid.
. The Adviser and Subadvisers select broker-dealers which, in their
best judgment, provide prompt and reliable execution at favorable
security prices and reasonable commission rates.
. They may select broker-dealers which provide them with research
services and may cause a Fund to pay such broker-dealers
commissions which exceed those other broker-dealers may have
charged, if in their view the commissions are reasonable in
relation to the value of the brokerage and/or research services
provided by the broker-dealer.
. When purchasing or selling securities trading on the over-the-
counter market, the Adviser and Subadvisers will generally execute
the transaction with a broker engaged in making a market for such
securities.
. The Adviser and Subadvisers may place certain orders with their
affiliates, subject to the requirements of the 1940 Act.
. No transactions may be effected by a Fund with an affiliate of the
Adviser or a Sub-Adviser acting as principal for its own account.
Brokerage commissions are negotiated, as there are no standard rates. All
brokerage firms provide the service of execution of the order made. Some
brokerage firms routinely provide research and statistical data to their
customers, and some firms customarily provide research reports on particular
companies and industries to customers that place a certain volume of trades
with them.
The Adviser, and each Subadviser, will place orders with brokers providing
useful research and statistical data services if reasonable commissions can be
negotiated for the total services furnished even though lower
18
<PAGE>
commissions may be available from brokers not providing such services. The
Adviser, and each Subadviser, uses these services in connection with all of
its investment activities, and some of the data or services obtained in
connection with the execution of transactions for the Investment Company may
be used in managing other investment accounts. Conversely, data or services
obtained in connection with transactions in other accounts may be used by the
Adviser, and each Subadviser, in providing investment advice to the Investment
Company. To the extent that the Adviser, and each Subadviser, uses research
and statistical data services so obtained, its expenses may be reduced and
such data has therefore been and is one of the factors considered by the
Adviser, and each Subadviser, in determining its fee for investment advisory
services.
At times, transactions for the Investment Company may be executed together
with purchases or sales of the same security for other accounts of the Adviser
or a Subadviser. When making concurrent transactions for several accounts, an
effort is made to allocate executions fairly among them. Transactions of this
type are executed only when the Adviser, or a Subadviser, believes it to be in
the best interests of the affected Fund(s), as well as any other accounts
involved. However, the possibility exists that concurrent executions may work
out to the disadvantage of the Fund(s) involved.
The Investment Company paid aggregate brokerage commissions of $ in 1999,
$2,040,381 in 1998 and $1,920,465 in 1997.
Commissions to Affiliated Brokers
- -------------------------------------------------------------------------------
During the past three years, the Investment Company has paid brokerage
commissions to Mutual of America Securities Corporation (Securities
Corporation), an affiliate of the Adviser, through an introducing brokerage
arrangement with Bear Stearns Securities Corp., and to Fred Alger & Co. (Fred
Alger), an affiliate of Alger Management, Inc., as follows:
<TABLE>
<CAPTION>
Year of Commissions % of Total % of Aggregate Dollars
Payment/Broker Paid Commissions Paid of Transactions
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1999 -- Securities
Corporation $ % %
- --------------------------------------------------------------------------------
1998 -- Securities
Corporation $ 50,136 2.5% 2.3%
- --------------------------------------------------------------------------------
1997 -- Securities
Corporation $ 64,092 3.14% 3.6%
- --------------------------------------------------------------------------------
1999 -- Fred Alger $ % %
- --------------------------------------------------------------------------------
1998 -- Fred Alger $180,054 8.8% 7.3%
- --------------------------------------------------------------------------------
1997 -- Fred Alger $216,495 10.61% 10.03%
</TABLE>
The purchases and sales placed through Fred Alger related primarily to smaller
capitalization stocks, for which execution may be more difficult.
Portfolio Turnover
- -------------------------------------------------------------------------------
In 1999, the portfolio turnover rate for the Aggressive Equity Fund was %,
compared to a turnover rate in 1998 of 144% and a turnover rate in 1997 of
81%. The 1998 rate was higher due to a change in the Fund's portfolio manager
during the year and the subsequent restructuring of the Fund's portfolio by
the new manager.
The Adviser and the Subadvisers do not consider portfolio turnover rate to be
a limiting factor when they deem it appropriate to purchase or sell securities
for a Fund. The portfolio turnover rate for a Fund in any year will depend on
market conditions, and the rate may increase depending on market conditions or
if a new portfolio manager for a Fund restructures the Fund's holdings. The
Insurance Companies' Separate Accounts do not pay taxes on the investment
gains of the Funds. As a consequence, the Adviser and Subadvisers do not
consider how long a Fund has held a security, or how capital gain upon sale
would be characterized, in deciding whether to sell that security.
The Equity Index Fund, the Indexed Assets of the All America Fund and the Mid-
Cap Equity Index Fund each attempt to duplicate the investment results of an
S&P Index. As a result, the Adviser anticipates that these Funds will hold
investments generally for longer periods than actively managed funds.
19
<PAGE>
PURCHASE, REDEMPTION AND PRICING OF SHARES
Calculation of Net Asset Value
- -------------------------------------------------------------------------------
A Separate Account purchases or redeems shares of a Fund at net asset value. A
Fund's net asset value is equal to:
. the sum of the value of the securities the Fund holds,
. plus any cash or other assets, including interest and dividends
accrued, and
. minus all liabilities, including accrued expenses.
Net asset value is determined once daily immediately after the declaration of
dividends, if any, as of the time of the close of the regular trading session
on the New York Stock Exchange (generally 4:00 p.m. Eastern Standard Time) on
each day the Exchange is open for trading (a Valuation Day). A Valuation
Period for calculation of a Fund's net asset value per share is the period
after the close of a Valuation Day and ending at the close of the next
Valuation Day. The Investment Company determines the net asset value for a
Valuation Period by multiplying a Fund's net asset value per share as of the
preceding Valuation Period by that Fund's Change Factor (described below) for
the current Valuation Period.
The Change Factor for a Fund for any Valuation Period is determined as:
(a) the ratio of (i) the net asset value of the Fund at the end of the
current Valuation Period, before any amounts are allocated to or
withdrawn from the Fund for that Valuation Period, to (ii) the net 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) 1.00000 plus the component of the annual rate of the Adviser's fee
against a Fund's assets for the number of days from the end of the
preceding Valuation Period to the end of the current Valuation Period.
Pricing of Securities Held by the Funds
- -------------------------------------------------------------------------------
In determining a Fund's net asset value, the Adviser must value the securities
and other assets the Fund owns.
1) If market quotations are readily available for an investment, the
Adviser uses market value as follows:
. An equity security will be valued at the last sale price for the
security on the principal exchange on which the security is
traded, or at the last bid price on the principal exchange on
which such security is traded if such bid price is of a more
recent day than the last sale price.
. For any equity security not traded on an exchange but traded in
the over-the-counter market, the value will be the last sale price
available, or if no sale, at the latest available bid price.
. Debt securities will be valued at a composite fair market value,
"evaluated bid," which may be the last sale price, by a valuation
service selected by the Adviser and approved by the Investment
Company's Board of Directors.
2) If there are any portfolio securities or assets for which market quotations
are not readily available, the Adviser will use fair value pricing, as
determined in good faith by or under the direction of the Board of
Directors of the Investment Company.
3) If a money market security has a remaining maturity of 60 days or less, the
Adviser will use the amortized cost method of valuation to approximate
market value, as follows:
. A security is initially valued at cost on the date of purchase (or
at market value on the 61st day prior to maturity if the security
had more than 60 days remaining to maturity at date of purchase by
a Fund), and the Adviser assumes constant proportionate
amortization in value until maturity of any discount or premium.
. The maturity of a variable rate certificate of deposit is deemed
to be the next coupon date on which the interest rate is to be
adjusted.
20
<PAGE>
. Market value will be used instead if the amortized cost value is
materially different from the actual market value of the security.
4) For stock options and futures contracts, these valuations
apply:
. Stock options written by a Fund are valued at the mean of the last
bid and asked price on the principal exchange where the option is
traded, as of the close of trading on that exchange.
. When a Fund writes a call option, the amount of the premium is
included in the Fund's assets and the market value of the call is
included in its liabilities and adjusted thereafter to current
market value.
. If a call expires or if the Fund enters into a closing purchase
transaction, it realizes a gain (or a loss if the cost of the
transaction exceeds the premium received when the call was
written) without regard to any unrealized appreciation or
depreciation in the underlying securities, and the liability
related to such call is extinguished.
. If a call is exercised, the Fund realizes a gain or loss from
the sale of the underlying securities and the proceeds of the
sale increased by the premium originally received.
. A premium a Fund pays on the purchase of a put will be deducted
from a Fund's assets and an equal amount will be included as an
investment and subsequently adjusted to the current market value
of the put.
. Futures contracts, and options thereon, traded on commodities
exchanges are valued at their official settlement price as of the
close of such commodities exchanges.
TAXATION OF THE INVESTMENT COMPANY
Taxes on Funds' Investment Earnings and Income
- -------------------------------------------------------------------------------
The Investment Company has in the past elected the special tax treatment
afforded a "regulated investment company" under Subchapter M of the Internal
Revenue Code, and it intends to continue to qualify under Subchapter M. The
Investment Company will not owe Federal income tax on the ordinary income and
net realized capital gains that it distributes to shareholders, if it
qualifies as a regulated investment company.
If the Investment Company were to fail to qualify as a regulated investment
company, it would be subject to Federal income tax on the Funds' ordinary
income and net realized capital gains, whether or not it distributes the
income and gains to shareholders. If the Funds were to pay Federal income tax,
their investment performance would be negatively affected.
Income Dividends and Capital Gains Distributions
- -------------------------------------------------------------------------------
Funds of the Investment Company declare dividend and other distributions at
least annually. The dividends and distributions are 100% reinvested in
additional full and fractional shares of the Fund to which they relate, both
for net investment income and net realized short- or long-term capital gains.
For each Fund, the Investment Company intends to distribute all net realized
long- or short-term capital gains, if any, and net investment income to the
shareholders of the Fund.
The tax treatment of the Insurance Companies and the Separate Accounts and the
tax implications of an investment in any Contract are described in the
prospectus or brochure for the Contract.
DISTRIBUTION ARRANGEMENTS
The Investment Company sells shares of its Funds on a continuous basis, and it
sells only to the Separate Accounts of the Insurance Companies. The shares are
sold at their respective net asset values, without the imposition of a sales
charge. The Investment Company has entered into a Distribution Agreement with
Mutual of America, as principal underwriter, for the distribution of the
Funds' shares. Mutual of America is a registered broker-dealer with the
National Association of Securities Dealers, Inc.
21
<PAGE>
YIELD AND PERFORMANCE INFORMATION
Performance information is computed separately for each Fund in accordance
with the formulas described below. At any time in the future, total return and
yields may be higher or lower than in the past and there can be no assurance
that any historical results will continue.
Yield of the Money Market Fund. The Money Market Fund calculates a seven-day
"current yield" (eight days when the seventh prior day has no net asset value
because the Investment Company is closed on that day) based on a hypothetical
shareholder account containing one share at the beginning of the seven-day
period. The return is calculated for the period by determining the net change
in the hypothetical account's value for the period, excluding capital changes.
The net change is divided by the share value at the beginning of the period to
give the base period return. This base period return is then multiplied by
365/7 to annualize the yield figure, which is carried to the nearest one-
hundredth of one percent.
Realized capital gains or losses and unrealized appreciation or depreciation
of the assets of the Money Market Fund are included in the hypothetical
account for the beginning of the period but changes in these items during the
period are not included in the value for the end of the period. Income other
than investment income is excluded for the period. Values also reflect asset
charges (for advisory fees) as well as brokerage fees and other expenses.
Current yields will fluctuate daily. Accordingly, yields for any given seven-
day period do not necessarily represent future results. It should be
remembered that yield depends on the type, quality, maturities and rates of
return of the Money Market Fund's investments, among other factors. The Money
Market Fund yield does not reflect the cost of insurance and other insurance
company separate account charges. It also should not be compared to the yield
of money market funds made available to the general public because they may
use a different method to calculate yield. In addition, their yields are
usually calculated on the basis of a constant one dollar price per share and
they pay out earnings and dividends which accrue on a daily basis.
The following is an example of the calculation of the Money Market Fund's
yield for the seven-day period ended December 30, 1999. Yields may fluctuate
substantially from the example shown.
1. Value for December 23, 1999
2. Value for December 30, 1999 (exclusive of capital changes and any
non-investment income)
3. Net change equals Line 1 subtracted from Line 2
4. Base period return equals Line 3 divided by Line 1
5. Current yield equals Line 4 annualized (multiplied by 365/7)
The Money Market Fund calculates effective yield by following steps 1-4 above
to obtain a base period return, then compounding the base period return as
follows:
Effective Yield = [(Base Period Return + 1) to the power of 365/7] - 1
Calculation of Total Return and Average Annual Total Return. Total Return
reflects changes in the price of a Fund's shares and assumes that any
dividends or capital gains distributions are reinvested in that Fund's shares
immediately rather than paid to the investor in cash.
Average Annual Total Return is calculated by finding the average annual
compounded rates of return of a hypothetical investment over the periods
shown, 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.
22
<PAGE>
Yield of the Bond Funds. Yield of the shares of the Bond Funds will be
computed by annualizing net investment income, as determined by the
Commission's formula, calculated on a per share basis, for a recent one-month
or 30-day period and dividing that amount by the net asset value per share of
the Fund on the last trading day of that period. Net investment income will
reflect amortization of any market value premium or discount of fixed income
securities (except for obligations backed by mortgages or other assets) over
such period and may include recognition of a pro rata portion of the stated
dividend rate of dividend paying portfolio securities. The Yield of the Fund
will vary from time to time depending upon market conditions, the composition
of the portfolio and operating expenses allocated to the Fund.
Performance Comparisons. Each Fund may from time to time include the Total
Return, the Average Annual Total Return and Yield of its shares in
advertisements or in information furnished to shareholders. The Money Market
Fund may also from time to time include the Yield and Effective Yield of its
shares in information furnished to shareholders. Any statements of a Fund's
performance will also disclose the performance of the respective separate
account issuing the Contracts.
Each Fund may from time to time also include the ranking of its performance
figures relative to such figures for groups of mutual funds categorized by
Lipper Analytical Services ("Lipper") as having the same or similar investment
objectives or by similar services that monitor the performance of mutual
funds. Each Fund may also from time to time compare its performance to average
mutual fund performance figures compiled by Lipper in Lipper Performance
Analysis.
Advertisements or information the Investment Company furnishes to current or
prospective investors also may include evaluations of a Fund published by
nationally recognized ranking services and by financial publications that are
nationally recognized. These publications may include Barron's, Business Week,
CDA Technologies, Inc., Changing Times, Dow Jones Industrial Average,
Financial Planning, Financial World, Forbes, Fortune, Hulbert's Financial
Digest, Institutional Investor, Investors Daily, Money, Morningstar Mutual
Funds, The New York Times, Stanger's Investment Adviser, Value Line, The Wall
Street Journal, Wiesenberger Investment Company Service and USA Today.
In reports or other communications to shareholders, the Investment Company
also may describe general economic and market conditions affecting the Funds
and may compare the performance of the Funds with (1) that of mutual funds
included in the rankings prepared by Lipper or similar investment services
that monitor the performance of insurance company separate accounts or mutual
funds, (2) IBC/Donoghue's Money Fund Report, (3) other appropriate indices of
investment securities and averages for peer universe of funds which are
described in this Statement of Additional Information, or (4) data developed
by the Adviser or any of the Subadvisers derived from such indices or
averages.
Comparative Indices for the Funds
- -------------------------------------------------------------------------------
The Investment Company compares the performance of each Fund (other than the
Money Market Fund) against a widely recognized index or indices for stock or
bond market performance, based on the type of securities the Fund purchases.
The annual and semi-annual financial reports that the Investment Company
prepares will contain graphs with the Funds' performances compared to their
indices.
It is not possible for an investor to directly invest in an unmanaged index.
Performance comparisons to indices are for informational purposes and do not
reflect any actual investment. The Funds pay investment advisory and other
expenses that are not applicable to unmanaged indices.
Equity Index Fund and All America Fund: Performance of each of these Funds is
compared to the Standard & Poor's Composite Index of 500 Stocks (the S&P 500
Index).
The S&P 500 Index is a market value-weighted and unmanaged index showing the
changes in the aggregate market value of 500 stocks relative to the base
period 1941-43, with an average market value of approximately $9 billion. The
S&P 500 Index is composed almost entirely of common stocks of companies listed
on the NYSE, although the common stocks of a few companies listed on the
American Stock Exchange or traded OTC are included. The 500 companies
represented include approximately 400 industrial concerns, as well as
financial services, utility and transportation concerns. The S&P 500 Index
represents about 80% of the market value of all issues traded on the NYSE.
Mid-Cap Equity Index Fund: Performance is compared to the Standard & Poor's
MidCap 400 Index (the S&P Midcap 400 Index).
23
<PAGE>
The S&P Mid-Cap 400 Index is a market value weighted and unmanaged index
showing the changes in the aggregate market value of 400 stocks issued by U.S.
companies with medium market capitalizations, generally between $300 million
and $5 billion and with an average market value of approximately $1.5 billion.
Almost 70% of the stocks are listed on the New York Stock Exchange and
approximately 30% are traded on the Nasdaq National Market (over-the-counter).
Aggressive Equity Fund: Performance is compared to the Russell 2000 Index.
The Russell 2000 Index is a market capitalization weighted index of the 2000
smallest companies in the Russell 3000 Index. The Russell 2000 companies
represent approximately 12% of the Russell 3000 total market capitalization,
and the largest company in the Russell 2000 Index has a current market value
of approximately $1 billion.
Composite Fund: Performance is compared to the S&P 500 Index, the Lehman
Government/Corporate Index and the 90-day Treasury bill rate. (See "Equity
Index Fund and All America Fund" above and "Bond Fund" below).
These three indices represent the three asset allocation categories in which
the Composite Fund invests.
Bond Fund: Performance is compared to the Lehman Brothers Government/Corporate
Bond Index (the Lehman Government/Corporate Index).
The Lehman Government/Corporate Index is a measure of the market value of
approximately 5,300 bonds with a face value currently in excess of $1 million,
which have at least one year to maturity and are rated "Baa" or higher
(investment grade) by a nationally recognized statistical rating agency.
Short-Term Bond Fund: Performance is compared to the Salomon Brothers 1-3 Year
Bond Index.
Mid-Term Bond Fund: Performance is compared to the Salomon Brothers 3-7 Year
Bond Index.
The Salomon Brothers 1-3 Year Bond Index and the 3-7 Year Bond Index are
comprised of the portion of the Salomon Brothers Broad Investment-Grade Bond
Index (BIG Index) with the maturity indicated. The BIG Index includes
Treasury, Agency, mortgage and corporate securities. It is market-
capitalization weighted and includes all fixed-rate bonds with a maturity of
one year or longer and a minimum of $50 million amount outstanding at entry
which remain in the index until their amount falls below $25 million ($200
million for mortgage securities).
24
<PAGE>
DESCRIPTION OF CORPORATE BOND RATINGS
Description of Corporate bond ratings of Moody's Investors Services, Inc.:
Aaa- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt-edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Ba- Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
B- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca- Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C- Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
Description of corporate bond ratings of Standard & Poor's Corporation:
AAA- Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is very strong.
AA- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A- Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
BBB- Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher-rated categories.
25
<PAGE>
<TABLE>
<C> <S>
BB - Debt rated BB, B, CCC and CC is regarded, on balance, as predominantly
B speculative with respect to the issuer's capacity to pay interest and
CCC repay principal in accordance with the terms of the obligation. BB
CC indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions.
C - The rating C is reserved for income bonds on which no interest is being
paid.
D - Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
</TABLE>
Plus (+) or Minus (-): The ratings from "AA" to "BB" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
INDEPENDENT AUDITORS
The financial statements included in this Statement of Additional Information
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto and are included herein in
reliance upon the authority of said firm as experts in giving audit reports.
Arthur Andersen LLP have been selected as the independent auditors of the
Investment Company for its fiscal year ending December 31, 1999. Arthur
Andersen LLP also acts as the independent auditors of the Insurance Companies.
Their address is 1345 Avenue of the Americas, New York, New York.
LEGAL MATTERS
The legal validity of the shares described in the Prospectus has been passed
on by Patrick A. Burns, Esq., Senior Executive Vice President and General
Counsel of the Investment Company.
CUSTODIAN
The Custodian of the securities and other assets held by the Investment
Company's Funds is The Chase Manhattan Bank, 1285 Avenue of the Americas, New
York, New York 10019.
USE OF STANDARD & POOR'S INDICES
The Equity Index Fund, the Indexed Assets of the All America Fund and the Mid-
Cap Equity Index Fund (together, the Indexed Portfolios) are not sponsored,
endorsed, sold or promoted by Standard & Poor's Corporation (S&P). S&P makes
no representation or warranty, express or implied, to the owners of the
Indexed Portfolios or any member of the public regarding the advisability of
investing in securities generally or in the Indexed Portfolios particularly or
the ability of the S&P 500 Index or the S&P MidCap 400 Index to track general
stock market performance. S&P's only relationship to the Investment Company is
the licensing of certain trademarks and trade names of S&P and of the S&P 500
Index and the S&P MidCap 400 Index which is determined, composed and
calculated by S&P without regard to the Indexed Portfolios. S&P has no
obligation to take the needs of the Indexed Portfolios or the owners of the
Indexed Portfolios into consideration in determining, composing or calculating
the S&P 500 Index or the S&P MidCap 400 Index. S&P is not responsible for and
has not participated in the calculation of the net asset values of the Indexed
Portfolios, the amount of the shares of the Indexed Portfolios or the timing
of the issuance or sale of the Indexed Portfolios. S&P has no obligation or
liability in connection with the administration, marketing or trading of the
Indexed Portfolios.
S&P does not guarantee the accuracy and/or the completeness of the S&P 500
index or the S&P MidCap 400 Index or any data included therein. S&P makes no
warranty, express or implied, as to results to be obtained by the Indexed
Portfolios, owners of the Indexed Portfolios, or any other person or entity
from the use of the S&P 500 index, the S&P MidCap 400 Index or any data
included therein. S&P makes no express or implied warranties, and expressly
disclaims all warranties of merchantability or fitness for a particular
purpose or use with respect to the S&P 500 Index, the S&P MidCap 400 Index or
any data included therein. Without limiting any of the foregoing, in no event
shall S&P have any liability for any special, punitive, indirect, or
consequential damages (including lost profits), even if notified of the
possibility of such damages.
26
<PAGE>
FINANCIAL STATEMENTS
Financial statements of the Investment Corporation for the year ended December
31, 1999 are included as follows:
[To be included by Post-Effective Amendment]
<TABLE>
<CAPTION>
Page
----
<S> <C>
President's Message........................................................ 28
Portfolio Management Discussions........................................... 29
Portfolio of Investments in Securities:
Money Market Fund......................................................... 36
All America Fund.......................................................... 37
Equity Index Fund......................................................... 45
Mid-Cap Equity Index Fund................................................. 50
Bond Fund................................................................. 55
Short-Term Bond Fund...................................................... 58
Mid-Term Bond Fund........................................................ 60
Composite Fund............................................................ 62
Aggressive Equity Fund.................................................... 66
Statement of Assets and Liabilities........................................ 68
Statement of Operations.................................................... 69
Statements of Changes in Net Assets........................................ 70
Financial Highlights....................................................... 72
Notes to Financial Statements.............................................. 78
Report of Independent Public Accountants................................... 82
</TABLE>
27
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
Exhibit 10(c)(ii). Power of Attorney of Robert J. McGuire.
Item 26. Business and Other Connections of the Investment Adviser
Mutual of America Capital Management Corporation (the "Adviser") is the
investment adviser to the Investment Company, and is registered as an
investment adviser under the Investment Advisers Act of 1940. The names,
addresses and positions with the Adviser of each Director and officer of the
Adviser is set forth below.
<TABLE>
<CAPTION>
Positions Principal Occupation
Name with Adviser During Past Two Years
---- ------------ ---------------------
<S> <C> <C>
Thomas J. Moran......... Director, Chairman of President, Chief Executive
320 Park Avenue the Board Officer and Director of Mutual of
NY, NY 10022 America Life
F. Harlan Batrus........ Director Partner, Lazard Freres & Co.
30 Rockefeller Plaza
NY, NY 10020
Robert X. Chandler...... Director Director, Development Office,
Director, Development Archdiocese of Boston
Office Archdiocese of
Boston 2121 Commonwealth
Avenue Brighton, MA
02135
Nathaniel A. Davis...... Director Vice President, Network
17680 Old Meadow Rd. Engineering Operations, Nextel
McLean, VA 22102 Communications
Anthony F. Earley....... Director Chairman, President and Chief
Detroit Edison Company Operating Officer, Detroit Edison
2000 Second Avenue Co.
Room 2407 WCB
Detroit, MI 48226
William T. Knowles...... Director Consultant
Orr's Island, ME 04066
Walter A. McDougal...... Director Former Chairman and President,
Garden City, NY 11530 Richmond Hill Savings Bank
Peter J. Powers......... Director President and Chief Executive
1345 Avenue of the Officer, Powers Global Strategies
Americas (strategic planning and
NY, NY 10105 consulting)
James E. Quinn.......... Director Vice Chairman, Tiffany & Co.
757 Fifth Avenue
NY, NY 10022
Richard J. Ciecka....... President, Chief Vice Chairman of the Board,
320 Park Avenue Executive Officer and Mutual of America Life, until
NY, NY 10022 Director October 1998
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
Positions Principal Occupation
Name with Adviser During Past Two Years
---- ------------ ---------------------
<S> <C> <C>
Manfred Altstadt........ Senior Executive Vice Senior Executive Vice President
320 Park Avenue President and Chief and Chief Financial Officer of
NY, NY 10022 Financial Officer Mutual of America Life and
American Life
Patrick A. Burns........ Senior Executive Vice Senior Executive Vice President
320 Park Avenue President and General and General Counsel of Mutual of
NY, NY 10022 Counsel America Life and American Life
Amir Lear............... Executive Vice President Senior Vice President, Mutual of
320 Park Avenue and Assistant to the America Life, until October 1998
NY, NY 10022 President and Chief
Executive Officer
Andrew L. Heiskell...... Executive Vice President Executive Vice President of the
320 Park Avenue Adviser
NY, NY 10022
Thomas J. Larsen........ Executive Vice President Executive Vice President of the
320 Park Avenue Adviser since June 1998; prior
NY, NY 10022 thereto, Senior Vice President,
Desai Capital Management
Joseph Brunken.......... Senior Vice President Senior Vice President of the
320 Park Avenue Adviser
NY, NY 10022
Mary E. Canning......... Senior Vice President Senior Vice President of the
320 Park Avenue Adviser since May 1999; prior
NY, NY 10022 thereto, Managing
Director/Portfolio Manager,
Phoenix Duff & Phelps
Susan J. Ferber......... Senior Vice President Senior Vice President of the
320 Park Avenue Adviser since May 1999; prior
NY, NY 10022 thereto, Vice President--Business
Development, Argus Investors
Counsel
Stanley M. Lenkowicz.... Senior Vice President, Senior Vice President and Deputy
320 Park Avenue Deputy General Counsel General Counsel, Mutual of
NY, NY 10022 and Secretary America Life and American Life
Nancy McAvey............ Senior Vice President Vice President of the Adviser
320 Park Avenue
NY, NY 10022
Phillip McMahon......... Senior Vice President Vice President of the Adviser
320 Park Avenue until February 2000; prior
NY, NY 10022 thereto, Equity Securities
Analyst
John P. Middleton....... Senior Vice President Senior Vice President of the
320 Park Avenue Adviser since May 1999; prior
NY, NY 10022 thereto, Vice President, Raymond
James & Associates
Paul Travers............ Senior Vice President Senior Vice President of the
320 Park Avenue Adviser
NY, NY 10022
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
Positions Principal Occupation
Name with Adviser During Past Two Years
---- ------------ ---------------------
<S> <C> <C>
Gary P. Wetterau...... Senior Vice President Vice President of the Adviser
320 Park Avenue
NY, NY 10022
David Wood............ Senior Vice President Senior Vice President of the
320 Park Avenue Adviser
NY, NY 10022
Aline Couture......... Vice President Vice President of the Adviser
320 Park Avenue
NY, NY 10022
Doris Klug............ Vice President Vice President of the Adviser
320 Park Avenue
NY, NY 10022
Robert H. Stewart..... Vice President Vice President of the Adviser
320 Park Avenue
NY, NY 10022
</TABLE>
Each of Oak Associates, Ltd. ("Oak Associates") and Fred Alger Management,
Inc. ("Alger Management") is a subadviser for a portion of the Active Assets
of the All America Fund allocated to it. Each subadviser is registered as an
investment adviser under the Investment Advisers Act of 1940. The names,
addresses and positions of each director and officer of each subadviser are
incorporated by reference to the Form ADV of the subadviser filed with the
Securities and Exchange Commission, as set forth below.
Oak Associates, Ltd., Form ADV, SEC File No. 801-23632.
Fred Alger Management, Inc., Form ADV, SEC File No. 801-06709.
C-3
<PAGE>
Item 27. Principal Underwriters
(a) Mutual of America Life Insurance Company, the principal underwriter of
the Registrant, acts as depositor and principal underwriter of Mutual of
America Separate Account No. 2 and Mutual of America Separate Account No. 3,
and as principal underwriter of The American Separate Account No. 2 and The
American Separate Account No. 3 of The American Life Insurance Company of New
York.
(b) The name, business address and position of each senior officer and
director of Mutual of America are as follows:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Principal Underwriter
- ------------------ --------------------------
<S> <C>
Directors
Clifford L. Alexander, Director
Jr........................
Washington, D.C.
Patricia A. Cahill........ Director
Denver, Colorado
Roselyn P. Epps, M.D...... Director
Bethesda, Maryland
Dudley H. Hafner.......... Director
Dallas, Texas
Earle H. Harbison, Jr..... Director
St. Louis, Missouri
Frances R. Hesselbein..... Director
New York, New York
William Kahn.............. Director
St. Louis, Missouri
LaSalle D. Leffall, Jr., Director
M.D.......................
Washington, D.C.
Michael A. Pelavin........ Director
Flint, Michigan
Fioravante G. Perrotta.... Director
New York, New York
Francis H. Schott......... Director
New York, New York
O. Stanley Smith, Jr...... Director
Columbia, South Carolina
Sheila M. Smythe.......... Director
Valhalla, New York
Elie Wiesel............... Director
New York, New York
Officers-Directors
William J. Flynn.......... Chairman of the Board
Thomas J. Moran........... President and Chief Executive Officer
Manfred Altstadt.......... Senior Executive Vice President and Chief Financial
Officer
Patrick A. Burns.......... Senior Executive Vice President and General Counsel
Salvatore R. Curiale...... Senior Executive Vice President, Technical
Operations
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Principal Underwriter
------------------ --------------------------
<S> <C>
Other Officers
Diane Aramony............. Senior Vice President, Corporate Secretary and
Assistant to the Chairman
Meyer Baruch.............. Senior Vice President, State Compliance and
Government Regulations
Deborah Swinford Becker... Senior Vice President and Associate General Counsel
Nicholas Branchina........ Senior Vice President and Associate Treasurer
William Breneisen......... Executive Vice President, Office of Technology
Jeremy J. Brown........... Executive Vice President and Chief Actuary
Allen J. Bruckheimer...... Senior Vice President and Associate Treasurer
Patrick Burke............. Senior Vice President, Special Markets
Sean Carroll.............. Senior Vice President, Facilities Management
William Conway............ Executive Vice President, Marketing and Corporate
Communications
William A. DeMilt......... Executive Vice President, Real Estate Management
Warren A. Essner.......... Senior Vice President, Corporate Services
Chris W. Festog........... Senior Vice President and Controller since April
1999; prior thereto, Chief Financial Officer of the
Global Energy Business unit of Zurich Insurance
Company
James Flynn............... Senior Vice President, Marketing
Michael Gallagher......... Senior Vice President, Direct Response and Technical
Boca Raton, FL Communications
Harold J. Gannon.......... Senior Vice President, Corporate Tax
Gordon Gaspard............ Senior Vice President, Technical Services
Robert Giaquinto.......... Senior Vice President, MIS Operations
Boca Raton, Fl
Thomas E. Gilliam......... Executive Vice President and Assistant to the
President and Chief Executive Officer
John R. Greed............. Executive Vice President and Treasurer
Jared Gutman.............. Senior Vice President, Billing and Regulatory
Services/Life and Disability Claims, since February
2000; prior thereto, Vice President
Thomas A. Harwood......... Senior Vice President, Competition and Asset
Retention
Sandra Hersko............. Senior Vice President, Technical Administration
Edward J.T. Kenney........ Senior Vice President and Assistant to the President
and Chief Executive Officer
Gregory A. Kleva, Jr...... Executive Vice President and Deputy General Counsel
Robert Kordecki........... Senior Vice President, National Accounts
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with Principal Underwriter
------------------ --------------------------
<S> <C>
Stanley M. Lenkowicz....... Senior Vice President and Deputy General Counsel
Daniel LeSaffre............ Senior Vice President, Human Resources and Training
Robert W. Maull............ Senior Vice President and Corporate Actuary
George L. Medlin........... Executive Vice President, Internal Audit
Lynn M. Nadler............. Senior Vice President, Training--Boca Raton
Boca Raton, FL
Roger F. Napoleon.......... Senior Vice President and Associate General Counsel
James Peterson............. Senior Vice President, Training--New York and
Leadership Development
William Rose............... Senior Vice President, Field Operations
Dennis J. Routledge........ Senior Vice President, LAN/Telecommunications
Robert W. Ruane............ Senior Vice President, Corporate Communications and
Direct Response
William G. Shannon......... Senior Vice President, Individual Financial Planning
Walter W. Siegel........... Senior Vice President and Actuary
Joan M. Squires............ Senior Vice President, Business Applications
Anne M. Stanard............ Senior Vice President, Human Resources, since
February 2000, prior thereto, Vice President
Eldon Wonacott............. Senior Vice President, Field Administration
Raymond Yeager............. Senior Vice President, MIS Operations
Boca Raton, FL
</TABLE>
The business address of all officers and directors is 320 Park Avenue, New
York, New York 10022, unless otherwise noted.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the registrant had duly caused this post-effective
amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, the State of
New York, the 2nd day of March, 2000.
Mutual of America Investment
Corporation
/s/ Dolores J. Morrissey
By: _________________________________
Dolores J. Morrissey
President
Pursuant to the requirements of the Securities Act of 1933, this post-
effective amendment to its Registration Statement has been signed below by the
following persons in the capacities indicated on March 2, 2000.
Principal Executive Officer:
/s/ Dolores J. Morrissey
By: _________________________________
Dolores J. Morrissey
President
Principal Financial Officer and Principal Accounting Officer:
/s/ Manfred Altstadt
_____________________________________
Manfred Altstadt
Directors:
/s/ Manfred Altstadt
_____________________________________
Manfred Altstadt
/s/ Dolores J. Morrissey
_____________________________________
Dolores J. Morrissey
*
_____________________________________
Peter J. Flanagan
*
_____________________________________
Robert J. McGuire
*
_____________________________________
George J. Mertz
*
_____________________________________
Howard J. Nolan
/s/ Manfred Altstadt
*By: ________________________________
Attorney-in-fact
C-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Page
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<C> <S>
99.10(c)(ii) Power of Attorney of Robert J. McGuire
</TABLE>
<PAGE>
Exhibit 10(c)(ii)
POWER OF ATTORNEY
The undersigned Director of Mutual of America Investment Corporation, a
Maryland corporation, hereby constitutes and appoints Thomas J. Moran, Dolores
J. Morrissey, Manfred Altstadt, Patrick A. Burns and Stanley M. Lenkowicz, and
each of them (with full power to each of them to act alone), his true and
lawful attorney-in-fact and agent, with full power of substitution to each,
for him and on his behalf and in his name, place and stead, to execute and
file any of the documents referred to below relating to registrations under
the Securities Act of 1933 or the Investment Company Act of 1940 (the Acts):
registration statements on any form or forms under the Acts, and any and all
amendments and supplements thereto (including post-effective amendments), with
all exhibits and all agreements, consents, exemptive applications and other
documents and instruments necessary or appropriate in connection therewith,
each of said attorneys-in-fact and agents being empowered to act with or
without the others or other, and to have full power and authority to do or
cause to be done in the name and on behalf of the undersigned each and every
act and thing requisite and necessary or appropriate with respect thereto to
be done in and about the premises in order to effectuate the same, as fully to
all intents and purposes as the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney on the
29th day of February, 2000.
/s/ Robert J. McGuire
------------------------------------
Robert J. McGuire
