<PAGE> 1
As filed with the Securities and Exchange Commission on August 14, 1998
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. 14 [ X ]
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 15
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
(NAME AND ADDRESS OF AGENT FOR SERVICE)
(800) 432-4320
(Registrant's Telephone Number)
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
1
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[ ] 60 days after filing pursuant to paragraph (a)
[ X ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] pursuant to paragraph (a) of Rule 485 or 486
Registrant has filed its report pursuant to Rule 24f-2 for the year ended
December 31, 1997 on March 13, 1998.
CROSS REFERENCE SHEET
Form N-1A
Item
Part I Caption Prospectus
1. Cover Page Cover Page
2. Synopsis Prospectus Summary
3. Condensed Financial Financial Highlights Information
4. General Description of Investment Objectives and Policies;
Registrant 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 Please refer to Annual Report
Fund's Performance
5B. Management's Discussion of
Year 2000 Preparedness
6. Capital Stock and Other Determination of Net Asset Value;
Securities 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
2
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and N/A
History
13. Investment Objectives and Investment of the Assets; Investment
Policies Restrictions
14. Management of the Fund Trustees and Officers
3
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ENTERPRISE ACCUMULATION TRUST
ATLANTA FINANCIAL CENTER
3343 PEACHTREE ROAD, N.E., SUITE 450
ATLANTA, GEORGIA 30326
PROSPECTUS
DATED NOVEMBER 1, 1998
ENTERPRISE ACCUMULATION TRUST (the "Fund") is a registered open-end
diversified management investment company offering a broad range of investment
alternatives through its eleven separate Portfolios. The Fund permits you to
choose 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. ("the Adviser"), selects 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:
GROWTH PORTFOLIO: Seeks capital appreciation, primarily from investments in
common stocks.
GROWTH AND INCOME PORTFOLIO: Seeks total return in excess of the total
return of the Lipper Growth and Income Mutual Funds Average measured over a new
period of three to five years, by investing primarily in a broadly diversified
group of large capitalization stocks.
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.
EQUITY INCOME PORTFOLIO: Seeks a combination of growth and income to achieve
an above average and consistent total return, primarily from investments in
dividend-paying common stocks.
CAPITAL APPRECIATION PORTFOLIO: Seeks maximum capital appreciation,
primarily through investment in common stock of companies that demonstrate
accelerating earnings momentum and consistently strong financial
characteristics.
SMALL COMPANY GROWTH PORTFOLIO: Seeks capital appreciation by investing
primarily in common stocks of small capitalization companies believed by the
Portfolio Manager to have an outlook for strong earnings growth and potential
for significant capital appreciation.
SMALL COMPANY VALUE 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.
GLOBAL FINANCIAL SERVICES PORTFOLIO: Seeks capital appreciation, primarily
through investment in common stock of domestic and foreign financial services
companies.
HIGH-YIELD BOND PORTFOLIO: Seeks maximum current income, primarily from debt
securities that are rated Ba or lower by Moody's Investor Service, Inc.
("Moody's") or BB or lower by Standard & Poor's Corporation ("S&P").
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 the Portfolio Manager's assessments of
relative investment values.
The Fund currently sells Shares 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 of
the Contracts (the "Contractholders"). 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 Portfolios to raise cash at times not otherwise deemed
advantageous by the Adviser or the Portfolio Managers. See "Management of the
Fund."
1
<PAGE> 5
This Prospectus explains concisely what you should know about the Fund
before you invest. Offers of sales of shares of the Fund must be accompanied by
a current prospectus for one of the Contracts. Please read the Fund's Prospectus
and the Prospectus for the contracts and keep them for future reference. You can
find more detailed information about the Portfolios in a Statement of Additional
Information ("SAI"), dated November 1, 1998, which has been filed with the
Securities and Exchange Commission ("SEC"). The SAI is incorporated by reference
into this Prospectus (which means that it is legally part of the Prospectus).
You can obtain a free copy of the SAI by writing to MONY, Mail Drop 9-34, 1740
Broadway, New York, NY 10019 or by calling (800) 487-6669. The SEC maintains a
Web site (http://www.sec.gov) that contains the SAI, material incorporated by
reference and other information regarding the Portfolios.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
2
<PAGE> 6
ENTERPRISE CAPITAL MANAGEMENT, INC.
INVESTMENT ADVISER
PROSPECTUS DATED NOVEMBER 1, 1998
THE HIGH-YIELD BOND PORTFOLIO INVESTS 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 AND
HAVE SPECIAL RISKS. THEY MAY NOT BE SUITABLE FOR ALL INVESTORS. PLEASE READ THE
RISK INFORMATION CAREFULLY.
3
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY....................................................... 3
FINANCIAL HIGHLIGHTS..................................................... 5
Equity Portfolio....................................................... 5
Small Company Value Portfolio.......................................... 6
International Growth Portfolio......................................... 7
High-Yield Bond Portfolio.............................................. 8
INVESTMENT OBJECTIVES AND POLICIES....................................... 10
ADDITIONAL INFORMATION ON INVESTMENT OBJECTIVES AND POLICIES............. 13
INVESTMENT TECHNIQUES AND ASSOCIATED RISKS............................... 14
MANAGEMENT OF THE FUND................................................... 19
DETERMINATION OF NET ASSET VALUE......................................... 22
PURCHASE OF SHARES....................................................... 22
REDEMPTION OF SHARES..................................................... 22
STATE LAW RESTRICTIONS................................................... 22
DIVIDENDS, DISTRIBUTIONS AND TAXES....................................... 23
CALCULATION OF PERFORMANCE............................................... 23
ADDITIONAL INFORMATION................................................... 24
CONTROL PERSONS.......................................................... 25
APPENDIX................................................................. 26
</TABLE>
4
<PAGE> 8
PROSPECTUS SUMMARY
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 risk characteristics of each Portfolio are different. In general,
investors should consider the following risks: An investment in any of the
Portfolios carries the risk that the net asset value of the Portfolio shares
will fluctuate in response to market conditions. An investment in the High-Yield
Bond Portfolio carries an increased risk that issuers of securities in which the
High-Yield Bond Portfolio invests may default in the payment of principal and
interest. In addition, the non-investment grade securities in which the
High-Yield Bond Portfolio invests may be subject to increased risks relating to
market price, relative liquidity and sensitivity to interest rate and economic
changes as compared to investment grade securities. The Small Company Value
Portfolio and the Small Company Growth Portfolio carry the risk that smaller
capitalization companies may experience higher growth rates and higher failure
rates than do larger companies. The limited volume and frequency of trading of
small capitalization companies may subject their stocks to greater price
deviations than stocks of larger companies. The International Growth Portfolio
and the Global Financial Services Portfolio carry additional risks associated
with possibly less stable foreign securities and currencies. See "Certain
Investment Techniques and Associated Risks."
INVESTMENT ADVISER
Enterprise Capital Management, Inc. ("the Adviser"") is the investment
adviser of each of the Portfolios. The Adviser serves also as investment adviser
to The Enterprise Group of Funds, Inc., a registered investment company
consisting of approximately $2.5 billion of assets under management as of June
30, 1998. Performance of similar Portfolios of The Enterprise Group of Funds,
Inc. may differ from those of the Fund due to a number of factors including size
of the Portfolios, investment cash flows and redemptions. The Adviser is a
subsidiary of MONY, which has approximately $16.6 billion total assets under
management as of June 30, 1998.
MANAGEMENT FEE
The Adviser receives a monthly fee and pays a portion of such fee to the
respective Portfolio Manager for each Portfolio at varying annual percentage
rates of average daily net assets, as follows:
<TABLE>
<CAPTION>
PORTFOLIO ADVISER'S FEE PORTFOLIO MANAGER'S FEES
--------- -------------------------- -----------------------------
<S> <C> <C>
Growth .75% .30% up to $1 billion
Montag & Caldwell, Inc. .20% over $1 billion
------------------------- -------------------------- -----------------------------
Growth and Income .75% .30% up to $100 million
Retirement System .25% $100 - 200 million
Investors, Inc. .20% thereafter
------------------------- -------------------------- -----------------------------
Equity.................. .80% up to $400 million .40% up to $1 billion
OpCap Advisors .75% $400-800 million .30% over $1 billion
.70% over $800 million
---------------------------------------------------- ------------------------------
Equity Income .75% .30% up to $100 million
1740 Advisers, Inc. .25% $100-200 million
.20% thereafter
---------------------------------------------------- --------------------------
Capital Appreciation.... .75% .50% up to $100 million
Provident Investment .45% $100-$200 million
Counsel, Inc.. .35% $200-300 million
.30% thereafter
------------------------- -------------------------- -----------------------------
Small Company Growth.... 1.00% .65% up to $50million
Pilgrim Baxter & .55% $50-100 million
Associates, Ltd. .45% thereafter
------------------------- -------------------------- -----------------------------
Small Company Value..... .80% up to $400 million .40% up to $1 billion
Gabelli Asset .75% $400-800 million .30% over $1 billion
Management, Inc. .70% over $800 million
------------------------- -------------------------- -----------------------------
International Growth .85% .45% up to $100 million
Brinson Partners, Inc. .35% $100 - 200 million
.325% $200-500 million
</TABLE> .25% over $500 million
5
<PAGE> 9
<TABLE>
<S> <C> <C>
------------------------- ---------------------------- -----------------------------
Global Financial .85% .50% up to $100 million
Services
Sanford C. Bernstein & .40% $100 - 300 million
Co., Inc. .30% thereafter
------------------------- ---------------------------- -----------------------------
High-Yield Bond .60% .30% up to $100 million
Caywood-Scholl Capital .25% over $100 million
Management
------------------------- ---------------------------- -----------------------------
Managed .80% up to $400 million .40% up to $1 billion
OpCap Advisors .75% $400-800 million .30% $1-2 billion
.70% over $800 million .25% over $2 billion
</TABLE>
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.
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.
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 Fund's 1997 financial statements, financial highlights
and related notes thereto which are incorporated by reference in the SAI.
Further information regarding the performance of each Portfolio is available in
the Fund's Annual Report. No financial highlights are presented for the Growth,
Growth and Income, Equity Income, Capital Appreciation, Small Company Growth,
and Global Financial Services Portfolios because they had not commenced
operations as of the date of this Prospectus. The Fund's Annual Report may be
obtained without charge upon written request to MONY, Mail Drop 9-34, 1740
Broadway, New York, NY 10019 or by calling (800) 487-6669.
6
<PAGE> 10
ENTERPRISE ACCUMULATION TRUST
EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.................... $ 28.86 $ 23.35 $ 18.14 $ 17.95 $ 17.23 $ 15.24 $ 11.92 $ 12.50
---------- ---------- ---------- -------- -------- -------- -------- --------
Net investment income (loss) 0.30 0.37 0.33 0.28 0.18 0.17 0.24 0.30
Net realized and unrealized
gains (losses) on
investments............... 7.13 5.52 6.38 0.41 1.13 2.49 3.42 (0.58)
---------- ---------- ---------- -------- -------- -------- -------- --------
Total from investment
operations........... 7.43 5.89 6.71 0.69 1.31 2.66 3.66 (0.28)
---------- ---------- ---------- -------- -------- -------- -------- --------
Dividends from net investment
income.................... 0.32 0.09 0.49 0.18 0.17 0.24 0.34 0.21
Distributions from net
realized capital gains.... 0.88 0.29 1.01 0.32 0.42 0.43 0.00 0.09
---------- ---------- ---------- -------- -------- -------- -------- --------
Total distributions... 1.20 0.38 1.50 0.50 0.59 0.67 0.34 0.30
---------- ---------- ---------- -------- -------- -------- -------- --------
Net asset value, end of
period.................... $ 35.09 $ 28.86 $ 23.35 $ 18.14 $ 17.95 $ 17.23 $ 15.24 $ 11.92
========== ========== ========== ======== ======== ======== ======== ========
Total return................ 25.76% 25.22% 38.44% 3.87% 7.85% 17.90% 31.20% (2.20)%
---------- ---------- ---------- -------- -------- -------- -------- --------
Net assets end of period (in
thousands)................ $ 517,803 $ 314,907 $ 167,963 $ 88,583 $ 66,172 $ 33,581 $ 17,221 $ 10,248
---------- ---------- ---------- -------- -------- -------- -------- --------
Ratio of expenses to average
net assets................ 0.84% 0.81% 0.69% 0.67% 0.72% 0.79% 0.86% 0.92%
---------- ---------- ---------- -------- -------- -------- -------- --------
Ratio of expenses to average
net assets (excluding
waivers).................. 0.84% 0.81% 0.72% 0.69% 0.72% 0.79% 0.86% 0.99%
---------- ---------- ---------- -------- -------- -------- -------- --------
Ratio of net investment
income (loss) to average
net assets................ 1.42% 1.94% 1.94% 1.81% 1.47% 1.48% 2.09% 3.45%
---------- ---------- ---------- -------- -------- -------- -------- --------
Ratio of net investment
income (loss) to average
net assets (excluding
waivers).................. 1.42% 1.94% 1.91% 1.79% 1.47% 1.48% 2.09% 3.38%
---------- ---------- ---------- -------- -------- -------- -------- --------
Portfolio turnover.......... 17% 30% 29% 38% 15% 27% 41% 49%
---------- ---------- ---------- -------- -------- -------- -------- --------
Average commission per
share(C).................. $ 0.0577 $ 0.0567
---------- ----------
<CAPTION> YEAR
ENDED
DECEMBER 31, PERIOD OF
----------- AUGUST 1, 1988 -
1989 DECEMBER 31, 1988
----------- ------------------
<S> <C> <C>
Net asset value, beginning of
period.................... $ 10.19 $ 10.00
------- -------
Net investment income (loss) 0.26 0.00
Net realized and unrealized
gains (losses) on
investments............... 2.05 0.19
------- -------
Total from investment
operations........... 2.31 0.19
------- -------
Dividends from net investment
income.................... 0.00 0.00
Distributions from net
realized capital gains.... 0.00 0.00
------- -------
Total distributions... 0.00 0.00
------- -------
Net asset value, end of
period.................... $ 12.50 $ 10.19
======= =======
Total return................ 22.70% 1.90%(B)
------- -------
Net assets end of period (in
thousands)................ $ 5,997 $ 1,059
------- -------
Ratio of expenses to average
net assets................ 0.85% 0.85%(A)
------- -------
Ratio of expenses to average
net assets (excluding
waivers).................. 1.54% 6.79%(A)
------- -------
Ratio of net investment
income (loss) to average
net assets................ 3.93% 0.10%(A)
------- -------
Ratio of net investment
income (loss) to average
net assets (excluding
waivers).................. 3.24% (5.84)%(A)
------- -------
Portfolio turnover.......... 28% 0%
------- -------
Average commission per
share(C)..................
</TABLE>
- ------------------
(A) Annualized
(B) Not annualized
(C) Disclosure is not applicable to periods prior to 1996. Represents average
commission rate per share charged to the Portfolio on purchases and sales
of equity investments on which commissions were charged during the period.
7
<PAGE> 11
ENTERPRISE ACCUMULATION TRUST
SMALL COMPANY VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.................... $ 20.22 $ 18.48 $ 17.56 $ 18.62 $ 16.72 $ 15.11 $ 10.46 $ 12.06
Net investment income (loss) 0.05 0.25 0.32 0.19 0.10 0.09 0.09 0.31
Net realized and unrealized
gains (losses) on
investments............... 8.91 1.82 1.75 (0.16) 2.98 3.05 4.86 (1.47)
---------- ---------- ---------- ---------- ---------- -------- ------- -------
Total from investment
operations............. 8.96 2.07 2.07 0.03 3.08 3.14 4.95 (1.16)
---------- ---------- ---------- ---------- ---------- -------- ------- -------
Dividends from net investment
income.................... 0.15 0.12 0.40 0.10 0.10 0.10 0.30 0.15
Distributions from net
realized capital gains.... 2.33 0.21 0.75 0.99 1.08 1.43 0.00 0.29
---------- ---------- ---------- ---------- ---------- -------- ------- -------
Total distributions..... 2.48 0.33 1.15 1.09 1.18 1.53 0.30 0.44
---------- ---------- ---------- ---------- ---------- -------- ------- -------
Net asset value, end of
period.................... $ 26.70 $ 20.22 $ 18.48 $ 17.56 $ 18.62 $ 16.72 $ 15.11 $ 10.46
========== ========== ========== ========== ========== ======== ======= =======
Total return................ 44.32% 11.21% 12.28% 0.02% 19.51% 21.50% 48.10% (9.80)%
---------- ---------- ---------- ---------- ---------- -------- ------- -------
Net assets end of period (in
thousands)................ $ 365,266 $ 192,704 $ 166,061 $ 144,880 $ 105,635 $ 31,211 $ 9,777 $ 2,744
---------- ---------- ---------- ---------- ---------- -------- ------- -------
Ratio of expenses to average
net assets................ 0.86% 0.84% 0.69% 0.66% 0.74% 0.86% 1.00% 1.02%
---------- ---------- ---------- ---------- ---------- -------- ------- -------
Ratio of expenses to average
net assets (excluding
waivers).................. 0.86% 0.84% 0.72% 0.67% 0.74% 0.86% 1.19% 1.62%
---------- ---------- ---------- ---------- ---------- -------- ------- -------
Ratio of net investment
income (loss) to average
net assets................ 0.21% 1.35% 1.86% 1.30% 1.06% 1.05% 1.41% 3.32%
---------- ---------- ---------- ---------- ---------- -------- ------- -------
Ratio of net investment
income (loss) to average
net assets (excluding
waivers)................... 0.21% 1.35% 1.83% 1.29% 1.06% 1.05% 1.22% 2.38%
---------- ---------- ---------- ---------- ---------- -------- ------- -------
Portfolio turnover.......... 58% 137% 70% 58% 70% 105% 120% 44%
---------- ---------- ---------- ---------- ---------- -------- ------- -------
Average commission per
share(C).................. $ 0.0456 $ 0.0480
---------- ----------
<CAPTION>
YEAR
ENDED
DECEMBER 31, PERIOD OF
----------- AUGUST 1, 1988 -
1989 DECEMBER 31, 1988
----------- ------------------
<S> <C> <C>
Net asset value, beginning of
period.................... $ 10.19 $ 10.00
Net investment income (loss) 0.17 0.00
Net realized and unrealized
gains (losses) on
investments............... 1.70 0.19
------- -------
Total from investment
operations............. 1.87 0.19
------- -------
Dividends from net investment
income.................... 0.00 0.00
Distributions from net
realized capital gains.... 0.00 0.00
------- -------
Total distributions..... 0.00 0.00
------- -------
Net asset value, end of
period.................... $ 12.06 $ 10.19
======= =======
Total return................ 18.40% 1.90%(B)
------- -------
Net assets end of period (in
thousands)................ $ 2,302 $ 571
------- -------
Ratio of expenses to average
net assets................ 0.95% 0.95%(A)
------- -------
Ratio of expenses to average
net assets (excluding
waivers).................. 2.38% 9.22%(A)
------- -------
Ratio of net investment
income (loss) to average
net assets................ 2.48% 0.23%(A)
------- -------
Ratio of net investment
income (loss) to average
net assets (excluding
waivers)................... 1.05% (8.04)%(A)
------- -------
Portfolio turnover.......... 58% 0%
------- -------
Average commission per
share(C)..................
</TABLE>
- ----------------
(A) Annualized
(B) Not annualized
(C) Disclosure is not applicable to periods prior to 1996. Represents average
commission rate per share charged to the Portfolio on purchases and sales
of equity investments on which commissions were charged during the period.
8
<PAGE> 12
ENTERPRISE ACCUMULATION TRUST
MANAGED PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
------------ ------------ ------------ ----------- ----------- ----------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period............... $ 34.31 $ 28.06 $ 20.82 $ 21.35 $ 20.11 $ 17.56 $ 12.43 $ 13.80
----------- ----------- ----------- --------- --------- --------- -------- --------
Net investment income
(loss).................. 0.35 0.59 0.40 0.40 0.46 0.25 0.29 0.31
Net realized and unrealized
gains (losses) on
investments............. 8.06 5.99 8.97 0.15 1.55 2.95 5.31 (0.81)
----------- ----------- ----------- --------- --------- --------- -------- --------
Total from investment
operations......... 8.41 6.58 9.37 0.55 2.01 3.20 5.60 (0.50)
----------- ----------- ----------- --------- --------- --------- -------- --------
Dividends from net
investment income....... 0.55 0.06 0.75 0.46 0.24 0.27 0.39 0.28
Distributions from net
realized capital gains.. 1.39 0.27 1.38 0.62 0.53 0.38 0.08 0.59
----------- ----------- ----------- --------- --------- --------- -------- --------
Total
distributions...... 1.94 0.33 2.13 1.08 0.77 0.65 0.47 0.87
----------- ----------- ----------- --------- --------- --------- -------- --------
Net asset value, end of
period.................. $ 40.78 $ 34.31 $ 28.06 $ 20.82 $ 21.35 $ 20.11 $ 17.56 $ 12.43
=========== =========== =========== ========= ========= ========= ======== ========
Total return.............. 24.50% 23.47% 46.89% 2.57% 10.39% 18.60% 46.00% (3.60)%
----------- ----------- ----------- --------- --------- --------- -------- --------
Net assets end of period
(in thousands).......... $ 2,672,932 $ 1,935,343 $ 1,264,718 $ 689,252 $ 525,163 $ 236,175 $ 98,468 $ 45,955
----------- ----------- ----------- --------- --------- --------- -------- --------
Ratio of expenses to
average net assets...... 0.76% 0.74% 0.67% 0.64% 0.66% 0.69% 0.73% 0.80%
----------- ----------- ----------- --------- --------- --------- -------- --------
Ratio of expenses to
average net assets
(excluding
waivers)................ 0.76% 0.74% 0.67% 0.64% 0.66% 0.69% 0.73% 0.80%
----------- ----------- ----------- --------- --------- --------- -------- --------
Ratio of net investment
income (loss) to average
net assets.............. 1.14% 2.16% 1.80% 2.23% 3.21% 2.06% 2.42% 3.79%
----------- ----------- ----------- --------- --------- --------- -------- --------
Ratio of net investment
income (loss) to average
net assets (excluding
waivers)................ 1.14% 2.16% 1.80% 2.23% 3.21% 2.06% 2.42% 3.79%
----------- ----------- ----------- --------- --------- --------- -------- --------
Portfolio turnover........ 32% 29% 31% 33% 21% 23% 57% 112%
----------- ----------- ----------- --------- --------- --------- -------- --------
Average commission per
share(C)................ $ 0.0574 $ 0.0531
----------- -----------
<CAPTION> YEAR
ENDED
DECEMBER 31, PERIOD OF
------------ AUGUST 1, 1988 -
1989 DECEMBER 31, 1988
----------- ------------------
<S> <C> <C>
Net asset value, beginning
of period............... $ 10.44 $ 10.00
-------- -------
Net investment income
(loss).................. 0.34 0.05
Net realized and unrealized
gains (losses) on
investments............. 3.06 0.39
-------- -------
Total from investment
operations......... 3.40 0.44
-------- -------
Dividends from net
investment income....... 0.03 0.00
Distributions from net
realized capital gains.. 0.01 0.00
-------- -------
Total
distributions...... 0.04 0.00
-------- -------
Net asset value, end of
period.................. $ 13.80 $ 10.44
======== =======
Total return.............. 32.60% 4.40%(B)
-------- -------
Net assets end of period
(in thousands).......... $ 22,459 $ 3,238
-------- -------
Ratio of expenses to
average net assets...... 0.85% 0.85%(A)
-------- -------
Ratio of expenses to
average net assets
(excluding
waivers)................ 1.05% 3.37%(A)
-------- -------
Ratio of net investment
income (loss) to average
net assets.............. 5.10% 3.88%(A)
-------- -------
Ratio of net investment
income (loss) to average
net assets (excluding
waivers)................ 4.09% 1.36%(A)
-------- -------
Portfolio turnover........ 196% 38%
-------- -------
Average commission per
share(C)................
</TABLE>
- ----------------
(A) Annualized
(B) Not annualized
(C) Disclosure is not applicable to periods prior to 1996. Represents average
commission rate per share charged to the Portfolio on purchases and sales
of equity investments on which commissions were charged during the period.
9
<PAGE> 13
ENTERPRISE ACCUMULATION TRUST
INTERNATIONAL GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD OF
----------------------------------------- NOVEMBER 18, 1994 -
1997 1996 1995 DECEMBER 31, 1994
------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 6.05 $ 5.39 $ 4.96 $ 5.00
-------- -------- -------- -------
Net investment income (loss)........ 0.06 0.05 0.04 0.00
Net realized and unrealized gains
(losses) on investments............ 0.26 0.63 0.67 (0.04)
-------- -------- -------- -------
Total from investment
operations.................... 0.32 0.68 0.71 (0.04)
-------- -------- -------- -------
Dividends from net investment income 0.04 0.00 0.04 0.00
Distributions from net realized
capital gains....................... 0.15 0.02 0.24 0.00
-------- -------- -------- -------
Total distributions............ 0.19 0.02 0.28 0.00
-------- -------- -------- -------
Net asset value, end of period...... $ 6.18 $ 6.05 $ 5.39 $ 4.96
======== ======== ======== =======
Total return........................ 5.26% 12.65% 14.64% (0.80)%(B)
-------- -------- -------- -------
Net assets end of period (in
thousands)......................... $ 78,148 $ 52,768 $ 18,598 $ 3,247
-------- -------- -------- -------
Ratio of expenses to average net
assets............................. 1.19% 1.38% 1.55% 1.55%(A)
-------- -------- -------- -------
Ratio of expenses to average net
assets (excluding waivers)......... 1.19% 1.38% 2.21% 8.85%(A)
-------- -------- -------- -------
Ratio of net investment income
(loss) to average net assets....... 1.34% 1.32% 1.17% 0.80%(A)
-------- -------- -------- -------
Ratio of net investment income
(loss) to average net assets
(excluding waivers)................ 1.34% 1.32% 0.51% (6.34)%(A)
-------- -------- -------- -------
Portfolio turnover.................. 28% 21% 27% 0.0%
-------- -------- -------- -------
Average commission per share(C)..... $ 0.0257 $ 0.0224
-------- --------
</TABLE>
- ----------------
(A) Annualized
(B) Not annualized
(C) Disclosure is not applicable to periods prior to 1996. Represents average
commission rate per share charged to the Portfolio on purchases and sales
of equity investments on which commissions were charged during the period.
10
<PAGE> 14
ENTERPRISE ACCUMULATION TRUST
HIGH-YIELD BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
PERIOD OF
YEARS ENDED DECEMBER 31, NOVEMBER 18, 1994 -
1997 1996 1995 DECEMBER 31, 1994
------------ ------------ ------------ ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period... $ 5.51 $ 5.31 $ 4.98 $ 5.00
-------- -------- -------- -------
Net investment income (loss)........... 0.51 0.45 0.45 0.04
Net realized and unrealized gains
(losses) on investments................ 0.20 0.21 0.35 (0.01)
-------- -------- -------- -------
Total from investment
operations...................... 0.71 0.66 0.80 0.03
-------- -------- -------- -------
Dividends from net investment income... 0.51 0.45 0.45 0.05
Distributions from net realized capital
gains................................. 0.00 0.01 0.02 0.00
-------- -------- -------- -------
Total distributions.......... 0.51 0.46 0.47 0.05
-------- -------- -------- -------
Net asset value, end of period......... $ 5.71 $ 5.51 $ 5.31 $ 4.98
======== ======== ======== =======
Total return........................... 13.38% 12.93% 16.59% 0.50%(B)
-------- -------- -------- -------
Net assets end of period (in thousands) $ 68,364 $ 34,411 $ 15,223 $ 1,421
-------- -------- -------- -------
Ratio of expenses to average net assets 0.77% 0.85% 0.85% 0.85%(A)
-------- -------- -------- -------
Ratio of expenses to average net assets
(excluding waivers)................... 0.77% 0.94% 1.59% 7.80%(A)
-------- -------- -------- -------
Ratio of net investment income (loss)
to average net assets.................. 8.47% 8.57% 8.51% 7.84%(A)
-------- -------- -------- -------
Ratio of net investment income (loss)
to average net assets (excluding
waivers)............................... 8.47% 8.48% 7.77% 0.80%(A)
-------- -------- -------- -------
Portfolio turnover...................... 175% 175% 115% 0%
-------- -------- -------- -------
</TABLE>
- ----------
(A) Annualized
(B) Not annualized
(C) Disclosure not applicable to periods prior to 1996. Represents average
commission rate per share charged to the Portfolio on purchases and sales
of equity investments on which commissions were charged during the period.
11
<PAGE> 15
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 at any time by the Portfolio Managers, subject to the oversight
of the Adviser, usually in response to their 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.
GROWTH PORTFOLIO
The objective of the Growth Portfolio is appreciation of capital primarily
through investments in common stocks. Under normal circumstances, at least 65%
of the Portfolio's total assets will be invested in common stocks. The
Portfolio's common stock selection emphasizes those companies having growth
characteristics, but the Portfolio's investment policy recognizes that
securities of other companies may be attractive for capital appreciation
purposes by virtue of special developments or depression in price believed to be
temporary. The potential for appreciation of capital is the basis for investment
decisions; any income is incidental.
GROWTH AND INCOME PORTFOLIO
The objective of the Growth and Income Portfolio is to achieve a total
return in excess of the total return of the Lipper Growth and Income Mutual
Funds Average, measured over a period of three to five years, by investing
primarily in a broadly diversified group of large capitalization companies. The
Portfolio seeks this objective primarily through capital appreciation with
income as a secondary consideration. The Portfolio will invest in securities of
companies which the Portfolio Manager believes to be financially sound and will
consider such factors as the sales, growth and profitability prospects for the
economic sector and markets in which the company operates and for the services
or products it provides; the financial condition of the company; its ability to
meet its liabilities and to provide income in the form of dividends; the
prevailing price of the security; how that price compares to historical price
levels of the security, to current price levels in the general market, and to
the prices of competing companies; projected earnings estimates and earnings
growth rate of the company, and the relation of those figures to the current
price.
In general, the Portfolio will invest in stocks of companies with market
capitalizations in excess of $750 million. Although there is no assurance that
the Portfolio will meet its objective, the securities held in the Growth and
Income Portfolio will generally reflect the price volatility of the broad equity
market (i.e., the Standard & Poor's 500 Index).
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 ADRs listed on a domestic securities exchange or traded
in the United States over-the-counter market.
EQUITY INCOME PORTFOLIO
The objective of the Equity Income Portfolio is a combination of growth and
income to achieve an above-average and consistent total return, primarily from
investments in dividend-paying common stocks. Under normal circumstances, at
least 65% of the Portfolio's total assets will be invested in dividend-paying
common stocks.
12
<PAGE> 16
The Portfolio's principal criterion in stock selection is above-average
yield, and it uses this criterion as a discipline to enhance stability and
reduce market risk. Subject to this primary criterion, the Portfolio invests in
stocks that have relatively low price to earnings ratios or relatively low price
to book value ratios.
CAPITAL APPRECIATION PORTFOLIO
The objective of the Capital Appreciation Portfolio is maximum capital
appreciation, primarily through investments in common stocks of companies that
demonstrate accelerating earnings momentum and consistently strong financial
characteristics. Under normal circumstances, at least 65% of the Portfolio's
total assets will be invested in common stocks.
The Portfolio invests primarily in common stocks of companies which meet the
Portfolio Manager's criteria of: (a) steadily increasing earnings; and (b) a
three-year average performance record of sales, earnings, dividend growth,
pretax margins, return on equity and reinvestment rate at an aggregate average
of 1.5 times the average performance of the Standard & Poor's 500 common stocks
("S&P 500") for the same period. The Portfolio attempts to invest in a range of
small, medium and large companies designed to achieve an average capitalization
of the companies in which it invests that is less than the average
capitalization of the S&P 500. The potential for maximum capital appreciation is
the basis for investment decisions; any income is incidental.
SMALL COMPANY GROWTH PORTFOLIO
The Small Company Growth Portfolio seeks capital appreciation and invests
primarily in common stocks of small capitalization companies believed by the
Portfolio Manager to have an outlook for strong earnings growth and potential
for significant capital appreciation. The Portfolio will normally be as fully
invested as practicable in common stocks and securities convertible into common
stocks, but also may invest up to 5% of its assets in warrants and rights to
purchase common stocks. In the option of the Portfolio Manager, there may be
times when the shareholder's best interests are best served and the investment
objective is more likely to be achieved by having varying amounts of the
Portfolio's assets in convertible securities. Under normal market conditions,
the Portfolio will invest at least 65% of its total assets in common stocks and
convertible securities of small capitalization companies (market capitalization
of up to $1 billion). At certain times that percentage may be substantially
higher. Securities will be sold when the Portfolio Manager believes that
anticipated appreciation is no longer probable, alternative investments offer
superior appreciation prospects, or the risk of a decline in market price is too
great. Because of its policy with respect to the sales of investments, the
Portfolio may from time to time realize short-term gains or losses. The
Portfolio will likely have somewhat greater volatility than the stock market in
general, as measured by the S&P 500 Index.
SMALL COMPANY VALUE PORTFOLIO
The investment objective of the Small Company Value 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 of companies with
market capitalizations of under $1 billion. 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. Since small companies tend to be less actively followed by stock
analysts, the market may overlook favorable trends and then adjust its valuation
more quickly once investor interest is surfaced. The Portfolio Manager seeks out
companies in the public market that are selling at a discount to their private
market value (PMV) measured using proprietary research techniques in areas of
core competencies. The Portfolio Manager then determines whether there is an
emerging catalyst that will focus investor attention on the underlying assets of
the company. Small companies may be subject to a valuation catalyst such as
increased investor attention, takeover efforts or a change in management.
13
<PAGE> 17
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 total 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 Portfolio 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 Portfolio
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.
GLOBAL FINANCIAL SERVICES PORTFOLIO
The investment objective of the Global Financial Services Portfolio is
capital appreciation. The Portfolio seeks to achieve its objective primarily
through investment in the common and preferred stocks of domestic and foreign
financial services companies. Under normal circumstances, at least 80% of the
Portfolio's total assets will be invested in financial services companies.
For Portfolio purposes, a financial services company is a firm that in its
most recent fiscal year either (i) derived at least 50% of its revenues or
earnings from financial services activities, or (ii) devoted at least 50% of its
assets to such activities. Financial services companies provide financial
services to consumers and businesses and include the following types of U.S. and
foreign firms: commercial banks, thrift institutions and their holding
companies; consumer and industrial finance companies; diversified financial
services companies; investment banks; securities brokerage and investment
advisory firms; financial technology companies; real estate-related firms;
leasing firms; credit card companies; government-sponsored financial
enterprises; investment companies; insurance brokerages; and various firms in
all segments of the insurance industry such as multi-line property and casualty,
and life insurance companies and insurance holding companies.
The Portfolio will concentrate its investments in the financial services
industry. This policy may not be changed without the approval of a majority of
the Portfolio's shareholders. The Portfolio Manager seeks to maximize returns by
combining fundamental and quantitative research to identify securities of
financial expected returns. Its research analysts employ a long-term approach to
forecasting the earnings and growth potential of companies and attempt to
construct global portfolios that produce maximum returns at a given risk level.
14
<PAGE> 18
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 under
normal circumstances it will invest at least 80% of the value of its total
assets in high-yielding, income-producing corporate bonds that are rated B3 or
better by Moody's or B- or better by S&P or investment grade. 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".
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".
As of December 31, 1997, the High-Yield Bond Portfolio consisted of securities
classified as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
RATINGS TOTAL INVESTMENTS
------- -----------------
<S> <C>
AAA................................. 5.1%
BBB................................. 0.4%
BB.................................. 18.8%
B................................... 72.6%
Non-rated*.......................... 3.1%
</TABLE>
- ----------
* Equivalent ratings for these securities would have been B.
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
Company Value Portfolio and the Small Company Growth Portfolio invest may, to a
lesser extent, be included. Debt securities are expected to be predominantly
U.S. Government securities and investment grade intermediate to long- term
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 exchange or are represented by ADRs 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.
15
<PAGE> 19
ADDITIONAL INFORMATION ON INVESTMENT OBJECTIVES AND POLICIES
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.
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 by the Portfolio Manager in high quality short-term
money market securities and cash equivalents.
The portfolio turnover rates of the Portfolios cannot be accurately
predicted. Nevertheless, the portfolio turnover rates for the Growth, Equity
Income, Global Financial Services, Capital Appreciation, Small Company Growth
and Growth and Income Portfolios are not expected to exceed 100%. 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 SECURITIES, TECHNIQUES AND ASSOCIATED RISKS
The investment techniques and securities 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 and Global
Financial Services Portfolio may invest in all of the above, both foreign and
domestic, including foreign currency, foreign time deposits, and foreign bank
acceptances.
TIME DEPOSITS.
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.
VARIABLE RATE NOTES.
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 Portfolios have 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 prepare 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 Portfolios 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.
16
<PAGE> 20
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 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 one business day.
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.
BORROWING.
As a fundamental policy, each Portfolio may borrow money, in an amount not
exceeding 10% of the value of its total assets, as a temporary measure for
extraordinary or emergency purposes.
FORWARD COMMITMENTS.
Securities may be purchased on a "when issued" or on a "forward delivery"
basis, which means it may take as long as 120 days before such obligations are
delivered to a Portfolio. The purpose of such investments is to attempt to
obtain higher rates of return or lower purchase costs than would be available
for securities purchased for immediate delivery. Securities purchased on a when
issued or forward delivery basis involve a risk that the value of the security
to be purchased may decline prior to the settlement date. In addition, if the
dealer through which the trade is made fails to consummate the transaction, the
Portfolio may lose an advantageous yield or price. The Portfolio does not accrue
income prior to delivery of the securities in the case of forward commitment
purchases.
ILLIQUID AND RESTRICTED SECURITIES
No Portfolio will invest more than 10% of its net assets in illiquid or
restricted securities. Illiquid securities include securities that lack readily
available market quotations and securities that cannot be disposed of within
seven days in the normal course of business at the price at which they are
valued. A restricted security is one that is subject to a contractual
restriction on its resale or which cannot be sold publicly until registered
under the Securities Act of 1933 (the "1933 Act"). Restricted securities include
securities that are eligible for resale to "qualified institutional buyers"
pursuant to Rule 144A under the 1933 Act. Rule 144A securities are not subject
to the 10% limitation if they are determined to be liquid pursuant to guidelines
established by the Board of Directors. The marketability of certain Rule 144A
securities held by a Portfolio could be adversely affected if qualified
institutional buyers become uninterested in purchasing such securities.
REITS
Each Portfolio may invest up to 10% of its total assets in the securities of
real estate investment trusts ("REITs"). REITs are pooled investment vehicles
which invest in real estate and real estate-related loans. The value of a REIT's
shares generally is affected by changes in the value of the underlying
investments of the trust.
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HEDGING TRANSACTIONS.
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.
Futures Contracts and Options on Future Contracts. To the extent permitted
by Arizona and New York law, each Portfolio may engage in futures contracts or
options on futures contracts for bona fide hedging or other purposes. When a
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 a Portfolio's 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 Portfolio 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 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. 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.
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. 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 use call options to hedge 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
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(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.
Put Options. Each Portfolio may write put options ("puts") on individual
securities. When writing puts, 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 (a
"covered put"). As a result, such Portfolio will forego the opportunity to trade
the segregated assets or write calls against those assets.
In addition, a Portfolio will receive premium income from writing covered
puts, although it may be required, when the put is exercised, to purchase
securities at higher prices than the current market price.
Each Portfolio may purchase puts on securities (whether or not it holds such
securities), Index Options (described below) (whether or not it holds such
Options) or broadly-based stock indexes.
Index Options. All the Equity Portfolios (Equity, Growth, Growth and Income,
Capital Appreciation, Equity Income, Small Company Growth, Small Company Value,
International Growth, Global Financial Services and Managed Portfolios) may
invest in options on stock indexes. These options are based on indexes of stock
prices that change in value according to the market value of the stocks they
include. Some stock index options are based on a broad market index, such as the
New York Stock Exchange Composite Index or the Standard & Poor's 500. Other
index options are based on a market segment or on stocks in a single industry.
Stock index options are traded primarily on securities exchanges.
Because the value of an index option depends primarily on movements in the
value of the index rather than in the price of a single security, whether a
Portfolio will realize a gain or loss from purchasing or writing an option on a
stock index depends on movements in the level of stock prices in the stock
market generally, or, in the case of certain indexes, in an industry or market
segment rather than changes in the price of a particular security. Consequently,
successful use of stock index options by a Portfolio will depend on that
Portfolio Manager's ability to predict movements in the direction of the stock
market generally or in a particular industry. This requires different skills and
techniques than predicting changes in the value of individual securities.
Interest Rate Swaps. In order to attempt to protect the portfolio
investments from interest rate fluctuations, the Portfolios may engage in
interest rate swaps. The Portfolios tend to use interest rate swaps as a hedge
and not as a speculative investment. Interest rate swaps involve the exchange,
by a Portfolio with another party, of their respective rights to receive
interest (e.g., an exchange of fixed rate payments for floating rate payments).
For example, if a Portfolio holds an interest-paying security whose interest
rate is reset once a year, it may enter into an interest rate swap in order to
obtain the right to receive interest at a rate that is reset daily. Such a swap
position would offset changes in the value of the underlying security due to
subsequent changes in interest rates. This would protect the Portfolio from a
decline in the value of the underlying security due to rising interest rates,
but would also limit its ability to benefit from falling interest rates.
A Portfolio will enter into interest rate swaps only on a net basis (i.e.,
the two payment streams will be netted out, with the Portfolio receiving or
paying as the case may be, only the net amount of the two payments). The net
amount of the excess, if any, of the Portfolio's obligations over its
entitlements with respect to each interest rate swap will be accrued on a daily
basis, and an amount of cash or liquid debt securities having an aggregate net
asset value at least equal to the accrued excess, will be maintained in a
segregated account by the Portfolio's custodian bank.
The use of interest rate swaps involves investment techniques and risks
different from those associated with ordinary portfolio security transactions.
If the Portfolio Manager is incorrect in its forecasts of market values,
interest rates and other applicable factors, the investment performance of the
Portfolio will be less favorable than it would have been if this investment
technique were never used. Interest rate swaps do not involve the delivery of
securities or other underlying assets or principal. Thus, if the other party to
an interest rate swap defaults, the Portfolio's risk of loss consists of the net
amount of interest payments that the Portfolio is contractually entitled to
receive.
GENERAL RISKS ASSOCIATED WITH EQUITY (EQUITY, GROWTH, GROWTH AND INCOME, CAPITAL
APPRECIATION, GLOBAL FINANCIAL SERVICES, EQUITY INCOME, SMALL COMPANY GROWTH,
SMALL COMPANY VALUE, 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.
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Small Company Value Portfolio and Small Company Growth Portfolio. The Small
Company Value Portfolio and the Small Company Growth Portfolio are expected to
have greater risk exposure and reward potential than a Portfolio 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.
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.
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 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 generally 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.
International Growth Portfolio. The International Growth Portfolio, and to a
lesser extent the Global Financial Services Portfolio, carry additional risks
associated with possibly less stable foreign securities and currencies.
FOREIGN SECURITIES
As noted above, the International Growth Portfolio will invest primarily in
foreign securities, and the Global Financial Services Portfolio may invest 50%
or more of its total assets in such securities. All other Portfolios may invest
up to 20% of their total assets in foreign securities, including sponsored and
unsponsored ADRs and EDRs which are securities of U.S. issuers representing
underlying 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 the Adviser, subject to the overall review of
the Fund's Board of 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.
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
the Global Financial Service 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.
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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 Portfolio 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.
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 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
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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.
Liquidity and Valuation. Because of periods of relative illiquidity, many
high-yield bonds may be thinly traded. As a result, the Board of Trustees'
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.
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. Such income will be subject to the distribution
requirements applicable to regulated investment companies under the Code even
though no cash distribution of such interest is received in the year in which
such income is taxed.
TEMPORARY 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) 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 and Global Financial Services
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.
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
The Fund and the Adviser have entered into an Investment Adviser Agreement
pursuant to which the Adviser provides investment advisory and administrative
services to the Portfolios, subject to the direction of the Board and in keeping
with the stated investment objectives of each Portfolio. The Adviser and the
Fund have entered into Portfolio Manager Agreements with each of the Portfolio
Managers discussed below.
The Adviser is assisted in its duty to provide investment supervisory
services by Evaluation Associates, Inc. ("EAI"), which has had 26 years of
experience in evaluating investment advisers for individuals and institutional
investors. The oversight and management services provided by the Adviser 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 Portfolio, and (vi) preparing presentations
to shareholders which analyze the Portfolio's overall investment program and
performance.
The Adviser and the Fund have received an exemptive order from the
Securities and Exchange Commission which permits the Fund, subject to, among
other things, initial Contractholder authority, to thereafter enter into or
amend Portfolio Manager Agreements without obtaining Contractholder approval
each time. On April 28, 1997 Contractholders voted affirmatively to give the
Fund this
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ongoing authority. With Board approval, the Adviser is permitted to employ new
Portfolio Managers for the Portfolios, change the terms of the Portfolio
Managers Agreements or enter into a new Agreement with that Portfolio Manager.
Contractholders of a Portfolio continue to have the right to terminate the
Portfolio Manager's Agreement for the Fund at any time by a vote of the majority
of the outstanding voting securities of the Portfolio. Contractholders will be
notified of any Portfolio Manager changes or other material amendments to
Portfolio Manager Agreement that occur under these arrangements.
The Adviser is a subsidiary of MONY, one of the nation's largest insurance
companies. The Adviser also serves as the investment adviser to The Enterprise
Group of Funds, Inc., a registered investment company consisting of a series of
14 separate investment portfolios with assets of $2.5 billion as of June 30,
1998. The Adviser'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.
As part of its operational responsibilities, the Adviser has undertaken to
review each of its internal systems and obtain assessments from each service
provider, including Portfolio Managers, of Year 2000 issues which could
potentially impact services to the Fund. Although at this time, there can be no
assurance that there will be no adverse impact on the Fund, the Adviser is
unaware of any Year 2000 issues which remain unresolved or have been identified
as unresolvable. In addition, the Adviser has established a timetable to
periodically re-evaluate systems to ensure that new issues or those which may
not previously have been identified are addressed and resolved in an expeditious
manner. The Adviser does not anticipate any material expenditures for monitoring
Year 2000 issues. Companies or governmental entities in which the Portfolios
invest could be affected by the Year 2000 problem, but at this time, the Adviser
cannot predict the degree of impact on the Portfolios.
PORTFOLIO MANAGERS
Growth Portfolio
The Portfolio Manager of the Growth Portfolio is Montag & Caldwell, Inc.
("Montag & Caldwell"). Its address is 1100 Atlanta Financial Center, 3343
Peachtree Road, N.E., Atlanta, Georgia 30326, and it is controlled by Allegheny
Corporation. Montag & Caldwell and its predecessors have been engaged in the
business of providing investment counseling to individuals and institutions
since 1945. Ronald E. Canakaris, President and Chief Investment Officer, is
responsible for the day-to-day investment management of the Portfolio and has
more than 30 years' experience in the investment industry. He has been President
of Montag & Caldwell for more than 26 years and has served as Portfolio Manager
since inception. Total assets under management for all clients as of June 30,
1998, approximated $22 billion. Usual investment minimum is $40 million.
Representative clients include: Black & Decker, Bristol-Myers Squibb and Wake
Forest University. The management fee paid by the Growth Portfolio is .75% of
net assets, and the Portfolio Manager receives .30% for assets under management
up to $1 billion; .20% thereafter.
Growth and Income Portfolio
The Portfolio Manager of the Growth and Income Portfolio is Retirement
System Investors Inc. ("RSI") which is a subsidiary of Retirement System Group
Inc. Its address is 317 Madison Ave., New York, New York 10017. James P.
Coughlin, President and Chief Investment Officer, is responsible for the
day-to-day management of the Portfolio and has more than 30 years' experience in
the investment industry. He has served as President and Chief Investment Officer
of RSI since 1989. Total assets under management for RSI were $566.4 million as
of June 30, 1998. The management fee is .75%, and the Portfolio Manager receives
.30% for assets under management of that fee up to $100 million; .25% on the
next $100 million; and .20% for assets greater than $200 million.
Equity Portfolio
The Portfolio Manager of the Equity Portfolio is OpCap Advisors ("OpCap")
which is a subsidiary of Oppenheimer Capital, a general partnership. OpCap's
address is One World Financial Center, New York, New York 10281. The Portfolio
Manager and its affiliates have operated as investment advisers to both mutual
funds and other clients since 1968, and had $66.6 billion under management as of
June 30, 1998. Eileen Rominger, Managing Director of Oppenheimer Capital, is
responsible for the day-to-day management of the Portfolio. Ms. Rominger has
more than 19 years experience in the investment industry and has served as the
day-to-day manager of the Portfolio since its inception in 1988. Usual
investment minimum is $20 million. 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 billion; and .30% thereafter.
Equity Income Portfolio
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The Portfolio Manager of the Equity Income Portfolio is 1740 Advisers, Inc.
("1740 Advisers"). It is a subsidiary of MONY. Its address is 1740 Broadway, New
York, New York 10019. John V. Rock, President and Director, is responsible for
the day-to-day investment management of the Portfolio and has more than 34
years' experience in the investment industry. He has served as President of 1740
Advisers since 1974. Total assets under management (for the Equity Income
Portfolio and all other accounts managed) as of June 30, 1998, were
approximately $1.7 billion. Usual investment minimum is $20 million. The
management fee paid by the Equity Income Portfolio is .75% of net assets, and
the Portfolio Manager receives .30% for assets under management of that fee up
to $100 million; and .25% on the next $100 million; and .20% thereafter.
Capital Appreciation Portfolio
The Portfolio Manager of the Capital Appreciation Portfolio is Provident
Investment Counsel, Inc. ("PIC"). PIC traces its origins to an investment
partnership formed in 1951. PIC is a wholly owned subsidiary of United Asset
Management, Inc. Its address is 300 North Lake Avenue, Pasadena, California
91101. Jeffrey J. Miller is a Managing Director of the firm and is responsible
for the day-to-day management of the Portfolio. He has more than 25 years'
experience in the investment industry. He has been Managing Director of PIC
since 1972. As of June 30, 1998, total assets under management for all clients
were $18.6 billion. Usual investment minimum is $5 million. Representative
clients include: Pennsylvania State Employees Retirement System, Kansas Public
Employees Retirement System and United Methodist Church Board of Pensions. The
management fee is .75% and the Portfolio Manager receives .50% for assets under
management of that fee up to $100 million; .45% for assets under management for
the next $100 million; .35% for assets greater than $200 million up to $300
million; and .30% thereafter.
Small Company Growth Portfolio
The Portfolio Manager of the Small Company Growth Portfolio is William D.
Witter, Inc. ("Witter"). Witter is owned by its employees. Its offices are at
One Citicorp Center, 153 East 53rd Street, New York, New York 10022. William D.
Witter, President, and Paul B. Phillips, Managing Director, are responsible for
the day-to-day management of the Portfolio. They have more than 60 years'
combined experience in the investment industry. Mr. Witter and Mr. Phillips have
been employed in their present positions by Witter since 1977 and 1996,
respectively. Mr. Phillips previously served as Senior Portfolio Manager at
Witter from 1986-1995. As of June 30, 1998, total assets under management for
all clients were $900 million. Usual investment minimum is $20 million. The
management fee is 1.00% and the Portfolio Manager receives .65% for assets under
management of that fee up to $50 million; and .55% for assets under management
for the next $50 million; and .45% for assets thereafter.
Small Company Value Portfolio
The Portfolio Manager of the Small Company Value Portfolio is Gabelli Asset
Management Company ("Gabelli"). Its offices are located at One Corporate Center,
Rye, New York 10580. Gabelli is a wholly-owned subsidiary of Gabelli Funds, Inc.
Gabelli's predecessor, Gabelli & Company, Inc., was founded in 1977 by Mario J.
Gabelli who has served as its Chief Investment Officer since inception. He is
responsible for the day-to-day management of the Portfolio and has more than 27
years of experience in the investment industry. As of June 30, 1998, total
assets under management for all clients were $7.3 billion. Usual investment
minimum is $1 million. The 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 billion;
and .30% thereafter.
International Growth Portfolio
The Portfolio Manager of the International Growth Portfolio is Brinson
Partners, Inc. ("Brinson"). Brinson is a wholly-owned subsidiary of UBS AG.
Brinson's address is 209 South LaSalle Street, Chicago, Illinois 60604.
Day-to-day management of this Portfolio is performed by a committee, and no
person is primarily responsible for making recommendations to that committee. As
of June 30, 1998, Brinson's assets under management for all clients approximated
$156 billion. Usual investment minimum is $25 million. The management fee is
.85%, and the Portfolio Manager receives .45% for assets under management up to
$100 million; .35% for assets under management from $100 million to $200
million; .325% for assets from $200 million to $500 million; and .25% for assets
greater than $500 million.
Global Financial Services Portfolio
The Portfolio Manager of the Global Financial Services Portfolio is Sanford
C. Bernstein & Co., Inc. ("Sanford Bernstein"). Sanford Bernstein's address is
767 Fifth Avenue, New York, New York 10153-0185. Sanford Bernstein was
established in 1967 and as of June 30, 1998, had approximately $78 billion in
assets under management. Day-to-day management of this Portfolio is performed by
Sanford Bernstein's Global Investment Policy Group which is chaired by Andrew S.
Adelson who has more than 20
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<PAGE> 28
years' experience in the investment industry. The management fee is .85% of
average daily net assets, and of that fee, the Portfolio Manager receives .50%
for assets up to $100 million; .40% for assets from $100 million to $300
million; and .30% for assets over $300 million.
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. The address of Caywood-Scholl is 4350 Executive Drive,
Suite 125, San Diego, California 92121. Mr. Caywood, Managing Director and Chief
Executive Officer, is responsible for the day-to-day management of the Portfolio
and has more than 29 years of investment industry experience. He joined
Caywood-Scholl in 1986 as Chief Investment Officer. Caywood-Scholl provides
investment advice with respect to high-yield, low grade fixed income
instruments. As of June 30, 1998, assets under management for all clients
approximated $816.9 million. Usual investment minimum is $1 million. The annual
management fee is .60% of average daily net assets; and the Portfolio Manager
receives .30% for assets up to $100 million and .25% thereafter.
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 24 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 billion;
.30% of average daily net assets from $1 billion to $2 billion; and .25%
thereafter.
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 fees, Fund
accounting and audit expenses; custodian, dividend disbursing and transfer agent
fees; and other expenses not expressly assumed by the Adviser 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 trading
session ("Close") of the New York Stock Exchange ("NYSE") 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 Portfolio 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 Portfolio 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
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<PAGE> 29
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 Portfolio'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 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 and MONY 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 Portfolio. 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", "Investment Restrictions", 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
qualitative 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. Portfolios 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.
Dividends from net investment income, if any, on the Equity, Small Company
Value, International Growth, Global Financial Services, Growth, Growth and
Income, Small Company Growth, Capital Appreciation, Equity Income 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.
Dividends from investment income on the High-Yield Bond Portfolio 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.
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<PAGE> 30
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.
BROKERAGE TRANSACTIONS
Each Portfolio Manager selects the brokerage firms which complete portfolio
transactions for that Fund, subject to the overall direction and review of the
Adviser and the Board of Directors of the Fund.
The initial criterion which must be met by any Portfolio Manager in selecting
brokers and dealers to effect securities transactions for a Portfolio is whether
such brokers and dealers can obtain the most favorable combination of price and
execution for the transaction. This does not mean that the execution decision
must be based solely on whether the lowest possible commission costs may be
obtained. In seeking to achieve the best combination of price and execution, the
Portfolio Managers evaluate the overall quality and reliability of
broker-dealers and the service they provide, including their general execution
capability, reliability and integrity, willingness to take positions in
securities, general operational capabilities and financial condition.
Subject to this primary objective, the Portfolio Managers may select for
brokerage transactions those firms which furnish brokerage and research services
to the Fund, the Adviser and the respective Portfolio Managers, or those firms
who agree to pay certain of the Fund's expenses, including certain custodial and
transfer agent services, and, consistent with the National Association of
Securities Dealers, Inc. Conduct Rules, those firms which have been active in
selling shares of the Fund.
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 Portfolio.
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 eleven 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
27
<PAGE> 31
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 assets of such
Portfolio. The assets of each Portfolio are required to be segregated on the
Portfolio's books of account. The Fund's Board of Trustees has agreed to monitor
the Fund 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 Portfolio will be prorated by total
net assets.
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 Portfolio itself would be
unable to meet its obligations.
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 the Investment Adviser Agreement or a Portfolio Manager
Agreement, or a change in a fundamental policy are matters which require
separate voting by each Portfolio. To the extent required by law, the Variable
Accounts, which are the shareholders of the Portfolio, 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 the Adviser 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.
Control Persons. As of the date of this Prospectus 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.
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 9-34, 1740 Broadway, New York, NY
10019 or by telephone request (800-487-6669).
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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 "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
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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.
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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 ("SAI") is not a prospectus
and should be read in conjunction with the Prospectus dated November 1, 1998
(the "Prospectus") of Enterprise Accumulation Trust (the "Fund"). Mutual of New
York ("MONY") and MONY America Contractowners can obtain copies of the Fund's
Prospectus by writing to MONY, Mail Drop 9-34, 1740 Broadway, New York, NY 10019
or by calling MONY at (800) 487-6669.
The date of this Additional Statement is November 1, 1998.
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TABLE OF CONTENTS
<S> <C>
General Information and History.......................... 3
Investment Objectives and Policies....................... 3
Investment of Assets..................................... 4
Investment Restrictions.................................. 8
Trustees and Officers.................................... 9
Control Persons.......................................... 11
Investment Management and Other Services................. 11
Determination of Net Asset Value......................... 13
Dividends, Distribution and Taxes........................ 13
Fund Transactions and Brokerage.......................... 14
Fund Yield and Total Return Information.................. 14
Additional Information................................... 15
</TABLE>
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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 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. The Small Cap Fund's name was changed on May 1, 1998, to the Small Company
Value Fund. The Fund commenced offering the Growth, Growth and Income, Equity
Income, Capital Appreciation, Small Company Growth, and Global Financial
Services Portfolios on November 1, 1998.
INVESTMENT OBJECTIVES AND POLICIES
International Growth Portfolio - Capital appreciation, primarily
through a diversified Portfolio of non-U.S. equity securities. The Portfolio
Manager believes that, over the long term, investing across international equity
markets based upon discrepancies between market prices and fundamental values
may achieve a positive enhancement for the Portfolio's investment performance
relative to the returns from the Benchmark.
Fundamental value is considered to be the current value of long-term,
sustainable future cash flows derived from a given asset class or security. In
determining fundamental value, the Portfolio Manager examines the relative price
to value of the investment opportunity based upon the prospects for relative
economic growth among countries, regions or geographic areas; expected levels of
inflation; government policies influencing business conditions; and the outlook
for currency relationships. Investment decisions are based on comparisons of
current market prices to fundamental values.
Although it may invest anywhere in the world, it is expected that the
Portfolio will primarily invest in the equity markets included in the Morgan
Stanley Capital International Non-U.S. Equity (Free) Index which currently are
Japan, the United Kingdom, Germany, France, Canada, Italy, the Netherlands,
Australia, Switzerland, Spain, Hong Kong, Belgium, Singapore, Malaysia, Sweden,
Denmark, Norway, New Zealand, Austria, Finland and Ireland. The composition of
the Index may change over time, according to criteria established by Morgan
Stanley.
Global Financial Services Portfolio - Sanford Bernstein systematically
applies a marriage of fundamental and quantitative research to identify
securities that are attractively priced relative to their expected returns and
to develop a portfolio that trades off risk and reward over full market cycles.
The Portfolio Manager employs a centralized investment approach in all
portfolios. The Global Investment Policy Group uses its many years of experience
and market memory to review analysts' latest research findings and forecasts.
The group integrates the work of analysts, economists and the quantitative
group, systematically applying valuation and portfolio construction processes to
select securities. The portfolio managers then apply the Investment Policy
Groups' decisions, deviating only to conform to fund objectives.
Sanford Bernstein employs 129 analysts who take an intensive, long-term
approach to forecasting earnings power and growth. Organized in global industry
teams so that they can discern companies' strategies, cost pressures and
competition in a global context, Sanford Bernstein analysts are centrally
located so that the senior professionals can control the quality of their
findings.
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
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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 Portfolios have 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 Portfolios 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 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
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of the futures contract assuming all contractual obligations have been
satisfied. In addition, because under current futures industry practices 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 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
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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 Fund 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 the 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 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 Portfolios 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
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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.
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 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. As to 75% of the assets of any Portfolio, 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. Except for the Global Financial Services Portfolio, 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 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.
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 Fund is permitted to use by any of its other fundamental
policies.
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6. Invest more than 10% of its net assets in illiquid securities
(securities for which market quotations are not readily available) and
repurchase agreements which have a maturity of longer than seven days.
7. 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.
8. 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.
9. 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.)
10. 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.
11. 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
Fund security.
12. Invest for the purposes of exercising control or management of
another company.
13. Issue senior securities as defined in the Investment Company Act of
1940, as amended (the "1940 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 Fund securities.
14. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
15. 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.
16. Invest more than 10% of its net 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 net assets.
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.
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 August 1,
1998, the trustees and officers of the Fund as a group owned none of its
outstanding shares.
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NAME, AGE, AND POSITION PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
HELD WITH REGISTRANT
Arthur T. Dietz (74) President, ATD Advisory Corp. since 1996;
Trustee President and Chief Executive Officer,
Strategic Portfolio Management, Inc.,
1987-1995; Mills B. Lane Professor of
Finance and Banking, Emory University,
1954-1988; Director, The Enterprise Group of
Funds, Inc.
*Samuel J. Foti (46) President and Chief Operating Officer, MONY
Trustee since 1994; Executive Vice President, MONY
(1991-1994); Trustee, MONY since 1993;
Senior Vice President, MONY (1989-1991);
Director, MONY Life Insurance Co. of America
since 1989; Director, MONY Brokerage, Inc.
since 1990; Director, MONY International
Holdings, Inc. since 1994; Director, MONY
Life Insurance Company of the Americas, Ltd.
since 1994, MONY Bank & Trust Co. of the
Americas, Ltd. since 1994; Director, Life
Insurance Marketing and Research Associates;
Chairman, Life Insurance Marketing and
Research Associates 1996-1997; Director, The
Enterprise Group of Funds, Inc.
Arthur Howell (80) Of Counsel, law firm of Alston & Bird,
Trustee Atlanta, Georgia; President, Summit
Industries, Inc.; Chairman, Crescent Banking
Co., Inc.; President, Jonesheirs, Inc.;
Director, The Enterprise Group of Funds,
Inc.
William A. Mitchell, President/CEO, Carter & Associates (real
Jr.(58) Trustee estate development), Atlanta, Georgia since
1994; Director, John Wieland Homes since
1992; Director, The Enterprise Group of
Funds, Inc.
Lonnie H. Pope (64) Chief Executive Officer, Longleaf
Trustee Industries, Inc., Marietta, Georgia; Board
Member, Georgia Chamber of Commerce;
Director, The Enterprise Group of Funds,
Inc.
*Michael I. Roth (52) Chairman and Chief Executive Officer, MONY
Trustee since 1993; President and Chief Executive
Officer, MONY (1991-1993); Director, MONY
Life Insurance Company of America since
1991; Director, ARES Holdings Inc. since
1995; 1740 Advisers, Inc. since 1992; MONY
CS, Inc. since 1989; Executive Vice
President and Chief Financial Officer, MONY
(1989-1991); 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); Director, the Life
Insurance Counsel of New York; Director,
Pitney Bowes, Inc.; Director, Promus Hotel
Corporation.
*Victor Ugolyn (50) Chairman, President and Chief Executive
Trustee Officer, The Enterprise Group of Funds, Inc.
since 1991; Chairman, President and
9
<PAGE> 43
Chief Executive Officer, Enterprise Capital
Management, Inc. and Enterprise Fund
Distributors, Inc. since 1991; Chairman,
President and Chief Executive Officer,
Enterprise Accumulation Trust; Vice Chairman
and Chief Marketing Officer, Value Line
Securities, Inc.
(1986-1991).
Catherine R. McClellan Secretary, The Enterprise Group of Funds,
(42) Secretary Inc.; Senior Vice President, Secretary and
Chief Counsel, Enterprise Capital
Management, Inc.; Senior Vice President,
Secretary and Chief Counsel, Enterprise Fund
Distributors, Inc.
Herbert M. Williamson Assistant Secretary and Treasurer, The
(47) Asst. Secretary, Enterprise Group of Funds, Inc.; Enterprise
Treasurer Capital Management, Inc. and Enterprise
Fund Distributors, Inc.
Phillip G. Goff (34) Vice President and Chief Financial Officer,
Vice President The Enterprise Group of Funds, Inc.;
Enterprise Capital Management, Inc. and
Enterprise Fund Distributors, Inc. 1995 -
Present; Audit Manager, Coopers & Lybrand
LLP (1986-1995).
Remuneration of Officers and Trustees. All officers of the Fund are
officers of Enterprise Capital Management, Inc. 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 $10,000 plus $500 for each trustees' meeting attended and
$500 for each committee meeting attended.
The following sets forth compensation paid to each of the Trustees for
the fiscal year ended December 31, 1997:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
PENSION OR ESTIMATED
AGGREGATE RETIREMENT ANNUAL TOTAL
COMPENSATION BENEFITS BENEFITS COMPENSATION
FROM ACCRUED UPON FROM REGISTRANT
NAME REGISTRANT PART RETIREMENT PAID TO TRUSTEES
----------------------- ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Arthur T. Dietz......... $13,500 None None $27,000
Arthur Howell........... $13,000 None None $26,000
William A. Mitchell, Jr. $12,500 None None $25,000
Lonnie H. Pope.......... $13,000 None None $27,000
</TABLE>
* Each Trustee also served as a Director of The Enterprise Group of Funds, Inc.
and received fees for such services.
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
Enterprise Capital Management, Inc. (the "Adviser"), the investment
adviser of each of the Portfolios, serves also as the investment adviser to The
Enterprise Group of Funds, Inc. The Adviser is a subsidiary of The Mutual Life
Insurance Company of New York ("MONY"). The Adviser provides oversight and
management services to the Fund which include, but are not limited to, (1)
supervising the Portfolio Managers' compliance with federal and state
regulations, including the 1940 Act, (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
10
<PAGE> 44
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 the Adviser, 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 Adviser under the Investment
Adviser Agreement are paid by the Fund. The Investment Adviser Agreement lists
examples of expenses paid by the Fund, of which the major categories relate to
interest, taxes, fees to noninterested 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 Investment Adviser Agreement, the 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
Adviser undertakes to pay or refund to 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>
<CAPTION>
Port Mgr Port Mgr Port Mgr
Total Fee 1997 Fee 1997 Total Fee 1996 Fee 1996 Total Fee 1995 Fee 1995
-------------- -------- -------------- -------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Equity $ 3,319,628 $ 1,743,990 $ 752,635
Small Company Value 2,119,841 1,316,050 907,835
Managed 16,976,135 11,086,850 5,852,587
International Growth 604,348 303,177 94,931
High-Yield Bond 299,011 143,878 49,627
</TABLE>
*The Adviser has reallowed $21,526 to the High-Yield Bond Portfolio during 1996.
**The Adviser has reallowed the following amounts of its advisory fees to the
Portfolios during 1995: Equity -- $35,480, Small Company Value -- $41,237;
Managed -- $57,047 International Growth -- $74,222; and High-Yield Bond --
$61,596.
The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard for its
obligations thereunder, the Adviser 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 Adviser to
act as investment adviser for any other person or firm.
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
11
<PAGE> 45
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 Fund transactions to brokers and dealers, but only in
conformity with the price, execution, and other considerations and practices
discussed above.
It is the practice of the Portfolio Managers to cause purchase or sale
transactions to be allocated among the Portfolio 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.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Portfolio transactions and brokerage policies are set forth in the
Prospectus. In the last three fiscal years ended December 31, the Fund has paid
the following aggregate amounts for brokerage commissions on transactions in
Portfolio securities.
<TABLE>
<CAPTION>
TOTAL AFFILIATED
PORTFOLIO BROKERAGE 1997 BROKERAGE 1997
------------------- ------------------ ---------------
<S> <C> <C>
Equity $ 164,149 $ 67,454
Small Company Value $ 534,558 NONE
Managed $ 1,382,062 $ 442,852
International Growth $ 181,826 $ 7,791
High-Yield Bond $ 562 NONE
<CAPTION>
TOTAL AFFILIATED
PORTFOLIO BROKERAGE 1996 BROKERAGE 1996
------------------- ------------------ ---------------
<S> <C> <C>
Equity $ 204,255 $ 9,000
Small Company Value $ 784,580 $ 283,427
Managed $ 922,241 $ 6,000
International Growth $ 102,770 $ 5,789
High-Yield Bond $ 516 NONE
<CAPTION>
TOTAL AFFILIATED
PORTFOLIO BROKERAGE 1995 BROKERAGE 1995
------------------- ------------------ ---------------
<S> <C> <C>
Equity $ 110,759 $ 2,580
Small Company Value $ 377,157 $ 9,660
International Growth $ 48,107 $ 1,860
High-Yield Bond $ 464 NONE
Managed $ 937,342 $ 16,416
</TABLE>
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.
12
<PAGE> 46
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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The dividend policies of the Portfolios are discussed in the
Prospectus. In computing interest income, the Funds 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. 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 ordinary income.
Each Portfolio is qualified and intends to remain qualified and elect
to be treated as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended, (the ""Code"). To remain qualified as
a regulated investment company, a Portfolio must, among other things, (a) derive
at least 90% of is gross income from the sales or other disposition of
securities, dividends, interest, proceeds from loans of stock or securities and
certain other related income; and (b) diversify its holdings so that, at the end
of each fiscal quarter, (i) 50% of the market value of the Portfolio's assets is
represented by cash, government securities and other securities limited in
respect of any one issuer to 5% of the Portfolio's net assets and to not more
than 10% of the voting securities of any one issuer (other than government
securities) and (ii) not more than 25% of the Portfolio's assets is invested in
the securities (other than government securities or the securities of other
regulated investment companies) of any one issuer.
Income received by a Portfolio from sources within foreign countries
may be subject to withholding and other taxes imposed by such countries. Income
tax treaties between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine in advance the effective
rate of foreign tax to which a Portfolio will be subject, since the amount of
that Portfolio's assets to be invested in various countries is not known.
Shareholders are urged to consult their tax advisors regarding specific
questions as to Federal, state and local taxes.
FUND YIELD AND TOTAL RETURN INFORMATION
The average annual total return for the year ended September 30, 1998,
for the five-year period ended September 30, 1998, and the period from inception
through September 30, 1998, is shown in the following table:
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE FIVE YEARS
ENDED ENDED FOR THE PERIOD
SEPT. 30, 1998 SEPT. 30, 1998 FROM INCEPTION TO
PORTFOLIO (ONE YEAR) (FIVE YEARS) SEPT. 30, 1998(1)
-------------------- ----------------- ----------------------- -----------------
<S> <C> <C> <C>
Equity
Small Company Value.
International Growth
Managed
High-Yield Bond.....
</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 Company Value, Growth, Growth and Income, Small
Company Growth, Capital Appreciation, Equity Income, 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 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, Growth, Growth
and Income, Small Company Growth, Capital Appreciation, Equity Income, and Small
Company Value Portfolios (or as to obligations purchased during that 30-day
period, based on the purchase price
13
<PAGE> 47
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 + I is raised to the 6th power.
I 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 Fund Series. If additional Portfolios are created
by the Board of Trustees, shareholders 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 1940 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.
Independent Accountants. PricewaterhouseCoopers LLP, located at 1100
Campanile Building, 1155 Peachtree Street, Atlanta, Georgia 30309, serves as
independent accountants of the Fund; their services include auditing the annual
financial statements of each Portfolio as well as other related services.
PricewaterhouseCoopers LLP also serves as independent accountants for the
Adviser and its affiliates.
Financial Statements. The following statements are incorporated by
reference: Portfolios of Investment Securities, Statement of Assets and
Liabilities, Statements of Operations, and Statements of Changes in Net Assets.
Custodian. State Street Bank and Trust Company, P.O. Box 8505, Boston,
MA 02266-8505, serves as custodian of the Fund and also acts as transfer agent
and shareholder servicing agent for the Fund.
14
<PAGE> 48
Part B-Annual Report
ENTERPRISE ACCUMULATION TRUST
EQUITY PORTFOLIO
OPCAP ADVISORS
NEW YORK, NEW YORK
The objective of Enterprise Accumulation Trust Equity Portfolio is to seek
long term capital appreciation through investment in a diversified portfolio of
equity securities selected on the basis of a value-oriented approach to
investing.
As the stock market rose in 1997, OpCap Advisors maintained an
above-average cash position because it became somewhat difficult to find
superior companies that were underpriced. As of December 31, 1997, the
portfolio's net assets were allocated 82 percent to common stocks and 18 percent
to cash and cash equivalents. This cash position provides a resource to purchase
quality stocks opportunistically when they become available at favorable prices.
The portfolio's large cash position may serve shareholders well if the Asian
financial crisis continues to buffet the stock market.
The portfolio achieved satisfactory results in 1997. OpCap achieved these
results by being disciplined in its philosophy of investing in superior
companies that have strong competitive positions, generate high cash flow and
effectively deploy that cash to benefit shareholders.
Recently, OpCap established a new position in the common stock of Diageo
PLC, a premier global consumer products company. Diageo was formed through the
recent merger of two consumer products giants -- Grand Metropolitan and
Guinness. The portfolio already owned Grand Metropolitan stock and received
Diageo shares in the merger. OpCap then bought additional Diageo shares. The
company's well-known brands include Burger King, Pillsbury, Guinness and Dom
Perignon, among many others. OpCap liquidated portfolio positions in Warner
Lambert and Progressive Group.
At the end of December, the portfolio's five largest equity positions were
ACE Ltd., EXEL Ltd., Lockheed Martin Corp., Caterpillar, Inc., and Wells Fargo &
Co. Major industry positions were in insurance, banking, machinery,
miscellaneous financial services and transportation.
A tight U.S. job market and the Asian crisis may approximately offset each
other in their impact on the U.S. economy. OpCap does not anticipate inflation
will pick up markedly, or that the U.S. will slide into a recession. Whether the
stock market indexes may rise or fall in 1998 is a matter of conjecture. There
might be a high level of market volatility until these issues sort themselves
out, but volatility creates opportunities to buy stocks at favorable prices.
OpCap continues to invest for the long term in superior businesses that are
reasonably valued, especially those which generate a high level of cash
throughout the economic cycle. By being disciplined in this value approach,
OpCap seeks to control risk and match or exceed its benchmarks regardless of
economic or market trends.
105
<PAGE> 49
CHANGE IN VALUE OF A $10,000 INVESTMENT IN
ENTERPRISE ACCUMULATION TRUST EQUITY PORTFOLIO FROM
INCEPTION (8/1/88) THROUGH 12/31/97
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) EQUITY PORTFOLIO* S&P 500** LIPPER GROWTH***
<S> <C> <C> <C>
8/1/88 10000 10000 10000
12/31/88 10190 10367 12109
12/31/89 12500 13652 15435
12/31/90 12223 13228 14600
12/31/91 16038 17258 19905
12/31/92 18909 18573 21423
12/31/93 20393 20445 23990
12/31/94 21182 20715 23613
12/31/95 29325 28500 31323
12/31/96 36721 35044 36798
12/31/97 46179 46734 47131
</TABLE>
* Enterprise performance numbers do not include variable
account expenses. Remember that historic performance does
not predict future performance. Shares may be worth more or
less at redemption than at original purchase.
** The S&P 500 Index is an unmanaged index which includes 500
companies which tend to be leaders in important industries
within the U.S. economy and excludes any transaction or
holding charges.
*** Lipper Analytical Services is an independent reporting
service that measures the performance of most mutual funds.
The performance results reflect an unmanaged index and are
net of all expenses other than sales charges and redemption
fees.
The views expressed in this report reflect those of the portfolio manager
only through the end of the period of the report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions.
106
<PAGE> 50
ENTERPRISE ACCUMULATION TRUST
EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SHARES OR
COMMON STOCKS -- 82.15% PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------
<S> <C> <C>
ADVERTISING -- 1.55%
Omnicom Group Inc. 190,000 $ 8,051,250
AEROSPACE -- 4.77%
AlliedSignal Inc. 91,840 3,576,020
Boeing Company 38,657 1,891,777
Lockheed Martin Corporation 195,000 19,207,500
-----------
24,675,297
AUTOMOTIVE -- 2.07%
LucasVarity PLC (ADR) 307,000 10,706,625
BANKING -- 7.44%
BankBoston Corporation 107,000 10,051,313
Citicorp 95,544 12,080,344
Wells Fargo & Company 48,362 16,415,876
-----------
38,547,533
CAPITAL GOODS & SERVICES -- 3.46%
General Electric Company 91,088 6,683,582
Textron Inc. 180,000 11,250,000
-----------
17,933,582
CHEMICALS -- 3.43%
Du Pont (E. I.) de Nemours &
Company 120,000 7,207,500
Hercules Inc. 102,202 5,116,488
Monsanto Company 130,000 5,460,000
-----------
17,783,988
COMPUTER HARDWARE -- 0.61%
Adaptec Inc. (a) 85,000 3,155,625
CONSUMER NON-DURABLES -- 2.35%
Avon Products Inc. 122,756 7,534,149
Mattel Inc. 124,875 4,651,594
-----------
12,185,743
DRUGS & MEDICAL PRODUCTS -- 1.80%
Becton, Dickinson & Company 186,158 9,307,900
ELECTRICAL EQUIPMENT -- 1.94%
Avnet Inc. 152,000 10,032,000
ELECTRONICS -- 0.88%
Arrow Electronics Inc. (a) 140,924 4,571,222
ENERGY -- 0.43%
Triton Energy Ltd. (a) 76,004 2,218,367
FOOD & BEVERAGES & TOBACCO -- 2.20%
Diageo PLC 181,000 6,855,375
Sysco Corporation 100,000 4,556,250
-----------
11,411,625
HEALTH CARE -- 2.95%
Tenet Healthcare Corporation (a) 460,700 15,260,688
HOTELS & RESTAURANTS -- 2.64%
McDonald's Corporation 286,000 13,656,500
INSURANCE -- 20.63%
ACE Ltd. 276,000 26,634,000
AFLAC Inc. 185,128 9,464,669
American International Group
Inc. 38,418 4,177,958
Everest Reinsurance Holdings 175,000 7,218,750
EXEL Ltd. 391,348 24,801,679
General Re Corporation 75,000 15,900,000
Mid Ocean Ltd. 160,000 8,680,000
Renaissance Holdings Ltd. 225,000 9,928,125
-----------
106,805,181
<CAPTION>
NUMBER OF SHARES OR
PRINCIPAL AMOUNT VALUE
------------------- -------------------
<S> <C> <C>
MACHINERY -- 6.51%
Caterpillar Inc. 386,000 $ 18,745,125
Dover Corporation 280,000 10,115,000
Tenneco Inc. 123,000 4,858,500
-----------
33,718,625
MISC. FINANCIAL SERVICES -- 5.69%
Countrywide Credit Industries
Inc. 316,088 13,552,273
Federal Home Loan Mortgage
Corporation 379,180 15,901,861
-----------
29,454,134
PUBLISHING -- 1.08%
Donnelley R R & Sons Company 150,000 5,587,500
RETAIL -- 2.74%
May Department Stores Company 269,712 14,210,451
TELECOMMUNICATIONS -- 1.60%
Sprint Corporation 141,000 8,266,125
TRANSPORTATION -- 5.38%
AMR Corporation (a) 69,000 8,866,500
Canadian Pacific Ltd. 270,000 7,357,500
Carnival Corporation 210,000 11,628,750
-----------
27,852,750
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $287,874,088) 425,392,711
COMMERCIAL PAPER -- 15.42%
Ford Motor Credit Company 5.80%
due 01/07/98 20,000,000 19,980,666
General Motors Acceptance
Corporation
5.82% due 01/14/98 20,000,000 19,957,967
American Express Credit
Corporation
5.63% due 01/13/98 20,000,000 19,962,467
IBM Credit Corporation
5.74% due 01/21/98 20,000,000 19,936,222
-----------
TOTAL COMMERCIAL PAPER
(IDENTIFIED COST $79,837,322) 79,837,322
REPURCHASE AGREEMENT -- 2.76%
State Street Bank & Trust Repurchase
Agreement, 5.00% due 01/02/98
Collateral: U.S. Treasury Note
$14,555,000, 5.62% due
11/30/99 Value $14,591,388 14,305,000 14,305,000
-----------
TOTAL REPURCHASE AGREEMENT
(IDENTIFIED COST $14,305,000) 14,305,000
TOTAL INVESTMENTS
(IDENTIFIED COST $382,016,410) $ 519,535,033
OTHER ASSETS LESS LIABILITIES -- (0.33)% (1,731,714)
-----------
NET ASSETS 100% $ 517,803,319
</TABLE>
(a) Non-income producing security
See accompanying notes to financial statements.
107
<PAGE> 51
SMALL CAP PORTFOLIO
GAMCO INVESTORS, INC.
RYE, NEW YORK
The objective of Enterprise Accumulation Trust 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.
The strong portfolio performance in 1997 was the result of GAMCO's sector
bets on cable television and cable television networks, its positioning in niche
industrial companies, its focus on corporate restructurings and some good
old-fashioned stock picking.
Cable television stocks, particularly Cablevision Systems (up 210 percent
in 1997) went from the doghouse to the penthouse for two reasons: Cash flows
exceeded analysts' consensus expectations and cable developed a technology
mantra, with Microsoft's Bill Gates committing $1 billion to the proposition
that coaxial cable would be the highway of choice for internet transmission to
American homes. The cable industry is in great shape except for the political
jawboning over cable rates that is likely to take place in an election year like
1998.
The portfolio's positioning in niche industrial companies also contributed
to returns. These companies reflect the new competitive strengths of American
industry, the prospect of improving earnings and the likelihood that smaller
niche players would be targeted by larger competitors. In 1997, stocks like
Goulds Pumps and Brad Ragan were strong performers on takeovers.
Corporate restructurings helped boost portfolio performance in 1997. The
splitting of CTEC Corporation into Commonwealth Telephone, RCN and Cable
Michigan and Culbro (up 71 percent) into General Cigar and Griffin Land
Resources were good examples of this activity.
The marketplace is in the early stages of the third great wave of mergers
and acquisitions, triggered by General Electric's hostile bid to acquire Kemper
in March 1994. The first wave was in the 1960s, with conglomerates buying
companies to build diversified empires. The second wave in the 1980s was led by
the financial engineers -- leveraged buyout specialists preying on undervalued
companies. The current wave is being propelled by strategic corporate buyers
looking to extend product lines and distribution systems through the acquisition
of companies in related businesses and consolidators, savvy individuals creating
operational and financial leverage by consolidating fragmented industries. GAMCO
believes this wave may be the strongest of all.
For the last five years American companies have been able to boost earnings
through technology-oriented productivity gains and extensive cost cutting.
Progress may continue on these fronts but much of the work has already been
done. Limited pricing flexibility in an increasingly global economy may restrain
profit margins. Many companies may become increasingly dependent on growth
through the acquisition of complementary businesses.
The portfolio has benefited from several deals throughout the year. In
addition to those mentioned above, the portfolio reaped profits on General Host,
Black Entertainment Television, International Family Entertainment and
Fieldcrest Cannon.
Looking ahead to 1998, although sensitive to the impact of labor and
commodities, inflation likely may remain in check. Barring any synchronized
worldwide economic upswing, a relative low probability considering Asian
economic weakness, interest rates may be stable. In general, corporate earnings
growth may be respectable, in the 7-9 percent range. With expectations high,
however, there may be more earnings disappointments in the year ahead. Merger,
acquisition and restructuring activity may remain strong. If this scenario
unfolds, we may see the market in-line with corporate earnings.
GAMCO is concerned about several potential problems: The ripple effect on
U.S. profits from the currency debacle in Southeast Asia and a potential run on
Latin American currencies and economies; an upswing in wage inflation; upward
pressure on interest rates; and the potential for a 1999 lame-duck Clinton
administration. Last, but certainly not least, the level of the market is a
concern. Valuations are high by most measures and the overall equity market does
not appear to have a margin of safety.
GAMCO believes deals may have a favorable impact on many of the portfolio's
holdings. With the lower longer term capital gain rate of 20 percent, we believe
the owner/managers of many companies in the portfolio may be tempted to monetize
their investments. This may be an important source of profits for the portfolio.
108
<PAGE> 52
CHANGE IN VALUE OF A $10,000 INVESTMENT IN
ENTERPRISE ACCUMULATION TRUST SMALL CAP PORTFOLIO
FROM INCEPTION (8/1/88) THROUGH 12/31/97
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) SMALL CAP PORTFOLIO* RUSSELL 1000 VALUE** LIPPER GROWTH***
<S> <C> <C> <C>
8/1/88 10000 10000 10000
12/31/88 10190 10351 10022
12/31/89 12060 12960 12132
12/31/90 10883 11912 10462
12/31/91 16120 14845 15539
12/31/92 19584 16895 17277
12/31/93 23405 19955 20201
12/31/94 23409 19556 20104
12/31/95 26284 27060 26460
12/31/96 29231 32915 30260
12/31/97 42186 44495 34814
</TABLE>
* Enterprise performance numbers do not include variable
account expenses. Remember that historic performance does not
predict future performance. Shares may be worth more or less
at redemption than at original price.
** The Russell 1000 Value Index is an unmanaged index which
excludes any transaction or holding charges. The Russell
1000 Value Index replaces the Russell 2000 Index as the
broad-based comparison to the Small Cap Portfolio as it more
appropriately reflects the securities market in which the
portfolio invests. During 1997, an investment in the above
hypothetical shareholder account increased $12,955 compared
to $6,282 and $11,580 in the Russell 1000 Value Index and
Russell 2000 Index, respectively.
*** Lipper Analytical Services is an independent reporting
service that measures the performance of most mutual funds.
The performance results reflect an unmanaged index and are
net of all expenses other than sales charges and redemption
fees.
The views expressed in this report reflect those of the portfolio manager
only through the end of the period of the report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions.
109
<PAGE> 53
ENTERPRISE ACCUMULATION TRUST
SMALL CAP PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SHARES OR
COMMON STOCKS -- 92.70% PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------
<S> <C> <C>
ADVERTISING -- 0.93%
Ackerley Inc. 200,000 $ 3,387,500
AEROSPACE -- 8.24%
Aeroquip Vickers Inc. 23,000 1,128,437
Ametek Aerospace Products Inc. 88,000 2,376,000
Coltec Industries Inc. (a) 190,000 4,405,625
Curtiss Wright Corporation 90,000 3,268,125
Gencorp Inc. 220,000 5,500,000
Moog Inc. (a) 25,000 873,438
Sequa Corporation (Class A) 70,000 4,554,375
Sequa Corporation (Class B) 28,000 2,072,000
SPS Technologies Inc. 136,000 5,933,000
-------------------
30,111,000
APPAREL & TEXTILES -- 0.38%
Carlyle Inds Inc. 159,759 239,639
Hartmarx Corporation 150,000 1,143,750
-------------------
1,383,389
AUTOMOTIVE -- 9.26%
Clarcor Inc. 145,000 4,295,625
Echlin Inc. 120,000 4,342,500
Federal Mogul Corporation 50,000 2,025,000
Modine Manufacturing Company 225,000 7,678,125
Navistar International
Corporation Inc. (a) 90,000 2,233,125
Scheib Earl Inc. 225,000 1,800,000
Standard Motor Products Inc. 180,000 4,061,250
Superior Inds International Inc. 10,000 268,125
Transpro Inc. 10,000 90,000
Wynns International Inc. 220,000 7,012,500
-------------------
33,806,250
BROADCASTING -- 9.81%
BET Holdings Inc. (a) 144,000 7,866,000
Chris Craft Industries Inc. 150,000 7,846,875
Echostar Communications
Corporation 20,000 335,000
Gray Communications Systems Inc. 34,500 905,625
Gray Communications Systems Inc.
(Class B) 100,000 2,575,000
GST Telecommunications Inc. 190,000 2,256,250
Lin Television Corporation (a) 100,000 5,450,000
Paxson Communications
Corporation 200,000 1,475,000
United International Holdings
Inc. (a) 70,000 805,000
United Television Inc. 61,000 6,336,375
-------------------
35,851,125
CABLE -- 5.72%
AFC Cable Systems Inc. (a) 17,000 505,750
Cable Michigan Inc. 17,500 400,312
Cablevision Systems Corporation
(a) 186,000 17,809,500
Century Communications
Corporation 126,000 1,228,500
Mercom Inc. 56,800 539,600
Rogers Communications Inc. 25,000 121,875
United Video Satellite Group 10,000 287,500
-------------------
20,893,037
CAPITAL GOODS & SERVICES -- 0.05%
AAR Corporation 5,000 193,750
CHEMICALS -- 1.18%
Church & Dwight Inc. 100,000 2,806,250
Lawter International Inc. 140,000 1,522,500
-------------------
4,328,750
COMPUTER SOFTWARE -- 0.13%
Software Artistry Inc. 20,000 486,250
<CAPTION>
NUMBER OF SHARES OR
PRINCIPAL AMOUNT VALUE
------------------- -------------------
<S> <C> <C>
CONSUMER DURABLES -- 0.80%
Envirosource Inc. (a) 450,000 $ 1,350,000
Noel Group 111,500 383,281
Oneida Ltd. 45,000 1,200,938
-------------------
2,934,219
CONSUMER SERVICES -- 0.69%
Berlitz International Inc. (a) 45,000 1,170,000
ITT Educational Services Inc. 28,000 624,750
Mikasa Inc. 50,000 728,125
-------------------
2,522,875
ELECTRICAL EQUIPMENT -- 1.62%
Corecom Inc. 85,000 860,625
Oak Technology 15,000 97,500
Portec Inc. 55,000 797,500
Thomas Industries Inc. 210,000 4,147,500
-------------------
5,903,125
ELECTRONICS -- 0.56%
CTS Corporation 64,000 2,044,000
ENERGY -- 1.46%
Kaneb Services Inc. (a) 180,000 933,750
USX Delhi Group 214,000 4,387,000
-------------------
5,320,750
ENTERTAINMENT & LEISURE -- 8.32%
Ascent Entertainment Group Inc. 150,000 1,556,250
Bull Run Corporation 70,000 269,063
Churchill Downs Inc. 17,000 745,875
Florida Panthers Holdings Inc. 50,000 862,500
Gaylord Entertainment Company
New 210,001 6,706,907
GC Companies Inc. 80,000 3,790,000
HSN Inc. 210,000 10,815,000
Jackpot Enterprises Inc. 235,000 2,658,437
Spectravision Inc. (Class B)
(a)(b) 274,617 0
Ticketmaster Group Inc. 130,000 2,990,000
-------------------
30,394,032
FINANCE -- 1.08%
Pioneer Group Inc. 140,000 3,937,500
FOOD & BEVERAGES & TOBACCO -- 3.50%
Celestial Seasonings Inc. (a) 111,000 3,496,500
Chock Full O Nuts Corporation 162,000 1,134,000
Eskimo Pie Corporation 82,000 943,000
General Cigar Holdings Inc.
(Class A) (a) 10,000 213,125
General Cigar Holdings Inc.
(Class B) (a) 190,000 4,049,375
Tootsie Roll Industries Inc. 47,320 2,957,500
-------------------
12,793,500
HOTELS & RESTAURANTS -- 1.42%
Aztar Corporation (a) 455,000 2,843,750
Trump Hotels & Casino Resorts
Inc. 350,000 2,340,625
-------------------
5,184,375
INSURANCE -- 1.14%
Danielson Holding Corporation 25,000 181,250
Liberty Corporation 85,000 3,973,750
-------------------
4,155,000
MACHINERY -- 4.57%
Ampco Pittsburgh Corporation 110,000 2,151,875
Baldwin Technology Company Inc.
(a) 120,000 600,000
Banner Aerospace Inc. 44,500 492,281
Commercial Intertech Corporation 5,000 103,750
Culligan Water Technologies Inc. 9,000 452,250
Daniel Industries Inc. 30,000 577,500
</TABLE>
110
<PAGE> 54
ENTERPRISE ACCUMULATION TRUST
SMALL CAP PORTFOLIO -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SHARES OR
PRINCIPAL AMOUNT VALUE
------------------- -------------------
<S> <C> <C>
Fairchild Corporation 65,000 $ 1,616,875
Franklin Electric Inc. 20,000 1,285,000
Hach Company 20,000 252,500
Hach Company (Class A) 20,000 187,500
Idex Corporation 32,000 1,116,000
Katy Industries Inc. 160,000 3,260,000
Kollmorgen Corporation 124,000 2,270,750
Nortek Inc. 73,000 1,939,063
Standex International
Corporation 11,000 387,750
-------------------
16,693,094
MANUFACTURING -- 3.46%
Cerion Technologies Inc. (a) 5,000 9,844
Crane Company 70,000 3,036,250
Fedders Corporation 350,000 2,143,750
Industrial Distribution Group
Inc. 12,000 188,250
Oil Dri Corporation of America 120,000 1,980,000
Ralcorp Holdings Inc. New 15,000 254,062
Strattec Security Corporation 19,500 497,250
Trimas Corporation 100,000 3,437,500
Tyler Corporation (a) 200,000 1,100,000
-------------------
12,646,906
METALS & MINING -- 1.81%
Calmat Company 55,000 1,533,125
Handy & Harman 115,000 3,967,500
Park Ohio Industries Inc. 20,000 365,000
Prime Resources Group Inc. 8,300 56,544
TVX Gold Inc. 200,000 675,000
-------------------
6,597,169
MISC. FINANCIAL SERVICES -- 1.39%
Data Broadcasting Corporation 165,000 928,125
Midland Company 65,700 4,139,100
-------------------
5,067,225
PAPER PRODUCTS -- 0.72%
Greif Brothers Corporation 50,000 1,675,000
Nashua Corporation 80,000 940,000
-------------------
2,615,000
PHARMACEUTICALS -- 1.50%
Carter Wallace Inc. 100,000 1,687,500
Ivax Corporation 340,000 2,295,000
Twinlab Corporation 60,000 1,485,000
-------------------
5,467,500
PRINTING & PUBLISHING -- 3.39%
Lee Enterprises Inc. 95,000 2,808,437
Media General Inc. 125,000 5,226,562
Meredith Corporation 45,000 1,605,938
Nelson Thomas Inc. 33,000 381,563
Price Communications Corporation 93,750 802,734
Pulitzer Publishing Company 25,000 1,570,313
-------------------
12,395,547
PUBLISHING -- 0.65%
McClatchy Newspapers Inc. 67,000 1,821,562
Topps Inc. 250,000 554,688
-------------------
2,376,250
REAL ESTATE -- 1.54%
Catellus Development Corporation
(a) 200,000 4,000,000
Griffin Land & Nurseries Inc. 105,000 1,627,500
-------------------
5,627,500
RETAIL -- 4.03%
Brunos Inc. (a) 175,000 360,938
Burlington Coat Factory
Warehouse Corporation 115,000 1,890,312
Giant Foods Inc. 120,000 4,042,500
NUMBER OF SHARES OR
PRINCIPAL AMOUNT VALUE
------------------- -------------------
Lillian Vernon Corporation 80,000 $ 1,330,000
Neiman Marcus Group Inc. 180,000 5,445,000
Phar Mor Inc. (a) 65,000 609,375
Ragan Brad Inc. 30,000 1,050,000
-------------------
14,728,125
SECURITY & INVESTIGATION SERVICES -- 2.80%
Pittway Corporation 37,200 2,590,050
Rollins Inc. 330,000 6,703,125
Wackenhut Corporation 40,000 927,500
-------------------
10,220,675
TELECOMMUNICATIONS -- 4.88%
Aerial Communications Inc. 130,000 926,250
Associated Group Inc. (a) 68,000 2,014,500
Atlantic Tele Network Inc. 10,000 108,750
Centennial Cellular Corporation
(a) 150,000 3,075,000
Commonwealth Telephone
Enterprises 53,333 1,333,325
Comsat Corporation 142,000 3,443,500
RCN Corporation 70,000 2,397,500
Shared Tech Fairchild Inc. 70,000 1,023,750
Telephone & Data Systems Inc. 75,000 3,492,187
-------------------
17,814,762
TRANSPORTATION -- 2.55%
GATX Corporation 110,000 7,981,875
Hudson General Corporation 28,000 1,344,000
-------------------
9,325,875
UTILITIES -- 3.04%
Citizens Utilities Company
Delaware 200,000 1,925,000
Tejas Gas Corporation Delaware 150,000 9,187,500
-------------------
11,112,500
WIRELESS COMMUNICATIONS -- 0.08%
Teligent Inc. 12,000 295,500
-------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $271,806,848) 338,614,055
- ----------------------------------------------------------------------------
U.S. TREASURY BILLS -- 6.87%
- ----------------------------------------------------------------------------
U.S. Treasury Bill
5.08% due 01/29/98 $ 5,032,000 5,012,118
U.S. Treasury Bill 5.09% due
01/22/98 1,000,000 997,031
U.S. Treasury Bill 5.10% due
01/08/98 4,950,000 4,945,091
U.S. Treasury Bill 5.13% due
01/22/98 1,527,000 1,522,430
U.S. Treasury Bill 5.15% due
01/29/98 1,513,000 1,506,940
U.S. Treasury Bill 5.18% due
01/22/98 5,535,000 5,518,275
U.S. Treasury Bill 5.28% due
01/22/98 4,642,000 4,627,703
U.S. Treasury Bill 5.37% due
02/19/98 953,000 946,034
-------------------
TOTAL U.S. TREASURY BILLS
(IDENTIFIED COST $25,075,622) 25,075,622
- ----------------------------------------------------------------------------
</TABLE>
111
<PAGE> 55
ENTERPRISE ACCUMULATION TRUST
SMALL CAP PORTFOLIO -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SHARES OR
REPURCHASE AGREEMENT -- 2.53% PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------
<S> <C> <C>
State Street Bank & Trust
Repurchase Agreement, 5.00%
due 01/02/98 Collateral: U.S.
Treasury Bond $9,410,000,
5.625%, due 11/30/99 Value
$9,433,525 $ 9,245,000 $ 9,245,000
-------------------
TOTAL REPURCHASE AGREEMENT
(IDENTIFIED COST $9,245,000) 9,245,000
- ----------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $306,127,470) 372,934,677
OTHER ASSETS LESS LIABILITIES -- (2.10)% (7,668,856)
-------------------
NET ASSETS 100% $ 365,265,821
===============================================================
</TABLE>
(a) Non-income producing security
(b) In bankruptcy
See accompanying notes to financial statements.
112
<PAGE> 56
MANAGED PORTFOLIO
OPCAP ADVISORS
NEW YORK, NEW YORK
The objective of Enterprise Accumulation Trust Managed Portfolio is to seek
growth of capital over time through investment in a portfolio consisting of
common stocks, bond and cash equivalents, the percentages of which will vary
based on management's assessments of relative investment values.
The recent volatility of the U.S. dollar and other currencies, coupled with
the Asian financial crisis, has caused some investors to be concerned about the
outlook for large U.S. multinational companies. As a result, some of these
companies' stocks fared worse in 1997 than those of more purely domestic
companies. Such companies owned by the portfolio include McDonald's Corp. and
Citicorp.
At December 31, 1997, portfolio assets were allocated 87 percent to common
stocks, 1 percent Treasury notes and bonds and 12 percent to cash and cash
equivalents.
Some of the stocks owned by the portfolio delivered exceptional returns in
1997. Many were in the financial services sector, which in general performed
well. They included, among others, Federal Home Loan Mortgage Corp. (Freddie
Mac), a home mortgage company, and ACE Ltd., a Bermuda based provider of excess
directors and officers liability insurance. Freddie Mac's stock was up 52
percent in the year, while ACE stock rose more than 60 percent.
A few other holdings were disappointing. The market price of McDonald's
Corp., the fast-food chain, increased only about 5 percent in 1997 and the
market price of Boeing Co., the aircraft manufacturer, declined. Boeing's stock
suffered when it became apparent the company was experiencing production
problems. OpCap expects these problems to last through mid-1998, after which
cash flow may accelerate.
Recently, OpCap established a new position in the common stock of Diageo
PLC, a premier global consumer products company. Diageo was formed through the
recent merger of two consumer products giants -- Grand Metropolitan and
Guinness. The portfolio already owned Grand Metropolitan stock and received
Diageo shares in the merger. OpCap then bought additional Diageo shares. The
company's well-known brands include Burger King, Pillsbury, Guinness and Dom
Perignon, among many others. OpCap also established a new position in Dow
Chemical Co., a leading producer of chemicals and plastics. Dow is in the
process of divesting its underperforming businesses to concentrate on those
businesses with the highest returns and strongest prospects. In addition to its
new strategy of focusing on its strengths, Dow is increasing shareholder value
by repurchasing shares. OpCap eliminated the portfolio's holdings in
Tele-Communications Inc., Union Pacific Corp. and Waste Management, Inc.
The portfolio's five largest equity positions at December 31 were Wells
Fargo, Federal Home Loan Mortgage, Citicorp, Dupont E.I. DeNemours & Co., and
Mattel. Major industry positions included the banking sector, miscellaneous
financial services, chemicals, insurance and machinery.
OpCap is a long-term investor in superior businesses that may increase the
value of shareholders' capital through all market conditions. The objectives of
this strategy are to preserve capital and to generate excellent returns for the
portfolio's shareholders. While one may not take lightly the impact of the
current economic difficulties in Asia, we believe each of the multinational
businesses owned by the portfolio may benefit substantially longer term even if
experiencing some short-term weakness. For instance, one of McDonald's biggest
challenges in Asia had been the very high cost of store locations in cities.
These locations are now "on sale" for roughly half the price in many locations.
OpCap believes a tight U.S. job market and the Asian crisis may
approximately offset each other in their impact on the U.S. economy. It is
probable, therefore, that inflation may not pick up markedly, nor may the U.S.
slide into a recession. Whether the stock market indexes may rise or fall in
1998 is a matter of conjecture, however, there may be a high level of market
volatility until these issues sort themselves out. Volatility creates
opportunities to buy stocks at favorable prices.
113
<PAGE> 57
CHANGE IN VALUE OF A $10,000 INVESTMENT IN
ENTERPRISE ACCUMULATION TRUST MANAGED PORTFOLIO
FROM INCEPTION (8/1/88) THROUGH 12/31/97
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) MANAGED PORTFOLIO* S&P 500** LIPPER GROWTH***
<S> <C> <C> <C>
8/1/88 10000 10000 10000
12/31/88 10440 10367 10236
12/31/89 13836 13652 12007
12/31/90 13336 13228 12113
12/31/91 19468 17258 15377
12/31/92 23098 18573 16249
12/31/93 25498 20445 18318
12/31/94 26152 20715 17828
12/31/95 38416 20500 22034
12/31/96 47433 35044 25130
12/31/97 59054 46734 29847
</TABLE>
* Enterprise performance numbers do not include variable
account expenses. Remember that historic performance does not
predict future performance. Shares may be worth more or less
at redemption than at original purchase.
** The S&P 500 Index is an unmanaged index which includes 500
companies which tend to be leaders in important industries
within the U.S. economy and excludes any transaction or
holding charges.
*** Lipper Analytical Services is an independent reporting
service that measures the performance of most mutual funds.
The performance results reflect an unmanaged index and are
net of all expenses other than sales charges and redemption
fees.
The views expressed in this report reflect those of the portfolio manager
only through the end of the period of the report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions.
114
<PAGE> 58
ENTERPRISE ACCUMULATION TRUST
MANAGED PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SHARES OR
COMMON STOCKS -- 86.27% PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------
<S> <C> <C>
AEROSPACE -- 4.33%
Boeing Company 2,100,000 $ 102,768,750
Loral Space &
Communications (a) 600,000 12,862,500
-------------------
115,631,250
BANKING -- 15.65%
BankBoston Corporation 1,000,000 93,937,500
Citicorp 1,000,000 126,437,500
First Empire State Corporation 104,500 48,592,500
Wells Fargo & Company 440,000 149,352,500
-------------------
418,320,000
CHEMICALS -- 9.94%
Dow Chemical Company 550,000 55,825,000
Du Pont (E. I.) de Nemours
& Company 2,050,000 123,128,125
Hercules Inc. 700,000 35,043,750
Monsanto Company 1,103,000 46,326,000
Solutia Inc. 200,000 5,337,500
-------------------
265,660,375
COMPUTER SOFTWARE -- 1.19%
Computer Associates
International Inc. 600,000 31,725,000
CONSUMER NON-DURABLES -- 4.28%
Mattel Inc. 3,075,000 114,543,750
CONSUMER PRODUCTS -- 1.03%
Nike Inc. 700,000 27,475,000
DRUGS & MEDICAL
PRODUCTS -- 2.66%
Becton, Dickinson & Company 1,425,000 71,250,000
ELECTRICAL EQUIPMENT -- 0.38%
Varian Associates Inc. 200,000 10,112,500
ELECTRONICS -- 0.40%
Unitrode Corporation (a) 500,000 10,750,000
ENERGY -- 0.55%
Triton Energy Ltd. (a) 500,000 14,593,750
FINANCE -- 2.00%
American Express Company 600,000 53,550,000
FOOD & BEVERAGES & TOBACCO -- 2.97%
Diageo PLC 2,100,000 79,537,500
HOTELS & RESTAURANTS -- 4.11%
McDonald's Corporation 2,300,000 109,825,000
INSURANCE -- 7.59%
ACE Ltd. 700,000 67,550,000
EXEL Ltd. 1,800,000 114,075,000
Transamerica Corporation 200,000 21,300,000
-------------------
202,925,000
MACHINERY -- 5.78%
Caterpillar Inc. 1,800,000 87,412,500
Tenneco Inc. 1,700,000 67,150,000
-------------------
154,562,500
MISC. FINANCIAL
SERVICES -- 10.11%
Countrywide Credit
Industries Inc. 800,000 34,300,000
Federal Home Loan Mortgage
Corporation 3,450,000 144,684,375
Federal National Mortgage
Association 1,600,000 91,300,000
-------------------
270,284,375
PAPER & FOREST PRODUCTS -- 2.42%
Champion International
Corporation 1,425,000 64,570,313
<CAPTION>
NUMBER OF SHARES OR
PRINCIPAL AMOUNT VALUE
------------------- -------------------
<S> <C> <C>
PRINTING & PUBLISHING -- 2.55%
Time Warner Inc. 1,100,000 $ 68,200,000
REAL ESTATE -- 1.96%
Security Capital Group Inc.
(Class A)(a) 33,156 52,385,902
TECHNOLOGY -- 3.19%
Intel Corporation 400,000 28,100,000
National Semiconductor
Corporation (a) 2,200,000 57,062,500
-------------------
85,162,500
TELECOMMUNICATIONS -- 3.18%
Tele-Communications Inc. New 3,000,000 84,937,500
-------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $1,497,257,680) 2,306,002,215
- --------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 0.01%
- --------------------------------------------------------------------------
RETAIL -- 0.01%
Venture Stores 32,922 358,027
-------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST $1,566,100) 358,027
- --------------------------------------------------------------------------
COMMERCIAL PAPER -- 11.52%
- --------------------------------------------------------------------------
Ameritech Corporation, 5.89%
due 02/04/98 $30,000,000 29,833,117
Banc One Corporation, 5.85%
due 01/05/98 34,167,000 34,144,791
Deere (John) Capital
Corporation
5.55% due 02/09/98 30,000,000 29,819,625
Deere (John) Capital
Corporation
5.70% due 02/09/98 25,000,000 24,845,625
General Electric Capital
Corporation,
5.75% due 02/02/98 50,000,000 49,744,444
Merrill Lynch & Company Inc.
5.79% due 01/29/98 40,000,000 39,819,867
Ford Motor Credit Company
5.72% due 01/29/98 50,000,000 49,777,555
Ford Motor Credit Company
5.75% due 01/12/98 50,000,000 49,912,153
-------------------
TOTAL COMMERCIAL PAPER
(IDENTIFIED COST $307,897,177) 307,897,177
- --------------------------------------------------------------------------
U.S. TREASURY BONDS -- 0.36%
- --------------------------------------------------------------------------
U.S. Treasury Bond
6.25% due 08/15/23 9,300,000 9,571,002
-------------------
TOTAL U.S. TREASURY BONDS
(IDENTIFIED COST $8,682,639) 9,571,002
- --------------------------------------------------------------------------
U.S. TREASURY NOTES -- 0.47%
- --------------------------------------------------------------------------
U.S. Treasury Note
7.875% due 04/15/98 8,370,000 8,429,092
U.S. Treasury Note
7.875% due 08/15/01 3,952,500 4,224,353
-------------------
TOTAL U.S. TREASURY NOTES
(IDENTIFIED COST $12,357,711) 12,653,445
- --------------------------------------------------------------------------
</TABLE>
115
<PAGE> 59
ENTERPRISE ACCUMULATION TRUST
MANAGED PORTFOLIO -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHORT TERM GOVERNMENT NUMBER OF SHARES OR
SECURITIES -- 0.24% PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Bank
Consolidated Discount Note,
5.75% due 01/02/98 $ 6,300,000 $ 6,298,994
-------------------
TOTAL SHORT TERM GOVERNMENT SECURITIES
(IDENTIFIED COST $6,298,994) 6,298,994
- --------------------------------------------------------------------------
State Street Bank & Trust
Repurchase Agreement,
5.00% due 01/02/98
Collateral: U.S. Treasury
Note $18,025,000,
5.625% due 10/31/99
Value $18,159,232 $17,800,000 17,800,000
-------------------
TOTAL REPURCHASE AGREEMENT
(IDENTIFIED COST $17,800,000) 17,800,000
- --------------------------------------------------------------------------
REPURCHASE NUMBER OF SHARES OR
AGREEMENTS -- 0.67% PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $1,851,860,301) $ 2,660,580,860
OTHER ASSETS LESS LIABILITIES -- 0.46% 12,351,186
-------------------
NET ASSETS 100% $ 2,672,932,046
===============================================================
</TABLE>
(a) Non-income Producing
See accompanying notes to financial statements.
116
<PAGE> 60
INTERNATIONAL GROWTH PORTFOLIO
BRINSON PARTNERS, INC.
CHICAGO, ILLINOIS
The objective of Enterprise Accumulation Trust International Growth
Portfolio is to seek capital appreciation, primarily through a diversified
portfolio of non-U.S. equity securities.
For the year ended December 31, 1997, the portfolio showed a slight gain.
Currency allocation and security selection added value, which was partially
offset by market selection. Within markets, the 5 percent allocation to cash
detracted from results as most markets outside of the Pacific region registered
strong double-digit returns. The underweight in Switzerland also detracted but
the portfolio's underweight to the turbulent Pacific region added value. The
overweight of the U.S. dollar and underweight in the Japanese yen and core
European currencies contributed to the positive results. Within Japan, the
underweight position in the poorly performing banks and financial sectors and
the emphasis on blue-chip exporters, pharmaceuticals, electricals, and insurance
companies added value.
Continental European markets were strong performers during the course of
the first 10 months, despite reacting negatively in October to the banking and
currency crisis in Asia, as investors began to incorporate the anticipated
negative consequences of a slowdown in this region's overall demand. Commodity
and basic industry companies, luxury goods and spirits manufacturers, as well as
companies engaged in infrastructure, construction and commodity goods projects
and multinational banks were particularly vulnerable. Despite this, over the
full year, European markets registered high double-digit returns, reflecting an
environment of benign inflation, low interest rates, improving growth and
ongoing company restructuring.
In January 1997, the portfolio held underweights in the four relevant
Southeast Asia countries: Japan, Hong Kong, Malaysia and Singapore. Brinson
Partners gradually increased exposure to Malaysia and Singapore to a modest
overweight, using defensive issues as the market declines there offered
attractive opportunities to gain superior long-term returns. Conversely, in
recognition of a number of vulnerabilities in the Japanese economy, Brinson
reduced exposure there in July and again in early December to the current level
of a 6 percent underweight. Furthermore, the manager reinstated a partial hedge
on the yen in October which has proven beneficial. The portfolio has been
substantially underweight in Japanese banks for a sustained period as they
sorted through their property loan problems of the early '90s and Brinson
further cut that position by selling Sumitomo Trust and Sanwa Bank in November.
The portfolio remains underweight in Hong Kong equities and has fully hedged the
currency exposure.
The Japanese equity market represents the largest underweight in the
portfolio. In the other developed markets, Brinson continues to emphasize New
Zealand and Australia, Germany, Belgium and the United Kingdom. The portfolio is
neutrally positioned in Finland and Spain, and invested but quite underweight in
Hong Kong, Switzerland, the Netherlands, Canada and France. Brinson also
recently established a position in Sweden, which ranks reasonably in relative
attractiveness. The portfolio continues to maintain a 5 percent strategic cash
position reflecting Brinson's view that non-U.S. equity markets are expensive.
In addition to the currency underweights in the Japanese yen and the Hong
Kong dollar, the portfolio maintains an underweight exposure to the overvalued
U.K. pound. These underweights are primarily hedged into the U.S. dollar. The
New Zealand dollar is modestly attractive and represents a small overweight
position. This overweight is the result of allowing the currency to mirror the
overweight market allocation.
The portfolio continues to undergo restructuring in order to reduce its
overall level of risk and in particular, to minimize its exposure to
economically sensitive sectors such as steel. Brinson, however, is finding
attractive valuations in U.K. food manufacturers. They are undergoing extensive
restructuring in the form of cost cutting, personnel reductions and plant
modernizations. Within Japan, the portfolio continues to maintain its
underweight to Japanese banks and overweight to the Japanese electronic
industry. The thrust of Brinson's strategy in Asia (ex-Japan) is to underweight
interest rate and economically sensitive stocks, such as banking, property and
construction. In addition, highly leveraged stocks and stocks with foreign
currency debt have been underweighted. Brinson emphasizes securities with
defensive earnings, such as utilities, consumer non-durables and export carriers
which are less exposed to weakening domestic economies.
As with all international growth funds, Enterprise Accumulation Trust
International Growth Portfolio carries additional risks associated with possibly
less stable foreign securities and currencies, lack of uniform accounting
standards and political instability.
117
<PAGE> 61
CHANGE IN VALUE OF A $10,000 INVESTMENT IN
ENTERPRISE ACCUMULATION TRUST INTERNATIONAL GROWTH PORTFOLIO
FROM INCEPTION (11/30/94) THROUGH 12/31/97
<TABLE>
<CAPTION>
MEASUREMENT PERIOD INTERNATIONAL
(FISCAL YEAR COVERED) PORTFOLIO* EAFE** LIPPER GROWTH***
<S> <C> <C> <C>
11/30/94 10000 10000 10000
12/31/94 10040 10063 9867
12/31/95 11510 11191 10855
12/31/96 12967 11868 12422
12/31/97 13648 12079 13325
</TABLE>
* Enterprise performance numbers does not include variable
account expenses. Remember that historic performance does not
predict future performance. Shares may be worth more or less
at redemption than at original purchase.
** The EAFE Index is an unmanaged index which excludes
transaction or holding charges.
*** Lipper Analytical Services is an independent reporting
service that measures the performance of most mutual funds.
The performance results reflect an unmanaged index and are
net of all expenses other than sales charges and redemption
fees.
The views expressed in this report reflect those of the portfolio manager
only through the end of the period of the report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions.
118
<PAGE> 62
ENTERPRISE ACCUMULATION TRUST
INTERNATIONAL GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SHARES OR
COMMON STOCKS -- 93.10% PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------
<S> <C> <C>
AUSTRALIA -- 4.65%
Amcor Ltd. 18,500 $ 81,387
Boral Ltd. 46,400 117,336
Brambles Industries Ltd. 8,000 158,766
Broken Hill Proprietary 56,900 528,455
Coca Cola Amatil 9,000 67,257
CSR Ltd. 33,000 111,840
David Jones Ltd. 117,000 131,921
Lend Lease Corporation 8,205 160,428
Mayne Nickless Ltd. 16,000 84,571
Mim Holdings Ltd. 56,709 34,743
National Australia Bank 39,000 544,713
News Corporation 84,254 465,109
Pacific Dunlop Ltd. 54,000 114,382
Qantas Airways Ltd. 57,590 101,943
Rio Tinto Ltd. 20,763 242,268
Santos Ltd. 13,000 53,548
Telstra Corporation 20,000 42,233
Westpac Bank Corporation 62,000 396,650
WMC Ltd. 37,000 129,014
Woolworths Ltd. 20,000 66,870
-----------
3,633,434
BELGIUM -- 3.51%
Bruxelles Lambert Groupe 1,050 151,899
Delhaize Le Lion 5,200 263,852
Electrabel 2,070 478,797
Fortis AG 1,828 381,378
Fortis AG (Rts)(a) 128 17
Generale De Banque 500 217,606
Generale De Banque 300 769
Kredietbank 620 260,209
Kredietbank(Vvpr) 13 5,456
Petrofina SA 900 332,177
Society General De Belgique 1,500 137,243
Solvay 3,100 194,947
Tractebel CAP 2,500 217,943
Union Miniere(a) 1,423 98,705
-----------
2,740,998
CANADA -- 3.32%
Agrium Inc 6,200 74,840
Alcan Aluminum Ltd. 4,900 135,097
Bank Montreal 3,600 159,589
Barrick Gold Corporation 3,000 55,946
Canadian National Railway Company 3,400 160,120
Canadian Pacific Ltd. 11,300 304,433
Hudsons Bay Company 3,900 86,921
Imasco Ltd. 1,700 60,670
Imperial Oil Ltd. 4,000 257,514
Magna International Inc. 1,200 75,575
Moore Corporation Ltd. 3,600 55,295
Newbridge Networks Corporation(a) 1,500 52,535
Noranda Inc. 5,100 87,793
Northern Telecom Ltd. 900 80,078
Nova Corporation Alberta 13,100 124,670
Potash Corp Saskatchewan Inc. 1,400 116,581
Royal Bank Canada Montreal 4,600 243,350
Seagram Ltd. 2,800 90,620
Telus Corporation 6,600 145,481
Transcanada Pipelines Ltd. 6,900 154,025
Westcoast Energy Inc. 3,200 74,231
-----------
2,595,364
<CAPTION>
NUMBER OF SHARES OR
PRINCIPAL AMOUNT VALUE
------------------- -------------------
<S> <C> <C>
FINLAND -- 0.73%
Cultor Oyj 700 $ 38,012
Merita A Ltd. 12,900 70,524
Metsa Serla Oy 3,300 25,729
Nokia (AB) Oy 3,700 262,688
Outokumpu Oy 2,600 31,719
Pohjola 500 18,529
Rauma Oy 111 1,731
Sampo Insurance A 1,200 38,966
Upm Kymmene Oy 4,000 79,986
-----------
567,884
FRANCE -- 5.18%
Accor 724 134,611
Alcatel Alsthom 1,476 187,611
Axa Uap 2,620 202,731
Axa Uap Cvg 2,120 2,078
Banque National Paris A 2,800 148,828
Cie Bancaire SA 260 42,120
Cie De St Gobain 1,522 216,218
Cie Fin Paribas 1,500 130,348
CSF Thomson 3,900 122,926
Dexia France 1,259 145,804
Eaux Cie General (Wts) (a) 2,369 1,610
Elf Aquitaine 2,020 234,942
France Telecom 5,700 206,747
Generale Des Eaux 1,669 232,942
Groupe Danone 600 107,170
Lafarge Coppee SA 1,300 85,299
Lagardere 3,700 122,339
Michelin 2,965 149,272
Pechiney 3,216 126,962
Peugeot SA 1,625 204,931
Pinault Printemps Redo 400 213,409
Rhone Poulenc Ord A 4,516 202,295
Seita 4,800 172,269
Soc Generale 1,515 206,414
Suez Lyonnaise Des Eaux 1,774 196,309
Total Company 1,827 198,834
Usinor 3,700 53,424
-----------
4,048,443
GERMANY -- 9.66%
Allianz AG 3,150 815,976
BASF AG 4,200 148,837
Bayer AG 11,400 425,848
Bayer Motoren Werken 400 299,063
Commerzbank AG 9,550 375,853
Continental Ag 8,650 190,892
Daimler Benz AG 4,350 305,161
Deutsche Bank AG 8,900 628,311
Deutsche Telekom 31,200 587,076
Hochtief AG 3,000 118,402
Hoechst AG 3,800 133,078
Man AG 500 144,807
Mannesmann AG 720 363,812
Metro AG 6,072 217,707
Munchener Ruckvers 1,550 584,174
Preussag AG 900 274,660
Rheim-West Elektr AG 6,450 345,994
Schering AG 3,650 352,025
Siemens AG 7,000 414,408
Veba AG 7,550 514,119
Volkswagen AG 550 309,403
-----------
7,549,606
</TABLE>
119
<PAGE> 63
ENTERPRISE ACCUMULATION TRUST
INTERNATIONAL GROWTH PORTFOLIO -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SHARES OR
PRINCIPAL AMOUNT VALUE
------------------- -------------------
<S> <C> <C>
HONG KONG -- 1.02%
Cheung Kong Holdings 21,000 $ 137,534
Citic Pacific Limited 11,000 43,722
CLP Holdings 12,000 66,589
Hang Seng Bank 9,000 86,818
Hong Kong & China Gas 52,000 100,658
Hong Kong Telecommunications 53,600 110,327
Hutchison Whampoa 24,000 150,523
Sun Hung Kai Properties 10,000 69,686
Swire Pacific 6,000 32,907
-----------
798,764
IRELAND -- 0.28%
Smurfit (Jefferson) Group 78,000 216,514
ITALY -- 4.01%
Assic Generali 12,670 311,199
Banca Commerciale Italiana 33,000 114,726
Credito Italiano 63,000 194,271
Danieli Di Risp 19,000 68,310
Edison SPA 16,000 96,778
Eni ADS 3,300 188,306
Eni Ord 51,000 289,163
IMI 16,900 200,622
INA 61,000 123,621
Mediobanca SPA 7,000 54,963
Montedison SPA 214,580 192,746
Rinascente LA 19,800 147,744
Rinascente (Wts) (a) 400 484
Rinascente Savings Risp 18,000 67,157
SAI Di Risp 20,000 88,185
Soc Italiano 23,500 96,976
Telecom Italia Mobile 41,000 189,240
Telecom Italia Mobile Di Risp 100,000 284,341
Telecom Italia Spa 17,775 113,543
Telecom Italia Spa Risp 71,500 315,263
-----------
3,137,638
JAPAN -- 18.73%
Amada Company 31,000 115,149
Asahi Glass Company 20,000 94,968
Bank of Tokyo/Mitsubishi 28,000 386,000
Canon Inc. 25,000 582,063
Canon Sales 10,000 114,115
Citizen Watch Company 29,000 194,340
Dai Nippon Printng 28,000 525,389
Daiichi Pharmaceutical 25,000 281,458
Daikin Kogyo 31,000 116,811
Daiwa House Industries Co. 16,000 84,552
Denso Corporation 17,000 305,966
Fanuc Co. 12,800 484,277
Fujitsu 18,000 193,000
Hitachi 61,000 434,480
Honda Motor Company 10,000 366,853
Hoya Corporation 4,000 125,603
Inax Corporation 22,000 63,859
Ito Yokado Company 12,000 611,166
Kaneka Corporation 31,000 139,841
Keio Teito Electric Rail 35,000 133,760
Kintetsu 36,000 192,173
Kirin Brewery Company 36,000 261,929
Kokuyo Company 10,000 172,321
Kuraray Company Ltd. 37,000 306,043
Kyocera Corporation 4,100 185,893
Marui Company 16,000 248,755
Matsushita Electric Ind 46,000 672,896
Mitsubishi Paper 39,000 54,660
NGK Insulators 50,000 444,206
Nintendo 3,100 303,898
Nippon Meat Packer 20,000 272,651
NUMBER OF SHARES OR
PRINCIPAL AMOUNT VALUE
------------------- -------------------
Nippon Steel Corporation 25,000 $ 36,953
Okumura 36,000 85,471
Osaka Gas Corporation 59,000 134,656
Sankyo Pharmaceutical Company 22,000 497,051
Secom Company 7,000 447,117
Seino Transport 21,000 104,702
Sekisui House 48,000 308,432
Sony Corporation 6,700 595,236
Sumitomo Bank 33,000 376,580
Sumitomo Chemical Industries 36,000 82,714
Sumitomo Electric Industries 25,000 340,813
Takeda Chemical Industries 19,000 541,319
TDK Corporation 5,000 376,809
Tokio Marine & Fire 28,000 317,378
Tokyo Electric Power 7,900 143,999
Tokyo Steel Manufacturing 16,000 54,040
Tonen Corporation 22,000 118,618
Toray Industries Inc. 110,000 492,839
Toshiba Corporation 72,000 299,426
Toyo Suisan Kaisha 18,000 124,623
Toyota Motor Corporation 19,000 544,229
Yamazaki Baking Company 15,000 145,899
-----------
14,637,979
MALAYSIA -- 1.59%
Hume Industries Berhad 30,000 31,469
Kuala Lumpur Kepong 65,000 139,542
Land & General Holdings 62,000 11,477
Malayan Banking Berhad 30,000 87,158
Malaysia International Shipping 26,000 38,103
Nestle Malaysia Berhad 16,000 74,045
New Straits Times Press 33,000 40,895
Perusahaan Otomobl 19,000 18,563
Petronas Gas Berha 30,000 68,261
Public Bank Berhad Foreign 24,000 8,268
Public Bank Berhad Local 31,000 9,644
Public Bank FGN (Rts) 4,800 0
Resorts World Berhad 27,000 45,469
Rothmans of Pall Mall 17,000 132,215
Sime Darby Berhad 93,000 89,425
Telekom Malaysia 67,500 199,576
Tenaga Nasional 80,000 170,716
UMW Holdings Berhad 10,000 7,585
United Engineers (Malay) 22,000 18,326
YTL Corporation Berhad 36,000 48,592
YTL Power International 800 615
-----------
1,239,944
NETHERLANDS -- 4.55%
ABN Amro Holdings NV 14,709 286,541
Akzo Nobel NV 550 94,829
Elsevier NV 17,200 278,234
Heineken NV 1,300 226,321
Hoogovens & Staalf 1,562 64,016
Ing NTFL 8,515 358,632
KLM 2,834 104,826
Kon Ptt Nederland 8,824 368,165
Philips Electronics 4,500 269,869
Royal Dutch Petroleum 20,100 1,103,312
Unilever NV Cva 6,480 399,477
-----------
3,554,222
NEW ZEALAND -- 3.23%
Brierley Investment NPV 519,000 370,670
Carter Holt Harvey NPV 179,000 276,471
Fletcher Challenge Building
Division NPV 58,250 119,057
Fletcher Challenge Energy
Division NPV 63,250 221,458
</TABLE>
120
<PAGE> 64
ENTERPRISE ACCUMULATION TRUST
INTERNATIONAL GROWTH PORTFOLIO -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SHARES OR
PRINCIPAL AMOUNT VALUE
------------------- -------------------
<S> <C> <C>
Fletcher Challenge Forest
Division NPV 123,958 $ 102,926
Fletcher Challenge Paper Division
NPV 117,500 153,509
Lion Nathan Limited 37,000 82,928
Telecom Corporation of New
Zealand 231,000 1,119,987
Telecom Corporation of New
Zealand (ADR) 2,000 77,500
-----------
2,524,506
SINGAPORE -- 1.85%
City Developments 17,000 78,671
DBS Lands 38,000 58,167
Elec & Eltek International 4,400 20,152
Foreign Reg Bank Singapore 17,000 145,239
Fraser & Neave 7,000 30,317
Hotel Properties 61,000 39,810
Keppel Corporation 20,000 57,431
Keppel Land Ltd. 21,000 28,905
Natsteel Ltd. 13,000 17,585
Overseas Chinese Bank 29,600 172,103
Singapore Airlines 31,000 202,314
Singapore Press Holdings 7,000 87,630
Singapore Telecom 145,000 270,128
United Overseas Bank 33,000 183,061
Venture Manufacturing 9,000 25,096
Wing Tai Holdings 22,000 25,714
-----------
1,442,323
SPAIN -- 2.52%
Acerinox SA 200 29,629
Banco Bilbao Vizcaya 6,800 220,046
Banco Central Hispanoamericano 5,940 144,650
Banco Popular Esp 1,920 134,217
Banco Santander 5,400 180,414
Corp Mapfre Sa 2,400 63,643
Empresa Nac Electricid 12,900 229,042
Formento di Const Y Contra 2,800 106,597
Gas Natural Sdg 2,500 129,636
Iberdrola SA 13,800 181,615
Repsol SA 2,900 123,728
Repsol SA (ADR) 1,000 42,562
Tabacalera SA 300 24,319
Telefonica De Espana 8,700 248,408
Vallehermoso SA 1,600 49,045
Viscofan Envoltura 2,600 65,277
-----------
1,972,828
SWEDEN -- 1.61%
Abb Ab 5,700 67,482
Astra Ab 13,200 228,592
Electrolux Ab 900 62,457
Ericsson Lm Tel 4,600 172,937
Hennes And Mauritz 3,100 136,652
Nordbanken Holding 30,400 171,912
Securitas Ab 1,900 57,431
Skanska Ab 1,700 69,692
Svenska Handelsbanken 2,700 93,345
Swedish Match 21,000 70,089
Volvo Ab 4,900 131,450
-----------
1,262,039
SWITZERLAND -- 4.74%
Abb Ag Series A 70 87,907
Credit Suisse Group 2,361 365,170
Holderbk Fn Glarus 123 100,339
Nestle SA 290 434,444
Novartis AG 591 958,575
NUMBER OF SHARES OR
PRINCIPAL AMOUNT VALUE
------------------- -------------------
Roche Holdings AG 67 $ 665,094
Sairgroup (a) 75 102,655
Schw Ruckversicher 168 314,109
Sulzer Ag 128 81,117
Swiss Life 163 127,950
UBS 172 248,607
Zurich Versicharung 463 220,537
-----------
3,706,504
UNITED KINGDOM -- 21.92%
Abbey National 19,000 342,034
Barclays PLC 11,000 292,836
Bass 11,500 178,884
BAT Industries 92,200 840,787
BG 97,470 438,659
BG (B Shares) 8,000 3,811
Billiton PLC 73,000 187,048
Booker PLC 44,000 231,264
British Energy 46,000 319,598
British Petroleum 55,423 733,165
British Sky Broadcasting 25,000 187,245
British Steel 75,000 161,376
British Telecom 86,000 677,642
BTR PLC 38,000 114,844
Cable & Wireless 21,000 184,535
Cadbury Schweppes 34,000 343,156
Centrica 79,000 116,133
Charter 18,357 225,834
Coats Viyella PLC 75,900 113,446
Diageo PLC 41,600 380,587
FKI 93,500 293,326
General Electric Company 82,900 537,164
Glaxo Wellcome 49,200 1,172,956
Great Universal Stores 31,000 390,537
Greenalls Group 25,000 179,854
Hanson PLC 31,650 141,205
Hillsdown Holdings 97,000 235,797
House of Fraser PLC 104,000 343,348
HSBC Holdings 21,500 557,957
Inchcape 52,000 139,218
Legal & General 47,500 415,060
Lloyds TSB Group PLC 71,264 927,115
Marks & Spencer 56,500 558,747
Mirror Group 100,000 320,287
National Westminster Bank 19,700 327,455
Northern Foods 56,000 242,827
Peninsular and Oriental Steam Nav 35,500 403,788
Reckitt & Colman 10,700 167,839
Reuters Holdings 21,000 229,375
Rio Tinto Corporation 21,100 260,099
RJB Mining 55,000 114,729
Royal Sun Alliance Ins 26,738 269,212
Scottish Hydro 23,400 192,941
Sears 137,000 119,262
Sedgwick Group 90,000 209,912
Smithkline Beecham 51,000 525,641
Tate & Lyle PLC 24,000 197,494
TESCO 37,000 305,102
Thames Water 26,000 387,121
Unilever 22,200 190,959
Vodafone Group 51,300 370,745
Williams Holdings 59,000 327,547
-----------
17,127,503
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST $71,447,839) 72,756,493
</TABLE>
121
<PAGE> 65
ENTERPRISE ACCUMULATION TRUST
INTERNATIONAL GROWTH PORTFOLIO -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SHARES OR
PREFERRED STOCK -- 0.68% PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------
<S> <C> <C>
AUSTRALIA -- 0.15%
News Corporation 24,187 $ 119,711
GERMANY -- 0.29%
Henkel Kgaa 3,600 227,132
ITALY -- 0.24%
Fiat SPA 119,600 182,544
-----------
TOTAL PREFERRED STOCK
(IDENTIFIED COST $474,888) 529,387
COMMERCIAL PAPER -- 1.92%
Arco Coal Australia 5.90%
due 01/23/98 1,000,000 996,394
General Electric Capital
Corporation Discount, 5.78%
due 01/14/98 500,000 498,956
-----------
TOTAL COMMERCIAL PAPER
(IDENTIFIED COST $1,495,350) 1,495,350
State Street Bank & Trust
Repurchase Agreement, 4.00%
due 01/02/98
Collateral: U.S. Treasury
Note $1,440,000, 8.5% due
02/15/20 Value $1,909,351 $ 1,870,000 1,870,000
-----------
TOTAL REPURCHASE AGREEMENTS
(IDENTIFIED COST $1,870,000) 1,870,000
TOTAL INVESTMENTS
(IDENTIFIED COST $75,288,077) $ 76,651,230
OTHER ASSETS LESS LIABILITIES -- 1.91% 1,496,273
-----------
NET ASSETS 100% $ 78,147,503
</TABLE>
(a) Non-income Producing
(Rts) Rights
(Wts) Warrants
ADR American Depository Receipts
ADS American Depository Shares
See accompanying notes to financial statements.
122
<PAGE> 66
HIGH-YIELD BOND PORTFOLIO
CAYWOOD-SCHOLL CAPITAL MANAGEMENT
SAN DIEGO, CALIFORNIA
The objective of Enterprise Accumulation Trust High-Yield Bond portfolio is
to seek maximum current income, primarily from debt securities that are rated Ba
or lower by Moody's Investors Service or BB or lower by Standard & Poor's.
The 1997 high-yield new issuance was a record $125.1 billion. For
comparison 1996 issuance was $73.4 billion. The estimated size of the high yield
market is now $454 billion. Because spreads did not widen, 1997 was also a
record year in terms of new money committed to the high-yield market. Mutual
fund inflows reached a new high at $17.3 billion, coupon interest was estimated
at $32 billion, and structured products contributed an estimated $5 to $8
billion. Accordingly, it appears that significant new funds were invested by
financial institutions, pension funds and foreign buyers. As a result, for the
majority of the year demand exceeded supply, causing spreads to tighten in
virtually all sectors.
Given the strong economic conditions that prevailed through 1997 and the
substantial amounts of liquidity in the U.S. financial system, it is not
surprising that defaults among high-yield issuers remained below their historic
averages.
However, 1997 also saw the decoupling of the U.S. Treasury and stock
markets creating greater uncertainty in the high-yield market place. The
decoupling is the result of the economic crisis in Asia, with both markets
forecasting slower economic conditions. The magnitude of the impact and its
duration are of great importance to the high-yield market.
The consensus is the Federal Reserve is on hold or possibly considering an
ease in interest rates. Therefore the interest rate picture is at worst benign
or possibly constructive for the fixed income market. Key determinants for the
market in 1998 may be the extent the domestic economy slows in reaction to the
developments in Asia and the continuation of strong corporate cash flow. A
significant slowdown in economic activity would likely result in a decline in
equity prices. How sharp the decline is and its impact on the stock market may
be important. A relatively stable stock market, combined with 2.0 percent Gross
Domestic Product growth may lead to a stable high-yield market. As long as
default rates remain below or near their historic average the technical picture
may remain sound.
To date the impact of the Asia crisis upon the high-yield market has been
minimal. The technical balance of the market is favorable and is expected to
remain so for the short term, so long as the stock market does not drop
substantially from its present levels. If the U.S. stock market begins to
discount significantly slower economic conditions this would likely result in
wider spreads in the high-yield market. As always, Caywood-Scholl may emphasize
selectivity in the investment process, looking for those securities which offer
the most attractive risk-adjusted returns.
Like all investments in high-yield bond funds, an investment in the
High-Yield Bond Portfolio carries an increased risk that issuers of securities
in which the High-Yield Bond Portfolio invests may default in the payment of
principal and interest as compared to the risk of such defaults in other income
portfolios. In addition, an investment in the High-Yield Bond Portfolio may be
subject to certain other risks relating to the market price, relative liquidity
in the secondary market and sensitivity to interest rate and economic changes on
the noninvestment grade securities in which the High-Yield Bond Portfolio
invests that are higher than may be associated with higher rated, investment
grade securities.
123
<PAGE> 67
CHANGE IN VALUE OF A $10,000 INVESTMENT IN
ENTERPRISE ACCUMULATION TRUST HIGH-YIELD BOND PORTFOLIO
FROM INCEPTION (11/30/94) THROUGH 12/31/97
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) HIGH-YIELD BOND* LEHMAN BB** LIPPER GROWTH***
<S> <C> <C> <C>
11/30/94 10000 10000 10000
12/31/94 10111 10079 10025
12/31/95 11788 12280 11767
12/31/96 13312 13376 13257
12/31/97 15093 15066 14969
</TABLE>
* Enterprise performance numbers does not include variable
account expenses. Remember that historic performance does not
predict future performance. Shares may be worth more or less
at redemption than at original purchase.
** The Lehman BB Index is an unmanaged index which excludes
transaction and holding charges.
*** Lipper Analytical Services is an independent reporting
service that measures the performance of most mutual funds.
The performance results reflect an unmanaged index and are
net of all expenses other than sales charges and redemption
fees.
The views expressed in this report reflect those of the portfolio manager
only through the end of the period of the report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions.
124
<PAGE> 68
ENTERPRISE ACCUMULATION TRUST
HIGH-YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
CORPORATE BONDS, CONVERTIBLE
SECURITIES & COMMON NUMBER OF SHARES OR
STOCKS -- 80.20% PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------
<S> <C> <C>
ADVERTISING -- 0.82%
Universal Outdoor Inc.
9.75% due 10/15/06 $ 500,000 $ 561,688
APPAREL & TEXTILES -- 1.21%
Brazos Sportswear Inc. 10.50% due
07/01/07 300,000 299,250
Carter William Company Acquired
10.375% due 12/01/06 500,000 527,500
-----------
826,750
AUTOMOTIVE -- 0.79%
United Auto Group Inc. 11.00% due
07/15/07 550,000 537,625
BANKING -- 2.90%
Bay View Capital Corporation
Delaware, 9.125% due 08/15/07 450,000 462,375
Imperial Credit Industries Inc.
9.875% due 01/15/07 550,000 540,375
Southern Pacific Funding
Corporation, 11.50% due
11/01/04 250,000 248,750
Western Financial Savings Bank
Orange California, 8.50% due
07/01/03 750,000 732,187
-----------
1,983,687
BROADCASTING -- 7.91%
Chancellor Radio Broadcasting
8.125% due 12/15/07 750,000 735,000
Echostar Communications
Corporation, Zero Coupon due
06/01/04 800,000 731,000
Fox Kids Worldwide Inc. Zero
Coupon due 11/01/07 750,000 445,312
Fox Kids Worldwide Inc. 9.25% due
11/01/07 600,000 580,500
Fox/Liberty Media Inc. 8.875% due
08/15/07 700,000 698,250
Fox/Liberty Networks Llc/Fln Zero
Coupon due 08/15/07 200,000 128,250
Grupo Televisa S A De C V 11.875%
due 05/15/06 100,000 113,375
Rogers Communications Inc 8.875%
due 07/15/07 500,000 500,000
Rogers Communications Inc. 9.125%
due 01/15/06 200,000 203,000
Sinclair Broadcast Group Inc.
8.75% due 12/15/07 600,000 604,500
TCI Satellite Entertainment Inc.
Zero Coupon due 02/15/07 1,000,000 668,750
-----------
5,407,937
BUILDING & CONSTRUCTION -- 1.11%
Building Materials Corporation
America, 8.00% due 10/15/07 400,000 401,000
Nortek Inc. 9.125% due 09/01/07 350,000 357,875
-----------
758,875
<CAPTION>
NUMBER OF SHARES OR
PRINCIPAL AMOUNT VALUE
------------------- -------------------
<S> <C> <C>
CABLE -- 4.18%
Adelphia Communications
Corporation, 9.25% due 10/01/02 $ 250,000 $ 255,000
Adelphia Communications
Corporation, 10.50% due
07/15/04 850,000 915,875
Cablevision Systems Corporation
7.875% due 12/15/07 350,000 357,346
Century Communications
Corporation, 9.50% due 03/01/05 400,000 421,000
TCI Communications Inc. 6.875%
due 02/15/06 900,000 905,157
-----------
2,854,378
CHEMICALS -- 1.45%
General Chemical Corporation
9.25% due 08/15/03 250,000 259,375
Huntsman Polymers Corporation
11.75% due 12/01/04 250,000 280,313
Pioneer Amers Acquisition
Corporation, 9.25% due 06/15/07 450,000 450,000
-----------
989,688
COMMUNICATIONS -- 4.83%
Globalstar L P 10.75% due
11/01/04 400,000 391,000
Globalstar L P 11.375% due
02/15/04 600,000 604,500
Globalstar Telecommunications
(Wts) 450 51,300
Iridium Capital Corporation
13.00% due 07/15/05 600,000 630,750
Iridium Capital Corporation
14.00% due 07/15/05 800,000 876,000
Iridium World Communications
(Wts) 450 63,000
Orion Network Systems Inc. Zero
Coupon due 01/15/07 900,000 688,875
-----------
3,305,425
CONSUMER PRODUCTS -- 2.44%
CLN Holdings Inc. Zero Coupon due
05/15/01 400,000 266,000
E & S Holdings Corporation
10.375% due 10/01/06 250,000 231,250
French Fragrances Inc. 10.375%
due 05/15/07 350,000 368,375
Herff Jones Inc. 11.00% due
08/15/05 350,000 378,875
Sealy Mattress Company Zero
Coupon due 12/15/07 700,000 424,375
-----------
1,668,875
</TABLE>
125
<PAGE> 69
ENTERPRISE ACCUMULATION TRUST
HIGH-YIELD BOND PORTFOLIO -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SHARES OR
PRINCIPAL AMOUNT VALUE
------------------- -------------------
<S> <C> <C>
CONTAINERS/PACKAGING -- 5.20%
Huntsman Packaging Corporation
9.125% due 10/01/07 $ 150,000 $ 154,500
Owens Illinois Inc. 8.10% due
05/15/07 1,550,000 1,659,368
Plastic Containers Inc. 10.00%
due 12/15/06 100,000 105,250
Printpack Inc. 9.875% due
08/15/04 500,000 531,250
Printpack Inc. 10.625% due
08/15/06 250,000 265,625
Stone Container Corporation
10.75% due 10/01/02 200,000 206,500
United States Can Corporation
10.125% due 10/15/06 600,000 633,000
-----------
3,555,493
CRUDE & PETROLEUM -- 0.37%
Clark Refining & Marketing Inc.
8.875% due 11/15/07 250,000 251,875
ENERGY -- 1.94%
Canadian First Oil Ltd 8.75% due
09/15/07 300,000 303,375
Chesapeake Energy Corporation
9.125% due 04/15/06 150,000 154,500
Clark USA Inc. 10.875% due
12/01/05 800,000 871,000
-----------
1,328,875
ENTERTAINMENT & LEISURE -- 1.90%
AMF Group Inc. 10.875% due
03/15/06 850,000 931,813
Cobblestone Golf Group Inc.
11.50% due 06/01/03 200,000 217,500
Livent Inc. 9.375% due 10/15/04 150,000 150,000
-----------
1,299,313
FOOD & BEVERAGES & TOBACCO -- 6.77%
Jitney Jungle Stores America
Inc., 10.375% due 09/15/07 700,000 724,500
NBTY Inc. 8.625% due 09/15/07 800,000 800,000
North Atlantic Trading Inc.
11.00% due 06/15/04 350,000 366,625
Ralphs Grocery Company 10.45% due
06/15/04 450,000 506,250
Ralphs Grocery Company 11.00% due
06/15/05 450,000 513,000
Randalls Food Markets Inc. 9.375%
due 07/01/07 900,000 927,000
Shoppers Food Warehouse
Corporation, 9.75% due 06/15/04 350,000 357,875
Twin Laboratories Inc. 10.25% due
05/15/06 400,000 430,000
-----------
4,625,250
GAMING -- 0.79%
Trump Atlantic City Associates
11.25% due 05/01/06 550,000 539,000
HEALTH CARE -- 4.61%
Dade International Inc. 11.125%
due 05/01/06 350,000 389,375
Kinetic Concepts Inc. 9.625% due
11/01/07 250,000 253,750
Mariner Health Group Inc.
9.50% due 04/01/06 200,000 208,000
NUMBER OF SHARES OR
PRINCIPAL AMOUNT VALUE
------------------- -------------------
Maxxim Medical Inc. 10.50% due
08/01/06 $ 650,000 $ 703,625
Mediq Inc. 7.50% due 07/15/03 575,000 588,656
Quest Diagnostics Inc. 10.75% due
12/15/06 600,000 657,000
Vencor Inc. 8.625% due 07/15/07 350,000 350,000
-----------
3,150,406
HOTELS & RESTAURANTS -- 2.73%
AFC Enterprises Inc. 10.25% due
05/15/07 450,000 474,750
Apple South Inc. 9.75% due
06/01/06 150,000 159,000
Felcor Suites Limited
Partnership, 7.625% due
10/01/07 250,000 252,685
Foodmaker Corporation 9.75% due
11/01/03 250,000 252,500
Hammon John Q. Hotels 8.875% due
02/15/04 250,000 255,313
HMH Properties Inc. 8.875% due
07/15/07 450,000 473,625
-----------
1,867,873
MACHINERY -- 2.01%
Axiohm Inc. 9.75% due 10/01/07 500,000 507,500
Bucyrus International Inc. 9.75%
due 09/15/07 350,000 353,500
Park Ohio Industries Inc. 9.25%
due 12/01/07 500,000 511,875
-----------
1,372,875
MEDICAL INSTRUMENTS -- 0.38%
Physician Sales & Service Inc.
8.50% due 10/01/07 250,000 256,875
METALS & MINING -- 2.52%
Kaiser Aluminum & Chemical
Corporation, 10.875% due
10/15/06 250,000 271,875
Oregon Steel Mills Inc. 11.00%
due 06/15/03 450,000 486,000
WCI Steel Inc. 10.00% due
12/01/04 700,000 717,500
Wheeling Pittsburgh Corporation
9.25% due 11/15/07 250,000 245,000
-----------
1,720,375
MISC. FINANCIAL SERVICES -- 0.30%
DVI Inc. 9.875% due 02/01/04 200,000 208,000
OIL SERVICES -- 0.47%
Pride Petroleum Services Inc.
9.375% due 05/01/07 300,000 322,500
PAGING SERVICES -- 0.01%
Pagemart Nationwide Inc. 875 8,750
PAPER & FOREST PRODUCTS -- 0.31%
Maxxam Group Inc. 11.25% due
08/01/03 200,000 212,000
PHARMACEUTICALS -- 0.81%
Pharmaceutical Fine Chemicals
9.75% due 11/15/07 550,000 556,875
PRINTING & PUBLISHING -- 0.55%
Von Hoffmann Press Inc. 10.375%
due 05/15/07 350,000 373,188
</TABLE>
126
<PAGE> 70
ENTERPRISE ACCUMULATION TRUST
HIGH-YIELD BOND PORTFOLIO -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SHARES OR
PRINCIPAL AMOUNT VALUE
------------------- -------------------
<S> <C> <C>
PUBLISHING -- 0.76%
American Lawyer Media Inc. 9.75%
due 12/15/07 $ 250,000 $ 253,750
Time Warner Inc. 7.75% due
06/15/05 250,000 265,000
-----------
518,750
REAL ESTATE -- 0.55%
Crown Castle International
Corporation, Zero Coupon due
11/15/07 600,000 378,000
RESTAURANTS -- 0.37%
Perkins Family Restaurants L P
10.125% due 12/15/07 250,000 253,125
RETAIL -- 1.53%
Ann Taylor Inc. 8.75% due
06/15/00 200,000 199,750
Cole National Group Inc. 8.625%
due 08/15/07 700,000 696,500
Michaels Stores Inc. 6.75% due
01/15/03 150,000 153,000
-----------
1,049,250
TELECOMMUNICATIONS -- 15.20%
American Communications Services
Inc., Zero Coupon due 11/01/05 800,000 640,000
American Communications Services
Inc. (Wts) (a) 11/01/05 300 28,200
Call-Net Telecommunications Zero
Coupon due 08/15/07 300,000 205,125
CCPR Services Inc. 10.00% due
02/01/07 650,000 648,375
Comcast Cellular Holdings Inc.
9.50% due 05/01/07 1,100,000 1,149,500
ICG Holdings Inc. Zero Coupon due
05/01/06 1,000,000 750,000
Intermedia Communications Inc.
8.50% due 01/15/08 400,000 400,000
Intermedia Communications Inc.
8.875% due 11/01/07 200,000 206,000
McLeodUSA Inc. Zero Coupon due
03/01/07 550,000 399,437
Metronet Communications Corp.
Zero Coupon due 11/01/07 500,000 305,625
Metronet Communications
Corporation, 12.00% due
08/15/07 100,000 115,500
Nextel Communications Inc. Zero
Coupon due 09/15/07 1,300,000 822,250
Nextel Communications Inc. Zero
Coupon due 10/31/07 500,000 304,375
Nextlink Communications Inc.
9.625% due 10/01/07 350,000 359,625
RCN Corporation Zero Coupon due
10/15/07 700,000 440,125
RCN Corporation 10.00% due
10/15/07 250,000 257,500
Rogers Cantel Inc 8.80% due
10/01/07 1,050,000 1,047,375
Sprint Spectrum L P Zero Coupon
due 08/15/06 800,000 626,000
Sprint Spectrum L P 11.00% due
08/15/06 400,000 449,000
Teleport Communications Group
Zero Coupon due 07/01/07 1,100,000 902,000
Winstar Equipment Corporation
12.50% due 03/15/04 300,000 333,750
-----------
10,389,762
NUMBER OF SHARES OR
PRINCIPAL AMOUNT VALUE
------------------- -------------------
TEXTILES -- 0.73%
Polymer Group Inc. 9.00% due
07/01/07 $ 500,000 $ 498,750
TRANSPORTATION -- 0.78%
Atlas Air Inc. 12.25% due
12/01/02 200,000 223,750
Eletson Holdings Inc. 9.25% due
11/15/03 300,000 306,375
-----------
530,125
UTILITIES -- 0.81%
Calenergy Inc. 7.63% due 10/15/07 100,000 100,491
Ferrellgas Partners L P 9.375%
due 06/15/06 300,000 317,250
Midland Funding Corporation
10.33% due 07/23/02 128,460 138,095
-----------
555,836
WASTE MANAGEMENT -- 0.16%
Allied Waste North America Inc.
10.25% due 12/01/06 100,000 109,375
-----------
TOTAL CORPORATE BONDS, CONVERTIBLE SECURITIES & COMMON
STOCKS
(IDENTIFIED COST $53,015,744) 54,827,424
PREFERRED STOCK -- 0.29%
TELECOMMUNICATIONS -- 0.29%
Intermedia Communications Inc. 7,500 197,813
-----------
TOTAL PREFERRED STOCK
(IDENTIFIED COST $187,500) 197,813
FOREIGN BONDS -- 9.83%
APPAREL & TEXTILES -- 0.38%
Reliance Industries Limited 8.25%
due 01/15/27 250,000 260,505
BASIC INDUSTRIES -- 1.14%
Cemex S A 12.75% due 07/15/06 650,000 780,000
BROADCASTING -- 1.12%
Grupo Televisa 11.875% due
05/15/06 250,000 273,125
Grupo Televisa S A 11.375% due
05/15/03 400,000 437,000
TV Azteca S A De C V 10.125% due
02/15/04 50,000 51,625
-----------
761,750
CABLE -- 0.48%
Kabelmedia Holding Zero Coupon
due 08/01/06 450,000 330,188
CHEMICALS -- 0.51%
PCI Chemical Canada Inc. 9.25%
due 10/15/07 350,000 349,562
CONTAINERS/PACKAGING -- 0.64%
Viacap SA De C V 11.375% due
05/15/07 400,000 435,000
</TABLE>
127
<PAGE> 71
ENTERPRISE ACCUMULATION TRUST
HIGH-YIELD BOND PORTFOLIO -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SHARES OR
PRINCIPAL AMOUNT VALUE
------------------- -------------------
<S> <C> <C>
ENERGY -- 0.80%
Petroleos Mexicanos 8.85% due
09/15/07 $ 250,000 $ 247,670
Petroleos Mexicanos 9.00% due
06/01/07 300,000 299,805
-----------
547,475
GOVERNMENT BOND -- 3.11%
Argentina Global 11.00% due
10/09/06 250,000 267,500
Argentina Rep 11.00% due 10/09/06 400,000 430,000
Mexico United Mexican States
9.875% due 01/15/07 1,000,000 1,042,937
Russian Federation 10.00% due
06/26/07 200,000 183,000
Turkiye Cumhuriyeti 10.00% due
09/19/07 200,000 203,740
-----------
2,127,177
PAPER & FOREST PRODUCTS -- 0.74%
Indah Kiat Finance Mauritius
Limited, 10.00% due 07/01/07 300,000 249,000
Pindo Deli Finance Mauritius
Limited, 10.75% due 10/01/07 300,000 257,250
-----------
506,250
TELECOMMUNICATIONS -- 0.24%
Hermes Europe Railtel B V 11.50%
due 08/15/07 150,000 166,125
TRANSPORTATION -- 0.67%
TFM S A Ce C V 10.25% due
06/15/07 150,000 154,125
Transportacion Maritima Mexica
10.00% due 11/15/06 300,000 301,500
-----------
455,625
-----------
TOTAL FOREIGN BONDS
(IDENTIFIED COST $6,616,114) 6,719,657
U.S. TREASURY BILLS -- 1.40%
U.S. Treasury Bill 5.14% due
11/12/98 1,000,000 955,235
-----------
TOTAL U.S. TREASURY BILLS
(IDENTIFIED COST $955,235) 955,235
U.S. TREASURY BONDS -- 1.93%
U.S. Treasury Bond 6.375% due
08/15/27 1,250,000 1,319,050
-----------
TOTAL U.S. TREASURY BONDS
(IDENTIFIED COST $1,286,347) 1,319,050
NUMBER OF SHARES OR
PRINCIPAL AMOUNT VALUE
------------------- -------------------
U.S. TREASURY NOTES -- 1.50%
U.S. Treasury Note 6.125% due
08/15/07 $ 1,000,000 $ 1,027,440
-----------
TOTAL U.S. TREASURY NOTES
(IDENTIFIED COST $1,014,173) 1,027,440
REPURCHASE AGREEMENT -- 2.81%
State Street Bank & Trust
Repurchase Agreement, 4.00% due
01/02/98 Collateral: U.S.
Treasury Note $1,480,000, 8.5%
due 02/15/20 Value $1,962,389 1,920,000 1,920,000
-----------
TOTAL REPURCHASE AGREEMENT
(IDENTIFIED COST $1,920,000) 1,920,000
PREFERRED STOCK -- 0.38%
DRUGS & MEDICAL PRODUCTS -- 0.38%
Fresenius Med Care Capital Trust 250 262,500
-----------
TOTAL PREFERRED STOCK
(IDENTIFIED COST $263,906) 262,500
TOTAL INVESTMENTS
(IDENTIFIED COST $65,259,019) $ 67,229,119
OTHER ASSETS LESS LIABILITIES -- 1.66% 1,135,054
-----------
NET ASSETS 100% $ 68,364,173
</TABLE>
(a) Non-income producing
See accompanying notes to financial statements.
128
<PAGE> 72
ENTERPRISE ACCUMULATION TRUST
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTERNATIONAL HIGH-YIELD
EQUITY SMALL CAP MANAGED GROWTH BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value..................... $519,535,033 $372,934,677 $2,660,580,860 $ 76,651,230 $67,229,119
Foreign currency at value
(cost -- $1,195,333).................... -- -- -- 1,180,695 --
Cash and other............................ 2,355 -- 2,681 1,773 4,762
Receivable for foreign currency sold
(net)................................... -- -- -- 278,958 --
Receivable for investments sold........... -- 615,787 11,472,739 32,218 --
Receivable for fund shares sold........... 527,276 386,464 2,047,976 76,139 141,919
Dividends receivable...................... 522,200 151,340 1,500,625 195,358 --
Interest receivable....................... 1,987 1,284 480,832 208 1,313,343
------------ ------------ -------------- ----------- -----------
Total assets.................... 520,588,851 374,089,552 2,676,085,713 78,416,579 68,689,143
------------ ------------ -------------- ----------- -----------
LIABILITIES:
Payable for investments purchased......... 2,217,487 8,240,323 -- 145,089 265,249
Payable for fund shares redeemed.......... 118,740 280,981 1,050,966 16,719 1,805
Investment advisory fee payable........... 340,314 240,626 1,631,223 56,052 33,714
Other accrued expenses.................... 108,991 61,801 471,478 51,216 24,202
------------ ------------ -------------- ----------- -----------
Total liabilities............... 2,785,532 8,823,731 3,153,667 269,076 324,970
------------ ------------ -------------- ----------- -----------
NET ASSETS:
Accumulated paid-in capital............... 352,782,620 272,255,462 1,654,285,279 72,660,041 65,025,120
Accumulated undistributed net investment
income (loss)........................... 5,906,167 1,050,774 26,677,477 956,929 --
Accumulated undistributed net realized
gain on investments..................... 21,595,909 25,152,378 183,248,731 2,905,112 1,368,953
Net unrealized appreciation on investments
and translation of foreign currencies
denominated amounts..................... 137,518,623 66,807,207 808,720,559 1,625,421 1,970,100
------------ ------------ -------------- ----------- -----------
Total net assets................ $517,803,319 $365,265,821 $2,672,932,046 $ 78,147,503 $68,364,173
============ ============ ============== =========== ===========
Fund shares outstanding................... 14,758,299 13,679,941 65,542,653 12,646,714 11,966,911
------------ ------------ -------------- ----------- -----------
Net asset value per share................. $35.09 $26.70 $40.78 $6.18 $5.71
INVESTMENTS AT COST....................... $382,016,410 $306,127,470 $1,851,860,301 $ 75,288,077 $65,259,019
</TABLE>
See accompanying notes to financial statements.
129
<PAGE> 73
ENTERPRISE ACCUMULATION TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INTERNATIONAL HIGH-YIELD
EQUITY SMALL CAP MANAGED GROWTH BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends............................... $ 5,153,553* $ 1,568,790 $ 27,884,970 $ 1,546,385* $ 19,425
Interest................................ 4,277,419 1,274,117 16,687,323 253,012 4,582,071
----------- ----------- ------------ ---------- ----------
Total.............................. 9,430,972 2,842,907 44,572,293 1,799,397 4,601,496
----------- ----------- ------------ ---------- ----------
OPERATING EXPENSES:
Investment advisory fee................. 3,319,628 2,119,841 16,976,135 604,348 299,011
Custodian and fund accounting fees...... 70,887 63,388 322,226 195,690 43,536
Reports and notices to shareholders..... 79,238 48,521 397,514 15,698 9,496
Trustees' fees and expenses............. 17,419 14,608 50,155 11,492 11,038
Audit and legal fees.................... 29,081 23,998 88,497 18,332 17,963
Miscellaneous........................... 8,476 7,681 60,084 1,345 1,021
----------- ----------- ------------ ---------- ----------
Total operating expenses........... 3,524,729 2,278,037 17,894,611 846,905 382,065
----------- ----------- ------------ ---------- ----------
NET INVESTMENT INCOME............ 5,906,243 564,870 26,677,682 952,492 4,219,431
----------- ----------- ------------ ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS -- NET:
Net realized gain on security
transactions.......................... 21,596,989 25,509,856 183,271,808 3,352,456 1,426,942
Net realized loss on foreign currency
transactions.......................... -- -- -- (258,495) --
Net realized loss on futures
transactions.......................... -- -- -- -- (40,672)
----------- ----------- ------------ ---------- ----------
Net realized gain on investments........ 21,596,989 25,509,856 183,271,808 3,093,961 1,386,270
Net change in unrealized gain (loss) on
investments and translation of foreign
currencies denominated amounts........ 66,581,351 68,857,605 286,998,102 (1,712,233) 876,263
----------- ----------- ------------ ---------- ----------
Net realized and unrealized gain
(loss) on investments............ 88,178,340 94,367,461 470,269,910 1,381,728 2,262,533
----------- ----------- ------------ ---------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS........ $94,084,583 $94,932,331 $496,947,592 $ 2,334,220 $6,481,964
=========== =========== ============ ========== ==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
* Net of foreign taxes withheld of $45,150 and $219,707, respectively.
130
<PAGE> 74
(This page intentionally left blank.)
131
<PAGE> 75
ENTERPRISE ACCUMULATION TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
EQUITY PORTFOLIO SMALL CAP PORTFOLIO
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income......................... $ 5,906,243 $ 4,530,803 $ 564,870 $ 2,416,759
Net realized gain on investments.............. 21,596,989 12,678,406 25,509,856 28,896,623
Net realized loss on futures.................. -- -- -- (900)
Net change in unrealized gain on
investments................................ 66,581,351 34,566,579 68,857,605 (12,857,423)
------------ ------------ ------------ ------------
Net increase in net assets resulting from
operations............................... 94,084,583 $ 51,775,788 94,932,331 18,455,059
------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income......................... (4,530,879) (983,203) (1,934,367) (1,108,977)
Net realized gains............................ (12,619,248) (3,099,385) (29,120,607) (2,010,186)
------------ ------------ ------------ ------------
Total dividends and distributions to
shareholders.......................... (17,150,127) (4,082,588) (31,054,974) (3,119,163)
------------ ------------ ------------ ------------
FUND SHARE TRANSACTIONS:
Net proceeds from sales....................... 194,805,120 141,947,982 125,153,914 53,086,228
Reinvestment of dividends and distributions... 17,150,127 4,082,588 31,054,974 3,119,163
Cost of shares redeemed....................... (85,993,316) (46,779,501) (47,524,243) (44,898,602)
------------ ------------ ------------ ------------
Net increase in net assets from fund share
transactions............................... 125,961,931 99,251,069 108,684,645 11,306,789
------------ ------------ ------------ ------------
Total increase in net assets............. 202,896,387 146,944,269 172,562,002 26,642,685
NET ASSETS:
Beginning of year............................. 314,906,932 167,962,663 192,703,819 166,061,134
------------ ------------ ------------ ------------
End of year................................... $517,803,319 $314,906,932 $365,265,821 $192,703,819
============ ============ ============ ============
SHARES ISSUED AND REDEEMED:
Issued........................................ 6,024,088 5,377,143 4,898,620 2,712,554
Issued in reinvestment of dividends and
distributions.............................. 488,747 141,462 1,163,108 154,261
Redeemed...................................... (2,666,560) (1,801,187) (1,911,458) (2,320,780)
------------ ------------ ------------ ------------
Net increase............................... 3,846,275 3,717,418 4,150,270 546,035
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
132
<PAGE> 76
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH
MANAGED PORTFOLIO PORTFOLIO HIGH-YIELD BOND PORTFOLIO
--------------------------------- ----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996 1997 1996
-------------- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ 26,677,682 $ 34,357,948 $ 952,492 $ 469,448 $ 4,219,431 $ 2,054,070
183,271,808 86,738,070 3,093,961 1,830,273 1,426,942 364,910
-- -- -- -- (40,672) (22,678)
286,998,102 213,973,719 (1,712,233) 2,175,265 876,263 789,178
-------------- -------------- ----------- ----------- ----------- -----------
496,947,592 335,069,737 2,334,220 4,474,986 6,481,964 3,185,480
-------------- -------------- ----------- ----------- ----------- -----------
(34,358,125) (3,366,114) (469,566) -- (4,578,453) (2,054,070)
(86,729,089) (15,402,221) (1,839,878) (190,139) -- (33,884)
-------------- -------------- ----------- ----------- ----------- -----------
(121,087,214) (18,768,335) (2,309,444) (190,139) (4,578,453) (2,087,954)
-------------- -------------- ----------- ----------- ----------- -----------
764,890,598 602,776,605 44,114,615 36,234,262 37,450,856 22,145,776
121,087,214 18,768,335 2,309,444 190,139 4,578,453 2,087,926
(524,249,625) (267,220,838) (21,069,633) (6,539,162) (9,979,756) (6,143,188)
-------------- -------------- ----------- ----------- ----------- -----------
361,728,187 354,324,102 25,354,426 29,885,239 32,049,553 18,090,514
-------------- -------------- ----------- ----------- ----------- -----------
737,588,565 670,625,504 25,379,202 34,170,086 33,953,064 19,188,040
1,935,343,481 1,264,717,977 52,768,301 18,598,215 34,411,109 15,223,069
-------------- -------------- ----------- ----------- ----------- -----------
$2,672,932,046 $1,935,343,481 $ 78,147,503 $ 52,768,301 $ 68,364,173 $ 34,411,109
============== ============== =========== =========== =========== ===========
20,029,862 19,459,858 6,817,722 6,375,789 6,681,479 4,149,703
2,969,279 547,022 373,696 32,357 813,628 389,665
(13,856,866) (8,684,392) (3,259,958) (1,143,764) (1,778,183) (1,154,032)
-------------- -------------- ----------- ----------- ----------- -----------
9,142,275 11,322,488 3,931,460 5,264,382 5,716,924 3,385,336
============== ============== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
133
<PAGE> 77
ENTERPRISE ACCUMULATION TRUST
EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year...................... $ 28.86 $ 23.35 $ 18.14 $ 17.95 $ 17.23
-------- -------- ------- ------- -------
Income from investment operations:
Net investment income................................. 0.30 0.37 0.33 0.28 0.18
Net realized and unrealized gain on investments....... 7.13 5.52 6.38 0.41 1.13
-------- -------- ------- ------- -------
Total from investment operations.............. 7.43 5.89 6.71 0.69 1.31
-------- -------- ------- ------- -------
Less dividends and distributions:
Dividends to shareholders from net investment
income............................................. (0.32) (0.09) (0.49) (0.18) (0.17)
Distribution to shareholders from net capital gains... (0.88) (0.29) (1.01) (0.32) (0.42)
-------- -------- ------- ------- -------
Total dividends and distributions............. (1.20) (0.38) (1.50) (0.50) (0.59)
-------- -------- ------- ------- -------
Net asset value, end of year............................ $ 35.09 $ 28.86 $ 23.35 $ 18.14 $ 17.95
======== ======== ======= ======= =======
Total return.................................. 25.76% 25.22% 38.44% 3.87% 7.85%
-------- -------- ------- ------- -------
Net assets, end of year (000)........................... $517,803 $314,907 $167,963 $88,583 $66,172
-------- -------- ------- ------- -------
Ratio of net operating expenses to average net assets... 0.84% 0.81% 0.69% 0.67% 0.72%
-------- -------- ------- ------- -------
Ratio of net operating expenses (excluding waivers) to
average net assets.................................... 0.84% 0.81% 0.72% 0.69% 0.72%
-------- -------- ------- ------- -------
Ratio of net investment income to average net assets.... 1.42% 1.94% 1.94% 1.81% 1.47%
-------- -------- ------- ------- -------
Ratio of net investment income (excluding waivers) to
average net assets.................................... 1.42% 1.94% 1.91% 1.79% 1.47%
-------- -------- ------- ------- -------
Portfolio turnover...................................... 17% 30% 29% 38% 15%
-------- -------- ------- ------- -------
Average commission per share (a)........................ $ 0.0577 $ 0.0567
-------- --------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
(a) Disclosure not applicable to periods prior to 1996. Represents average
commission rate per share charged to the fund on purchases and sales of
equity investments on which commissions were charged during the period.
134
<PAGE> 78
ENTERPRISE ACCUMULATION TRUST
SMALL CAP PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year..................... $ 20.22 $ 18.48 $ 17.56 $ 18.62 $ 16.72
-------- -------- -------- -------- -------
Income from investment operations:
Net investment income (b)............................ 0.05 0.25 0.32 0.19 0.10
Net realized and unrealized gain (loss) on
investments....................................... 8.91 1.82 1.75 (0.16) 2.98
-------- -------- -------- -------- -------
Total from investment operations............. 8.96 2.07 2.07 0.03 3.08
-------- -------- -------- -------- -------
Less dividends and distributions:
Dividends to shareholders from net investment
income............................................ (0.15) (0.12) (0.40) (0.10) (0.10)
Distribution to shareholders from net capital
gains............................................. (2.33) (0.21) (0.75) (0.99) (1.08)
-------- -------- -------- -------- -------
Total dividends and distributions............ (2.48) (0.33) (1.15) (1.09) (1.18)
-------- -------- -------- -------- -------
Net asset value, end of year........................... $ 26.70 $ 20.22 $ 18.48 $ 17.56 $ 18.62
======== ======== ======== ======== =======
Total return................................. 44.32% 11.21% 12.28% .02% 19.51%
-------- -------- -------- -------- -------
Net assets, end of year (000).......................... $365,266 $192,704 $166,061 $144,880 $105,635
-------- -------- -------- -------- -------
Ratio of net operating expenses to average net
assets............................................... 0.86% 0.84% 0.69% 0.66% 0.74%
-------- -------- -------- -------- -------
Ratio of net operating expenses (excluding waivers) to
average net assets................................... 0.86% 0.84% 0.72% 0.67% 0.74%
-------- -------- -------- -------- -------
Ratio of net investment income to average net assets... 0.21% 1.35% 1.86% 1.30% 1.06%
-------- -------- -------- -------- -------
Ratio of net investment income (excluding waivers) to
average net assets................................... 0.21% 1.35% 1.83% 1.29% 1.06%
-------- -------- -------- -------- -------
Portfolio turnover..................................... 58% 137% 70% 58% 70%
-------- -------- -------- -------- -------
Average commission rate per share (a).................. $ 0.0456 $ 0.0480
-------- --------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
(a) Disclosure not applicable to periods prior to 1996. Represents average
commission rate per share charged to the fund on purchases and sales of
equity investments on which commissions were charged during the period.
(b) For 1997, this calculation was based on average monthly shares outstanding.
135
<PAGE> 79
ENTERPRISE ACCUMULATION TRUST
MANAGED PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................. $ 34.31 $ 28.06 $ 20.82 $ 21.35 $ 20.11
---------- ---------- -------- -------- --------
Income from investment operations:
Net investment income............................ 0.35 0.59 0.40 0.40 0.46
Net realized and unrealized gain
(loss) on investments......................... 8.06 5.99 8.97 0.15 1.55
---------- ---------- -------- -------- --------
Total from investment operations......... 8.41 6.58 9.37 0.55 2.01
---------- ---------- -------- -------- --------
Less dividends and distributions:
Dividends to shareholders from net investment
income........................................ (0.55) (0.06) (0.75) (0.46) (0.24)
Distribution to shareholders from net capital
gains......................................... (1.39) (0.27) (1.38) (0.62) (0.53)
---------- ---------- -------- -------- --------
Total dividends and distributions........ (1.94) (0.33) (2.13) (1.08) (0.77)
---------- ---------- -------- -------- --------
Net asset value, end of year....................... $ 40.78 $ 34.31 $ 28.06 $ 20.82 $ 21.35
========== ========== ======== ======== ========
Total return............................. 24.50% 23.47% 46.89% 2.57% 10.39%
---------- ---------- -------- -------- --------
Net assets, end of year (000)...................... $2,672,932 $1,935,343 $1,264,718 $689,252 $525,163
---------- ---------- -------- -------- --------
Ratio of net operating expenses to average net
assets........................................... 0.76% 0.74% 0.67% 0.64% 0.66%
---------- ---------- -------- -------- --------
Ratio of net operating expenses (excluding waivers)
to average net assets............................ 0.76% 0.74% 0.67% 0.64% 0.66%
---------- ---------- -------- -------- --------
Ratio of net investment income to average net
assets........................................... 1.14% 2.16% 1.80% 2.23% 3.21%
---------- ---------- -------- -------- --------
Ratio of net investment income (excluding waivers)
to average net assets............................ 1.14% 2.16% 1.80% 2.23% 3.21%
---------- ---------- -------- -------- --------
Portfolio turnover................................. 32% 29% 31% 33% 21%
---------- ---------- -------- -------- --------
Average commission per share (a)................... $ 0.0574 $ 0.0531
---------- ----------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
(a) Disclosure not applicable to periods prior to 1996. Represents average
commission rate per share charged to the fund on purchases and sales of
equity investments on which commissions were charged during the period.
136
<PAGE> 80
ENTERPRISE ACCUMULATION TRUST
INTERNATIONAL GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, PERIOD OF
------------------------------- NOVEMBER 18, 1994-
1997 1996 1995 DECEMBER 31, 1994
------- ------- ------- ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year......................... $ 6.05 $ 5.39 $ 4.96 $ 5.00
------ ------- ------- ------
Income from investment operations:
Net investment income................................. 0.06 0.05 0.04 --
Net realized and unrealized gain (loss) on
investments......................................... 0.26 0.63 0.67 (0.04)
------ ------- ------- ------
Total from investment operations................. 0.32 0.68 0.71 (0.04)
------ ------- ------- ------
Less dividends and distributions:
Dividends to shareholders from net investment
income.............................................. (0.04) -- (0.04) --
Distribution to shareholders from net capital gains... (0.15) (0.02) (0.24) --
------ ------- ------- ------
Total dividends and distributions................ (0.19) (0.02) (0.28) --
------ ------- ------- ------
Net asset value, end of year............................... $ 6.18 $ 6.05 $ 5.39 $ 4.96
====== ======= ======= ======
Total return..................................... 5.26% 12.65% 14.64% (0.80)%(c)
------ ------- ------- ------
Net assets, end of year (000).............................. $78,148 $52,768 $18,598 $3,247
------ ------- ------- ------
Ratio of net operating expenses to average net assets...... 1.19% 1.38% 1.55% 1.55% (b)
------ ------- ------- ------
Ratio of net operating expenses (excluding waivers) to
average net assets....................................... 1.19% 1.38% 2.21% 8.85% (b)
------ ------- ------- ------
Ratio of net investment income to average net assets....... 1.34% 1.32% 1.17% 0.80% (b)
------ ------- ------- ------
Ratio of net investment income (excluding waivers) to
average net assets....................................... 1.34% 1.32% 0.51% (6.34)%(b)
------ ------- ------- ------
Portfolio turnover......................................... 28% 21% 27% 0%
------ ------- ------- ------
Average commission per share (a)........................... $0.0257 $0.0224
------ -------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
(a) Disclosure not applicable to periods prior to 1996. Represents average
commission rate per share charged to the fund on purchases and sales of
equity investments on which commissions were charged during the period.
(b) Annualized.
(c) Not annualized.
137
<PAGE> 81
ENTERPRISE ACCUMULATION TRUST
HIGH-YIELD BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, PERIOD OF
----------------------------------------- NOVEMBER 18, 1994-
1997 1996 1995 DECEMBER 31, 1994
----------------- ------- ------- ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year.................. $ 5.51 $ 5.31 $ 4.98 $ 5.00
------ ------- ------- ------
Income from investment operations:
Net investment income.......................... 0.51 0.45 0.45 0.04
Net realized and unrealized gain (loss) on
investments.................................. 0.20 0.21 0.35 (0.01)
------ ------- ------- ------
Total from investment operations.......... 0.71 0.66 0.80 0.03
------ ------- ------- ------
Less dividends and distributions:
Dividends to shareholders from net investment
income....................................... (0.51) (0.45) (0.45) (0.05)
Distribution to shareholders from net capital
gains........................................ -- (0.01) (0.02) --
------ ------- ------- ------
Total dividends and distributions......... (0.51) (0.46) (0.47) (0.05)
------ ------- ------- ------
Net asset value, end of year........................ $ 5.71 $ 5.51 $ 5.31 $ 4.98
====== ======= ======= ======
Total return.............................. 13.38% 12.93% 16.59% 0.50%(c)
------ ------- ------- ------
Net assets, end of year (000)....................... $68,364 $34,411 $15,223 $1,421
------ ------- ------- ------
Ratio of net operating expenses to average net
assets............................................ 0.77% 0.85% 0.85% 0.85%(b)
------ ------- ------- ------
Ratio of net operating expenses (excluding waivers)
to average net assets............................. 0.77% 0.94% 1.59% 7.80%(b)
------ ------- ------- ------
Ratio of net investment income to average net
assets............................................ 8.47% 8.57% 8.51% 7.84%(b)
------ ------- ------- ------
Ratio of net investment income (excluding waivers)
to average net assets............................. 8.47% 8.48% 7.77% 0.80%(b)
------ ------- ------- ------
Portfolio turnover.................................. 175% 175% 115% 0%
------ ------- ------- ------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
(b) Annualized.
(c) Not annualized.
138
<PAGE> 82
ENTERPRISE ACCUMULATION TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION OF THE TRUST
Enterprise Accumulation Trust (the "Trust") was organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940 as a diversified, open-end management investment company. The Trust is
authorized to issue an unlimited number of five classes of shares of beneficial
interest at $.01 par value: the Equity Portfolio, the Small Cap Portfolio, the
Managed Portfolio, the International Growth Portfolio and the High-Yield Bond
Portfolio. The Trust serves as an investment vehicle for MONYMaster, a flexible
payment variable annuity policy, and MONY Equity Master, a flexible premium
variable universal life insurance policy, issued by The Mutual Life Insurance
Company of New York, Inc. ("MONY") and MONY America, a wholly-owned subsidiary
of MONY. The Trust also serves as an investment vehicle for a
corporate-sponsored variable universal life product issued by MONY America. The
following is a summary of significant accounting policies consistently followed
by the Trust in the preparation of its financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES
Valuation of Investments -- The Equity, Small Cap, Managed, International
Growth and High-Yield Bond Portfolios: Investment securities, other than debt
securities, listed on either a national or foreign securities exchange or traded
in the over-the-counter National Market System are valued each business day at
the last reported sales price; if there are no such reported sales, the
securities are valued at their last quoted bid price. Other securities traded
over-the-counter and not part of the National Market System are valued at the
last quoted bid price. Debt securities (other than certain short-term
obligations) are valued each business day by an independent pricing service
approved by the Board of Trustees. Short-term debt securities having a remaining
maturity of sixty days or less are valued at amortized cost, which approximates
market value. Any securities for which market quotations are not readily
available are valued at their fair value as determined in good faith by the
Board of Trustees.
Special Valuation Risk -- The high-yield securities in which the High-Yield
Bond Portfolio may invest may be considered speculative in regard to the
issuer's continuing ability to meet principal and interest payments. The value
of the lower rated securities in which the High-Yield Bond Portfolio may invest
will be affected by the credit worthiness of individual issuers, general
economic and specific industry conditions, and will fluctuate inversely with
changes in interest rates. In addition, the secondary trading market for lower
quality bonds may be less active and less liquid than the trading market for
higher quality bonds.
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. Under each repurchase agreement, the Portfolio receives, as collateral,
securities whose market value (including interest) is at least equal to the
repurchase price.
Futures Contracts -- Upon entering into such a contract, a Portfolio is
required to deposit with the broker an amount of cash or securities equal to the
minimum "initial margin" requirements of the exchange. Pursuant to the contract,
the Portfolio agrees to receive from or pay to the broker an amount of cash
equal to the daily fluctuation in the value of the contract. Such receipts or
payments, known as "variation margin," are recorded by the Portfolio as
unrealized appreciation or depreciation. When the contract is closed the
Portfolio records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and value at the time it was
closed and reverses any unrealized appreciation or depreciation previously
recorded. There were no open futures contracts held in any of the Portfolios at
December 31, 1997.
Foreign Currency Translation -- Securities, other assets and liabilities of
the International Growth Portfolio whose values are initially expressed in
foreign currencies are translated to U.S. dollars at the bid price of such
currency against U.S. dollars last quoted by a major bank. Dividend and interest
income and certain expenses denominated in foreign currencies are marked-
to-market daily based on daily exchange rates and exchange gains and losses are
realized upon ultimate receipt or disbursement. The Trust does not isolate that
portion of its realized and unrealized gains on investments from changes in
foreign exchange rates from fluctuations arising from changes in the market
prices of the investments.
Security Transactions and Other Income -- Security transactions are
accounted for on the trade date. In determining the gain or loss from the sale
of securities, the cost of securities sold has been determined on the basis of
identified cost. Dividend
139
<PAGE> 83
ENTERPRISE ACCUMULATION TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
income is recorded on the ex-dividend date and interest income is accrued as
earned. Discounts or premiums on debt securities purchased are accreted or
amortized to interest income over lives of the respective securities.
Expenses -- Each portfolio bears expenses incurred specifically on its
behalf as well as a portion of the common expenses of the Trust.
Federal Income Taxes -- It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to
shareholders; accordingly, no Federal income tax provision is required.
Use of Estimates in Preparation of Financial Statements -- Preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that may affect the
reported amounts of assets and liabilities at the date of the financial
statement and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Dividends and Distributions -- The Equity, Small Cap, Managed and
International Growth Portfolios: Dividends and distributions to shareholders
from net investment income and net realized capital gains, if any, are declared
and paid at least annually. The High-Yield Bond Portfolio: Dividends from net
investment income are declared daily and paid monthly. Distributions from net
realized capital gains, if any, are declared and paid at least annually.
3. FORWARD CURRENCY CONTRACTS
As part of its investment program, the International Growth Portfolio
utilizes forward currency exchange contracts to manage exposure to currency
fluctuations and hedge against adverse changes in connection with purchases and
sales of securities. The Portfolio enters into forward contracts only for
hedging purposes. At December 31, 1997, the International Growth Portfolio had
entered into various forward currency exchange contracts under which it is
obligated to exchange currencies at specified future dates. Risks arise from the
possible inability of counterparties to meet the terms of their contracts and
from movements in currency values. Outstanding contracts at December 31, 1997
are as follows:
<TABLE>
<CAPTION>
CONTRACT TO NET UNREALIZED
SETTLEMENT ----------------------------------- APPRECIATION/
DATE RECEIVE DELIVER (DEPRECIATION)
- ---------- --------------- --------------- --------------
<S> <C> <C> <C>
1/20/98 USD 1,627,054 AUD 2,200,000 $ 192,566
1/20/98 USD 1,749,351 BEL 64,000,000 19,992
1/20/98 CAD 1,800,000 USD 1,329,394 (68,908)
1/20/98 CHF 4,300,000 USD 2,981,556 (31,578)
1/20/98 USD 968,523 CHF 1,400,000 8,065
1/20/98 USD 395,793 DEM 700,000 6,218
1/20/98 DKK 4,700,000 USD 696,255 (9,603)
1/20/98 FRF 9,300,000 USD 1,522,313 24,714
1/20/98 USD 5,061,028 GBP 3,030,000 89,087
1/20/98 USD 1,183,037 HKD 9,200,000 (3,226)
1/20/98 HKD 3,000,000 USD 383,853 2,972
1/20/98 USD 402,825 ITL 730,000,000 (9,762)
1/20/98 JPY 583,000,000 USD 4,957,989 (480,007)
1/20/98 USD 3,128,922 JPY 374,000,000 256,254
1/20/98 USD 675,042 MYR 1,800,000 211,874
1/20/98 USD 577,599 NLG 1,150,000 9,726
1/20/98 NLG 2,550,000 USD 1,272,487 (13,290)
1/20/98 NOK 3,000,000 USD 427,137 (20,466)
1/20/98 SEK 14,500,000 USD 1,872,538 (45,287)
1/20/98 USD 1,317,472 SEK 10,200,000 32,095
1/20/98 USD 817,439 SGD 1,200,000 107,522
---------
$ 278,958
=========
</TABLE>
140
<PAGE> 84
ENTERPRISE ACCUMULATION TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment advisory fee is payable monthly to Enterprise Capital
Management, Inc. ("Enterprise Capital"), a wholly-owned subsidiary of MONY, and
is computed as a percentage of each Portfolio's net assets as of the close of
business each day and is as follows: for each of the Equity, Small Cap, and
Managed Portfolios, .80% for the first $400 million, .75% for the next $400
million, and .70% for net assets over $800 million, .85% for the International
Growth Portfolio and .60% for the High-Yield Bond Portfolio.
Enterprise Capital has agreed to reimburse the Portfolios for expenses
incurred in excess of a percentage of average net assets. The percentages are as
follows: Equity -- .95%, Small Cap -- .95%, Managed -- .95%, International
Growth Portfolio -- 1.55% and High-Yield Bond Portfolio -- .85%.
Enterprise Capital has entered into sub-advisory agreements with various
investment advisers as Portfolio Managers for the Trust. A portion of the
management fee received by Enterprise Capital is paid to the Portfolio Manager.
5. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1997, purchases and sales proceeds of
investment securities, other than short-term securities, were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT
OBLIGATIONS STOCKS AND BONDS
------------------------ ----------------------------
PORTFOLIO PURCHASES SALES PURCHASES SALES
- -------------------------------------------------------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Equity.................................................. -- -- $122,604,162 $ 56,389,528
Small Cap............................................... -- -- 200,540,520 139,316,877
Managed................................................. -- -- 788,461,611 9,275,527
International Growth.................................... -- -- 43,344,114 18,394,338
High-Yield Bond......................................... $3,803,637 $1,524,063 107,190,504 80,036,195
</TABLE>
6. UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS AND DISTRIBUTIONS
At December 31, 1997, the composition of unrealized appreciation
(depreciation) of investment securities and the cost of investment for Federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
NET APPRECIATION
PORTFOLIO TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
- ----------------------------------------------------- -------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
Equity............................................... $ 382,017,441 $139,174,894 $ (1,656,271) $137,518,623
Small Cap............................................ 306,663,418 76,677,207 (9,870,000) 66,807,207
Managed.............................................. 1,831,881,883 830,588,366 (21,867,808) 808,720,558
International Growth................................. 75,633,249 10,086,803 (8,738,048) 1,348,755
High-Yield Bond...................................... 65,270,632 2,238,213 (268,113) 1,970,100
</TABLE>
The capital gains dividend distribution paid to shareholders, taken in
additional shares, is as follows:
<TABLE>
<CAPTION>
28% CAPITAL GAINS
-----------------
<S> <C>
Equity Portfolio........................................................................... $10,973,315
Small Cap Portfolio........................................................................ 15,475,183
Managed Portfolio.......................................................................... 75,381,463
International Growth Portfolio............................................................. 650,328
High-Yield Bond............................................................................ 106,706
</TABLE>
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
futures and options transactions, losses deferred due to wash sales, foreign
currency transactions, investments in passive foreign investment companies, and
excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital. Any taxable
gain remaining at fiscal year end is distributed in the following year.
141
<PAGE> 85
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Enterprise Accumulation Trust:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of each of the portfolios of Enterprise
Accumulation Trust (Equity, Small Cap, Managed, International Growth, and
High-Yield Bond Portfolios) as of December 31, 1997 and the related statements
of operations for the year then ended, and the statements of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the four years (or periods) in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights for the year ended December 31, 1993 were audited by other auditors,
whose report dated February 18, 1994, expressed an unqualified opinion thereon.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Enterprise Accumulation Trust (Equity, Small Cap, Managed, International Growth,
and High-Yield Bond Portfolios) as of December 31, 1997, the results of their
operations for the year then ended, and the changes in their net assets for each
of the two years in the period then ended, and their financial highlights for
each of the four years (or periods) in the period then ended in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
February 19, 1998
142
<PAGE> 86
TRUSTEES AND PRINCIPAL OFFICERS
<TABLE>
<S> <C>
Victor Ugolyn Trustee, Chairman, President and
Chief Executive Officer
Arthur T. Dietz Trustee
Samuel J. Foti Trustee
Arthur Howell Trustee
William A. Mitchell, Jr. Trustee
Lonnie H. Pope Trustee
Michael I. Roth Trustee
Phillip G. Goff Vice President
Catherine R. McClellan Secretary
Herbert M. Williamson Treasurer
</TABLE>
INVESTMENT ADVISER
Enterprise Capital Management, Inc.
Atlanta Financial Center
3343 Peachtree Road, Suite 450
Atlanta, Georgia 30326
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
P. O. Box 1713
Boston, Massachusetts 02105
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
1100 Campanile Building
1155 Peachtree Street
Atlanta, Georgia 30309
This report is authorized for distribution only to shareholders and to
others who have received a copy of this Trust's prospectus.
143
<PAGE> 87
(This page intentionally left blank.)
144
<PAGE> 88
Part C Other Information
Item 24. Financial Statements and Exhibits
Financial Statements:
Included in the Prospectus:
Financial Highlights
Incorporated by reference 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, 1997 for the
Enterprise Accumulation Trust.
The Semi-Annual Report to Shareholders will be filed
pursuant to a post-effective on or before November 1, 1998.
Included in Part C:
None
Exhibits:
(1) Declaration of Trust, as amended -- previously filed with
original Registration Statement on Form N-1A on April 28, 1988.
(2) By-laws of Registrant.*
(3) Not Applicable.
(4) Not Applicable.
(5) Investment Sub-Advisory Agreement.
(6) Distribution Agreement.*
(7) Not Applicable.
(8) Custody Agreement -- previously filed with Post-Effective
Amendment No. 2 on May 1, 1990.
(9) Not Applicable.
1
<PAGE> 89
(10) Not applicable.
(11) Consent of Independent Accountants: Filed herewith.
(12) Not Applicable.
(13) Agreement relating to initial capital.*
(14) Not Applicable.
(15) Not Applicable.
(16) Performance Calculations -- previously filed with Post-Effective
Amendment No. 1 on May 1, 1989.
* Previously filed with Pre-Effective Amendment No. 1 on July 13, 1988.
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") own 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: MONY Realty Partners, Inc., MONY
Funding, Inc., MONY CS, Inc., MONY Brokerage, 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.
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of May 1, 1998
-------------- ---------------------
<S> <C>
Shares of Beneficial Interest
Equity Portfolio 5
High Yield Bond Portfolio 5
Managed Portfolio 5
Small Company Value Portfolio 5
International Growth Portfolio 5
</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.
2
<PAGE> 90
Item 28. Business and Other Connections of Investment Adviser
See "Investment Management Agreement" in the Prospectus and "Investment
Management and Other Services" in the Statement of Additional Information
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 Statement of
Additional Information and the 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 -- Not applicable.
(c) Not applicable.
Item 30. Location of Required Records -- Rule 31a-1 (Except those maintained by
Custodian and Transfer Agent)
<TABLE>
<CAPTION>
Entity Function Address
----------------------- --------------- ------------------------
<S> <C> <C>
Enterprise Accumulation Registrant Atlanta Financial Center
Trust 3343 Peachtree Road, N.E., Suite 450
Atlanta, GA 30326-1022
Enterprise Capital Investment Same as above.
Management, Inc. Adviser
</TABLE>
3
<PAGE> 91
THE RECORDS OF THE PORTFOLIO MANAGERS ARE KEPT AT THE FOLLOWING LOCATIONS:
<TABLE>
<S> <C>
Growth Portfolio Montag & Caldwell, Inc.
1100 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, GA 30326-1450
Growth & Income Retirement System Investors Inc.
Portfolio 317 Madison Avenue
New York, NY 10017
Equity Portfolio OpCap Advisors
One World Financial Center
New York, NY 10281
Equity Income 1740 Advisers, Inc.
Portfolio 1740 Broadway
New York, NY 10019
Capital Appreciation Provident Investment Counsel, Inc.
Portfolio 300 North Lake Avenue
Pasadena, CA 91101
Small Company Growth William D. Witter, Inc.
Portfolio One Citicorp Center
153 East 53rd Street
New York, NY 10022
Small Company Gabelli Asset Management Company
Value Portfolio One Corporate Center
Rye, New York 10580
International Growth Brinson Partners, Inc.
Portfolio 209 South LaSalle Street
Chicago, IL 60604
Global Financial Sanford C. Bernstein & Co., Inc.
Services Portfolio 1 North Lexington Avenue
White Plains, NY 10601-1785
High-Yield Bond Caywood-Scholl Capital Management
Portfolio 4350 Executive Drive, Suite 125
San Diego, CA 92121
Managed Portfolio OpCap Advisors
One World Financial Center
New York, NY 10281
</TABLE>
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not applicable.
4
<PAGE> 92
(b) Registrant hereby undertakes to assist shareholder communication in
accordance with the provisions of Section 16 of the Investment Company
Act of 1940.
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 August 13, 1998.
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 August 13, 1998
- ---------------------------- Chief Executive Officer
Victor Ugolyn
/s/ Phillip G. Goff Principal Financial August 13, 1998
- ---------------------------- and Accounting Officer
Phillip G. Goff
/s/ Samuel J. Foti Director August 13, 1998
- ----------------------------
Samuel J. Foti
/s/ Arthur T. Dietz Director August 13, 1998
- ----------------------------
Arthur T. Dietz
/s/ Arthur Howell Director August 13, 1998
- ----------------------------
Arthur Howell
/s/ William A. Mitchell, Jr. Director August 13, 1998
- ----------------------------
William A. Mitchell, Jr.
/s/ Lonnie H. Pope Director August 13, 1998
- ----------------------------
Lonnie H. Pope
/s/ Michael I. Roth Director August 13, 1998
- ----------------------------
Michael I. Roth
</TABLE>
5
<PAGE> 93
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibits: Description Page
- --------- ----------- ----
<S> <C> <C>
(1) Declaration of Trust, as amended - previously filed with
original Registration Statement on Form N-1A on April 28,
1998.
(2) By-laws of Registrant.*
(3) Not Applicable.
(4) Not Applicable.
(5) Investment Sub-Advisory Agreement.
(6) Distribution Agreement.*
(7) Not Applicable.
(8) Custody Agreement -- previously filed with Post-Effective
Amendment No. 2 on May 1, 1990.
(9) Not Applicable.
(10) Not Applicable.
(11) Consent of Independent Accountants: Filed herewith.
(12) Not Applicable.
(13) Agreement relating to initial capital.*
(14) Not Applicable.
(15) Not Applicable.
</TABLE>
6
<PAGE> 94
<TABLE>
<S> <C> <C>
(16) Performance Calculations -- previously filed with
Post-Effective Amendment No. 1 on May 1, 1989.
</TABLE>
*Previously filed with Pre-Effective Amendment No. 1 on October 13, 1988.
7
<PAGE> 1
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 14 to the registration statement of Enterprise Accumulation Trust on Form
N-1A under the Securities Act of 1933 (file number 33-21534) of our report dated
February 19, 1998 on our audit of the financial statements and financial
highlights of Enterprise Accumulation Trust appearing in the Registrant's 1997
Annual Report which is incorporated by reference in the Post-Effective Amendment
to the Registration Statement. We also consent to the reference to our Firm
under the caption "Independent Accountants."
PricewaterhouseCoopers LLP
Atlanta, Georgia
August 11, 1998
