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As filed with the Securities and Exchange Commission on June 13, 1996
Registration No. 33-21534
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. ____ [ ]
POST-EFFECTIVE AMENDMENT NO. 11 [ X ]
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 12
ENTERPRISE ACCUMULATION TRUST
(Exact Name of Registrant as Specified in Charter)
ATLANTA FINANCIAL CENTER
3343 PEACHTREE ROAD, STE. 450, ATLANTA, GA 30326
(Address of Principal Executive Offices)
Catherine R. McClellan
Atlanta Financial Center
3343 Peachtree Road, Ste. 450, Atlanta, Georgia 30326
(800) 432-4320
(Registrant's Telephone Number)
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[ ] On May 1, 1996 pursuant to paragraph (b)
[ X ] 60 days after filing pursuant to paragraph (a)
[ ] pursuant to paragraph (a) of Rule 485 or 486
Registrant has registered an indefinite number of shares under the Securities
Act of 1933 pursuant to Rule 24f-2 promulgated under the Investment Company Act
of 1940 and has filed its report pursuant to that Rule for the year ended
December 31, 1995 on February 23, 1996.
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CROSS REFERENCE SHEET
Form N-1A
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Item
Part I Caption Prospectus
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1. Cover Page Cover Page
2. Synopsis Prospectus Summary
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Investment Objectives and
Policies; Additional Information
on Investment Objectives and
Policies; Additional Information
5. Management of the Fund Investment Management Agreement;
Additional Information; Investment
Techniques
5A. Management's Discussion of Fund's Please refer to Annual Report
Performance
6. Capital Stock and Other Securities Determination of Net Asset Value;
Purchase of Shares; Additional
Information
7. Purchase of Securities Purchase of Shares
8. Redemption or Repurchase Redemption of Shares
9. Legal Proceedings N/A
Part B Caption Statement of Additional Information
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Infomation and History N/A
13. Investment Objectives and Policies Investment of the Assets;
Investment Restrictions
14. Management of the Fund Trustees and Officers
</TABLE>
Registrant has registered an indefinite number of shares under the Securities
Act of 1933 pursuant to Rule 24f-2 promulgated under the Investment Company Act
of 1940 and has filed its report pursuant to that Rule for the year ended
December 31, 1995 on February 23, 1996.
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ENTERPRISE ACCUMULATION TRUST
Atlanta Financial Center
3343 Peachtree Road, N.E., Ste. 450
Atlanta, Georgia 30326-1022
(800) 432-4320
ENTERPRISE ACCUMULATION TRUST (the "Fund") is a registered open-end diversified
management investment company offering a broad range of investment alternatives
through its five Portfolios. It permits an investor the flexibility of
choosing among different investment objectives, through the following
Portfolios, each of which is a separate series of shares of beneficial interest
of the Fund ("Shares"). The Fund's principal Investment Adviser, Enterprise
Capital Management, Inc., selects, subject to shareholder approval, separate
sub-advisers referred to as "Portfolio Managers" that provide investment advice
for the Portfolios and that are selected on the basis of able investment
performance in their respective areas of responsibilities. The investment
objective of each Portfolio is as follows:
EQUITY PORTFOLIO: Seeks long term capital appreciation through investment in a
diversified portfolio of equity securities selected on the basis of a
value-oriented approach to investing.
SMALL CAP PORTFOLIO: Seeks capital appreciation through investment in a
diversified portfolio of equity securities of companies with market
capitalizations of under $1 billion.
INTERNATIONAL GROWTH PORTFOLIO: Seeks capital appreciation, primarily through
a diversified portfolio of non-United States equity securities.
MANAGED PORTFOLIO: Seeks growth of capital over time through investment in a
portfolio consisting of common stocks, bonds and cash equivalents, the
percentages of which will vary based on management's assessments of relative
investment values.
HIGH-YIELD BOND PORTFOLIO: Seeks maximum current income, primarily from debt
securities that are rated Ba or lower by Moody's Investor Service, Inc. or BB
by Standard & Poor's Corporation ("S&P").
Shares of the Fund are currently sold to variable accounts of life
insurance company affiliates of The Mutual Life Insurance Company of New York
("MONY") and a life insurance company affiliate of MONY that were established
to fund certain Flexible Payment Variable Annuity and Life Insurance contracts
(the "Contracts"). These variable accounts (the "Variable Accounts") invest in
Shares of the Fund in accordance with allocation instructions received from
holders (the "Contractholders") of the Contracts. Allocation rights are
further described in the attached prospectus for the Contracts. The Variable
Accounts will redeem Shares to the extent necessary to provide benefits under
the Contracts. In the future, Shares may be sold to certain other variable
accounts and affiliated entities of MONY. It is possible, although not
presently anticipated, that a material conflict could arise between and among
the various variable accounts which invest in the Fund. Such conflict could
cause the liquidation of assets of one or more of the Fund Portfolios to raise
cash at times not otherwise deemed advantageous by the Investment Adviser or
Portfolio Managers. See "Management of the Fund," p.17.
This Prospectus sets forth concisely information about the Fund that a
prospective investor ought to know before investing, and offers of sales of
shares of the Fund, must be accompanied by a current prospectus for one of the
Contracts and both should be retained for future reference. A Statement of
Additional Information dated July 12, 1996 has been filed with the Securities
and Exchange Commission and is available without charge upon written request to
MONY, Maildrop 76-18, 500 Frank W. Burr Blvd., Teaneck, N.J. 07666-6888
[1-800-487-6669]. The Statement of Additional Information (which is
incorporated in its entirety by reference in this Prospectus) contains more
detailed information about the Fund and its management, including more complete
information about certain risk factors.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
ENTERPRISE CAPITAL MANAGEMENT, INC.
INVESTMENT ADVISER
Prospectus dated July 12, 1996
IN PURSUING ITS INVESTMENT OBJECTIVE, THE HIGH-YIELD BOND PORTFOLIO MAY INVEST
SIGNIFICANTLY IN LOWER-RATED BONDS, COMMONLY REFERRED TO AS "JUNK BONDS."
BONDS OF THIS TYPE ARE CONSIDERED TO BE SPECULATIVE WITH REGARD TO THE PAYMENT
OF INTEREST AND RETURN OF PRINCIPAL. INVESTMENT IN THESE TYPES OF SECURITIES
HAVE SPECIAL RISKS AND THEREFORE, MAY NOT BE SUITABLE FOR ALL INVESTORS.
INVESTORS SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN
THIS PORTFOLIO. PLEASE REFER TO PAGE 15 OF THE PROSPECTUS.
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TABLE OF CONTENTS
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Page
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Prospectus Summary 3
Financial Highlights 5
Equity Portfolio 5
Small Cap Portfolio 6
Managed Portfolio 7
International Growth Portfolio 8
High-Yield Bond Portfolio 9
Investment Objectives and Policies 10
Additional Information on Investment Objectives and Policies 12
Investment Techniques and Associated Risks 13
Investment Restrictions 18
Management of the Fund 18
Determination of Net Asset Value 20
Purchase of Shares 21
Redemption of Shares 21
State Law Restrictions 21
Dividends, Distributions and Taxes 22
Calculation of Performance 22
Additional Information 23
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PROSPECTUS SUMMARY
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The Fund The Fund is a Massachusetts business trust which issues
its shares in series as is designated as a "Portfolio".
Together, the five Portfolios are designed to enable an
investor to choose a number of investment alternatives
to achieve financial goals and to shift assets
conveniently among Portfolios when and if investment
aims or perception of the marketplace change.
Investment Objectives
and Restrictions The investment objective of each of the Portfolios is
set forth on the cover page of this Prospectus. These
objectives are described in more detail under the
heading "Investment Objectives and Policies." Although
each Portfolio will be actively managed by experienced
professionals, there can be no assurance that the
objectives will be achieved.
The value of the portfolio securities of each
Portfolio and therefore the Portfolio's net asset
value per share may increase or decrease because of
varying factors. There are generally two types of
risk associated with an investment in one or more of
the Portfolios: market (or interest rate) risk and
financial (or credit) risk. Market risk for equities
is the risk associated with movement of the stock
market in general. Market risk for fixed income
securities is the risk that interest rates will
change, thereby affecting their value. Generally, the
value of fixed income securities declines as interest
rates rise, and conversely, their value rises as
interest rates decline. The second type of risk,
financial or credit risk, is associated with the
financial condition and profitability of an individual
equity or fixed income issuer. The financial risk in
owning equities is related to earnings stability and
overall financial soundness of individual issuers and
of issuers collectively which are part of a particular
industry. For fixed income securities, credit risk
relates to the financial ability of an issuer to make
periodic interest payments and ultimately repay the
principal at maturity. The high-yield bonds in which
the High-Yield Bond Portfolio will invest are subject
to greater risks than lower yielding, higher rated
fixed income securities. (See "Additional Information
on Investment Objectives and Policies" for risk
aspects of the individual Portfolios).
Investment Adviser Enterprise Capital Management, Inc. ("Enterprise
Capital"), the investment adviser of each of the
Portfolios, serves also as investment adviser to The
Enterprise Group of Funds, Inc., a registered investment
company consisting of approximately $737 million of
assets under management at March 31, 1996. Enterprise
Capital is a subsidiary of The Mutual Life Insurance
Company of New York ("MONY") and has approximately $2.62
billion total assets under management. Portfolio Managers
are as follows: OpCap Advisors for the Equity, Small Cap
and Managed Portfolios; Brinson Partners, Inc. for the
International Growth Portfolio; and Caywood-Scholl
Capital Management, Inc. for the High-Yield Bond
Portfolio.
Management Fee Enterprise Capital receives a monthly fee and pays a
portion of such fee to the respective Portfolio Manager
from each Portfolio at varying annual percentage rates of
average daily net assets, as follows: .80 percent of
average daily net assets for the Equity, Small Cap, and
Managed Portfolios up to $400 million; .75 percent for
assets from $400 million to $800 million; and .70 percent
for assets in excess of $800 million; .60 percent of
average daily net assets for the
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High-Yield Bond Portfolio and .85 percent of average
daily net assets for the International Growth Portfolio.
Purchases and
Redemption of Shares Currently, shares of the Fund are sold at their net asset
value per share, without sales charge, for allocation to
the Variable Accounts as the underlying investment for
the Contracts. Accordingly, the interest of the
Contractholder with respect to the Fund is subject to the
terms of the Contract as described in the accompanying
Prospectus for the Contract, which should be reviewed
carefully by a person considering the purchase of a
Contract. That Prospectus describes the relationship
between increases or decreases in the net asset value of
Fund shares and any distributions on such shares, and the
benefits provided under a Contract. The rights of the
Variable Accounts as shareholders of the Fund should be
distinguished from the rights of a Contractholder which
are described in the Contract. As long as shares of the
Fund are sold for allocation to the Variable Accounts,
the terms "shareholder" or "shareholders" in this
Prospectus shall refer to the Variable Accounts. Shares
are redeemed at their respective net asset values as next
determined after receipt of proper notice of redemption.
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The above is qualified in its entirety by the detailed information
appearing elsewhere in this Prospectus, the Statement of Additional
Information, and the accompanying Prospectus for the Contract.
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FINANCIAL HIGHLIGHTS
The financial highlights for each of the years presented below have been
audited by the Fund's independent accountants. This information should be read
in conjunction with the Trust's 1995 financial statements, financial highlights
and related notes thereto included in the Statement of Additional Information.
Further information regarding the performance of each Portfolio is available in
the Fund's Annual Report. Annual Reports may be obtained without charge upon
written request to MONY, Maildrop 76-18, 500 Frank W. Burr Blvd., Teaneck, N.J.
07666-6888 (1-800-487-6669).
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INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of each Portfolio of the Fund are
described below. Investment objectives of each Portfolio are fundamental
policies which cannot be changed for any Portfolio without a majority vote of
the shareholders of that Portfolio; investment policies are not fundamental and
may be adjusted by the Portfolio Managers, subject to the oversight of
Enterprise Capital, at any time, usually in response to its perception of
developments in the securities markets. The extent to which a Portfolio will
be able to achieve its distinct investment objectives depends upon each
Portfolio Manager's ability to evaluate and develop the information it receives
into a successful investment program. Although each Portfolio will be managed
by experienced professionals, there can be no assurance that any Portfolio will
achieve its investment objectives. The values of the securities held in each
Portfolio will fluctuate and the net asset value per share at the time shares
are redeemed may be more or less than the net asset value per share at the time
of purchase. Investors should also refer to "Investment Techniques" for
additional information concerning the investment techniques employed for some
or all of the Portfolios.
EQUITY PORTFOLIO
The investment objective of the Equity Portfolio is long term capital
appreciation through investment in securities (primarily equity securities) of
companies that are believed by the Portfolio Manager to be undervalued in the
marketplace in relation to factors such as the companies' assets or earnings.
It is the Portfolio Manager's intention to invest in securities of companies
which in the Portfolio Manager's opinion possess one or more of the following
characteristics: undervalued assets, valuable consumer or commercial
franchises, securities valuation below peer companies, substantial and growing
cash flow and/or a favorable price to book value relationship. Investment
policies aimed at achieving the Portfolio's objective are set in a flexible
framework of securities selection which primarily includes equity securities,
such as common stocks, preferred stocks, convertible securities, rights and
warrants in proportions which vary from time-to-time. Under normal
circumstances at least 65% of the Portfolio's assets will be invested in equity
securities. The Portfolio will invest primarily in stocks listed on the New
York Stock Exchange. In addition, it may also purchase securities listed on
other domestic securities exchanges, securities traded in the domestic
over-the-counter market and foreign securities provided that they are listed on
a domestic or foreign securities exchange or represented by American Depository
Receipts listed on a domestic securities exchange or traded in the United
States over-the-counter market.
SMALL CAP PORTFOLIO
The investment objective of the Small Cap Portfolio is to seek capital
appreciation through investments in a diversified portfolio consisting
primarily of equity securities of companies with market capitalizations of
under $1 billion. Smaller-capitalization companies are often under-priced for
the following reasons: (i) institutional investors, which currently represent
a majority of the trading volume in the shares of publicly-traded companies,
are often less interested in such companies because in order to acquire an
equity position that is large enough to be meaningful to an institutional
investor, such an investor may be required to buy a large percentage of the
company's outstanding equity securities and (ii) such companies may not be
regularly researched by stock analysts, thereby resulting in greater
discrepancies in valuation. The Portfolio may also purchase securities in
initial public offerings, or shortly after such offerings have been completed,
when the Portfolio Manager believes that such securities have
greater-than-average market appreciation potential. Under normal circumstances
at least 65% of the Portfolio's assets will be invested in equity securities.
The majority of securities purchased by the Portfolio will be traded on the New
York Stock Exchange, the American Stock Exchange or in the over-the-counter
market, and will also include options, warrants, bonds, notes and debentures
which are convertible into or exchangeable for, or which grant a right to
purchase or sell, such securities. In addition, the Portfolio may also purchase
foreign securities provided that they are listed on a domestic or foreign
securities exchange or are represented by American Depository Receipts listed
on a domestic securities exchange or traded in the United States
over-the-counter market.
In pursuing its objective, the Portfolio's strategy will be to invest in stocks
of companies with value that may not be fully reflected by current stock price.
The Portfolio Manager attempts to identify a universe of stocks for which the
market has relatively low expectations as measured by overall price relative to
fundamental measures of growth and valuation. To institute this strategy, the
Portfolio Manager utilizes various proprietary valuation tools centered around
price/sales ratios to target investments in companies whose growth potential
exceeds commonly perceived expectations.
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INTERNATIONAL GROWTH PORTFOLIO
The International Growth Portfolio seeks capital appreciation, primarily
through a diversified portfolio of non-United States equity securities. It is
a fundamental policy of the Portfolio that it will invest at least 80% of the
value of its assets (except when maintaining a temporary defensive position) in
equity securities of companies domiciled outside the United States. That
portion of the Portfolio not invested in equity securities is, in normal
circumstances, invested in U.S. and foreign government securities, high grade
commercial paper, certificates of deposit, foreign currency, bankers
acceptances, cash and cash equivalents, time deposits, repurchase agreements
and similar money market instruments, both foreign and domestic. The Portfolio
may invest in convertible debt securities of foreign issuers which are
convertible into equity securities at such time as a market for equity
securities is established in the country involved.
The Portfolio Manager's investment perspective for the Portfolio is to
invest in the equity securities of non-U.S. markets and companies which are
believed to be undervalued based upon internal research and proprietary
valuation systems. This international equity strategy reflects the Portfolio
Manager's decisions concerning the relative attractiveness of asset classes,
the individual international equity markets, industries across and within those
markets, other common risk factors within those markets and individual
international companies. The Portfolio Manager initially identifies those
securities which it believes to be undervalued in relation to the issuer's
assets, cash flow, earnings and revenues. The relative performance of foreign
currencies is an important factor in the Portfolio's performance. The
Portfolio Manager may manage the Portfolio's exposure to various currencies to
take advantage of different yield, risk and return characteristics. The
Portfolio Manager's proprietary valuation model determines which securities are
potential candidates for inclusion in the Portfolio.
The benchmark for the fund is the Morgan Stanley Capital International
Non-U.S. Equity (Free) Index (the "Benchmark"). The Benchmark is a market
driven broad based index which includes non-U.S. equity markets in terms of
capitalization and performance. The Benchmark is designed to provide a
representative total return for all major stock exchanges located outside the
U.S. From time-to-time, the Portfolio Manager may substitute securities in an
equivalent index when it believes that such securities in the index more
accurately reflect the relevant international market.
As a general matter, the Portfolio Manager will purchase for the Fund only
securities contained in the underlying index relevant to the Benchmark. The
Portfolio Manager will attempt to enhance the long-term return and risk
performance of the Portfolio relative to the Benchmark by deviating from the
normal Benchmark mix of country allocation and currencies in reaction to
discrepancies between current market prices and fundamental values. The active
management process is intended to produce a superior performance relative to
the Benchmark index.
The Portfolio Manager will purchase securities of companies domiciled in a
minimum of eight to 12 countries outside the United States.
MANAGED PORTFOLIO
The investment objective of the Managed Portfolio is to achieve growth of
capital over time through investment in a portfolio consisting of common
stocks, bonds and cash equivalents, the percentages of which
will vary based on the Portfolio Manager's assessments of the relative outlook
for such investments. In seeking to achieve its investment objective, the
types of equity securities in which the Portfolio may invest are likely to be
the same as those in which the Equity Portfolio invests, although securities of
the type in which the Small Cap Portfolio invests may, to a lesser extent, be
included. Debt securities are expected to be predominantly investment grade
intermediate to long term U.S. Government and corporate debt, although the
Portfolio will also invest in high-quality short-term money market and cash
equivalent securities and may invest almost all of its assets in such
securities when the Portfolio Manager deems it advisable in order to preserve
capital. In addition, the Portfolio may also purchase foreign securities
provided that they are listed on a domestic or foreign securities
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exchange or are represented by American Depository Receipts listed on a
domestic securities exchange or traded in the United States over-the-counter
market.
The allocation of the Portfolio's assets among the different types of
permitted investments will vary from time-to-time based upon the Portfolio
Manager's evaluation of economic and market trends and its perception of the
relative values available from such types of securities at any given time.
There is neither a minimum nor a maximum percentage of the Portfolio's assets
that may, at any given time, be invested in any of the types of investments
identified above. Consequently, while the Portfolio will earn income to the
extent it is invested in bonds or cash equivalents, the Portfolio does not have
any specific income objective.
HIGH-YIELD BOND PORTFOLIO
The investment objective of the High-Yield Bond Portfolio is maximum
current income, primarily from debt securities that are rated Ba or lower by
Moody's or BB or lower by S&P. It is a fundamental policy of the Portfolio that
it will invest at least 80% of the value of its total assets (except when
maintaining a temporary defensive position) in high-yielding, income-producing
corporate bonds that are rated B3 or better by Moody's or B- or better by S&P.
The corporate bonds in which the Portfolio invests are high-yielding but
normally carry a greater credit risk than bonds with higher ratings. In
addition, such bonds may involve greater volatility of price than higher-rated
bonds. For a discussion of High-Yield Securities and related risks, see
"Investment Techniques and Associated Risks -- High-Yield Securities" at page
15.
The Portfolio's investments are selected by the Portfolio Manager after
careful examination of the economic outlook to determine those industries that
appear favorable for investments. Industries going through a perceived decline
generally are not candidates for selection. After the industries are selected,
bonds of issuers within those industries are selected based on their
creditworthiness, their yields in relation to their credit and the relative
strength of their common stock prices. Companies near or in bankruptcy are not
considered for investment. The Portfolio does not purchase bonds which are
rated Ca or lower by Moody's or CC or lower by S&P or which, if unrated, in the
judgment of the Portfolio Manager have characteristics of such lower-grade
bonds. Should an investment purchased with the above-described credit quality
requisites be downgraded to Ca or lower or CC or lower, the Portfolio Manager
shall have discretion to hold or liquidate the security.
Subject to the restrictions described above, under normal circumstances,
up to 20% of the Portfolio's assets may include: (1) bonds rated Caa by Moody's
or CCC by S&P; (2) unrated debt securities which, in the judgment of the
Portfolio Manager have characteristics similar to those described above; (3)
convertible debt securities; (4) puts, calls and futures as hedging devices;
(5) foreign issuer debt securities; and (6) short-term money market
instruments, including certificates of deposit, commercial paper, U.S.
Government Securities and other income-producing cash equivalents. For a
discussion on options and futures and their related risks, see "Investment
Techniques and Associated Risks," at page 12.
ADDITIONAL INFORMATION ON INVESTMENT OBJECTIVES AND POLICIES
For the Equity and Small Cap Portfolios, at times when the investment
climate is viewed as favorable, common stocks will be heavily emphasized.
Under normal circumstances, at least 65% of each Portfolio's total assets will
be invested in common stocks or securities convertible into common stocks.
Under normal conditions, no less than 80% of the total assets of the
International Growth and High-Yield Bond Portfolios will be invested in equity
or debt securities identified in the respective Portfolio policies listed
above.
In the event that future economic or financial conditions adversely affect
equity securities, or stocks are considered overvalued, each of the Equity,
Small Cap, and International Growth Portfolios may temporarily invest a
substantial portion of its assets in debt securities, with an emphasis on money
market instruments or cash and cash equivalents until the Portfolio Manager
determines that market conditions warrant returning to investments in equity
securities. Please refer to the discussion on Defensive Tactics at page 16.
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Each Portfolio will in the normal course have varying amounts of cash
assets which have not yet been invested in accordance with its objectives.
This cash will be temporarily invested in high quality short term money market
securities and cash equivalents.
Management of Assets
The Portfolio Managers intend to manage each Portfolio's assets by buying
and selling securities to help attain its investment objective. This may
result in increases or decreases in a Portfolio's current income available for
distribution to its shareholders. While none of the Portfolios is managed with
the intent of generating short-term capital gains, each of the Portfolios may
dispose of investments (including money market instruments) regardless of the
holding period if, in the opinion of the Portfolio Manager, an issuer's
creditworthiness or perceived changes in a company's growth prospects or asset
value make selling them advisable. Such an investment decision may result in
capital gains or losses and could result in a high portfolio turnover rate
during a given period, resulting in increased transaction costs related to
equity securities. Disposing of debt securities in these circumstances should
not increase direct transaction costs since debt securities are normally traded
on a principal basis without brokerage commissions. However, such transactions
do involve a mark-up or mark-down of the price.
During periods of unusual market conditions when the Portfolio Manager
believes that investing for defensive purposes is appropriate, or in order to
meet anticipated redemption requests, part or all of the assets of one or more
of the Portfolios may be invested in cash or cash equivalents including
obligations listed below.
The portfolio turnover rates of the Portfolios cannot be accurately
predicted. Nevertheless, it is anticipated that the International Growth
Portfolio will have an annual turnover rate (excluding turnover of securities
having a maturity of one year or less) of 100% or less. A 100% annual turnover
rate would occur, for example, if all the securities in a Portfolio's
investment portfolio were replaced once in a period of one year.
INVESTMENT TECHNIQUES AND ASSOCIATED RISKS
The investment techniques or instruments described below are used for the
Portfolios' investment programs:
SHORT-TERM INVESTMENTS. Each Portfolio typically invests a part of its
assets in various types of U.S. Government securities and high-quality,
short-term debt securities with remaining maturities of one year or less
("money market instruments"). This type of short-term investment is made to
provide liquidity for the purchase of new investments and to effect redemptions
of shares. The money market instruments in which each Portfolio may invest
include government obligations, certificates of deposit, bankers' acceptances,
commercial paper, short-term corporate securities and repurchase agreements.
The International Growth Portfolio may invest in all of the above, both foreign
and domestic, including foreign currency, foreign time deposits, and foreign
bank acceptances.
REPURCHASE AGREEMENTS. Each Portfolio may acquire securities subject to
repurchase agreements. Under a typical repurchase agreement, a Portfolio would
acquire a debt security for a relatively short period (usually for one day and
not for more than one week) subject to an obligation of the seller to
repurchase and of the Portfolio to resell the debt security at an agreed-upon
higher price, thereby establishing a fixed investment return during the
Portfolio's holding period. A Portfolio will enter into repurchase agreements
with member banks of the Federal Reserve System having total assets in excess
of $500 million and with dealers registered with the Securities and Exchange
Commission. Under each repurchase agreement the selling institution will be
required to maintain as collateral securities whose market value is at least
equal to the repurchase price. Repurchase agreements could involve certain
risks in the event of default or insolvency of the selling institution,
including costs of disposing of securities held as collateral and any loss
resulting from delays or restrictions upon the Portfolio's ability to dispose
of securities. Pursuant to guidelines established by the Fund's Board of
Trustees, the Portfolio Manager considers the creditworthiness of those banks
and non-bank dealers with which a Portfolio
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enters into repurchase agreements and monitors on an ongoing basis the value of
securities held as collateral to ensure that such value is maintained at the
required level. A Portfolio will not enter into a repurchase agreement with a
dealer if the agreement has a maturity beyond seven days.
LOANS OF PORTFOLIO SECURITIES. Each Portfolio may lend its portfolio
securities if such loans are secured continuously by collateral (cash, U.S.
Government or agency obligations or letters of credit) maintained on a daily
basis in an amount at least equal at all times to the market value of the
securities loaned and if the Portfolio does not incur any fees (other than the
transaction fees of its custodian bank) in connection with such loans. A
Portfolio may call the loan at any time on five days' notice and reacquire the
loaned securities. During the loan period, the Portfolio would continue to
receive the equivalent of the interest paid by the issuer on the securities
loaned and would also have the right to receive the interest on investment of
the cash collateral in short-term debt instruments. A portion of either or
both kinds of such interest may be paid to the borrower of such securities. It
is not intended that the value of the securities loaned, if any, would exceed
10% of the value of a Portfolio's total assets. Securities loans must also
meet applicable tests under the Internal Revenue Code of 1986, as amended (the
"Code"). A Portfolio could experience various costs or losses if a borrower
defaults on its obligation to return the borrowed securities.
OPTIONS AND FUTURES. To the extent permitted by Arizona and New York law,
each of the Equity, Small Cap and International Growth Portfolios intend to
engage in futures contracts or options on futures contracts for bona fide
hedging or other purposes, and to write calls and puts on individual
securities. When either the Equity, Small Cap or International Growth
Portfolio anticipates a significant market or market sector advance, the
purchase of a futures contract affords a hedge against not participating in the
advance at a time when such Portfolio is not fully invested ("anticipatory
hedge"). Such a purchase of a futures contract would serve as a temporary
substitute for the purchase of individual securities, which then may be
purchased in an orderly fashion once the market has stabilized. As individual
securities are purchased, an equivalent amount of futures contracts could be
terminated by offsetting sales. Any such Portfolio may sell futures contracts
in anticipation of or in a general market or market sector decline that may
adversely affect the market value of such Portfolio's securities ("defensive
hedge"). To the extent that the Equity, Small Cap or International Growth
Portfolio of securities changes in value in correlation with the underlying
security or index, the sale of futures contracts would substantially reduce the
risk to the Portfolios of a market decline and by so doing, provide an
alternative to the liquidation of securities positions in the Portfolios with
attendant transaction costs. So long as the Commodity Futures Trading
Commission rules so require, none of the Equity, Small Cap or International
Growth Portfolios will enter into any financial futures or options contract
unless such transactions are for bona-fide hedging purposes, or for other
purposes only if the aggregate initial margins and premiums required to
establish such non-hedging positions would not exceed 5% of the liquidation
value of such Portfolio's assets. When writing put options, a Portfolio will
maintain in a segregated account at its Custodian liquid assets with a value
equal to at least the exercise price of the option to secure its obligation to
pay for the underlying security. As a result, such Portfolio forgoes the
opportunity of trading the segregated assets or writing calls against those
assets. There may not be a complete correlation between the price of options
and futures and the market prices of the underlying securities. The Portfolio
may lose the ability to profit from an increase in the market value of the
underlying security or may lose its premium payment. If due to a lack of a
market a Portfolio could not effect a closing purchase transaction with respect
to an over-the-counter ("OTC") option, it would have to hold the callable
securities until the call lapsed or was exercised.
The Managed Portfolio is authorized to, but does not presently intend to,
purchase, sell and write options and purchase and sell futures contracts for
hedging and other purposes. In the event that the Portfolio Manager intends in
the future to engage in such transactions, appropriate disclosures will be made
to existing and prospective shareholders.
<PAGE> 13
Except as otherwise indicated, the Portfolio Managers may engage in the
following hedging transactions to seek to hedge all or a portion of a
Portfolio's assets against market value changes resulting from changes in
equity values, interest rates and currency fluctuations utilizing covered
options, futures and forwards. Hedging is a means of offsetting, or
neutralizing, the price movement of an investment by making another investment,
the price of which should tend to move in the opposite direction from the
original investment.
Call Options
The Portfolios may write (sell) call options that are listed on national
securities exchanges or are available in the over-the-counter market through
primary broker-dealers. Call options are short-term contracts with a duration
of nine months or less. Such Portfolios of the Fund may only write call options
which are "covered," meaning that the Portfolio either owns the underlying
security or has an absolute and immediate right to acquire that security,
without additional cash consideration, upon conversion or exchange of other
securities currently held in the Portfolio. In addition, no Portfolio will,
prior to the expiration of a call option, permit the call to become uncovered.
If a Portfolio writes a call option, the purchaser of the option has the right
to buy (and the Portfolio has the option to sell) the underlying security
against payment of the exercise price throughout the term of the option. The
Portfolio's obligation to deliver the underlying security against payment of
the exercise price would terminate either upon expiration of the option or
earlier if the Portfolio were to effect a "closing purchase transaction"
through the purchase of an equivalent option on an exchange. The Portfolio
would not be able to effect a closing purchase transaction after it had
received notice of exercise. The International Growth Portfolio may purchase
and write covered call options on foreign and U.S. securities and indices and
enter into related closing transactions.
Generally, such a Portfolio intends to write listed covered calls when it
anticipates that the rate of return from doing so is attractive, taking into
consideration the premium income to be received, the risks of a decline in
securities prices during the term of the option, the probability that closing
purchase transactions will be available if a sale of the securities is desired
prior to the exercise, or expiration of the options, and the cost of entering
into such transactions. A principal reason for writing calls on a securities
portfolio is to attempt to realize, through the receipt of premium income, a
greater return than would be earned on the securities alone. A covered call
writer such as a Portfolio, which owns the underlying security has, in return
for the premium, given the opportunity for profit from a price increase in the
underlying security above the exercise price, but it has retained the risk of
loss should the price of the security decline.
The writing of covered call options involves certain risks. A principal
risk arises because exchange and over-the-counter markets for options are a
relatively new and untested concept, it is impossible to predict the amount of
trading interest which may exist in such options, and there can be no
assurance that viable exchange and over-the-counter markets will develop or
continue. The Portfolios will write covered call options only if there appears
to be a liquid secondary market for such options. If, however, an option is
written and a liquid secondary market does not exist, it may be impossible to
effect a closing purchase transaction in the option. In that event, the
Portfolio may not be able to sell the underlying security until the option
expires or the option is exercised, even though it may be advantageous to sell
the underlying security before that time.
The Portfolios will only engage in hedging transactions against changes
resulting from market conditions in the values of securities owned or expected
to be owned by the Portfolios. Unless otherwise indicated, a Portfolio will not
enter into a hedging transaction (except for closing transactions) if,
immediately thereafter, the sum of the amount of the initial deposits and
premiums on open contracts and options would exceed 20% of the Portfolio's
total assets taken at current value.
<PAGE> 14
PORTFOLIO TRANSACTIONS
The Portfolio Managers' primary consideration when executing security
transactions with broker-dealers is to obtain, and maintain the availability
of, execution at the most favorable prices and in the most effective manner
possible. A Portfolio Manager may select, under certain conditions,
Oppenheimer & Co., Inc., an affiliate of the OpCap Advisors, Inc., the
Portfolio Manager of the Equity, Small Cap and Managed Portfolios, to execute
each Portfolio's transactions. When selecting broker-dealers, other than
Oppenheimer & Co., Inc., to execute a Portfolio's transactions, the Portfolio
Managers may consider their record of sales of shares of other investment
company clients of the Portfolio Managers. Selection of broker-dealers to
execute portfolio transactions must be done in a manner consistent with the
foregoing primary consideration, the "Rules of Fair Practice" of the National
Association of Securities Dealers, Inc. and such other policies as the Board of
Trustees may determine. (For a further discussion of portfolio trading, see
the Statement of Additional Information, "Investment Management and Other
Services.")
GENERAL RISKS ASSOCIATED WITH EQUITY (EQUITY, SMALL CAP, INTERNATIONAL GROWTH
AND MANAGED) PORTFOLIOS
The Equity Portfolios seek to reduce risk of loss of principal due to
changes in the value of individual stocks by investing in a diversified
portfolio of common stocks and through the use of options on stocks. Such
investment techniques do not, however, eliminate all risks. Investors should
expect the value of the Equity Portfolios and the net asset value of their
shares to fluctuate based on market conditions.
RISK ASPECTS OF THE INDIVIDUAL PORTFOLIOS
SMALL CAP PORTFOLIO. The Small Cap Portfolio is expected to have greater
risk exposure and reward potential than a fund which invests primarily in
larger-capitalization companies. The trading volumes of securities of
smaller-capitalization companies are normally less than those of
larger-capitalization companies. This often translates into greater price
swings, both upward and downward. Since trading volumes are lower, new demand
for the securities of such companies could result in disproportionately large
increases in the price of such securities. The waiting period for the
achievement of an investor's objectives might be longer since these securities
are not closely monitored by research analysts and, thus, it takes more time
for investors to become aware of fundamental changes or other factors which
have motivated the Portfolio's purchase. Smaller-capitalization companies
often achieve higher growth rates and experience higher failure rates than do
larger-capitalization companies.
It is the present intention of the Equity, Small Cap, International Growth
and Managed Portfolio Managers with respect to each of the respective
Portfolios to invest no more than 5 percent of its net assets in bonds rated
below Baa3 by Moody's or BBB by S&P (commonly known as "junk bonds"). In the
event that the Portfolio Managers intend in the future to invest more than 5%
of the net assets of any such Portfolio in junk bonds, appropriate disclosures
will be made to existing and prospective shareholders. For information about
the possible risks of investing in junk bonds see "High-Yield Securities" below
and "Investment of the Assets" in the Statement of Additional Information.
INTERNATIONAL GROWTH PORTFOLIO. The International Growth Portfolio
carries additional risks associated with possibly less stable foreign
securities and currencies. Refer to "Foreign Currency and Values" and "Foreign
Securities" sections of the Statement of Additional Information.
MANAGED PORTFOLIO. An investment in the Managed Portfolio will entail
both market and financial risk, the extent of which depends on the amount of
the Portfolio's assets which are committed to equity, longer term debt or money
market securities at any particular time. The Managed Portfolio may invest in
mortgage-backed securities. Such securities, while similar to other fixed-
income securities, involve additional risk because mortgage prepayments are
passed through to the holder of the mortgage-backed security and must be
reinvested. When interest rates fall, prepayments tend to rise. The Portfolio
may have to reinvest that portion of its assets invested in such securities
more frequently when interest rates are low than when interest rates are high.
<PAGE> 15
Although the Managed Portfolio seeks to reduce credit risks, i.e., failure
of obligors to pay interest and principal, through careful selection of
investments, and it seeks to reduce market risks resulting from fluctuations in
the principal value of debt obligations due to changes in prevailing interest
rates by careful timing of maturities of investments, such risks cannot be
eliminated, and these factors will affect the net asset value of shares in the
Managed Portfolio. The value of debt obligations has an inverse relationship
with prevailing interest rates. The risks of investing in fixed income
securities are greater when such securities are high-yield securities.
HIGH-YIELD SECURITIES
Notwithstanding the investment policies and restrictions applicable to the
High-Yield Bond Portfolio which are designed to reduce risks associated with
such investments, high-yield securities may carry higher levels of risk than
many other types of income producing securities. These risks are of three
basic types: the risk that the issuer of the high-yield bond will default in
the payment of principal and interest; the risk that the value of the bond will
decline due to rising interest rates, economic conditions, or public
perception; and the risk that the investor in such bonds may not be able to
readily sell such bonds. Each of the major categories of risk are impacted by
various factors, as discussed below:
High-Yield Bond Market
The high-yield bond market is relatively new and has grown in the context
of a long economic expansion. Any downturn in the economy may have a negative
impact on the perceived ability of the issuer to make principal and interest
payments which may adversely affect the value of outstanding high-yield
securities and reduce market liquidity.
Sensitivity to Interest Rate and Economic Changes
In general, the market prices of bonds bear an inverse relationship to
interest rates; as interest rates increase, the prices of bonds decrease. The
same relationship may hold for high-yield bonds, but in the past high-yield
bonds have been somewhat less sensitive to interest rate changes than treasury
and investment grade bonds. While the price of high-yield bonds may not
decline as much, relatively, as the prices of treasury or investment grade
bonds decline in an environment of rising interest rates, the market price, or
value, of a high-yield bond will be expected to decrease in periods of
increasing interest rates, negatively impacting the net asset value of the
High-Yield Bond Portfolio. High-yield bond prices may not increase as much,
relatively, as the prices of treasury or investment grade bonds in periods of
decreasing interest rates. Payments of principal and interest on bonds are
dependent upon the issuer's ability to pay. Because of the generally lower
creditworthiness of issuers of high-yield bonds, changes in the economic
environment generally, or in an issuer's particular industry or business, may
severely impact the ability of the issuer to make principal and interest
payments and may depress the price of high-yield securities more significantly
than such changes would impact higher rated, investment grade securities.
Payment Expectations
Many high-yield bonds contain redemption or call provisions which might be
expected to be exercised in periods of decreasing interest rates. Should bonds
in which the High-Yield Bond Portfolio has invested be redeemed or called
during such an interest rate environment, the Portfolio would have to sell such
securities without reference to their investment merit and reinvest the
proceeds received in lower-yielding securities, resulting in a decreased return
for investors in the High-Yield Bond Portfolio. In addition, such redemptions
or calls may reduce the High-Yield Bond Portfolio's asset base over which the
Portfolio's investment expenses may be spread.
<PAGE> 16
Liquidity and Valuation
Because of periods of relative illiquidity, many high-yield bonds may be
thinly traded. As a result, the Board of Directors' ability to accurately
value high-yield bonds and determine the net asset value of the High-Yield Bond
Portfolio, as well as the Portfolio's ability to sell such securities, may be
limited. Public perception of and adverse publicity concerning high-yield
securities may have a significant negative impact on the value and liquidity of
high-yield securities, even though not based on fundamental investment
analysis.
DEFENSIVE TACTICS
Any or all of the Portfolios may at times for defensive purposes, at the
determination of the Portfolio Manager, temporarily place all or a portion of
their assets in cash, short-term commercial paper (i.e. short-term unsecured
promissory notes issued by corporations to finance short-term credit needs),
United States Government Securities, high-quality debt securities (including
"Eurodollar" and "Yankee Dollar" obligations, i.e., U.S. issuer borrowings
payable overseas in U.S. funds and obligations of foreign issuers payable in
U.S. funds), non-convertible preferred stocks and obligations of banks when in
the judgment of the Portfolio Manager such investments are appropriate in light
of economic or market conditions. The International Growth Portfolio may invest
in all of the above, both foreign and domestic, including foreign currency,
foreign time deposits, and foreign bank acceptances. When a Portfolio takes a
defensive position, it may not be following the fundamental investment policy
of the Portfolio.
Tax Considerations
To the extent that the High-Yield Bond Portfolio invests in securities
structured as zero coupon bonds, the Portfolio will be required to report
interest income even though no cash interest payment is received until maturity
of the bond. Investors in the High-Yield Bond Portfolio would be taxed on this
interest income even though no cash distribution of such interest is received
in the year in which such income is taxed.
INVESTMENT RESTRICTIONS
Each Portfolio is subject to certain investment restrictions which,
together with its investment objective, are fundamental policies changeable
only by shareholder vote. Under some of those restrictions, each Portfolio may
not:
1. Invest more than 5% of the value of its total assets in the securities
of any one issuer, or purchase more than 10% of the voting securities, or more
than 10% of any class of security, of any issuer (for this purpose all
outstanding debt securities of an issuer are considered as one class and all
preferred stock of an issuer are considered as one class).
2. Concentrate its investments in any particular industry, but if deemed
appropriate for attaining its investment objective, a Portfolio may invest up
to 25% of its total assets (valued at the time of investment) in any one
industry classification used by that Portfolio for investment purposes.
3. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three years
of continuous operation.
4. Make loans, except through the purchase of U.S. Government securities
and corporate debt obligations, repurchase agreements or lending portfolio
securities as described above under "Loans of Portfolio Securities".
<PAGE> 17
5. Borrow money in excess of 10% of the value of its total assets. It may
borrow only as a temporary measure for extraordinary or emergency purposes and
will make no additional investments while such borrowings exceed 5% of the
total assets. Such prohibition against borrowing does not prohibit escrow or
other collateral or margin arrangements in connection with the hedging
instruments which a Portfolio is permitted to use by any of its other
fundamental policies.
6. Invest more than 10% of its net assets in illiquid securities
(securities for which market quotations are not net readily available) and
repurchase agreements which have a maturity of longer than seven days. Other
investment restrictions are described in the Statement of Additional
Information.
All percentage limitations apply immediately after a purchase or initial
investment and any subsequent change in any applicable percentage resulting
from market fluctuations or other changes in the amount of total assets does
not require elimination of any security from a Portfolio.
MANAGEMENT OF THE FUND
The Fund's Board of Trustees has overall responsibility for the management
of the Fund under the laws of Massachusetts governing the responsibilities of
trustees of a Massachusetts business trust. In general, such responsibilities
are comparable to those of directors of a Massachusetts business corporation.
The Board of Trustees of the Fund has undertaken to monitor the Fund for the
existence of any material irreconcilable conflict between the interests of
variable annuity Contractholders and variable life insurance Contractholders
and shall report any such conflict to the boards of MONY and MONY America. The
Boards of Directors of those companies have agreed to be responsible for
reporting any potential or existing conflicts to the Trustees of the Fund and,
at their own cost, to remedy such conflict up to and including establishing a
new registered management investment company and segregating the assets
underlying the variable annuity contracts and the variable life insurance
contracts. The Statement of Additional Information contains information about
the Trustees and Officers of the Fund.
INVESTMENT ADVISER AGREEMENT
Enterprise Capital provides administrative services to the Portfolios,
subject to the direction of the Board and in keeping with the stated investment
objectives of each Portfolio. Enterprise Capital and the Fund have entered
into Portfolio Manager Agreements with each of the Portfolio Managers discussed
below.
Enterprise Capital is assisted in this duty by Evaluation Associates,
Inc., which has had 24 years of experience in evaluating investment advisers
for individuals and institutional investors. The oversight and management
services provided by Enterprise Capital include (i) supervising the Portfolio
Managers' compliance with state and federal regulations, including the
Investment Company Act, (ii) evaluating the Portfolio Managers' performance,
(iii) analyzing the composition of the investment portfolios of each Portfolio
of the Fund and preparing reports thereon for the Board or any committee of the
board, (iv) evaluating each Portfolio's performance in comparison to similar
mutual funds and other market information, (v) conducting searches, upon a
request of the Board, for a replacement for any Portfolio Manager then serving
the Fund, and (vi) preparing presentations to shareholders which analyze the
Fund's overall investment program and performance.
Enterprise Capital is a subsidiary of MONY, one of the nation's largest
insurance companies. Enterprise Capital serves as the investment adviser to
The Enterprise Group of Funds, Inc., a registered investment company consisting
of ten separate investment portfolios with assets of $737 million at March 31,
1996. Total assets under management at March 31, 1996 are approximately $2.62
billion. Enterprise Capital's address is Atlanta Financial Center, 3343
Peachtree Road, Ste. 450, Atlanta, Georgia 30326-1022. MONY's address is 1740
Broadway, New York, New York 10019.
<PAGE> 18
PORTFOLIO MANAGERS
Equity Portfolio
The Portfolio Manager of the Equity Portfolio is OpCap Advisors which is a
subsidiary of Oppenheimer Capital, a general partnership. The Portfolio
Manager and its affiliates have operated as investment advisers to both mutual
funds and other clients since l968, and had approximately $40 billion under
management as of March 31, 1996. Eileen Rominger, Senior Vice President of
Oppenheimer Capital, is responsible for the day-to-day management of the
Portfolio. Ms. Rominger has more than 17 years experience in the investment
industry. The annual Management Fee is .80% of average daily net assets up to
$400 million; .75% of average daily net assets from $400 million to $800
million; and .70% of average daily net assets in excess of $800 million, and
the Portfolio Manager receives .40% of average daily net assets up to
$1,000,000,000 and .30% thereafter. Usual investment minimum is $10 million.
Representative clients include Pacific Telesis Group, Caterpillar, Inc. and New
York State Electric & Gas. OpCap's address is One World Financial Center, New
York, New York 10281.
Small Cap Portfolio
Portfolio Manager of the Small Cap Portfolio is GAMCO Investments, Inc.
("GAMCO"). Its offices are located at One Corporate Center, Rye, New York
10580. GAMCO is a majority owned subsidiary of Gabelli Funds, Inc. GAMCO's
predecessor, Gabelli & Company, Inc., was founded in 1977 by Mario J. Gabelli
who served as its chief investment officer since inception. He is responsible
for the day-to-day management of the Portfolio and has more than 30 years of
experience in the investment industry. Representative clients include: AT&T;
Halliburton Co. and ITT Corp. As of March 31, 1996, total assets under
management for all clients were $5.1 billion. Usual investment minimum is $1
million. The annual management fee is .80% of the average daily net assets up
to $400 million; .75% of average daily net assets from $400 million to $800
million; and .70% of average daily net assets from $400 million to $800
million; and the Portfolio Manager receives .40% of average daily net assets up
to $1,000,000,000 and .30% thereafter.
International Growth Portfolio
The Portfolio Manager of the International Growth Portfolio is Brinson
Partners, Inc. which is a wholly owned subsidiary of Brinson Holdings, Inc. and
is an acquisition of Swiss Bank Corporation presently pending. Investments of
the International Growth Portfolio are managed by a committee of the Portfolio
Manager. As of December 31, 1995, Brinson Partners Inc.'s assets under
management for all clients approximated $53 billion. Usual investment minimum:
$25 million. Representative clients not disclosed due to confidentiality
agreements. Brinson's address is 209 South LaSalle Street, Chicago,
Illinois 60604. The annual Management Fee is .85% of average daily net assets,
and the Portfolio Manager receives 53% of that fee for assets under management
up to $100 million; 41% of that fee for assets under management from $100
million to $200 million; 38% of that fee for assets from $200 million to $500
million; and 29% of that fee for assets greater than $500 million.
Managed Portfolio
The Portfolio Manager of the Managed Portfolio is OpCap Advisors,
described in the paragraph referencing the Equity Portfolio. Richard J.
Glasebrook II, Managing Director of Oppenheimer Capital, is responsible for the
day-to-day management of the Portfolio. He has more than 22 years of
investment industry experience. The annual Management Fee is .80% of average
daily net assets up to $400 million; .75% of average daily net assets from $400
million to $800 million; and .70% of average daily net assets in excess of $800
million, and the Portfolio Manager receives .40% of average daily net assets up
to $1,000,000,000 and .30% thereafter.
High-Yield Bond Portfolio
The Portfolio Manager of the High-Yield Bond Portfolio is Caywood-Scholl
Capital Management ("Caywood-Scholl"). This firm was formed in April 1986 and
is owned by its employees. Mr. Caywood, Managing Director and Chief Executive
Officer, is responsible for the day to day management of the Portfolio. He has
more than 27 years investment industry experience. Caywood-Scholl provides
investment advice exclusively with respect to high-yield, low grade fixed
income instruments. As of March 31, 1994, assets under management for all
clients approximated $643 million. Usual investment minimum: $1 million.
Representative
<PAGE> 19
clients include: Hospital Corporation of America; Colonial Penn
Insurance; and Golden Rule Insurance. The address of Caywood-Scholl Capital
Management is 4350 Executive Drive, Suite 125, San Diego, California 92121.
The annual Management Fee is .60% of average daily net assets, and the
Portfolio Manager receives 50% of that fee for assets up to $100,000,000 and
42% of that fee for assets above $100,000,000.
General Portfolio Information
Under the Investment Adviser Agreement, each Portfolio is responsible for
bearing organizational expenses, taxes and governmental fees; brokerage
commissions, interest and other expenses incurred in acquiring and disposing of
portfolio securities; trustees fees, out of pocket travel expenses and other
expenses for trustees who are not interested persons; legal, fund accounting
and audit expenses; custodian, dividend disbursing and transfer agent fees; and
other expenses not expressly assumed by Enterprise Capital under the Investment
Adviser Agreement.
The Statement of Additional Information contains more information about
the Investment Adviser Agreement, including a more complete description of the
management fee and expense arrangements, exculpation provisions and portfolio
transactions for the Fund.
DETERMINATION OF NET ASSET VALUE
The net asset value per share is calculated separately for each Portfolio.
The net asset value of each Portfolio is determined at the close of the
regular trading session ("Close") of the New York Stock Exchange ("NYSE")
(currently 4:00 p.m. Eastern Time) each day the NYSE is open and on each other
day on which there is a sufficient degree of trading in any Portfolio's
portfolio securities affecting materially the value of such securities (if the
Fund receives a request to redeem its shares that day), by dividing the value
of the Portfolio's net assets by the number of shares outstanding. The Fund's
Board of Trustees has established procedures to value the Portfolios'
securities to determine net asset value; in general, those valuations are based
on market value, with special provisions for (i) securities (including
restricted securities) not having readily-available market quotations and (ii)
short-term debt securities. Further details are in the Statement of Additional
Information.
PURCHASE OF SHARES
Investments in the Fund may be made by the Variable Accounts. Persons
desiring to purchase Contracts funded by any Portfolio or Portfolios of the
Fund should read this Prospectus in conjunction with the Prospectus of the
Contract(s).
Shares of each Portfolio of the Fund are offered to the Variable Accounts
without sales charge at the respective net asset values of the Portfolios next
determined after receipt by the Fund of the purchase payment in the manner set
forth above under "Determination of Net Asset Value." Certificates
representing shares of the Fund will not be physically issued. Enterprise Fund
Distributors, Inc. acts without remuneration from the Fund as the exclusive
Distributor of the Fund's shares. The principal executive office of the
Distributor is located at Atlanta Financial Center, 3343 Peachtree Road, N.E.,
Suite 450, Atlanta, Georgia 30326-1022.
REDEMPTION OF SHARES
Shares of any Portfolio of the Fund can be redeemed by the Variable
Accounts at any time for cash, at the net asset value next determined after
receipt of the redemption request in proper form. The market value of the
securities in each of the Portfolios is subject to daily fluctuation and the
net asset value of each Portfolio's shares will fluctuate accordingly. The
redemption value of the Fund's shares may be either more or less than the
original cost to the Variable Account. Payment for redeemed shares is
ordinarily made within seven days after receipt by the Fund's transfer agent of
redemption instructions in proper form. The redemption privilege may be
suspended and payment postponed during any period when: (l) the New York Stock
Exchange is closed other than for customary weekend or holiday closings or
trading thereon is restricted as determined by the Securities and Exchange
Commission; (2) an emergency, as defined by the Securities and Exchange
Commission exists making
<PAGE> 20
trading of portfolio securities or valuation of net assets not reasonably
practicable; (3) the Securities and Exchange Commission has by order permitted
such suspension.
STATE LAW RESTRICTIONS
The investments of the MONY America Variable Accounts are subject to the
provisions of the New York and Arizona insurance law, respectively, applicable
to the investments of life insurance company separate accounts. Although these
state law investment restrictions do not apply directly to the Fund, the
Portfolios will comply, without the approval of shareholders, with such
statutory requirements, as they exist or may be amended.
Under pertinent provisions of New York law, as they currently exist, the
assets of the Variable Accounts of MONY may be invested in any investments (1)
permitted by agreement between these Variable Accounts and their
Contractholders and (2) acquired in good faith and with that degree of care in
acquiring investments that an ordinarily prudent person in a like position
would use under similar circumstances. The only agreement with Contractholders
pertaining to investments permitted for the Variable Accounts is as described
in the prospectuses for the Contracts, namely that the Variable Accounts will
invest only in shares of the Fund. The investment of the assets of the Fund
are subject to the investment objectives, policies and restrictions applicable
to the Portfolios, as described in this prospectus (see "Investment Objectives
And Policies" at page 9 and "Investment Restrictions" at page 17 and Statement
of Additional Information, "Investment Restrictions").
The pertinent provisions of Arizona law, as they currently exist, are in
summary form as follows:
The assets of variable accounts established by MONY America may be
invested in any investments that are of the kind permitted and that satisfy the
quantitative requirements, but without regard to quantitative restrictions.
Bonds, debentures, notes, commercial paper and other evidences of
indebtedness, and preferred, guaranteed or preference stock must have received
an investment grade rating approved by the Director of Insurance. Funds may
not be invested in foreign banks (other than foreign branches of domestic
banks) except that investments may be made in obligations issued, assumed or
guaranteed by the International Bank for Reconstruction and Development.
Investments not otherwise permitted under Arizona law may be made in an amount
not exceeding in the aggregate 10 percent of assets and not exceeding 2 percent
of assets as to any one such investment.
Although compliance with New York and Arizona laws described above will
ordinarily result in compliance with any applicable laws of other states, under
some circumstances the laws of other states could impose additional
restrictions. Accordingly, if any state or other jurisdiction in which the
Variable Accounts propose to do business imposes limits applicable to the
Variable Accounts, in addition to any imposed by New York and Arizona law, the
Fund will comply with such further investment limits.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio intends to distribute substantially all of its net
investment income and any net realized capital gains. Dividends from net
investment income and any distributions of realized capital gains will be paid
in additional shares of the Portfolio paying the dividend or making the
distribution and credited to the shareholder's account unless the shareholder
elects to receive such dividends or distributions in cash.
EQUITY, SMALL CAP, INTERNATIONAL GROWTH AND MANAGED PORTFOLIOS. Dividends
from net investment income, if any, on the Small Cap, Equity, International
Growth and Managed Portfolios will be declared and paid at least annually, and
any net realized capital gains will be declared and paid at least once per
calendar year.
HIGH-YIELD BOND PORTFOLIO. Dividends from investment income are declared
and paid quarterly. Distributions of realized net short-term capital gains, if
any, and realized long-term capital gains will be declared and paid at least
once per calendar year.
<PAGE> 21
TAXES. Because the Fund intends to distribute all of the net investment
income and capital gains of each Portfolio and otherwise qualify each Portfolio
as a regulated investment company under Subchapter M of the Internal Revenue
Code, it is not expected that any Portfolio of the Fund will be required to pay
any federal income tax on such income and capital gains. Since the Variable
Accounts are the shareholders of the Fund, no discussion is presented herein as
to the federal income tax consequences at the shareholder level. For
information concerning the federal income tax consequences to contractholders,
see the accompanying Prospectus for the Contracts.
CALCULATION OF PERFORMANCE
From time-to-time the performance of one or more of the Portfolios may be
advertised. The performance data contained in these advertisements is based
upon historical earnings and is not indicative of future performance. The data
for each Portfolio reflects the results of that Portfolio of the Fund and
recurring charges and deductions borne by or imposed on the Portfolio. As the
performance for any Portfolio does not include charges and deductions under the
Contracts, comparisons with other portfolios used in connection with different
variable accounts may not be useful. Set forth below for each Portfolio is the
manner in which the data contained in such advertisements will be calculated.
The performance data for these Portfolios will reflect the "yield" and
"total return". The "yield" of each of these Portfolios refers to the income
generated by an investment in that Portfolio over the 30 day period stated in
the advertisement and is the result of dividing that income by the value of the
Portfolio. The value of each Portfolio is the average daily number of shares
outstanding multiplied by the net asset value per share on the last day of the
period. "Total Return" for each of these Portfolios refers to the value a
Shareholder would receive on the date indicated if a $1,000 investment had been
made the indicated number of years ago. It reflects historical investment
results less charges and deductions of the Fund.
In addition, reference in advertisements may be made to various indices,
including, without limitation, the Standard & Poor's 500 Stock Index, the
Russell 2000 and the Lehman Brothers Corporate/Government Index, and various
rankings by independent evaluators such as Morningstar and Lipper Analytical
Services, Inc. in order to provide the reader a basis for comparison.
ADDITIONAL INFORMATION
ORGANIZATION OF THE FUND. The Fund, under the name of Quest for Value
Accumulation Trust, was organized as a Massachusetts business trust on March 2,
1988 and is registered with the Securities and Exchange Commission as an
open-end diversified management investment company. The Fund changed its name
to the Enterprise Accumulation Trust on September 16, 1994. When issued,
shares are fully paid and have no preemptive or conversion rights. The shares
of beneficial interest of the Fund, $0.01 par value, are divided into five
separate series. The shares of each series are freely-transferable and equal
as to earnings, assets and voting privileges with all other shares of that
series. There are no conversion, preemptive or other subscription rights.
Upon liquidation of the Fund or any Portfolio, shareholders of a Portfolio are
entitled to share pro rata in the net assets of that Portfolio available for
distribution to shareholders after all debts and expenses have been paid. The
shares do not have cumulative voting rights.
The Fund's Board of Trustees, whose responsibilities are comparable to
those of directors of a Massachusetts corporation, is empowered to issue
additional classes of shares, which classes may either be identical except as
to dividends or may have separate assets and liabilities; classes having
separate assets and liabilities are referred to as "series". The creation of
additional series and offering of their shares (the proceeds of which would be
invested in separate, independently managed portfolios with distinct investment
objectives, policies and restrictions) would not affect the interests of the
current shareholders in the existing Portfolios.
The assets received by the Fund on the sale of shares of each Portfolio
and all income, earnings, profits and proceeds thereof, subject only to the
rights of creditors, are allocated to each Portfolio, and constitute the
<PAGE> 22
assets of such Portfolio. The assets of each Portfolio are required to be
segregated on the Fund's books of account. The Fund's Board of Trustees has
agreed to monitor the portfolio transactions and management of each of the
Portfolios and to consider and resolve any conflict that may arise. Direct
expenses will be allocated to each Portfolio and general expenses of the Fund
will be prorated by total net assets.
VOTING. For matters affecting only one Portfolio, only the shareholders
of that Portfolio are entitled to vote. For matters relating to all the
Portfolios but affecting the Portfolios differently, separate votes by
Portfolio are required. Approval of an Investment Management or Portfolio
Manager Agreements and a change in fundamental policies would be regarded as
matters requiring separate voting by each Portfolio. To the extent required by
law, the Variable Accounts, which are the shareholders of the Fund, will vote
the shares of the Fund, or any Portfolio of the Fund, held in the Variable
Accounts in accordance with instructions from Contractholders, as described
under the caption "Voting Rights" in the accompanying Prospectus for the
Contracts. Shares for which no instructions are received from Contractholders,
as well as shares which Enterprise Capital or its parent, MONY, may own, will
be voted in the same proportion as shares for which instructions are received.
The Fund does not intend to hold annual meetings of shareholders. However, the
Board of Trustees will call special meetings of shareholders for action by
shareholder vote as may be requested in writing by holders of 10% or more of
the outstanding shares of a Portfolio or as may be required by applicable laws
or the Declaration of Trust pursuant to which the Fund has been organized.
Under Massachusetts law shareholders could, in certain circumstances, be
held personally liable as partners for Fund obligations. The Fund's Declaration
of Trust contains an express disclaimer of shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given in
each instrument entered into or executed by the Fund. The Declaration of Trust
also provides for indemnification out of the Fund's property for any
shareholder held personally liable for any Fund obligation. Thus, the risk of
loss to a shareholder from being held personally liable for obligations of the
Fund is limited to the unlikely circumstance in which the Fund itself would be
unable to meet its obligations.
CUSTODIAN AND TRANSFER AGENT. The custodian of the assets of the Fund is
State Street Bank and Trust Company, P.O. Box 8505, Boston, MA 02266-8505,
which also acts as transfer agent and shareholder servicing agent for the Fund.
CONTRACTHOLDER INQUIRIES. Inquiries concerning the purchase and sale of
shares of the Fund as well as inquiries concerning dividends and account
statements should be directed to MONY. Inquiries concerning management and
investment policies of the Fund should be directed to Enterprise Capital, 3343
Peachtree Road, Ste. 450, Atlanta, Georgia 30326; or telephone 1-800-432-4320.
ANNUAL REPORT. The Fund's latest annual report which includes the
Management's Discussion and Analysis, is available upon request and without
charge upon written request to MONY, Mail Drop 76-18, 500 Frank W. Burr Blvd.,
Teaneck, New Jersey 07666-6888.
<PAGE> 23
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER AND CORPORATE BOND RATINGS
Commercial Paper Ratings
Moody's commercial paper ratings are opinions of the ability of issuers to
repay promissory obligations when due. Moody's employs the following three
designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers: Prime 1 - Superior Ability for Repayment;
Prime 2 - Strong Ability for Repayment; Prime 3 - Acceptable Ability for
Repayment.
S & P's commercial paper rating is a current assessment of the likelihood
of timely payment. Ratings are graded into four categories, ranging from "A"
for the highest quality obligations to "D" for the lowest. Issues assigned the
highest rating, "A", are regarded as having the greatest capacity for timely
payment. Issues in this category are delineated with the numbers "1", "2", and
"3" to indicate the relative degree of safety. The designation "A-1" indicates
that the degree of safety regarding timely payment is either overwhelming or
very strong. The "A+" designation is applied to those issues rated "A-1" which
possess overwhelming safety characteristics. Capacity for timely payment on
issues with the designation "A-2" is strong. However, the relative degree of
safety is not as high as for issues designated "A-1."
Fitch's commercial paper ratings represent Fitch's assessment of the
issuer's ability to meet its obligations in a timely manner. The assessment
places emphasis on the existence of liquidity. Ratings range from "F-1+" which
represents exceptionally strong credit quality to "F-4" which represents weak
credit quality.
Duff's short-term ratings apply to all obligations with maturities of
under one year, including commercial paper, the uninsured portion of
certificates of deposit, unsecured bank loans, master notes, bankers
acceptances, irrevocable letters of credit and current maturities of long-term
debt. Emphasis is placed on liquidity. Ratings range for Duff 1+ for the
highest quality to Duff 5 for the lowest, issuers in default. Issues rated
Duff 1+ are regarded as having the highest certainty of timely payment. Issues
rated Duff 1 are regarded as having very high certainty of timely payment.
Thomson's BankWatch, Inc. ("TBW") assigns only one Issuer Rating to each
company, based upon a qualitative and quantitative analysis of the consolidated
financials of an issuer and its subsidiaries. The rating incorporates TBW's
opinion of the vulnerability of the company to adverse developments which may
impact the marketability of its securities, as well as the issuer's ability to
repay principal and interest. Ratings range from "A" for highest quality to
"E" for the lowest, companies with very serious problems.
Bond Ratings
A bond rated "Aaa" by Moody's is judged to be the best quality. They
carry the smallest degree of investment risk. Interest payments are protected
by a large or by an exceptionally stable margin and principal is deemed secure.
While the various protective elements may change, such foreseeable changes are
unlikely to impair the fundamentally strong position of such issues. Bonds
which are rated "Aa" are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as high
grade bonds. Margins of protection on "Aa" bonds may not be as large as on
"Aaa" securities or fluctuations of protective elements may be of greater
magnitude or there may be other elements present which make the long-term risks
appear somewhat larger than "Aaa" securities. Bonds which are rated "A"
possess many favorable investment attributes and are to be considered as upper
medium grade obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which suggest a
susceptibility to impairment some time in the future. Bonds rated "Baa" are
considered medium grade obligations whose interest payments and principal
security appear adequate for the present but may lack certain protective
elements or may be characteristically unreliable over any great length of time.
Moody's applies numerical modifiers "1", "2" and "3" in each generic rating
classification from "Aa" through "B" in its corporate bond rating system. The
modifier
<PAGE> 24
"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. Bonds rated "Ba" are judged to have speculative elements and
bonds rated below "Ba" are speculative to a higher degree.
Debt rated "AAA" by S & P has the highest rating assigned by it. Capacity
to pay interest and repay principal is extremely strong. Debt rated "AA" has a
strong capacity to pay interest and repay principal and differs from "AAA"
issues only in small degree. Debt rated "A" has a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt
in higher rated categories. Debt rated "BBB" is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest
and repay principal for debt in this category than in higher rated categories.
Debt rated "BB" and below is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal.
Debt rated "AAA", the highest rating by Fitch, is considered to be of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. Debt rated "AA" is regarded as very high credit quality.
The obligor's ability to pay interest and repay principal is very strong. Debt
rated "A" is of high credit quality. The obligor's ability to pay interest and
repay principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than debt with higher
ratings. Debt rated "BBB" is of satisfactory credit quality. The obligor's
ability to pay interest and repay principal is adequate, however a change in
economic conditions may adversely affect timely payment. Plus (+) and minus
(-) signs are used with a rating symbol (except "AAA") to indicate the relative
position within the category.
Debt rated "AAA", the highest rating by Duff's, is considered to be of the
highest credit quality. The risk factors are negligible being only slightly
more than for risk-free U.S. Treasury debt. Debt rated "AA" is regarded as
high credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time-to-time because of economic conditions. Debt rated "A"
is considered to have average but adequate protection factors. Bonds rated
"BBB" are considered to have below average protection factors but still
sufficient for prudent investment. Bonds rated "BB" and below are below
investment grade and possess fluctuating protection factors and risk.
<PAGE> 25
STATEMENT OF ADDITIONAL INFORMATION
Enterprise Accumulation Trust
Atlanta Financial Center
3343 Peachtree Road, N.E., Ste. 450
Atlanta, GA 30326-1022
(800) 432-4320
This Statement of Additional Information (the "Additional Statement") is
not a Prospectus. Investors should understand that this Additional Statement
should be read in conjunction with the Prospectus dated July 1, 1996 (the
"Prospectus") of Enterprise Accumulation Trust (the "Fund"). Mutual of New
York ("MONY) contractowners can obtain copies of the Prospectus of the Fund by
written request to MONY, 1740 Broadway, New York, NY 10019 or by calling MONY
at (800) 487-6669.
The date of this Additional Statement is July 1, 1996.
<PAGE> 26
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information and History 3
Investment of Assets 3
Investment Restrictions 9
Trustees and Officers 11
Control Persons 12
Investment Management and Other Services 12
Determination of Net Asset Value 16
Dividends, Distribution and Taxes 16
Portfolio Yield and Total Return Information 17
Additional Information 18
Financial Statements A-1
</TABLE>
<PAGE> 27
GENERAL INFORMATION AND HISTORY
The Fund was organized as a Massachusetts business trust under the name Quest
for Value Accumulation Trust on March 2, 1988. On September 16, 1994, it
changed its name to The Enterprise Accumulation Trust. In addition, the Fund's
Bond and Money Market Portfolios were reorganized, and all of their respective
assets were transferred to another registered investment company. The Fund
commenced offering the International Growth and High-Yield Bond Portfolios on
November 18, 1994.
INVESTMENT OF ASSETS
The investment objective and policies of each Portfolio of the Fund are
described in the Prospectus. A further description of the investments and
investment methods applicable to certain Portfolios appears below.
OBLIGATIONS ISSUED OR GUARANTEED BY U.S. GOVERNMENT AGENCIES OR
INSTRUMENTALITIES. Some obligations issued or guaranteed by U.S. government
agencies or instrumentalities, such as securities issued by the Federal Home
Loan Bank, are backed by the right of the agency or instrumentality to borrow
from the Treasury. Others, such as securities issued by the Federal National
Mortgage Association ("Fannie Mae"), are supported only by the credit of the
instrumentality and not by the Treasury. If the securities are not backed by
the full faith and credit of the United States, the owner of the securities
must look principally to the agency issuing the obligation for repayment and
may not be able to assert a claim against the United States in the event that
the agency or instrumentality does not meet its commitment.
INFORMATION ON TIME DEPOSITS AND VARIABLE RATE NOTES. The Portfolios may
invest in fixed time deposits, whether or not subject to withdrawal penalties;
however, investment in such deposits which are subject to withdrawal penalties,
other than overnight deposits, are subject to the 10% limit on illiquid
investments set forth in the Prospectus.
The commercial paper obligations which the Portfolios may buy are unsecured and
may include variable rate notes. The nature and terms of a variable rate note
(i.e., a "Master Note") permit a Portfolio to invest fluctuating amounts at
varying rates of interest pursuant to a direct arrangement between a Portfolio
as lender and the issuer as borrower. It permits daily changes in the amounts
borrowed. The Portfolio has the right at any time to increase, up to the full
amount stated in the note agreement, or to decrease the amount outstanding
under the note. The issuer may prepay at any time and without penalty any part
of or the full amount of the note. The note may or may not be backed by one or
more bank letters of credit. Because these notes are direct lending
arrangements between the Portfolio and the issuer, it is not generally
contemplated that they will be traded; moreover, there is currently no
secondary market for them. The Portfolios have no limitations on the type of
issuer from whom these notes will be purchased; however, in connection with
such purchase and on an ongoing basis, the Portfolio Managers will consider the
earning power, cash flow and other liquidity ratios of the issuer, and its
ability to pay principal and interest on demand, including a situation in which
all holders of such notes made demand simultaneously. The Portfolios will not
invest more than 5% of their total assets in variable rate notes.
INSURED BANK OBLIGATIONS. The Federal Deposit Insurance Corporation ("FDIC")
insures the deposits of federally insured banks and savings and loan
associations (collectively referred to as "banks") up to $100,000. The
Portfolios may, within the limits set forth in the Prospectus, purchase bank
obligations which are fully insured as to principal by the FDIC. Currently, to
remain fully insured as to principal, these investments must be limited to
$100,000 per bank; if the principal amount and accrued interest together exceed
$100,000, the excess accrued interest will not be insured. Insured bank
obligations may have limited marketability. Unless the Board of Trustees
determines that a readily available market exists for such obligations, a
Portfolio will treat such obligations as subject to the 10% limit for illiquid
investments set forth in the Prospectus for each Portfolio unless such
obligations are payable at principal amount plus accrued interest on demand or
within seven days after demand.
LOWER RATED BONDS. Each Portfolio, other than the High-Yield Bond Portfolio,
may invest up to 5%, and the High-Yield Bond Portfolio may invest up to 100%,
of its assets in bonds rated below Baa3 by Moody's Investors Service, Inc.
("Moody's") or BBB by Standard & Poor's Corporation ("S&P"). Securities rated
less than "Baa" by Moody's or "BBB" by S&P are classified as non-investment
grade securities and are considered speculative by those rating agencies. It
is the Fund's policy not to rely exclusively on ratings issued by credit rating
agencies but
<PAGE> 28
to supplement such ratings with the respective Portfolio Manager's own
independent and ongoing review of credit quality. Junk bonds may be issued as
a consequence of corporate restructuring, such as leveraged buyouts, mergers,
acquisitions, debt recapitalizations, or similar events or by smaller or highly
leveraged companies. Although the growth of the high yield securities market
in the 1980s had paralleled a long economic expansion, recently many issuers
have been affected by adverse economic and market conditions. It should be
recognized that an economic downturn or increase in interest rates is likely to
have a negative effect on (i) the high yield bond market, (ii) the value of
high yield securities and (iii) the ability of the securities' issuers to
service their principal and interest payment obligations, to meet their
projected business goals or to obtain additional financing. The market for
junk bonds may be less liquid than the market for investment grade bonds. In
periods of reduced market liquidity, junk bond prices may become more volatile
and may experience sudden and substantial price declines. Also, there may be
significant disparities in the prices quoted for junk bonds by various dealers.
Under such conditions, a Portfolio may find it difficult to value its junk
bonds accurately. Under such conditions, a Portfolio may have to use subjective
rather than objective criteria to value its junk bond investments accurately
and rely more heavily on the judgment of the Fund's Board of Trustees. Prices
for junk bonds also may be affected by legislative and regulatory developments.
For example, recent federal rules require that savings and loans gradually
reduce their holdings of high-yield securities. Also, from time to time,
Congress has considered legislation to restrict or eliminate the corporate tax
deduction for interest payments or to regulate corporate restructuring such as
takeovers, mergers or leveraged buyouts. Such legislation, if enacted, may
depress the prices of outstanding junk bonds.
STOCK INDEX FUTURES AND RELATED OPTIONS. Unlike when a Portfolio purchases or
sells a security, no price is paid or received by the Portfolio upon the
purchase or sale of a futures contract. Instead, the Portfolio will be
required to deposit with its broker an amount of cash or U.S. Treasury bills
equal to approximately 5% of the contract amount. This is known as initial
margin. Such initial margin is in the nature of a performance bond or good
faith deposit on the contract which is returned to the Portfolio upon
termination of the futures contract assuming all contractual obligations have
been satisfied. In addition, because under current futures industry practice
daily variations in gains and losses on open contracts are required to be
reflected in cash in the form of variation margin payments, the Portfolio may
be required to make additional payments during the term of the contract to its
broker. Such payments would be required where during the term of a stock index
futures contract purchased by the Portfolio, the price of the underlying stock
index declined, thereby making the Portfolio's position less valuable. In all
instances involving the purchase of stock index futures contracts by the
Portfolio resulting in a net long position, an amount of cash and cash
equivalents equal to the market value of the futures contracts will be
deposited in a segregated account with the Fund's custodian to collateralize
the position and thereby insure that the use of such futures is unleveraged.
At any time prior to the expiration of the futures contract, the Portfolio may
elect to close the position by taking an opposite position which will operate
to terminate the Portfolio's position in the futures contract.
There are several risks in connection with the use of stock index futures in
the Portfolios as a hedging device. One risk arises because of the imperfect
correlation between the price of the stock index future and the price of the
securities which are the subject of the hedge. This risk of imperfect
correlation increases as the composition of the Portfolio diverges from the
securities included in the applicable stock index. The price of the stock
index future may move more than or less than the price of the securities being
hedged. If the price of the stock index future moves less than the price of
the securities which are the subject of the hedge, the hedge will not be fully
effective, but, if the price of the securities being hedged has moved in an
unfavorable direction, the Portfolios would be in a better position than if it
had not hedged at all. If the price of the securities being hedged has moved
in a favorable direction this advantage will be partially offset by the stock
index future. If the price of the stock index futures moves more than the
price of the stock the Portfolio will experience a loss or a gain on the future
which will not be completely offset by movement in the price of the securities
which are the subject of the hedge. To compensate for the imperfect
correlation of movements in the price of securities being hedged and movements
in the price of the stock index futures, the Portfolio may buy or sell stock
index futures in a greater dollar amount than the dollar amount of the
securities being hedged if the historical volatility of the prices of such
securities has been greater than the historical volatility of the index.
Conversely, the Portfolio may buy or sell fewer stock index futures contracts
if the historical volatility of the price of the securities being hedged is
less than the historical volatility of the stock index. It is possible that
where the Portfolio has sold futures to hedge against a decline in the market,
the market may advance and the Portfolio may decline. If this occurred, the
Portfolio would lose money on the futures and also experience a decline in the
value of its securities. While this should occur, if at all, for a very brief
period
<PAGE> 29
or to a very small degree, the Portfolio Manager believes that over time
the value of a diversified portfolio will tend to move in the same direction as
the market indices upon which the futures are based. It is also possible that
if the Portfolio has hedged against the possibility of a decline in the market
adversely affecting stocks it held and stock prices increase instead, the
Portfolio will lose part or all of the benefit of the increased value of its
stock which it had hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Portfolio has insufficient
cash, it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. The Portfolio may also have
to sell securities at a time when it may be disadvantageous to do so.
Where futures are purchased to hedge against a possible increase in the price
of stocks before the Portfolio is able to invest its cash (or cash equivalents)
in stock (or options) in an orderly fashion, it is possible the market may
decline instead. If the Portfolio then concluded to not invest in stock or
options at the time because of concern as to possible further market decline or
for other reasons, the Portfolio will realize a loss on the futures contract
that is not offset by a reduction in the price of securities purchased.
In addition to the possibility that there may be an imperfect correlation or no
correlation at all between movements in the stock index future and the portion
of the portfolio being hedged, the price of stock index futures may not
correlate perfectly with movements in the stock index due to certain market
distortions. All participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the index and
futures markets. Moreover, the deposit requirements in the futures market are
less onerous than margin requirements in the securities market and may
therefore cause increased participation by speculators in the market. Such
increased participation may also cause temporary price distortions. Due to the
possibility of price distortion in the futures market and because of the
imperfect correlation between movements in the stock index and movements in the
price of stock index futures, the value of stock index futures contracts as a
hedging device may be reduced.
Currently, stock index futures contracts can be purchased or sold with respect
to several different stock indices, each based on a different measure of market
performance. Positions in stock index futures may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.
Although the Portfolios intend to purchase or sell futures only on exchanges or
boards of trade where there appears to be an active secondary market, as with
stock options, there is no assurance that a liquid secondary market or an
exchange or board of trade will exist for any particular contract or at any
particular time. In such event it may not be possible to close a futures
position and in the event of adverse price movements, the Portfolio would
continue to be required to make daily cash payments of variation margin.
However, in the event futures contracts have been used to hedge portfolio
securities, such securities will not be sold until the futures contract can be
terminated. In such circumstances, an increase in the price of the securities,
if any, may partially or completely offset losses on the futures contract.
However, as described above, there is no guarantee that the price of securities
will, in fact, correlate with the price movements in the futures contract and
thus provide an offset to losses on a futures contract.
In addition, if the Portfolio has insufficient cash it may at times have to
sell securities to meet variation margin requirements. Such sales may have to
be effected at a time when it is disadvantageous to do so.
FINANCIAL FUTURES. No price is paid or received upon the purchase of a
financial future. Upon entering into a futures transaction, a Portfolio will be
required to deposit an initial margin payment equal to a specified percentage
of the contract value. Initial margin payments will be deposited with the
Fund's custodian bank in an account registered in the futures commission
merchant's name; however the futures commission merchant can gain access to
that account only under specified conditions. As the future is marked to
market to reflect changes in its market value, subsequent payments, called
variation margin, will be made to or from the futures commission merchant on a
daily basis. Prior to expiration of the future, if the Portfolio elects to
close out its position by taking an opposite position, a final determination of
variation margin is made, additional cash is required to be paid by or released
to the Portfolio, and any loss or gain is realized for tax purposes. Although
financial futures by their terms call for the actual delivery or acquisition of
the specified debt security, in most cases the obligation is fulfilled by
closing out the position. All futures transactions are effected through a
clearing house associated with the exchange on which the contracts are traded.
At present, no Portfolio intends to enter into financial futures and options on
such
<PAGE> 30
futures if after any such purchase, the sum of initial margin deposits on
futures and premiums paid on futures options would exceed 5% of a Fund's total
assets. This limitation is not a fundamental policy.
WRITING CALLS. When any of the Equity, Small Cap or International Growth
Portfolio writes a call, it receives a premium and agrees to sell the callable
securities to a purchaser of a corresponding call during the call period
(usually not more than 9 months) at a fixed exercise price (which may differ
from the market price of the underlying securities) regardless of market price
changes during the call period. If the call is exercised, the Portfolio
forgoes any possible profit from an increase in market price over the exercise
price. A Portfolio may, in the case of listed options, purchase calls in
"closing purchase transactions" to terminate a call obligation. A profit or
loss will be realized, depending upon whether the net of the amount of option
transaction costs and the premium received on the call written is more or less
than the price of the call subsequently purchased. A profit may be realized if
the call lapses unexercised, because the Portfolio retains the underlying
security and the premium received. Sixty percent of any such profits are
considered long-term gains and forty percent are considered short-term gains
for tax purposes. If, due to a lack of a market, a Portfolio could not effect
a closing purchase transaction, it would have to hold the callable securities
until the call lapsed or was exercised. The Fund's Custodian, or a securities
depository acting for the Custodian, will act as the Fund's escrow agent,
through the facilities of the Options Clearing Corporation ("OCC") in
connection with listed calls, as to the securities on which the Portfolio has
written calls, or as to other acceptable escrow securities, so that no margin
will be required for such transactions. OCC will release the securities on the
expiration of the calls or upon the Portfolio's entering into a closing
purchase transaction.
An option position may be closed out only on a market which provides secondary
trading for options of the same series, and there is no assurance that a liquid
secondary market will exist for any particular option. A Portfolio's option
activities may affect its turnover rate and brokerage commissions. The exercise
of calls written by a Portfolio may cause the Portfolio to sell securities to
cover the call, thus increasing its turnover rate in a manner beyond the
Portfolio's control.
CALL OPTIONS. The Portfolios may write (sell) call options that are listed on
national securities exchanges or are available in the over-the-counter market
through primary broker-dealers. Call options are short-term contracts with a
duration of nine months or less. Such Portfolios of the Fund may only write
call options which are "covered," meaning that the Portfolio either owns the
underlying security or has an absolute and immediate right to acquire that
security, without additional cash consideration, upon conversion or exchange of
other securities currently held in the Portfolio. In addition, no Portfolio
will, prior to the expiration of a call option, permit the call to become
uncovered. If a Portfolio writes a call option, the purchaser of the option
has the right to buy (and the Portfolio has the option to sell) the underlying
security against payment of the exercise price throughout the term of the
option. The Portfolio's obligation to deliver the underlying security against
payment of the exercise price would terminate either upon expiration of the
option or earlier if the Portfolio were to effect a "closing purchase
transaction" through the purchase of an equivalent option on an exchange. The
Portfolio would not be able to effect a closing purchase transaction after it
had received notice of exercise. The International Growth Portfolio may
purchase and write covered call options on foreign and U.S. securities and
indices and enter into related closing transactions.
Generally, such a Portfolio intends to write listed covered calls when it
anticipates that the rate of return from doing so is attractive, taking into
consideration the premium income to be received, the risks of a decline in
securities prices during the term of the option, the probability that closing
purchase transactions will be available if a sale of the securities is desired
prior to the exercise, or expiration of the options, and the cost of entering
into such transactions. A principal reason for writing calls on a securities
portfolio is to attempt to realize, through the receipt of premium income, a
greater return than would be earned on the securities alone. A covered call
writer such as a Portfolio, which owns the underlying security has, in return
for the premium, given the opportunity for profit from a price increase in the
underlying security above the exercise price, but it has retained the risk of
loss should the price of the security decline.
The writing of covered call options involves certain risks. A principal risk
arises because exchange and over-the-counter markets for options are a
relatively new and untested concept, it is impossible to predict the amount of
trading interest which may exist in such options, and there can be no assurance
that viable exchange and over-the-counter markets will develop or continue.
The Portfolios will write covered call options only if there appears to be
<PAGE> 31
a liquid secondary market for such options. If, however, an option is written
and a liquid secondary market does not exist, it may be impossible to effect a
closing purchase transaction in the option. In that event, the Portfolio may
not be able to sell the underlying security until the option expires or the
option is exercised, even though it may be advantageous to sell the underlying
security before that time.
FOREIGN CURRENCY VALUES AND TRANSACTIONS
Investments in foreign securities will usually involve currencies of foreign
countries, and the value of the assets of the International Growth Portfolio
(and of the other Portfolios that may invest in foreign securities to a much
lesser extent) as measured in United States dollars may be affected favorably
or unfavorably by changes in foreign currency exchange rates and exchange
control regulations, and the International Growth Portfolio may incur costs in
connection with conversions between various currencies.
The normal currency allocation of the International Growth Portfolio is
identical to the currency mix of the Benchmark. The Portfolio expects to
maintain this normal currency exposure when global currency markets are fairly
priced relative to each other and relative to associated risks. The Portfolio
may actively deviate from such normal currency allocations to take advantage of
or to protect the Portfolio from risk and return characteristics of the
currencies and short-term interest rates when those prices deviate
significantly from fundamental value. Deviations from the Benchmark are
determined by the Portfolio Manager based upon its research.
To manage exposure to currency fluctuations, the Portfolio may alter equity or
money market exposures (in its normal asset allocation mix as previously
identified), enter into forward currency exchange contracts, buy or sell
options, futures or options on futures relating to foreign currencies and may
purchase securities indexed to currency baskets. The Portfolio will also use
these currency exchange techniques in the normal course of business to hedge
against adverse changes in exchange rates in connection with purchases and
sales of securities. Some of these strategies may require the Portfolio to set
aside liquid assets in a segregated custodial account to cover its obligations.
These techniques are further described below.
The Portfolio may conduct its foreign currency exchange transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market or through entering into contracts to purchase or sell foreign
currencies at a future date (i.e., "forward foreign currency" contract or
"forward" contract). A forward contract involves an obligation to purchase or
sell a specific currency amount at a future date, which may be any fixed number
of days from the date of the contract, agreed upon by the parties, at a price
set at the time of the contract. The Portfolio will convert currency on a spot
basis from time to time and investors should be aware of the potential costs of
currency conversion.
When the Portfolio Manager believes that the currency of a particular country
may suffer a significant decline against the U.S. dollar or against another
currency, the Portfolio may enter into a currency contract to sell, for a fixed
amount of U.S. dollars or other appropriate currency, the amount of foreign
currency approximating the value of some or all of the Portfolio's securities
denominated in such foreign currency.
At the maturity of a forward contract, the Portfolio may either sell a
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by repurchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Portfolio may realize a gain or loss from currency
transactions.
The Portfolio also may purchase and write put and call options on foreign
currencies (traded on U.S. and foreign exchanges or over-the-counter markets)
to manage the Portfolio's exposure to changes in currency exchange rates. Call
options on foreign currency written by the Portfolio will be "covered", which
means that the Fund will own an equal amount of the underlying foreign
currency. With respect to put options on foreign currency written by the
Portfolio, the Portfolio will establish a segregated account with its custodian
bank consisting of cash, U.S. government securities or other high grade liquid
debt securities in amount equal to the amount the Portfolio would be required
to pay upon exercise of the put.
<PAGE> 32
Foreign Securities
As noted above, under normal circumstances the International Growth Portfolio
will invest primarily in foreign securities. All other Portfolios, except the
Government Securities Portfolio, may, subject to the 10% limitation, invest in
foreign securities as well as both sponsored and unsponsored American
Depository Receipts ("ADRs"), and European Depository Receipts ("EDRs") which
are securities of U.S. issuers backed by securities of foreign issuers. There
may be less information available about unsponsored ADRs and EDRs, and
therefore, they may carry higher credit risks. The Portfolios may also invest
in securities of foreign branches of domestic banks and domestic branches of
foreign banks.
Investments in foreign equity and debt securities involve risks different from
those encountered when investing in securities of domestic issuers. The
appropriate Portfolio Managers and Enterprise Capital, subject to the overall
review of the Fund's Trustees, evaluate the risks and opportunities when
investing in foreign securities. Such risks include trade balances and
imbalances and related economic policies; currency exchange rate fluctuations;
foreign exchange control policies; expropriation or confiscatory taxation;
limitations on the removal of funds or other assets; political or social
instability; the diverse structure and liquidity of securities markets in
various countries and regions; policies of governments with respect to possible
nationalization of their own industries; and other specific local, political
and economic considerations.
INVESTMENT RESTRICTIONS
The Fund's significant investment restrictions applicable to the Portfolios are
described in the Prospectus. The following are also fundamental policies and,
together with the restrictions and other fundamental policies described in the
Prospectus, cannot be changed without the vote of a majority of the outstanding
voting securities of that Portfolio. Such a majority is defined as the lesser
of (a) 67% or more of the shares of the Portfolio present at the meeting of
shareholders of the Fund, if the holders of more than 50% of the outstanding
shares of the Portfolio are present or represented by proxy or (b) more than
50% of the outstanding shares of the Portfolio. For the purposes of the
following restrictions and those contained in the Prospectus: (i) all
percentage limitations apply immediately after a purchase or initial
investment; and (ii) any subsequent change in any applicable percentage
resulting from market fluctuations or other changes in the amount of total
assets does not require elimination of any security from the Portfolio.
Each Portfolio of the Fund may not:
1. Make loans of money or securities, except (a) by the purchase of debt
obligations in which the Portfolio may invest consistent with its
investment objectives and policies; (b) by investing in repurchase
agreements; or (c) by lending its portfolio securities, not in excess of
10% of the value of a Portfolio's total assets, made in accordance with
guidelines adopted by the Fund's Board of Trustees, including maintaining
collateral from the borrower equal at all times to the current market
value of the securities loaned.
2. Invest in securities of any issuer if, to the knowledge of the Fund, any
officer or trustee of the Fund or any officer or director of the
Investment Adviser or the Portfolio Manager owns more than 1/2 of 1% of
the outstanding securities of such issuer, and such officers, trustees and
directors who own more than 1/2 of 1% own in the aggregate more than 5% of
the outstanding voting securities of such issuer.
3. Pledge its assets or assign or otherwise encumber them in excess of 10%
of its net assets (taken at market value at the time of pledging) and then
only to secure borrowings effected within the limitations set forth in the
Prospectus.
4. Purchase or sell real estate; however, the Portfolios may purchase
marketable securities of issuers which engage in real estate operations or
which invest in real estate or interests therein, and securities which are
secured by real estate or interests therein.
<PAGE> 33
5. Purchase securities on margin (except for such short-term loans as are
necessary for the clearance of purchases of portfolio securities) or sell
securities short except "against the box." (Collateral arrangements in
connection with transactions in options and futures are not deemed to be
margin transactions.)
6. Purchase or sell physical commodities or physical commodity futures
contracts, or oil, gas or mineral exploration or developmental programs,
except that a Portfolio may invest in the securities of companies which
operate, invest in, or sponsor such programs.
7. Engage in the underwriting of securities except insofar as the Fund may
be deemed an underwriter under the Securities Act of 1933 in disposing of
a portfolio security.
8. Invest for the purposes of exercising control or management of another
company.
9. Issue senior securities as defined in the Act except insofar as the Fund
may be deemed to have issued a senior security by reason of: (a) entering
into any repurchase agreement; (b) borrowing money in accordance with
restrictions described above; or (c) lending portfolio securities.
10. Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.
11. Invest more than 5% of the value of its total assets in warrants not
listed on either the New York or American Stock Exchange. However, the
acquisition of warrants attached to other securities is not subject to
this restriction.
12. Invest more than 10% of its total assets in securities which are
restricted as to disposition under the federal securities laws or
otherwise. This restriction shall not apply to securities received as a
result of a corporate reorganization or similar transaction affecting
readily marketable securities already held by the respective Portfolios;
however, each Portfolio will attempt to dispose in an orderly fashion of
any securities received under these circumstances to the extent that such
securities, together with other unmarketable securities, exceed 10% of
that Portfolio's total assets.
<PAGE> 34
TRUSTEES AND OFFICERS
The trustees and officers of the Fund, and their principal occupations during
the past five years, are set forth below. Trustees who are "interested
persons", as defined in the 1940 Act, are denoted by an asterisk. As to their
duties relative to the Fund, the address of each is Atlanta Financial Center,
3343 Peachtree Road, N.E., Ste. 450, Atlanta, GA 30326-1022. As of March 1,
1996, the trustees and officers of the Fund as a group owned none of its
outstanding shares.
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION PAST FIVE YEARS
- - ------------ ------------------------------------
<S> <C>
Arthur T. Dietz (72) President, ATD Advisory Corp., 1996 to present; President
Trustee and Chief Executive
*Samuel J. Foti (44) President and Chief Operating Officer, MONY since 1994; Executive Vice
Trustee President, MONY (1991-1994); Trustee, MONY since 1993; Senior Vice President and Chief Marketing
Officer, MONY (1989-1991).
Arthur Howell (77) Of Counsel, law firm of Alston & Bird, Atlanta, Georgia; President and
Trustee Chairman of the Board, Summit Industries, Inc.; Secretary of the Executive Committee, Crescent
Banking Co., Inc.; Director, The Enterprise Group of Funds, Inc.
William A. Mitchell, Jr. (58) President, Carter & Associates (real estate development), Atlanta, Georgia;
Trustee Director, The Enterprise Group of Funds, Inc.
Lonnie H. Pope (62) President and Chief Executive Officer of AFF, Inc. (creator and manufacturer
Trustee of aromatics, flavors and fragrances), Marietta, Georgia; Director, The Enterprise Group of Funds,
Inc.
*Michael I. Roth (50) Chairman and Chief Executive Officer, MONY since 1993; President and Chief
Trustee Executive Officer, MONY (1991-1993); Executive Vice President and Chief Financial Officer, Primerica
Corporation (1987); Executive Vice President, Primerica Corporation (1982-1987); Director,
The Enterprise Group of Funds, Inc.; Director, American Council of Life Insurance (ACLI).
*Victor Ugolyn (48) Chairman, President and Chief Executive Officer, The Enterprise Group of Funds, Inc. since
Trustee 1991; Chairman, President and Chief Executive Officer, Chairman, President and Enterprise Capital
and Enterprise Fund Distributors, Inc. since 1991; Vice Chief Executive Officer Chairman and Chief
Marketing Officer, Value Line Securities, Inc. (1986-1991).
Catherine R. McClellan (40) Secretary, The Enterprise Group of Funds, Inc.; Senior Vice President, Secretary
Secretary and Chief Counsel, Enterprise Capital Management, Inc.; Secretary and Chief Counsel, Enterprise Fund
Distributors, Inc.
Herbert M. Williamson (44) Assistant Secretary and Treasurer, The Enterprise Group of Funds, Inc.; Vice
Asst. Secretary, Treasurer President, Assistant Secretary and Treasurer, Enterprise Capital Management, Inc.; and Assistant
Secretary and Treasurer, Enterprise Fund Distributors, Inc.
Phillip G. Goff (32) Vice President and Chief Financial Officer, The Enterprise Group of Funds, Enterprise Capital
Vice President Management, Inc. and Enterprise Fund Distributors, Inc., 1995 to present; Audit Manager,
Coopers & Lybrand, L.L.P. 1986-1995.
</TABLE>
<PAGE> 35
REMUNERATION OF OFFICERS AND TRUSTEES. All officers of the Fund are officers
of Enterprise Capital and receive no salary or fee from the Fund. The
Trustees, other than Messrs. Foti, Roth and Ugolyn will be paid an annual fee
of $3,500 plus $500 for each trustees' meeting attended and $100 for each
committee meeting attended.
The following sets forth compensation paid to each of the Trustees during 1995:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Pension or Estimated
Aggregate Retirement Annual Total
Compensation Benefits Benefits Compensation
From Accrued As Upon From Registrant
Name Registrant Part of Retirement Paid to Directors
<S> <C> <C> <C> <C>
Arthur T. Dietz $5,700 None None $18,700
Arthur Howell $5,700 None None $18,700
William A. Mitchell, Jr. $5,500 None None $16,500
Lonnie H. Pope $5,700 None None $18,700
</TABLE>
* Each Director received fees for services as a Director of The Enterprise
Group of Funds, Inc.
CONTROL PERSONS
As of the date of this Additional Statement MONY and MONY Life Insurance
Company of America ("MONY America"), its wholly-owned subsidiary, through their
respective Variable Accounts, own all of the Fund's outstanding shares. The
shares held by the Variable Accounts generally will be voted in accordance with
instructions of Contractholders. Under certain circumstances, however, MONY
and MONY America may disregard voting instructions received from
Contractholders. The Fund might nonetheless be deemed to be controlled by MONY
and MONY America by virtue of the definitions contained in the 1940 Act
although the Fund disclaims such control.
INVESTMENT MANAGEMENT AND OTHER SERVICES
The Investment Adviser provides oversight and management services to the Fund
which include, but are not limited to, (1) supervising the sub-adviser's
compliance with federal and state regulations, including the Investment Company
Act of 1940, (2) evaluating the portfolio managers' performance, (3) analyzing
the composition of the investment portfolios of each Portfolio of the Fund and
preparing reports thereon for the Board or any committee of the Board, (4)
evaluating each Portfolio's performance in comparison to similar mutual funds
and other market information, (5) conducting searches, upon request of the
Board, for a replacement for any portfolio manager then serving the Fund, and
(6) preparing presentations to shareholders which analyze the Fund's overall
investment program and performance.
THE PORTFOLIO MANAGER AGREEMENTS. Under the Portfolio Manager Agreements, the
Portfolio Managers, subject to the oversight of Enterprise Capital, are
required to: (i) regularly provide investment advice and recommendations to the
respective Portfolios of the Fund with respect to their investments, investment
policies and the purchase and sale of securities; (ii) supervise continuously
and determine the securities to be purchased or sold by the respective
Portfolios of the Fund and the portion, if any, of the assets of these
Portfolios of the Fund to be held uninvested; and (iii) arrange for the
purchase of securities and other investments by the respective Portfolios of
the Fund and the sale of securities and other investments held by each of these
Portfolios of the Fund.
Expenses not expressly assumed by the Investment Adviser under the Advisory
Agreement or by Enterprise Fund Distributors, Inc. (the "Distributor") are paid
by the Fund. The Advisory Agreement lists examples of expenses paid by the
Fund, of which the major categories relate to interest, taxes, fees to
non-interested trustees, legal and audit expenses, custodian and transfer agent
expenses, stock issuance costs, certain printing and registration costs, and
non-recurring expenses, including litigation. Under the Advisory Agreement,
the Investment Adviser guarantees that the total expenses of the Fund in any
fiscal year, exclusive of taxes, interest, brokerage fees and distribution
expense reimbursements shall not exceed, and the Investment Adviser undertakes
to pay or refund to
<PAGE> 36
the Fund any amount by which such expenses do exceed, the most restrictive state
law provisions in effect in states where shares of a Portfolio of the Fund are
qualified to be sold. The payment of the management fee at the end of any month
will be reduced or postponed so that at no time will there be any accrued but
unpaid liability for the payment of the management fee under this expense
limitation.
Advisory Fees Paid
<TABLE>
1993 1994 1995*
--------- --------- ---------
<S> <C> <C> <C>
Equity $293,291 $274,412 $752,635
Small Cap 370,368 447,052 907,835
Managed 2,260,164 2,148,748 5,852,687
High-Yield Bond N/A 853 49,627
International Growth N/A 1,850 94,931
</TABLE>
* The Adviser has reallowed the following amounts of its advisory fees to the
Portfolio Managers during 1995: Equity - $35,480, Small Cap - $41,237;
Managed - $57,047; High-Yield Bond - $61,596; and International Growth
-$74,222.
The Advisory Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard for its obligations thereunder,
Enterprise Capital or the Portfolio Manager, as the case may be, is not liable
for any act or omission in the course of, or in connection with, the rendition
of services thereunder. The Agreement permits the Investment Adviser to act as
investment adviser for any other person or firm.
The Advisory Agreement and Portfolio Manager Agreements were approved by the
Fund's Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Fund (as defined in the Act) and who have no direct
or indirect financial interest in such Agreements on October 25, 1994, and by
the shareholders of the Equity, Small Cap and Managed Portfolios on May 18,
1989 and the International Growth and High-Yield Bond Portfolios on November
18, 1994.
PORTFOLIO TRANSACTIONS. Portfolio decisions are based upon recommendations and
the judgment of the Portfolio Managers. Prices of portfolio securities
purchased from underwriters of new issues include a commission or concession
paid by the issuer to the underwriter, and prices of securities purchased from
dealers include a spread between the bid and asked prices. The Fund seeks to
obtain prompt execution of orders at the most favorable net price.
Transactions may be directed to dealers during the course of an underwriting
in return for their brokerage and research services, which are intangible and
on which no dollar value can be placed. There is no formula for such
allocation. The research information may or may not be useful to the Fund
and/or other accounts of the Portfolio Managers; information received in
connection with directed orders of other accounts managed by the Portfolio
Managers or its affiliates may or may not be useful to the Fund. Such
information may be in written or oral form and includes information on
particular companies and industries as well as market, economic or
institutional activity areas. It serves to broaden the scope and supplement
the research activities of the Portfolio Managers, to make available additional
views for consideration and comparison, and to enable the Portfolio Managers to
obtain market information for the valuation of securities held by the Fund.
Sales of shares of the Fund, subject to applicable rules covering the
Distributor's activities in this area, will also be considered as a factor in
the direction of portfolio transactions to brokers and dealers, but only in
conformity with the price, execution and other considerations and practices
discussed above. The Fund may execute brokerage transactions through
Oppenheimer & Co., Inc. ("Opco"), an affiliated broker-dealer of a Portfolio
Manager, acting as agent in accordance with procedures established by the Board
of Trustees but will not purchase any securities from or sell any securities to
Opco acting as principal for its own account.
<PAGE> 37
The following table presents information as to the allocation of brokerage
commissions paid to Opco by the Equity, Managed and Small Cap Portfolios for
the fiscal years ended December 31, 1993, 1994 and 1995:
<TABLE>
<CAPTION>
Total Brokerage Commissions Paid
Portfolio 1993 1994 1995
- - --------- ------- ------- -------
<S> <C> <C> <C>
Equity $41,376 $115,459 $110,759
Small Cap $259,355 $772,820 $376,456
Managed $437,190 $321,308 $937,342
</TABLE>
<TABLE>
<CAPTION>
Brokerage Commissions Paid to Opco
$ Amounts %
-------- ----
Portfolio 1993 1994 1995 1993 1994 1995
- - --------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Equity $ 28,926 $ 57,392 $ 56,180 70% 50% 51%
Small Cap $183,570 $374,198 $158,257 71% 48% 36%
Managed $284,786 $124,809 $340,835 65% 39% 42%
</TABLE>
It is the practice of the Portfolio Managers to cause purchase or sale
transactions to be allocated among the Fund and others whose assets it manages
in such manner as it deems equitable. In making such allocations among the
Fund and other client accounts, the main factors considered are the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held, and the opinions of the persons
responsible for managing the portfolios of each Fund and other client accounts.
When possible, concurrent orders to purchase or sell the same security by more
than one of the accounts managed by the Portfolio Managers or an affiliate are
combined, which in some cases could have a detrimental effect on the price or
volume of the security in a particular transaction as far as a Fund is
concerned. Transactions effected pursuant to such combined orders are averaged
as to price and allocated in accordance with the purchase or sale orders
actually placed for such account.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each of the Portfolios of the Fund is
determined each day the New York Stock Exchange (the "NYSE") is open, at the
close of the regular trading session of the NYSE that day, by dividing the
value of the Portfolio's net assets by the number of shares outstanding.
Investment securities (other than debt securities) listed on a national
securities exchange or designated as national market system securities are
valued each business day at the last reported sale price; if there are no such
reported sales, the securities are valued at their last quoted bid price. Other
securities traded in the over-the-counter market but not designated as national
market system securities are valued at the last quoted bid price. Investment
debt securities (other than short-term obligations) are valued each business day
by an independent pricing service approved by the Board of Trustees.
Investments are valued by the pricing service using methods which include
current market quotations from a major market maker in the securities and
trader-reviewed "matrix" prices. Short-term debt securities having a remaining
maturity of more than sixty days are valued on a "marked-to-market" basis, that
is, at prices based upon market quotations for securities of similar type,
yield, quality and maturity. Short-term debt securities having a remaining
maturity of sixty days or less are valued at amortized cost, which approximates
market value. Any securities or other assets for which market quotations are
not readily available are valued at their fair value as determined in good faith
by the Board of Trustees.
<PAGE> 38
DIVIDENDS, DISTRIBUTIONS AND TAXES
The dividend policies of the Portfolios are discussed in the Prospectus. In
computing interest income, the Portfolios will amortize any discount or premium
resulting from the purchase of debt securities except for mortgage- or other
receivables-backed obligations subject to monthly payment of principal and
interest. Gains or losses resulting from unamortized discount or premium on
securities issued prior to July 19, 1984 will be treated as capital gains or
losses when realized. With respect to market discount on bonds issued after
July 18, 1984, a portion of any capital gain realized upon disposition may be
recharacterized as taxable ordinary income in accordance with the 1984 Tax
Reform Act.
CAPITAL GAINS AND LOSSES. Gains or losses on the sales of securities by the
Fund will be long-term capital gains or losses if the securities have been held
by the Fund for more than twelve months, regardless of how long you have held
your shares. Gains or losses on the sale of securities held for twelve months
or less will be short-term capital gains or losses. To the extent that net
capital losses are carried forward and are used to offset future capital gains,
it is probable that the gains so offset will not be distributed to
shareholders.
PORTFOLIO YIELD AND TOTAL RETURN INFORMATION
The average annual total return for the year ended March 31, 1996 and the
period from inception through March 31, 1996 is shown in the following table:
<TABLE>
<CAPTION>
Average Annual Total Return
---------------------------
For the Five Years
For the Year Ended Ended (1)For the Period
March 31, 1996 March 31, 1996 from Inception to
Portfolio (one year) (five year) March 31, 1996
- - --------- -------------------- -------------------- --------------------
<S> <C> <C> <C>
Equity 35.73% 17.99% 16.34%
Small Cap 21.14% 16.16% 14.07%
International Growth 21.40% N/A 12.07%
Managed 38.93% 20.76% 20.34%
High-Yield Bond 12.42% N/A 13.22%
======================================================================================
</TABLE>
(1) Reflects waiver of advisory fees and assumption of other expenses by the
Portfolio Manager in its previous role as Investment Advisor. Without
such waivers and assumptions, the average annual total return during the
period would have been lower.
The table above assumes that a $1,000 payment was made at the beginning of the
period shown, that no further payments were made, and that any distributions
from the assets of the Portfolio were reinvested. The table reflects the
historical rates of return, and deductions for all charges, expenses and fees
of the Fund.
For the Equity, Small Cap and International Growth Portfolios and for the
equity securities of the Managed Portfolio, net investment income is the net of
the dividends accrued (1/360 of the stated dividend rate multiplied by the
number of days the particular security is in the Portfolio) on all equity
securities during the 30-day period and expenses accrued for the period. It
does not reflect capital gains or losses. For the Portfolios, net investment
income is the net of interest earned on the obligation held by the Portfolio
and expenses accrued for the period. Interest earned on the obligation is
determined by (i) computing the yield to maturity based on the market value of
<PAGE> 39
each obligation held in the corresponding Portfolio and on the day before the
beginning of the period with respect to debt obligations held by the Equity,
Managed, International Growth and Small Cap Portfolios (or as to obligations
purchased during that 30-day period, based on the purchase price plus accrued
interest); (ii) dividing the yield to maturity for each obligation by 360;
(iii) multiplying that quotient by the market value of each obligation
(including actual accrued interest) for each day of the subsequent 30-day month
that the obligation is in the Portfolio; and (iv) totaling the interest on each
obligation. Discount or premium amortization is recomputed at the beginning of
each 30-day period and with respect to discount and premium on mortgage- or
other receivables-backed obligations subject to monthly payment of principal
and interest; discount and premium is not amortized on the remaining security.
Gain or loss attributable to actual monthly paydowns is reflected as an
increase or decrease in interest income during that period.
The yield shown reflects deductions for all charges, expenses and fees of the
Fund. The table does not reflect charges and deductions which are, or may be,
imposed under the Contracts.
Net investment income of a Portfolio less all charges and expenses of the Fund
with respect to that Portfolio is divided by the product of the average daily
number of shares outstanding and the net asset value of one share on the last
day of the period. The sum of the quotient + 1 is raised to the 6th power. 1
is subtracted from this result and then multiplied by 2.
ADDITIONAL INFORMATION
DESCRIPTION OF THE FUND. It is not contemplated that regular annual meetings
of shareholders will be held. Shareholders have the right, upon the
declaration in writing or vote of a majority of the outstanding shares of the
Fund, to remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon written request of the record holders
(for at least six months) of 10% of its outstanding shares. In addition, 10
shareholders holding the lesser of $25,000 or 1% of the Fund's outstanding
shares may advise the Trustees in writing that they wish to communicate with
other shareholders for the purpose of requesting a meeting to remove a Trustee.
The Trustees will then either give the applicants access to the Fund's
shareholder list or mail the applicants' communication to all other
shareholders at the applicants' expense.
The Declaration of Trust contains an express disclaimer of shareholder
liability for the Fund's obligations, and provides that the Fund shall indemnify
any shareholder who is held personally liable for the obligations of the Fund.
It also provides that the Fund shall assume, upon request, the defense of any
claim made against any shareholder for any act or obligation of the Fund and
shall satisfy any judgment thereon. Thus, while Massachusetts law permits a
shareholder of a trust (such as the Fund) to be held personally liable as a
partner under certain circumstances, the risk of a shareholder incurring any
financial loss on account of shareholder liability is limited to the relatively
remote circumstance in which the Fund itself would be unable to meet the
obligations described above.
POSSIBLE ADDITIONAL PORTFOLIO SERIES. If additional Portfolios are created by
the Board of Trustees, shares of each such Portfolio will be entitled to vote
as a class only to the extent permitted by the Act (see below) or as permitted
by the Board of Trustees. Income and operating expenses would be allocated
fairly among two or more Portfolios by the Board of Trustees.
Under Rule 18f-2 under the Act, any matter required to be submitted to a vote
of shareholders of any investment company which has two or more series
outstanding is not deemed to have been effectively acted upon unless approved
by the holders of a "majority" (as defined in that Rule) of the voting
securities of each series affected by the matter. Such separate voting
requirements do not apply to the election of trustees or the ratification of
the selection of independent accountants. The Rule contains special provisions
for cases in which an advisory agreement is approved by one or more, but not
all, series. A change in investment policy may go into effect as to one or
more series whose holders so approve the change even though the required vote
is not obtained as to the holders of other affected series.
<PAGE> 40
DISTRIBUTION AGREEMENT. Under the Distribution Agreement between each
Portfolio and the Distributor, the Distributor acts as the Portfolio's agent in
the continuous public offering of its shares. Expenses normally attributed to
sales, including advertising and the cost of printing and mailing prospectuses
other than those furnished to existing shareholders, are borne by the
Distributor.
INDEPENDENT ACCOUNTANTS. Coopers & Lybrand L.L.P. serves as independent
accountants of the Fund; their services include auditing the annual financial
statements of each Portfolio as well as other related services. Coopers &
Lybrand L.L.P. also serves as independent accountants for the Investment
Adviser and its affiliates.
<PAGE> 41
Part C Other Information
Item 24. Financial Statements and Exhibits
Financial Statements:
Included in the Prospectus:
Financial Highlights
Included in Part B:
Schedule of Investments, Statement of Assets and
Liabilities, Statement of Operations, Statement of Changes
in Net Assets, Notes to Financial Statements, and Report of
Independent Accountants for the year ended December 31, 1995
for the Enterprise Accumulation Trust.
Included in Part C:
None
Exhibits:
(1) Declaration of Trust, as amended -- previously
filed with original Registration Statement on Form N-1A on
4/28/88.
(2) By-laws of Registrant.*
(3) Not Applicable.
(4) Not Applicable.
(5) Investment Advisory Agreement. Filed herewith.
(6) Distribution Agreement.*
(7) Not Applicable.
(8) Custody Agreement -- previously filed with
Post-Effective Amendment No. 2 on 5/1/90.
(9) Not Applicable.
(10) Opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will when
sold be legally issued, fully paid and non-assessable --
previously filed with Pre-Effective Amendment No. 2 on 7/22/88.
(11) Consent of Independent Accountants.
(12) Not Applicable.
(13) Agreement relating to initial capital.*
(14) Not Applicable.
<PAGE> 42
(15) Not Applicable.
(16) Performance Calculations -- previously filed with
Post-Effective Amendment No. 1 on 5/1/89.
* Previously filed with Pre-Effective Amendment No.
1 on 7/13/88.
Item 25. Persons Controlled by or Under Common Control with Registrant
As of the date of this Post-Effective Amendment variable accounts of
life insurance company affiliates of the Mutual Life Insurance
Company of New York ("MONY") owns all the outstanding shares of the
registrant as described in the Registrant's Statement of Additional
Information. Shares of the Registrant will be voted as directed by
persons having interests in the respective Variable Accounts.
Registrant might be deemed to be controlled by such insurance company
affiliates of MONY although Registrant declaims such control.
The Subsidiaries of MONY are as follows: Ares, Inc., Ares Holdings,
Inc., MONY Cs, Inc., MONY Brokerage, Inc., MONY Realty Partners,
Inc., MONY Credit Corporation, 1740 Advisers, Inc., MONY Securities
Corp., MONY Life Insurance Company of America, Enterprise Capital
Management, Inc., 1740 Ventures, Inc., MONY International Holdings,
Inc., MONY Bank & Trust Company of the Americas, Ltd., MONY
International Life Insurance Co. Seguros de Vida S.A.
<PAGE> 43
Item 26. Number of Holders of Securities
<TABLE>
<Caption
Number of
Record
Holders as of
Title of Class May 1, 1996
-------------- -----------
<S> <C>
Shares of Beneficial Interest
Equity Portfolio 2
High Yield Bond Portfolio 2
Managed Portfolio 2
Small Cap Portfolio 2
International Growth Portfolio 2
</TABLE>
Item 27. Indemnification
- - -------- ---------------
See Registration Statement, Form N-1A, File No. 33-15489, July 1,
1987, Item No. 27, which is incorporated herein by reference.
Item 28. Business and Other Connections of Investment Adviser
- - -------- ----------------------------------------------------
See "Investment Management Agreement" in the Prospectus and
"Investment Management and Other Services" in the Additional Statement
regarding the business of the investment adviser and sub-adviser. For
information as to the business, profession, vocation or employment of
a substantial nature of each of the officers and directors of the
investment adviser, reference is made to "Trustees and Officers" in
the Additional Statement and investment adviser's Form ADV filed under
the Investment Advisers Act of 1940, File No. 801-27181, incorporated
herein by reference. For information regarding the sub-adviser,
reference is made to sub-adviser's Form ADV filed under the Investment
Advisers Act of 1940, File No. 801-27180, incorporated herein by
reference.
Item 29. Principal Underwriter
- - -------- ---------------------
(a) Enterprise Fund Distributors, Inc. acts as
principal underwriter for the Registrant and The Enterprise
Group of Funds, Inc.
(b) Set forth below is certain information pertaining
to the partners and officers of Enterprise Fund Distributors,
Registrant's Principal Underwriter; the Principal Business
Address of each is Atlanta Fiancial Center, 3343 Peachtree
Road, N.E., Suite 450, Atlanta Georgia 30326-1022.
(c) Not applicable.
<PAGE> 44
Item 30. Location of Required Records -- Rule 31a-1
-------- ------------------------------------------
(Except those maintained by Custodian and Transfer Agent)
Enterprise Capital Management, Inc.
3343 Peachtree Road, Ste. 450
Atlanta, GA 30326
OpCap Advisors
One World Financial Center
New York, New York 10281
Brinson Partners, Inc.
209 S. LaSalle Street
Suite 111
Chicago, Illinois 60604
GAMCO Investors, Inc.
One Corporate Center
Rye, New York 10580
Caywood-Scholl Capital Management
4350 Executive Drive
Suite 125
San Diego, CA 92121
Item 31. Management Services
-------- -------------------
Not Applicable.
Item 32. Undertakings
-------- -------------------
(a) Not applicable.
(b) Registrant hereby undertakes to assist
shareholder communication in accordance with the provisions of
Section 16 of the Investment Company Act of 1940.
<PAGE> 45
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia on June 12, 1996.
ENTERPRISE ACCUMULATION TRUST
By: /s/ Victor Ugolyn
-------------------------------------------------------------
Victor Ugolyn Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement of the Registrant has
been signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Victor Ugolyn
- - ---------------------------------- Chairman, President and June 12, 1996
Victor Ugolyn Chief Executive Officer
/s/ Phillip G. Goff
- - ---------------------------------- Principal Financial June 12, 1996
Phillip G. Goff and Accounting Officer
/s/ Samuel J. Foti Director June 12, 1996
- - ----------------------------------
Samuel J. Foti
/s/ Arthur T. Dietz Director June 12, 1996
- - ----------------------------------
Arthur T. Dietz
/s/ Arthur Howell Director June 12, 1996
- - ----------------------------------
Arthur Howell
/s/ William A. Mitchell, Jr. Director June 12, 1996
- - ----------------------------------
William A. Mitchell, Jr.
/s/ Lonnie H. Pope Director June 12, 1996
- - ----------------------------------
Lonnie H. Pope
/s/ Michael I. Roth Director June 12, 1996
- - ----------------------------------
Michael I. Roth
</TABLE>
<PAGE> 46
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Page
----------- ----
<S> <C>
5 Investment Adviser's Agreement
10 Opinion of Counsel
11 Consent of Independent Accountants
</TABLE>
<PAGE> 1
EXHIBIT 5
ENTERPRISE ACCUMULATION TRUST
INVESTMENT ADVISER'S AGREEMENT
THIS AGREEMENT, made this 9th day of September, 1994, is by and between
Enterprise Accumulation Trust, a trust organized under the laws of
Massachusetts (hereinafter referred to as the "Fund"), and Enterprise Capital
Management, Inc., a Georgia corporation (hereinafter referred to as the
"Adviser").
WITNESSETH THAT:
In consideration of the mutual covenants herein contained, the Fund and the
Adviser agree as follows:
(1) The Fund hereby employs the Adviser to act as the Investment Adviser
of the Fund, and in addition to render certain other services to the Fund, all
as set forth herein. The Adviser hereby accepts such employment and agrees to
perform such services on the terms set forth, and for the compensation herein
provided.
(2) The Adviser will furnish each Portfolio of the Fund advice with
respect to the investment and reinvestment of the assets of each Portfolio of
the Fund in accordance with the investment objectives of each such Portfolio as
set forth in any currently effective registration statement with the Securities
and Exchange Commission (the "SEC") with respect to securities of the Fund.
(3) In carrying out its duties hereunder, it is contemplated that the
Adviser will select and employ subinvestment adviser Portfolio Managers for the
respective Portfolios of the Fund, subject to compliance with the provisions of
Section 15 of the Investment Company Act of 1940, as amended.
(4) The Adviser will provide oversight and management services to the Fund
which will include, but not be limited to, (i) supervising the sub-advisers'
compliance with federal and state regulations, including the Investment Company
Act, (ii) evaluating the sub-advisers' performance, (iii) analyzing the
composition of the investment portfolios of each Portfolio of the Trust and
preparing reports thereon for the Board or any committee of the Board, (iv)
evaluating each Portfolio's performance in comparison to similar mutual funds
and other market information, (v) conducting searches, upon request of the
Board, for a replacement for any sub-adviser then serving the Trust, and (vi)
preparing presentations to shareholders which analyze the Trust's overall
investment program and performance.
<PAGE> 2
(5) The Adviser will for all purposes be deemed to be an independent
contractor. The Adviser has no authority to act for or represent the Fund in
any way and is not an agent of the Fund.
(6) The Adviser will, at its own expense, furnish to the Fund directly or
through any of the Adviser's affiliates or subsidiaries, office facilities,
including space, furniture and equipment, and, to the extent that such services
are not being provided by others under contract with the Fund, personnel for
the managing of the affairs of, servicing the investment of, and keeping the
books and records of the Fund, including clerical, research, statistical and
investment work, but not including duties or services which are customarily
performed for an open-end management investment company by its Board of
Trustees, custodian, transfer agent, registrar, dividend disbursing agent,
auditors and legal counsel.
Personnel provided shall be persons satisfactory to the Board of
Trustees of the Fund to serve as officers of the Fund, including a President,
one or more Vice Presidents, a Secretary, a Treasurer and such additional
officers and employees as may reasonably be necessary for the execution of its
duties under this Agreement.
The personnel and facilities furnished as aforesaid shall be subject
to the control and direction of the Board of Trustees of the Fund. Such
personnel shall be employees of the Fund, notwithstanding that some or all of
their compensation and expenses of their employment may be paid by the Adviser.
(7) It is understood that the Adviser does not, by this Agreement,
undertake to assume or pay any costs or expenses of the Fund except those
specifically stated herein to be payable by the Adviser. In connection
therewith, the Adviser understands that the Fund pays and shall continue to pay
the following expenses (which shall not be a limited statement of such
expenses):
(a) The fees, compensation and traveling expenses of the independent
Trustees of the Fund,
(b) Telephone, telegraphic and postage expenses related to
communications between Trustees and officers of the Fund, other than those
provided by the Adviser,
(c) The fees of any custodian, transfer agent, registrar or dividend
disbursing agent of the Fund,
(d) Compensation of the Fund's auditors and counsel, including
compensation and costs relating to litigation,
<PAGE> 3
(e) Franchise, income and original issue taxes relating to the Fund
and its securities,
(f) Fees and legal expenses incurred in qualifying the shares of the
Fund for sale with any state regulatory agency in the several states, and the
fees and expenses of maintaining, renewing, increasing or amending such
qualification,
(g) Insurance premiums or interest on indebtedness,
(h) Association dues,
(i) Fees and expenses involved in registering and maintaining
registrations of the Fund and of its shares with the SEC, including the
preparation and printing of prospectuses,
(j) Costs of printing and mailing reports to shareholders, proxy
statements, dividends notices and other communications to shareholders, as well
as all expenses of shareholders and Trustees meetings,
(k) Cost of printing of stock certificates,
(l) Broker's commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the Fund is a
party, and
(m) Business licenses, intangible and franchise taxes.
Costs relating to the Fund's dividends and capital gains reinvestment
program and other shareholder plans will not be borne by the Fund except to the
extent of the normal cost to the Fund of issuing shares. All other costs
relating to such programs and plans will be borne by the Adviser.
(8) The Fund agrees to pay the Adviser for its services and facilities to
be furnished under this Agreement, within 15 days after the close of each
calendar month after the effective date of this Agreement, the amounts equal to
the percentages of the average of the daily closing net asset values of the
respective Portfolios of the Fund that are set forth in Schedule A hereto.
Subject to the requirements of Section 15 of the Investment Company Act of
1940, such Schedule A may be amended from time to time by agreement between the
Fund and the Adviser with respect to existing Portfolios of the Fund or as new
Portfolios are added to the Fund.
(9) The services of the Adviser hereunder are not to be deemed to be
exclusive, and the Adviser is free to render services to others and to engage
in other activities so long as its services hereunder are not impaired thereby.
Without in any way relieving the Adviser of its responsibilities hereunder, it
is agreed that the Adviser
<PAGE> 4
may employ others to furnish factual information, economic advice and/or
research, and investment recommendations, upon which its investment advice and
service is furnished hereunder.
(10) In the absence of willful misfeasance, bad faith or gross negligence
in the performance of its duties hereunder, or reckless disregard of its
obligations and duties hereunder, the Adviser shall not be liable to the Fund
or to any shareholder or shareholders of the Fund for any mistake of judgment,
act or omission in the course of, or connected with, the services to be
rendered by the Adviser hereunder.
(11) Subject to and in accordance with the articles of incorporation and
by-laws of the Fund and of the Adviser, it is agreed that the Trustees,
officers, employees and shareholders of the Fund are or may become interested
in the Adviser as Trustees, officers, employees and shareholders, or otherwise
and that Trustees, officers, employees and shareholders of the Adviser are or
may become similarly interested in the Fund and that the Adviser may be or
become interested in the Fund as a shareholder, or otherwise.
(12) The Adviser will not take, and it will take necessary steps to
prevent its officers and Trustees from taking, at any time, a short position in
any Portfolio securities shares of the Fund. The Adviser also will cooperate
with the Fund in adopting a written policy prohibiting insider trading with
respect to Fund portfolios transactions.
(13) In connection with the management of the investment and reinvestment
of the assets of the Fund and subject to review by the Fund's Board of
Trustees, the Adviser is authorized to select the brokers or dealers that will
execute purchase and sale transactions for each Portfolio of the Fund and, at
its option, at all times or from time to time to permit the respective
Portfolio Managers to make such selections, subject to the review of the
Adviser. In connection with such activity, the Adviser is directed to use its
best efforts to obtain the best available price and most favorable execution
with respect to all such purchases and sales of portfolio securities for the
Fund. Subject to this primary requirement, and maintaining as its first
consideration the benefits for the Fund, its Portfolios and its shareholders,
the Adviser shall have the right, subject to the control of the Board of
Trustees of the Fund, to follow the policy of selecting brokers and dealers who
furnish statistical research and other services to the Fund, the Adviser or any
Portfolio Manager and, subject to the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., to consider sales of shares of the
Portfolios as a factor in the selection of brokers or dealers.
With respect to Section 17(e) of the Investment Company Act of 1940
and Section 11(a) of the Securities Exchange Act of 1934, the Fund hereby
expressly consents and agrees that any associated person of the Adviser,
including,
<PAGE> 5
without limitation, MONY Securities Corporation, may effect securities
transactions on any exchange of which such associated person is a member, and
that the Adviser and such associated person may receive or retain compensation
in connection therewith.
The Adviser recognizes that Oppenheimer & Company, Inc., ("Opco")
will act as regular broker for the Fund Portfolios of which OpCap Advisors acts
as Portfolio Manager, so long as it is lawful for Opco so to act, and that Opco
may be a major recipient of brokerage commissions paid by these Fund
Portfolios. These Fund Portfolios will not purchase any securities from or
sell any securities to Opco acting as principal for their own account.
On occasions when the Adviser deems the purchase or sale of a
security or other investment to be in the best interest of any Portfolio of the
Fund as well as other Portfolios of the Fund, the Adviser may, to the extent
permitted by applicable law and regulations, but shall not be obligated to,
aggregate the securities to be so sold or purchased in order to obtain the best
execution and lower brokerage commissions, if any. In such event, allocation
of the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Adviser in the manner that it considers to be
the most equitable and consistent with its fiduciary obligations to the Fund
and each of its Portfolios.
(14) The Fund may terminate this Agreement by sixty days written notice to
the Adviser at any time, without the payment of any penalty, by vote of the
Fund's Board of Trustees, or by vote of a majority of its outstanding voting
securities, and the Adviser may terminate this Agreement by sixty days written
notice to the Fund, without the payment of any penalty. This Agreement shall
immediately terminate in the event of its assignment, unless an order is issued
by the Securities and Exchange Commission conditionally or unconditionally
exempting such assignment from the provisions of Section 15(a) of the
Investment Company Act of 1940, in which event this Agreement shall remain in
full force and effect.
(15) Subject to prior termination as provided above, this Agreement shall
continue in force from the date of execution until September 9, 1995 and from
year to year thereafter if its continuance after said date: (1) is
specifically approved on or before said date and at least annually thereafter
by vote of the Board of Trustees who are not parties to this Agreement or
interested persons of any such party, or by vote of a majority of the
outstanding voting securities of the Fund; and (2) is specifically approved at
least annually by the vote of a majority of Trustees of the Fund who are not
parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
(16) This Agreement may be amended at any time by mutual consent of the
parties; provided, that such consent on the part of the Fund shall have been
approved by a vote of the majority of the outstanding voting securities of the
Fund; but further provided, that this limitation shall not prevent any minor
amendments to the
<PAGE> 6
Agreement which may be required by federal or state regulatory bodies, which
amendments may be made without shareholder approval.
(17) This terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested persons," when used herein, shall have the
respective meanings specified in the Investment Company Act of 1940 as now in
effect or as hereafter amended.
(18) This Agreement is executed by the Trustees of the Fund, not
individually, but rather in their capacity as Trustees under the Declaration of
Trust made March 2, 1988. None of the Shareholders, Trustees, officers,
employees, or agents of the Fund shall be personally bound or liable under this
Agreement, nor shall resort be made to their private property for the
satisfaction of any obligation or claim hereunder but only to the property of
the Fund and, if the obligation or claim relates to the property held by the
Fund for the benefit of one or more but fewer than all Portfolios, then only to
the property held for the benefit of the affected Portfolio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers and their corporate seals hereunto
duly affixed and attested, as of the date first above written.
<TABLE>
<CAPTION>
<S> <C>
(Seal) ENTERPRISE ACCUMULATION TRUST
ATTEST: /s/ Catherine R. McClellan By: Victor Ugolyn
-------------------------- -------------------------------------
Its: President
(Seal) ENTERPRISE CAPITAL MANAGEMENT, INC.
ATTEST: /s/ Catherine R. McClellan By: Leilani S. Hall
-------------------------- -------------------------------------
Its: Executive Vice President
</TABLE>
<PAGE> 7
SCHEDULE A
ENTERPRISE ACCUMULATION TRUST
INVESTMENT ADVISER'S AGREEMENT
MAY 1, 1996
This Schedule made this 1st day of May, 1996, is by and between Enterprise
Accumulation Trust (the "Trust"), a Massachusetts trust, and Enterprise Capital
Management, Inc., a Georgia corporation.
The Agreement is hereby modified by adding to Schedule A the following:
<TABLE>
<CAPTION>
Name of Portfolio Percentage of Average Daily Closing Net Asset Values of Portfolio To Be Paid
- - ----------------- ----------------------------------------------------------------------------
<S> <C>
Equity At the rate of .80% of the average of the daily closing net asset values of the Portfolio per year of assets
up to $400,000,000; at the rate of .75% of the average of the daily closing net asset values of the Portfolio
per year for assets from $400,000,000 to $800,000,000; and at the rate of .70% of the average of the daily
closing net asset values of the Portfolio in excess of $800,000,000 per year, paid monthly.
Small Cap At the rate of .80% of the average of the daily closing net asset values of the Portfolio per year of assets
up to $400,000,000; at the rate of .75% of the average of the daily closing net asset values of the Portfolio
per year for assets from $400,000,000 to $800,000,000; and at the rate of .70% of the average of the daily
closing net asset values of the Portfolio in excess of $800,000,000 per year, paid monthly.
Managed At the rate of .80% of the average of the daily closing net asset values of the Portfolio per year of assets
up to $400,000,000; at the rate of .75% of the average of the daily closing net asset values of the Portfolio
per year for assets from $400,000,000 to $800,000,000; and at the rate of .70% of the average of the daily
closing net asset values of the Portfolio in excess of $800,000,000 per year, paid monthly.
International Growth At the rate of .85% of the average of the daily closing net asset values of the Portfolio per year, paid
monthly.
High-Yield Bond At the rate of .60% of the average of the daily closing net asset values of the Portfolio per year, paid
monthly.
</TABLE>
Wherever there is any conflict between this Schedule and the printed part
of the Agreement, the provisions of the Agreement are paramount and the
Agreement shall be construed accordingly.
<PAGE> 8
IN WITNESS WHEREOF, the parties hereof have caused this Schedule to be
signed by their duly authorized officers and their corporate seals hereunto
affixed and attested to as of the date first above written.
ENTERPRISE ACCUMULATION TRUST
(SEAL)
ATTEST: /s/ Catherine R. McClellan By: Herbert M. Williamson
-------------------------- ----------------------------------
Its: Treasurer
ENTERPRISE CAPITAL MANAGEMENT, INC.
(SEAL)
ATTEST: /s/ Catherine R. McClellan By: Phillip G. Goff
--------------------------- ----------------------------------
Its: Vice President
<PAGE> 1
EXHIBIT 10
Securities and Exchange Commission
450 Fifth Street
Washington, D.C. 20549
Re: Enterprise Accumulation Trust
Registration Statement No. 33-21534
Dear Sir or Madam:
I am counsel to Enterprise Accumulation Trust, (the "Fund"), and in so acting,
have reviewed Post-Effective Amendment No. 10 (the "Post Effective Amendment")
to the Fund's Registration Statement on Form N-1A, Registration File No.
33-21534. Representatives of the Fund have advised that the Fund will file the
Post-Effective Amendment pursuant to paragraph (a) of Rule 485 ("Rule 485")
promulgated under the Securities Act of 1933. In connection therewith, the
Fund has requested that I provide this letter.
In my examination of the Post-Effective Amendment, I have assumed the
conformity to the originals of all documents submitted to me as copies.
Based upon the foregoing, I hereby advise you that:
(1) the Fund is a trust duly incorporated and validly existing in good
standings under the laws of the State of Massachusetts; and
(2) the Common Stock to be offered has been duly authorized and, when
sold as contemplated in the Amendments, will be validly issued, fully paid and
nonassessable.
Very truly yours,
/s/ Catherine R. McClellan
- - --------------------------
Catherine R. McClellan
Senior Vice President and Chief Counsel
CRM/sm
<PAGE> 1
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Port-Effective Amendment No. 11 to the
registration statement under the Securities Act of 1933 (file number 33-21534)
of our report dated February 22, 1996 on our audit of the financial statements
and financial highlights of The Enterprise Group of Funds, Inc. appearing in
the Registrant's 1995 Annual Report. We also consent to the reference to our
Firm under the caption "Independent Accountants."
COPPERS & LYBRAND L.L.P.
Atlanta, Georgia
June 7, 1996
